Sterling Minerals Ltd entered into a contract with Nem Infrastructure Private Ltd for excavation work at a predetermined fixed rate, explicitly excluding any cost escalations. Due to unforeseen market changes, Nem Infras

In this case, the arbitrator awarded additional compensation to Nem Infrastructure Pvt. Ltd., despite the contract with Sterling Minerals Ltd. having a fixed rate clause that explicitly excluded cost escalations. Sterling Minerals challenges the award on the ground that the arbitrator exceeded his jurisdiction by ignoring the contractual provisions. As per the principles laid down in ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 , if an arbitral award is passed in contravention of the terms of the contract, it amounts to a patent illegality and can be set aside under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996 for being in conflict with the public policy of India. Further, in Associate Builders v. DDA, (2015) 3 SCC 49 , the Supreme Court held that while arbitral tribunals are not courts of equity, they are bound by the contract. Any award that ignores or rewrites the terms of the contract amounts to a jurisdictional error and violates the public policy ground of patent illegality. Even in Rajasthan State Mines and Minerals Ltd. v. Eastern Engineering Enterprises, (1999) 9 SCC 283 , the Court held that arbitrators derive their jurisdiction from the contract and must act within its four corners. They cannot award a claim that is expressly barred by the contract. In the present case, the contract between Sterling Minerals and Nem Infrastructure clearly excluded any cost escalations. The arbitrator's award of additional compensation overrides this express bar, amounting to a disregard of the contractual limitation. Thus, the arbitrator has exceeded the scope of authority granted under the arbitration agreement. In light of the above precedents, the contention of Sterling Minerals Ltd. is justified. The arbitrator acted beyond jurisdiction, and the award is liable to be set aside under Section 34 on the ground of patent illegality and violation of public policy.