M/S Abhoy Charan Bakshi vs State Of Odisha & Ors on 13 March, 2026

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    Orissa High Court

    M/S Abhoy Charan Bakshi vs State Of Odisha & Ors on 13 March, 2026

    Author: Sanjeeb K Panigrahi

    Bench: Sanjeeb K Panigrahi

                                                                   Signature Not Verified
                                                                   Digitally Signed
                                                                   Signed by: BHABAGRAHI JHANKAR
                                                                   Reason: Authentication
                                                                   Location: ORISSA HIGH COURT, CUTTACK
                                                                   Date: 24-Mar-2026 16:52:38
    
    
    
    
            IN THE HIGH COURT OF ORISSA AT CUTTACK
    
                               ARBA No.35 of 2019
                                  Along with
                               ARBA No.37 of 2019
    
      (In the matters of Appeals under Section 37 of the Arbitration and
      Conciliation Act, 1996)
    
    
                           (In ARBA No.35 of 2019)
    
      M/S Abhoy Charan Bakshi                    ....            Appellant(s)
                                      -versus-
      State of Odisha & Ors.                     ....          Respondent (s)
    
    Advocates appeared in the case through Hybrid Mode:
    
     For Appellant (s)            :         Mr. Nilakanthar Jujharsingh, Adv.
    
    
     For Respondent (s)           :                   Mr. Sonak Mishra, ASC.
    
    
                           (In ARBA No.37 of 2019)
    
     State of Odisha& Ors.                       ....            Appellant (s)
                                      -versus-
     M/S Abhoy Charan Bakshi                     ....          Respondent (s)
    
    Advocates appeared in the case through Hybrid Mode:
    
     For Appellant (s)            :                   Mr. Sonak Mishra, ASC.
    
    
     For Respondent(s)            :         Mr. Nilakanthar Jujharsingh, Adv.
    
    
    
    
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                                                                      Signature Not Verified
                                                                     Digitally Signed
                                                                     Signed by: BHABAGRAHI JHANKAR
                                                                     Reason: Authentication
                                                                     Location: ORISSA HIGH COURT, CUTTACK
                                                                     Date: 24-Mar-2026 16:52:38
    
    
    
    
                     CORAM:
                     DR. JUSTICE SANJEEB K PANIGRAHI
                         DATE OF HEARING:-07.03.2026
                       DATE OF JUDGMENT:-13.03.2026
         Dr. Sanjeeb K Panigrahi, J.
    

    1. Since both the appeals arise out of arbitral award relating to the

    contract executed by the same party and involve common questions

    SPONSORED

    concerning the scope of interference under Sections 34 and 37 of the

    Arbitration and Conciliation Act, 1996 (for short “the Act”), they are

    taken up together and are being disposed of by this common

    judgment.

    2. The present appeals arises out of judgment dated 12.9.2019 passed in

    ARBP No.161 of 2017, wherein the learned District Judge, Dhenkanal

    partly allowed the said application and set aside the award in respect

    of refund of royalty amounting to Rs.61,17,354/-, while affirming the

    remaining claims allowed by the Arbitrator. Aggrieved by the

    interference with the award on that limited aspect, the contractor as

    well as the State have preferred the present appeals under Section 37

    of the Act. However, for the sake of convenience and effective

    adjudication, ARBA No.35 of 2019 is treated as the lead case.

    I. FACTUAL MATRIX OF THE CASE:

    3. The dispute traces its origin to a contract awarded by the

    Government of Odisha for execution of irrigation infrastructure

    works. The Chief Engineer and Basin Manager, Brahmani Left Basin,

    Samal, Angul, on behalf of the Government, invited item-rate bids
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    for the work described as “Balance work for construction of

    structured system in the command area of Bhairpur Branch Canal

    with provision of minors and sub-minors including all structures of

    Baruan Distribution System of O.E.C.F. Package No.12(E)”.

    4. The appellant contractor participated in the tender process and

    submitted its bid for execution of the said work. Upon evaluation of

    the bids received, the bid of the appellant was accepted by the

    authorities through Letter No.3000 dated 22.5.2008. Consequent

    upon acceptance of the bid, a formal agreement was executed on

    16.6.2008 between the Governor of Odisha acting through the

    Executive Engineer, OECF Division No.III, Jiridamali, and the

    appellant contractor.

    5. Under the said agreement, the work was registered as Agreement

    No. LCB-I of 2008-2009 and the total contract value was fixed at

    Rs.10,32,97,050/-. The contract stipulated that the work would

    commence on 16.6.2008 and would be completed within a period of

    twenty-four months, the scheduled date of completion being

    15.6.2010.

    6. The nature of the work primarily involved excavation of earth,

    transportation of the excavated material, and formation of canal

    embankments as part of the irrigation infrastructure. Among the

    various items of work incorporated in the Bill of Quantities, Item

    No.5 related to “Earth work in canal embankment”. For this item the

    appellant quoted a rate of Rs.60/- per cubic metre, which was

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    accepted by the departmental authorities at the time of finalization of

    the contract.

    7. According to the appellant, prior to submission of bids a pre-bid

    meeting was convened by the departmental authorities to clarify the

    scope and conditions of the work. It is the case of the contractor that

    during the said meeting the Executive Engineer informed the

    participating contractors that no royalty would be levied on earth

    excavated from the canal for the purpose of forming the canal

    embankment. It was further indicated that in the event additional

    earth was required beyond the excavated quantity, the same would

    be obtained from nearby Government land identified as approved

    borrow areas. Relying on this understanding, the appellant claims to

    have quoted the rate for BOQ Item No.5 without including any

    component towards royalty. The contractor asserts that the

    departmental authorities also accepted the rate on that basis.

    8. After commencement of the work, the appellant undertook

    excavation and embankment formation in accordance with the

    specifications of the agreement. During the course of execution, the

    appellant addressed a letter dated 4.2.2009 to the Executive Engineer

    requesting that no deduction towards royalty be made from the bills

    submitted for earthwork, as such deduction was allegedly contrary

    to the terms understood between the parties. The Executive

    Engineer, however, disputed the claim of the contractor by letter

    dated 18.3.2009. The appellant again reiterated its request through

    another communication dated 23.3.2009. Despite these
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    representations, the departmental authorities proceeded to deduct

    amounts towards royalty from the running account bills submitted

    by the contractor during execution of the work.

    9. It is the case of the appellant that deductions towards royalty were

    made progressively from the running account bills and continued up

    to the eighteenth running account bill. According to the contractor, a

    total sum of Rs.61,17,354/- was recovered by the department from the

    bills submitted for the execution of earthwork under BOQ Item No.5.

    The appellant contends that such deduction was made without

    modifying the accepted rate of the item of work by adding royalty at

    the prescribed rate and was therefore contrary to the agreed

    contractual terms. The contractor asserts that the royalty component

    had never formed part of the quoted rate and that the deduction

    consequently resulted in financial loss to the contractor during

    execution of the work.

    10.The appellant further alleged that during the execution of the project,

    the departmental authorities rejected the earth obtained from

    excavation of the canal for the purpose of embankment formation

    and instead instructed the contractor to procure earth from borrow

    areas. According to the contractor, although the agreement

    contemplated supply of earth from approved Government borrow

    areas, no such areas were handed over by the authorities. The

    contractor therefore arranged borrow areas from private landowners

    and incurred expenditure for securing their consent and

    compensating them for extraction of earth. The earth so obtained was
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    transported to the work site and utilized for formation of canal

    embankments with the approval of the departmental engineers

    supervising the work.

    11.The contractor further asserted that procurement of earth from

    private borrow areas resulted in additional financial burden. It was

    stated that the earth had to be transported to the work site from

    locations situated approximately five kilometres away, thereby

    involving additional transportation costs. In addition, the contractor

    claims to have incurred expenditure in stripping the borrow areas to

    obtain suitable earth and subsequently restoring the land by refilling

    it with the stripped soil. According to the appellant, these additional

    operations were undertaken in compliance with the instructions of

    the departmental authorities, but the department did not reimburse

    the expenses incurred towards stripping of borrow areas,

    transportation of earth, or restoration of the lands from which the

    material had been obtained.

    12.Another grievance originally raised by the contractor relates to

    escalation in labour costs during the course of execution of the work.

    It is stated that during the relevant period the Government of Odisha

    revised the minimum wages payable to unskilled labourers from

    Rs.70/- to Rs.90/- per day by notification dated 13.7.2009 issued by

    the Labour and Employment Department. According to the

    appellant, the increase in minimum wages and the rise in cost of

    petrol, oil and lubricants resulted in additional expenditure in

    executing the extra and additional items of work. The contractor
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    claims that the department failed to compensate these increased costs

    despite repeated requests made during execution of the project.

    13.The appellant also alleged that an amount of Rs.19,00,000/- was

    withheld by the department from the eighth running account bill

    dated 23.9.2009 and kept in miscellaneous deposit without assigning

    any justification. According to the contractor, the deductions and

    withholding of payments caused financial hardship and were

    repeatedly brought to the notice of the departmental authorities.

    14.Ultimately, the contractor received the eighteenth running account

    bill along with the final bill on 31.3.2011, wherein the earlier

    deductions towards royalty were reflected. The appellant contends

    that despite several representations seeking release of the withheld

    amount and refund of the royalty deducted, the departmental

    authorities did not take steps to resolve the dispute.

    15.In view of the unresolved claims, the appellant addressed further

    communications to the Chief Engineer and the Executive Engineer

    requesting settlement of the outstanding dues. The contractor

    ultimately raised a formal claim by letter dated 6.6.2011 demanding

    payment of various amounts including refund of royalty deducted,

    compensation for stripping and transportation of earth from borrow

    areas, labour escalation and refund of the amount withheld. The

    department disputed these claims through its reply dated 8.7.2011.

    Thereafter, the appellant requested the authorities to refer the

    dispute to arbitration in terms of the relevant clause of the contract.

    As the request was not accepted within the stipulated time, the
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    contractor approached the High Court seeking appointment of an

    arbitrator.

    16.Pursuant to proceedings initiated under Section 11 of the Arbitration

    and Conciliation Act, 1996, learned former Judge of the High Court

    was appointed as the Sole Arbitrator to adjudicate the disputes

    between the parties. In the arbitration proceedings the appellant

    raised six claims including refund of royalty deducted, cost of

    stripping of borrow areas, transportation of earth, balance payment

    for compacting, labour price escalation and refund of the withheld

    amount. By award dated 6.5.2017, the learned Sole Arbitrator

    allowed the claims partly and awarded a total sum of Rs.6,10,54,178/-

    in favour of the claimant along with interest. The State authorities

    thereafter challenged the award before the District Judge under

    Section 34 of the Act, leading to the judgment presently under

    appeal.

    17.Upon consideration of the rival contentions advanced by the parties,

    the learned District Judge, Dhenkanal, by judgment dated 12.9.2019

    in ARBP No.161 of 2017, partly allowed the application filed under

    Section 34 of the Arbitration and Conciliation Act, 1996. The learned

    court below examined the award passed by the learned Sole

    Arbitrator in respect of the several claims adjudicated therein. While

    doing so, the learned District Judge declined to interfere with the

    findings of the arbitrator in respect of Claim Nos.2 to 6 and affirmed

    the award to that extent. However, insofar as Claim No.1 relating to

    refund of royalty deducted from the running account bills
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    amounting to Rs.61,17,354/- was concerned, the learned District

    Judge came to the conclusion that the award on that issue could not

    be sustained and accordingly set aside that portion of the arbitral

    award. As a result, the interference by the learned District Judge

    remained confined only to the question of refund of royalty. It is this

    limited part of the judgment setting aside Claim No.1 which is the

    subject matter of challenge in the present appeal filed under Section

    37 of the Arbitration and Conciliation Act, 1996.

    18.This Court shall now endeavour to summarise the contentions of the

    Parties and the broad grounds that have been raised.

    II. APPELLANT’S SUBMISSIONS:

    19. Learned counsel appearing for the appellant contends that the

    learned District Judge committed an error in setting aside the award

    in respect of the claim relating to refund of royalty while otherwise

    affirming the arbitral award. It is submitted that the learned Sole

    Arbitrator had examined the contractual terms, the materials placed

    on record and the conduct of the parties during execution of the

    work, and upon such consideration had rightly concluded that the

    deduction of royalty from the running account bills was not justified.

    According to the appellant, the arbitrator had arrived at the said

    conclusion on appreciation of evidence and interpretation of the

    contract, and therefore the court exercising jurisdiction under Section

    34 of the Arbitration and Conciliation Act ought not to have

    interfered with that finding in the absence of any patent illegality or

    perversity in the award.

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    20.It is further contended on behalf of the appellant that the work in

    question involved excavation and utilization of earth for formation

    of canal embankments under BOQ Item No.5. According to the

    appellant, during the pre-bid meeting held prior to submission of

    bids, the departmental authorities had indicated that royalty would

    not be levied on earth excavated from the canal for the purpose of

    embankment formation. Relying on such clarification, the appellant

    quoted the rate of Rs.60/- per cubic metre for the said item of work

    without including any component towards royalty, and the said rate

    was accepted by the respondents at the time of finalization of the

    contract. It is therefore submitted that the subsequent deduction of

    royalty from the contractor’s bills was contrary to the understanding

    on which the bid had been submitted and accepted.

    21.Learned counsel for the appellant also submits that the arbitrator had

    taken note of the fact that the departmental authorities did not

    provide the approved borrow areas as contemplated under the

    contract. The contractor was instead required to procure earth from

    private lands by compensating the landowners and arranging for

    transportation of the material to the work site. According to the

    appellant, the earth so procured was utilized for embankment work

    with the approval of the departmental engineers supervising the

    project. In such circumstances, it is argued that the deduction of

    royalty from the contractor’s bills lacked contractual justification,

    particularly when the contractor had itself incurred expenditure for

    obtaining the earth from private borrow areas.

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    22.The appellant further submits that the contractor had consistently

    objected to the deduction of royalty during the execution of the work

    by addressing letters to the departmental authorities requesting that

    such deductions be discontinued. It is argued that despite these

    representations the respondents continued to deduct royalty from

    the running account bills up to the eighteenth bill, resulting in

    recovery of a total sum of Rs.61,17,354/-. According to the appellant,

    the arbitrator, upon considering the correspondence exchanged

    between the parties and the contractual provisions, had rightly held

    that the said deduction was not sustainable and had therefore

    directed refund of the amount.

    23.It is lastly contended that the learned District Judge, while exercising

    jurisdiction under Section 34 of the Arbitration and Conciliation Act,

    exceeded the permissible scope of interference by reassessing the

    merits of the claim relating to royalty. The appellant submits that the

    arbitral award had dealt with the claims in detail and had granted

    relief after evaluating the evidence and contractual provisions. In

    such circumstances, it is argued that the finding of the arbitrator on

    the issue of royalty constituted a possible and reasonable view

    arising from the material on record and ought not to have been

    disturbed by the court below. The appellant therefore submits that

    the judgment of the learned District Judge insofar as it sets aside

    Claim No.1 relating to refund of royalty deserves to be reversed.

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    III. RESPONDENTS’ SUBMISSIONS:

    24.Per contra, learned counsel appearing for the respondents-State

    supports the judgment of the learned District Judge and submits that

    the court below was justified in setting aside the award in respect of

    the claim relating to refund of royalty. It is contended that the

    contract documents themselves clearly indicated that the bid price

    quoted by the contractor was required to include all costs associated

    with execution of the work. In particular, reference is made to the

    provisions relating to BOQ Item No.5 dealing with earthwork in

    canal embankment, which according to the respondents

    contemplated procurement of earth from approved borrow areas

    along with all ancillary operations including excavation, loading,

    transportation and other incidental activities. It is therefore

    submitted that the contractor was fully aware of the nature of the

    work and the costs involved while quoting the rate for the said item.

    25.Learned counsel for the State further contends that the contractual

    conditions specifically provided that the bid price shall include all

    duties, taxes and levies payable by the contractor. Royalty being a

    statutory levy payable on excavation of minor minerals, it is argued

    that the contractor was under an obligation to factor such levy into

    the rate quoted in the bid. The respondents also rely upon

    government communications issued in this regard, which, according

    to them, required deduction of royalty on earth extracted for

    construction works executed through the tender process. It is

    therefore submitted that the deduction of royalty from the
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    contractor’s bills was in accordance with the applicable statutory

    provisions as well as the contractual terms governing the work.

    26.It is also submitted on behalf of the respondents that the appellant

    cannot rely upon any alleged assurance said to have been given

    during the pre-bid meeting. According to the State, records relating

    to the pre-bid meeting show that no contractor, including the

    appellant, had attended the meeting to seek clarification regarding

    the conditions of the tender. In such circumstances, it is argued that

    the contention that royalty was not to be deducted is without factual

    basis. The respondents therefore submit that the learned District

    Judge rightly held that the arbitral award directing refund of royalty

    was unsustainable and that no interference with the impugned

    judgment is warranted in the present appeal.

    IV. ISSUE FOR CONSIDERATION:

    27.Having heard the parties and perused the materials available on

    record, this court here has identified the following issue to be

    determined:

    A. Whether the order of the Ld. District Judge warrants interference

    keeping in mind the limitations of this court’s powers under

    Section 37 of the A&C Act?

    V. ISSUE A: WHETHER THE ORDER OF THE LD. DISTRICT
    JUDGE WARRANTS INTERFERENCE KEEPING IN MIND THE
    LIMITATIONS OF THIS COURT’S POWERS UNDER SECTION
    37 OF THE A&C ACT?

    28.Before going into the merits of the contentions, it is necessary to

    outline the ambit and scope of Section 37of the 1996 Act.

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    29.The Supreme Court and this Court in catena of judgments have held

    that the powers of appellate court while exercising jurisdiction under

    Section 37 of the 1996 Act against orders passed by the Arbitral

    Tribunal is very restricted and narrow and the same should be

    exercised when the orders seems to be perverse, arbitrary and

    contrary to law.

    30.In Reliance Infrastructure Ltd. v. State of Goa1, the Apex Court

    noticing its previous decision in MMTC Ltd. v. Vedanta Ltd.2 has

    noted the limited scope of interference under Section 34 and further

    narrower scope of appeal under Section 37 of the Act particularly

    when dealing with the concurrent findings of the arbitrator and that

    of the Court. Relevant paragraph ’14’ of MMTC Ltd.(supra) as noted

    in paragraph ’26’ in Reliance Infrastructure Ltd.(supra) is to be

    extracted hereinunder:–

    “14. As far as interference with an order made
    under Section 34, as per Section 37, is concerned, it cannot
    be disputed that such interference under Section 37 cannot
    travel beyond the restrictions laid down under Section 34.
    In other words, the court cannot undertake an independent
    assessment of the merits of the award, and must only
    ascertain that the exercise of power by the court
    under Section34 has not exceeded the scope of the provision.
    Thus, it is evident that in case an arbitral award has been
    confirmed by the court under Section 34 and by the court in
    an appeal under Section 37, this Court must be extremely
    cautious and slow to disturb such concurrent findings.”

    1

    (2024) 1 SCC 479
    2
    (2019) 4 SCC 163

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    31.The same view has been expressed in UHL Power Company

    Ltd. v. State of Himachal Pradesh3 in paragraph ’16’ while noticing

    paragraph ’11’ in MMTC Ltd.(supra):–

    “16. As it is, the jurisdiction conferred on courts
    under Section 34 of the Arbitration Act is fairly narrow,
    when it comes to the scope of an appeal under Section 37 of
    the Arbitration Act, the jurisdiction of an appellate court in
    examining an order, setting aside or refusing to set aside an
    award, is all the more circumscribed. In MMTC
    Ltd. v. Vedanta Ltd. [MMTC Ltd.
    v. Vedanta Ltd., (2019) 4
    SCC 163 : (2019) 2 SCC (Civ) 293], the reasons for vesting
    such a limited jurisdiction on the High Court in exercise of
    powers under Section 34 of the ArbitrationAct have been
    explained in the following words : (SCC pp. 166-67, para

    11)
    “11. As far as Section 34 is concerned, the position is well-

    settled by now that the Court does not sit in appeal over the
    arbitral award and may interfere on merits on the limited
    ground provided under Section 34(2)(b)(ii) i.e. if the award
    is against the public policy of India. As per the legal position
    clarified through decisions of this Court prior to the
    amendments to the 1996 Act in 2015, a violation of Indian
    public policy, in turn, includes a violation of the
    fundamental policy of Indian law, a violation of the interest
    of India, conflict with justice or morality, and the existence
    of patent illegality in the arbitral award. Additionally, the
    concept of the “fundamental policy of Indian law” would
    cover compliance with statutes and judicial precedents,
    adopting a judicial approach, compliance with the principles
    of natural justice, and Wednesbury [Associated Provincial
    Picture Houses Ltd. v. WednesburyCorpn., [1948] 1 K.B.
    223(CA)] reasonableness. Furthermore, “patent illegality”

    itself has been held to mean contravention of the substantive

    3
    (2022) 4 SCC 116

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    law of India, contravention of
    the 1996 Act, and contravention of the terms of the
    contract.”

    32.In Haryana Tourism Ltd. v. Kandhari Beverages Ltd.4 as noted in

    paragraph ’30’ in Reliance Infrastructure Ltd.(supra), it was held on

    the scope of interference under Sections 34 and 37 of the Act’ 1996 as

    under:–

    “30. In Haryana Tourism [Haryana Tourism
    Ltd. v. Kandhari Beverages Ltd.
    , (2022) 3 SCC 237 : (2022)
    2 SCC (Civ) 87], this Court yet again pointed out the
    limited scope of interference under Sections 34 and37 of
    the Act; and disapproved interference by the High Court
    under Section 37 of the Act while entering into merits of the
    claim in the following words : (SCC p. 240, paras 8-9)
    “8.
    So far as the impugned
    judgment and order [Kandhari Beverages
    Ltd. v. Haryana Tourism Ltd., 2018 SCC OnLine
    P&H 3233] passed by the High Court
    quashing and setting aside the
    award and the order passed by the Additional District
    Judge under Section 34 of the Arbitration Act are
    concerned, it is required to be noted that in an appeal
    under Section 37 of the Arbitration Act, the High
    Court has entered into the merits of the claim, which is
    not permissible in exercise of powers
    under Section 37 of the Arbitration Act.

    9. As per settled position of law laid down by this
    Court in a catena of decisions, an award can be set
    aside only if the award is against the public policy of
    India. The award can be set aside under Sections 34/37
    of the Arbitration Act, if the award is found to be
    contrary to : (a) fundamental policy of Indian Law; or
    4
    2022) 3 SCC 237

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    (b) the interest of India; or (c) justice or morality; or

    (d) if it is patently illegal. None of the aforesaid
    exceptions shall be applicable to the facts of the case on
    hand. The High Court has entered into the merits of
    the claim and has decided the appeal
    under Section 37 of the Arbitration Act as if the High
    Court was deciding the appeal against the
    judgment and decree passed by the learned trial court.

    Thus, the High Court has exercised the jurisdiction not
    vested in it under Section 37 of the Arbitration Act.

    The impugned judgment andorder [Kandhari
    Beverages Ltd. v. Haryana Tourism Ltd., 2018 SCC
    OnLine P&H 3233] passed by the High Court is hence
    not sustainable.”

    33.It was, thus, observed in paragraph ’33’ of Reliance Infrastructure

    Ltd.(supra) as under:–

    “33. Keeping in view the aforementioned principles
    enunciated by this Court with regard to the limited scope of
    interference in an arbitral award by a Court in the exercise
    of its jurisdiction under Section34 of the Act, which is all
    the more circumscribed in an appeal under Section 37, we
    may examine the rival submissions of the parties in relation
    to the matters dealt with by the High Court.”

    34.It is observed in Punjab State Civil Supplies Corpn. Ltd. v. Sanman

    Rice Mills5 that:

    “9. The object of the Act is to provide for a speedy and
    inexpensive alternative mode of settlement of dispute with
    the minimum of intervention of the courts. Section 5 of the
    Act is implicit in this regard and prohibits interference by
    the judicial authority with the arbitration proceedings
    except where so provided in Part-I of the Act. The judicial

    5
    2024 SCC OnLine SC 2632

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    interference, if any, is provided inter-alia only by means of
    Sections 34 and 37 of the Act respectively.

    10. Section 34 of the Act provides for getting an arbitral
    award set aside by moving an application in accordance
    with sub-Section (2) andsub-Section (3) of Section 34 of the
    Act which inter-alia provide for the grounds on which an
    arbitral award is liable to be set aside. One of the main
    grounds for interference or setting aside an award is where
    the arbitral award is in conflict with the public policy of
    India i.e. if the award is induced or affected by fraud or
    corruption or is in contravention with the fundamental
    policy of Indian law or it is in conflict with most basic
    notions of morality and justice. A plain reading of Section
    34
    reveals that the scope of interference by the court with
    the arbitral award under Section 34 is very limited and the
    court is not supposed to travel beyond the aforesaid scope to
    find out if the award is good or bad.

    11. Section 37 of the Act provides for a forum of appeal
    inter-alia against the order setting aside or refusing to set
    aside an arbitral award under Section 34 of the Act. The
    scope of appeal is naturally akin to andlimited to the
    grounds enumerated under Section 34 of the Act.

    12. It is pertinent to note that an arbitral award is not liable
    to be interfered with only on the ground that the award is
    illegal or is erroneous in law that too upon reappraisal of the
    evidence adduced before the arbitral trial. Even an award
    which may not be reasonable or is non-speaking to some
    extent cannot ordinarily be interfered with by the courts. It
    is also well settled that even if two views are possible there is
    no scope for the court to reappraise the evidence and to take
    the different view other than that has been taken by the
    arbitrator. The view taken by the arbitrator is normally
    acceptable and ought to be allowed to prevail.
    xxxxxx

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    14. It is equally settled law that the appellate power
    under Section 37of the Act is not akin to the normal
    appellate jurisdiction vested in the civil courts for the reason
    that the scope of interference of the courts with arbitral
    proceedings or award is very limited, confined to the ambit
    of Section 34 of the Act only and even that power cannot be
    exercised in a casual and a cavalier manner.
    xxxxxx

    16. It is seen that the scope of interference in an appeal
    under Section37 of the Act is restricted and subject to the
    same grounds on which an award can be challenged
    under Section 34 of the Act. In other words, the powers
    under Section 37 vested in the court of appeal are not
    beyond the scope of interference provided under Section 34
    of the Act.”

    Here, the Supreme Court has once again reiterated that even an

    award which may not be reasonable or is nonspeaking to some

    extent cannot ordinarily be interfered with by the courts. It is also

    well settled that even if two views are possible there is no scope for

    the court to reappraise the evidence and to take the different view

    other than that has been taken by the arbitrator. The view taken by

    the arbitrator is normally acceptable and ought to be allowed to

    prevail.

    35.In Konkan Railway Corpn. Ltd. v. Chenab Bridge Project6 referring

    to MMTC Limited (supra) it has been held that:

    “19….The scope of jurisdiction
    under Section 34 and Section 37 of the Act is not akin to
    normal appellate jurisdiction. It is well-settled that courts

    6
    (2023) 9 SCC 85

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    ought not to interfere with the arbitral award in a
    casual and cavalier manner. The mere possibility of an
    alternative view on facts or interpretation of the contract
    does not entitle courts to reverse the findings of the arbitral
    tribunal…”

    36.In Dyna Technology Private Limited v. Crompton Greaves Limited7,

    the Apex Court observed as under:

    “24. There is no dispute that Section 34 of the Arbitration
    Act limits a challenge to an award only on the grounds
    provided therein or as interpreted by various courts. We
    need to be cognizant of the fact that arbitral awards should
    not be interfered with in a casual and cavalier manner,
    unless the court comes to a conclusion that the perversity of
    the award goes to the root of the matter without there being
    a possibility of alternative interpretation which may sustain
    the arbitral award. Section 34 is different in its approach
    and cannot be equated with a normal appellate jurisdiction.
    The mandate under Section 34 is to respect the finality of
    the arbitral award and the party autonomy to get their
    dispute adjudicated by an alternative forum as provided
    under the law. If the courts were to interfere with the
    arbitral award in the usual course on factual aspects, then
    the commercial wisdom behind opting for alternate dispute
    resolution would stand frustrated.

    25. Moreover, umpteen number of judgments of this Court
    have categorically held that the courts should not interfere
    with an award merely because an alternative view on facts
    and interpretation of contract exists. The courts need to be
    cautious and should defer to the view taken by the Arbitral
    Tribunal even if the reasoning provided in the award is
    implied unless such award portrays perversity
    unpardonable under Section 34 of the Arbitration Act.”

    7

    (2019) 20 SCC 1
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    37.Judicial scrutiny of arbitral awards is stringently limited under

    Indian law. Section 34 of the Arbitration and Conciliation Act, 1996,

    provides the exclusive grounds upon which an arbitral award can be

    challenged. Courts, therefore, are not empowered to interfere merely

    because another interpretation or outcome may seem more

    reasonable. The jurisdiction under Section 34 is confined to

    procedural and legal infirmities such as lack of jurisdiction, violation

    of natural justice, or patent illegality. Consequently, appellate

    jurisdiction under Section 37 is even narrower in its scope. Its

    purpose is to evaluate whether the court adjudicating under Section

    34 has remained within the permissible statutory boundaries. The

    appeal court cannot re-evaluate evidence or reconsider the factual

    matrix afresh. The statutory framework thus reflects an overarching

    legislative intent to insulate arbitral decisions from excessive judicial

    intervention. The entire architecture of Sections 34 and 37 reinforces

    the finality and autonomy of arbitral proceedings. Arbitration is

    designed to offer an efficient, expert-led, and expedited alternative to

    litigation. Courts must therefore resist the temptation to intervene

    unless the decision by the court under Section 34 itself amounts to a

    significant transgression of legal boundaries.

    38.Judicial restraint under Section 37 also reflects respect for

    institutional competence of arbitral tribunals in resolving technical

    and commercial disputes. Courts are cautious not to intrude into

    operational or industry-specific assessments unless such assessments

    are manifestly disconnected from evidence or contractual terms.

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    Arbitration is valued precisely because it permits specialized

    adjudication, and appellate courts must avoid substituting judicial

    perceptions for commercial judgment, unless the latter is

    demonstrably arbitrary or legally unsound.

    39.The balance, therefore, lies between two competing imperatives:

    preserving arbitral autonomy and ensuring legal accountability.

    Excessive deference risks validating legally flawed awards, while

    excessive interference undermines arbitration as an effective dispute

    resolution mechanism. Section 37 embodies this balance by allowing

    interference only when legal thresholds are crossed. Courts must

    carefully calibrate intervention to correct illegality without re-

    opening factual controversy, thereby preserving both rule of law and

    arbitral efficiency.

    40.Now this Court shall endeavour to answer the main question framed

    herein. The controversy in the present appeal lies within a narrow

    compass. As noticed earlier, the learned District Judge interfered

    with the arbitral award only in respect of Claim No.1 relating to

    refund of royalty amounting to Rs.61,17,354/-. The remaining

    findings of the learned Sole Arbitrator with regard to the other

    claims were allowed to stand. The limited question that therefore

    arises for consideration in this appeal is whether the learned District

    Judge was justified, within the parameters of jurisdiction under

    Section 34 of the Arbitration and Conciliation Act, 1996, in setting

    aside the arbitral award on the issue of royalty. The determination of

    this question necessarily requires examination of the contractual
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    provisions governing the work, the nature of the claim raised before

    the arbitrator, and the reasoning adopted in the arbitral award.

    41.The contract between the parties related to execution of canal works

    involving excavation of earth and formation of embankments. For

    the purpose of execution of the work, the agreement incorporated a

    Bill of Quantities specifying the various items of work and the rates

    applicable to each item. The dispute in the present case revolves

    around the interpretation of the provisions relating to earthwork

    contained in the Bill of Quantities, particularly Item Nos.4 and 5.

    These provisions governed excavation of earth from the canal and

    the utilization of earth for formation of canal embankments. The

    contractor had quoted the rates for these items during the tender

    process and the same had been accepted by the departmental

    authorities while entering into the agreement.

    42.BOQ Item No.4 essentially related to excavation of earth from the

    canal section. The specification of this item described the work of

    excavation in soil for the canal, including dressing of the excavated

    surfaces and disposal of the excavated material as required for the

    execution of the project. The item thus contemplated excavation of

    earth as part of the process of constructing the canal system. The

    excavated earth formed a material component in the execution of the

    work and could also be utilized for the formation of canal

    embankments depending upon the requirements of the project and

    the instructions issued by the departmental engineers supervising

    the work.

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    43.BOQ Item No.5, on the other hand, dealt with earthwork in canal

    embankment. The specification of this item contemplated formation

    of embankments using earth obtained either from the canal

    excavation or from approved borrow areas. The item included the

    processes necessary for formation of the embankment such as

    excavation of earth, loading into transport vehicles, transportation to

    the work site, deposition in layers and compaction. The provision

    further indicated that the quoted rate would cover the various

    operations required for embankment formation including

    construction and maintenance of haul roads and borrow areas as

    may be required for execution of the work.

    44.The contractor had quoted a rate of Rs.60/- per cubic metre for BOQ

    Item No.5 relating to earthwork in canal embankment. It is the case

    of the appellant that this rate had been quoted on the understanding

    that earth required for the embankment would be obtained from the

    canal excavation at the first instance and that royalty would not be

    levied on such earth. According to the appellant, the departmental

    authorities had conveyed during the pre-bid stage that if additional

    earth was required beyond what could be obtained from the canal

    excavation, the same would be made available from Government

    borrow areas. On that basis, the contractor asserts that the rate

    quoted did not include any component towards royalty.

    45.During execution of the work, however, the departmental authorities

    deducted royalty from the contractor’s running account bills in

    respect of the earth utilized for embankment formation. The
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    materials on record indicate that deductions were made

    progressively from the bills submitted by the contractor for the

    earthwork carried out under BOQ Item No.5. According to the

    contractor, such deductions continued up to the eighteenth running

    account bill, resulting in recovery of an amount of Rs.61,17,354/-. The

    contractor had addressed letters during the course of execution

    objecting to such deductions and requesting that the royalty

    component be excluded from the bills.

    46.The respondents, on the other hand, relied upon the contractual

    provision which stipulated that the bid price quoted by the

    contractor would include all duties, taxes and levies payable in

    connection with execution of the work. Royalty being a statutory

    levy payable on extraction of minor minerals, the State contended

    that the contractor was obliged to factor such levy into the rate

    quoted in the tender. The respondents also relied upon government

    communications governing deduction of royalty in works executed

    through the tender process, contending that the departmental

    authorities were bound to deduct royalty in accordance with the

    statutory framework regulating extraction of earth.

    47.The arbitral tribunal examined the rival contentions in the light of the

    materials produced before it. The arbitrator took note of the

    correspondence exchanged between the parties during the execution

    of the work, including the letters addressed by the contractor

    requesting that royalty should not be deducted from the bills

    submitted for earthwork. The arbitrator also considered the
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    circumstances in which earth for embankment formation was

    procured and utilized during the execution of the project.

    48.The materials placed before the arbitrator indicated that the

    contractor had been required to procure earth from borrow areas for

    the purpose of embankment formation. The contractor asserted that

    approved borrow areas had not been handed over by the department

    and that it had therefore arranged earth from private lands by

    compensating the landowners. It was further stated that the earth so

    procured had to be transported to the work site and utilized for

    formation of the canal embankment under the supervision of

    departmental engineers. These factual aspects formed part of the

    evidence considered by the arbitrator while examining the claim

    relating to royalty.

    49.Another aspect considered in the arbitral proceedings related to the

    nature of the deductions made from the running account bills. The

    contractor had raised objections to the deduction of royalty during

    execution of the work and had reiterated such objections through

    written communications addressed to the departmental authorities.

    Despite such objections, the deductions were continued and were

    reflected in the bills prepared by the department. The contractor

    ultimately received the final bill wherein the royalty deductions were

    incorporated, though the contractor recorded an endorsement

    accepting the bill with a royalty objection.

    50.The arbitrator analysed the contractual provisions and the factual

    circumstances surrounding the execution of the work. In doing so,
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    the arbitrator took into account the nature of BOQ Item Nos.4 and 5

    and the manner in which the work had actually been carried out. The

    arbitrator also considered whether the rate quoted for embankment

    formation could reasonably be construed as including the royalty

    component, particularly in the context of the contractor’s assertion

    that earth had been procured from private borrow areas and that the

    contractor had already incurred expenditure for obtaining such

    earth.

    51.Since the learned District Judge interfered with the award only in

    respect of Claim No.1 relating to refund of royalty, it becomes

    necessary to examine the reasoning which weighed with the learned

    Sole Arbitrator while allowing the said claim. The award reveals that

    the arbitrator addressed the issue by closely examining the

    contractual documents, particularly the estimate prepared by the

    department, the description of the relevant items in the Bill of

    Quantities, and the oral and documentary evidence placed on record

    by the parties. The arbitrator proceeded on the premise that the

    determination of the claim essentially depended upon whether the

    rate quoted by the contractor for BOQ Item No.5–namely “Earth

    work in canal embankment”–was inclusive of royalty or whether

    royalty had been separately deducted by the department without

    contractual authority.

    52.In the course of the award, the arbitrator first adverted to the

    estimate prepared by the departmental authorities for the work in

    question. On examination of the rate analysis forming part of the
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    estimate, the arbitrator recorded a finding that the calculation of the

    unit rate corresponding to BOQ Item No.5 did not include any

    component towards royalty on earth. The estimate, which formed

    part of the contractual documents, indicated the factors taken into

    account while determining the rate for the said item of work.

    According to the arbitrator, the absence of any reference to royalty in

    the rate analysis suggested that the departmental authorities

    themselves had not factored royalty charges while preparing the

    estimate on the basis of which the tender was invited.

    53.The arbitrator then examined the description of the various items

    contained in the Bill of Quantities forming part of the agreement

    between the parties. It was noticed that several items in the BOQ

    expressly referred to royalty as a component of the work. In

    particular, BOQ Item Nos.4, 9, 10, 11, 14 and 15 contained references

    to royalty in their respective descriptions. However, BOQ Item No.5,

    which related to “Earth work in canal embankment”, did not contain

    any mention of royalty. The arbitrator considered this difference to

    be of significance. According to the arbitrator, where the employer

    intended that royalty should form part of the contractor’s liability

    under a particular item of work, the same had been expressly stated

    in the description of that item. The omission of such reference in

    BOQ Item No.5 therefore indicated that royalty was not intended to

    be included in the rate quoted for that item.

    54.The arbitrator further considered the oral evidence adduced by the

    respondents during the arbitral proceedings. In particular, the
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    evidence of the respondents’ witness was examined in relation to the

    contents of the BOQ. The witness admitted during cross-examination

    that BOQ Item No.5 did not contain any stipulation relating to

    royalty, whereas other items in the agreement specifically mentioned

    royalty charges. The arbitrator treated this admission as

    corroborating the contractor’s case that the rate quoted for the

    embankment work had not been framed with the inclusion of

    royalty. The arbitrator therefore concluded that the contractual

    documents themselves did not support the deduction of royalty from

    the contractor’s bills under BOQ Item No.5.

    55.Another aspect considered by the arbitrator related to the alleged

    clarification said to have been given during the pre-bid meeting

    convened prior to submission of the bids. The contractor had

    asserted that during the pre-bid meeting it had been indicated that

    royalty would not be levied on earth excavated from the canal for

    use in embankment formation. The respondents relied upon the

    minutes of the pre-bid meeting to contend that no such clarification

    had been given. The arbitrator examined the document relied upon

    by the respondents and observed that the minutes produced did not

    clearly establish that the bidders had been informed that royalty

    would be chargeable on the earth utilized for the work. The

    arbitrator also found that the authenticity of the said minutes had not

    been satisfactorily proved through the concerned departmental

    officer. On that basis, the arbitrator declined to place reliance upon

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    the document produced by the respondents in support of their

    contention.

    56.The arbitrator also took into account the conduct of the parties

    during the execution of the work. The materials on record indicated

    that the contractor had objected to the deduction of royalty during

    the course of execution and had addressed letters requesting the

    departmental authorities not to deduct such amounts from the

    running account bills. Despite such objections, deductions continued

    to be made from the bills submitted by the contractor. The arbitrator

    observed that the consistent objection raised by the contractor during

    execution lent support to the contention that royalty had not been

    contemplated as part of the rate quoted for the work.

    57. Having considered the contractual documents, the estimate

    prepared by the department and the evidence led by the parties, the

    arbitrator arrived at the conclusion that the rate quoted by the

    contractor for BOQ Item No.5 did not include the element of royalty.

    The arbitrator held that the deduction of royalty from the

    contractor’s running account bills was therefore not supported by the

    terms of the agreement. On that basis, the arbitrator allowed Claim

    No.1 and directed the respondents to refund the amount of

    Rs.61,17,354/- which had been recovered from the contractor’s bills

    towards royalty.

    58.It is thus evident that the arbitrator did not proceed merely on a

    general assumption but undertook a detailed examination of the

    contractual provisions, the estimate forming part of the tender
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    documents and the evidence placed before the tribunal. The

    conclusion reached by the arbitrator was founded upon the

    interpretation of the BOQ items and the surrounding contractual

    material.

    59.When the matter came before the learned District Judge under

    Section 34 of the Arbitration and Conciliation Act, the court

    interfered with the award on the ground that royalty constituted a

    statutory levy and that the contractor was liable to bear the same.

    However, the reasoning adopted by the arbitrator demonstrates that

    the issue before the tribunal was essentially one of contractual

    interpretation, namely whether the rate quoted for BOQ Item No.5

    was intended to include royalty. The arbitrator interpreted the

    contractual documents and reached a conclusion on the basis of the

    materials available before him.

    60.In the opinion of this Court, the reasoning adopted by the arbitrator

    reflects a possible interpretation of the contractual terms governing

    the work. The arbitrator examined the estimate prepared by the

    department, compared the language of different BOQ items and

    considered the evidence of the departmental witness before arriving

    at the conclusion that royalty had not been included in the rate

    quoted for the embankment work. Such an interpretation cannot be

    said to be irrational or unsupported by the record.

    61.In arbitral jurisprudence, once the arbitrator has interpreted the

    terms of the contract and arrived at a conclusion based on the

    materials placed before the tribunal, the court exercising jurisdiction
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    under Section 34 cannot substitute its own interpretation merely

    because another view is possible. The role of the court is confined to

    examining whether the award suffers from patent illegality or

    perversity. Where the arbitrator’s view is a plausible one arising

    from the evidence and contractual provisions, interference is not

    warranted.

    62.Viewed in that light, the reasoning adopted by the learned Sole

    Arbitrator in allowing Claim No.1 represents a plausible view on the

    basis of the contractual documents and the evidence placed on

    record. The interpretation of BOQ Item No.5 and the conclusion that

    royalty had not been included in the quoted rate constitute a possible

    construction of the agreement between the parties. In such

    circumstances, the award on that aspect could not have been

    interfered with in proceedings under Section 34 of the Arbitration

    and Conciliation Act.

    63.In the present case, the issue before the arbitrator involved

    interpretation of the contractual provisions governing earthwork and

    examination of the factual circumstances under which the earth

    required for embankment formation had been procured and utilized.

    The arbitrator considered the correspondence exchanged between

    the parties, the objections raised by the contractor during execution

    of the work, and the manner in which deductions had been made

    from the running account bills. On the basis of such materials, the

    arbitrator arrived at a conclusion that the contractor was entitled to

    refund of the royalty deducted.

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    64.Having regard to the materials considered by the arbitrator and the

    reasoning reflected in the award, it cannot be said that the view

    taken by the arbitral tribunal was one that no reasonable person

    could have arrived at. The interpretation adopted by the arbitrator

    with regard to the contractual provisions and the factual

    circumstances surrounding procurement and utilization of earth

    constitutes a plausible view arising from the evidence on record. In

    such circumstances, the award directing refund of royalty cannot be

    said to suffer from patent illegality or perversity warranting

    interference. The finding of the arbitrator on this issue therefore

    represents a possible view on the materials placed before the

    tribunal.

    65.It is well settled that the jurisdiction of a court under Section 34 of the

    Arbitration and Conciliation Act is supervisory in nature and does

    not extend to reappreciation of evidence or substitution of the court’s

    own interpretation of the contract in place of that adopted by the

    arbitral tribunal. Where the arbitrator has interpreted the contractual

    provisions and assessed the evidence placed before it, the court may

    interfere only if the award suffers from patent illegality, perversity,

    or contravention of the fundamental policy of law. A possible view

    taken by the arbitrator on the basis of the materials on record

    ordinarily does not warrant interference in proceedings under

    Section 34.

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    VI. CONCLUSION:

    66.In view of the discussion made hereinabove, this Court is of the

    considered opinion that the learned Sole Arbitrator had examined

    the contractual provisions, the estimate forming part of the tender

    documents, the description of the items contained in the Bill of

    Quantities and the evidence adduced by the parties before arriving at

    the conclusion that the rate quoted for BOQ Item No.5 was not

    inclusive of royalty. The reasoning recorded in the award

    demonstrates that the arbitrator interpreted the contractual

    documents and assessed the materials placed before the tribunal in

    order to determine the entitlement of the claimant. The conclusion so

    reached represents a possible and reasonable view arising from the

    record. In proceedings under Section 34 of the Arbitration and

    Conciliation Act, 1996, the court does not sit in appeal over the

    arbitral award and cannot substitute its own interpretation of the

    contract in place of that adopted by the arbitrator merely because

    another view may also be possible.

    67.The learned District Judge, while partly allowing the application

    under Section 34, interfered with the award only in respect of Claim

    No.1 relating to refund of royalty. However, having regard to the

    reasoning contained in the arbitral award, this Court finds that the

    view taken by the arbitrator on the issue of royalty cannot be said to

    suffer from patent illegality or perversity so as to justify interference

    within the limited scope of jurisdiction under Section 34 of the Act.

    The learned District Judge, in effect, substituted his own
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    interpretation of the contractual provisions in place of that adopted

    by the arbitrator, which is impermissible in law. The interference

    with the award on that limited aspect was therefore not warranted.

    68.Consequently, the judgment dated 12.9.2019 passed by the learned

    District Judge, Dhenkanal in ARBP No.161 of 2017, insofar as it sets

    aside the arbitral award dated 6.5.2017 with respect to Claim No.1

    relating to refund of royalty amounting to Rs.61,17,354/-, cannot be

    sustained and is hereby set aside. The arbitral award dated 6.5.2017

    passed by the learned Sole Arbitrator in Arbitration Proceeding

    No.26 of 2015 is restored in its entirety. The appeal filed under

    Section 37 of the Arbitration and Conciliation Act, 1996 is

    accordingly allowed.

    69. Accordingly, both the ARBAs are disposed of.

    70.Any interim orders passed during pendency of the appeal shall stand

    vacated. Pending interlocutory applications, if any, shall also stand

    disposed of.

    71.There shall be no order as to costs.

    (Dr. Sanjeeb K Panigrahi)
    Judge
    Orissa High Court, Cuttack,
    Dated the 13th March, 2026/

    Page 35



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