Summary: The High Court of Madras canceled an arbitration decision involving M/s Muthu Construction from Salem and the Union of India, represented by Southern Railway. The court found problems with unfairness and misunderstanding in the arbitration process.
The case is about a contract between M/s Muthu Construction, represented by Mr. Kannan, and the Union of India through the Southern Railway. The contract, known as SA/280, involved various repair works on railway tracks. After disagreements arose about payments, especially regarding the measurement of "track metre," the issue went to arbitration.
M/s Muthu Construction argued against the arbitration decision made on February 25, 2022. The main problem was the measurement unit "track metre" used for payment calculations. M/s Muthu Construction claimed that the measurements for certain items were treated differently, leading to unfair payment calculations.
Justice N. Anand Venkatesh found that the arbitration panel's majority decision misunderstood the contract terms. The panel used different measurement methods for different items, leading to a clear mistake. The court mentioned earlier decisions that said awards must follow contract terms to avoid being overturned.
The arbitrator who disagreed with the majority claimed that the other members were unfair, saying they had already made up their minds and did not openly discuss the case. The court stressed the need for fairness in arbitration, referring to basic rules of fairness.
The judgment mentioned important Supreme Court decisions about fairness and bias. The court emphasized that any bias breaks Section 18 of the Arbitration and Conciliation Act, 1996, which requires fairness and impartiality.
On January 20, 2026, the court canceled the arbitration decision and ordered Southern Railway to pay ₹1,50,000 to M/s Muthu Construction.
This case shows how important it is to have fair arbitration and to strictly follow contract terms in legal disputes.
