What did the Supreme Court say about court interference in arbitral awards?

Courts can interfere only on limited grounds under Sections 30 and 33 of the 1940 Act, such as jurisdictional errors or public policy. They should not re-appreciate evidence.

Did the force majeure clause bar the contractor’s claim?

The clause said Act of God damages cannot be claimed. But there was no proof the flood was an Act of God event, so the bar did not apply.

What happened to the interest awarded by the arbitrator?

The Supreme Court allowed the award but permitted reducing the interest rate from 18% to 1% for fairness.

Which statute governed the challenge to the award?

The Arbitration Act, 1940—specifically Sections 30 and 33—controlled the challenge to set aside the award.

What is the key takeaway for contractors and departments?

Lead clear evidence when relying on force majeure. Arbitrator’s supported findings will usually stand; courts rarely re-examine facts.

State of Uttar Pradesh v. Allied Constructions

Supreme Court of India 2003 Construction Contract (2003) 7 SCC 396 Arbitration 7 min read

Author: Gulzar Hashmi

Location: India

Slug: state-of-uttar-pradesh-v-allied-constructions

Published: 2025-11-02

PRIMARY_KEYWORDS: arbitration award; force majeure; Section 30; Section 33; limited court review SECONDARY_KEYWORDS: Act of God; interest on award; bridge contract; flood; Supreme Court

Quick Summary

A contractor working on a bridge project suffered flood damage and claimed money in arbitration. The department said the contract barred such claims under a force majeure clause. Courts were asked if the award could stand.

Held: The Supreme Court kept the award but allowed a sharp cut in interest. Courts cannot re-try facts. Unless the arbitrator exceeds power or violates public policy, the award stands.

Issues

Can an arbitrator grant damages when the contract appears to bar claims arising from unforeseen natural events?
When can a court set aside an award under Sections 30 and 33 of the Arbitration Act, 1940?

Rules

Sections 30 & 33 (1940 Act): Limited grounds to set aside—jurisdictional error, misconduct, or conflict with public policy.
Judicial Restraint: Courts should not re-assess evidence or the arbitrator’s interpretation if supported by proof.
Force Majeure Clauses: If invoked, the claiming party must prove the event fits the clause (e.g., Act of God).

Gavel and contract with a flood icon representing force majeure

Facts (Timeline)

Bridge Contract

Parties signed a construction contract for a “bridge-cum-fall” at Munda Khera Scape, cost about ₹37,20,000.

Flood (25 Aug 1991)

Flooding hit the area and the worksite while construction was going on.

Arbitration Started

The contractor claimed damages from the flood before an arbitrator.

Award & Interest

Award of ₹12,55,365 plus interest at 18% and 6% for different periods.

Force Majeure Objection

Department objected during execution, citing a clause barring claims due to unforeseen rains/Act of God.

Courts Below

Trial Court and High Court upheld the award; department appealed further.

Timeline graphic: contract, flood, arbitration, court challenge, final decision

Arguments

Appellant (State)

Force majeure clause bars claims for unexpected rains/Act of God.
Award should be set aside; arbitrator ignored contract terms.
Interest granted was excessive.

Respondent (Contractor)

Award is based on evidence; courts cannot re-appreciate facts.
Force majeure not proved by the State as an Act of God event.
Award should be enforced as a decree.

Judgment

The Supreme Court refused to set aside the award. It reiterated the narrow gateway for court interference under the 1940 Act. However, it allowed the interest rate to be reduced from 18% to 1% for part of the period.

Result: Award sustained; interest moderated.

Ratio Decidendi

Court review is confined to Sections 30 and 33—no re-try of facts.
Force majeure bars apply only if the event meets the clause and is proved.
Where the arbitrator’s view is plausible and based on evidence, courts will not interfere.

Why It Matters

This case protects arbitral finality and clarifies force majeure proof. Departments and contractors must keep evidence ready; mere labels like “Act of God” are not enough.

Key Takeaways

Narrow challenge: Use Sections 30/33 only for serious legal faults.
Evidence first: Force majeure needs solid proof of the event and its impact.
Deference: If the arbitrator’s view is supported, courts won’t substitute their own.
Interest review: Appellate courts may tune interest for fairness.

Mnemonic + 3-Step Hook

Mnemonic: “ PROVE OR PAUSE”

PROVE — Prove force majeure with evidence.
OR — Otherwise, the clause won’t save you.
PAUSE — Courts pause before interfering with awards.

Read the clause carefully.
Collect weather/site records to prove the event.
Argue within Sections 30/33 if challenging.

IRAC Outline

Issue

Whether damages can be granted despite a clause barring claims for unforeseen natural events.

Rule

Sections 30/33; limited court interference; force majeure must be proved.

Application

No proof of Act of God flood; arbitrator’s findings backed by material.

Conclusion

Award sustained; interest reduced.

Glossary

Force Majeure: Contract clause excusing performance for extraordinary events beyond control.
Act of God: Natural events (e.g., floods, earthquakes) with no human role; must be strictly proved.
Sections 30 & 33: Provisions in the 1940 Act for setting aside awards and related challenges.