Authority: High Court of Judicature at Madras

Order Date: 16 July 2026

Case Overview

  • The appeals (CMA No. 2837 of 2019 and CMA No. 3982 of 2019) challenged the order and decree dated 09‑01‑2019 passed by the Principal District Judge, Salem, in AR.O.P.No. 4/2016.
  • Parties: Union of India (represented by Deputy Chief Engineer, Construction Office, Southern Railway, Podanur, Coimbatore) as appellant in CMA 2837; Savio Industries Structural Corporation (Salem) as appellant in CMA 3982.
  • Under the contract dated 10‑04‑2007, Southern Railway awarded Savio a risk‑and‑cost contract (Agreement No. DCE/CN/SA/15/07) valued at Rs 1,22,74,585 (also referenced as Rs 59.78 lakhs) for construction of a Road Over Bridge at Level Crossing 126, with a 14‑month completion period ending 09‑06‑2008.
  • Work was to be executed in two phases: (i) temporary level crossing and diversion roads (completed by August 2007); (ii) construction of the bridge after traffic diversion.
  • Southern Railway delayed opening the temporary crossing until 12‑04‑2008; Savio received notice of opening on 15‑04‑2008 and was instructed to commence bridge work within two months.
  • Southern Railway issued a 7‑day notice on 17‑04‑2008, a 48‑hour notice on 25‑04‑2008, and terminated the contract on 28‑04‑2008, alleging non‑performance.
  • Savio contended the delay was caused by the Railway’s failure to divert traffic; the Railway argued Savio failed to mobilise foundation materials and abandoned the work.
  • The matter was referred to an Arbitral Tribunal under Clause 64 of the Railway GCC. The Tribunal awarded Rs 5,73,724 (award dated 16‑09‑2015) – granting only Claim 3 (payment for work already done) and rejecting the remaining eight claims.
  • Savio appealed the award under Section 34 of the Arbitration and Conciliation Act, 1996. The District Judge, Salem, held the termination arbitrary and illegal, awarding Claim 1, Claim 2, Claim 6 (Rs 7,61,430) and Claim 9 (Rs 50,000) while rejecting other claims.
  • Both parties appealed the District Judge’s order: Railway in CMA 2837, Savio in CMA 3982.
  • The High Court examined the evidence, noting that the Tribunal correctly found Savio responsible for the delay and that the District Judge exceeded its jurisdiction by re‑evaluating arbitral findings, contrary to Supreme Court precedents (McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181; Ssangyong Engineering & Construction v. NHAI, AIR 2019 SC 5041).
  • The Court reiterated the limited scope of Section 34 courts: they may only correct clerical errors, severable invalid portions, or post‑award interest, not substitute the Tribunal’s factual findings.

Final Outcome

  • CMA 2837 of 2019 (Railway’s appeal) is allowed; the District Judge’s order is set aside.
  • CMA 3982 of 2019 (Savio’s appeal) is dismissed.
  • The arbitral award dated 16‑09‑2015 is restored in its entirety, granting only Claim 3 to Savio.
  • No costs are awarded to either party.
  • The connected miscellaneous petition is closed.

Topics: Arbitration, Railway Contract Dispute