Bengaluru Court Sets Aside ₹9 Crore Arbitral Award Against Karnataka Education Department

A Bengaluru commercial court in Karnataka, India, recently set aside an arbitral award of over ₹9 crore that had been issued against the Karnataka Department of State Education Research and Training (DSERT) in a dispute with Puthur Infotech.

The Bengaluru commercial court, presided over by Judge Vijaya Kumar Rai, ruled that the arbitrator had committed a “patent illegality” by failing to consider the State government's objection that Puthur Infotech's claims were barred by limitation. The court explicitly stated that “the omission to record a finding on limitation is a fundamental defect which goes to the root of the matter and renders the award patently illegal for non-consideration of the defence raised by the respondent.” The dispute originated from a 2013 tender where DSERT contracted Puthur Infotech for maintenance services in 4,396 schools across Karnataka. Puthur Infotech claimed outstanding payments despite receiving ₹5.07 crore out of a ₹7.19 crore contract, leading to arbitration after conciliation failed through the MSME Council. In May 2023, the sole arbitrator, former Himachal Pradesh High Court Chief Justice L Narayana Swamy, had awarded Puthur Infotech ₹7.75 crore, including interest, plus an additional ₹1.27 crore with interest.

This ruling carries significant legal implications for arbitration practice in India, particularly concerning the grounds for challenging and setting aside arbitral awards. It reinforces the principle that an arbitrator's failure to address fundamental legal defences, such as limitation, constitutes a