Calcutta High Court
Mintech Global Pvt Ltd vs Ultra Tech Cement Limited on 16 March, 2026
Author: Debangsu Basak
Bench: Debangsu Basak
1
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL APPELLATE JURISDICTION
ORIGINAL SIDE
Present:
The Hon'ble Justice Debangsu Basak
And
The Hon'ble Justice Md. Shabbar Rashidi
AO-COM/6/2025
MINTECH GLOBAL PVT LTD
VS
ULTRA TECH CEMENT LIMITED
WITH
AO-COM/7/2025
ULTRA TECH CEMENT LIMITED
VS
MINTECH GLOBAL PRIVATE LIMITED
For Mintech Global Pvt. Ltd. : Mr. Jishnu Saha, Sr. Adv.
Mr. Rizu Ghoshal, Sr. Adv.
Mr. Sirsanya Bandyopadhyay, Adv.
Mr. Soham Kr. Roy, Adv.
Mr. Rahul Kr. Singh, Adv.
For Ultra Tech Cement Ltd. : Mr. S. N. Mookherjee, Sr. Adv.
Mr. Mainak Bose, Sr. Adv.
Mr. Debjyoti Saha, Adv.
Mr. Shubrojyoti Mookherjee,Adv.
Mr. Anirudh Goyal, Adv.
Hearing Concluded on : February 13, 2026
Judgement on : March 16, 2026
DEBANGSU BASAK, J.:-
1. Two appeals have been heard analogously as they emanate
out of the same impugned judgement and order dated November
2
8, 2024 passed by the learned Single Judge under Section 34 of
the Arbitration and Conciliation Act, 1996.
2. For the sake of convenience, the parties in the two appeals,
are referred to as claimant and respondent as they were before
the Arbitral Tribunal.
3. By the impugned judgement and order, learned Single Judge
has partly set aside and modified the arbitral award dated March
20, 2023. Learned Single Judge has set aside the claim from
Commitment Charges of the claimant being claim No. A3 and
modified the rate of interest on repayment of mobilisation
advance from 9% to 14.5%.
4. Learned senior advocate appearing for the claimant has
submitted that, the parties entered into a contract dated January
27, 2016. He has contended that, the objective of the contract
was setting up of a captive manufacturing unit for cement end
products with such manufacturing units being set up solely at
the instance and for the captive consumption of the respondent.
He has pointed out that the total project investment was of Rs.
65.74 crores, out of which, respondent paid Rs. 31.98 crores as
mobilization advance being 50% of the total project investment
cost which was repayable by the claimant in 96 equated monthly
3
installments at the rate of 14.5% interest on reducing balance
principals. He has pointed out that, the lock in period was for 10
years and extendable by 6 years. The respondent was liable to
utilise 100% of the capacity of the plant.
5. Learned senior advocate appearing for the claimant has
contended that, clause 1.10 A of the contract has to be read along
with clause 1.7 which provides for Minimum Assured Production
(MAP) and Annexure-I which provides for pricing mechanism and
for compensation payable to the claimant even in case of zero
production. He has contended that, commitment charges were
accordingly claimed and awarded on such basis for the balance
period of ten years after the respondent stopped supply.
According to him, Arbitral Tribunal has correctly held that the
payment of commitment charges was the contractual obligation of
the respondent.
6. Learned senior advocate appearing for the claimant has
contended that, the contract contained an exit clause being
clause 1.11 which has to be read with Annexure-III of the
contract. He has contended that, exit was permitted only upon six
months’ written notice coupled with full indemnification and
compensation. According to him, exit clause being clause 1.11 did
4
not override clause 1.10 (A). In any event, the exit clause did not
become applicable as the Arbitral Tribunal has correctly held that
the contract was not validly terminated.
7. Learned senior advocate appearing for the claimant has
submitted that, in terms of the contract, the manufacturing units
were set up. Production was underway and the products were
being sold to the respondent. However, by two emails dated
March 7, 2017 and March 8, 2017, the respondent had asked the
claimant to stop procurement of raw materials till further
instructions. He has pointed out that, there was no reference to
clause 1.11 in the emails. Neither of the emails had constituted a
six month’s notice. In fact, even after the emails, the respondent
had revised the commitment charges in May 2017 and
acknowledged liability to pay them. The respondent had
continued paying commitment charges till June 2017 but later
claimed that they had terminated the contract in March 2017.
8. Learned senior advocate appearing for the claimant has
contended that, the respondent had acted in breach of the
contract by prematurely exiting the contract before the expiry of
the lock in period. The contract contained an arbitration clause,
which the claimant had invoked.
5
9. Learned senior advocate appearing for the claimant has
referred to the proceedings and findings of the Arbitral Tribunal.
He has referred to the claims raised by the claimant and the
counterclaim of the respondent. He has referred to the fact that,
the manufacturing plant was operating during the arbitration.
10. Referring to the findings in the impugned judgement and
order, learned senior advocate appearing for the claimant has
submitted that, the learned Single Judge misread the contract
between the parties. He has submitted that, learned Single Judge
failed to harmonise the lock in period under clause 1.10 A with
the exit clause 1.11. He has contended that, the learned Single
Judge has read the exit clause being clause 1.11 in isolation and
therefore, rendered the lock in period regulatory and useless
surplusage. He has contended that, the learned Single Judge has
effectively rewritten the contract between the parties which it
cannot do.
11. Learned senior advocate appearing for the claimant has
contended that, the learned Single Judge has misread and
misapplied the ratio of 1991 Volume 1 Supreme Court Cases
533 (Indian Oil Corporation Ltd. vs. Amritsar Gas Service
and others). He has contended that, although the contract
6
between the parties provided for the contract to be determined at
will upon service of a prior 30 days notice, and although
compensation payable was limited to the notice period of 3
months, there was no lock in period in the case of Amirtsar Gas
Service (supra).
12. Learned senior advocate appearing for the claimant has
contended that, the learned Single Judge interfered with the
arbitral award excessively. He has contended, since the findings
and the reasoning of the Arbitral Tribunal is plausible, learned
Single Judge has erred in substituting the findings of the Arbitral
Tribunal, which is impermissible in law.
13. Learned senior advocate appearing for the claimant has
contended that, respondent never pleaded mitigation before the
Arbitral Tribunal or even in its application under Section 34 of
the Act of 1996. The respondent had never led any evidence in
support of such mitigation and did not dispute the operation of
the plant. He has contended that the plea of mitigation was raised
for the first time by the respondent by the written submission
before the learned Single Judge. He has contended that mitigation
being a question of fact cannot be argued without pleadings. He
has referred to the records of the Arbitral Tribunal. He has
7
contended that the claimant had run the plant under orders of
the Arbitral Tribunal dated April 16, 2018. Claimant had filed
monthly accounts showing continuous losses. He has contended
that, the learned Single Judge introduced the concept of
mitigation on the basis of oral submissions of the claimant which
violated the rules of pleadings and caused serious prejudice to the
respondent.
14. Learned senior advocate appearing for the claimant has
contended that, reduction of interest on mobilisation advance by
the Arbitral Tribunal was reasonable and justified and therefore
did not call for any interference. He has contended that, the
mobilisation advance was repayable under the contract in 96
monthly installments. In view of the respondent’s refusal to
accept deliveries under the contract, leading to the breach of the
contract, Arbitral Tribunal had directed refund of the entire
mobilisation advance at a time and accordingly considered it
prudent to reduce the interest payable thereon from 14.5% to 9%.
He has contended that, the Arbitral Tribunal can take a middle
ground for a fair resolution.
15. Learned senior advocate appearing for the claimant has
contended that, the appellant invoked the arbitration for
8
contractual breach and premature exit by the respondent, before
the expiry of the lock in period
16. Learned senior advocate appearing for the claimant has
contended that, Arbitral Tribunal is the final authority on the
interpretation of the contract. He has contended that, liquidated
damages do not require proof of actual loss. Damages are
assessed on the date of the breach. Judicial review under Section
34 of the Act of 1996 is supervisory and not appellate. In support
of such contentions, he has relied upon 2024 Volume 1
Supreme Court Cases 479 (Reliance Infrastructure Limited
vs. State of Goa), 2025 Volume 2 Supreme Court Cases 417
(OPG Power Generation Private Limited vs. Enexio Power
Cooling Solutions India Private Limited and Another) and
2025 SCC Online Cal 10191 (Ashiana, represented by its
proprietor Ashoke Kumar Shaw vs. Biva Dutta Roy and
Others).
17. Relying upon 2024 Volume 6 Supreme Court Cases 357
(Delhi Metro Rail Corporation Limited vs. Delhi Airport Metro
Express Private Limited), learned senior advocate appearing for
the respondent has contended that, every part and parcel of a
contract must be read to gather the true intent of the parties.
9
18. Learned senior advocate appearing for the claimant has
contended that, neither the Arbitral Tribunal nor the Court can
make out a new contract for the parties. He has relied upon 2023
Volume 15 Supreme Court Cases 781 (PSA Sical Terminals
Private Limited vs. Board of Trustees of V.O. Chidambranar
Port Trust Tuticorin and Others), and 2006 Volume 2
Supreme Court Cases 628 (Shin Satellite Public Co. Ltd. vs.
Jain Studios Ltd.) in this regard.
19. On the proposition of the effect of lock in period in contracts,
learned senior advocate appearing for the claimant has relied
upon 2004 Volume 2 Supreme Court Cases 712 (Food
Corporation of India and Others. vs. Babulal Agrawal), 2014
SCC Online Bom 4768 (Indiabulls Properties (P) Ltd. vs.
Treasure World Developers (P) Ltd.) and 2012 SCC Online Cal
2941 (Laxmi Pat Surana vs. Pantaloon Retail India Ltd. &
Ors.), 2009 SCC Online Del 706 (Satya Narain Sharma-Huf
vs. Ashwani Sarees Pvt. Ltd.) and 2021 SCC Online Del 4167
(Zoom Communications Private Limited vs. Brij Mohan Punj).
20. On the issue that, mitigation of losses is a mixed question of
fact and law and has to be proved by adducing evidence, learned
10
senior advocate appearing for the claimant has relied upon 2009
SCC Online Del 2143 (MMTC Limited vs M/s. H.J. Baker &
Bros. INC..) and 2023 Volume 9 Supreme Court Cases 424
(H.J. Baker and Brothers INC.. vs. Minerals and Metals Trade
Corporation Ltd. (MMTC)).
21. On the proposition that, a plea not taken before the Arbitral
Tribunal cannot be raised for the first time before the court of law
under Section 34 of the Act of 1996, learned senior advocate
appearing for the claimant has relied upon 2009 Volume 17
Supreme Court Cases 796 (Fiza Developers & Inter-Trade
Private Limited vs. AMCI (India) Private Limited & Another),
2003 5 Bom CR 146 (Oil & Natural Gas Corporation Ltd vs.
Comex Services S.A.), All India Reporter 1956 Calcutta 321
(Shah and Co. vs. Ishar Singh Kripal Singh and Co.) and
2015 Volume 3 Bom CR 15 (Harinarayan Bajaj vs. Madhukar
Sheth).
22. On the proposition that, reduction of interest by the Arbitral
Tribunal was reasonable and justified and therefore did not call
for any interference, learned senior advocate appearing for the
claimant has relied upon 2025 SCC Online AP 4458 (Sunrise &
11
Engineering Industries Rep. by its Managing Partner Sri.
Myneni Veerababu vs. Hindustan Shipyard Limited, rep. by
its Additional General Manager (Law) and Another).
23. Learned senior advocate appearing for the respondent has
contended that, the scope of Section 37 of the Act of 1996 is to
ascertain whether the learned Single Judge in adjudicating the
matter acted within the scope of Section 34 of the Act of 1996 or
not. In support of such contention, he has relied upon 2024 SCC
Online SC 2632 (Punjab State Civil Supplies Corporation
Limited and Another vs. Sanman Rice Mills and Others),
2024 Volume 1 Supreme Court Cases 479 (Reliance
Infrastructure Limited vs. State of Goa) and 2025 SCC Online
SC 2088 (Sepco Electric Power Construction Corporation vs.
Gmr Kamalanga Energy Limited). He has contended that, the
claimant has not alleged or established any transgression of
jurisdiction by the learned Single Judge.
24. Learned senior advocate appearing for the respondent has
contended that, the finding of the Arbitral Tribunal that there was
no termination of the contract dated January 27, 2016 is
perverse. He has contended that, respondent relied upon email
dated March 7, 2017, March 8, 2017, April 24, 2017 and May 10,
12
2017 to contend that the parties had by agreement terminated
the contract and that, the claimant would retain the plant. He
has contended that, Arbitral Tribunal restricted its analysis to the
emails dated March 7, 2017 and March 8, 2017 ignoring the
emails dated April 24, 2017 and May 10, 2017. According to him,
such conduct has vitiated the award on the ground of perversity
which is a patented illegality. He has relied upon 2019 Volume
15 Supreme Court Cases 131 (Ssangyong Engineering and
Construction Company Limited vs. National Highways
Authority of India (NHAI)) in support of his contention.
25. Learned senior advocate appearing for the respondent has
contended that, even if there was no termination of the agreement
as held by the Arbitral Tribunal, then also the award towards
future commitment charges is liable to be set aside. He has
contended that, there was no evidence in support of the loss
allowed by the Arbitral Tribunal in this regard. He has contended
that, the claimant relied upon a chart annexed to the statement
of claim to compute future commitment charges. Future
commitment charges have been done from January 16, 2018 for a
period of 10 years from the alleged respective plant
13
commencement dates for the 3 plants. No other evidence has
been produced.
26. Relying upon 2009 Volume 12 Supreme Court Cases 1
(State of Rajasthan and Another vs. Ferro Concrete
Construction Private Limited) and 2019 Volume 15 Supreme
Court Cases 131 (Ssangyong Engineering & Construction
Company Limited v. National Highways Authority of India
(NHAI)), learned senior advocate appearing for the respondent has
contended that, mere reliance on a chart in the statement of
claim is not proof. No reasons have been given in support of the
award for future commitment charges. The commitment charges
could not have exceeded a period of 6 months as the contract is
determinable. Without proof of actual loss having been suffered,
there cannot be an award for damages. The award is therefore
contrary to binding decisions of Superior Courts and therefore is
in violation of fundamental policy of Indian law. In this regard, he
has relied upon Section 34 (2) (b) (ii) Explanation I(ii) of the Act of
1996, 2015 Volume 3 Supreme Court Cases 49 (Associate
Builders vs. Delhi Development Authority) and 2019 Volume
15 Supreme Court Cases 131 (Ssangyong Engineering &
Construction Company Limited vs. National Highways
14
Authority of India (NHAI)). He has also relied upon Sections 73
and 74 of the Indian Contract Act, 1872 as well as 2015 Volume
4 Supreme Court Cases 136 (Kailash Nath Associates v. DDA
and Another), 2019 Volume 5 Supreme Court Cases 341
(Mahanagar Telephone Nigam Limited vs. Tata
Communications Limited), 2023 SCC Online SC 1366
(Unibros Versus All India Radio) in this regard.
27. Learned senior advocate appearing for the respondent has
contended that, the contract was entered into on January 27,
2016. Arbitral Tribunal however has awarded commitment
charges for a period of ten years from the date of the
commencement of production of the plants i.e. on August 29,
2016, November 02, 2016 and March 29, 2017. Therefore,
Arbitral Tribunal has in effect granted commitment charges for a
period beyond the expiry of the contract. The award has thus
violated Section 34 (2A) of the Act of 1996.
28. Learned senior advocate appearing for the respondent has
contended that, the obligation of the respondent to commitment
charges is dependent upon the ability of the claimant to
manufacture and perform its obligation. He has pointed out that,
Minimum Assured Production was never reached by the claimant.
15
Therefore, the view taken by the Arbitral Tribunal is not plausible.
In this regard he has relied upon 2023 Volume 15 Supreme
Court Cases 781 (PSA Sical Terminals Private Limited vs.
Board of Trustees of V.O. Chidambranar Port Trust Tuticorin
and Others), 2022 Volume 4 Supreme Court Cases 463
(Indian Oil Corporation Limited vs. Shree Ganesh Petroleum
Rajgurunagar), 2020 Volume 5 Supreme Court Cases 164
(South East Asia Marine Engineering and Constructions
Limited (Seamec Limited) vs. Oil India Limited.).
29. Learned senior advocate appearing for the respondent has
contended that, even the investment of the claimant of
approximately Rs. 33 crores, award of Rs. 171.36 crores with
interest should shock the conscience of the Court. He has pointed
out that, by an order dated April 17, 2018, claimant was relieved
of his obligation under the contract. The effect of the order dated
April 16, 2018 has not been considered by the Arbitral Tribunal.
30. Learned senior advocate appearing for the respondent has
contended that, Arbitral Tribunal did not answer issue no. 2
framed in the arbitration proceedings. He has contended that,
issue no. 2 related to the obligation of the claimant to complete
the Ready Mix Motor Plant (EMM Plant). Unless such an issue is
16
answered, the liability of the respective parties cannot be decided
appropriately.
31. Learned senior advocate appearing for the respondent has
referred to Section 73 of the Contract Act, 1872 and submitted
that, such provision inherently includes the issue of mitigation of
damages which has a bearing on quantification of damages. He
has relied upon 1961 SCC Online SC 100 (Murlidhar
Chiranjilal vs. Harishchandra Dwarkadas and Another) in
this regard. He has contended that, the award does not deal with
the issue of mitigation at all and therefore, is contrary to the
fundamental policy of Indian Law. He has relied upon 2015
Volume 3 Supreme Court Cases 49 (Associate Builders vs.
Delhi Development Authority) and (2019) Volume 15 Supreme
Court Cases 131 (Ssangyong Engineering & Construction
Company Limited vs. National Highways Authority of India
(NHAI)) in this regard.
32. Learned senior advocate appearing for the respondent has
contended that, although, the issue of damages was not proved
before the Tribunal, the same was not dealt within the award. The
application under Section 34 of the Act of 1996 filed on behalf of
17
the respondent had contained grounds with regard to violations of
Sections 73 and 74 of the Contract Act, 1872.
33. Learned senior advocate appearing for the respondent has
contended that, the contract provided for interest on mobilization
advance at the rate of 14.5%. He has pointed out to the body of
the award where, Arbitral Tribunal held that the respondent was
entitled to interest at the rate of 14.5% per annum on the refund
of mobilization award from March, 2017 till repayment. However,
the award ultimately had awarded interest at the rate of 9% per
annum which is contrary to the recording in the award. According
to him, the award contains a manifest error. Relying upon 2025
Volume 7 Supreme Court Cases 1 (Gayatri Balasamy v. ISG
Novasoft Technologies Limited), he has contended that, Court
under Section 34 of the Act of 1996 has the power to modify such
errors. In any event, award of interest at the rate of 9% per
annum is different from the rate prescribed being 14.5% and is
therefore in violation of Section 31 (7) (a) of the Act of 1996. He
has relied upon 2015 Volume 9 Supreme Court Cases 695
(Union of India v. Bright Power Projects (India) Private
Limited), 2022 Volume 9 Supreme Court Cases 286 (Delhi
Airport Metro Express Private Limited vs. Delhi Metro Rail
18
Corporation) and 2025 SCC Online SC 2473 (Sri Lakshmi
Hotel Pvt. Limited and Another vs. Sriram City Union
Finance Ltd. and Another) in this regard.
34. Learned senior advocate appearing for the respondent has
contended that, claim A.4 made in the statement of claim was
disallowed and challenged to the same by the claimant was
dismissed by the learned Trial Judge. He has contended that, in
the appeal, no ground was taken and that, such claim was
abandoned by the claimant.
35. Parties had entered into a contract dated January 27, 2016
for the setting up of captive manufacturing unit for cement and
products, namely fly ash bricks, AAC blocks, and ready mix
mortar for the captive consumption of the respondent.
36. Under the contract, the respondent had agreed to pay 50%
of the total project investment cost. Respondent had therefore
paid ₹ 31.98 crores being 50% of the total project investment cost
of ₹ 65.74 crores to the appellant. Under the contract, the
appellant had to repay such advance of Rs. 31.98 crores in 96
equated monthly instalments at the rate of 14.5% interest
calculated on reducing balance of principal.
19
37. Under the contract, the claimant had set up manufacturing
unit for fly ash bricks was set up on August 29, 2016, AAC blocks
on November 2, 2016 and ready mix mortar on March 29, 2017.
38. By two emails dated March 7, 2017 March 8, 2017,
respondent had asked the claimant to stop procurement of raw
materials until further instructions.
39. Disputes and differences had arisen between the parties for
which, the claimant had invoked the arbitration clause contained
in the contract.
40. Arbitral Tribunal had entered into reference on the disputes
to refer to it. Appellant had filed a statement of the claims
containing 8 number of claims. Respondent had filed a statement
of defence and counterclaim containing number 5 of
counterclaims. Claimant had filed a rejoinder to which the
respondent had filed a sur rejoinder.
41. Claimant had filed an application under Section 17 of the
Act of 1996 before the Arbitral Tribunal on which an order dated
April 16, 2018 was passed by the Arbitral Tribunal. Claimant had
filed another application under Section 17 of the Act of 1996.
20
42. Before the Arbitral Tribunal, the parties had examined two
witnesses each. Arbitral Tribunal had made and published its
award dated March 20, 2023.
43. Respondent had challenged the award dated March 20,
2023 under Section 34 of the Act of 1996 by way of AP (COM) No.
334 of 2024 while the application under Section 34 of the Act of
1996 of the claimant was registered as AP(COM) 335 of 2024.
44. Claimant had put the award into execution by way of EC No.
55 of 2023.
45. By the impugned judgement and order, the learned Single
Judge has disposed of all the three applications under Section 34
of the Act of 1996. Parties have preferred two separate appeals
under Section 37 of the Act of 1996.
46. Parties have referred to various authorities on the scope and
ambit of Sections 34 and 37 of the Act of 1996. Essentially, the
authorities cited at the Bar dwelt on provisions of Sections 34(2)
(b), 34 (2-A) and 37 of the Act of 1996.
47. Punjab State Civil Supplies Corporation Ltd (supra) has
held that, the scope of Section 37 of the Act of 1996 is much more
summary in nature and not like an ordinary civil appeal given the
fact that, proceedings under Section 34 of the Act of 1996 is
21
summary in nature and not like a full-fledged regular civil suit. It
has held that, the scope of intervention of the Court in arbitral
matters is virtually prohibited, if not absolutely barred and that
the interference is confined only to the extent envisaged under
Section 34 of the Act of 1996. The appellate power under Section
37 of the Act of 1996 is limited within the domain of Section 34 of
the Act of 1996 and is exercisable only to find out if the Court,
exercising power under Section 34 of the Act of 1996 has acted
within its limits as prescribed thereunder or has exceeded or
failed to exercise the powers. The appellate Court has no
authority of law to consider the matter in dispute before the
Arbitral Tribunal on merits so as to find out as to whether the
decision of the Arbitral Tribunal is right or wrong upon
reappraisal of the evidences as if it were sitting in an ordinary
Court of Appeal.
48. Sepco Electricity Power Construction Corporation
(supra) has held that, the scope under Section 37 of the Act of
1996 is inherently limited and narrower. It is governed by the
mandate of parameters under Section 34 (2) of the Act of 1996. It
has also held that, while the initial probe is initiated during a
recourse under Section 34 of the Act of 1996, and if the Section
22
34 Court affirms the award, a Court exercising the mandate of
Section 37 of the Act of 1996 ought to employ caution and
reluctance to alter the concurrent findings.
49. Reliance Infrastructure Ltd (Supra) has held that, a Court
exercising power under Section 34 of the Act of 1996 is not
expected to act as an appellate Court and reappreciate the
evidence. Scope of interference would be limited to ground
provided under Section 34 of the Act. Interference under Section
37 of the Act of 1996 cannot travel beyond the restrictions laid
down under Section 34 of the Act of 1996 i.e. the Court cannot
undertake an independent assessment of the merits of the award
and must only ascertain that the exercise of powers under
Section 34 has not exceeded the scope of such provision.
50. OPG Power Generation Private Ltd (supra) has explained,
Explanation 2 to Section 34(2)(b)(ii) of the Act of 1996. It has held
that, to bring the contravention with the fundamental policy of
Indian law, into play, 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.
As by way of illustration, it has stated that violation of the
principles of natural justice, disregarding orders of superior
23
courts in India or the binding effect of the judgment of a superior
court and violating laws of India linked to public good or public
interest, are to be considered contravention of the fundamental
policy of Indian law. However, while assessing any contravention
of the fundamental policy of Indian law, extent of judicial scrutiny
must not exceed the limits as set out in Explanation 2 to Section
34(2)(b)(ii).
51. OPG Power Generation Private Ltd (supra) has explained
what would be construed as patent illegality appearing on the
face of the award in terms of Section 34(2-A) of the Act of 1996. It
has noticed various authorities on the subject. It has quoted
paragraph 39 from 2024 Volume 6 Supreme Court Cases 357
(Delhi Metro Rail Corporation Limited vs. Delhi Airport
Metro Express Private Limited).
52. A Coordinate Bench in Ashiana (Supra) has noticed
another Coordinate Bench on the issue of scope and ambit of
Section 34 of the Act of 1996.
53. Ssangyong Engineering & Construction Company
Limited (supra) has held that, non consideration of vital evidence
in the reasoning of the Arbitral Tribunal vitiates the award due to
perversity i.e patent illegality appearing on the face of the award.
24
54. Associate Builders (Supra) has held that, binding effect of
the judgment of a superior court being disregarded would be
violative of the fundamental policies of Indian law within the
meaning of Section 34 of the Act of 1996.
55. South East Asia Marine Engineer and Constructions
Limited (supra) has held that, if the interpretation of the
contract by the Arbitral Tribunal is perverse and not a possible
interpretation, award passed is liable to be set aside.
56. Shree Ganesh Petroleum (Supra) has held that, an award
ignoring the terms of the contract would not be in public interest
after noticing Associate Builders (Supra).
57. The scheme of the Act of 1996 requires minimal intervention
of a Court in arbitration proceeding including the Arbitral Award.
The awards passed by the Arbitral Tribunal are not to be
interfered with alone set aside on any trivial ground. Award
passed by the Arbitral Tribunal are not required to be scrutinised
by the Court under Section 34 of the Act of 1996 as a Court of
appeal, reappreciate the evidence and substitute its finding,
where, two views are possible. However, an award passed by a
Arbitral Tribunal under provision of the Act of 1996 is not
immune from challenge.
25
58. Section 37 of the Act of 1996 does not required the Court to
reapprise the subject matter of the lis as a regular appeal Court,
substitute its findings with that of the Section 34 Court or the
award on a reappreciation of the evidence. What it mandates,
however, is to evaluate the decision of the Section 34 Court in
order to assess whether or not such Court acted within the
parameters of Section 34 of the Act of 1996 or not.
59. Scope of interference under Section 37 of the Act of 1996 is
limited to the grounds provided under Section 34 of the Act of
1996 and that too, to assess as to whether, the recourse under
Section 34 of the Act of 1996 was correct or not. While scope of
interference with an arbitral award is narrow under Section 34 of
the Act of 1996 it is narrower under Section 37 thereof.
60. Under Section 34 of the Act of 1996, amongst other
grounds, an award can be set aside when there is patent illegality
appearing on the face of the award and when, the award is in
contravention of the fundamental policy of India. An arbitral
award can be successfully challenged if it is established that it
was passed in violation of the principles of natural justice, or is in
disregard to orders of superior courts in India or the binding
effect of the judgment of a superior court or violates law of India
26
linked to public good or public interest, on the ground that it
contravenes the fundamental policy of Indian law.
61. An award can be said to be vitiated by reason of patent
illegality, if the decision of the arbitrator is 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 ignorance
of vital evidence would also attract the ground of patent illegality.
An award without reasons would suffer from patent illegality. An
award without reason or a decision on a subject not referred to
arbitration would also attract the ground of patent illegality.
62. A plausible view taken by an arbitrator, a construction of
contract which can be had on the basis of the materials placed
before the Arbitral Tribunal, erroneous application of law or
wrong appreciation of evidence are not grounds to set aside an
award under Section 34 of the Act of 1996.
63. In accordance with the remit under Section 37 of the Act of
1996, we have to evaluate as to whether or not, the impugned
judgment and order under Section 34 of the Act of 1996, falls foul
of the parameters of Section 34.
27
64. By the impugned judgment and order, learned Single Judge
has, set aside the award to the extent of claim (iii) to the tune of
Rs. 127,12,64,892/- towards future commitment charges. The
learned Single Judge has also modified the award to the extent of
counter claim no. (ii) inasmuch as the interest payable on the
mobilization advanced from March, 2017 till the date of the award
is to be calculated at the rate of 14.50 % per annum instead of
9% per annum. Save as aforesaid learned Single Judge has
refused to interfere with award under any other score.
65. Before the Learned Single Judge, the parties had raised the
issues of future commitment charges and reductions of interest.
Both such issues concerned interpretation of the contract.
Interpretation of the contract is within the domain of the
arbitrator. A plausible interpretation of the subject by the
arbitrator is not open to interference by a Court under Sections
34 or 37 of the Act of 1996. However, if the award is based on no
evidence or passed ignoring the terms of the contract or the
interpretation of the terms of the contract is perverse, then the
award is to be set aside. Care and caution needs to be exercised
if the Court decides to interfere with the award. If the award is
28
severable then such portions of the award which requires
interference should be altered leaving the balance.
66. Learned Single Judge has taken clause 1.11 of the contract
which permits both the parties to withdraw from the contract
and Annexure III thereof into consideration for the purpose of
future commitment charges has noticed that, clause 1.11 of the
contract subjects such exit to the conditions stipulated in
Annexure-III of the Contract and that Annexure III provides two
separate situations, where, the parties to the contract choose to
exit. Learned Single Judge has considered whether the
termination was valid or not.
67. As has been noticed by the learned Single Judge, the
respondent in the arbitration choose to exit the contract.
Therefore, learned Single Judge has rightly held that, clause 2 of
Annexure III applied which provided that, if the claimant agreed
to retain the manufacturing facility, claimant will have to return
the balance mobilization advance along with any pending interest
within one month from the end of the notice period.
68. Learned Single Judge has noticed that, although, the
contract prescribed an exit notice of six months, such notice was
not issued. However, the respondent had proceeded on the
29
premise that the communication dated March 7, 2017 asking the
claimant to stop production was a termination notice.
69. Learned Single Judge, has held that, although a termination
notice of six months was not given, nonetheless, the conduct of
the parties have established that, the parties treated the contract
to be terminated. In such factual matrix, the learned Single Judge
has held that, the termination of the contract therefore, cannot be
said to be invalid to such extent.
70. Learned Single Judge has applied the ratio of Amritsar Gas
(Supra) in arriving at the decision that, the future commitment
charges should be limited to six months. The learned Single
Judge has taken March, 2017 being the date when, production
was directed to be stopped, as the date of commencement of the
six months’ notice period and hence, held that, future
commitment charges as awarded by the award was patently
illegal.
71. We have to arrive at a finding that, the interpretation given
by the Arbitral Tribunal in the award with regard to the
termination, is a plausible explanation and therefore, does not
call for any interference under Section 34 of the Act of 1996,
30
since, the learned Single Judge has interfered with such portion
of the award.
72. The agreement between the parties contains a lock in period
of ten years extendable for another six years on mutual
agreement as has been stipulated in Clause 1.10(A). It also has
an exit clause at Clause 1.11. Clause 1.11 being the exit clause
has provided that whichever party withdraws from its respective
contractual agreement under the agreement within the lock in
period, such party shall fully indemnify the other as per the
consideration set out in Annexure III. Annexure III of the
agreement has provided for the eventualities of either of the
parties exiting the agreement. It has provided for situations
where, either the claimant or the respondent had decided to exit
the agreement. Parties had therefore contemplated and provided
for exit from the agreement.
73. Amritsar Gas Service and Others (supra) has considered
a distributorship agreement for sale of Liquidified Petroleum Gas
which was revoked by Indian Oil Corporation. Such
distributorship agreement had provisions for termination. In the
facts of that case, Supreme Court had modified the award to
31
grant relief for compensation of loss of the earning for the period
of the notice and not the restoration of the distributorship.
74. The various provisions of the agreement relating to
termination has to be considered in the given facts and
circumstances of each case in order to evaluate the quantum of
compensation that may be granted to a party who has suffered
the breach. In the facts and circumstances of the present case,
learned Single Judge has rightly modified such portion of the
award.
75. Arbitral Tribunal has proceeded on the basis that, there was
no termination notice. Therefore, Arbitral Tribunal, proceeded to
grant future commitment charges for ten years from the date of
commencement of production.
76. It is trite law that, Arbitral Tribunal cannot rewrite the
contract between the parties. Contract between the parties
prescribed payment of commitment charges in the event of an
exit.
77. Interpretation given by the Arbitral Tribunal with regard to
the commitment charges, in respect of claim (iii) is not plausible.
Arbitral Tribunal had taken the date of the commencement of
production of the three plants and 10 years therefrom to direct
32
payment of commitment charges. Arbitral Tribunal had
overlooked the fact that, the payment of commitment charges was
under the contract limited to ten years from the date of the
contract. Arbitral Tribunal had therefore erred in taking a
different date for the purpose of calculating 10 years for the
payment of commitment charges.
78. Arbitral Tribunal had failed to take into consideration the
orders passed under Section 17 of the Act of 1996. Stoppage of
production as communicated by the email dated March 7, 2017
has to be read and understood in the context of the conduct of
the parties subsequent thereto. Neither the respondent had asked
the claimant nor did the claimant resume production subsequent
to March 7, 2017. This has established that the contract stood
terminated on March 7, 2017. Claimant had obtained interim
order from the Arbitral Tribunal under Section 17 of the Act of
1996 relieving the parties.
79. Therefore, for all practical purposes, parties had acted on
the basis that, respondent had exited the contract with effect
from March 7, 2017. Any other interpretation is not a plausible
one.
33
80. With regard to the rate of interest, Arbitral Tribunal after
holding that, the claimant was liable to return the mobilization
advance with interest at the rate of 14.50 % on reducing balance
on principal, ultimately directed refund with interest at the rate of
9%.
81. Arbitral Tribunal had acted beyond the express terms of the
contract in reducing the rate of interests. It is not a case that no
rate of interest was prescribed under the contract.
82. Learned Single Judge has therefore rightly held that, the
Arbitral Tribunal acted contrary to the contract in reducing the
rate of interest.
83. We have not found that the exercise of jurisdiction by the
learned Single Judge under Section 34 of the Act of 1996, stands
vitiated.
84. In such circumstances, AO-COM/6/2025 and AO-
COM/7/2025 are dismissed without any order as to costs.
[DEBANGSU BASAK, J.]
85. I agree.
[MD. SHABBAR RASHIDI, J.]
