Delhi High Court
National Technical Research … vs M/S Corporate Infotech Private Limited on 1 April, 2026
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 05.02.2026
Judgment pronounced on: 01.04.2026
+ O.M.P. (COMM) 378/2024, I.A. 38340/2024 (Stay) & I.A.
10172/2025 (Dir.)
NATIONAL TECHNICAL RESEARCH ORGANISATION
.....Petitioner
Through: Mr. Vikramjit Banerjee, ASG
with Ms. Arunima Dwivedi
CGSC, Ms. Pinki Pawar GP,
Ms. Himanshi Singh and Mr.
Abhishek, Advocates, Mr. Amit
Kumar (NTRO) and Mr.
Bhaskhar Ghosh (NTRO).
versus
M/S CORPORATE INFOTECH PRIVATE LIMITED
.....Respondent
Through: Mr. Amit Sibal, Senior
Advocate along with Mr.
Bharat Arora and Mr. Gourav
Arora, Advocates.
CORAM:
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
JUDGMENT
HARISH VAIDYANATHAN SHANKAR, J.
1. This Petition has been filed under Section 34 of the Arbitration
and Conciliation Act, 19961, assailing the Arbitral Award dated
02.04.20242 passed by the learned Sole Arbitrator in the arbitration
proceedings titled as “M/S Corporate Infotech Pvt. Ltd. v. National
Technical Research Organisation“. By the Impugned Award, the
1
Act
2
Impugned Award
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learned Arbitral Tribunal3 substantially allowed the claims of the
Respondent herein.
BRIEF FACTS:
2. The Petitioner, National Technical Research Organisation4,
floated a limited tender enquiry bearing No. NTRO/CPC/07/2017
dated 09.11.2017 for the supply, installation and integration of a
network solution for the establishment of a secure intranet
infrastructure at various locations across India.
3. Pursuant to the tender process, a contract dated 10.08.20185
was executed between NTRO and the Respondent, for the supply,
installation and integration of a secure and reliable network
infrastructure across twenty-three (23) locations, including the
establishment of a wide area network and local area networks,
together with associated training, testing and support obligations.
4. The said contract also provides for the payment terms between
the parties, which are to be made in different stages, and it also
contemplated the provision of a comprehensive warranty and
incorporated clauses relating to performance milestones, testing
procedures, liquidated damages, and performance security.
5. Under the contractual framework, the Respondent was required
to furnish a Performance Bank Guarantee6 equivalent to ten (10)
per cent of the contract value within thirty (30) days of signing the
contract, valid up to sixty (60) days beyond the completion of the
warranty period and to complete the project within the stipulated3
Tribunal
4
NTRO
5
Contract
6
PBG
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timeline of twenty-eight (28) weeks, i.e. 20.02.2019. The contract
further envisaged completion of Acceptance Testing procedures7
and On-Site Acceptance Tests8, upon successful completion of which
the system would be treated as fully commissioned, and the warranty
obligations would commence.
6. The Respondent furnished the PBG to the Petitioner after the
execution of the contract, leading to a delay of eighteen (18) days.
Besides, during the course of execution of the contract, the
Respondent completed the supply of equipment with a delay of
twenty-four (24) weeks, and thereby, the Petitioner, as per the
contractual terms, released seventy (70) per cent of the payment to the
Respondent.
7. It is not in dispute that, in the backdrop of circumstances
prevailing during the COVID-19 pandemic, the payment terms inter
se the parties were amended, whereby the remaining 30% of the
contract price was bifurcated into two components, namely 20% and
10%, to be released upon satisfaction of the Respondent. Pursuant
thereto, the amount constituting twenty (20) per cent was released to
the Respondent, and the only amount remaining payable to the
Respondent was ten (10) per cent.
8. The parties thereafter engaged in the process of finalisation of
ATPs, following which phases of OSAT were conducted. During this
period, issues arose between the parties regarding the progress of
testing, operational readiness of the system, attribution of delays, and
compliance with contractual obligations, including renewal of licences
7
ATP
8
OSAT
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and provision of support services, with each party attributing default
and delay to the other.
9. Subsequently, the Petitioner, vide Legal Notice dated
08.07.2022, addressed to the Respondent, crystallised the disputes
inter alia in relation to: (i) attribution of delay in completion of the
project and testing phases; (ii) the entitlement of NTRO to levy
Liquidated Damages9 (iii) the commencement of the warranty
period; (iv) the release and continued validity of the PBG; and (v)
entitlement to the balance payments. In this backdrop, the Petitioner,
in accordance with the contractual terms, withheld the ten (10) per
cent balance payment, inter alia, on account of LD and the
subsistence of the PBG.
10. The Respondent, in its reply dated 20.07.2022 to the said
notice, called upon the Petitioner to remit the remaining ten (10) per
cent of the contract price allegedly due and payable, and further
sought return of the PBG.
11. Aggrieved thereby, the Respondent approached this Court by
way of preferring a petition, bearing OMP.(I)(COMM.) 228/2022,
under Section 9 of the Act, wherein this Court vide its Order dated
27.07.2022, granted interim protection in favour of the Respondent
herein, subject to extension of the PBG for a further six months.
12. Thereafter, vide Order dated 24.11.2022, this Court directed
that the said Section 9 petition be treated as an application under
Section 17 of the Act and proceeded to appoint a learned Sole
Arbitrator, Justice (Retd.) R.K. Gauba, to adjudicate the disputes inter
se the parties.
9
LD
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13. Pursuant to the constitution of the learned Tribunal, both parties
filed their respective pleadings, including the Statement of Claim,
Statement of Defence, and documents in support thereof. Evidence
was led by the Respondent, whereas the Petitioner chose not to lead
any evidence.
14. Vide Award dated 02.04.2024, the learned Tribunal adjudicated
the disputes inter se the parties, including claims pertaining to
payments, levy of LD, commencement of the warranty period, and
other contractual obligations.
15. Aggrieved by the said Award, the Petitioner has preferred the
present Petition under Section 34 of the Act, assailing the Impugned
Award on various grounds.
CONTENTIONS ON BEHALF OF THE PETITIONER/ NTRO:
16. Learned Additional Solicitor General10 appearing for the
Petitioner would submit that the Impugned Award is liable to be set
aside as it suffers from patent illegality and is contrary to the terms of
the contract as well as the evidence on record.
17. It would be contended that the learned Tribunal failed to
properly appreciate the contractual framework governing timelines,
testing requirements and consequences of delay, and has returned
findings which are contrary to the material placed before it.
18. Learned ASG appearing for the Petitioner would further submit
that the learned Tribunal erred in holding that the delay in execution
of the project was attributable to both parties. As per the learned ASG,
the delay was occasioned primarily on account of the Respondent’s
10
ASG
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failure to supply equipment, complete installation, and successfully
demonstrate the system in accordance with contractual requirements.
19. Learned ASG appearing for the Petitioner would contend that
the learned Tribunal has failed to appreciate the admission of CW-1,
who unequivocally stated that media links could not be utilised
without the supply of routers. On this basis, it would be argued that
since routers had not been delivered at the relevant time, the absence
of media connectivity cannot be treated as a contributing factor to
delay, and consequently, the delay could not have been attributed to
both parties.
20. According to the learned ASG, this admission establishes that
commissioning was impossible in the absence of routers, and
therefore, the entire delay ought to have been fastened upon the
Claimant alone, rendering the learned Tribunal’s finding of shared
responsibility perverse and contrary to the evidence on record.
21. It is further contended that the learned Tribunal incorrectly
determined the date of completion of OSAT and consequently erred in
fixing the commencement of the warranty period. According to the
learned ASG, successful completion of OSAT never occurred in terms
of the contract, and therefore, the warranty could not have been
treated as having commenced.
22. Learned ASG appearing for the Petitioner would further submit
that the learned Tribunal failed to properly appreciate the contractual
framework, which expressly entitled NTRO to levy LD on account of
delay and to retain the PBG as security for due performance. It would
be contended that the rejection of the Petitioner’s claim for LD is
contrary to the express terms of the contract and amounts to an
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erroneous interpretation thereof. In support of this submission,
reliance is placed upon the decision of the Hon’ble Supreme Court in
Consolidated Construction Consortium Limited v. Software
Technology Parks of India11 to contend that contractual stipulations
relating to LD must ordinarily be given effect to in accordance with
their terms.
23. Learned ASG appearing for the Petitioner would further
contend that the learned Tribunal has erred in its findings relating to
the PBG. It would be submitted that the learned Tribunal has wrongly
treated the issue of the PBG as consequential to its findings on LD
and attribution of delay. According to the learned ASG, the
contractual stipulation governing the PBG operates independently and
entitles NTRO to retain or invoke the same as security for due
performance of contractual obligations.
24. Learned ASG appearing for the Petitioner would also submit
that the learned Tribunal overlooked material evidence regarding non-
renewal of licences and alleged deficiencies in performance, which
demonstrated continued non-compliance by the Respondent of its
contractual obligations.
25. It would further be contended that the learned Tribunal erred in
directing the release of the PBG and in allowing claims for payment,
and that the conclusions reached amount to rewriting the contract and
ignoring binding contractual stipulations.
26. Learned ASG appearing for the Petitioner would further
contend that the learned Tribunal has failed to properly appreciate the
admitted delay in completion of the project. Even if, arguendo, the
11
(2025) 7 SCC 757
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date of 17.03.2020 is accepted as the relevant completion date, the
delay of several weeks beyond the stipulated contractual timeline
renders the Respondent liable for the levy of LD in terms of the
contract.
27. Learned ASG appearing for the Petitioner would submit that the
learned Tribunal, despite noting the delay, has erroneously declined to
permit levy of LD and has instead proceeded to award the balance
consideration amounting to Rs. 7,14,61,511/- as due and payable as on
17.03.2020. According to the learned ASG, such a conclusion is
inconsistent with the contractual framework governing delay and LD
and overlooks the consequence of breach expressly agreed between
the parties.
28. It would be contended that once a delay beyond the contractual
completion period stood established, the entitlement of the Petitioner
to impose LD arose automatically under the contract, and the learned
Tribunal’s refusal to give effect to the same amounts to an erroneous
interpretation of the contract and non-consideration of material facts
on record.
29. Learned ASG appearing for the Petitioner additionally
questions the award of interest as being excessive and unwarranted in
the facts of the case and places reliance upon the ruling of the Hon’ble
Apex Court in ONGC v. Saw Pipes12, to contend that the Impugned
Award is patently illegal and contrary to the terms of the contract.
30. On the aforesaid grounds, it would be urged by the learned
ASG appearing for the Petitioner that the Impugned Award warrants
interference under Section 34 of the Act.
12
(2003) 5 SCC 705
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CONTENTIONS ON BEHALF OF THE RESPONDENT:
31. Per contra, learned senior counsel appearing for the
Respondent would submit that the present petition is nothing but an
attempt to re-agitate factual issues and to seek a re-appreciation of
evidence, which is impermissible in proceedings under Section 34 of
the Act.
32. It would be contended that the learned Tribunal has undertaken
a detailed examination of the contractual provisions, correspondence
exchanged between the parties, evidence led during the proceedings,
and the conduct of the parties, and has returned a reasoned Award
which does not warrant interference.
33. Learned senior counsel appearing for the Respondent would
submit that issues relating to attribution of delay, progress of testing
phases, operational readiness of the system and interpretation of
contractual provisions were all examined by the learned Tribunal,
which concluded that responsibility for delay could not be attributed
exclusively to one party.
34. It would further be contended that the learned Tribunal rightly
considered the operationalisation of the system, including the handing
over of credentials and conduct of testing, and arrived at a plausible
conclusion regarding completion of contractual milestones and
commencement of warranty obligations.
35. It would also be submitted that the Petitioner did not lead any
evidence before the learned Tribunal. Despite having raised serious
allegations regarding delay, non-compliance, and deficiencies in
performance, the Petitioner chose not to examine any witness or
adduce independent oral evidence in support of its assertions. In such
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circumstances, the learned Tribunal was constrained to decide the
issues on the basis of the pleadings, documentary record, and the
evidence led by the Respondent.
36. It would be submitted that the Petitioner, having elected not to
substantiate its case by leading evidence, cannot now assail the factual
findings of the learned Tribunal or seek a re-appreciation of the
evidentiary record under the limited jurisdiction of Section 34 of the
Act.
37. Learned senior counsel appearing for the Respondent would
submit that the learned Tribunal rightly rejected the Petitioner’s claim
for levy of liquidated damages, having found that such levy was not
justified in the factual matrix of the case, particularly in view of the
shared nature of delays. It would be contended that the learned
Tribunal correctly applied the settled principles governing liquidated
damages and reasonable compensation.
38. In this regard, reliance would be placed upon the judgments of
the Hon’ble Supreme Court in Kailash Nath Associates v. Delhi
Development Authority & Anr13 and the decision of this Court in
Vishal Engineers Builders v. Indian Oil Corporation Limited14 to
submit that even where a contract provides for liquidated damages,
compensation must be reasonable and cannot be imposed
mechanically in the absence of established loss or breach exclusively
attributable to the contractor.
39. It would be argued that the findings relating to the PBG and
payment obligations are based on an interpretation of the contract and
13
(2015) 4 SCC 136
14
(2011) SCC Online Del 5124
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appreciation of evidence and fall squarely within the jurisdiction of
the learned Tribunal.
40. Learned senior counsel appearing for the Respondent would
further submit that in prayer clauses (c), (d), (e) and (g) of the present
Petition, the Petitioner seeks, inter alia, imposition of liquidated
damages, forfeiture of the PBG, and other consequential reliefs.
However, no such independent counter-claims or substantive reliefs
were sought by the Petitioner before the learned Arbitrator, and
therefore, the present Petition is liable to be dismissed.
41. Learned senior counsel appearing for the Respondent would
further submit that the Impugned Award does not suffer from any
perversity, patent illegality or violation of public policy, and that the
challenge is in substance an appeal on merits, which is not
maintainable.
42. On these grounds, learned senior counsel appearing for the
Respondent would pray for dismissal of the petition.
ANALYSIS:
43. This Court has heard the learned counsel appearing on behalf
of the parties at length and, with their able assistance, carefully
perused the paper-book and other material documents placed on
record, including the record of the learned Tribunal, as well as the
written submissions filed by the respective parties.
44. 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 Act. The contours of judicial
intervention in such proceedings have been authoritatively delineated
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and settled by a consistent and evolving line of precedents of the
Hon’ble Supreme Court.
45. 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.15, while dealing with the grounds
of conflict with the public policy of India and perversity, grounds
which have also been urged in the present case, made certain
pertinent observations, which are reproduced hereunder:
“Relevant legal principles governing a challenge to an arbitral
award
30. Before we delve into the issue/sub-issues culled out above, it
would be useful to have a look at the relevant legal principles
governing a challenge to an arbitral award. Recourse to a court
against an arbitral award may be made through an application for
setting aside such award in accordance with sub-sections (2), (2-A)
and (3) of Section 34 of the 1996 Act. Sub-section (2) of Section
34 has two clauses, (a) and (b). Clause (a) has five sub-clauses
which are not relevant to the issues raised before us. Insofar as
clause (b) 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 view15
(2025) 2 SCC 417
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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
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
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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
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
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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
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
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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
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.
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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
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:
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(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 Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019)
15 SCC 131, which dealt with the legal position post the 2015
Amendment in Section 34 of the 1996 Act, it was observed that a
decision which is perverse, while no longer being a ground for
challenge under “public policy of India”, would certainly amount
to a patent illegality appearing on the face of the award. It was
pointed out that an award based on no evidence, or which ignores
vital evidence, would be perverse and thus patently illegal. It was
also observed that a finding based on documents taken behind the
back of the parties by the arbitrator would also qualify as a
decision based on no evidence inasmuch as such decision is not
based on evidence led by the parties, and therefore, would also
have to be characterised as perverse [See Ssangyong Engg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131].
72. The tests laid down in Associate Builders v. DDA, (2015) 3
SCC 49 to determine perversity were followed in Ssangyong
Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 and
later approved by a three-Judge Bench of this Court in Patel Engg.
Ltd. v. North Eastern Electric Power Corpn. Ltd., (2020) 7 SCC
167.
73. In a recent three-Judge Bench decision of this Court in DMRC
Ltd. v. Delhi Airport Metro Express (P) Ltd., (2024) 6 SCC 357,
the ground of patent illegality/perversity was delineated in the
following terms: (SCC p. 376, para 39)
“39. In essence, the ground of patent illegality is available for
setting aside a domestic award, if the decision of the arbitrator is
found to be perverse, or so irrational that no reasonable person
would have arrived at it; or the construction of the contract is such
that no fair or reasonable person would take; or, that the view of
the arbitrator is not even a possible view. A finding based on no
evidence at all or an award which ignores vital evidence in arriving
at its decision would be perverse and liable to be set aside under
the head of “patent illegality”. An award without reasons would
suffer from patent illegality. The arbitrator commits a patent
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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.
*****
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 interfere [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].
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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 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)
46. A careful and comprehensive perusal of the Impugned Award
demonstrates that the learned Arbitrator has examined the pleadings,
documentary material, correspondence exchanged between the parties,
and the evidence led in support of their respective claims and
assertions. The Impugned Award reflects due consideration of the
relevant facts and surrounding circumstances germane to the disputes.
The Petitioner has assailed the Impugned Award primarily on the
grounds that the learned Tribunal (i) erred in attributing delay to both
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parties, (ii) wrongly rejected the levy of LD, (iii) incorrectly
determined the completion of OSAT and commencement of the
warranty period, (iv) unjustifiably directed release of the PBG, and (v)
incorrectly determined the entitlement to the balance payments. In
view of the aforesaid, the grounds of challenge are addressed
hereunder:
(i) DELAY:
47. The principal grievance of the Petitioner pertains to the
attribution of delay in performance of the contract by the Respondent.
It has been contended that the delay in execution and testing phases
was solely attributable to the Respondent and that the learned Tribunal
erred in holding that both parties contributed to the delay.
48. A perusal of the Award, however, demonstrates that the learned
Tribunal undertook a detailed examination of the contractual
milestones, the stipulated completion period of twenty-eight (28)
weeks, the admitted delay in supply of equipment, the sequence of
ATP finalisation, the conduct of OSAT in phases, and the
correspondence exchanged between the parties.
49. The learned Tribunal has recorded specific findings that the
delay in operationalisation could not be attributed exclusively to one
party. It has considered the issues relating to the availability of sites,
provision of bulk encryption units and media connectivity, vetting of
ATP documentation, and compilation of test results. On the basis of
the material before it, the learned Tribunal concluded that both parties
had contributed, in varying degrees, to the delay in completion of
testing. The decision of the learned Tribunal pertaining to the delay in
the Impugned Award is reproduced herein below:
“On Delay
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145. It is admitted case of the parties that there has been delay in
“Delivery, Installation and Commissioning of the systems”
stipulated “to be completed within 28 weeks from the date of
signing of Contract (10,08.2018)”, as per Clause 4 of Part-I (Ex. C-
I) which period would have ended on 08.02.2019. Each party
accuses the other of being responsible for delay while defending
itself with assertion that it did not contribute to delay in any
manner.
146. Indisputably, the supply of equipment, was completed by
CIPL on 09.08.2019, entailing a delay of more than 26 weeks
beyond the scheduled date of completion of the project, which was
20.02.2019. The sequence admittedly was supply of more than
85% of the equipment before 20.02.2019, equipment under 7-line
items being pending at that stage, and out of them 4-line items
having been delivered on 30.04.2019, 1-item on 03.06.2019 and
the last 2 items delivered on 08.08.2019, copies of related delivery
challans/invoices (Ex. R-2, Colly.) being not in dispute.
147. It is admitted that vide letter nos.
CIPL/PMO/NTRO_STTC/19 dated 25.10.2018 (Ex. C-9) and
CIPL/PMO/NTRO_SITC/26 dated 31.10.2018 (Ex. C-10) along
with location wise list of engineers, the Claimant sought
permission for all the site engineers to access the sites but since the
Respondent’s outstation sites were not ready for laying the LAN
Cabling Infra, the work could not commence. The LAN Diagram
for all the outstation sites were admittedly submitted vide CIPL
letter No.CIPL/PMO/NTRO-SITC/64 dated 30.11.2018 (Ex. C-
11). It is not in dispute that the Claimant vide its letter No.
CIPL/PMO/NTRO_SITC/27 dated 31.10.2018 (Ex. C-13) stated
that infra at the MDC was not ready. There was no 3-phase power
supply in the UPS room No. 301 at MDC and 300 Meter 3 Phase
power cable was provided by M/s CIPL as the UPS installation
work was getting delayed after the request from NTRO vide Letter
No. XXXIIII68/05/2018-SMNY-2545 dated 29.10.2018 (Ex. C-
14). Further, the NTRO officials were informed by Claimant vide
letter No CIPL/PMO/NTRO_SITC/331 dated 05.03.2019 (Ex. C-
12) about completion of Lah/UTP & OFC Cabling at all the
outstation sites. It is also not in dispute that the Respondent, vide
its letter dated. 07.06.2019 (Ex. C-27), had acknowledged that
MPLS Links for the project were being provided by M/s Railtel
and delivery was under process and, further, that, to reduce the
implementation delay, the Claimant might start configuration of
network equipment as well as end terminal desktops at remote sites
through their on-site reps.
148. There is no denial that the Respondent was expected under the
contract to provide the media links and sites to the claimant
immediately on the award of the contract in the year 2018, it is also
admitted that the Claimant had addressed Letters dated 14.06:2019
(Ex. C-28) and 12.07.2019 (Ex. C-29) requesting the Respondent,
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inter: alia, for media-connectivity and informing that non
availability of the same (media-connectivity had caused an
unnecessary and substantial delay in the project execution and loss
to the Claimant. It is not denied that on 14:11.2019 (Ex. C-30), the
Respondent wrote on the issue of non-availability of sites and
media connectivity asking the Claimant to use the physical media
connectivity of existing functional networks, albeit only at 7-8
locations. Admittedly, the Claimant had to follow up by other
letters (Ex. C-46 to C-49) lastly by email dated 09.12.2022 (Ex. C-
50). Indisputably, three sites had not been provided by the
respondent to the claimant for connectivity ie. even after more than
4 years from the date of award of contract.
149. There is no clear or cogent answer to the plea of the Claimant
of lack of cooperation from the Respondent illustrated by no
results having come forth in response to letter dated 24.05.2019,
requesting the Respondent to comply with their obligations and
provide media links at all the sites on an urgent basis, along with
other network requirements i.e. cooling, earthing and input power
supply to power on the devices, for progress of the project and to
establish the network connectivity, Indeed, the letter dated
07.06.2019 (Ex. C-27) of the Respondent, on the subject of MPLS
Links for project HSTN to be provided by M/s Railtel, calling
upon the Claimant to start configuration of network equipment as
well as end terminal desktops at remote sites through their on-site
reps, is reflective of the Respondent having contributed to the
delay in as much as under Clause 1 of Enclosure 1B of the
Contract (Ex. C-1), it was obliged to provide media-connectivity so
essential for the installation and commissioning. The
communications dated 14.06.2019 (Ex. C-28) and 12.07.2019 (Ex.
C-29), do demonstrate that work at the remote sites was hampered
due to non-provisioning of Media Links and bulk encryption units
by the Respondent. The solution suggested by letter 14.11.2019
(Ex. C-30), for use of the physical media connectivity of existing
functional networks, albeit only at 7-8 locations, was nothing but a
stop gap or ad-hoc one.
150. It is clear from the Contract (Ex. C-1) that the Claimant was
expected to arrange imports of the equipment from various
international vendors, whose manufacturing plants were out-side
China. It is the case of the Claimants that the said condition of non-
China products had caused slight delay which was not objected to
and instead the Claimant was allowed to proceed with installation
and commissioning of the equipment as per the Contract. It is also
the plea of Claimant that late delivery of last two items DX -80
VoIP, delivered on 08.08.2019, was due to the force Majeure
events and & other reasons, covered by para 7 in Part III of the
Contract (Ex. C-1), and did not have any impact on commissioning
of Network. In this context, reference is made to (i) Notification of
Govt, of India (“Gol”), Ministry of Finance (“MoF”) regarding
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enhancement in custom tariff vide notification no 6); (ii) Cisco
Distributors Letter dated 19.03.2019 (Ex. C-7) clearly stated global
material constraints as the material had to be of the latest
manufacture for which reason Cisco started manufacturing
components in different factories across globe thus getting delayed
for adherence of the contract clause; (iii) BIS Certification made
applicable after award of contract resulted in delayed delivery of
Cisco products like IP. Phone which required BIS certification got
delayed by BIS department and, thus, delivery was delayed for 16-
18 weeks and finally effected on 09.08.2019; and (iv) Cisco letter
dated 01.04.2019 (Ex. C-8) to NTRO mentioned challenges in
delivering Cisco products due to global material constraints and
supply chain issues.
151. The argument of the Respondent that the Claimant was well
aware of the condition in the contract that imports of the equipment
be arranged, from various international vendors whose
manufacturing plants were out-side China has merit. This obliged
the Claimant to be in readiness in terms of its contractual
obligations to arrange items and services as per the technical
specifications and functional requirement given in the contract
within contracted timelines, ever since the evaluation stage of the
tender ie May 2018. The delay attributable to reasons such as
Notification dated 11.10.2018 (Ex. C-6) of MoF (GOI) regarding
enhancement in custom tariff, Cisco Distributors Letters dated
19.03.2019 (Ex. C-7) and 01.04.2019 (Ex. C-8) on the subjects of
global material constraints or BIS Certification made applicable
after award of contract to Cisco products like IP Phone can also not
be accepted as force majeure since these are not covered by the
clause. But, even if the same are treated as having contributed they
were not the sole cause of delay in commissioning, the end
objective. Thus, nothing tums on this part of the controversy for
the reason the contract was not merely for supply but also
installation and commissioning of the equipment.
152. The argument of the Respondent, founded on letter dated
07.06.2019 (Ex. C-2T) asking the Claimant to finish LAN side
infrastructure/Civil work and deployment and configuration of end
points at all sites, to the effect that there was delay on the part of
the Claimant in Configuration of Equipment and also LAN side
infrastructure and deployment of end points as per contract
requirement, such LAN side work having continued till July 2019
and End point deployment till Oct 2019 does not impress since
there were delays on its part as well primarily in making the sites
available and providing media connectivity and bulk encryption
units even as late as end of 2019.
153. On the foregoing facts, and in the circumstances, both parties
must share the blame for delay in meeting the time line specified as
the Delivery Period under the contract (Ex. C-1).”
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50. The petitioner’s contention that the learned Arbitrator ignored
the admission of the Respondent’s witness is wholly misconceived.
The statement of CW-1 that media links cannot be utilised without
routers is merely a technical acknowledgement of the functional
interdependence between connectivity infrastructure and routing
hardware; it does not establish that routers were the sole prerequisite
for commissioning nor that the Respondent had otherwise fulfilled its
own contractual obligations. The proposition is reciprocal in nature;
just as media links cannot function without routers, routers are equally
incapable of establishing a network in the absence of media
connectivity.
51. The evidence on record demonstrates that media links, bulk
encryption units, and complete site readiness were not made available
in accordance with contractual timelines. Commissioning was the
ultimate contractual objective, and it required simultaneous
availability of equipment as well as connectivity and infrastructure.
52. The learned Tribunal, upon a holistic appreciation of
correspondence and admissions on both sides, concluded that the
delay was attributable to both parties. The Petitioner’s argument is, in
substance, an attempt to isolate one answer in cross-examination and
invite a re-appreciation of evidence, which is impermissible within the
limited scope of interference under Section 34 of the Act.
(ii) REJECTION OF LIQUIDATED DAMAGES:
53. Insofar as the challenge to the rejection of LD is concerned, this
Court finds no infirmity in the reasoning adopted by the learned
Tribunal. The learned Tribunal has noted that the Petitioner did not
adduce evidence to establish actual loss suffered on account of the
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alleged delay, nor demonstrate that the stipulated amount was justified
in the factual context of the case.
54. The Impugned Award reflects that the learned Tribunal
considered the legal position governing LD, including the relevant
judicial precedents on the requirement of reasonable compensation
and the non-automatic nature of such clauses. Upon appreciation of
the contractual terms, the conduct of the parties, and the evidentiary
record, the learned Tribunal concluded that the levy of liquidated
damages was not justified in the circumstances.
55. The reliance placed upon Consolidated Construction
Consortium Limited (supra) by the Petitioner does not advance its
case. The said decision reiterates that contractual clauses must be
interpreted in accordance with their terms; however, it equally
recognises that the application of such clauses depends upon the
factual determination of breach and entitlement. In the present case,
the learned Tribunal’s interpretation of the clause and its conclusion
that unilateral levy was not justified is a plausible construction of the
contract based on an appreciation of the evidence.
56. The contention regarding the levy of LD is also intrinsically
linked to the finding on delay attribution. The contractual clause
relating to LD presupposes delay, attributable to the contractor. Once
the learned Tribunal, upon appreciation of evidence, has held that
responsibility for delay was shared and not exclusively attributable to
the Respondent, the rejection of unilateral levy of LD flows logically
from such a finding. Thus, the view taken by the learned Tribunal is
certainly a possible and plausible view and does not entail interference
from this Court in the exercise of the present jurisdiction.
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(iii) COMPLETION OF OSAT:
57. The Petitioner has further contended that successful completion
of OSAT never occurred in terms of the contract and, therefore, the
learned Tribunal erred in determining the commencement of the
warranty period.
58. The Impugned Award, however, reveals that the learned
Tribunal examined the phases of OSAT conducted, the operational
readiness of the system, the handing over of credentials, and the
conduct of parties subsequent to testing.
59. A reading of the Impugned Award further indicates that the
learned Tribunal has taken into consideration the sequence of events
relating to the handing over of sites and operationalisation of the
system. The learned Tribunal recorded that there were delays not only
in the execution by the Respondent but also on the part of the
Petitioner in making sites available and facilitating completion of
testing. The learned Tribunal further noted that the login credentials
were taken over by the Petitioner on 17.03.2020 and treated the OSAT
as having been completed on that date.
60. On that basis, the learned Tribunal determined that the warranty
period stood commenced from 17.03.2020 and consequently expired
on 16.03.2023. The computation of the warranty period thus flowed
from a factual determination of completion and operational acceptance
of the system. Such determination is rooted in an appreciation of
material on record and contractual interpretation. The relevant
portions of the Impugned Award dealing with completion of OSAT
and commencement of the warranty period are extracted herein below:
“On OSAT
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162. It is admitted position under the contract (Ex. C-1) that upon
successful completion of OSAT, the seller and buyer were to sign a
certificate of conformity. This certificate was not issued and the
grievance of the Claimant in this regard forms subject matter of the
reliefs sought. The dispute came to the fore with the Respondent
(buyer) issuing the notice dated 08.07.2022 (Ex. C-68), alleging
non-fulfillment of contractual terms and conditions invoking the
provisions mentioned in para 4, part-l of the contract stating, inter
alia, that the Claimant (seller) could not successfully conduct
OSAT, the Claimant having replied sending Demand Notice dated
20.07.2022 (Ex. C-69) seeking balance payment and return of
PBG.
163. As noted earlier, On-Site Acceptance Test (“OSAT) is one of
the important conditions of the contract, referred to in the preamble
and stipulated in terms as pre-requisite, along with completion of
training, for the discharge of contractual obligations of the
Claimant and having a bearing on the commencement of the three-
year free comprehensive onsite warranty with operational support
for the Respondent. As also already noted, in terms of the original
contract (Ex. C-1) the balance 30% of the contract value after
payment of 70% against successful delivery for complete system
Hardware, Software, related documents/ Certificate from OEM and
PBG) was stipulated to be paid – per Clause 4 (b) of Part III – on
“user’s certificate of successful completion of installation/
Integration, commissioning, Site Acceptance Test (OST) and onsite
training”. Admittedly, the above clause 4(b) post-amendment (Ex,
C-43), carried on 28.05.2020, split the balance 30% into two
tranches – one of 20% (on deployment of 70% of data terminals
and commencement of services at minimum eight locations duly
certified by the user) and the balance 10% still contingent on user’s
certificate of successful completion of installation/ integration,
commissioning Site Acceptance Test (OSAT) and onsite training”.
It is clear from the pleadings and the evidence that 90% of the
contract value has already been paid, the dispute being over the
balance 10%, it being the case of the Respondent that OSAT has
not been completed and so the amount has not become due.
164. Closely connected to the above is also the case of the
Respondent that the obligations of the Claimant towards three-year
free comprehensive onsite warranty with operational support for
the Respondent are yet to commence since that would occur only
when OSAT is completed. Per contra, it is the case of the Claimant
that the Respondent has abused its position to deny certificate of
completion of OSAT even after six rounds, all tests having been
successfully demonstrated, and redemonstrated, the process
adopted being non-transparent, dilatory and unilateral, the denial of
OSAT completion being not fair since the Claimant took control of
all equipment to the exclusion of the Claimant after handing over
of the log-in credentials on 17.03.2020, The Claimant relies upon,
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inter alla, letter dated 01.07.2022 (Ex C-70) to assert that it had
been informing the Respondent having successfully redemonstrated
all the points to the OSAT committee at all available locations, It is
contended that after completion of training before 07.10.2019, the
project was complete and the 3-ycar on-site warranty had
commenced from the said date i.e., 07.10.2019. It is pleaded that
owing to immense financial pressure, the amendment of contract
dated 28.05.2020 and consequent release of 20% payment was
accepted, and 10% contract value and PBG left to be claimed later,
the work of the Claimant being complete in all aspects.
165. The submission of the Claimant that OSAT was to be
conducted before the training (Part I Para 6 of Contract) cannot be
accepted since the Contract (Ex. C-1) does not specify that to be
the sequence of the two events. Further, the training of the
personnel has nothing to do with the successful testing of
functionality of the system, the latter being covered by OSAT, a
requisite step separate from training.
166. Under the contract (Ex. C-I), the OSAT was to be completed
within four, weeks of commissioning of the services (Clause 17 of
Part III). That the OSAT has been delayed is not in dispute. Since
there was delay in installation and commissioning, and there was
delay in ATP document being finalized, the delay in OSAT was a
natural consequence to follow.
167. Concededly, in terms of the procedure stipulated in para 17 of
Part III of the contract (Ex. C-1) an Independent committee was
required to undertake OSAT in accordance with the mutually
formulated ATP, initiated by the Claimant and vetted by the
Respondent, by verifying parameters and functionalities albeit in
the presence of representatives of the Seller (the Claimant). In the
context of letters (Ex. C-61 to Ex.
C-64) relied upon by the Claimant, the Respondent has, inter alia,
asserted that the OSAT team has 09 scientists, who had the
requisite expertise and domain knowledge to conduct the OSAT as
per the mutually agreed ATP document. The plea of the Claimant
that the OSAT conducting team members had no domain
experience is not supported by any evidence and, thus, need not be
given any credence.
168. The assertion of CW-I that there was no express provision in
the contract as to the period within which document for ATP was
to be submitted prior to offering OSAT cannot be accepted since
the time-line for OSAT was prescribed (within 4 weeks after
Installation and commissioning of the system”). At the same time,
however, it cannot be ignored that ATP was to be vetted and
accepted by the Respondent. This also took time. Admittedly, the
ATP document was submitted on 12.11.2019, after a request was
forwarded by the respondent vide letter dated 11.09.2019 (Ex.R-4),
with reference to para 17(b) of part-Ill of contract agreement
(Ex.C-1), Respondent having sought amendments of the ATP as
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per letter dated 02.12.2019 (Ex.C-90), reference being made to
letter dated 19.12.2019 (Ex.C-91) of the Claimant, the latter being
agreeable to discuss and include specific tests as desired by the
respondent. Concededly, the final vetted ATP document was
submitted by the claimant on 10.02.2020 (Ex. R-6) and approved
by the Respondent on 14.02.2020. In this chronology, neither side
can blame the other exclusively for delay in ATP document being
developed.
169. Would It be fair to blame one party or the other for delay in
initiation or timely completion of OSAT at the connected sites?
The answer is in the negative
170. The case of the Respondent that the Claimant had been
requested to first configure the central site, followed by single link
connectivity with two remote sites, before replicating the
configurations to other remote sites or further that the sites came
up, one after another, owing to sequencing and rotation of
manpower by CIPL is not substantiated by any evidence. There is
nothing presented to refute the case of the Claimant that the sites
were provided for connectivity in six (6) batches during the period
of three years and accepted by the Respondent after successful
testing and commissioning. Indeed, if there was any problem in
functioning of any of the sites, the respondent would have been
reluctant to provide the other sites. It is admitted in the pleadings
by the Respondent that it had offered WAN connectivity after
ascertaining viable configurations at the central’ site to ensure
security of the network It is the plea of the Respondent itself that
the Claimant was to complete the OSAT only at the connected
sites, and joining issue with the Claimant on its contention based
on non-availability of links and BUs at the other sites (terming it as
a ruse), expressly stating that at no time it had sought conduct of
OSAT for not connected sites. It is also own case of the
Respondent, and conceded by CW-2, that OSAT arranged for the
connected sites, accounted for most of the project resources, the
configurations at each of the remote sites other than MDC and
DRS being the same, such configuration, if completed at one
remote site, being easily replicable at the other sites, even without
connectivity.
171. Though not denying that such arrangement by the Respondent
under the contract was expected to be made by August 2018, it is
own averment of the Respondent that the BEUs and links for the
OSAT had been provided in December 2019 Le. when that
Claimant was able to credibly show that the systems had been
configured and the lines will be used. Notwithstanding denial by
CW-1, it is established by letter dated 03.12.2019 (Ex. C-31) of the
Claimant that OSAT was offered on 03.12.2019 and not earlier. It
is, however, also conceded that OSAT had commenced in February
2020, 194 out of 966 parametric test cases having failed in initial
phase, per OSAT reports issued vide letter No.
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XXXIII/68/05/2018-SMNY-Vol-III dated 28 May 2020 (Ex. R-
24), also indicating 19 functional tests and 303 parametric tests as
“not conducted”
172. As noted earlier, it is conceded that the Respondent vide letter
No. XXXIII/68/05/2018-SMNY-109 dated 13.01.2020 (Ex. R-21)
had requested the Claimant to confirm implementation of network
configurations of all devices and activation of data terminals for
initiating OSAT whilst the Claimant vide their letter
CIPL/PMO/NTRO_SITC/941 dated 15.01.2020 (Ex. R-22) had
claimed that they had implemented all security policies and
baseline configurations communicated by NTRO, also saying that
they were prepared for OSAT only at MDC, Aya Nagar.
173. As is expressly admitted by CW-1, there is no doubt that
OSAT had to be conducted six times between February 2020 and
June 2022, it covering 1269 tests (both parametric and functional),
including VC, VolP, TP and Data Services, and since a number of
parametric and functional tests were failing or had failed, they were
re-demonstrated to OSAT team even after handing over of
credentials. The first phase of OSAT was from 17.02.2020 to
06.03.2020 whilst the last phase of OSAT was from 10.06.2022 to
23.06.2022, Reference is to be made in this context to various
communications such as letter dated 17.02.2020 (Ex, R-23), letter
dated 17.03.2020 (Ex.C-38), letter dated 20.03.2020 (Ex.C-39),
letter dated 07.04.2020 (Ex.C-40), letter dated 14.04.2020 (Ex.C-
41) and letter dated 20.04.2020 (Ex.C-42), letter dated 28.05.2020
(Ex. R-24), letter dated 1106.2020 (part of Ex.R-7), letter dated
16.09.2021 (Ex. R-13), letter dated 01:10.2021 (Ex, R-9), letter
dated 29.04.2022 (Ex.R-16), and letter dated 08.07.2022 (Ex: C-
68). The plea of the Respondent, as put 1o CW-2, that the OSAT
could not be conducted from March 2020 to November 2020, and
again from April 2021 going beyond May 2021, due to COVID
restrictions might be accepted based on judicial notice of the
pandemic conditions then prevailing. Even after the last phase of
OSAT (10.06.2022 to 23.06.2022), per communication dated
08.07.2022 (Ex. C-68), based on conduct of OSAT, carried out in
presence of representatives of the claimant, as admitted by CW-1,
two tests viz. Test 1 and Test 3. (out of total 1269) had statedly
failed to be successfully demonstrated, this being brought out
during testimony of CW-2 based on the joint test reports,
pertaining to “High Availability” Test (HA Test), particularly Test
1, the observations to such effect having been endorsed by
representatives of both sides.
174. Indisputably. by email dated 27.06.2022 (Ex. C-67), the
Respondent had communicated to the Claimant that OSAT team
was compiling reports of OSATs done between 10.06.2022 to
23.06.2022 at various sites and observations of OSAT team, if any,
shall be communicated. No communication thereafter sharing the
report of OSAT Committee has been shown the light of the day by
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the Respondent, the notice dated 08.07.2022 (Ex. C-68),
mentioning that the claimant had failed Test 1 and 3, two out of
total 1269 tests.
175. The “OSAT Document for Project “HSTN”, classified as
“Confidential”, the respondent being the custodian, produced
during the cross-examination of CW-2, reflected that representative
of the claimant had signed relevant pages of the spiral book shown
relating to tests conducted on 03.03.2020, 31.12.2020, 19.03.2021
and some other dates post 05.03.2020. It was, however, also
brought out that there are a number of pages of the said document
pertaining to passed tests which do not bear signatures, CW-2
having pointed out test nos. 4, 5, 6, 8 and 10 at page nos.6, 7, 8 and
9 of the OSAT document to illustrate this point. The “Joint test
reports conducted during /0.06.2022 to 23.06.2022” with which
CW-2 was confronted during his cross-examination is a document
similar to the “OSAT Document for Project “HSTN'”, also
classified as “Confidential”. Seen in light of letter dated 08.07.2022
(Ex. C-68) of the Respondent stating that two tests i.e, test 1 at two
sites and test 3 at all sites remained to be successfully
demonstrated, giving impression that all but the said two tests had
been successfully demonstrated, the plea of the Claimant that its
representative was allowed to sign only when the representative of
the respondent would show the relevant page or specific place on a
particular page of the book relating to the specific tests cannot be
rejected, there being no evidence adduced to affirm to the contrary.
176. As was highlighted by the Claimant at the final hearing, letter
dated 28.05.2020 (Ex.R-24) and Annexure-1, mentioned total test
conducted to be 966 and passed test 772 and test failed 194, no
details of the balance 284 tests having been set out. Subsequent
letter dated 16.09.2021 (Ex. R-13) put the number of failed tests as
18 tests. However, Letter dated 23.09.2021 (Ex. R-14) relied upon
by the Respondent itself stated that all tests had been successfully
demonstrated to the members of S-NOC, and this would definitely
include test 1 and 3. The response of the Respondent by letter dated
01.10.2021 (Ex. R-9) did not take the position that S-NOC was not
the authority for conducting tests, as was the argument raised at
final hearing. The letter dated 01.10.2021 simply stated that
verification by OSAT Committee was under progress. No records
of the OSAT Committee have been shared nor any member of the
said Committee was called In as a witness to explain as to how
their assessment vis-à-vis Tests 1 and 3 was different from that of
the S-NOC.
177. The above deficiencies in the material relied upon by the
Respondent put a question mark on the transparency, objectivity,
and fairness of the procedure of OSAT which was expected to be a
collaborative exercise.
178. From the above, it emerges that the Respondent has also
contributed substantially to the non-completion of OSAT in time. It
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is granted in its favor that it could not be expected to wait
indefinitely for the seller to complete the supply, installation and
commissioning. There was inordinate delay in each of the said
stages But as concluded earlier, the Respondent must partake the
blame for this delay, it not having readily handed over all the sites,
it being in default in timely providing BEUs and media
connectivity, taking its own time in vetting the ATP document and
compiling of test results of OSAT in various phases and such other
indulgences. Just as the Respondent was entitled to fill delivery
within time stipulated under the contract, the Claimant would also
legitimately be expecting timely completion, discharge and exit.
The delays on the part of the Respondent meant the Claimant was
also stuck in uncertainty. The timelines having gone haywire, there
had to be a fresh understanding of remaining obligations under the
contract, and this required some initiative from the Buyer which is
found amiss.
179. Going by the text of the contract, the Claimant could not get
the certificate of completion without Test 1 and 3 also being
certified formally, Assuming, however, that they had failed to pass
the muster, is it fair to expect the Claimant to have demonstrated
them when the systems had not been in its control? This is where
the takeover of the log-in credentials by the Respondent on
17.03.2020 becomes crucial. It was not merely take-over of the
log-in credentials but a direction accompanied by a command to
the personnel of the Claimant to keep hands off, to maintain a be-
at-bay approach. The use by the Respondent of the systems put in
position by the Claimant under the contract (Ex C-1), and the sites
where the same were installed and commissioned, to the absolute
exclusion of the Claimant, except when called upon for operational
support, with effect from 17.03.2020 made it difficult, if not
impossible, for the Claimant to demonstrate (or redemonstrate the
pending functional or parametric tests through an objective and
transparent process, the Respondent controlling not only the access
to the sites and the systems but also the documentation of conduct
of OSAT, an exercise which has been rather opaque.
180. The decision of the Respondent to exclude the Claimant as
above can only be construed as waiver on its part of the clause for
completion of OSAT to the extent balance as on the said date
(17.03.2020). The complete take over on 17.03.2020 only means
the Claimant could not thereafter be held accountable, the
respondent being in full control of all the systems and sites,
independently making changes/modifications of system
configurations, which had the effect on functioning of systems
including OSAT. That the Claimant continued even subsequently
to collaborate for remaining OSAT will be of no consequence.
181. On the above facts, and in the circumstances, it is fair and just
to deem the OSAT to have stood completed, for purposes of
triggering the consequences in the contract to follow (viz.
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commencement of warranty, period of validity of PBG, and
payment obligations) on 17.03.2020. It is held accordingly.
On Warranty
182. As noted earlier, the preamble of the contract indisputably
stated that “Seller is required to provide three-year free
comprehensive onsite warranty with operational support to buyer
from the date of completion of Site Acceptance Test (OSAT) and
training …”. Admittedly, in terms of clause 8 of Part-I of the
contract (Ex. C-1), the claimant was to supply the three (3) years
comprehensive onsite warranty “at all 23 pan India locations
mentioned in the contract” in respect of “(a)ll the equipment,
hardware, software, components, services” of the project “against
defective workmanship and materials, faulty designs or inferior
quality of materials”, this covering “(a)ll consumables &g. LAN,
OFC cables, Connectors, wires etc.”, the
“comprehensive warranty services to also include software services
and software upgrades and troubleshooting”, there being a liability
on the part of the Claimant (seller) to have the defects or faults etc.
to be “repaired / replaced / resolved at any site free of charges”.
Crucially, the said clause 8 of the contract (Ex. C-1) stipulated that
warranty period will commence from successful completion of Site
Acceptance Test (ST) and training”.
183. It is the case of the Claimant that after completion of training
before 07.10.2019, the project was complete at the end of the
Claimant and the 3-year on-site warranty had commenced from
07.10.2019 ie. after completion of training. Per contra, it is
contended by the Respondent that mere completion of training is
not sufficient. The other requirement of successful completion of
OSAT also had to be met, the training was to follow OSAT and not
the other way around. It was pleaded that OSAT has not been
completed and so the warranty period cannot be said to have
commenced
184. The contention of the Respondent that warranty is yet to
commence and there is no question of determination of the end
date cannot be accepted. The argument that OSAT must have
preceded training has been rejected earlier. The core question to be
addressed here is as to whether, in the given facts and
circumstances, the warranty period had commenced with
completion of training, notwithstanding the dispute over OSAT
completion, as is contended by the Claimant.
185. There can be no denial of the fact that the warranty, License
and services from the original equipment manufacturer commences
once the equipment is activated. It is admitted that the Specialized
Advance Level training required the products under warranty, as
installed at the site where training was organized, to come in usage
by the Respondent from their date of activation ie., since
07.10.2019. This naturally means that the OEM warranty period
had commenced from 07.10.2019 in respect of such equipment.
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Though some stray instances of deficiency in support in operations
have been quoted, there is no denial in the course of evidence by
the Respondent that the personnel of the Claimant (Ex. CW-1/3)
had been stationed at the sites of the Respondent to provide on-site
support and have continued beyond the period of three (3) years for
operational support and that post the confirmation by the
Respondent that VC, VolP, TP, Data services had been made
functional at seven (7) sites and demanding handover, inter alia,
vide Letter dated 06.03.2020 (Ex. C-36) & 10.03.2020 (Ex. C-37),
the Claimant was made to hand over the login credentials of all the
network equipment and devices of the seven sites including MDC
& DRS to the employees of the Respondent vide Letter dated
17.03.2020 (Ex. C-38), and thereafter, the Respondent has been
using the equipment and services, provided by the claimant in
terms of the contract, for the last more than three years, a fact
proved by CW-1 and not refuted in evidence by the Respondent.
Based on these facts, it has been concluded earlier that the
Respondent had waived strict compliance with the balance OSAT
and that the said exercise (OSAT) is deemed to have been
completed on 17.03.2020.
186. The plea of the Claimant, that the warranty clause in the
contract (Ex. C l) would have come into play with completion of
training (07.10,2019) cannot be accepted. As noted earlier, the
other prerequisite was completion of OSAT which is found to be
complete on 17.03.2020, the date on which the Respondent
compelled the Claimant to hand over the log-in credentials and also
the systems and sites, excluding the Claimant even from access,
except when called for operational support. Since OSAT is deemed
to have been completed on 17.03.2020, that is the date from which
the consequences in the contract would follow, including
commencement of warranty, and, thus, the warranty clause under
the contract (Ex. C-1) would have begun from 17.03.2020 and,
being for three years, ended on 16.03.2023.
187. It needs to be examined if there have been breaches
committed by the Claimant vis d vis the obligations under the
warranty clause during the above-mentioned period and, if so, with
what consequences. These issues are considered in context of case
of the Respondent asserting its right to impose Liquidated
Damages and invoke PBG.”
61. It is also evident from the Impugned Award that the learned
Tribunal did not determine the issue of completion of OSAT in
isolation. The learned Tribunal took into account multiple relevant
factors, including delays in handing over sites, the conduct of the
parties during execution and testing, the contemporaneous
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correspondence exchanged between them, the impact of the COVID-
19 pandemic on contractual timelines, and the overall procedural
fairness of the process adopted. The conclusion regarding completion
of OSAT and commencement of the warranty period thus emerged
from a cumulative assessment of factual and contractual
circumstances, and cannot be said to be arbitrary or based on
extraneous considerations.
(iv) RELEASE OF PERFORMANCE GUARANTEE (PBG):
62. Insofar as the PBG is concerned, the direction for its release is a
corollary to the findings recorded on completion, shared delay, and
rejection of LD. Retention of a performance security must have
contractual justification. Once the learned Tribunal found the absence
of exclusive default and unjustified levy of liquidated damages, the
direction for release of the PBG cannot be termed arbitrary or contrary
to the contract.
63. The Petitioner has also alleged that the learned Tribunal
overlooked material evidence regarding non-renewal of licences and
deficiencies in performance. A reading of the Impugned Award,
however, indicates that these aspects were noted and considered.
Merely because the learned Tribunal did not accept the Petitioner’s
interpretation of such material does not imply non-consideration. An
erroneous appreciation of evidence, even if assumed, does not amount
to patent illegality unless it goes to the root and renders the decision
perverse.
(v) RELEASE OF WITHHELD PAYMENT:
64. With regard to entitlement to the balance payment, the learned
Tribunal has recorded that it was an admitted position that ten (10) per
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cent of the contract value remained withheld by the Petitioner. Having
rejected the claim for levy of LD and having found no established loss
or subsisting breach, justifying retention of the said amount, the
learned Tribunal concluded that the Respondent was entitled to the
release of the withheld balance consideration. The direction for
payment thus flows as a natural consequence of the rejection of LD
and the determination of completion of contractual milestones.
65. The Impugned Award, in directing release of the balance
amount, does not rewrite the contract but gives effect to the reciprocal
obligations of the parties upon completion of performance. Such a
finding, being founded on an appreciation of facts and an
interpretation of contractual provisions, does not suffer from patent
illegality or perversity warranting interference under Section 34 of the
Act.
66. The reliance placed by the Petitioner upon ONGC (supra) to
contend that the Award is patently illegal must be examined in the
context of the post-2015 statutory framework. The expression “patent
illegality” does not permit re-appreciation of evidence or correction of
errors of fact. The illegality must go to the root of the matter and be
apparent on the face of the Award. No such illegality is demonstrated
in the present case.
CONCLUSION:
67. In view of the law laid down by the Hon’ble Supreme Court in
OPG Power (supra), and upon consideration of the detailed
examination undertaken by the learned Tribunal of the contractual
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provisions and the material on record, this Court finds no ground
warranting interference under Section 34 of the Act.
68. The Impugned Award reflects a plausible and reasoned
interpretation of the contract and an evaluation of evidence within the
jurisdiction of the learned Tribunal. It is well settled that a court
exercising limited supervisory jurisdiction under Section 34 cannot re-
appreciate evidence or substitute its own interpretation of contractual
clauses where the view taken by the learned Tribunal is a possible and
reasonable one.
69. Viewed in its entirety, the Impugned Award reflects a reasoned
and structured adjudication of the disputes by the learned Tribunal
within the confines of the contractual terms agreed upon by the
parties, the material placed on record, and the jurisdiction vested in
the learned Arbitral Tribunal. The Impugned Award demonstrates due
application of mind to the pleadings, evidence, and relevant
contractual provisions.
70. In view of the foregoing discussion, this Court is of the
considered opinion that the Petitioner has failed to establish any
ground under Section 34(2) or Section 34(2A) of the Act warranting
interference with the Impugned Award.
71. The present Petition, along with pending application(s), if any,
stands disposed of in the above terms.
72. No Order as to costs.
HARISH VAIDYANATHAN SHANKAR, J.
APRIL 1, 2026/jk
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