Delhi High Court
Institute Of Human Behaviour And Allied … vs Mi 2 C Securities And Facilities on 6 April, 2026
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 03.02.2026
Judgment pronounced on: 06.04.2026
+ O.M.P. (COMM) 286/2024, I.A. 33341/2024 (Stay), I.A.
33342/2024 (Ex. from filing certified copies of the arbitral
record), I.A. 33343/2024 (Ex. from filing entire
original/certified copies of the arbitral tribunal record), I.A.
33344/2024 (Delay of 5 days in re-filing the petition) & I.A.
36363/2024 (Delay of 4 days in filing the short note)
INSTITUTE OF HUMAN BEHAVIOUR AND ALLIED
SCIENCES .....Petitioner
Through: Mr. Tushar Sannu, Standing
Counsel with Ms. Ankita
Bhadouriya and Mr. Umesh
Kumar, Advocates.
versus
MI 2 C SECURITIES AND FACILITIES .....Respondent
Through: Mr. Rajesh Gogna, Mr. Shivam
Tiwari, Ms. Rebina Rai and Ms.
Punita Jha, Advocates.
+ OMP (ENF.) (COMM.) 272/2024, EX.APPL.(OS) 2/2025
(Filed on behalf of the decree holder to place on record the new
certificate of incorporation dt. 29.04.2024) & EX.APPL.(OS)
59/2025 (Filed on behalf of the decree holder for amendment of
memo of parties)
MI2C SECURITY AND FACILITIES PVT LTD
.....Decree Holder
Through: Mr. Rajesh Gogna, Mr. Shivam
Tiwari, Ms. Rebina Rai and Ms.
Punita Jha, Advocates.
versus
INSTITUTE OF HUMAN BEHAVIOUR AND ALLIED
SCIENCES .....Judgement Debtor
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 1 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
Through: Mr. Tushar Sannu, Standing
Counsel with Ms. Ankita
Bhadouriya and Mr. Umesh
Kumar, Advocates.
CORAM:
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
JUDGMENT
HARISH VAIDYANATHAN SHANKAR, J.
1. The Objection Petition, being O.M.P. (COMM) 286/20241, has
been instituted under Section 34 of the Arbitration and Conciliation
Act, 19962, by Institute of Human Behaviour & Allied Sciences3,
assailing the Arbitral Award dated 26.02.2024 4 rendered by the
learned Sole Arbitrator in the arbitral proceedings initiated at the
instance of MI2C Securities and Facilities5.
2. The Claimant, in the above-stated arbitral proceedings vide the
Impugned Award, was awarded a principal sum of Rs. 1,37,05,429/-
towards the invoices raised along with Pre-reference Interest and
pendente lite interest at the rate of 18% and further, future interest at
the rate of 20% from the date of award until actual realisation.
3. For the sake of convenience, clarity and consistency, the parties
shall hereinafter be referred to in the same rank and nomenclature as
adopted in the above-stated Objection Petition.
1
Objection Petition
2
A&C Act
3
Petitioner
4
Impugned Award
5
Respondent
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 2 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
4. Parallelly, an Enforcement Petition, being O.M.P. (COMM)
272/2024 6 has been filed by the Respondent/ Award Holder under
Section 36 of the A&C Act, read with Order XXI Rules 1, 11(2), 30,
43, 64 & 66, read with Section 151 of the Code of Civil Procedure,
1908, seeking enforcement and execution of the Impugned Award.
5. It is because the enforceability of the Impugned Award is directly
contingent upon the fate of the challenge laid by way of the Objection
Petition, and since both the proceedings are intrinsically interlinked
with the Impugned Award, the Objection Petition and the
Enforcement Petition were heard together contemporaneously, in
order to obviate the possibility of conflicting determinations.
6. It is accordingly clarified that the Enforcement Petition shall
necessarily abide by the outcome of the Objection Petition, and in the
event the challenge to the Impugned Award succeeds, the
Enforcement Petition would consequently not survive for
consideration.
BRIEF FACTS:
7. The Petitioner is stated to be an autonomous Government
Institution and Hospital under the aegis of the Government of N.C.T.
of Delhi and the Respondent, a private limited company registered as
Micro, Small and Medium Enterprises7, is stated to be an integrated
security and facility management service provider engaged in
providing manpower for security services.
6
Enforcement Petition
7
MSME
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 3 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
8. The Petitioner issued a Notice inviting Tender dated
06.11.2015 8 seeking bids to provide security manpower to be
deployed at its premises. The Respondent participated in the said
bidding process and stood successful, in pursuance of which the
Petitioner issued an Offer Letter dated 08.08.20179 in favour of the
Respondent.
9. Consequent upon the issuance of the Offer Letter, the parties
entered into an Agreement dated 23.08.201710, initially operative for
a period of one year from 24.08.2017 to 24.08.2018, however, the said
Agreement was thereafter extended from time to time and remained in
force till 31.07.2020.
10. It is the case of the Respondent that, in addition to the sanctioned
strength stipulated for the guards under the Agreement, they provided
deployment of additional guards, bouncers and gunmen to the
Petitioner, on their oral instructions, pursuant to a meeting held on
24.08.2017.
11. Accordingly, as per the Respondent, additional manpower
comprising additional guards, bouncers and gunmen was deployed on
several occasions as per the requirement of the Petitioner, in addition
to the originally agreed strength of the guards, bouncers and gunmen,
as per the Agreement.
12. The Respondent raised invoices towards the Petitioner against
the regular services provided as per the Agreement, as well as against
the additional manpower provided.
8
NIT
9
Offer Letter
10
Agreement
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 4 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
13. It is the case of the Respondent that the Petitioner made a short
payment for the month of March, 2020 amounting to Rs. 5,01,000/-,
salary of the month of July, 2020 amounting to Rs. 57,45,826/- for the
sanctioned strength as per the Agreement and also no payment was
made with regards to the additional security guards, bouncers and
gunmen deployed on various occasions, amounting to
Rs.1,37,05,429/- even after various requests for the same was made to
the Petitioner.
14. Pursuant to the above-stated non-payment of the aggregate
amount of Rs. 1,99,52,255/-, the Respondent issued a Legal Notice
dated 25.12.2020 demanding therein the said due amounts, return of
performance bank guarantee amounting to Rs. 63,13,065/- and
invoked the Dispute Resolution Clause.
15. Pursuant to the Legal Notice, the Petitioners made the due
payment with regard to the short payment for the month of March,
2020 and salary due on sanctioned strength for the month of July,
2020.
16. Consequently, another Legal Notice dated 14.09.2021 was issued
by the Respondent to the Petitioner demanding dues of Rs.
1,37,05,429/- against deployment of additional security guards,
bouncers and gunmen, and invocation of the Dispute Resolution
Clause to refer the dispute with regards to non-payment of dues.
17. It is stated that the Petitioner failed to reply to the said Legal
Notice.
18. It is the case of the Respondent that the Petitioner made all the
payments with respect to the invoices raised against the regular
services rendered as per the Agreement, but did not make any
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 5 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
payments against the invoices raised for the additional guards,
bouncers and gunmen provided to the Petitioners.
19. Subsequently, the Respondent approached this Court under
Section 11 of the A&C Act for the appointment of an Arbitrator by
way of a Petition, being Arb. P No. 186/2022, which was allowed vide
Order dated 23.03.2022 and thereby an Arbitrator was appointed to
adjudicate upon the disputes inter se the parties.
20. The Respondent, who was the Claimant before the Arbitral
Tribunal, filed their Statement of Claim, thereby pressing upon the
following Claims viz.,
(i) Claim A, for payment towards invoices raised for additional
deployment i.e., extra security guards, bouncers and gunmen;
(ii) Claim B, interest on Claim A;
(iii)Claim C, Cost of Arbitration;
(iv) Claim D, any other relief which the learned Arbitrator may think
proper.
21. Upon completion of the pleadings and after the parties had led
their respective evidence, the learned Sole Arbitrator, by way of the
Impugned Arbitral Award dated 26.02.2024, issued the following
directions in relation to the claims preferred by the Respondent herein:
(i) Direction A – Claim A was allowed in favour of the Respondent
for a sum of Rs. 1,37,05,429/- towards the payment on account of
deployment of extra security guards, bouncers and gunmen.
(ii) Direction B – Claim B was allowed, directing the Petitioner to
pay the Respondent interest at the rate of 18% with monthly rests
on the principal amount granted by way of direction A.
Furthermore, the Respondent was directed to compute the
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 6 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
interest in terms of the Micro, Small and Medium Enterprises
Development Act, 200611, till the date of the Award, and provide
the same to the Petitioner within 2 weeks from the date of the
Award.
(iii)Direction C – The learned Arbitrator awarded the Respondent
post award future interest at the rate of 20%, if the Petitioner
failed to pay the amounts directed as per Directions A and B,
within a period of 60 days from the date of the award till actual
payment.
(iv) Direction D – Claim C was rejected, thereby directing each party
to bear their respective costs of arbitration.
22. Aggrieved thereof, the Petitioner has approached this Court, by
way of the Objection Petition, seeking to set aside the Impugned
Award.
CONTENTIONS ON BEHALF OF THE PETITIONER:
23. Learned counsel appearing on behalf of the Petitioner would, at
the outset, contend that the Impugned Award suffers from the vice of
being patently illegal. It would be submitted that the conclusions
arrived at by the learned Sole Arbitrator are bereft of cogent reasons
and unsupported by the pleadings and evidence on record. It would be
urged that the Award discloses non-application of the mind to material
objections raised by the Petitioner and, records conclusions in the
absence of necessary evidentiary and contractual foundation.
Challenge to Direction A – Award of Principal Amount for Alleged
Additional Deployment
11
MSMED Act
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 7 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
24. Learned counsel for the Petitioner would contend that the learned
Arbitrator was only empowered to adjudicate upon subject matters
within the terms of the Agreement as entered into between the parties
and disputes which arise thereof, and nothing beyond it.
25. Learned counsel for the Petitioner would, in this backdrop,
submit that the Agreement as between the parties was only restricted
to deployment of „security guards‟, and cannot be expanded to include
any other category, inter alia, bouncers or gunmen.
26. Learned counsel for the Petitioner would contend that the learned
Arbitrator has erred in interpreting the „variation clause‟ of
deployment at Annexure IV of the NIT Documents to mean additional
deployment.
27. It would be submitted that the „variation clause‟ of Annexure IV
of the NIT Documents only stipulates 25% “extra guards”, which
cannot be interpreted to include deployment of bouncers and gunmen.
This stipulation, if any meaning is to be assigned to it, would be
limited to 25% of the total number of guards (Total 247) which were
deployed as per the contract, and would be restricted to approximately
62 extra/additional guards.
28. It would be further contended that the Respondent produced no
evidence as to the market rates of the said additional bouncers and
gunmen, and raised invoices at rates that were inflated and which were
not agreed upon between the parties.
29. Learned counsel for the Petitioner would further assail the
Impugned award on the ground that the award travels beyond the
Statement of Claims of the Respondent, as before the learned Arbitral
Tribunal and grants reliefs which were not prayed for.
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 8 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
30. Learned counsel would urge that the Arbitral Tribunal, being a
creature of reference, is bound by the pleadings of the parties and
cannot grant reliefs not sought, nor mould reliefs in a manner that
prejudices the opposite party.
31. Assailing the award on merits, learned counsel would contend
that the learned Arbitrator erred in allowing claims for the period
August 2017 to December 2017 without any supporting evidence. It
would be further submitted that, the Claimant‟s own case, as borne out
from the record, was that attendance sheets and deployment records
were duly verified only for the period January 2018 to July 2020.
Despite this, the learned Arbitrator awarded amounts for an earlier
period without any documentary substantiation, rendering the finding
perverse and contrary to the evidence on record.
Challenge to Direction B – Grant of Interest at 18% under the
MSMED Act
32. On this premise, with particular emphasis on the award of
interest, learned counsel for the Petitioner would submit that the
Respondent had itself limited and quantified its claim towards interest.
Leaned counsel for the Petitioner would draw the attention of this
Court to the Statement of Claim filed by the Respondent before the
Arbitral Tribunal and the accompanying documents, wherein the
Respondent had expressly computed interest at the rate of 12.5%,
aggregating to Rs. 64,06,296.36/-, for a specific period. However, the
learned Arbitrator proceeded to grant interest at the rate of 18% per
annum, purportedly under the MSMED Act, followed by future
interest at the rate of 20% per annum, without any pleading,
quantification, or reasoned analysis.
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 9 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
33. Learned counsel for the Petitioner would further contend that the
learned Arbitrator has erroneously invoked the principles of the
MSMED Act without any foundational pleadings or proof.
34. Learned counsel would submit that the Respondent neither
pleaded nor established that it fulfilled the requirement of being a
„supplier‟ under the MSMED Act, nor was any determination made
with respect to the „appointed date‟ or the contractual trigger under
Sections 15 and 16 of the MSMED Act.
35. It would be urged that the mere assertion of MSME registration,
without pleading and proof of statutory compliance, cannot, ipso
facto, entitle a party to the penal rate of interest contemplated under
the MSMED Act.
36. Learned counsel for the Petitioner would further submit that the
statutory scheme of the MSMED Act was selectively and
impermissibly applied. It would be argued that the MSMED Act is a
self-sufficient statute that provides not only substantive benefits but
also a mandatory procedural mechanism under Section 18 of the
MSMED Act, including reference to the Micro and Small Enterprise
Facilitation Council12.
37. Learned counsel for the Petitioner would place reliance on the
decision of a Co-ordinate Bench of this Court in Idemia Syscom India
Private Limited vs. M/s Conjoinix Total Solutions Private Limited13
to contend that recourse to the MSEFC is mandatory and that the
learned Arbitrator erred in simultaneously declining such recourse
while awarding interest under the MSMED Act and that the MSMED
12
MSEFC
13
2025:DHC:1205
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 10 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
Act would have an overriding effect on the provisions of the A&C
Act.
38. Learned counsel would, in this backdrop, submit that the learned
Arbitrator erred in holding that recourse to the MSEFC was not
necessary, while simultaneously granting interest under the MSMED
Act. Such an approach, it would be urged, amounts to permitting a
party to approbate and reprobate, invoking the benefits of a special
statute while bypassing its mandatory procedure.
Challenge to Direction C – Award of Future Interest at 20% per
annum
39. Learned counsel for the Petitioner would seek to assail the award
of Future interest at the rate of 20% per annum on the ground of patent
illegality as being wholly arbitrary and unsupported by reasoning.
40. It would be urged that the Impugned Award does not disclose
any rationale, contractual stipulation or statutory basis for the grant of
such a high rate of future interest. It would further be submitted that
the absence of reasons renders this direction of awarding future
interest vulnerable under Section 31(3) of the A&C Act and
constitutes patent illegality apparent on the face of the award.
CONTENTIONS ON BEHALF OF THE RESPONDENT:
41. Per contra, learned counsel appearing on behalf of the
Respondent would contend that Section 34 of the A&C Act does not
envisage re-appreciation of evidence or facts, it does not constitute an
appeal on facts or law. It would be submitted that the ground of
„patent illegality‟ as contended by the Petitioner under Section 34(2A)
is a narrow ground and can be invoked to set aside an arbitral award
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 11 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
only in exceptional circumstances, where the arbitral award exhibits
perversity that goes to the root of the matter.
Direction A- Award of Principal Amount for Alleged Additional
Deployment
42. Learned counsel for the Respondent would submit that the
finding of the learned Arbitrator allowing the claim towards invoices
raised for additional deployment of guards, gunmen and bouncers is
based on a holistic appreciation of the contractual framework, tender
conditions, contemporaneous correspondence and admitted conduct of
the parties.
43. It would be contended that the Agreement between the parties
cannot be read in a pedantic manner. The variation clause contained in
Annexure IV of the NIT documents was correctly interpreted by the
learned Arbitrator to permit deployment beyond the baseline
requirement, particularly in the emergent and sensitive circumstances,
and such interpretation is a possible and reasonable view.
44. As regards the challenge on alleged absence of proof of market
rates, learned counsel would submit that the Arbitrator has taken into
account the material placed on record, including invoices, deployment
details and the prevailing contractual rates, and has returned findings
of fact which are immune from interference under Section 34 of the
A&C Act.
45. It would be further urged that the contention that the award
travels beyond the Statement of Claim is wholly unfounded. The
reliefs granted fall squarely within the claims as pleaded, and the
learned Arbitrator has neither granted any relief de hors the pleadings
nor moulded relief in excess thereof.
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 12 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
46. Addressing the challenge to the grant of the claims for
deployment for the period August 2017 to December 2017, learned
counsel would submit that the Arbitrator has recorded reasons for
allowing the claim based on cumulative material and oral evidence,
and the mere absence of certain documents does not render the finding
perverse. It would be contended that sufficiency or adequacy of
evidence is beyond the remit of Section 34 of the A&C Act.
Direction B- Grant of Interest at 18% under the MSMED Act
47. With respect to Direction B, learned counsel for the Respondent
would submit that the award of pendente lite interest at the rate of
18% is fully justified in law. It would be contended that the
Respondent is a registered MSME and had placed its registration on
record, which was duly considered by the learned Arbitrator.
48. Learned counsel would argue that once the Respondent is found
to be an MSME supplier and the payments are delayed beyond the
statutory period, the entitlement to interest under Sections 15 and 16
of the MSMED Act flows as a matter of law. It would be urged that
the learned Arbitrator was competent to apply the statutory mandate,
even if the exact computation was left to be finalised post-award.
49. It would further be submitted that the Petitioner cannot take
shelter behind technical pleas of pleading when the statutory
entitlement is clear and the delay in payment is undisputed.
50. The award of interest, it would be urged by the Respondent, is
compensatory in nature and intended to neutralise the economic
prejudice suffered by small enterprises.
51. On the issue of Section 18 of the MSMED Act, learned counsel
would submit that recourse to the MSEFC is an enabling mechanism
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 13 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
and does not oust the jurisdiction of an arbitral tribunal constituted
under an existing arbitration Agreement. It would be contended that
the invocation of arbitration by consent of parties is legally
permissible, and the Petitioner cannot selectively rely on the MSMED
Act only to resist interest.
52. In this regard, learned counsel for the Respondent would also
place strong reliance on the decision of a Co-ordinate Bench of this
Court in Indian Highways Management Company Limited v. SOWiL
Limited14 wherein the Court held that the buyer‟s obligation to pay
interest on delayed payments under Sections 15 and 16 of the
MSMED Act is absolute and not contingent upon the supplier
invoking the dispute resolution mechanism under Section 18 of the
MSMED Act.
Direction C – Award of Future Interest at 20% per annum
53. Assailing the challenge to Direction C, learned counsel for the
Respondent would submit that the award of future interest at the rate
of 20% is neither arbitrary nor illegal. It would be contended that the
rate has been awarded as a deterrent against continued default and
prolonged withholding of legitimate dues.
54. Learned counsel would argue that Section 31(7) of the A&C Act
vests wide discretion in the arbitral tribunal to award post-award
interest, and unless the rate is shown to be shockingly unconscionable
or prohibited by statute, the same cannot be interfered with under
Section 34 of the A&C Act.
55. It would be urged that the Petitioner, having enjoyed the benefit
of the Respondent‟s services and having withheld payment for years,
14
2021 SCC OnLine Del 5523
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 14 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
cannot now plead hardship against the award of future interest. The
direction, it would be submitted, is equitable and intended to ensure
timely compliance with the award.
ANALYSIS:
56. This Court has heard the learned counsel appearing on behalf of
the parties at length and, with their able assistance, perused the
materials placed on record.
57. At the outset, it is apposite to note that this Court remains
conscious of the limited scope of its jurisdiction while examining an
objection petition under Section 34 of the A&C Act. There is a
consistent and evolving line of precedents whereby the Hon‟ble
Supreme Court has authoritatively delineated and settled the contours
of judicial intervention in such proceedings.
58. In this regard, a 3-Judge Bench of the Hon‟ble Supreme Court,
after an exhaustive consideration of a catena of earlier judgments, in
OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions
(India) (P) Ltd.15, while dealing with the grounds of conflict with the
public policy of India, perversity and patent illegality, grounds which
have also been urged in the present case, made certain pertinent
observations, which are reproduced hereunder:
“Relevant legal principles governing a challenge to an arbitral
award
30. Before we delve into the issue/sub-issues culled out above, it
would be useful to have a look at the relevant legal principles
governing a challenge to an arbitral award. Recourse to a court
against an arbitral award may be made through an application for
setting aside such award in accordance with sub-sections (2), (2-A)
and (3) of Section 34 of the 1996 Act. Sub-section (2) of Section 34
has two clauses, (a) and (b). Clause (a) has five sub-clauses which
are not relevant to the issues raised before us. Insofar as clause (b)15
(2025) 2 SCC 417
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 15 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
is concerned, it has two sub-clauses, namely, (i) and (ii). Sub-
clause (i) of clause (b) is not relevant to the controversy in hand.
Sub-clause (ii) of clause (b) provides that if the Court finds that the
arbitral award is in conflict with the public policy of India, it may
set aside the award.
Public policy
31. “Public policy” is a concept not statutorily defined, though it
has been used in statutes, rules, notification, etc. since long, and is
also a part of common law. Section 23 of the Contract Act, 1872
uses the expression by stating that the consideration or object of an
agreement is lawful, unless, inter alia, opposed to public policy.
That is, a contract which is opposed to public policy is void.
*****
37. What is clear from above is that for an award to be against
public policy of India a mere infraction of the municipal laws of
India is not enough. There must be, inter alia, infraction of
fundamental policy of Indian law including a law meant to serve
public interest or public good.
*****
The 2015 Amendment in Sections 34 and 48
42. The aforementioned judicial pronouncements were all prior to
the 2015 Amendment. Notably, prior to the 2015 Amendment the
expression “in contravention with the fundamental policy of Indian
law” was not used by the legislature in either Section 34(2)(b)(ii) or
Section 48(2)(b). The pre-amended Section 34(2)(b)(ii) and its
Explanation read:
*****
44. By the 2015 Amendment, in place of the old Explanation to
Section 34(2)(b)(ii), Explanations 1 and 2 were added to remove
any doubt as to when an arbitral award is in conflict with the public
policy of India.
45. At this stage, it would be pertinent to note that we are dealing
with a case where the application under Section 34 of the 1996 Act
was filed after the 2015 Amendment, therefore the newly
substituted/added Explanations would apply [Ssangyong Engg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131].
46. The 2015 Amendment adds two Explanations to each of the
two sections, namely, Section 34(2)(b)(ii) and Section 48(2)(b), in
place of the earlier Explanation. The significance of the newly
inserted Explanation 1 in both the sections is two-fold. First, it does
away with the use of words : (a) “without prejudice to the
generality of sub-clause (ii)” in the opening part of the pre-
amended Explanation to Section 34(2)(b)(ii); and (b) “without
prejudice to the generality of clause (b) of this section” in the
opening part of the pre-amended Explanation to Section 48(2)(b);
secondly, it limits the expanse of public policy of India to the three
specified categories by using the words “only if”.
Whereas, Explanation 2 lays down the standard for adjudging
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 16 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
whether there is a contravention with the fundamental policy of
Indian law by providing that a review on merits of the dispute shall
not be done. This limits the scope of the enquiry on an application
under either Section 34(2)(b)(ii) or Section 48(2)(b) of the 1996
Act.
47. The 2015 Amendment by inserting sub-section (2-A) in Section
34, carves out an additional ground for annulment of an arbitral
award arising out of arbitrations other than international
commercial arbitrations. Sub-section (2-A) provides that the Court
may also set aside an award if that is vitiated by patent illegality
appearing on the face of the award. This power of the Court is,
however, circumscribed by the proviso, which states that an award
shall not be set aside merely on the ground of an erroneous
application of the law or by reappreciation of evidence.
48. Explanation 1 to Section 34(2)(b)(ii), specifies that an arbitral
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.
49. In the instant case, there is no allegation that the making of the
award was induced or affected by fraud or corruption, or was in
violation of Section 75 or Section 81. Therefore, we shall confine
our exercise in assessing as to whether the arbitral award is in
contravention with the fundamental policy of Indian law, and/or
whether it conflicts with the most basic notions of morality or
justice. Additionally, in the light of the provisions of sub-section
(2-A) of Section 34, we shall examine whether there is any patent
illegality on the face of the award.
50. Before undertaking the aforesaid exercise, it would be apposite
to consider as to how the expressions:
(a) “in contravention with the fundamental policy of Indian law”;
(b) “in conflict with the most basic notions of morality or justice”;
and
(c) “patent illegality” have been construed.
In contravention with the fundamental policy of Indian law
51. As discussed above, till the 2015 Amendment the expression
“in contravention with the fundamental policy of Indian law” was
not found in the 1996 Act. Yet, in Renusagar Power Co.
Ltd. v. General Electric Co., 1994 Supp (1) SCC 644, in the
context of enforcement of a foreign award, while construing the
phrase “contrary to the public policy”, this Court held that for a
foreign award to be contrary to public policy mere contravention of
law would not be enough rather it should be contrary to:
(a) the fundamental policy of Indian law; and/or
(b) the interest of India; and/or
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 17 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
(c) justice or morality.
*****
55. The legal position which emerges from the aforesaid discussion
is that after “the 2015 Amendments” in Section 34(2)(b)(ii) and
Section 48(2)(b) of the 1996 Act, the phrase “in conflict with the
public policy of India” must be accorded a restricted meaning in
terms of Explanation 1. The expression “in contravention with the
fundamental policy of Indian law” by use of the word
“fundamental” before the phrase “policy of Indian law” makes the
expression narrower in its application than the phrase “in
contravention with the policy of Indian law”, which means mere
contravention of law is not enough to make an award vulnerable.
To bring the contravention within the fold of fundamental policy of
Indian law, the award must contravene all or any of such
fundamental principles that provide a basis for administration of
justice and enforcement of law in this country.
56. Without intending to exhaustively enumerate instances of such
contravention, by way of illustration, it could be said that:
(a) violation of the principles of natural justice;
(b) disregarding orders of superior courts in India or the binding
effect of the judgment of a superior court; and
(c) violating law of India linked to public good or public interest,
are considered contravention of the fundamental policy of
Indian law.
However, while assessing whether there has been a contravention
of the fundamental policy of Indian law, the extent of judicial
scrutiny must not exceed the limit as set out in Explanation 2 to
Section 34(2)(b)(ii).
*****
Patent illegality
65. Sub-section (2-A) of Section 34 of the 1996 Act, which was
inserted by the 2015 Amendment, provides that an arbitral award
not arising out of international commercial arbitrations, may also
be set aside by the Court, if the Court finds that the award is visited
by patent illegality appearing on the face of the award. The proviso
to sub-section (2-A) states that an award shall not be set aside
merely on the ground of an erroneous application of the law or by
reappreciation of evidence.
66. In ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705, while
dealing with the phrase “public policy of India” as used in Section
34, this Court took the view that the concept of public policy
connotes some matter which concerns public good and public
interest. If the award, on the face of it, patently violates statutory
provisions, it cannot be said to be in public interest. Thus, an award
could also be set aside if it is patently illegal. It was, however,
clarified that illegality must go to the root of the matter and if the
illegality is of trivial nature, it cannot be held that award is against
public policy.
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 18 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
67. In Associate Builders v. DDA, (2015) 3 SCC 49, this Court
held that an award would be patently illegal, if it is contrary to:
(a) substantive provisions of law of India;
(b) provisions of the 1996 Act; and
(c) terms of the contract [See also three-Judge Bench decision of
this Court in State of Chhattisgarh v. SAL Udyog (P) Ltd.,
(2022) 2 SCC 275].
The Court clarified that if an award is contrary to the substantive
provisions of law of India, in effect, it is in contravention of
Section 28(1)(a) of the 1996 Act. Similarly, violating terms of the
contract, in effect, is in contravention of Section 28(3) of the 1996
Act.
68. In Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019)
15 SCC 131 this Court specifically dealt with the 2015
Amendment which inserted sub-section (2-A) in Section 34 of the
1996 Act. It was held that “patent illegality appearing on the face
of the award” refers to such illegality as goes to the root of matter,
but which does not amount to mere erroneous application of law. It
was also clarified that 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 [ See Ssangyong Engg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131]. Further, it
was observed, reappreciation of evidence is not permissible under
this category of challenge to an arbitral award [See Ssangyong
Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131].
Perversity as a ground of challenge
69. Perversity as a ground for setting aside an arbitral award was
recognised in ONGC Ltd. v. Western Geco International Ltd.,
(2014) 9 SCC 263. Therein it was observed that an arbitral decision
must not be perverse or so irrational that no reasonable person
would have arrived at the same. It was observed that if an award is
perverse, it would be against the public policy of India.
70. In Associate Builders v. DDA, (2015) 3 SCC 49 certain tests
were laid down to determine whether a decision of an Arbitral
Tribunal could be considered perverse. In this context, it was
observed that where:
(i) a finding is based on no evidence; or
(ii) an Arbitral Tribunal takes into account something irrelevant to
the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, such decision
would necessarily be perverse.
However, by way of a note of caution, it was observed that when a
court applies these tests it does not act as a court of appeal and,
consequently, errors of fact cannot be corrected. Though, a possible
view by the arbitrator on facts has necessarily to pass muster as the
arbitrator is the ultimate master of the quantity and quality of
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 19 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
evidence to be relied upon. It was also observed that an award
based on little evidence or on evidence which does not measure up
in quality to a trained legal mind would not be held to be invalid on
that score.
71. In Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019)
15 SCC 131, which dealt with the legal position post the 2015
Amendment in Section 34 of the 1996 Act, it was observed that a
decision which is perverse, 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. It was
pointed out that an award based on no evidence, or which ignores
vital evidence, would be perverse and thus patently illegal. It was
also observed that a finding based on documents taken behind the
back of the parties by the arbitrator would also qualify as a decision
based on no evidence inasmuch as such decision is not based on
evidence led by the parties, and therefore, would also have to be
characterised as perverse [See Ssangyong Engg. & Construction
Co. Ltd. v. NHAI, (2019) 15 SCC 131].
72. The tests laid down in Associate Builders v. DDA, (2015) 3
SCC 49 to determine perversity were followed in Ssangyong
Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 and
later approved by a three-Judge Bench of this Court in Patel Engg.
Ltd. v. North Eastern Electric Power Corpn. Ltd., (2020) 7 SCC
167.
73. In a recent three-Judge Bench decision of this Court in DMRC
Ltd. v. Delhi Airport Metro Express (P) Ltd., (2024) 6 SCC 357,
the ground of patent illegality/perversity was delineated in the
following terms: (SCC p. 376, para 39)
“39. In essence, the ground of patent illegality is available
for setting aside a domestic award, if the decision of the
arbitrator is found to be perverse, or so irrational that no
reasonable person would have arrived at it; or the
construction of the contract is such that no fair or
reasonable person would take; or, that the view of the
arbitrator is not even a possible view. A finding based on
no evidence at all or an award which ignores vital
evidence in arriving at its decision would be perverse and
liable to be set aside under the head of “patent illegality”.
An award without reasons would suffer from patent
illegality. The arbitrator commits a patent illegality by
deciding a matter not within its jurisdiction or violating a
fundamental principle of natural justice.”
Scope of interference with an arbitral award
74. The aforesaid judicial precedents make it clear that while
exercising power under Section 34 of the 1996 Act the Court does
not sit in appeal over the arbitral award. Interference with an
arbitral award is only on limited grounds as set out in Section 34 of
the 1996 Act. A possible view by the arbitrator on facts is to be
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 20 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
respected as the arbitrator is the ultimate master of the quantity and
quality of evidence to be relied upon. It is only when an arbitral
award could be categorised as perverse, that on an error of fact an
arbitral award may be set aside. Further, a mere erroneous
application of the law or wrong appreciation of evidence by itself is
not a ground to set aside an award as is clear from the provisions of
sub-section (2-A) of Section 34 of the 1996 Act.
75. In Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd.,
(2019) 20 SCC 1, paras 27-43, a three-Judge Bench of this Court
held that courts need to be cognizant of the fact that arbitral awards
are not to be interfered with in a casual and cavalier manner, unless
the court concludes that the perversity of the award goes to the root
of the matter and there is no possibility of an alternative
interpretation that may sustain the arbitral award. It was observed
that jurisdiction under Section 34 cannot be equated with the
normal appellate jurisdiction. Rather, the approach ought to be to
respect the finality of the arbitral award as well as party’s autonomy
to get their dispute adjudicated by an alternative forum as provided
under the law.”
59. Having delineated the scope and ambit of Section 34 of the A&C
Act, this Court now proceeds to examine and analyze the specific
grounds urged by the Petitioner in respect of each of the directions
issued by the learned Arbitrator in the Impugned Award.
Direction A – Award of Principal Amount for Alleged Additional
Deployment
60. The primary ground on which the Petitioner assails Direction A
is that the learned Arbitrator travelled beyond the contractual
framework by awarding amounts towards deployment of additional
guards, gunmen and bouncers, whereas, according to the Petitioner,
the Agreement contemplated only deployment of „security guards‟. It
has thus been urged that such an award runs contrary to the
Agreement and, therefore, attracts the vice of patent illegality under
Section 34(2A) of the Act.
61. A careful perusal of the Impugned Award, however, reveals that
the learned Arbitrator did not proceed on an extraneous or arbitrary
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 21 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
footing. On the contrary, the learned Arbitrator undertook a contextual
and holistic interpretation of the Agreement along with the contractual
documents, including the NIT conditions and the „variation clause‟
contained in Annexure IV of the NIT Documents.
62. The submission that the variation clause is restricted only to
“25% extra guards” and cannot include other categories such as
bouncers or gunmen, is, in essence, an invitation to this Court to adopt
a narrower interpretation in substitution of that adopted by the learned
Arbitrator. Such an exercise is impermissible under Section 34 of the
A&C Act. It is well settled that the interpretation of contractual terms
lies within the domain of Arbitral Tribunal, and where the view taken
is a plausible one, the same does not warrant interference. The view
taken by the learned Arbitrator is delineated in Paragraph No. 4.17 of
the Impugned Award. The said paragraph reads as under:
“4.17 Relevant paragraphs have been extracted herein above. From
the perusal of different clauses of the contract, the pleadings,
documents available on record, the evidence led by the parties it is
found by me that the deployment of extra security of guards,
gunmen and bouncers is part of the contract between the
parties. Annexure IV to the agreement titled DEPLOYMENT
provides as under:
“1. The contractor will provide following number of Security
Guards as mentioned hereunder:
Total number of Security guards required = 247 (25% extra
may be deployed as Extended requirement from time to time for
patient specific legal/ clinical obligations of the Institute)
Total No. of Gunmen required =03
Note: Detailed deployment of security personnel will be
provided at the time of award of contract. There will be no
additional payment towards relievers etc. In other words, the
above number will include deployment and roster of
deployment such that the relievers are subsumed in the total
no. of manpower required.
2. The above numbers may vary by 25% at the beginning of the
contract or any time during the course of the contract depending
upon the requirement. The pro rate additional payment on this
account will be calculated on the basis of wage component costSignature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 22 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
as defined in the next year three. No additional payment in
respect of material cost and administrative/service charges
component will be made for additional deployment over and
above the Number mentioned in the agreement. This coupled
with part B of Annexure xiv as appearing on page No. 74 of the
paper book, clauses x and xi clearly state that deployment
number may vary by 25% at any time during the course of
contract depending upon the requirement.”
(emphasis supplied)
63. In the present case, the interpretation adopted by the learned
Arbitrator is neither perverse nor one that no reasonable person would
arrive at. The contractual architecture itself supports the
aforementioned interpretation of the learned Arbitrator. Clause 2(c) of
the Agreement expressly stipulates that the NIT shall form part of the
Agreement between the parties. Once the NIT is contractually
incorporated, the annexures thereto, including Annexure IV, cannot be
selectively excluded or read in isolation. Merely because an
alternative interpretation is possible would not render the Award
vulnerable.
64. Further, the contention of the Petitioner that the „variation
clause‟, as read and interpreted by the learned Arbitrator to form part
of the Agreement, is without merit and equally untenable. Annexure
IV, which contains the said „variation clause‟, forms an integral part
of the NIT, which in turn, stands expressly incorporated into the
Agreement by virtue of Clause 2(c). Once such incorporation is
contractually acknowledged, the Arbitrator‟s reliance on Annexure IV
cannot be characterised as extraneous, perverse, or beyond the scope
of the Agreement. The interpretative exercise undertaken by the
learned Arbitrator, therefore, remains firmly anchored within the
contractual framework agreed upon by the parties and does not
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 23 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
transgress into the realm of patent illegality. The relevant portion of
the Agreement, being Clause 2, is reproduced herein under:
“2. The following documents shall be deemed to form and be read
and constructed as part of this Agreement, viz.:
a. Letter of acceptance of award of contract;
b. General/Special conditions of contract and service level;
c. Notice inviting Tender;
d. Financial Bid;
e. Scope of service;
F. Addendums, if any; and
g. Standing Operating Procedures (SOPs).”
(emphasis supplied)
65. It is trite law that the interpretation of contractual terms lies
within the exclusive domain of the arbitral tribunal. Even if two views
are possible, the Court, in proceedings under Section 34 of the A&C
Act, cannot substitute its own interpretation for that of the Arbitrator,
so long as the view adopted is a plausible one. The jurisdiction under
Section 34 of the A&C Act does not permit the Court to don the
mantle of an appellate forum over contractual interpretation merely on
the ground that another view may appear more appealing.
66. Insofar as the contention of the Petitioner regarding alleged
inflation of invoices or insufficiency of evidence is concerned, the
same pertains to the appreciation of evidence. The Impugned Award
reflects that the learned Arbitrator has considered the invoices,
deployment records and other material placed on record before
arriving at the quantified amount. The sufficiency or adequacy of such
evidence, again, cannot be re-examined in proceedings under Section
34 of the A&C Act, unless it is demonstrated that the findings are
based on no evidence at all or that vital evidence has been ignored,
which is not the case here.
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 24 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
67. Viewed thus, the findings returned by the learned Arbitrator are
based on plausible interpretation of the contract and an appreciation of
the material on record. The same do not suffer from perversity, patent
illegality, or any infirmity warranting interference under Section 34 of
the A&C Act.
68. In this regard, this Court deems it apposite to reference the
discussion as undertaken by the Hon‟ble Supreme Court in Ramesh
Kumar Jain vs. Bharat Aluminium Company Limited16, with respect
to when does an award fall into the ambit of being „patently illegal‟
vis-à-vis the appreciation of evidence and interpretation of contractual
terms. The Apex Court has clarified that patent illegality must be
something that goes to the root of the matter, such as an award that is
contrary to the contract, based on no evidence, or so irrational that it
shocks the judicial conscience. Mere erroneous appreciation of
evidence or adoption of one plausible interpretation over another does
not cross this high threshold. The relevant portion of the said
judgement is reproduced herein under fore ready reference:
“34. Thereafter, this court elucidated the meaning of the expression
„patent illegality‟ in Ssangyong Engg. & Construction Co. Ltd. v.
NHAI22 while taking into consideration the amendment act of
2015 and held it as a glaring, evident illegality that goes to the root
of the award. This includes: (a) an award deciding matters outside
the scope of the arbitration (beyond the contract or submission); (b)
an award contradicting the substantive law of India or the
Arbitration Act itself; (c) an award against the terms of the
contract; and (d) an award so unreasoned or irrational that it
manifests an error on its face.
35. Considering the aforesaid precedents, in our considered view,
the said terminology of „patent illegality‟ indicates more than one
scenario such as the findings of the arbitrator must shock the
judicial conscience or the arbitrator took into account matters he
shouldn‟t have, or he must have failed to take into account vital
matters, leading to an unjust result; or the decision is so irrational16
2025 INSC 1457
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 25 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
that no fair or sensible person would have arrived at it given the
same facts. A classic example for the same is when an award is
based on “no evidence” i.e., arbitrators cannot conjure figures or
facts out of thin air to arrive at his findings. If a crucial finding is
unsupported by any evidence or is a result of ignoring vital
evidence that was placed before the arbitrator, it may be a ground
the warrants interference. However, the said parameter must be
applied with caution by keeping in mind that “no evidence” means
truly no relevant evidence, not scant or weak evidence. If there is
some evidence, even a single witness‟s testimony or a set of
documents, on which the arbitrator could rely upon or has relied
upon to arrive at his conclusions, the court cannot regard the
conclusion drawn by the arbitrator as patently illegal merely
because that evidence has less probative value. This thin line is
stood crossed only when the arbitral tribunal‟s conclusion cannot
be reconciled with any permissible view of the evidence.
36. Having discussed the said law, we move ahead to another limb
of the submission which was espoused by the respondent
particularly with reference to obligations of the arbitrator to decide
the dispute in accordance with the terms of the contract. It is a
fundamental principle that the arbitrator cannot award anything that
is contrary to the contract. The arbitrator is bound by clear
stipulations inter se the parties, and an award ignoring such
stipulations would violate public policy by undermining freedom of
contract. However, that does not mean that not every award which
gives a benefit not expressly mentioned in the contract is in
violation. The arbitral tribunal in exercise of their power can very
well interpret the implied terms or fill gaps where the contract is
silent, so long as doing so does not contradict any express term. For
example, if a contract is silent on interest on delayed payments, an
arbitrator awarding reasonable interest is not contradicting the
contract rather it is a power exercised by the arbitrator to fulfill the
gap on the basis of equity which also mandated under Section
31(7)(a) of the A&C Act. Similarly, if a contract does not say either
way about compensating extra work done at request, the arbitrator
can imply a term or use principles of restitution to award a
reasonable sum, without violating the terms of contract. The thin
line is whether an express prohibition or restrictions in the contract
is breached by the award? If the answer is in affirmative, the award
is liable to struck down. However, where the contract is simply
silent on a legitimate claim which is inherently linked to the natural
corollary of contractual obligation of the parties the arbitrator will
be well within his powers to interpret the contract in the light of
principles of the contractual jurisprudence and apply the equity to
that situation. A contrary interpretation would lead to opening a
floodgate whereby a party who may have dominant position would
intentionally not ink down the natural obligation flowing from the
contract and subsequently; after obtaining the benefit the party
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 26 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
would agitate absence of express terms to sway away from even
discharging his alternative obligation of compensating the party at
loss. Hence the question which arises in such situations is, can the
party who bears the brunt and suffers the loss due to silence under
the contract regarding the natural contractual obligation which
arises in usual course of business be left in limbo? In our view, that
is the very purpose why section 70 of the Contract Act, 1872, has
been an intrinsic part of our Contract Act. The said provision
creates a statutory right independent of contract, often termed
quantum meruit or unjust enrichment remedy. For ready reference
the said provision has been extracted hereinbelow:
“70. Obligation of person enjoying benefit of non-
gratuitous act.
Where a person lawfully does anything for another
person, or delivers anything to him, not intending to do
so gratuitously, and such other person enjoys the
benefit thereof, the latter is bound to make
compensation to the former in respect of, or to restore,
the thing so done or delivered.”
37. The close scrutiny of the aforesaid provision reveals that it
comes into play when one party confers a benefit on another in
circumstances not governed by 28a contract, without intent to act
gratuitously. Hence in such situation, the party taking the benefit is
bound to pay compensation to the party who had gratuitously taken
the benefits and the courts including arbitral tribunals, can award
compensation under Section 70 if the conditions are met.
(emphasis supplied)
69. In Hindustan Construction Company Ltd. Vs National
Highways Authority of India17, the Hon‟ble Supreme Court cautioned
that courts exercising jurisdiction under Section 34 of the A&C Act do
not sit in appeal over the findings of the arbitral tribunal and cannot
re-examine contractual interpretation unless the view taken is perverse
or wholly untenable. The Apex Court expressly held that where the
arbitral tribunal adopts a plausible view after considering the material
on record, judicial interference is unwarranted. The relevant portion,
being Paragraph No. 13 of the said judgment, is reproduced herein
under for ready reference:
17
(2024) 2 SCC 613
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 27 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
“13. Now, we turn to the issue of whether the claim for the
construction of embankment forms part of the activity of clearing
and grubbing and was not payable as embankment work. We may
note here that two expert members of the Arbitral Tribunal held in
favour of the respondent on this point, whereas the third member
dissented. There cannot be any dispute that as far as the
construction of the terms of a contract is concerned, it is for the
Arbitral Tribunal to adjudicate upon. If, after considering the
material on record, the Arbitral Tribunal takes a particular view on
the interpretation of the contract, the Court under Section 34 does
not sit in appeal over the findings of the arbitrator. The Division
Bench has adverted to the findings recorded by the two members of
the Arbitral Tribunal. After considering the view taken by the
Arbitral Tribunal, the High Court observed that the real controversy
was whether the work of backfilling had been done and whether the
said work was liable to be excluded from the work of the
embankment construction by the respondent. The Division Bench
held that nothing is shown that indicates that the construction of the
embankment can be said to have been done in a manner where the
lower part of the embankment is made only by carrying out the
activity of backfilling. The High Court also noted that the appellant
sought to make deductions after initially paying the amounts for the
embankment. The Division Bench was right in holding that the
majority opinion of technical persons need not be subjected to a
relook, especially when the learned Single Judge had also agreed
with the view taken by the Arbitral Tribunal. We have also perused
the findings of the majority in the Award. We find nothing perverse
or illegal about it.”
(emphasis supplied)
70. Now turning to the contention of the Petitioner that the learned
Arbitrator awarded amounts for the period from August 2017 to July
2020 without supporting evidence. This contention is also equally
unpersuasive. Paragraph No. 4.2 of the Impugned Award
demonstrates that the learned Arbitrator relied upon attendance sheets
duly verified from January 2018 to July 2020, as well as the invoices
placed on record. The arbitral record further evidences that an invoice
dated 06.09.2017 was raised for additional deployment for the month
of August 2017 and was considered by the learned Arbitrator. The
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 28 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
relevant paragraph, being Paragraph No. 4.2 of the Impugned Award,
is reproduced herein under for ready reference:
“4.2 Dispute is with regard to the deployment of extra security
guards, gunmen and bouncers, which is seen from Attendance
sheets being exhibit CW-1/A-5, duly verified from January 2018 to
July 2020 confirming the deployment prepared by Mr. Satish
Kumar and verified by Mr. Vijender. I have also perused the bills/
invoices placed as Exhibit CW-1/A-6.”
71. In light of this, the plea of insufficiency of evidence, in
substance, invites this Court to re-appreciate evidentiary material, a
course of action impermissible under section 34 of the A&C Act. As
consistently held by the Hon‟ble Supreme Court, including in Ramesh
Kumar Jain (supra), sufficiency or adequacy of evidence is not a
ground for setting aside an arbitral award unless the finding is based
on no evidence or is so perverse that no reasonable person could have
arrived at it. This threshold is clearly, in view of the foregoing
discussion, not crossed in the present case.
72. The further submission of the Petitioner that the learned
Arbitrator granted relief beyond the Statement of Claim is also devoid
of merit. A reading of the Award indicates that the relief granted falls
within the scope of the claims raised. The Arbitrator neither granted
relief which was not pleaded nor moulded the claims in a manner alien
to the reference. It bears reiteration that pleadings in arbitral
proceedings are not to be construed with the same rigidity as in civil
suits.
73. Viewed thus, this Court finds no patent illegality in Direction A
of the Impugned Award. The reasoning adopted by the learned
Arbitrator is grounded in the contractual documents and supported by
the material on record. Whether this Court might have arrived at a
different conclusion is wholly irrelevant. The Impugned Award does
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 29 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
not disclose any perversity, irrationality, or violation of the contractual
framework warranting interference under Section 34 of the A&C Act.
74. In view of the foregoing discussion, the judicial precedents and
established threshold for interference under Section 34 of the A&C
Act, this Court is satisfied that the determination under the impugned
Direction does not merit interference. The view adopted by the
learned Arbitrator is founded on a plausible interpretation of the
contractual and statutory framework, supported by material on record,
and arrived at after due consideration of the rival submissions. The
impugned finding neither travels beyond the terms of reference nor
disregards any vital evidence, nor does it disclose such perversity or
irrationality as would shock the conscience of this Court. Interference
under Section 34, therefore, is plainly unwarranted.
Direction B – Grant of Interest at 18% under the MSMED Act
75. The challenge to Direction B is premised on the contention that
the learned Arbitrator improperly invoked the provisions of the
MSMED Act without foundational pleadings and without the
Respondent having first approached the MSEFC under Section 18 of
the MSMED Act, thereby rendering the award of interest patently
illegal.
76. This Court finds no infirmity in the approach adopted by the
learned Arbitrator. The Impugned Award records that the Respondent
had placed on record its MSME registration, which pre-dated the
execution of the Agreement between the parties, and that the
payments due were admittedly delayed. Once these foundational facts
stood established, the entitlement to interest under Sections 15 and 16
of the MSMED Act followed as a statutory sequitur.
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 30 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
77. In this regard, the reliance placed by the learned counsel for the
Respondent on Indian Highways Management Company Limited
(supra) is squarely apposite and legally sound. The said decision
categorically holds that the buyer‟s obligation to pay interest on
delayed payments under Sections 15 and 16 of the MSMED Act is
absolute and not contingent upon the supplier invoking the dispute
resolution mechanism under Section 18 of the said Act. The Court
expressly observed that Sections 15 and 16 confer substantive rights
and impose statutory obligations, independent of the forum chosen for
adjudication. It was further clarified that by virtue of Section 18(3), an
arbitral tribunal constituted under the MSMED Act is competent to
award statutory interest under the said Act, even in cases where the
MSEFC route has not been invoked. The relevant portion of the said
judgment reads as follows:
“34. It is apparent from the above that the provisions of Sections
15 and 16 of the MSMED Act confer substantive rights and
impose obligations, which are not contingent upon recourse to
any dispute resolution mechanism. Section 18 of the MSMED Act
provides for a dispute resolution mechanism in respect of any
amount due under Section 17 of the MSMED Act. It is obvious
that it may not be necessary for a supplier to seek recourse to any
proceedings for recovery of the amounts that may be otherwise
due to it, if the buyer complies with its obligation under Sections
15 and 16 of the MSMED Act.
35. The import of the contentions advanced on behalf of IHMCL
is that the obligations of the buyer under Sections 15 and 16 of the
MSMED Act are contingent upon the supplier resorting to
Conciliation or the adjudicatory process under Section 18 of the
MSMED Act. The plain language of Sections 15, 16 and 17 of the
MSMED Act, does not support this proposition.
****
41. As pointed out by Ms Arora, one of the Statements and
Objects of enacting the MSMED Act was to “make further
improvements in the Interest on Delayed Payments to Small Scale
and Ancillary Industrial Undertakings Act, 1993 and making that
enactment a part of the proposed legislation and to repeal that
enactment.”
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 31 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
43. In view of the above, it is clear that the MSMED Act is a
special legislation with regard to payment of interest and the
provisions of MSMED Act would override the provisions of the
A&C Act to the extent of any repugnancy. This view further
draws support from the non obstante provisions of Section 24 of
the MSMED Act, which reads as under: –
“24. Overriding effect. – The provisions of sections 15 to
23 shall have effect notwithstanding anything inconsistent
therewith contained in any other law for the time being in
force.”
45. Before concluding, it would also relevant to reiterate that the
scope of interference with an arbitral award is restricted. It is
permissible only on the grounds as set out under Section 34 of the
A&C Act. The view of an arbitral tribunal is final and binding
unless it is found that the impugned award is vitiated by patent
illegality or falls foul of the public policy of India. Even in those
cases, where it is found that the arbitral tribunal has erred in law,
interference with the arbitral award would not be permissible
unless it is found that the patent illegality goes to the root of the
matter and which vitiates the award [See: Delhi Airport Metro
Express Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd.: 2021
SCC OnLine SC 695]. Clearly, in this case, the impugned award
cannot be stated to be vitiated by patent illegality or in conflict
with the public policy of India.”
78. The reliance placed by the Petitioner on Idemia Syscom India
Private Limited (supra) to contend that recourse to the MSEFC is
mandatory and that the learned Arbitrator erred in simultaneously
declining such recourse while awarding interest under the MSMED
Act is misplaced and distinguishable on facts. The said decision arose
in the context of a petition under Section 11 of the A&C Act, where
proceedings before the MSEFC had already been initiated. The
observations therein regarding the overriding effect of the MSMED
Act were made in that specific factual backdrop and cannot be read as
laying down an inflexible rule that statutory interest under Sections 15
and 16 can be granted only through the Section 18 mechanism. The
relevant portion of the said judgement reads as under:
“12. While the A&C Act is the general law governing the field of
arbitration, MSMED Act governs a very specific nature of disputes
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 32 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
concerning MSME’s and it sets out a statutory mechanism for the
payment of interest on delayed payments. MSMED Act being the
specific law, and A&C Act being the general law, the specific law
would prevail over the general law. Even otherwise. MSMED Act
has been enacted subsequent to the A&C Act and the legislature is
presumed to have been aware about the existence of A&C Act
when the act was enacted. Sub-sections (1) and (4) of Section 18
contain non-obstante clauses which have the effect of overriding
any other law for the time being in force. Section 24 of the Act
states that the provisions of sections 15 to 23 shall have effect
notwithstanding anything inconsistent therewith contained in any
other law for the time being in force. Thus, the legislative intent is
clear that MSMED Act would have an overriding effect on the
provisions of A&C Act. The provisions of MSMED Act would
become ineffective if, by way of an independent arbitration
agreement between the parties, the process mandated in Section 18
of the MSMED Act is sidestepped. Moreover, the fact that the
petitioner has approached the Court under Section 11 of the A&C
Act first would be of no help to him as the MSMED Act does not
does not carve out any such exception to the non-obstante clause.”
(emphasis supplied)
79. In view of the foregoing discussion, this Court is unable to accept
the submission that recourse to the MSEFC under Section 18 of the
MSMED Act is a mandatory precondition for the grant of statutory
interest. The arbitration proceedings in the present case were initiated
pursuant to a valid arbitration Agreement, and the Petitioner
participated therein without demur. Once the Respondent‟s status as
an MSME supplier and the factum of delayed payment stood
established, the statutory consequence of interest followed inexorably.
The grant of pendente lite interest at the rate of 18% per annum,
therefore, does not suffer from patent illegality.
80. Accordingly, this Court finds that Direction B of the Impugned
Award is firmly anchored in the statutory mandate of Sections 15 and
16 of the MSMED Act and does not rest on any discretionary or
extraneous consideration. The learned Arbitrator has neither travelled
beyond the reference nor applied the law in a manner contrary to the
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 33 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
contractual framework or the governing statute. The award of
pendente lite interest at the rate of 18% is a legal consequence flowing
from delayed payment to a registered MSME supplier and cannot be
characterised as arbitrary, excessive, or perverse. No element of patent
illegality, going to the root of the matter, is therefore made out so as to
warrant interference under Section 34 of the A&C Act.
Direction C- Award of Future Interest at 20% per annum
81. The challenge by the Petitioner to Direction C proceeds on the
footing that the grant of future interest at the rate of 20% per annum is
excessive, arbitrary, and unsupported by adequate reasons, and
therefore falls foul of the standard of patent illegality. This
submission, however, also does not withstand judicial scrutiny.
82. It is apposite to note that Section 31(7)(b) of the A&C Act
expressly empowers an Arbitral Tribunal to award post-award interest
at such rate as it deems reasonable, unless otherwise agreed by the
parties. The provision vests a wide discretion in the arbitral tribunal,
recognising that post-award interest serves a distinct purpose, namely,
to secure compliance with the award and to compensate the award-
holder for the time value of money during the period of non-payment.
Section 31(7) of the A&C Act reads as under:
“31. Form and contents of arbitral award. —
*****
(7) (a) Unless otherwise agreed by the parties, where and in so far
asm, an arbitral award is for the payment of money, the arbitral
tribunal may include in the sum for which the award is made
interest, at such rate as it deems reasonable, on the whole or any
part of the money, for the whole or any part of the period between
the date on which the cause of action arose and the date on which
the award is made.
(b) A sum directed to be paid by an arbitral award shall, unless the
award otherwise directs, carry interest at the rate of two per cent.
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 34 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
higher than the current rate of interest prevalent on the date of
award, from the date of award to the date of payment.”
83. It is equally well settled that the mere fact that the rate of future
interest appears to be on the higher side does not, by itself, render the
award vulnerable to interference under Section 34 of the A&C Act.
Interference is warranted only where the rate awarded is either
expressly prohibited by statute, contractually interdicted, or so
unconscionable or irrational as to shock the judicial conscience. None
of these contingencies arises in the present case.
84. The Impugned Award discloses that the learned Arbitrator
granted future interest at a stepped-up rate only in the event of
continued non-compliance beyond the stipulated period of 60 days
post-award. The grant of future interest at 20% per annum is thus not
punitive in nature, but deterrent in design, intended to disincentivise
recalcitrance and to ensure timely satisfaction of the award. Such an
approach cannot be said to be alien to arbitral jurisprudence,
particularly in matters involving delayed payments despite
crystallisation of liability.
85. The contention that the learned Arbitrator failed to furnish
elaborate reasons for selecting the precise rate of 20% is also devoid
of merit. While Section 31(3) of the A&C Act mandates that reasons
be recorded for an arbitral award, it does not require a mathematical
exposition or granular justification for the exact percentage of interest
awarded, especially where the discretion exercised is statutorily
conferred and contextually justified. The requirement is of intelligible
reasoning, not forensic exactitude.
86. The objection that future interest at the rate of 20% per annum
was granted in the absence of a specific prayer in the Statement of
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 35 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
Claim is equally unsustainable. It is well settled that the power of an
arbitral tribunal to award post-award interest flows directly from
Section 31(7)(b) of the A&C Act and does not depend upon a specific
pleading or prayer by the claimant. Once a monetary award is made,
the grant of future interest operates as a statutory incident to secure
enforcement and cannot be characterised as a relief de hors the
reference. The award of post-award interest, therefore, is not in the
nature of an independent or unpleaded claim, but a legal consequence
that follows the adjudication of liability. Consequently, the exercise of
such statutory discretion cannot be faulted on the ground that it was
not expressly sought in the Statement of Claim.
87. Viewed through the prism of the settled parameters governing
patent illegality, Direction C also does not suffer from any infirmity
that goes to the root of the matter. The learned Arbitrator has acted
within jurisdiction, exercised a discretion expressly vested by statute,
and adopted an approach that is neither capricious nor perverse.
88. This Court is therefore of the considered view that the award of
future interest at the rate of 20% per annum does not cross the high
threshold of „patent illegality‟ and does not warrant interference under
Section 34 of the A&C Act, which is a scalpel and not a
sledgehammer. It corrects jurisdictional aberrations, not discretionary
outcomes.
DECISION:
(i). O.M.P. (COMM) 286/2024
89. For the reasons recorded hereinabove, this Court is of the
considered view that none of the grounds urged by the Petitioner
satisfy the narrow and exacting threshold for interference under
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 36 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
Section 34 of the A&C Act. The Impugned Award represents a
plausible and reasoned view taken by the learned Arbitral Tribunal
upon appreciation of the contractual framework, evidence on record,
and the applicable statutory regime.
90. Consequently, the Objection Petition is dismissed as devoid of
merit.
91. Accordingly, this Petition, being O.M.P. (COMM) 286/2024,
along with pending Application(s), if any, stands disposed of in the
aforesaid terms.
92. No Order as to costs.
(ii). O.M.P. (ENF.) (COMM.) 272/2024
93. In view of the dismissal of the Objection Petition, being O.M.P.
(COMM) 286/2024, in the aforesaid terms, the present Enforcement
Petition under Section 36 of the A&C Act shall proceed in accordance
with law.
94. In view of the Arbitral Award dated 26.02.2024 being in the
nature of a monetary decree, the Judgment Debtor is directed to
deposit, if not already deposited, the entire awarded sum, along with
accrued interest up to date with the Registry of this Court, within a
period of four (4) weeks from the date of this Judgement.
95. Accordingly, list the matter on 07.05.2026 for further
proceedings.
HARISH VAIDYANATHAN SHANKAR, J.
APRIL 06, 2026/ DJ
Signature Not Verified
Digitally Signed O.M.P. (COMM) 286/2024 & connected matter Page 37 of 37
By:NEERU
Signing Date:08.04.2026
16:09:52
