Mahanagar Telephone Nigam Limited vs Nokia Solutions & Network India Pvt. Ltd on 23 February, 2026
inkinccorporation@gmail.com Delhi High Court
Mahanagar Telephone Nigam Limited vs Nokia Solutions & Network India Pvt. Ltd on 23 February, 2026
$~14
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 23.02.2026
+ O.M.P. (COMM) 367/2016
MAHANAGAR TELEPHONE NIGAM LIMITED
....Petitioner
Through: Ms. Vidhi Jain and Mr. Madhur
Mittal, Advocates.
versus
NOKIA SOLUTIONS & NETWORK INDIA PVT. LTD.
.....Respondent
Through: Mr. Abhishek Tewari and Mr.
Utkarsh Trivedi, Advocates.
CORAM:
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
% JUDGEMENT (ORAL)
HARISH VAIDYANATHAN SHANKAR, J.
1. The present Petition has been instituted under Section 34 of the
Arbitration and Conciliation Act, 19961, read with Section 151 of
the Code of Civil Procedure, 1908, seeking setting aside of the
Arbitral Award dated 11.03.20162 passed by the learned Sole
Arbitrator.
2. The challenge in the present proceedings is directed primarily
against the findings recorded in the Impugned Award, in particular
those relating to the adjudication of Claims A to E. The Petitioner
1
A&C Act
2
Impugned Award
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seeks to assail the conclusions arrived at by the learned Arbitrator
under these heads. The relevant extract of the Impugned Award
pertaining to Claims A to E is reproduced hereunder:
“Claims A to E
The main question before the Tribunal, therefore, is
whether the claimant is entitled to be paid @ Rs.4273 per line on
account of it having completed the supplies by 28″ February 1995
or it is entitled to be paid @ Rs.4145 per line due to its having not
completed the supplies by 28th February 1995 because of GD
Tubes having been supplied only in July, 1995. The question is as
to whether by non-supply of GD tubes of the value of Rs.19,15,552
out of the total contract of more than Rs.39 crore, the supplies were
not complete in all respects up to 28” February 1995 and even
assuming, supplies were not completed, because of non-supply of
GD tubes, whether the claimant has suffered any loss so as to
entitle it not to make payment @ Rs.4273 per line.
As already mentioned above, supplies were complete in all
respects except that a small item of GD tubes of the value of
Rs.19,15,552 were not supplied for Delhi MTNL. The supplies
were to be made in Mumbai as well as in Delhi. MTNL on 29th
March 1996 had issued a letter to the DGM (Engg.) Mumbai as
well as DGM (ETF) Delhi referring to the purchase order and
stating that consequent upon a reduction in the customs duty, the
Department of Telecommunications had finalized prices on the
basis of per line cost @ Rs.4273 for supplies made up to 31st
March 1995 and Rs.4145 for supplies made after 31st March 1995.
While the Mumbai office of MTNL by its letter dated 12th June
1996 confirmed that all supplies of 50,000 lines to Mumbai were
completed by 31st March 1995, the Delhi office by its letter dated
12 March 1997 wrote that supply of the entire 50,000 line
equipment was received before 31 March 1995 except Gas
Discharge (GD) tubes valued at Rs. 19,15,552 which were supplied
on 12″ July 1995. The amended clause 10.0(b) of the purchase
order provided that the purchaser shall be entitled to the benefit of
any decrease in price on account of reduction in or remission of
customs duty, excise duty, sales tax or on account of any other tax
or duty which takes place after
the expiry of the initial delivery period mentioned in the purchase
order. It was in these circumstances that a letter was written to the
Delhi and Mumbai offices of MTNL to inform whether complete
supplies had been received by 31st March 1995. The rationale was
that in case complete supplies were not made and in the meantime
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to the benefit of such decrease in the customs duty, Both Delhi and
Mumbai offices wrote that supplies in all respects were complete
by 31st March 1995 except that in case of supplies to Delhi, a small
item of GD tubes of the value of Rs. 19,15,552 was received in
July 1995. Any decrease in customs duty during the extended
delivery period would entitle MTNL to claim reduction only in the
price of that item of which the customs duty had been reduced and
which had not been supplied by the extended date. In my view, it
cannot be said that just because a small item of the value of
Rs.19,15,552 had not been supplied by the expiry of the extended
period, the claimant would not be entitled to be paid the price even
in respect of those items which had been supplied before the
extended period. I am, therefore, clearly of the opinion that the
claimant would be entitled to be paid @ Rs.4273 per line as
supplies in all respects except GD tubes had been completed by
28″ February 1995. I am fortified in my opinion by the fact that the
witness of the respondent has stated that the entire material expect
GD tubes was supplied prior to 28th February 1995 and GD tubes
were supplied on 12th July 1995. This witness also admitted a note
made by him on the file on 7th November 2002 that GD tubes was a
minor item. On 1st December 1995, DGM (SI) wrote a letter to the
Accounts Officer that delayed position of supply did not hamper
the installation and commission of the system and that no loss was
suffered by the respondent. In this view of the matter, the
respondent cannot, in my opinion, claim that supplies in all
respects were not complete by 28″ February 1995 or that the
claimant would not be entitled to be paid @ Rs.4273 per line and
would be entitled to be paid @ Rs.4145 per line. The stand of the
respondent, in my view, is totally illegal and the claimant is to be
paid @ Rs.4273 per line. At best, the respondent could adjust the
reduction in excise/custom duty on the value of GD tubes which
were supplied after 31st March 1995 There is, however, nothing on
record to show as to whether there was any reduction in
excise/custom duty on GD tubes and what will be the total amount
of such duty benefit of which could be given to the respondent. In
the absence of anything on record about reduction of excise/custom
duty on GD tubes, I hold that claimant would be entitled to the
price of Rs.4273 per line.”
3. Learned counsel appearing on behalf of the Petitioner contends
that the learned Arbitral Tribunal has erred in failing to appreciate that
the gas discharge tubes constituted an essential component of the
supplies to be effected by the Respondent. It is submitted that, in
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overlooking the essentiality of the said tubes, the learned Arbitrator
has arrived at an erroneous conclusion that the supplies were complete
in all respects, which, according to the Petitioner, runs contrary to the
terms and conditions of the contract.
4. This Court has heard the learned counsel appearing on behalf of
the parties at length and, with their able assistance, has carefully
perused the paperbook and other material documents placed on record,
including the record of the Arbitral Tribunal, as well as the written
submissions filed by the respective parties.
5. At the outset, it is apposite to note that this Court is conscious
of the limited scope of its jurisdiction while examining an objection
petition under Section 34 of the A&C Act. The contours of judicial
intervention in such proceedings have been authoritatively delineated
and settled by a consistent and evolving line of precedents of the
Hon’ble Supreme Court.
6. In this regard, a three-Judge Bench of the Hon’ble Supreme
Court, after an exhaustive consideration of a catena of earlier
decisions, in OPG Power Generation (P) Ltd. v. Enexio Power
Cooling Solutions (India) (P) Ltd.3, while dealing with the grounds of
conflict with the public policy of India, perversity, patent illegality,
made certain pertinent observations, which are reproduced hereunder:
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 for3
(2025) 2 SCC 417
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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 public policy is void.
*****
35. In Renusagar Power Co. Ltd. v. General Electric Co., 1994
Supp (1) SCC 644, a three-Judge Bench of this Court observed
that the doctrine of public policy is somewhat open–textured and
flexible. By citing earlier decisions, it was observed that there are
two conflicting positions which are referred to as the “narrow
view” and the “broad view”. According to the narrow view, courts
cannot create new heads of public policy whereas the broad view
countenances judicial law making in these areas. In the field of
private international law, it was pointed out, courts refuse to apply
a rule of foreign law or recognise a foreign judgment or a foreign
arbitral award if it is found that the same is contrary to the public
policy of the country in which it is sought to be invoked or
enforced. However, it was clarified, a distinction is to be drawn
while applying the rule of public policy between a matter governed
by domestic law and a matter involving conflict of laws. It was
observed that the application of the doctrine of public policy in the
field of conflict of laws is more limited than that in the domestic
law and the courts are slower to invoke public policy in cases
involving a foreign element than when a purely municipal legal
issue is involved. It was held that contravention of law alone will
not attract the bar of public policy, and something more than
contravention of law is required.
*****
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.
*****
40. In ONGC Ltd. v. Western Geco International Ltd., (2014) 9
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SCC 263, paras 35, 38 & 39, which also related to the period prior
to the 2015 Amendment of Section 34(2)(b)(ii), a three-Judge
Bench of this Court, after considering the decision inONGC
Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705, without exhaustively
enumerating the purport of the expression “fundamental policy of
Indian law”, observed that it would include all such fundamental
principles as providing a basis for administration of justice and
enforcement of law in this country. The Court thereafter
illustratively referred to three fundamental juristic principles,
namely:
(a) that in every determination that affects the rights of a citizen or
leads to any civil consequences, the court or authority or quasi-
judicial body must adopt a judicial approach, that is, it must act
bona fide and deal with the subject in a fair, reasonable and
objective manner and not actuated by any extraneous
consideration;
(b) that while determining the rights and obligations of parties the
court or Tribunal or authority must act in accordance with the
principles of natural justice and must apply its mind to the
attendant facts and circumstances while taking a view one way
or the other; and
(c) that its decision must not be perverse or so irrational that no
reasonable person would have arrived at the same.
41. InAssociate Builders v. DDA, (2015) 3 SCC 49, a two-Judge
Bench of this Court, held that audi alteram partem principle is
undoubtedly a fundamental juristic principle in Indian law and is
enshrined in Sections 18 and 34(2)(a)(iii) of the 1996 Act. In
addition to the earlier recognised principles forming fundamental
policy of Indian law, it was held that disregarding:
(a) orders of superior courts in India; and
(b) the binding effect of the judgment of a superior court would
also be regarded as being contrary to the fundamental policy of
Indian law.
Further, elaborating upon the third juristic principle (i.e. qua
perversity), as laid down in ONGC Ltd. v. Western Geco
International Ltd., (2014) 9 SCC 263, 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 [Associate Builders case,
(2015) 3 SCC 49, para 31].
To this a caveat was added by observing that when a court applies
the “public policy test” to an arbitration award, it does not act as a
court of appeal and, consequently, errors of fact cannot be
corrected; and a possible view by the arbitrator on facts has
necessarily to pass muster as the arbitrator is the ultimate master of
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the quantity and quality of evidence to be relied upon when he
delivers his arbitral award. 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. Thus, once it is found that the arbitrator’s approach is not
arbitrary or capricious, it is to be taken as the last word on facts.
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 [SsangyongEngg. &
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
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
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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
(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
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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.
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
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contract, in effect, is in contravention of Section 28(3) of the 1996
Act.
68. In SsangyongEngg. & 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 SsangyongEngg. &
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 SsangyongEngg. & 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 inONGC 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. InAssociate 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
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 SsangyongEngg. & 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
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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 SsangyongEngg. & Construction
Co. Ltd. v. NHAI, (2019) 15 SCC 131].
72. The tests laid down inAssociate Builders v. DDA, (2015) 3
SCC 49 to determine perversity were followed in SsangyongEngg.
& 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 inDMRC
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
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.
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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.
*****
Scope of interference with the interpretation/construction of a
contract accorded in an arbitral award
84. An Arbitral Tribunal must decide in accordance with the terms
of the contract. In a case where an Arbitral Tribunal passes an
award against the terms of the contract, the award would be
patently illegal. However, an Arbitral Tribunal has jurisdiction to
interpret a contract having regard to terms and conditions of the
contract, conduct of the parties including correspondences
exchanged, circumstances of the case and pleadings of the parties.
If the conclusion of the arbitrator is based on a possible view of the
matter, the Court should not intefere [See: SAIL v. Gupta Brother
Steel Tubes Ltd., (2009) 10 SCC 63; Pure Helium India (P)
Ltd. v. ONGC, (2003) 8 SCC 593; McDermott International
Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181; MMTC
Ltd. v. Vedanta Ltd., (2019) 4 SCC 163]. But where, on a full
reading of the contract, the view of the Arbitral Tribunal on the
terms of a contract is not a possible view, the award would be
considered perverse and as such amenable to interference [South
East Asia Marine Engg. & Constructions Ltd. v. Oil India Ltd.,
(2020) 5 SCC 164].
Whether unexpressed term can be read into a contract as an
implied condition
85. Ordinarily, terms of the contract are to be understood in the
way the parties wanted and intended them to be. In agreements of
arbitration, where party autonomy is the grund norm, how the
parties worked out the agreement, is one of the indicators to
decipher the intention, apart from the plain or grammatical meaning
of the expressions used [BALCO v. Kaiser Aluminium Technical
Services Inc., (2016) 4 SCC 126].
86. However, reading an unexpressed term in an agreement would
be justified on the basis that such a term was always and obviously
intended by the parties thereto. An unexpressed term can be
implied if, and only if, the court finds that the parties must have
intended that term to form part of their contract. It is not enough for
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the court to find that such a term would have been adopted by the
parties as reasonable men if it had been suggested to them. Rather,
it must have been a term that went without saying, a term necessary
to give business efficacy to the contract, a term which, although
tacit, forms part of the contract [Adani Power (Mundra)
Ltd. v. Gujarat ERC, (2019) 19 SCC 9].
87. But before an implied condition, not expressly found in the
contract, is read into a contract, by invoking the business efficacy
doctrine, it must satisfy the following five conditions:
(a) it must be reasonable and equitable;
(b) it must be necessary to give business efficacy to the contract,
that is, a term will not be implied if the contract is effective
without it;
(c) it must be obvious that “it goes without saying”;
(d) it must be capable of clear expression;
(e) it must not contradict any terms of the contract [Nabha Power
Ltd. v. Punjab SPCL, (2018) 11 SCC 508, followed in Adani
Power case, (2019) 19 SCC 9].
(emphasis supplied)
7. A careful perusal of the extracted portion from the Impugned
Award, as set out in Paragraph 2 of this Judgment, clearly
demonstrates that the learned Arbitrator, upon a detailed examination
of materials placed on record, has arrived at, inter alia, certain
categorical factual conclusions. These conclusions, which are as
follows, constitute the core findings underpinning the adjudication of
Claims A to E and form the foundation of the reasoning adopted in the
Impugned Award:
(a) The principal issue before the learned Arbitrator was whether
the Claimant was entitled to payment at the rate of Rs. 4273 per
line on the basis that supplies were completed by 28.02.1995, or
whether the reduced rate of Rs. 4145 per line was applicable on
the ground that supplies were not complete until July 1995 due
to the delayed delivery of GD tubes.
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(b) It was undisputed that, except for GD tubes valued at Rs.
19,15,552, all other materials under the contract, worth more
than Rs. 39 crore, had been supplied within the stipulated
period. The GD tubes constituted only a very small fraction of
the total contract value.
(c) The Mumbai office confirmed that all 50,000 lines meant for
Mumbai were supplied by 31.03.1995. Similarly, the Delhi
office confirmed that the entire 50,000 line equipment was
received before 31.03.1995, except for GD tubes, which were
supplied on 12.03.1995.
(d) Under the amended Clause 10.0(b) of the purchase order, the
purchaser was entitled to the benefit of any reduction in
customs or excise duty occurring after the expiry of the initial
delivery period. However, such benefit could logically extend
only to those specific items supplied after the extended delivery
date and not to the entirety of the supplies already completed.
(e) The learned Arbitrator reasoned that the non-supply of a minor
component like GD tubes could not justify treating the entire
contract as incomplete, particularly when a substantial portion
of the supplies had been delivered within time and were
otherwise complete in all respects.
(f) The Respondent’s (the Petitioner in the present Petition) own
witness admitted that all materials except GD tubes were
supplied before 28.02.1995 and further acknowledged that GD
tubes were a minor item. This admission reinforced the
Claimant’s case that the supplies were substantially complete
within the prescribed period.
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(g) A contemporaneous communication dated 01.12.1995
confirmed that the delay in supplying GD tubes did not hamper
installation or commissioning of the system and that no loss was
suffered by the Respondent (the Petitioner in the present
Petition) on account of such delay.
(h) In these circumstances, the learned Arbitrator held that the
Respondent (the Petitioner in the present Petition) was not
justified in denying payment at Rs. 4273 per line for the entire
supply merely because of the delayed delivery of GD tubes.
(i) At best, the Respondent (the Petitioner in the present Petition)
could have claimed the benefit of any reduction in customs or
excise duty specifically applicable to GD tubes supplied after
31.03.1995, but such adjustment could only relate to that
particular item.
(j) Since there was no material on record demonstrating any actual
reduction in customs or excise duty on GD tubes or quantifying
any such benefit, the learned Arbitrator concluded that the
claimant was entitled to payment at the rate of Rs. 4273 per
line.
8. This Court is of the considered opinion that the submissions
advanced by the Petitioner in the present case, upon close scrutiny,
essentially amount to a challenge to the factual findings returned by
the learned Arbitrator and to the interpretation placed by the learned
Arbitrator upon the relevant contractual clauses. The grievance
projected is not essentially one of jurisdictional error, patent illegality,
or violation of public policy, but is fundamentally directed against the
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conclusions drawn by the Arbitral Tribunal on appreciation of
evidence and construction of the terms of the contract.
9. The learned Arbitrator, as noted earlier, after a detailed
examination of the pleadings, documentary material, contractual
stipulations, and the evidence led by the parties, has returned a
categorical finding on the core issue as to whether the supplies stood
completed in all respects as on the stipulated cut-off date, i.e.,
28.02.1995. Such a determination is essentially a finding of fact
coupled with an interpretative exercise of the contractual provisions
governing delivery, pricing, and consequences of delay.
10. These findings are demonstrably rooted in an assessment of the
evidentiary record and a reasoned construction of the contract between
the parties. In the considered view of this Court, findings of this nature
fall squarely within the domain of the Arbitral Tribunal and do not
invite interference under Section 34 of the A&C Act, unless they are
shown to be perverse, based on no evidence, vitiated by patent
illegality, or so irrational that no reasonable person could have arrived
at such conclusions. No such infirmity has been demonstrated in the
present case.
11. It is trite law, as reiterated by the Hon’ble Supreme Court in
OPG Power Generation (supra), wherein, after considering a catena
of earlier precedents, the scope of judicial interference under Section
34 of the A&C Act has been authoritatively delineated, that a court
exercising jurisdiction under Section 34 does not sit in appeal over the
arbitral award. The supervisory role of the Court is narrowly
circumscribed.
12. The Court further held that it is impermissible for the Court to
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re-appreciate evidence, reassess the probative value of material on
record, or substitute its own interpretation of contractual clauses
merely because another view may be possible. Interference is
warranted only where the award is based on no evidence, or where the
Arbitral Tribunal has taken into account matters wholly irrelevant to
the decision, or has ignored vital evidence which goes to the root of
the matter, or where the award suffers from patent illegality apparent
on the face of the record.
13. In the present petition, the Petitioner has neither established that
the findings are unsupported by evidence nor demonstrated that any
material evidence has been disregarded or that irrelevant
considerations have weighed with the learned Arbitrator.
14. In light of the detailed evaluation undertaken by the learned
Arbitrator of the material placed on record, and considering that the
reasoning in the Impugned Award is plausible, coherent, and legally
sustainable, this Court finds no ground to exercise its limited
jurisdiction under Section 34 of the A&C Act. The view adopted by
the learned Arbitrator is a possible and reasonable one based on the
evidence and the contractual provisions. In such circumstances, no
judicial interference is warranted. Accordingly, the present petition,
being devoid of merit, stands dismissed.
15. The present petition, along with pending application(s), if any,
is disposed of in the above terms.
HARISH VAIDYANATHAN SHANKAR, J.
FEBRUARY 23, 2026/nd/va
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