LAWDA arbitration award: High Court refuses to interfere with Rs 21.19 lakh payment

30/08/2026

SRINAGAR, Aug 29: The High Court of Jammu and Kashmir and Ladakh has dismissed a petition filed by the J&K Lakes and Waterways Development Authority (LAWDA) challenging an arbitration award directing payment of Rs 21.19 lakh to a contractor in a dispute over construction of a sewer line along the Nigeen fringe here.
Justice Shahzad Azeem, in a judgment pronounced on Friday, held that the award was supported by oral and documentary evidence and that the interpretation placed by the arbitrator on the relevant contractual clauses was a possible and reasonable view. The court said no ground for interference under Section 34 of the J&K Arbitration and Conciliation Act, 1997, was made out.
The case relates to a contract awarded by LAWDA to Mohammad Amin Shah for construction of a sewer line in Sub-Zones CO1 to CO4 of Zone 1(C) along the Nigeen fringe, from RD 1 to RD 1011 metres.
The work was allotted to Shah on December 27, 2007, for Rs 90.05 lakh against an advertised cost of Rs 99.21 lakh. The contract included departmental materials such as RCC spun pipes, manhole covers, cement and iron. Under the agreement executed in May 2008, the contractor was required to start the work within seven days and complete it within six months or 180 days.
A dispute subsequently arose over delays in the supply of departmental materials, escalation of prices, stoppage of work and other related claims. The contractor approached the court seeking appointment of an arbitrator and reference of the disputes to arbitration.
The contractor claimed that the required RCC spun pipes were not supplied in time. Against an indent of 165 pipes of 350-mm diameter, only 60 pipes were initially made available, with some having to be excavated from debris at Habbak-Nishat.
According to his case, work was carried out in two spells -- from January 30 to the end of March 2008 and from October 16, 2008, to the end of March 2009. He claimed that landowners subsequently objected to the work and sought compensation for land falling under the project alignment.
The contractor claimed around 55 per cent completion of the work, or 552 metres, and sought a total compensation of Rs 34.66 lakh besides 15 per cent compensation.
LAWDA, however, contested the claims, maintaining that the contractor himself delayed commencement of the work by about 28 days and worked for more than seven months against the stipulated six-month period.
The authority claimed that only about 42 per cent of the work had been completed and that 40.39 per cent payment had already been released. It also argued that the contractor had abandoned the remaining work and that the contract contained no escalation clause, thereby barring additional compensation.
The High Court had appointed retired District Judge Abdul Rashid Bhat-I as the sole arbitrator in July 2012. The arbitrator subsequently passed the award on June 14, 2014, directing payment of Rs 21,19,439 to the contractor within two months, failing which simple interest at the prevailing rate was to be paid.
The arbitrator found that delays in execution were attributable to LAWDA, particularly the non-supply of the required RCC spun pipes and the subsequent dispute with landowners.
The award recorded that after work commenced in January 2008, it stalled at the end of March for around seven months because of the shortage of RCC pipes. The pipes became available in October 2008, following which work resumed until it was again stopped in March 2009 after landowners raised objections regarding compensation for land falling within the alignment.
The arbitrator also rejected LAWDA's allegation that the contractor had abandoned the work. It held that the department was required to provide the RCC spun pipes and make the site available, and that the contractor could not be held responsible for non-completion when those obligations had not been fulfilled.
The High Court noted that LAWDA had itself admitted before the arbitrator that there had been problems relating to the supply of RCC pipes and that landowners had subsequently raised objections.
The compensation awarded by the arbitrator covered several heads, including Rs 36,000 for extra dewatering, Rs 5.14 lakh for idle labour, Rs 1.18 lakh for idle machinery, Rs 90,351 towards escalation and Rs 3.72 lakh towards losses and carriage relating to unused material, subject to its return.
The award also included Rs 2.34 lakh for watch and ward after March 2009, Rs 1.50 lakh towards fire loss, Rs 2.52 lakh for outstanding payment for work done and Rs 78,663 as compensation for blocked money.
The court observed that the arbitrator had substantially restricted the contractor's claims. The contractor's demand for 15 per cent compensation across all heads was declined, while the fire-loss claim was restricted to the official assessment. Escalation was also restricted to four per cent.
LAWDA challenged the award mainly on the ground that the arbitrator had acted contrary to contractual Clauses 21, 23 and 34 by awarding amounts towards extra dewatering, idle charges and escalation. The authority also argued that the award relied on interested witnesses, ignored departmental records and resulted in an undue benefit to a contractor who had completed only around 42 per cent of the work.
The contractor opposed the challenge, arguing that the High Court exercising jurisdiction under Section 34 was not sitting as an appellate court and could not re-appreciate evidence or substitute its own interpretation for that of the arbitrator where the latter's view was reasonably possible.
The High Court examined the three contractual clauses relied upon by LAWDA. Clause 21 provided that no compensation would be payable if work was suspended or abandoned on the directions of the authority, while Clause 23 stated that nothing extra would be paid for dewatering and diversion works ordinarily involved in execution.
Clause 34 made the contractor responsible for damage, theft, misuse or pilferage of departmental material after it had been issued.
The court held that the arbitrator's interpretation of these provisions could not be termed an impermissible view. It observed that Clause 21 specifically referred to suspension or abandonment "on the directions of this Authority" and there was no such direction in the present case.
Similarly, the court said Clause 23 could reasonably be read as covering ordinary dewatering required during execution, rather than additional pumping necessitated by departmental delay after trenches had already been dug. Clause 34, it added, dealt specifically with departmental material and could not be expanded into a general bar against claims relating to the contractor's own establishment, fire loss or watch and ward.
On the issue of price escalation, the court noted that the arbitrator had rejected the contractor's claim for 25 per cent escalation and instead adopted the department's own four per cent All India Price Index recommendation.
The court described the quantification as conservative and observed that the arbitrator had linked the escalation to delay attributable to the department. It further relied on Supreme Court precedents recognising an arbitrator's power to award compensation for additional costs arising from a party's failure to fulfil its contractual obligations, even in circumstances where the contract does not contain a specific escalation clause.
The High Court also rejected the argument that the arbitrator's findings should be disturbed because they were based on evidence produced by the contractor. It noted that the tribunal had considered affidavits, expenditure particulars, departmental communications, statements of departmental witnesses and Works Register entries.
The court said contrary assertions by LAWDA had been rejected where they were not supported by contemporaneous records and that re-appraisal of such evidence was beyond the scope of Section 34 proceedings.
The court further observed that the argument concerning the contractor's initial delay had not been ignored. The award had confined compensation to the two defaults found proved against LAWDA -- non-supply of pipes and the subsequent stoppage of work by landowners.
It also rejected the argument that the award became invalid merely because it was delivered beyond the three-month period earlier fixed by the court for completion of arbitration proceedings.
Concluding the matter, Justice Azeem said the award was supported by oral and documentary evidence, the interpretation of the contractual clauses was a possible view, and the escalation had been limited to the department's own four per cent recommendation.
The court held that there was no patent illegality on the face of the award or conflict with public policy and dismissed LAWDA's petition. Any interim directions continuing in the matter were also vacated, while pending applications were disposed of accordingly.

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