Delhi District Court
Jhawar Traders vs Sohan Lal Commodity Management Pvt Ltd on 3 July, 2026
IN THE COURT OF MS. PREETI AGRAWAL GUPTA,
DISTRICT JUDGE, (COMMERCIAL COURT)-02, WEST,
TIS HAZARI COURTS, EXTENSION BLOCK, DELHI
CNR NO.DLWT01-001352-2025
OMP (COMM) No.3/2025
M/S JHAWAR TRADERS,
A proprietorship firm, Through its Proprietor,
2603, Nai Basti, Naya Bazar, Delhi-110006.
...Petitioner
VERSUS
M/S SOHAN LAL COMMODITY MANAGEMENT PVT. LTD.
A company incorporated under the Companies Act, 1956,
642-643 DLF Tower, 15 Shivaji Marg Najafgarh Road,
Moti Nagar, New Delhi-110015
...Respondent
OBJECTION UNDER SECTION 34 OF THE ARBITRATION
& CONCILIATION ACT, 1996 FOR SETTING-ASIDE THE
ARBITRAL AWARD DATED 09.10.2024 (SIGNED ON
06.10.2024), PASSED IN ARBITRATION CASE TITLED AS
'SOHAN LAL COMMODITY MANAGEMENT PVT. LTD.
VS. JHAVAR TRADERS'.
Date of institution of Petition : 13.02.2025
Date of Assignment to this court : 14.02.2025
Date of hearing of final argument : 27.06.2026
Date of Judgment : 03.07.2026
JUDGMENT
1. By way of this judgment, the present petition Under
Section 34 of the Arbitration & Conciliation Act, 1996
(hereinafter called as A & C Act) is being taken up for
adjudication, as per law.
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 1/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
2. This petition has been filed on behalf the Petitioner
M/s Jhawar Traders (Respondent in the Claim petition in
question), through its Proprietor Sh. Ashok Kumar Jhawar
(Respondent in the claim petition in question) seeking setting
aside of Arbitral Award dated 09.10.2024 passed by Sh. C. K.
Chaturvedi, Ld. Sole Arbitrator, in respect of claim of the
respondent namely M/S Sohan Lal Commodity Management Pvt.
Ltd. As such, the impugned Award bears the date 06.10.2024 as
‘informed’, the effective and legal date of Award is 09.10.2024,
after due compliances, as regards payment of requisite stamp fees
by the respondent/Claimant. By way of the impugned Award,
claim of the respondent/Claimant has been decreed for a sum of
Rs.29,58,578/- in favour of the respondent and against the
petitioner alongwith pendente lite interest @ 9% p.a. from the
date of filing of the Statement of Claim till realisation of the
decretal amount. The Counter-claim filed on behalf of petitioner
herein, has been dismissed.
3. After admitting the present petition, the operation of
Arbitral Award was directed to be stayed conditionally and notice
of the petition issued upon the respondent namely M/S Sohan Lal
Commodity Management Pvt. Ltd. (Claimant before the Ld.
Arbitrator). Despite opportunity to file reply to the petition,
within the permissible timeline, respondent failed to file reply to
the petition U/S 34 of Arbitration and Conciliation Act, within
the maximum extendable statutory timeline of 120 days from
receipt of notice of the petition and consequently, vide orders
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 2/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
dated 13.01.2025, defence of the respondent has been struck off.
However, this Court allowed that the contents of the reply of the
petition would be treated as ‘Written Arguments’ on behalf of the
respondent.
4. During the pendency, the petitioner deposited the
30% of the principal Award amount, as condition to entertain the
present petition, which stood allowed vide orders of this Court
dated 05.05.2026.
5. The Arbitral Record was summoned and is placed on
record. Original Arbitral Record dated 09.10.2024 alongwith
arbitral proceedings, have been appreciated.
6. The present petition has been filed on behalf of
Petitioner U/S. 34 of the Arbitration & Conciliation Act, 1996,
challenging the Award passed by Ld. Sole Arbitrator on
09.10.2024, on various grounds, which have been crystalised
herein-below : –
(i). The Ld. Arbitral Tribunal failed to deal with the Petitioner’s
specific submissions and material contentions, ignored vital
evidence on record, rendering the Award perverse and legally
unsustainable. The Tribunal exceeded its jurisdiction by
adjudicating matters beyond the scope of the Contract and the
arbitration agreement and suffers from patent illegality.
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 3/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
(ii) The Impugned Award violates the settled principles
governing arbitral awards under Section 34 of the Arbitration and
Conciliation Act, 1996 and disregards the binding precedents of
the Hon’ble Apex Court, relied upon by the Petitioner. The Award
suffers from patent illegality and perversity as the Award is based
on no evidence, ignores vital evidence, considers irrelevant
factors and is irrational and contrary to ‘public policy of India’.
(iii) The Tribunal wrongly accepted the Respondent’s claim for
continuation of services till May 2020 despite Clause 13 of the
SWM Agreement being limited to one year and ignored that no
extension agreement or material evidence supporting
continuation of services was produced.
(iv) The Tribunal ignored the Respondent’s breach of the Lease
Agreement, by failing to pay monthly rent of Rs.10,000/- plus
GST, despite continued occupation of the godown, which was a
standalone contractual obligation, independent of the SWM
Agreement.
(v) The Tribunal dismissed the Petitioner’s counterclaim without
considering the evidence regarding the fact that the Respondent
violated Clause 16 of the SWM Agreement by failing to deploy
adequate manpower whereas emails from January and April 2020
demonstrated repeated staff shortages, affecting operations.
(vi) The tribunal failed to consider documentary evidence to the
fact that the Respondent breached Clause 14 of SWM Agreement
by failing to maintain computerized records and submit
mandatory reports, which caused stock mismatches, reporting
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
failures and FCI penalties.
(vii) The Tribunal failed to consider the material breaches that the
Respondent violated Clause 18(c) of SWM Agreement by failing
to carry out regular fumigation and ignored that FCI inspection
reports and emails documented infestations, delayed fumigation,
chemical shortages, and resulting penalties.
(viii) The Tribunal ignored documentary and financial evidence
supporting the Petitioner’s case that the Respondent breached
Clause 15 of SWM Agreement by failing to prevent stock
shortages, verification discrepancies and storage losses and that
FCI imposed recoveries and penalties, due to these lapses.
(ix) The Tribunal failed to consider that the Respondent failed to
vacate and hand over the godown after expiry of the contractual
arrangement, which prolonged financial exposure and operational
difficulties.
(x) The Tribunal failed to consider that the respondent repeatedly
ignored warnings regarding inadequate staffing, non-maintenance
of records, failure to fumigate, stock discrepancies and reporting
failures. These documented recurring breaches resulted in
substantial losses and penalties, but were overlooked by the
Tribunal.
(xi) The proceedings were conducted in violation of principles of
natural justice and were biased in favour of the respondent. The
Award dated 09.10.2024 passed by Ld. Sole Arbitrator is
perverse, erroneous, bad in law, against principles of natural
justice and liable to be set aside.
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 5/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
7. It is relevant to observe that the Respondent’s reply
to the petition was filed beyond the maximum permissible period
of 120 days and was accordingly struck off. However, this Court
allowed that that the contents of the reply would treated as
Written Arguments on behalf of the respondent. By way of
Written Arguments on behalf respondent opposing the present
petition, all the allegations made in the petition have been denied
and it is contended that the present petition is not maintainable
under Section 34 of the Act, for setting aside the impugned
Award. It is submitted that the Arbitral Award dated 09.10.2024
has been passed after following the due process of law and is a
well reasoned Award, contending that the present petition
deserves to be dismissed as baseless and filed on unfounded
grounds. Further, as submitted, Arbitral Award is stated to be
neither against the public policy nor perverse or patently illegal,
as claimed in the petition, praying for dismissal of the petition for
want of merits.
CONCISE SUMMARY OF ARBITRAL PROCEEDINGS
8. The Arbitral proceedings were initiated on a claim
filed by the respondent namely M/s Sohan Lal Commodity
Management Pvt. Ltd.(Respondent herein) in respect of Storage
and Warehouse Management Agreement (SWM Agreement)
dated 11.06.2019 for providing services for godowns of
petitioner herein, at Obra, Aurangabad District in Bihar. The
petitioner herein, being the owner of a PEG Godown situated at
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 6/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
Obra, Aurangabad District in Bihar, entered into a Warehouse
Management Agreement dated 11.06.2019 with the respondent
(Claimant in the Award in question) whereby the respondent
undertook to provide comprehensive services relating to storage
management, preservation, fumigation, maintenance of records,
deployment of manpower and operational management of the
warehouse, used for storage of food grains belonging to Food
Corporation of India (FCI) and Bihar State Warehousing
Corporation (BSWC). The SWM Agreement contemplated
commencement of contractual obligations with effect from
18.07.2019 and contained detailed provisions regarding mutual
obligations of the parties, payment mechanism and termination of
the agreement. The parties also entered upon a Lease Agreement,
dated 18.06.2019, under which, Respondent agreed to pay a
monthly rent of Rs.10,000/- (exclusive of GST) for the premises,
for a fixed term of 11 months commencing from 18.07.2019.
9. According to the claimant (respondent herein), it
commenced rendering contractual services from 18.07.2019 and
continued to perform its obligations till May 2020 and the
warehouse was handed back to the petitioner on 06.07.2020. It
was alleged that despite rendering services continuously and
raising monthly invoices in terms of Clause 18 of the Agreement,
the petitioner failed to make timely payment of the agreed
storage management and fumigation charges. The claimant
asserted that several reminders and a legal demand notice were
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 7/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
issued calling upon the petitioner to clear the outstanding dues,
but no payment was forthcoming. Consequently, invoking the
Clause 31 of the SWM Agreement contained in the contract, the
claimant sought recovery of the outstanding amount together
with contractual interest. The Claimant thereby filed Claim based
on monthly invoice amount with interest @12% p.a., amounting
to Rs.29,58,578/- after deducting amount of Rs.2,60,000/-
admittedly received from respondent.
10. The petitioner herein contested the claim, as
respondent before the Arbitral Tribunal, by filing a detailed
Statement of Defence wherein it was pleaded that as per SWM
Agreement the claimant was responsible for providing services
as per statutory norms for maintenance of stock delivery as and
when required, to deploy staff as per requirement and
maintenance of computerised records and registers. However,
due to poor performance of the claimant, the respondent suffered
heavy losses, and it decided against extending the tenure of
Agreement for further period. It pointed out shortage of 829
quintals of rice valueing Rs.56,40.000/- as on 06.07.2020 and
after completion of physical verification of stocks lying in the
godown, shortage of 1880 bags weighing 920 quintals valuing
Rs.33,12,360/- were found. It was further submitted that 3600
new gunny bags were given to the claimant during SWM
Agreement, against which the claimant handed over only 1620
gunny bags. The details of remaining 1980 bags were not given
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PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
to the respondent. The petitioner, as respondent therein, further
alleged that the claimant had committed repeated breaches of the
contractual obligations under the PEG Scheme, 2008 and Clause
16 of the SWM Agreement, by failing to properly preserve food
grains, failing to undertake effective fumigation and spraying
operations, failing to maintain adequate manpower, failing to
maintain computerized records and stock registers and otherwise
conducting warehouse operations in a negligent manner.
According to the petitioner, these deficiencies resulted in
substantial financial losses and exposed the petitioner to
deductions imposed by FCI on account of abnormal storage
losses.
11. In further defence, petitioner further alleged that
serious discrepancies were noticed at the time of handing over of
the warehouse. It was claimed that shortages of wheat bags, rice
bags and gunny bags were detected, besides deterioration of food
grains stored in several rakes. It was also alleged that the
claimant failed to comply with the obligations cast upon it under
Clauses 10, 14, 15 and 16 of the SWM Agreement , resulting in
financial liabilities upon the petitioner. On these premises, the
petitioner did not only resist the claimant’s monetary claim but
also raised substantial counter claims towards storage losses
allegedly recovered by FCI, losses arising from shortage of
stocks and gunny bags, damages arising from inadequate
manpower deployment, mismatch of accounts and other
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 9/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
consequential losses.
12. Besides several defences raised against the claim
filed before the Ld. Arbitrator, the respondent (petitioner herein)
raised a counter claim Rs.7,51,000/- for non-compliance of
Clause 15, on account if storage losses based on less quantity of
1880 bags of rice weighing 920 quintals valuing Rs.33,12,360/-
etc. and Rs.12,000/- is claimed for not employing adequate staff.
13. The claimant filed its reply to the Statement of
Defence as well as its response to the counter claims, denying the
allegations, pleading that the petitioner herein had itself
acknowledged satisfactory functioning of the warehouse
throughout the contractual period and had never issued any
contractual notice pointing out any alleged deficiency. It was
denied that there was any shortage of stock at the time of handing
over of possession and alleged that the allegations regarding
damaged food grains were directly attributable to structural
deficiencies in the warehouse, particularly water leakages,
regarding which repeated communications had been addressed to
the petitioner during the subsistence of the contract. The claimant
relied upon email communications and documents to assert that
that warehouse operations, preservation measures and fumigation
activities had been regularly undertaken during the contractual
period. It denied any deficiency or liability against the alleged
deficiency claimed by way of counter claim.
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
14. The Ld.Arbitral Tribunal framed issues regarding the
claimant’s entitlement to recover the outstanding contractual dues
together with interest and the petitioner’s entitlement to the
counter claims. During the arbitral proceedings, on an application
moved by the respondent (petitioner herein) under Section 23(3)
of the Act, Ld. Arbitrator allowed additional email
correspondences to be taken on record for purposes of
appreciating of evidence during final arguments, while directing
that no further evidence would be led by either party. Thereafter,
Ld. Arbitrator proceeded to consider and adjudicate the pending
dispute before him, after conclusion of recording of evidence of
the parties and hearing the arguments addressed by respective Ld.
Counsels for the parties. The impugned Award was passed in
favour of the claimant, as prayed alongwith interest while the Ld.
Arbitrator did not allow the counter-claim of the respondent
(petitioner herein). Aggrieved by the said award, the petitioner
has invoked the jurisdiction of this Court under Section 34 of the
Arbitration and Conciliation Act, 1996.
ADJUDICATION OF THE PRESENT PETITION
15. Final arguments have been addressed at length, by
Sh.Vikas Kumar, ld. Counsel for the petitioner and Sh. Rahat
Bansal, ld. Counsel for respondent. Arbitral Award/record has
been perused. Legal position has been examined.
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
16. Aggrieved by the impugned award, the petitioner
has challenged the same primarily on the grounds that the award
suffers from patent illegality appearing on the face of the award,
perversity in appreciation of evidence, non-consideration of
material documentary evidence and failure to appreciate the real
contractual obligations and omissions during the subsistence of
the Contract between the parties. It has been submitted that the
Award is liable to be set aside as the Ld. Arbitrator has failed to
adjudicate the real controversy between the parties, the Ld.
Arbitrator has proceeded on a fundamentally erroneous premise
that the dispute merely concerned non-payment of contractual
invoices. It is argued that the real controversy before the arbitral
tribunal was whether the claimant had faithfully discharged the
extensive contractual obligations undertaken by it under the
SWM Agreement. It is argued that the Ld. Arbitrator has failed to
undertake any meaningful examination of the entire evidence
including voluminous email correspondence exchanges between
the parties during the subsistence of the contract. It is contended
that the petitioner had repeatedly brought to the notice of the
claimant various deficiencies relating to maintenance of
computerized records, infrastructural shortcomings, preservation
issues, shortage of manpower, reporting defaults and operational
deficiencies, including repeated complaints regarding water
leakage affecting preservation of stocks. It is argued that the
impugned Award neither analyses their evidentiary value nor
reconciles them with the conclusions ultimately recorded and
instead, the Ld.Arbitrator merely proceeded on the assumption
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 12/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
that no actionable grievance existed because no formal cure
notice terminating the agreement had been issued.
17. It has been further argued for the petitioner that the
Arbitral Record in question itself demonstrates that though
additional email correspondence were allowed to be taken on
record as per Section 23(3) of the Arbitration and Conciliation
Act, for appreciation during final arguments, the Ld. Arbitrator
ignored the vital evidence while appreciating the claim and
counter claim and failed to appreciate the material evidence
which was of great significance and implications to the
determination of the dispute before the Ld. Arbitrator. The failure
of Ld.Arbitrator to analyse the testimonial evidence and even the
vital documentary evidence, while deciding the principal
disputes, renders the impugned Award vulnerable under Section
34 of the Act. It is contended that Ld. Arbitrator adopted a
mechanical approach relating to issuance of cure notices as an
absolute defence against every allegation of contractual breach. It
is argued that the SWM Agreement did not only contemplate
issuance of cure notices before termination of the contract, but
also specifically provided substantive contractual obligations to
be undertaken by the claimant under Clauses 10, 14, 15 and 16 of
the SWM Agreement. These clauses dealt with preservation of
stocks, maintenance of computerized records, deployment of
adequate manpower, operational management, fumigation, safety
measures and various obligations undertaken under the PEG
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 13/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
Scheme and the Ld. Arbitrator failed to properly interpret these
clauses thereby ignoring the breach of contractual obligation by
the Claimant. It is argued that such repeated breaches of these
provisions formed the very foundation of the defence as well as
the counter claims, which have been ignored by the Ld.
Arbitrator, thereby rendering his findings patently illegal and
perverse, as per the facts and material on record.
18. Another principal grievance raised by the petitioner
is that the learned Arbitrator adopted inconsistent standards while
appreciating documentary evidence of the parties. Whereas the
claimant’s invoices, ledger accounts and correspondence were
accepted without detailed scrutiny, the petitioner’s documentary
evidence regarding operational deficiencies, shortage of
manpower, infrastructural complaints, storage losses and other
contractual breaches was either rejected on technical grounds or
were not analysed at all. It is contended that arbitral proceedings
are not governed by the strict rules of evidence applicable to civil
trials and, therefore, all emails and communications exchanged
between the parties during the subsistence of the Agreement
material forming part of the arbitral record were required to be
appreciated in a holistic manner.
19. During further arguments on behalf of the petitioner,
reliance were placed on several emails presented during the
respondent evidence vide the email correspondence Ex.RW1/12,
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
Ex.RW1/14 and RW1/15. It has been argued that the Ld.
Arbitrator further failed to consider the documents such as
Ex.R1/10 (Colly.) which were tendered by the respondent witness
in support of the counter-claim and also ignored to consider
Ex.RW1/11 which proved the case of the respondent in respect of
claim for inadequate staff deployment by the claimant. It is
submitted that the Ld. Arbitrator further failed to consider crucial
evidence pertaining to stock shortages, chemical shortage,
observation of the FCI regarding some stocks being found
heavily infested for lack of adequate fumigation and repeated
requests raised by respondent to the claimant to take necessary
curative action during the subsistence of the contract obligation
between the parties. So much So that the deductions of huge
amount by the FCI in favour of respondent on account of
shortages of stock found in Purnia and Kishanganj during the
tenure of the claimant(respondent herein), have not been
examined by the Ld. Arbitrator. The evidence on record
pertaining to the Quality Control Reports of the FCI Bihar, which
were placed on record have not been appreciated in arriving at
the conclusion while delivering the Award by the Ld. Arbitrator.
It is argued that the Ld. Arbitrator arrived at perfunctory
conclusion without proper analyses of the defence, evidence and
contractual obligations and liabilities of the claimant/respondent.
20. Learned counsel further submitted that the findings
of Ld. Arbitrator regarding the defence pertaining to adequacy of
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
manpower, suffer from patent illegality. It is argued that the
petitioner specifically pleaded that warehouse operations of the
capacity involved required deployment of substantially higher
manpower under the applicable PEG norms. Documentary
communications allegedly demonstrated repeated shortage of
staff and consequent operational deficiencies. However, the
learned Arbitrator disposed of the entire issue by observing that
adequacy of manpower was a subjective matter for the claimant
without undertaking any analysis of the contractual provisions,
applicable operational norms or the emails and communications
exchanged between the parties during the subsistence of the
Agreement. It is submitted that for these reasons also, the
impugned Award suffers from patent illegality, is perverse and
liable to be set aside, as per law.
21. In the final leg of arguments, it has been contended
that the impugned Award as a whole reflects non application of
mind to the principal controversies existing between the parties.
It is further contended that the Ld. Arbitrator imported findings
from another arbitration matter titled ‘SLCM Vs. Capital
Propmart” and observed that the reasoning rendered therein
would form part of the present award, with the justification that
Ld. Counsels in the present case, which led to the impugned
Arbitral Award were the same and the discussion and reasons
fully applied and were not repeated for the reason of brevity and
paucity of time. It is contended that such observation by the Ld.
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
Arbitrator in itself renders the impugned Award unsustainable in
the eyes of law. The petitioner accordingly submits that the
cumulative effect of these infirmities renders the impugned
award liable to be set aside u/s 34 of the A & C Act.
22. In support of its case, ld. Counsel for petitioner has
placed reliance on binding judicial pronouncements in
”SsangYong Engineering and Construction Company Limited v.
National Highways Authority of India” [(2019) 15 SCC 131];
‘ONGC v. Saw Pipes Limited’ [(2003) 5 SCC 705]; ‘ONGC v.
Western Geco International Limited’ [(2014) 9 SCC 263]; ‘Patel
Engineering v. North Eastern Electric Power Corporation
Limited‘ [(2020) 7 SCC 167]; ‘ONGC v. Garware Shipping
Corporation Limited‘ [(2007) 13 SCC 434]; ‘PSA SICAL
Terminals (P) Ltd. v. Board of Trustees of V.O. Chidambranar
Port Trust Tuticorin‘ [2021 SCC OnLine SC 508], with the
contention that the impugned Award is well covered and qualifies
within the ambit of patent illegality and falls against the
fundamental public policy of India, calling for annulment owing
to its sufferance from infirmity, foundational defects in violation
of principle of natural justice and fair adjudication.
23. Per contra, ld. Counsel appearing for the respondent
supported the impugned award and submitted that the scope of
interference under Section 34 of the Arbitration and Conciliation
Act is extremely limited. It has been argued that this Court does
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
not exercise appellate jurisdiction over Arbitral Awards and is not
empowered to substitute its own opinion after fresh appreciation
of evidence, merely because another view may also be possible.
According to the respondent, the impugned Award is a well-
reasoned award based upon documentary evidence, oral
testimonies and proper interpretation of the contractual
provisions and deserves to be upheld, as it suffers from no
infirmity or illegality.
24. Ld. Counsel for the respondent further submitted
that the claimant continuously rendered warehouse management
services throughout the contractual period and regularly raised
invoices in accordance with Clause 18 of the Agreement. It was
argued that despite receiving the benefit of such services, the
petitioner deliberately withheld contractual payments while
continuing to avail the services of the claimant. According to the
respondent, no contractual notice pointing out any actionable
breach was ever issued during the subsistence of the agreement
and all allegations regarding operational deficiencies surfaced
only after legal proceedings were commenced, at the instance of
the respondent.
25. It was further argued by ld. Counsel for
respondent/Claimant that Ld.Arbitrator rightly appreciated the
evidence and correctly rejected the counter claims which were
unsupported by reliable documentary proof. It is contended that
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PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
the counter claim on the basis of alleged storage losses, shortages
and financial deductions were not substantiated by primary
documentary evidence and, therefore, no interference with the
award is warranted merely because the petitioner seeks a
different appreciation of the same evidence. It is further
contended that the petitioner herein has not disclosed or taken
any ground to show that the impugned Award suffers from patent
illegality committed by the Ld. Tribunal in passing the impugned
Award or to satisfy that the impugned Award is against the public
policy of India. In support of respondent’s case, heavy reliance
has been placed on the judicial pronouncements of Hon’ble Apex
Courts in Associated Builders Versus Delhi Development
Authority (2015) 3 SCC 49; Konkan Railway Corporation Ltd.
Versus Chenab Bridge Project Undertaking (2023) 9 SCC 85;
Ssangyong Engineering and Construction Co. Ltd. vs National
Highway Authority of India (2019) 15 SCC 131 and MMTC
Limited v. Vedanta Ltd, (2019) 4 SCC 163, with the argument
that interference u/s 34 of the Arbitration and Conciliation Act is
permissible only when findings of the Ld. Arbitrator are arbitrary,
capricious or perverse or and if any illegality goes to root of the
matter. It is contended that the Award does not suffer from any
illegality, perversity or violation of public policy and warrants no
interference by this Court. It is stated that a valid and enforceable
order/Award dated 09.10.2024 was passed by Ld. Arbitrator and
that the petition be dismissed, for want of merits.
26. The Court has appreciated vehement arguments on
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PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
behalf of respective Counsels. The impugned Arbitral Award
dated 09.10.2024 has been perused. The grounds of challenge
raised in the present petition and the response thereof, has been
duly considered. Legal statutory position and binding judicial
pronouncements have been duly appreciated, as per the facts and
circumstances of the present case.
RELEVANT LEGAL POSITION CONSIDERED
27. It may be relevant to first examine the well settled
legal position for exercise of jurisdiction of this Court u/s 34 of
the arbitration and Conciliation Act.
28. There can be no dispute regarding the settled legal
position that the jurisdiction of the Court under Section 34 of the
Arbitration and Conciliation Act which is supervisory in nature
and does not permit re-appreciation of the evidence as an
appellate court. At the same time, it is equally well settled that an
Arbitral Award may call for interference by this Court, if it
suffers from patent illegality appearing on the face of the Award,
ignores vital evidence, fails to decide material contractual issues,
adopts an interpretation which no fair-minded or reasonable
person would adopt or otherwise discloses perversity in
appreciation of evidence. This Court is to carefully examine the
objection petition u/s 34 of the A & C Act within the limited
contours and scope of its jurisdiction under the Act. This Court is
guided by well settled and binding judicial precedents of the
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AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
Hon’ble superior courts to examine the relevant legal principles
governing a challenge of the Arbitral Award.
29. A three-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.‘, (2025) 2 SCC 417 while dealing with
the grounds of conflict with the public policy of India and patent
illegality, grounds which have also been urged in the present
case, encapsulated the relevant legal principles governing a
challenge to the arbitral award, as under :
“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) 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
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AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
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.
*****
30. The Hon’ble Apex Court further considered the
implications of the 2015 amendment in Section 34 and 48 of the
A & C Act and was pleased to lay down:
“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)
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AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
(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 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
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AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
(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
(c) justice or morality.”
31. After duly considering the developing legal position
by way of appreciation of catena of judgments of the Hon’ble
Apex Court, the Hon’ble Supreme Court in OPG Power
Generation (P) Ltd. (Supra) was pleased to lay down the latest
legal position as under:
“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:
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PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
(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).”
32. The comprehensive legal position, after appreciation
of its own well celebrated pronouncements on the extent and
scope of Section 34 of the A & C Act of 2015, have been
examined by the Hon’ble Supreme court in laying the binding
and guiding legal position for this Court while exercising power
u/s 34 of the A & C Act. The Hon’ble Apex Court in OPG Power
Generation (P) Ltd. (Supra) laid the binding guidance on
examining if an Arbitral Award suffered from ‘patent illegality’
by way of following settled legal position:
“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
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AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
to the root of the matter and if the illegality is of trivial
nature, it cannot be held that award is against public
policy.
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
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GUPTA AGRAWAL
GUPTA(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
(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
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
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GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
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
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.”
33. The aforesaid judicial precedents make it clear that
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GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
while exercising power under Section 34 of the 1996 Act the
Court does not sit in appeal over the arbitral award. In ‘ Dyna
Technologies (P) Ltd. v. Crompton Greaves Ltd.‘, (2019) 20 SCC
1, it was observed that jurisdiction under Section 34 cannot be
equated with the normal appellate jurisdiction.
FINDINGS OF THE COURT
34. Keeping the aforesaid binding legal principles in
view, this Court now proceeds to examine whether the impugned
award withstands judicial scrutiny under Section 34 of the
Arbitration and Conciliation Act. Having considered the rival
submissions and perused the arbitral record, this Court is
conscious of the limited jurisdiction conferred under Section 34
of the Arbitration and Conciliation Act, 1996 . The Court is not
expected to substitute its own interpretation merely because
another view is possible. Equally, however, it is the settled
position of law that where the arbitral tribunal ignores material
evidence, fails to determine the principal disputes arising from
the contract, or returns findings which are unsupported by the
record, the award would suffer from patent illegality warranting
interference under Section 34 of the Act. In the present case,
there are allegations of passing of the impugned Award, suffering
from perversity and patent illegality, in complete disregard of
vital evidence presented by the petitioner (respondent in the
Award in question) during the arbitral proceedings. It has been
alleged that the impugned Award has been passed in violation of
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GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
fundamental principles of arbitral jurisprudence and
transgressing its jurisdiction beyond the terms of the contract
thereby committing blatant error in exercise of its jurisdiction,
amounting to patent illegality. The Court is to examine if
impugned Award suffers from such defects that demonstrates
perversity or patent illegality as recognised by the Hon’ble Apex
Court in Ssangyong Engineering v. NHAI (Supra). This Court is
to examine if the ld. Arbitrator has adopted such fair principles
critical to ensuring that the arbitral process remained fair,
transparent and legally sound.
35. It has been considered that the impugned Award
dated 09.10.2024 in question has been passed pursuant to the
appointment of Ld. Sole Arbitrator vide orders of Hon’ble High
Court of Delhi dated 19.01.2021 on a Petition U/S 11 of the Act
filed by the respondent. The Hon’ble High Court recognised the
existence of an Arbitration Agreement, vide Clause 31 and were
pleased to appoint the Ld. Arbitrator to decide the matter
pertaining to the disputes between the parties, in respect of the
SWM Agreement entered between the parties as on 11.06.2019.
The Statement of Claim was filed by the respondent herein
before the Ld. Arbitral Tribunal raising the demand of
Rs.29,58,578/- alongwith interest against the petitioner herein.
The petitioner filed its statement of defence disputing the claim
filed by the respondent herein and also filed its counter-claim
raising claims of Rs.60,98,532/- for recovery of alleged losses
incurred due to the respondent’s breaches, including deductions
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GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
made by BSWC/FCI for storage discrepancies and weight
shortages.
36. On further appreciation of the Arbitral record, it is
reflected that the parties led their respective evidence and
testimony, in support of their respective claims and counter
claims. Before adjudication leading to the impugned Award,
petitioner herein (Respondent in the arbitral proceedings) was
allowed to place additional documents, to be considered during
arguments, as per law. After concluding the proceedings, ld. Sole
Arbitrator delivered the impugned Award on 06.10.2024, which
was decreed on 09.10.2024, upon deposit of requisite stamp
duties by the claimant and accordingly, impugned Award dated
09.10.2024 granting Rs.29,58,578/- to the respondent (Claimant)
alongwith interest @ 9% p.a. from the date of Statement of
Claim, was passed and the counter claim raised by the petitioner
(Respondent/Counter Claimant in Award) was dismissed. Being
aggrieved by the impugned Arbitral Award, the present petition
u/s 34 of A & C Act has come up for determination before this
Court.
37. The petition has been filed accompanied with a
prayer for seeking condonation of delay U/S 34(3) of the Act r/w
Section 151 CPC. The copy of arbitral Award was received by
the petitioner on 15.10.2024 and the petition u/s 34 A & C Act
was filed within the statutory period of 90 days i.e. on
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 31/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
10.01.2025 before another territorial jurisdiction. However,
owing to defect of territorial jurisdiction, the petition was
withdrawn and filed before this Court, for which condonation on
the ground of exclusion of limitation for bonafide litigation
before the Court of another territorial jurisdiction, has been
prayed. The petitioner came up for filing before the territorial
jurisdiction of this Court on 13.02.2025. The petitioner has
accordingly sought exclusion of limitation for an inadvertent
filing of the petition before another court of territorial
jurisdiction, as per Section 14 of the Limitation Act. The petition
has been admitted before this Court, without any objection raised
on behalf of the respondent, either at the first instance or during
the proceedings. Even otherwise, the petitioner has disclosed
sufficient cause for filing the petition beyond the period of three
months from receipt of the notice of Award. After excluding the
time taken for bonafide filing before another Court of territorial
jurisdiction, it has been duly explained that the petitioner was
prevented by sufficient cause to file the petition within a period
of three months and the same may be entertained within a period
of 30 days thereafter, as per proviso 2 Section 34(3) of the
Arbitration and Conciliation Act. Accordingly, the petition is
taken up for determination on its merits herein.
38. The present petition raises several grounds of
challenges to the impugned Award on the assertion of the
petitioner that the ld. Arbitrator has failed to appreciate the
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 32/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
contractual duties and obligations of the parties arising out of the
SWM Agreement dated 11.06.2019 and Lease Agreement dated
18.06.2019, which were interlinked agreements by virtue of
which the claimant( respondent herein), was given rights for
possession, management and operation of the petitioner’s
godown under PEG Scheme 2008. It is the case of the petitioner
that the ld. Sole arbitrator has failed to appreciate the evidence
and documents placed before him during the trial and has
proceeded on one sided appreciation of evidence presented by the
claimant. It has been alleged that the Ld. Arbitrator has omitted
to take into account crucial evidence presented by the petitioner
in defence of the claim and in support of its counter claim. It has
been further alleged that the ld. Arbitrator has failed to appreciate
material evidence for determining the necessary contractual
obligations of the claimant in terms of the several binding clauses
of the SWM Agreement binding between the parties. The
respondent has outrightly denied that the impugned award suffers
from any perversity or any patent illegality and has duly
supported reasons and discussions of the Arbitrator as based on
the material and evidence placed before the Arbitral Tribunal. It
is case of the respondent that the Arbitral Tribunal has duly
considered all the relevant facts and law applicable and material
to the disputes that was pending before the Tribunal to arrive at a
just and logical adjudication/conclusion. It has been argued that
this Court is not competent to substitute its own wisdom in place
of that of the Arbitrator as the impugned Arbitral Award has been
passed in accordance with the principles of natural justice, after
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
according full opportunity to the respondent (petitioner herein).
39. A careful reading of the impugned award shows that
the ld. Sole Arbitrator has devoted considerable discussion to the
contractual obligation of the petitioner to make timely payment
of monthly invoices and the absence of any formal cure notice or
notice of termination during the currency/subsistence of the
SWM Agreement. While these circumstances undoubtedly
constitute relevant considerations, they could not have
substituted an independent adjudication of the principal
controversy which arose between the parties. The central issue
before the ld. Arbitrator was not merely whether invoices
remained unpaid but whether the claimant had discharged the
extensive contractual obligations undertaken under the SWM
Agreement dated 11.06.2019 so as to become entitled to the
contractual remuneration claimed.
40. It is an admitted case of the parties that the rights of
obligations of the parties emanated from the execution of the
SWM Agreement dated 11.06.2019 and another agreement
namely ‘Lease Agreement’ dated 18.06.2019 by which a PEG
godown located at Obra, Aurangabad District Bihar, constructed
under the scheme of 2008, was handed over to the respondent
(Claimant) for management and operations of the petitioner’s
godown, in compliance with the quality standards mandated by
the Food Corporation of India (FCI). These agreement executed
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 34/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
under the PEG Scheme, 2008 pertained to ensuring scientific
preservation and maintenance of food grains in compliance with
mandated quality standards. The SWM Agreement executed
between the parties was not a simple agreement for payment
against supply of goods or isolated services. It was a
comprehensive warehouse management contract requiring the
claimant to undertake preservation of food grains, fumigation,
deployment of adequate manpower, maintenance of statutory
records, compliance with PEG norms, operational management
of the warehouse and various ancillary obligations undertaken
under Clauses 3 to 21 of the SWM Agreement. As a defence and
to support its counter claim during the arbitral process, the
petitioner (respondent therein) alleged that the mandatory
obligations had been repeatedly breached by the
claimant/respondent herein, during the subsistence of the contract
and that such deficiencies on the part of the claimant resulted in
financial consequences including deterioration of food grains,
storage losses and operational lapses. These pleadings by way of
defence and counter claim of the petitioner before the Ld.
Arbitrator, formed the very foundation of the defence and counter
claims and therefore, required independent adjudication on their
own merits.
41. The Court has meticulously appreciated the arbitral
record which discloses that the parties had produced extensive
emails exchanged with each other during the subsistence of the
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 35/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
SWM Agreement in question. The Statement of Defence filed by
the petitioner as respondent in the arbitration proceedings, raised
specific allegations against the claimant alleging that there were
several deficiencies committed by the claimant, which caused
deposition of penalties by the supervisory government agency
FCI, during the subsistence of the Agreement between the
parties. It is further notable that the respondent in reply to the
counter-claims itself filed and placed reliance on various email
communications to explain the circumstances surrounding
damage to food grains, structural deficiencies in the warehouse
and day-to-day operational issues. The award also records that
the petitioner moved an application under Section 23(3) seeking
permission to place additional Gmail communications on record
and that the ld. Arbitrator specifically directed that those
communications would be considered at the stage of final
appreciation of evidence, as per law.
42. On appreciation of the reasons and findings of the
Ld. Arbitrator leading to passing of the impugned Award, there is
absence of any analysis of the documents and emails, presented
by the petitioner in its defence and in support of its counter
claim, on record. The claimant has specifically relied upon
emails dated 01.02.2020, 14.03.2020, 02.04.2020 and 17.04.2020
regarding stock transactions and operational issues, yet the award
does not analyse whether those communications corroborate or
contradict the rival cases. The claimant relied upon emails and
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
communications exchanged between the parties during the
subsistence of the agreement asserting that repeated complaints
had been addressed to the petitioner regarding water leakage in
the warehouse structure, which according to the claimant was the
responsibility of the owner under Clause 3 of the SWM
Agreement. The claimant also relied upon email correspondence
relating to inward and outward movement of stocks, operational
transactions, fumigation activities, preservation and security of
stocks, deployment of adequate man power for smooth
operations and claim of providing adequate man power. Against
the correspondence relied upon by the claimant, there are several
emails relied upon by the petitioner (respondent therein), which
were placed on record, including email dated 13.08.2019,
14.12.2019, 14.01.2020, 07.04.2020, 20.05.2020, 17.05.2020
which were addressed to the claimant/respondent raising
concerned about alleged deficiencies and failure to maintain
computerised record, submit periodical reports and proper
coordination with FCI and BSWC officials. Further by way of
the afore-detailed email communications, petitioner raised
concerns about inadequate staffing at Kishanganj godown
whereby the record also comprises of reiterated emails dated
16.12.2019 and 14.01.2020. By way of the contentious
correspondences during subsistence of the SWM Agreement, the
petitioner repeatedly called upon the respondent to rectify breach
of its fundamental responsibilities alleging that the failure of the
claimant(respondent herein) to take any effective corrective
action was causing significant disruptions in warehouse
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 37/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
operations. The petitioner/respondent before the arbitrator,
documents and email correspondences to support its defence and
counter claim to allege that the failure of the respondent to fulfil
its obligations under the SWM Agreement, were in breach of
Clause 14, Clause 16 and further alleged that the respondent also
committed breach of Clause 18 of the SWM Agreement by
failing to conduct regular fumigation. It has been a defence raised
by the petitioner(respondent) that the FCI made substantial
deductions over the past year on account of the deficiencies and
stock shortages, due to which huge losses were suffered.
43. The appreciation of impugned Award reveals that the
Ld. Arbitrator did not analyse and reconciled the communications
and records of rival parties, placed before him to arrive at a
finding as to whether any deficiencies in compliance of
contractual obligations by the claimant stood proved or not or if
such alleged deficiencies in day-to-day operation of the
warehouse, could be proved on record by the petitioner or not. It
was incumbent upon the learned Arbitrator to examine whether
the communications merely established routine operational
exchanges or whether they disclosed continuing deficiencies
having a bearing upon the contractual obligations of either party.
Instead, the award merely notices the existence of some
correspondence without evaluating its legal or evidentiary effect.
Such omission, in the opinion of this Court, cannot be treated as
a mere error in appreciation of evidence but amounts to failure to
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
consider material evidence going to the root of the disputes.
Instead of examining whether the claimant had substantially
complied with its contractual obligations, the learned Arbitrator
appears to have proceeded on the premise that in the absence of
issuance of contractual cure notices and termination of the
Agreement, the petitioner’s allegations necessarily stood diluted.
Paragraphs 21 to 33 of the award repeatedly emphasise that the
petitioner neither terminated the Agreement nor issued cure
notices contemplated under Clause 2(c) and, therefore, the
claimant’s performance ought to be treated as satisfactory.
44. In the considered opinion of this Court, such an
approach amounts to an oversimplification of the contractual
disputes which actually arose between the parties. The
contractual mechanism providing for cure notices regulated the
parties’ rights concerning continuation or termination of the
Agreement. However, whether the claimant had in fact
committed breaches of its contractual obligations was a distinct
issue requiring independent adjudication upon appreciation of
evidence. Absence of termination Notice could not automatically
lead to the legal conclusion that every contractual obligation had
been faithfully discharged or that every complaint raised by the
petitioner stood waived.
45. Ld. Counsel for the respondent argued that this
Court ought not to re-appreciate the evidence forming part of the
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 39/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
arbitral record. The submission correctly states the limits of
Section 34 jurisdiction. However, there exists a fundamental
distinction between reassessment of evidence and complete non-
consideration of material evidence. While the former falls outside
the jurisdiction of the Court, the latter has consistently been
recognised by the Hon’ble Supreme Court as a valid ground for
interference where such omission affects the decision-making
process itself.
46. Equally significant is the manner in which the
learned Arbitrator dealt with the petitioner’s defence concerning
alleged operational deficiencies. The defence raised specific
allegations regarding inadequate manpower, deficiencies in
preservation, non-maintenance of computerized records, shortage
of operational staff, storage losses and various failures in
warehouse management. These allegations were founded upon
contractual clauses allocating specific responsibilities to the
claimant. However, the impugned award does not undertake any
clause-wise examination of these contractual obligations before
recording findings on the petitioner’s liability to pay the
contractual remuneration.
47. The discussion relating to manpower illustrates
this difficulty. The petitioner specifically pleaded that
adequate manpower as required under PEG norms had not
been deployed by the claimant. Instead of examining the
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
contractual stipulations, the applicable operational
requirements and the documentary correspondence
exchanged between the parties, the learned Arbitrator
disposed of the issue by observing that adequacy of
manpower was essentially a subjective matter to be
determined by the claimant itself. Such reasoning, with
respect, overlooks the nature of the contractual obligations.
Whether manpower was contractually adequate could not be
determined solely by the claimant’s subjective assessment. The
Agreement itself imposed operational responsibilities and the
petitioner had produced documentary material alleging persistent
shortages. The learned Arbitrator was expected to determine
whether the contractual standards stood satisfied, rather than
conclude the issue on the basis of general observations.
48. Likewise, the ld.Arbitrator repeatedly observed that
the petitioner continued with the Agreement throughout its tenure
and therefore must be deemed to have accepted the claimant’s
performance. This reasoning, in the opinion of this Court, travels
beyond the contractual framework. The Agreement related to
management of warehouses storing public food stocks belonging
to governmental agencies. Continuity of warehouse operations
may have been dictated by operational necessity. It is further
relevant to consider that the claimant did not produced any
extension agreement or material evidence supporting the
continuation of services by the claimant (respondent herein).
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 41/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
Even otherwise, such continuation, by itself, could not dispense
with the requirement of examining whether the claimant had in
fact complied with the contractual obligations undertaken by it.
49. The impugned Award also proceeds on the premise
that because monthly invoices reflected charges for fumigation,
the allegation of inadequate fumigation necessarily stood
disproved. Such inference does not necessarily follow. The
raising of invoices establishes that charges were claimed; it does
not by itself establish that the contractual standard of
performance stood achieved. Whether fumigation operations
were undertaken in accordance with the contractual
specifications required independent examination of the
operational records, inspection reports, correspondence and other
documentary evidence produced by the parties. The impugned
award does not disclose any such analytical exercise.
50. This Court also finds substance in the grievance that
the learned Arbitrator adopted inconsistent standards while
appreciating documentary evidence. The claimant’s invoices,
reminders and ledger accounts were readily accepted as
establishing entitlement to payment. Conversely, substantial
portions of the petitioner’s documentary case were rejected either
on technical deficiencies or without detailed discussion of the
relied upon emails and communications. Although insufficiency
of proof may ultimately justify rejection of a particular claim, the
adjudicatory process nevertheless requires the tribunal to
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
examine all material evidence before arriving at such conclusion.
Ex. RW1/3 regarding non-submission of periodical reports was
noticed but dismissed as “merely theoretical”, without examining
whether repeated reporting defaults constituted breach of
contractual obligations.
51. It may be further relevant to consider that the Ld.
Arbitrator, in the impugned Award, has observed that the
reasoning adopted in the award rendered in ‘SLCM Vs. Capital
Propmart’ shall be read as part of the present award. Though an
Arbitrator may rely upon principles of law laid down in another
decision, he cannot incorporate factual findings and appreciation
of evidence recorded in another arbitral proceeding without
independently examining the evidence led in the case before him.
Every arbitral reference is founded upon its own pleadings,
evidence and contractual relationship. Adoption of factual
findings from another arbitration, without an independent
analysis of the evidence available in the present proceedings,
amounts to a failure to exercise the adjudicatory function in the
manner required of an arbitral tribunal. Such an approach is
inconsistent with the requirement of fair and independent
adjudication.
52. Arbitration undoubtedly permits flexibility in
procedural matters. Nevertheless, the duty to render a reasoned
Award under Section 31(3) of the Act obliges the arbitral tribunal
to indicate why material testimonial and documentary evidence
has neither been accepted nor discarded. A reasoned Award does
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
not require discussion of every aspect of evidence on record;
however, where there is substantial cross-examination of the
claimant’s witnesses towards the breaches alleged by the
respondent before the Ld. Tribunal further seeking support from
contentious correspondence including emails exchanged between
the parties and placing on record the correspondence pertaining
to alleged quality cheque deficiencies filed by the FCI and
material showing deductions made by the FCI owing to
deficiencies and discrepancies, a complete absence of analysis of
such evidence on record as relied upon by the respondent therein,
renders the reasoning process of the Ld. Arbitral Tribunal,
vulnerable to judicial scrutiny. Not only the documentary
evidence by way of voluminous correspondence exchanged
between the parties has been ignored by the Ld. Arbitrator in
arriving at its finding, the Ld. Arbitrator has also omitted to
analyse the testimonies of the witnesses during trial. The
impugned Award, therefore, discloses that several findings have
been returned by the Ld. Arbitrator without even determining the
issues before the Ld. Arbitral Tribunal in complete omission of
the crucial evidence on record. Ld. Arbitrator has completely
ignored to consider the relevant correspondence and
communications on record, exchanged between the parties during
the contractual period, which were directly related to the alleged
shortcomings in warehouse operations, structural deficiencies,
preservation issues and contractual compliances. The Tribunal is
expected to assess the probative value of the material placed
before it on the touchstone of fairness, relevance and surrounding
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
circumstances. However, appreciation of the impugned Arbitral
Award reveals that the Ld. Arbitrator proceeded with his findings
without taking into account the crucial and vital evidence that
was placed on record and if appreciated, could go to the root of
the matter in fairly adjudicating the claim and counter claim
raised before the Ld. Arbitral Tribunal.
53. This Court is, therefore, unable to accept the
respondent’s submission that the challenge merely seeks a fresh
appreciation of evidence. The present case is not one where the
petitioner merely seeks substitution of one possible view by
another. Rather, the challenge is directed against the significant
omission of the Ld. Arbitrator to consider the critical and vital
evidence which formed an integral part of the arbitral record.
Though, reappreciation of evidence is not permissible, it is the
law of the land that an Arbitral decision must not be perverse or
so irrational that no reasonable person would have arrived at the
same. In the facts of the present case, the findings arrived at by
the Ld. Arbitrator is based on presumption of one sided
contractual obligations in favour of the claimant after ignoring
vital evidence pertaining to the alleged breach of the contractual
obligations arising from the binding clauses in the SWM
Agreement, which formed the basis of business relationship
between the parties.
54. As afore-considered, in a recent three-Judge Bench
decision of the Hon’ble Supreme Court of India in ‘DMRC Ltd.
v. Delhi Airport Metro Express (P) Ltd.’ (2024) 6 SCC 357, the
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
ground of patent illegality/perversity was delineated in the
following terms:
“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.”
It was further held:-
“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
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.”
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
55. It is well settled law by way of binding precedents
herein-above partly reproduced and duly appreciated that there is
limited scope of challenge u/s 34 of the A & C Act which has
been reiterated and reaffirmed over evolving legal position of the
country. This well settled legal position was once again
highlighted by the Hon’ble Apex Court in ‘ PSA SICAL
Terminals (P) Ltd. v. Board of Trustees of V.O. Chidambranar
Port Trust Tuticorin‘ [2021 SCC OnLine SC 508], and numerous
pronouncements of our own Hon’ble Delhi High Court, to make
it clear that this Court, in exercise of its jurisdiction u/s 34 of A
& C Act, is not permitted to reappreciate the evidence as an
Appellate Court would do and further any interference would be
so warranted when the Award is in violation of ‘public policy of
India’, which has been held to mean ‘the fundamental police of
Indian law’. However, the principles of natural justice as
contained in Section 18 and 34(2)(a)(iii) of the Arbitration Act
would continue to be the grounds of challenge of an Award.
Accordingly, it is well settled position of law that ‘It is only such
arbitral awards that shock the conscience of the Court, that can
be set aside on the said ground. An award would be set aside on
the ground of patent illegality appearing on the face of the award
and as such, which goes to the roots of the matter.’
56. At the cost of repetition, it may be relevant to
consider the case of “Associate Builders v. Delhi Development
Authority”, (2015) 3 SCC 49, which was duly appreciated and
followed in case Ssang Yong Engineering (Supra), wherein it has
been held that where the decision of an Arbitrator in construction
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Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
of terms of a contract, is perverse, such decision or passing of the
Award 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, findings of the Arbitrator
based on one sided documents or ignoring the documents filed by
the other as in the present case, would also qualify as a decision
based on no evidence inasmuch as such decision is not based on
evidence led by the parties, and is therefore, liable to be
characterised as perverse.
57. In the present case, this Court has appreciated the
entire arbitral record and the findings of the Ld Arbitrator which
led to his findings therein leading to passing of the impugned
Award dated 09.10.2024. The Ld. Arbitrator has failed to
consider the binding contractual obligations between the parties
under several Clauses of the SWM Agreement which dealt with
the core issues and services that were intended to be rendered by
the claimant in respect of the preservation, safety and well keep
of the food grains of FCI. There has been voluminous documents
and correspondence brought on record before the ld. Arbitrator
by both the claimant and the petitioner (as respondent therein).
However, ld. Arbitrator clearly adopted inconsistent standards in
deciding the claim on the basis of the invoices and accounts
relied upon by the claimant, while ignoring the documentary
evidence brought forth by the petitioner, regarding operational
deficiencies, shortage of manpower, infrastructural complaints,
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 48/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
storage losses and other contractual breaches. Ld. Arbitrator has
failed to analyse the comprehensive material and evidence placed
on record and thereby, has ignored vital evidence in arriving at
his findings. Hence, the Ld. Arbitrator failed to rightly appreciate
the entire evidence and ignored vital evidence in arriving at its
decision thereby rendering the decision as ‘perverse’. As per well
settled law, an Award based no evidence, or which ignores vital
evidence, is perverse and thus, patently illegal (Reliance placed
on ‘Ssangyong Engg. & Construction Co. Ltd. v. NHAI‘, (2019)
15 SCC 131; ‘Associate Builders v. DDA‘, (2015) 3 SCC 49).
58. In view of the aforesaid facts and discussions, this
Court is of the considered opinion that the decision-making
process adopted by the ld. Arbitrator lacks objective adjudication
and thereby, suffers from patent illegality, appearing on the face
of the Award. The Award proceeds substantially on presumptions
arising from non-issuance of cure notices and continuation of the
contractual relationship, while failing to fairly and independently
adjudicate the contractual breaches alleged by the petitioner
(respondent therein) through material and crucial evidence. Such
omission strikes at the very root of the entire adjudicatory
process by which the arbitral conclusions have been reached and
therefore, attracts judicial interference within the limited
parameters recognised u/s 34 of the Arbitration and Conciliation
Act.
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 49/50
Digitally
PREETI signed by
AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
59. Having failed to adequately evaluate the entire
evidence and material on record and ignoring vital evidence
pertaining to alleged breaches and contractual obligations which
go to the root of the matter, the impugned Award dated
09.10.2024 suffers from patent illegality appearing on the face of
the Award. Accordingly, the Award is perverse and liable to be set
aside on the ground of patent illegality.
60. Therefore, the present petition is allowed and
impugned Award dated 09.10.2026 is set aside.
Parties shall be at liberty to assert their respective
rights and claims, in accordance with law.
No orders as to costs.
Petition stands disposed of accordingly.
File be consigned to Record R oom.
Digitally
Announced in the open Court today PREETI signed by
on this 03rd day of July, 2026. AGRAWAL PREETI
GUPTA AGRAWAL
GUPTA
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
OMP (Comm.) 3/2025 M/s Jawahar Traders Vs. M/s Sohan Lal Commodity Management Pvt Ltd. Page 50/50
(PREETI AGRAWAL GUPTA)
District Judge (Commercial Court)-02
West/Tis Hazari Courts/Delhi.
03.07.2026
