Chattisgarh High Court
South Eastern Coalfields Limited vs M/S M. K. Chaterjee on 7 April, 2026
Author: Rajani Dubey
Bench: Rajani Dubey
1
2026:CGHC:15708-DB
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23.02.2026 07.04.2026 -- 07.04.2026
NAFR
HIGH COURT OF CHHATTISGARH, BILASPUR
ARBA No. 27 of 2018
1 - South Eastern Coalfields Limited, A Company Duly
Incorporated Under The Indian Companies Act, 1956, Having Its
Office At Seepath Road Bilaspur, District Bilaspur (C.G.)
2 - The Chairman Cum Managing Director , SECL, Seepath Road
Bilaspur, District : Bilaspur, Chhattisgarh.
3 - The General Manager, SECL, Chirmiri Area, G. M. Complex
Post Office West Chirmiri, District Korea, Chhattisgarh.
... Appellants
versus
1 - M/s M. K. Chaterjee, A Partnership Firm Duly Registered
Under The Indian Partnership Act, 1932 Having Its Office At
Rajendrapath Post Office Ramgarh Cantt, District Hazaribagh
(Bihar) Having Its Camp Office At Chirmiri, District Korea
Chhattisgarh.
... Respondent
2
For Appellants : Mr. H.B. Agrawal, Sr. Advocate with Mr.
Vinod Deshmukh, Advocate.
For Respondent : Mr. Sharmila Singhai, Sr. Advocate with
Mr. Kanchan Kalwani, Advocate.
D.B. : Hon'ble Smt. Justice Rajani Dubey &
Hon'ble Shri Justice Radhakishan Agrawal
(CAV Order)
Per Rajani Dubey, J
1. The Appellants – S.E.C.L. authority filed this arbitration
appeal under Section 37 of the Arbitration and Conciliation
Act, 1966 (for short ‘the Arbitration Act‘) read with Section
13 of the Commercial Courts, Commercial Court Act, 2015
(for short ‘the Commercial Act‘) against order dated
06.02.2018 passed by the learned Commercial Court
(District Level), Naya Raipur (C.G.) in M.J.C. No.09/2017,
whereby the application preferred by the appellants herein
under Section 34 against the arbitral award dated
05.02.2017 passed by the learned Sole Arbitrator, was
dismissed holding it to be not against the public policy of
India.
2. Brief facts of the case are that the Appellants and the
respondent-company entered into a contract on 09.11.1990
for construction of 250 units of miners’ quarters (D/S),
including development work at Khurasia Colliery in the
3
Chirmiri Area of SECL (Chhattisgarh), vide Agreement No.
CE(C)/BSP/AGT/2/153.
3. Prior to execution of the agreement, the Chief Engineer of
the appellants (SECL) issued a provisional letter of
acceptance dated 28.02.1990. Subsequently, the Additional
Chief Engineer issued a work order dated 31.03.1990,
requiring the contractor to deposit an additional sum of Rs.
66,227/- (Rs. Sixty Six Thousand Two Hundred Twenty-
Seven only) towards 1% security deposit, making a total
initial security deposit of Rs. 1,66,227/-. It was further
stipulated that 5% of the gross value of running account bills
would be deducted towards security deposit, aggregating to
Rs. 8,31,137/- (Rs. Eight Lakh Thirty One Thousand One
Hundred Thirty-Seven only).
4. The stipulated period for completion of the work was 18
months, to be reckoned from the 10th day of issuance of the
letter of intent or from the actual date of handing over of the
site, whichever was later. The arrangement of cement was
primarily the responsibility of the contractor; however, the
appellants could supply cement subject to availability, with
the cost to be recovered as per the rates specified in the
schedule. Electricity was to be supplied at a single point,
and the cost of consumption was to be recovered at the
rates prescribed by SECL from time to time.
4
5. The respondent sought extension of time on multiple
occasions. Initially, by letter dated 11.06.1992, the
appellants granted extension up to 28.06.1992. Thereafter,
the respondent applied for further extension up to
31.12.1992 vide letter dated 30.08.1992. Subsequently, the
respondent further sought for extension of time upto
30.09.1993 and 30.09.1994, which was further granted by
the appellants.
6. During the subsistence of the contract, the disputes arose
between the parties in relation to the said contract. The
respondent invoked the arbitration clause as stipulated in
the Contract; however, the appellants failed to appoint an
Arbitrator. Consequently, the respondent filed an application
under Section 11(6) of the Act, 1996 before this Court,
pursuant to which a Sole Arbitrator was appointed.
Thereafter, the learned Sole Arbitrator after having
considered the material facts, documentary as well as oral
evidence of the parties, passed the arbitral award on
05.02.2017 holding that the respondent is entitled for
retention amount and also for refund of security deposit &
bank guarantee. The order dated 05.02.2017 passed by the
Sole Arbitrator was subjected to challenge before the
Commercial Court, Naya Raipur (C.G.) being M.J.C.
No.09/2017 and the learned Commercial Court, vide
5
impugned order dated 16.02.2018 dismissed the application
of the appellants on the ground that the order passed by the
learned Sole Arbitrator is not against the public policy of
India. Hence, this arbitration appeal.
7. Mr. H.B. Agrawal, learned Sr. counsel for the appellants
referring to the decision of Hon’ble Apex Court in the matter
of Steel Authority of India Ltd. Vs. J.C. Budharaja,
Government and Mining Contractor (1998 (8) SCC 122),
wherein the Hon’ble Apex Court held that reference of
dispute to arbitration must be sought within 03 years from
the date when the cause of action arose, submits that the
respondent’s claim is barred by limitation as the same has
been referred after 03 years from the date of cause of action
arose. Learned Sr. counsel further submits that the learned
Commercial Court did not consider clause 5.0 of the
agreement, which provides for retention of amount by the
applicants till the defects are made good by the contractor
and under this provision the amounts have been retained
which are justified from various communications made by
the appellants herein with regard to the delay in execution of
the work as also the defects in the work executed including
the communication dated 16.10.1991, 19.09.1991,
13.06.1991 and 01.02.1991 etc, thus, the learned Arbitrator
went beyond the four corners of the agreement as well as
6
the documents brought on record and therefore, the award
is against the public policy of India. Learned Sr. counsel
also submits that the learned Commercial Court did not
consider clause 17, which specifically provides that unless
the entire work under the contract is completed and certified
by the Engineer In-charge subject to the conditions
mentioned therein. The first condition being if any defects in
the work is detected after issue of completion certificate or
the same is rectified to the satisfaction of the Engineer In-
charge within a period of six months and it is proved by the
contractor to the complete satisfaction of the Engineer-in-
Charge that the site is completely watertight and only after
such defects are cured the security deposit could be
refunded. However, in the instant case, no such completion
certificate has been produced by the respondent herein so
as to entitle him for refund of security deposit. Learned
counsel also submits that admittedly the entire work has not
been completed by the contractor and therefore, the learned
Sole Arbitrator has travelled beyond the scope of contract
rendering the award with regard to the instant claim as
against the public policy of India.
8. Learned Sr. counsel also contended that the Arbitrator
himself has categorically come to a finding that from the
contentions mentioned under the contract it was the
7
claimant’s responsibility for procurement of cement and
steel and also come to a conclusion that the special terms
and conditions does not provide for any clause for payment
of escalation for price increase of cement, further, although
has come to a conclusion that escalation in respect of steel
is to be allowed only to the extent of statutory increase and
without there been any documents in support thereof has
come to a perverse finding that the claimant is entitled for
escalation. Learned Sr. counsel further submits that a
specific clause which bars payments of any loss of profit
has been inserted under the contract, the learned sole
arbitrator ignoring the same has passed the award which
renders the same against the public policy of India and also
the contract, therefore, the same deserves to be set aside.
Learned Sr. counsel also submits that it is well settled that
for claiming loss of profit, the claimant has to specifically
assert the loss occasioned to them with proof of the same
and also has to prove the breach of contract by other party
but in the present case, the Contractor could not complete
the entire work stipulated under the contract in time and
therefore, he was himself liable for breach of the contract
and no claim whatsoever for loss of profit should have been
entertained by the Arbitrator. On various occasions the
appellants had directed the respondent contractor to
8
accelerate the progress of work and also categorically
stated that the entire side had been handed over to them
since 18.03.1990. However, all these communications made
by the Government servants which forms part of the arbitral
proceedings has been completely ignored by the learned
Sole Arbitrator and therefore, the award of the Arbitrator is
liable to be set-aside on this short score alone. It has been
further contended that the learned Trial Court miserably
failed to appreciate the relevant provisions incorporated
under the contract in its right perspective and thus have
come to an erroneous finding that the award passed by the
learned Arbitrator is in accordance with law. So, the
impugned order and the award are liable to be set aside.
9. Alternate submission of learned Sr. counsel is that payment
of interest @ 9 % from 08.03.1996 to 04.02.2017 on
Rs.14,54,692/- as directed in clause (v) of para 118 of the
arbitral award may be modified to the extent of 6% from
08.03.1996 to 04.02.2017 on Rs.14,54,692/-, in the interest
of justice.
In support of his submission, learned Sr. counsel
placed reliance on the decisions of Hon’ble Apex Court in
the matter of J.G. Engineers Private Limited Vs. Union of
India and Another reported in (2011) 5 SCC 758,
Associate Builders Vs. Delhi Development Authority
9
reported in (2015) 3 SCC 49 and Sri Chittaranjan Maity
Vs. Union of India reported in (2017) 9 SCC 611.
10. Ms. Sharmila Singhai, learned Sr. counsel appearing for
respondent submits that genesis of this dispute traces back
to the year 1996, and the appellant despite having
acknowledged their liability, failed to discharge their
contractual obligation. Learned Sr. counsel submits that a
notice dated 27.07.1996 was issued by the respondent
which gave rise to proceedings under Section 11(6) of the
Arbitration Act, and this High Court referred the matter to
arbitration and the arbitral proceedings too were delayed
solely because of the appellants’ repeated adjournments
and non co-operation & finally the learned Sole Arbitrator
passed a reasoned award dated 05.02.2017 in favour of the
respondent directing payment of the legitimate amount due
along with applicable interest but the appellants without any
ground filed the application under Section 34 of the
Arbitration and Conciliation Act on 03.07.2017 long after the
statutory period of limitation had expired, which was
registered as MJC No.09/2017 & the learned Commercial
Court vide order dated 06.02.2018 affirming the arbitral
award, and again after long delay, the present appeal was
filed on 09.09.2018 well beyond the statutory period which
shows the deliberate intention to frustrate the respondent’s
10
right to enjoy the fruits of the award. Learned Sr. counsel
also submits that the partner of the respondent firm namely
B.N. Chatterjee has since expired during the pendency of
arbitral proceedings, and the old aged surviving partner
continues to suffer from serious ailment and age related
health issues. The respondent has been subjected to
mental agony and financial distress for nearly three decades
while the appellants have been unlawfully enjoying the
award amount. Learned Sr. counsel further contended that
the appellant No.1 being the Government of India
undertaking and therefore a ‘State’ under Article 12 of the
Constitution of India is expected to act as a model litigant
but the appellants have chosen to prolong litigation
unnecessarily contrary to settle principles of fair conduct
expected of public authority. It has been also contended that
under the settled proposition of law, a money decree cannot
be stayed. The consequential relief of the impugned award
is the affirmation of the award, which is already prevailing
partially in favour of the respondent. However, the benefits
of the award have been withheld voluntarily by preferring
the present appeal without paying the awarded amount to
the claimant, who is a senior citizen. The learned sole
Arbitrator considering terms of contract and after
appreciating oral and documentary evidence passed the
11
award dated 05.02.2017 and the learned Commercial Court
also by the impugned order dated 06.02.2018 rightly
dismissed the application of appellants but without any valid
ground the appellants filed this appeal. The appellants have
failed to demonstrate any good ground under Section 34 of
the Arbitration and Conciliation Act. So, the appeal being
without any merit is liable to be dismissed.
In support of her submission, learned Sr. counsel
placed reliance on the decisions of Hon’ble Apex Court in
the matter of Swan Gold Mining Limited Vs. Hindustan
Copper Limited reported in (2015) 5 SCC 739, Ravindra
Kumar Gupta and Company Vs. Union of India reported
in (2010) 1 SCC 409, Delhi Airport Metro Express
Private Limited Vs. Delhi Metro Rail Corporation Limited
reported in (2022) 1 SCC 131, Associate Builders Vs.
Delhi Development Authority reported in (2015) 3 SCC
49, Ispat Engineering & Foundry Works Vs. Steel
Authority of India Limited reported in (2001) 6 SCC 347
and Union of India and Another Vs. L.K. Ahuja and Co.
reported in (1988) 3 SCC 76.
11. We have heard learned counsel for the parties and perused
the material available on record.
12. It is clear from the record of the learned Trial Court that
appellant/SECL authorities and respondent company had
12
entered into an contract for construction of 250 units of
miner’s quarters (D/S) including development work at
Khurasia colliery, in Chirmiri area of SECL (Chhattisgarh) on
09.11.1990 vide agreement No.CE(C)/BSP/AGT/2/153. It is
not disputed that vide letter dated 28.02.1990, the Chief
Engineer of the appellants’ company issued provisional
letter of acceptance and on 31.03.1990 the work order was
issued by the Additional Chief Engineer stating that the
contract is required to deposit a further sum of Rs.66,227/-
being 1% as security deposit aggregating Rs.1,66,227/- and
5% of the gross amount would be recovered from the
running account bills to form total security deposit of
Rs.8,31,137/-. It is also not disputed that dispute arose
between the parties with regard to subject contract. The
respondent/contractor invoked the arbitration clause but the
appellants did not appoint an arbitrator and
respondent/company filed an application under Section
11(6) of the Arbitration Act before this Court and order had
been passed by this Court appointing the Sole Arbitration to
adjudicate the dispute and the learned Sole Arbitrator
passed the arbitral award dated 05.02.2017, against which
the appellant/SECL company filed an application under
Section 34 of the Arbitration Act before the learned
Commercial Court and the learned Commercial Court, vide
13
order dated 06.02.2018 dismissed the application filed by
the Appellant/SECL Company.
13. The learned Commercial Court, in para 3, framed point for
consideration, which reads thus :-
“Whether the Arbitral Award in conflict with
the public policy of India ?”
14. At the outset, it is well settled that the scope of interference
under Section 34 and Section 37 of the Arbitration Act is
extremely limited. The Court does not sit in appeal over the
findings of the learned Arbitrator and cannot re-appreciate
evidence or substitute its own interpretation merely because
another view is possible. Interference is permissible only
when the award is vitiated by patent illegality, perversity, or
is in conflict with the fundamental policy of Indian law or the
most basic notions of justice or morality.
15. In the present case, it is clear from the record that the
learned Sole Arbitrator has minutely examined the entire
material available on record, including oral and
documentary evidence, and has rendered a reasoned
award. The learned Commercial Court rightly finds that the
cause of action arose on 30.06.1994 i.e. extended period of
contract and respondent invoked arbitration clause on
27.07.1996 within three years from the date when cause of
action arose. The learned Commercial Court also
14
considered all the arguments advanced by both the parties
and finds that the learned Arbitrator did not ignore the
vital/substantial evidence led by the parties. The learned
Sole Arbitrator minutely appreciated the oral and
documentary evidence & decided the every claim as per the
evidence and entitlement of the respondent company. The
learned Arbitrator, in para 116 of the arbitral award dated
05.02.2017, out of 16 claims, has allowed 6 claims. There is
nothing on record to demonstrate that the learned Arbitrator
has ignored vital evidence, taken into account irrelevant
material, or rendered findings which are so arbitrary or
irrational that no reasonable person would arrive at such
conclusions. On the contrary, the award reflects a plausible
and reasoned view based on the material before the
Arbitrator.
16. It is also clear from the application of the appellants/SECL
authorities filed before the learned Commercial Court under
Section 34 and this appeal under Section 37 of the
Arbitration Act that no any valid ground raised by the
appellants which provides under Sections 34 and 37 of the
Arbitration Act.
17. The Hon’ble Apex Court in Associate Builders (supra)
held that when any of the heads/sub-heads of test of “public
policy” is applied to an arbitral award, court does not act as
15
court of appeal. Interference is permissible only when
findings of arbitrator are arbitrary, capricious or perverse, or
when conscience of court is shocked, or when illegality is
not trivial but goes to root of the matter, not when merely
another view is possible. Furthermore, arbitrator being
ultimate master of quantity and quality of evidence while
drawing arbitral award, award based on little evidence or on
evidence which does not measure up in quality to a trained
legal mind cannot be held invalid. Once it is found that
arbitrator’s approach is neither arbitrary nor capricious, no
interference is called for on facts.
18. In Swan (supra), Hon’ble Apex Court held in para 11 to 19
as under :-
“11. Section 34 of the Arbitration and
Conciliation Act, 1996 corresponds to Section 30
of the Arbitration Act, 1940 making a provision for
setting aside the arbitral award. In terms of sub-
section (2) of Section 34 of the Act, an arbitral
award may be set aside only if one of the
conditions specified therein is satisfied. The
arbitrator’s decision is generally considered
binding between the parties and therefore, the
power of the court to set aside the award would
be exercised only in cases where the court finds
that the arbitral award is on the fact of it
erroneous or patently illegal or in contravention of
the provisions of the Act. It is a well-settled
proposition that the court shall not ordinarily
16substitute its interpretation for that of the
arbitrator. Similarly, when the parties have arrived
at a concluded contract and acted on the basis of
those terms and conditions of the contract then
substituting new terms in the contract by the
arbitrator or by the court would be erroneous or
illegal.
12. It is equally well settled that the arbitrator
appointed by the parties is the final judge of the
facts. The finding of facts recorded by him cannot
be interfered with on the ground that the terms of
the contract were not correctly interpreted by
him.
13. We have gone through the facts of the case
and perused the documents on the basis of
which the arbitrator gave the award on 24-7-
2009.
14. The respondent issued a notice inviting
tender (NIT) for the operation of its mine.
Clauses 4.9.1 to 4.9.5 of NIT are extracted
hereinbelow:
“4.9.1. The rates quoted by the successful
bidder shall be deemed to be (inclusive) of
the sales taxes, other taxes and service tax
that the successful bidder will have to pay
in India and abroad for the performance of
this contract. HCL will perform such duty
regarding the deduction of such taxes at
source as per applicable laws.
4.9.2. The successful bidder shall also be
responsible to bear and pay any taxes,
cess, fees and/or duties levied including but
17not limited to interest, penalty and/or fine
Imposed by any authorities including
revenue authorities in India and/or abroad
at any time even beyond the expiry of the
contract period with respect of the work to
be performed by the successful bidder in
accordance with the contract.
4.9.3. The successful bidder shall also be
responsible for filing income tax return
and/or complying with necessary procedure
and/or formalities as required or may be
required under the fiscal laws of India
and/or abroad in respect of the work to be
performed by the successful bidder in
accordance with the contract.
4.9.4. Corporate tax and/or income tax, if
any applicable/levied in India and/or abroad
on the successful bidder and/or its
personnel and/or on the sub-contractors
engaged by the successful bidder and/or
the personnel of such sub-contractors in
respect of this contract will be the
responsibility of the successful bidder. All
the necessary return and other formalities
will be the responsibility of successful
bidder.
4.9.5. All the other statutory levies including
but not limited to custom duties/excise
duties, sales taxes, works contract and
other levies of whatsoever nature payable
in accordance with the law of India,
levied/leviable on the successful bidder
18and/or its sub -contractors in respect of
performance of this contract shall be the
responsibility of the successful bidder or
any of its sub-contractors.”
15. The appellant in response to NIT submitted
its technical and financial bids. Subsequent to the
submission of the technical bid and the price bid,
the parties entered into negotiation and thereafter
a letter of intent on the terms and conditions of
NIT and the other terms agreed during
subsequent negotiations was issued. In the said
letter of intent dated 3-3-2007, it was specifically
mentioned that the execution of work shall be on
the terms of notice inviting tender (NIT) and other
agreed discussions/negotiations subsequently
held between the parties. Finally the work order
was issued on 14-4-2007 in continuation with the
letter of intent dated 3-3-2007. The relevant
portion of the work order is extracted
hereinbelow:
“WORK ORDER
Sub: Reopening and operating of Surda Mine
and Mosabani Concentrator Plant at Indian
Copper Complex, Ghatsila
Dear Sir,
With reference to the above subject,
Hindustan Copper Limited is please to issue work
order in continuation with Lol dated 3-3-2007 to
re-commission, operate and maintain Surda Mine
and Mosabani Concentrator Plant to supply and
deliver copper concentrate at rates Rs
1,53,470.00 per tonne of metal in concentrate
(excluding royalty) to Maubhandar work of Indian
Copper Complex, produced from the operations
19of these units.
This work shall be governed by the terms
and conditions of the expressions of interest of
dated 21-9-2006, Notice Inviting Tender No.
HC/HO/GM (MBS)/SURDA dated 11-12-2006
and the other agreed during subsequent
discussions/negotiations, and the final offer.”
(emphasis supplied)”
16. In the course of hearing, Mr P.P. Rao,
learned Senior Counsel appearing for the
respondent produced before us a xerox copy of
the work order dated 14-4-2007. Clause 4.9.1
quoted hereinabove specifically mentions therein
that the rate quoted by the appellant was
inclusive of sales tax, service tax and other
taxes. The representative of the appellant signed
the work order on each page (20 pages) and
acknowledged and admitted the terms and
conditions for the said work.
17. From the facts mentioned hereinabove, it is
evident that the appellant has accepted the
liability of payment of excise duty, sales tax,
service tax and other taxes and hence it cannot
be held that Clause 4.9.1 of the work order is
inconsistent with the terms and conditions of the
contract documents. The learned arbitrator has
gone in detail of the dispute raised by the
appellant and rightly came to the conclusion that
the responsibility on the appellant is to abide by
the terms and conditions of the work order. We
have also gone through the order passed by the
High Court. The Court rightly came to the
conclusion that there is no patent illegality in the
award passed by the arbitrator which needs
20
interference under Section 34 of the Act.
18. Mr Sharan, learned Senior Counsel
appearing for the appellant, also challenged the
arbitral award on the ground that the same is in
conflict with the public policy of India. We do not
find any substance in the said submission. This
Court, in ONGC Ltd., observed that the term
“public policy of India” is required to be
interpreted in the context of jurisdiction of the
court where the validity of award is challenged
before it becomes final and executable. The
Court held that an award can be set aside if it is
contrary to the fundamental policy of Indian law
or the interest of India, or if there is patent
illegality. In our view, the sald decision will not in
any way come into rescue of the appellant. As
noticed above, the parties have entered into
concluded contract, agreeing terms and
conditions of the said contract, which was finally
acted upon. In such a case, the parties to the
said contract cannot back out and challenge the
award on the ground that the same is against the
public policy. Even assuming the ground
available to the appellant, the award cannot be
set aside because it is not contrary to the
fundamental policy of Indian law or against the
interest of India or on the ground of patent
illegality.
19. The words “public policy” or “opposed to
public policy”, find reference in Section 23 of the
Contract Act and also Section 34(2)(b)(ii) of the
Arbitration and Conciliation Act, 1996. As stated
21
above, the interpretation of the contract is matter
of the arbitrator, who is a Judge chosen by the
parties to determine and decide the dispute. The
Court is precluded from reappreciating the
evidence and to arrive at different conclusion by
holding that the arbitral award is against the
public policy.”
19. In Delhi Airport (supra), the Hon’ble Apex Court held in
para 22 to 28 as under :-
“Contours of the Court’s power to review
arbitral awards.
22. The 1996 Act was enacted to consolidate and
amend the law felating to domestic arbitration,
international commercial arbitration and
enforcement of foreign arbitral awards and also
to define the law relating to conciliation and for
matters connected therewith, by taking into
account the United Nations Commission on
International Trade Law (“UNCITRAL”) Model
Law on International Commercial Arbitration and
the UNCITRAL Conciliation Rules. One of the
principal objectives of the 1996 Act is to minimise
the supervisory role of Courts in the arbitral
process. With respect to Part I of the 1996 Act,
Section 5 imposes a bar on Intervention by a
judicial authority except where provided for,
notwithstanding anything contained in any other
law for the time being in force. An application for
setting aside an arbitral award can only be made
in accordance with provisions of Section 34 of
22the 1996 Act.
23. Relevant provisions of Section 34 [as they
were prior to the Arbitration and Conciliation
(Amendment) Act, 2015] read as under:
“34. Application for setting aside arbitral award.-
(1) Recourse to a Court against an arbitral award
may be made only by an application for setting
aside such award in accordance with sub-section
(2) and sub-section (3).
(2) An arbitral award may be set aside by the
Court only if-(a) the party making the application
furnishes proof that-
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under
the law to which the parties have subjected it or,
failing any indication thereon, under the law for
the time being in force; or
(iii) the party making the application was not
given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms of
the submission to arbitration, or it contains
decisions on matters beyond the scope of the
submission to arbitration:
Provided that, if the decisions on matters
submitted to arbitration can be separated from
those not so submitted, only that part of the
arbitral award which contains decisions on
matters not submitted to arbitration may be set
aside; or
23
(v) the composition of the Arbitral Tribunal or the
arbitral procedure was not in accordance with the
agreement of the parties, unless such agreement
was in conflict with a provision of this Part from
which the parties cannot derogate, or, failing
such agreement, was not in accordance with this
Part; or
(b) the Court finds that-
(1) the subject-matter of the dispute is not
capable of settlement by arbitration under the law
for the time being in force, or
(//) the arbitral award is in conflict with the public
policy of India.
Explanation.-Without prejudice to the generality
of sub-clause (ii), it is hereby declared, for the
avoidance of any doubt, that an award is in
conflict with the public policy of India if the
making of the award was induced or affected by
fraud or corruption or was in violation of Section
75 or Section 81.”
24. An amendment was made to Section 34 of
the 1996 Act by the Arbitration and
Concillation (Amendment) Act, 2015
(hereinafter “the 2015 Amendment Act”). A
perusal of the Statement of Objects and
Reasons of the 2015 Amendment Act would
disclose that the amendment to the 1996 Act
became necessary in view of the interpretation
of the provisions of the 1996 Act by Courts in
certain cases which had resulted in delav of
disposal of arbitration proceedings and
increase in interference by Courts in
24
arbitration matters, which had the tendency to
defeat the object of the 1996 Act. Initially, the
matter was referred to the Law Commission of
India to review the shortcomings in the 1996
Act in detail. The Law Commission of India
submitted its 176th Report, recommending
various amendments to the 1996 Act.
However, the Justice Saraf Committee on
Arbitration constituted by the Government,
was of the view that the proposed
amendments gave room for substantial
intervention by the court and were also
contentious. Thereafter, on reference, the Law
Commission undertook a comprehensive
study of the amendments proposed by the
Government, keeping in mind the views of the
Justice Saraf Committee and other
stakeholders. The 246th Report of the Law
Commission was submitted on 5-8-2014.
Acting on the recommendations made by the
Law Commission in its 246th Report,
amendments by way of the 2015 Amendment
Act were made to several provisions of the
1996 Act, including Section 34.
25. The amended Section 34 reads as under:
“34. Application for setting aside arbitral
award.-(1) Recourse to a Court against an
arbitral award may be made only by an
application for setting aside such award in
accordance with sub-section (2) and sub-
section (3).
(2) An arbitral award may be set aside by the
25Court only if-
(a) the party making the application furnishes
proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid
under the law to which the parties have
subjected it or, failing any indication
thereon, under the law for the time being
in force; or
(iii) the party making the application was
not given proper notice of the
appointment of an arbitrator or of the
arbitral proceedings or was otherwise
unable to present his case; or
(iv) the arbitral award deals with a
dispute not contemplated by or not
falling within the terms of the submission
to arbitration, or it contains decisions on
matters beyond the scope of the
submission to arbitration:
Provided that, if the decisions on matters
submitted to arbitration can be
separated from those not so submitted,
only that part of the arbitral award which
contains decisions on matters not
submitted to arbitration may be set
aside; or
(v) the composition of the Arbitral
Tribunal or the arbitral procedure was
not in accordance with the agreement of
the parties, unless such agreement was
in conflict with a provision of this Part
26from which the parties cannot derogate,
or, failing such agreement, was not in
accordance with this Part; or
(b) the Court finds that-
(i) the subject-matter of the dispute is
not capable of settlement by arbitration
under the law for the time being in force,
or
(ii) the arbitral award is in conflict with
the public policy of India.
Explanation 1. For the avoidance of any
doubt, it is clarified that an award is in
conflict with the public policy of India,
only if-
(i) the making of the award was induced
or affected by fraud or corruption or was
in violation of Section 75 or Section 81;
or
(ii) it is in contravention with the
fundamental policy of Indian law; or
(iii) it is in conflict with the most basic
notions of morality or justice.
Explanation 2.-For the avoidance of
doubt, the test as to whether there is a
contravention with the fundamental
policy of Indian law shall not entail a
review on the merits of the dispute.
(2-A) An arbitral award arising out of
arbitrations other than international
commercial arbitrations, may also be set
aside by the Court, if the Court finds that
the award is vitiated by patent illegality
27
appearing on the face of the award:
Provided that an award shall not be
set aside merely on the ground of an
erroneous application of the law or by
reappreciation of evidence.”
26. A cumulative reading of the
UNCITRAL Model Law and Rules, the
legislative intent with which the 1996 Act
is made, Section 5 and Section 34 of the
1996 Act would make it clear that judicial
interference with the arbitral awards is
limited to the grounds in Section 34.
While deciding applications filed under
Section 34 of the Act, Courts are
mandated to strictly act in accordance
with and within the confines of Section
34, refraining from appreciation or
reappreciation of matters of fact as well
as law. (See Uttarakhand Purv Sainik
Kalyan Nigam Ltd. v. Northern Coal
Field Ltd4, Bhaven Construction v.
Sardar Sarovar Narmada Nigam Ltd.5
and Rashtriya Ispat Nigam Ltd. v.
Dewan Chand Ram Saran6.)
27. For a better understanding of the
role ascribed to Courts in reviewing
arbitral awards while considering
applications filed under Section 34 of the
1996 Act, it would be relevant to refer to
a judgment of this Court in Ssangyong
Engg. & Construction Co. Ltd. v. NHAI
wherein R.F. Nariman, J. has in clear
28
terms delineated the limited area for
judicial interference, taking into account
the amendments brought about by the
2015 Amendment Act. The relevant
passages of the judgment in Ssangyong
are noted as under: (SCC pp. 169-71,
paras 34-41)
“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 of
Associate Builders i.e. the fundamental
policy of Indian law would be relegated
to “Renusagar” understanding of this
expression. This would necessarily
mean that Western Geco expansion has
been done away with. In short, Western
Geco, as explained in paras 28 and 29
of Associate Builders, 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 grounds of
challenge of an award, as is contained in
29
para 30 of Associate Builders.
35. It is important to notice that the
ground for interference insofar as it
concerns “interest of India” has since
been deleted, and therefore, no longer
obtains. Equally, the ground for
interference on the basis that the award
is in conflict with justice or morality is
now to be understood as a conflict with
the “most basic notions of morality or
justice”. This again would be in line with
paras 36 to 39 of Associate Builders, as
it is only such arbitral awards that shock
the conscience of the court that can be
set aside on this ground.
36. Thus, it is clear that public policy
of India is now constricted to mean
firstly, that a domestic award is contrary
to the fundamental policy of Indian law,
as understood in paras 18 and 27 of
Associate Builders, or secondly, that
such award is against basic notions of
justice or morality as understood in
paras 36 to 39 of Associate Builders.
Explanation 2 to Section 34(2)(b)(ii) and
Explanation 2 to Section 48(2)(b)(ii) was
added by the Amendment Act only so
that Western Geco, as understood in
Associate Builders, and paras 28 and 29
in particular, is now done away with.
37. Insofar as domestic awards made
in India are concerned, an additional
30
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 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 of
Associate Builders, 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, 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
31
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, 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 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 of
Associate Builders, while 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
32
based on documents taken behind the
back of the parties by the arbitrator
would also qualify as a decision based
on no evidence in asmuch as such
decision is not based on evidence led by
the parties, and therefore, would also
have to be characterised as perverse.”
28. This Court has in several other
judgments interpreted Section 34 of the
1996 Act to stress on the restraint to be
shown by Courts while examining the
validity of the arbitral awards. The
limited grounds available to Courts for
annulment of arbitral awards are well
known to legally trained minds.
However, the difficulty arises in applying
the well -established principles for
interference to the facts of each case
that come up before the Courts. There is
a disturbing tendency of Courts setting
aside arbitral awards, after dissecting
and reassessing factual aspects of the
cases to come to a conclusion that the
award needs. intervention and
thereafter, dubbing the award to be
vitiated by either perversity or patent
illegality, apart from the other grounds
available for annulment of the award.
This approach would lead to corrosion of
the object of the 1996 Act and the
endeavours made to preserve this
object, which is minimal judicial
33
interference with arbitral awards. That
apart, several judicial pronouncements
of this Court would become a dead letter
if arbitral awards are set aside by
categorising them as perverse or
patently illegal without appreciating the
contours of the said expressions.”
20. In light of the principles laid down by the Hon’ble Supreme
Court in Associate Builders (supra), Swan (supra), and
Delhi Airport (supra), it is clear that the Court cannot
interfere with an arbitral award merely on the ground that
another interpretation is possible or that the evidence could
have been appreciated differently. The Arbitrator is the final
authority on facts as well as interpretation of contract,
unless the view taken is wholly unreasonable or beyond the
scope of the contract. We find that the learned Commercial
Court rightly recorded its finding that reasons mentioned by
the learned Sole Arbitrator were genuine and approach of
the learned Arbitrator is neither arbitrary nor capricious. The
award is well reasoned and is in great detail on the basis of
material facts and the finding rendered by it are those which
fall within the terms and conditions of the contract and the
learned Commercial Court rightly dismissed the application
filed by the appellants under Section 34 of the Act. The
findings of the learned Sole Arbitrator do not suffer from any
34
patent illegality. The award is neither arbitrary nor perverse,
and the appellants have failed to establish any ground
falling within the limited ambit of Sections 34 or 37 of the
Act.
21. The case laws relied upon by the learned Sr. counsel for the
appellants in Steel Authority (supra), J.G. Engineers
(supra), Associate Builders (supra) and Sri Chittaranjan
(supra) would be of no help being distinguishable on the
ground of facts.
22. In the result, looking to the limited scope of Section 37 of the
Arbitration Act, this appeal being without any merit liable to
be and is hereby dismissed. No order as to costs.
23. Pending applications, if any, stand disposed of.
Sd/- Sd/-
(Rajani Dubey) (Radhakishan Agrawal)
Judge Judge
Digitally signed
pekde
by VIJAY
BHARATRAO
PEKDE
Date: 2026.04.07
13:56:47 +0530