Delhi High Court
Ramasethu Infrastructure vs Indian Railway Walfare Organisation on 24 March, 2026
Author: Subramonium Prasad
Bench: Subramonium Prasad
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 24rd MARCH, 2026
IN THE MATTER OF:
+ O.M.P. (COMM) 348/2020
RAMASETHU INFRASTRUCTURE .....Petitioner
Through: Mr. Gireesh Kumar and Ms. Sneha
Mathew, Advocates,
versus
INDIAN RAILWAY WALFARE ORGANISATION .....Respondent
Through: Mr. Sulaiman Mohd Khan, Ms. Taiba
Khan, Mr. Gopeshwer Singh Chandel,
Mr. Abdul Bari Khan, Ms. Aditi
Chaudhary and Mr. Chandra Bose,
Advocates.
CORAM:
HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
JUDGMENT
1. The Petitioner seeks to challenge the Award dated 23.12.2014 passed
by the Arbitral Tribunal while adjudicating the disputes between the parties
under a contract for construction of 140 dwelling units comprising of 20
units of Type A (Type I) (only ground floor), 68 units Type-B (Type II)
(only ground floor), 30 units Type C (Type III) (G-FF) and 22 units Type –
D (Type IV) (G-FF) Terrace, stair room in Ambattum village near T.I. Cycle
factory, Chennai – 600053, including all Civil, internal electrical, plumbing,
sewerage, roads, pavements, drains, U/G water tank, sub-station, Boundary
wall and gate etc. (hereinafter referred to as “tender work”) at quoted rates
or total cost of Rs.16,72,35,219/- on the terms and conditions given in the
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tender documents as filled in by the Petitioner (formerly known as M/s APR
Projects Private Limited).
2. The facts in brief leading to the filing of the present Petition are as
under:
a) The Petitioner herein is a private limited company under the Indian
Companies Act, 1956 engaged in the business of development of
infrastructure and other allied activities. The Petitioner company was
formerly known as M/s APR Projects Private Limited.
b) It is stated that on 29.07.2011, the Respondent herein issued a tender
notice for the tender work. Pursuant thereto, on 01.08.2011, the
Respondent invited bids for the tender work. The project cost was
estimated at Rs.14,50,00,000/- as of 01.08.2011 and the last date for
submission of bids was 20.09.2011.
c) It is stated that the Petitioner was the successful bidder of the tender
invited by the Respondent for the tender work. The Petitioner quoted
Rs.16,72,35,219/- as bid amount and the same was accepted by the
Respondent.
d) Thereafter, the Respondent vide Letter dated 27.12.2011, accepted the
bid of the Petitioner and informed the Petitioner that the completion
period of the project is 24 months and also informed that the Earnest
Money Deposit (“EMD”) of Rs.5,00,000/- paid by the Petitioner had
been retained and converted into security deposit. Further, the balance
amount shall be recovered by the Respondent in terms of Clause
6.2.17 of the tender document.
e) It is stated that the Respondent further requested the Petitioner to
submit a bank guarantee for an amount of Rs.83,62,000/- as
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performance guarantee before signing the agreement. The same was
submitted by the Petitioner on 12.01.2012. Thus, the total amount
deposited by the Petitioner with the Respondent totalled to
Rs.88,62,000/- (including EMD).
f) It is stated that except the Letter of Intent dated 27.12.2011, no formal
agreement was entered into between the parties. Further, in the Letter
of Intent, it was stated that the contract document shall be prepared by
the General Manager (SZ) IRWO, Chennai and the Petitioner shall be
required to sign the document on hearing from him. Thereafter, the
Petitioner mobilized administrative staffs in the month of January,
2012 and officially started commencing the tender work at the project
site from 24.02.2012.
g) It is stated that immediately after the commencement of the tender
work, the local residents started raising objections and obstructing the
work at the project site. The Petitioner sent communications dated
05.03.2012 and 05.04.2012 respectively to the Respondent expressing
their inability to continue the work due to the hostile attitude of the
local public and non-availability of the encumbrance free site.
Whereas, the Respondent after taking into account the
communications of the Petitioner, met with the District Collector, and
was advised that the construction could restart. The same was
informed by the Respondent to the Petitioner. In view of this
statement, the Petitioner on 07.04.2012 started the earthwork for the
foundation of Type ‘D’ units after mobilisation.
h) Material on record indicates that the Ambattur Zone Residents
Welfare Association filed W.P.(C) 12929/2012 in the High Court of
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Madras challenging the project. The High Court of Madras issued an
order directing status quo because of which the work came to a
standstill.
i) Thereafter, the Petitioner wrote a letter to the Respondent requesting
for termination of the contract and also sought for return of the bank
guarantees given by the Petitioner which is part of the tender
conditions. A further communication was made by the Petitioner to
the Respondent stating that they are winding up their establishment at
the site.
j) The Respondent did not agree to the said requests and informed the
Petitioner that the contract is still alive and asked the Petitioner to
remain at site.
k) The Petitioner thereafter invoked the force majeure clause in the
contract and requested the closure of the contract vide communication
dated 28.06.2012.
l) Material on record indicates that the Respondent presented a draft
contract agreement extending the time period which was not accepted
by the Petitioner.
m) The High Court of Madras dismissed the writ petition and vacated the
status quo order on 03.12.2012. Material on record indicates that the
Respondent directed the Petitioner to re-start the project. The
Respondent further directed the Petitioner to sign a fresh agreement.
The Petitioner was not willing to re-start the work fearing backlash
from the local people.
n) Thereafter on 26.12.2012, the Respondent sent a 7 days’ notice to the
Petitioner to commence work stating that if the Petitioner fails to
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commence the work within 7 days, the Respondent would be
compelled to rescind the contract and forfeit the performance
guarantee and the EMD.
o) Since the Petitioner did not commence the work, the Respondent
issued another notice dated 09.01.2013 wherein the Respondent
directed the Petitioner to start work in 48 hours in terms of Clause
6.8.3 of the tender document stating that on expiry of 48 hours, the
contract would be deemed to be rescinded if the Petitioner does not
commence work within 48 hours and the performance guarantee
would also be encashed and the EMD given would stand forfeited.
This letter was replied to by the Petitioner on 12.01.2013.
p) The contract with the Petitioner was formally terminated by the
Respondent and the Petitioner’s bank guarantee was invoked. The
Respondent awarded the balance work to a new agency.
q) The Respondent appointed the Arbitral Tribunal to adjudicate the
disputes between the parties. It is pertinent to mention that since the
Arbitral Tribunal has been constituted prior to 2015, the Petitioner has
not raised the issue of unilateral appointment of the Arbitrator.
r) The pleadings were completed and the Award has been passed by the
Arbitral Tribunal on 23.12.2014. Before the Arbitral Tribunal, the
Petitioner had raised the issue of force majeure which was dealt by
the Arbitral Tribunal in its Award. The claims of the Petitioner were
rejected.
s) The counter claims of the Respondent had also been rejected. The
Petitioner has approached this Court by filing the instant petition
challenging the Award dated 23.12.2014.
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3. At the outset it is pertinent to mention that the only issue raised before
this Court is as to whether the action of the Petitioner in discontinuing the
work and demanding foreclosure of the work and applications was justified
or not.
4. The said issue has been dealt with by the Arbitral Tribunal in
Paragraph 5 of the Award. The Tribunal after considering the clauses of the
contract and hearing the arguments of both sides came to a conclusion that
the disturbances at the site cannot be termed as “hostilities” and acts of
“public enmity” as provided in Clause 6.2.25 and do not qualify under
Clause 6.2.25 as the condition of force majeure. It has also been held by the
Arbitral Tribunal that the stand of the Respondent rejecting the claim of the
Petitioner for foreclosing the contract is justified. The Arbitral Tribunal was
of the opinion that the refusal of the Petitioner to start the work is clearly
abandonment of work and after waiting for sufficient time, the Respondent
proceeded for determination of the contract under Clause 6.8 of the tender
conditions. The challenge by the Petitioner in the present petition is
primarily on this finding of the Arbitral Tribunal. It is stated that no other
arguments had been advanced in the Court.
5. Learned Counsel for the Petitioner strenuously contends that the
condition on the site was such that it was impossible for the Petitioner to
continue with the work. The local residents were very hostile with the
Petitioner for the work being conducted and it was impossible to perform the
contract. He also strenuously contends that the Arbitral Tribunal has
interpreted the force majeure clause in a narrow manner which is absolutely
perverse and the same cannot be accepted. He therefore states that the award
deserves to be set aside.
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6. Per contra, learned Counsel for the Respondent, supports the findings
of the Arbitral Tribunal.
7. Heard the learned Counsels for the parties and perused the material on
record.
8. Clause 6.2.25 of the tender document deals with the force majeure
clause and reads as under:-
“6.2.25 Force Majeure Clause
i) If at any time during the continuance of this
contract the performance in whole or part by either
party of any obligation under this contract shall be
prevented or delayed by reasons of any war, hostility,
acts of Public enemy, Civil commotion, sabotage,
serious losses or damage by fire, explosion,
epidemic, strike, lock-out or acts of God (hereinafter
referred to as ‘Event’) provided notice of the
happening of any such event is given by either party
to the other within 10 days from the date of
occurrence thereof, neither party shall by reasons of
such events be entitled to terminate this contract, nor
shall either party have any claim for damages against
the other in respect of such non performance or delay
in performance, and works under the contract shall
be resumed as soon as practicable after such event
has come to an end or ceased to exist and decision of
the engineer as to whether the works have been so
resumed or not shall be final and conclusive;
provided further that if the performance, in whole or
in part of any obligation under this contract is
prevented or delayed by reasons of any such event for
a period exceeding 90 days, either party may at its
option terminate the contract by giving notice to other
party.
ii) In case of such event for which the Contractor has
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given timely written notice thereof to the Engineer,
Engineer shall make a fair and reasonable extension
of time for completion of the contract works. The
Contractor shall nevertheless constantly use his
endeavour to prevent delays and shall do all that may
reasonably be required to the satisfaction of the
Engineer.
iii) The contractor’s right to an extension of time limit
for completion of the work in the above mentioned
cases is subject to the following procedures.
a) That within 10 days after the occurrence of case of
FORCE MAJEURE but before the expiry of the
stipulated date of completion, he informs the Engineer
and IRWO in writing that he considers himself
entitled to an extension of the time limit.
b) That, he produces evidence of the date of
occurrence and the duration of the FORCE
MAJEURE in an adequate manner by means of
documents drawn up by reasonable authorities.
c) That, he proves that the said conditions have
actually interfered with the carrying out of the
contract.
d) That, he proves that the delay incurred is not due to
his own action or lack of action.
In the cases mentioned above for delays in completion
of the works, such failures or delays shall in no way
affect or vitiate the contract or alter the character
thereof or entitle the contractor to damage or
compensation thereof but the contractor shall apply
for extension of time at least 45 days before the
completion of the contract period and IRWO shall
grant such extension or extension of the completion
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dates as shall appear to the Engineer reasonable in
the circumstances and his decision in the matter will
be final and binding on the contractor.
e) In all other cases, IRWO may grant extension of
time with levy of compensation against legitimate of
damages as per clause 6.2.25 (a) and (b) and without
escalation (i.e. original quoted rates will be paid.)”
(emphasis supplied)
9. The Arbitral Tribunal has gone into the definition of force majeure by
referring to various dictionary meanings. The Tribunal has concluded as
under:-
“5.3.4 Event of “Hostility” and “Public Enmity-The
term hostility is defined in Black’s law dictionary as
state of enmity between individuals or nations. An act
or series of acts displaying antagonism, hostile act or
state acts of war. The AT is of the opinion that there
was no enmity between the Respondents and the
R.W.A. as such. The action of nuisance, threats and
disruption of work by R.W.A was not by enmity but
motivated simply to scare away the contractor so that
no construction could take place on the plot and they
continue to use the plot as playground. Even in this
the R.W.A did not succeed as the work continued as
per Claimant’s own admission (Para 5.2.4 above).
Hence the event of Hostility is not attracted. Similarly
the R.W.A, being a private body, cannot be termed as
“Public Enemy”. Thus the AT is of the view that the
Force Majeure clause is not attracted.
5.3.5 Notwithstanding the conclusion that the Force
Majeure clause is not attracted, even if it is assumed
that the event of Hostility did exist, it lasted only for
40 days i.e. from 22-03-2012 to 05-05-2012. After 05-
05-2012 the work was stayed as per the order of H.C.
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been arrived at by adding 40 days of hostility and 50
days (from 05-05-2012 to 25-06-2012) of the Stay
order and asked for termination of the contract. For
the 50 days period from 05-05-2012 to 25-06-2012
there was neither any hostility nor the period under
stay order from the Court is covered as an event
under Force Majeure clause.
5.3.6 Thus the request of termination of the contract
by the Claimant was rightly rejected by the
Respondent.
5.3.7 The stay by the High Court was vacated on 03-
12-2012 and the Respondent advised the Claimant to
restart the work. The claimant advised the
Respondent, vide its letter dated 24-12-2012, that
after examining the matter in detail they have
apprehension that the miscreants are planning to
attack again for stoppage of work. Hence they regret
to inform that they are not in a position to carry out
work (Para 5.2.13). The Respondent, treating the
refusal to restart work as amounting to abandoning
the work by the Claimant, proceeded to determine /
terminate the Contract as per Clause 6.8 of the
Tender conditions and forfeited the security deposit of
Rs. 5 Lakh and P.B.G of Rs. 83.62 Lakh by encashing
the same.
5.3.8 The AT is of the view that the apprehension of
the Claimant was a mere presumption which had no
basis, nor based on any evidence or hard facts and
the Respondent was within its right to terminate the
contract and forfeit the security deposit & encash the
Performance Guarantee.
5.3.9 In regard to discharge of reciprocal obligation,
we uphold the contention of the Respondent that theSignature Not Verified
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ownership of land by them was never disputed and
that has also been confirmed by the High Court of
Chennai when they dismissed the writ petition filed by
the RWA. The land was handed over to the Claimant
free of all encumbrances for starting the work and
when the disturbance took place the Respondent was
fully involved in getting it removed with the help
Executive & Judicial authorities.
53.10 Thus the Claims of the Claimant are rejected
and the award is Nil.”
10. It is now well settled that the interpretation of a contract lies
predominantly in the domain of the Arbitral Tribunal.
11. The Apex Court in National Highways Authority of India v. ITD
Cementation India Limited, 2015 (14) SCC 21, has held that the
interpretation of the terms of the contract is the jurisdiction of the Arbitrator.
The relevant portion of the said Judgment reads as under:-
“21. Since it was argued that the Arbitral Tribunal
disregarded the material terms of the contract while
making its assessment and failed to consider the
impact of sub-clauses 70.1 to 70.3(B) and exclusion in
Clause 70.8, the law on the point needs to be briefly
adverted to. In McDermott International v. Burn
Standard Co. Ltd. [(2006) 11 SCC 181] this Court
held as under: (SCC pp. 225-26, paras 112-13)“112. It is trite that the terms of the contract can
be express or implied. The conduct of the parties
would also be a relevant factor in the matter of
construction of a contract. The construction of the
contract agreement is within the jurisdiction of
the arbitrators having regard to the wide nature,
scope and ambit of the arbitration agreement and
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in passing the award by taking into consideration
the conduct of the parties. It is also trite that
correspondences exchanged by the parties are
required to be taken into consideration for the
purpose of construction of a contract.
Interpretation of a contract is a matter for the
arbitrator to determine, even if it gives rise to
determination of a question of law. [See Pure
Helium India (P) Ltd. v. Oil & Natural Gas
Commission [(2003) 8 SCC 593] and D.D. Sharma
v. Union of India [(2004) 5 SCC 325] .]
113. Once, thus, it is held that the arbitrator had
the jurisdiction, no further question shall be raised
and the court will not exercise its jurisdiction
unless it is found that there exists any bar on the
face of the award.”
xxx
23. In Sumitomo Heavy Industries Ltd. v. ONGC Ltd.
[(2010) 11 SCC 296 : (2010) 4 SCC (Civ) 459] , the
Court held: (SCC p. 313, para 43)
“43. … The umpire has considered the fact
situation and placed a construction on the clauses
of the agreement which according to him was the
correct one. One may at the highest say that one
would have preferred another construction of
Clause 17.3 but that cannot make the award in
any way perverse. Nor can one substitute one’s
own view in such a situation, in place of the one
taken by the umpire, which would amount to
sitting in appeal. As held by this Court in Kwality
Mfg. Corpn. v. Central Warehousing Corpn.
[(2009) 5 SCC 142 : (2009) 2 SCC (Civ) 406] the
Court while considering challenge to arbitral
award does not sit in appeal over the findings and
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decision of the arbitrator, which is what the High
Court has practically done in this matter. The
umpire is legitimately entitled to take the view
which he holds to be the correct one after
considering the material before him and after
interpreting the provisions of the agreement. If he
does so, the decision of the umpire has to be
accepted as final and binding.”
xxx
25. It is thus well settled that construction of the terms
of a contract is primarily for an arbitrator to decide.
He is entitled to take the view which he holds to be the
correct one after considering the material before him
and after interpreting the provisions of the contract.
The Court while considering challenge to an arbitral
award does not sit in appeal over the findings and
decisions unless the arbitrator construes the contract
in such a way that no fair-minded or reasonable
person could do.” (emphasis supplied)
12. Similarly, the Apex Court in National Highways Authority of India v.
Hindustan Construction Company Limited, 2024 (6) SCC 809, has held as
under:-
“16. Now, we turn to the issue of whether the claim
for the construction of embankment forms part of the
activity of clearing and grubbing and was not payable
as embankment work. We may note here that two
expert members of the Arbitral Tribunal held in
favour of the respondent on this point, whereas the
third member dissented. There cannot be any dispute
that as far as the construction of the terms of a
contract is concerned, it is for the Arbitral Tribunal to
adjudicate upon. If, after considering the material on
record, the Arbitral Tribunal takes a particular view
on the interpretation of the contract, the Court underSignature Not Verified
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Section 34 does not sit in appeal over the findings of
the arbitrator.”
13. Applying the said law to the facts of this case, it cannot be said that
the interpretation given by the Arbitral Tribunal is so perverse that it shocks
the conscience of the Court. The Arbitral Tribunal has applied literal
construction of the contract which is permissible. The Arbitral Tribunal has
also gone with the facts of the case to hold that the conditions were not such
which would come within the definition of force majeure. It was also held
on the facts that the work was not kept in abeyance beyond 90 days.
14. The parameters of Section 34 of the Arbitration & Conciliation Act
have been laid down succinctly by the Apex Court in several judgments. The
Apex Court has time and again held that an Award can be challenged only if
it is in violation of the principles of natural justice; or it disregards orders of
superior courts in India or the binding effect of the judgment of a superior
court; or it is violating law of India linked to public good or public interest,
are considered contravention of the fundamental policy of Indian law. The
Award can only be challenged if it is in contravention with the fundamental
policy of Indian law; or in conflict with the ‘most basic notions of morality’;
or in violation of principles of natural justice. Similarly, in order to bring a
challenge under the concept ‘most basic notions of morality and justice’, the
Award must have been rendered without following elementary principles of
justice and that violation would be such that it will shock the conscience of a
legally trained mind. Awards are never set aside just because a different or
better view is possible.
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15. The Apex Court in DMRC Ltd. v. Delhi Airport Metro Express (P)
Ltd., (2024) 6 SCC 357, has brought out various grounds for interference in
the award which reads as under:
“34. The contours of the power of the competent court
to set aside an award under Section 34 has been
explored in several decisions of this Court. In addition
to the grounds on which an arbitral award can be
assailed laid down in Section 34(2), there is another
ground for challenge against domestic awards, such as
the award in the present case. Under Section 34(2-A)
of the Arbitration Act, a domestic award may be set
aside if the Court finds that it is vitiated by “patent
illegality” appearing on the face of the award.
35. In Associate Builders v. DDA [Associate Builders
v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] ,
a two-Judge Bench of this Court held that although the
interpretation of a contract is exclusively within the
domain of the arbitrator, construction of a contract in
a manner that no fair-minded or reasonable person
would take, is impermissible. A patent illegality arises
where the arbitrator adopts a view which is not a
possible view. A view can be regarded as not even a
possible view where no reasonable body of persons
could possibly have taken it. This Court held with
reference to Sections 28(1)(a) and 28(3), that the
arbitrator must take into account the terms of the
contract and the usages of trade applicable to the
transaction. The decision or award should not be
perverse or irrational. An award is rendered perverse
or irrational where the findings are:
(i) based on no evidence;
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(ii) based on irrelevant material; or
(iii) ignores vital evidence.
36. Patent illegality may also arise where the award is
in breach of the provisions of the arbitration statute, as
when for instance the award contains no reasons at all,
so as to be described as unreasoned.
37. A fundamental breach of the principles of natural
justice will result in a patent illegality, where for
instance the arbitrator has let in evidence behind the
back of a party. In the above decision, this Court in
Associate Builders v. DDA [Associate Builders v.
DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204]
observed : (SCC pp. 75 & 81, paras 31 & 42)
“31. The third juristic principle is that a decision
which is perverse or so irrational that no
reasonable person would have arrived at the same
is important and requires some degree of
explanation. It is settled law that where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account
something irrelevant to the decision which it
arrives at; orSignature Not Verified
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(iii) ignores vital evidence in arriving at its
decision, such decision would necessarily be
perverse.
***
42.1. … 42.2. (b) A contravention of the
Arbitration Act itself would be regarded as a
patent illegality — for example if an arbitrator
gives no reasons for an award in contravention of
Section 31(3) of the Act, such award will be liable
to be set aside.” (emphasis supplied)
38. In Ssangyong Engg. & Construction Co. Ltd. v.
NHAI [Ssangyong Engg. & Construction Co. Ltd. v.
NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] ,
a two-Judge Bench of this Court endorsed the position
in Associate Builders [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , on the
scope for interference with domestic awards, even after
the 2015 Amendment : (Ssangyong Engg. &
Construction Co. case [Ssangyong Engg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 :
(2020) 2 SCC (Civ) 213] , SCC p. 171, paras 40-41)
“40. The change made in Section 28(3) by the
Amendment Act really follows what is stated in
paras 42.3 to 45 in Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204] , namely, that the construction of the
terms of a contract is primarily for an arbitrator
to decide, unless the arbitrator construes the
contract in a manner that no fair-minded or
reasonable person would; in short, that theSignature Not Verified
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arbitrator’s view is not even a possible view to
take. Also, if the arbitrator wanders outside the
contract and deals with matters not allotted to
him, he commits an error of jurisdiction. This
ground of challenge will now fall within the new
ground added under Section 34(2-A).
41. … Thus, a finding based on no evidence at all
or an award which ignores vital evidence in
arriving at its decision would be perverse and
liable to be set aside on the ground of patent
illegality. Additionally, a finding based on
documents taken behind the back of the parties by
the arbitrator would also qualify as a decision
based on no evidence inasmuch as such decision
is not based on evidence led by the parties, and
therefore, would also have to be characterised as
perverse.” (emphasis supplied)
39. In essence, the ground of patent illegality is
available for setting aside a domestic award, if the
decision of the arbitrator is found to be perverse, or so
irrational that no reasonable person would have
arrived at it; or the construction of the contract is such
that no fair or reasonable person would take; or, that
the view of the arbitrator is not even a possible view.
[Patel Engg. Ltd. v. North Eastern Electric Power
Corpn. Ltd., (2020) 7 SCC 167 : (2020) 4 SCC (Civ)
149.] A “finding” based on no evidence at all or an
award which ignores vital evidence in arriving at its
decision would be perverse and liable to be set aside
under the head of “patent illegality”. An award
without reasons would suffer from patent illegality.
The arbitrator commits a patent illegality by deciding
a matter not within his jurisdiction or violating a
fundamental principle of natural justice.
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40. A judgment setting aside or refusing to set aside an
arbitral award under Section 34 is appealable in the
exercise of the jurisdiction of the court under Section
37 of the Arbitration Act. It has been clarified by this
Court, in a line of precedent, that the jurisdiction
under Section 37 of the Arbitration Act is akin to the
jurisdiction of the Court under Section 34 and
restricted to the same grounds of challenge as Section
34. [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163,
para 14 : (2019) 2 SCC (Civ) 293; Konkan Railway
Corpn. Ltd. v. Chenab Bridge Project Undertaking,
(2023) 9 SCC 85, para 18 : (2023) 4 SCC (Civ) 458 :
2023 INSC 742, para 14.]
41. In the statutory scheme of the Arbitration Act, a
recourse to Section 37 is the only appellate remedy
available against a decision under Section 34. The
Constitution, however, provides the parties with a
remedy under Article 136 against a decision rendered
in appeal under Section 37. This is the discretionary
and exceptional jurisdiction of this Court to grant
special leave to appeal. In fact, Section 37(3) of the
Arbitration Act expressly clarifies that no second
appeal shall lie from an order passed under Section
37, but nothing in the section takes away the
constitutional right under Article 136. Therefore, in a
sense, there is a third stage at which this Court tests
the exercise of jurisdiction by the courts acting under
Section 34 and Section 37 of the Arbitration Act.”
16. In its latest Judgment, the Apex Court in OPG Power Generation
Limited v. Enexio Power Cooling Solutions India Private Limited & Anr.,
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has succinctly laid down as to what is the meaning of the expression ‘in
contravention with the fundamental policy of India law’ and ‘in conflict with
the most basic notions of morality and justice’. The Apex Court in the said
Judgment has observed as under:-
“51. As discussed above, till the 2015 Amendment the
expression “in contravention with the fundamental
policy of Indian law” was not found in the 1996 Act.
Yet, in Renusagar [Renusagar Power Co.
Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] ,
in the context of enforcement of a foreign award, while
construing the phrase “contrary to the public policy”,
this Court held that for a foreign award to be contrary
to public policy mere contravention of law would not
be enough rather it should be contrary to:
(a) the fundamental policy of Indian law; and/or
(b) the interest of India; and/or
(c) justice or morality.
52. In the judicial pronouncements that
followed Renusagar [Renusagar Power Co.
Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] ,
already discussed above, the domain of what could be
considered contrary to the “public policy of
India”/”fundamental policy of Indian law” expanded,
resulting in much greater interference with arbitral
awards than what the lawmakers intended. This led to
the 2015 Amendment in the 1996 Act.
53. In Ssangyong Engg. [Ssangyong Engg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 :
(2020) 2 SCC (Civ) 213] , this Court dealt with the
effect of the 2015 Amendment. While doing so, it took
note of a supplementary report of February 2015 of the
Law Commission of India made in the context of the
proposed 2015 Amendments. The said supplementary
report has been extracted in para 30 of that judgment.
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The key features of it are summarised below:
(a) Mere violation of law of India would not be a
violation of public policy in cases of international
commercial arbitrations held in India.
(b) The proposed 2015 Amendments in the 1996 Act
[i.e. in Sections 34(2)(b)(ii) and 48(2)(b) including
insertion of sub-section (2-A) in Section 34] were on
the assumption that the terms, such as,
“fundamental policy of Indian law” or conflict with
“most basic notions of morality or justice” would
not be widely construed.
(c) The power to review an award on merits is
contrary to the object of the Act and international
practice.
(d) The judgment in Western Geco [ONGC
Ltd. v. Western Geco International Ltd., (2014) 9
SCC 263 : (2014) 5 SCC (Civ) 12] would expand the
court’s power, contrary to international practice.
Hence, a clarification needs to be incorporated to
ensure that the term “fundamental policy of Indian
law” is narrowly construed. The applicability
of Wednesbury [Associated Provincial Picture
Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223
(CA)] principles to public policy will open the
floodgates. Hence, Explanation 2 to Section
34(2)(b)(ii) has been proposed.
54. After taking note of the supplementary report, the
Statement of Objects and Reasons of the 2015
Amendment Act, and the amended provisions of
Sections 28, 34 and 48, this Court held : (Ssangyong
Engg. case [Ssangyong Engg. & Construction Co.
Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ)
213] , SCC pp. 169-71 & 194, paras 34, 37-41 & 69)
“34. What is clear, therefore, is that the expression
“public policy of India”, whether contained in Section
34 or in Section 48, would now mean the “fundamental
policy of Indian law” as explained in paras 18 and 27
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of Associate Builders [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] i.e. the
fundamental policy of Indian law would be relegated
to Renusagar [Renusagar Power Co. Ltd. v. General
Electric Co., 1994 Supp (1) SCC 644] understanding
of this expression. This would necessarily mean
that Western Geco [ONGC Ltd. v. Western Geco
International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC
(Civ) 12] expansion has been done away with. In
short, Western Geco [ONGC Ltd. v. Western Geco
International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC
(Civ) 12] , as explained in paras 28 and 29
of Associate Builders [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , would no
longer obtain, as under the guise of interfering with an
award on the ground that the arbitrator has not
adopted a judicial approach, the court’s intervention
would be on the merits of the award, which cannot be
permitted post amendment. However, insofar as
principles of natural justice are concerned, as
contained in Sections 18 and 34(2)(a)(iii) of the 1996
Act, these continue to be the grounds of challenge of an
award, as is contained in para 30 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC 49
: (2015) 2 SCC (Civ) 204] .
35.-36.***
37. Insofar as domestic awards made in India are
concerned, an additional ground is now available
under sub-section (2-A), added by the Amendment
Act, 2015 to Section 34. Here, there must be patent
illegality appearing on the face of the award, which
refers to such illegality as goes to the root of the
matter, but which does not amount to mere
erroneous application of the law. In short, what is
not subsumed within “the fundamental policy of
Indian law”, namely, the contravention of a statute
not linked to public policy or public interest, cannot
be brought in by the backdoor when it comes to
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setting aside an award on the ground of patent
illegality.
38. Secondly, it is also made clear that
reappreciation of evidence, which is what an
appellate court is permitted to do, cannot be
permitted under the ground of patent illegality
appearing on the face of the award.
39. To elucidate, para 42.1 ofAssociate
Builders [Associate Builders v. DDA, (2015) 3 SCC
49 : (2015) 2 SCC (Civ) 204] , namely, a mere
contravention of the substantive law of India, by
itself, is no longer a ground available to set aside an
arbitral award. Para 42.2 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC
49 : (2015) 2 SCC (Civ) 204] , however, would
remain, for if an arbitrator gives no reasons for an
award and contravenes Section 31(3) of the 1996
Act, that would certainly amount to a patent
illegality on the face of the award.
40. The change made in Section 28(3) by the
Amendment Act really follows what is stated in
paras 42.3 to 45 in Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204] , namely, that the construction of the
terms of a contract is primarily for an arbitrator to
decide, unless the arbitrator construes the contract
in a manner that no fair-minded or reasonable
person would; in short, that the arbitrator’s view is
not even a possible view to take. Also, if the
arbitrator wanders outside the contract and deals
with the matters not allotted to him, he commits an
error of jurisdiction. This ground of challenge will
now fall within the new ground added under Section
34(2-A).
41. What is important to note is that a decision
which is perverse, as understood in paras 31 and 32
ofAssociate Builders [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , while
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no longer being a ground for challenge under
“public policy of India”, would certainly amount to
a patent illegality appearing on the face of the
award. Thus, a finding based on no evidence at all
or an award which ignores vital evidence in arriving
at its decision would be perverse and liable to be set
aside on the ground of patent illegality. Additionally,
a finding based on documents taken behind the back
of the parties by the arbitrator would also qualify as
a decision based on no evidence inasmuch as such
decision is not based on evidence led by the parties,
and therefore, would also have to be characterised
as perverse.
***
69. We therefore hold, following the aforesaid
authorities, that in the guise of misinterpretation of
the contract, and consequent “errors of
jurisdiction”, it is not possible to state that the
arbitral award would be beyond the scope of
submission to arbitration if otherwise the aforesaid
misinterpretation (which would include going
beyond the terms of the contract), could be said to
have been fairly comprehended as “disputes” within
the arbitration agreement or which were referred to
the decision of the arbitrators as understood by the
authorities above. If an arbitrator is alleged to have
wandered outside the contract and dealt with
matters not allotted to him, this would be a
jurisdictional error which could be corrected on the
ground of “patent illegality”, which, as we have
seen, would not apply to international commercial
arbitrations that are decided under Part II of the
1996 Act. To bring in by the backdoor grounds
relatable to Section 28(3) of the 1996 Act to be
matters beyond the scope of submission to
arbitration under Section 34(2)(a)(iv) would not be
permissible as this ground must be construed
narrowly and so construed, must refer only to
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matters which are beyond the arbitration agreement
or beyond the reference to the Arbitral Tribunal.”
(emphasis supplied)
55. The legal position which emerges from the
aforesaid discussion is that after “the 2015
Amendments” in Section 34(2)(b)(ii) and Section
48(2)(b) of the 1996 Act, the phrase “in conflict with
the public policy of India” must be accorded a
restricted meaning in terms of Explanation 1. The
expression “in contravention with the fundamental
policy of Indian law” by use of the word
“fundamental” before the phrase “policy of Indian
law” makes the expression narrower in its application
than the phrase “in contravention with the policy of
Indian law”, which means mere contravention of law is
not enough to make an award vulnerable. To bring the
contravention within the fold of fundamental policy of
Indian law, the award must contravene all or any of
such fundamental principles that provide a basis for
administration of justice and enforcement of law in this
country.
56. Without intending to exhaustively enumerate
instances of such contravention, by way of illustration,
it could be said that:
(a) violation of the principles of natural justice;
(b) disregarding orders of superior courts in India or
the binding effect of the judgment of a superior court;
and
(c) violating law of India linked to public good or
public interest, are considered contravention of the
fundamental policy of Indian law.
However, while assessing whether there has been a
contravention of the fundamental policy of Indian law,
the extent of judicial scrutiny must not exceed the limit
as set out in Explanation 2 to Section 34(2)(b)(ii).
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Most basic notions of morality and justice
57. In Renusagar [Renusagar Power Co.
Ltd. v. General Electric Co., 1994 Supp (1) SCC 644]
this Court held that an arbitral award is in conflict
with the public policy of India if it is, inter alia,
contrary to “justice and morality”. Explanation 1,
inserted by the 2015 Amendment, makes it clear that an
award is in conflict with the public policy of India,
inter alia, if it conflicts with the “most basic notions of
morality or justice”.
Justice
58. Justice is the virtue by which the
society/court/Tribunal gives a man his due, opposed to
injury or wrong. Justice is an act of rendering what is
right and equitable towards one who has suffered a
wrong. Therefore, while tempering justice with mercy,
the court must be very conscious, that it has to do
justice in exact conformity with some obligatory law,
for the reason that human actions are found to be just
or unjust on the basis of whether the same are in
conformity with, or in opposition to, the law [Union of
India v. Ajeet Singh, (2013) 4 SCC 186, para 26 :
(2013) 2 SCC (Cri) 347 : (2013) 2 SCC (L&S) 321] .
Therefore, in “judicial sense”, justice is nothing more
nor less than exact conformity to some obligatory law;
and all human actions are either just or unjust as they
are in conformity with, or in opposition to, the law [P.
Ramanatha Aiyar’s Advanced Law Lexicon, 6th Edn.,
Vol. III, p. 2621.] .
59. But, importantly, the term “legal justice” is not
used in Explanation 1, therefore simple conformity or
non-conformity with the law is not the test to determine
whether an award is in conflict with the public policy
of India in terms of Explanation 1. The test is that it
must conflict with the most basic notions of justice. For
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lack of any objective criteria, it is difficult to
enumerate the “most basic notions of justice”. More
so, justice to one may be injustice to another. This
difficulty has been acknowledged by many renowned
jurists, as is reflected in the observations of this Court
in State (NCT of Delhi) v. Gurdip Singh Uban [State
(NCT of Delhi) v. Gurdip Singh Uban, (2000) 7 SCC
296] , extracted below : (SCC p. 310, para 23)
“23. The words “justice” and “injustice”, in our view,
are sometimes loosely used and have different
meanings to different persons particularly to those
arrayed on opposite sides. “One man’s justice is
another’s injustice” [Ralph Waldo Emerson
: Essays (1803-82), First Series, 1841, “Circles”].
Justice Cardozo said:’The web is entangled and
obscure, shot through with a multitude of shades and
colors, the skeins irregular and broken. Many hues that
seem to be simple, are found, when analysed, to be a
complex and uncertain blend. Justice itself, which we
are wont to appeal to as a test as well as an ideal, may
mean different things to different minds and at different
times. Attempts to objectify its standards or even to
describe them have never wholly succeeded.’ (Selected
Writings of Cardozo, pp. 223-224, Falcon
Publications, 1947).”
(emphasis in original)
60. In Associate Builders [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , while this
Court was dealing with the concept “public policy of
India”, in the context of a Section 34 challenge prior to
the 2015 Amendment, it was held that an award can be
said to be against justice only when it shocks the
conscience of the court [ See Associate Builders case,
(2015) 3 SCC 49, para 36 : (2015) 2 SCC (Civ) 204] .
The Court illustrated by stating that where an arbitral
award, without recording reasons, awards an amount
much more than what the claim is restricted to, it
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would certainly shock the conscience of the court and
render the award vulnerable and liable to be set aside
on the ground that it is contrary to justice.
61. In Ssangyong [Ssangyong Engg. & Construction
Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC
(Civ) 213] , which dealt with post the 2015 Amendment
scenario, it was observed that an argument to set aside
an award on the ground of being in conflict with “most
basic notions of justice”, can be raised only in very
exceptional circumstances, that is, when the conscience
of the court is shocked by infraction of some
fundamental principle of justice. Notably, in that case
the majority award created a new contract for the
parties by applying a unilateral circular, and by
substituting a workable formula under the agreement
by another, dehors the agreement. This, in the view of
the Court, breached the fundamental principles of
justice, namely, that a unilateral addition or alteration
of a contract can never be foisted upon an unwilling
party, nor can a party to the agreement be liable to
perform a bargain not entered with the other party [
See Ssangyong Engg. case, (2019) 15 SCC 131, para
76 : (2020) 2 SCC (Civ) 213] . However, a note of
caution was expressed in the judgment by observing
that this ground is available only in very exceptional
circumstances and under no circumstance can any
court interfere with an arbitral award on the ground
that justice has not been done in the opinion of the
court because that would be an entry into the merits of
the dispute.
62. In the light of the discussion above, in our view,
when we talk about justice being done, it is about
rendering, in accord with law, what is right and
equitable to one who has suffered a wrong. Justice is
the virtue by which the society/court/Tribunal gives a
man his due, opposed to injury or wrong. Dispensation
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of justice in its quality may vary, dependent on person
who dispenses it. A trained judicial mind may dispense
justice in a manner different from what a person of
ordinary prudence would do. This is so, because a
trained judicial mind is likely to figure out even minor
infractions of law/norms which may escape the
attention of a person with ordinary prudence.
Therefore, the placement of words “most basic
notions” before “of justice” in Explanation 1 has its
significance. Notably, at the time when the 2015
Amendment was brought, the existing law with regard
to grounds for setting aside an arbitral award, as
interpreted by this Court, was that an arbitral award
would be in conflict with public policy of India, if it is
contrary to:
(a) the fundamental policy of Indian law;
(b) the interest of India;
(c) justice or morality; and/or is
(d) patently illegal.
63. As we have already noticed, the object of
inserting Explanations 1 and 2 in place of earlier
explanation to Section 34(2)(b)(ii) was to limit the
scope of interference with an arbitral award, therefore
the amendment consciously qualified the term
“justice” with “most basic notions” of it. In such
circumstances, giving a broad dimension to this
category [ In conflict with most basic notions of
morality or justice.] would be deviating from the
legislative intent. In our view, therefore, considering
that the concept of justice is open-textured, and notions
of justice could evolve with changing needs of the
society, it would not be prudent to cull out “the most
basic notions of justice”. Suffice it to observe, they [
Most basic notions of justice.] ought to be such
elementary principles of justice that their violation
could be figured out by a prudent member of the public
who may, or may not, be judicially trained, which
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means, that their violation would shock the conscience
of a legally trained mind. In other words, this ground
would be available to set aside an arbitral award, if
the award conflicts with such elementary/fundamental
principles of justice that it shocks the conscience of the
Court.
Morality
64. The other ground is of morality. On the question of
morality, in Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204] , this Court, after referring to the provisions
of Section 23 of the Contract Act, 1872; earlier
decision of this Court in Gherulal [Gherulal
Parakh v. Mahadeodas Maiya, 1959 SCC OnLine SC 4
: AIR 1959 SC 781] ; and Indian Contract Act by
Pollock and Mulla, held that judicial precedents have
confined morality to sexual morality. And if “morality”
were to go beyond sexual morality, it would cover such
agreements as are not illegal but would not be
enforced given the prevailing mores of the day. The
Court also clarified that interference on this ground
would be only if something shocks the Court’s
conscience [ See Associate Builders case, (2015) 3
SCC 49, para 39 : (2015) 2 SCC (Civ) 204] .”
17. The learned Arbitrator has interpreted the force majeure clause and
has come to the conclusion that the present event on which reliance is placed
by the Petitioner will not fall within the four corners of force majeure
clause. This Court is in agreement with the view taken by the learned
Arbitrator. Even otherwise, as repeatedly held by the Apex Court, the
interpretation of a contract, predominantly, is in the domain of the
Arbitrator. An award cannot be set aside just because another view is
possible or sometimes is even more preferable.
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18. In the opinion of this Court, the challenge does not fall within the
parameters of Section 34 of the Arbitration & Conciliation Act. The fact that
another conclusion is possible will not persuade this Court to substitute its
own conclusion to the one arrived at by the Arbitral Tribunal unless it is said
to be so perverse that it shocks the conscience of the Court.
19. With these observations, the petition is dismissed along with pending
application(s), if any.
SUBRAMONIUM PRASAD, J
MARCH 24, 2026
hsk/JR
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