Delhi District Court
Nine Projects Pvt Ltd vs Alpha Pacific Systems Pvt Ltd on 20 April, 2026
IN THE COURT OF SH. AJAY PANDEY
DISTRICT JUDGE (COMMERCIAL COURT-10) CENTRAL,
TIS HAZARI COURTS, DELHI
OMP Comm 86/2024
Nine Projects Pvt Ltd.
Through AR Sh. Pradeep Kumar Gupta
Khasra No. 405, 406, Opposite metro pillar 121,
Mehrauli Gurgaon Road,
Ghitorni, South-West Delhi
Email : [email protected] Applicant/objector
Vs
Alpha Pacific Systems Pvt. Ltd.
Through its MD/Director/AR
B-1, DSIDC Complex, Kirti Nagar,
New Delhi-110015
Email : [email protected]
Phone: 9811742989 Respondent
Date of Institution : 25.09.2024
Date of Arguments : 06.04.2026
Date of Judgment : 20.04.2026
JUDGMENT:
–
APPLICATION/APPEAL U/S 19 OF THE MICRO, SMALL
AND MEDIUM ENTERPRISES DEVELOPMENT ACT,
2006 R/W S. 34 OF THE ARBITRATION AND
CONCILIATION ACT, 1996 FILED BY THE
CLAIMANT/APPELLANT AGAINST THE AWARD/ORDER
DT. 12.06.2024 PASSED BY THE LD. SOLE ARBITRATOR
SHRI K.K. NANGIA
1. This order shall decide application/appeal under
section 19 of The Micro Small and Medium Enterprises
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Development Act 2006 read with section 34 of The
Arbitration and Conciliation Act challenging the arbitral
award dated 12.06.2024 and application under section
36(3) for stay of operation of impugned award.
2. Vide impugned award dated 12.06.2024, learned
Arbitral Tribunal dismissed the claim of the applicant
and allowed counter-claim of the respondent for
Rs.11,79,000/-.
FACTS AS PER APPLICATION
3. It is inter-alia stated in the application that :-
3.1 Applicant is a company carrying on inter-
alia business of rendering specialized construction
services as well as services of controlled demolition of
RCC structure/diamond cutting of RCC structure and
supplying material and installation of
equipments/machines. The applicant is registered as
MSME Enterprise under Micro, Small and Medium
Enterprises Development Act, 2006.
3.2 Respondent is a company engaged in
business of civil construction work.
3.3 Respondent issued work order dated
06.10.2018 for diamond cutting work to the petitioner in
respondent’s project of Joshiyara Barrage, Uttarkashi.
Applicant rendered its service and supplied material in
combination of said work and completed the work on
21.01.2019. On 21.01.2019 a revised work order dated
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21.01.2019 was issued. Copy of both the work orders are
annexed with the application.
3.4 Applicant issued following tax invoices :-
S. No. Invoice No. Date Value of Work/Goods
Supplied (including
GST( (Rs.)
1. 07-2671-2018 16.01.2019 38,94,000.00
2. 07-2672-2018 16.01.2019 98,50,711.00
3. 07-3097-2018 30.03.2019 95,08,571.00
The invoices were accepted by the respondent and
no objection was raised. Respondent also made
payments against the invoices.
3.5 Respondent made full payment of the
invoice no. 07-2671-2018 dated 16.01.2019 for a sum of
Rs.38,94,000/- clearly demonstrating that such supply
was accepted by the respondent and respondent
knowingly cleared the payment through National Small
Industries Corporation.
3.6 Respondent issued completion certificate
dated 11.12.2019 to the applicant mentioning “Diamond
cutting Work – Joshiyara Barrage of total value of
Rs.1,64,06,171/- which includes Diamond Wall saving
and Core Cutting to our satisfaction and we are pleased
with their work.” showing that respondent was satisfied
from the work of applicant.
3.7 Respondent released only part payment
from total due amount of Rs.2,32,53,282/-.
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3.8 Applicant, sent an email dated 29.01.2021
to the respondent demanding balance outstanding
amount of Rs.40,15,000/-. Respondent replied that email
through email dated 30.06.2021, admitting the liability to
pay balance pending amount to applicant.
3.9 After rigorous follow-up, respondent made
part payment of Rs.2,03,32,122/-. Applicant also issued a
credit note dated 30.03.2019 to the respondent for
Rs.2,06,160/-. Respondent wrongfully continued to
withhold the amount of Rs.27,15,000/-.
3.10 Applicant sent legal notice dated 12.10.2022
to the respondent on 15.10.2022 demanding balance
outstanding amount of Rs.27,15,000/- but respondent did
not make any payment.
3.11 Respondent sent a letter dated 18.08.2023 to
the applicant wherein it was mentioned “payment of
Appellant was supposed to be Rs.1,93,59,282/- but the
Respondent paid Rs.2,05,38,283/- and the Respondent
wrongfully demanded Rs.11,79,000/- from the Appellant
through such letter.”
3.12 Applicant is stated to be entitled to payment
of interest as per section 16 of MSMED Act.
3.13 Applicant filed online application under
section 18(1) of MSMED Act 2006 before Micro Small
Enterprises Facilitation Council. But respondent did not
come forward for settlement and conciliation. Hence, the
matter was referred to MSME Arbitral Tribunal for
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arbitration proceedings under the provisions of MSMED
Act 2006.
3.14 Applicant filed his claim before the Learned
Arbitrator. Respondent filed statement of defence and
counter-claim. Applicant filed its rejoinder. Affidavits of
evidences were filed. Written submissions were also
filed before learned Arbitrator.
3.15 Vide impugned award dated 12.06.2024,
learned Arbitral Tribunal dismissed the claim of
applicant and allowed counter-claim of respondent for
Rs.11,79,000/-.
GROUNDS IN APPLICATION :-
4. In the grounds of application it is stated that :-
4.1 The impugned award is against the facts,
law, evidence and material on record and is against the
law of land. It is further stated that admitted liability in
favour of applicant was not considered and that
application sent an email dated 29.01.2021 to the
respondent demanding outstanding amount of
Rs.40,15,000/- and respondent admitted its liability to
pay such balance vide email dated 30.01.2021, but
learned Arbitrator ignored such evidence.
4.2 It is further stated that the substantial
question of law is involved in the present appeal as tax
invoice no. 07-2671-2018 dated 16.01.2019 for a sum of
Rs.38,94,000/- was issued by the applicant for supply of
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material in combination of said work and respondent
made full payment against the said tax invoice through
National Small Industries Corporation (NSIC) but such
tax invoice was later on denied by respondent. Hence,
this act and conduct of respondent is against the doctrine
of Estoppel as per section 115 of the Indian Evidence
Act and the same was not considered by learned
Arbitrator which is against the violation of law.
4.3 It is further stated that while passing the
impugned award dated 12.06.2024, learned Arbitrator
has failed to appreciate that as per section 15 of MSMED
Act, the respondent was liable to make payment for
supply of material by the applicant in combination of
service. Learned Arbitrator exceeded the power and
jurisdiction which is serious violation of law.
4.4 It is further stated that while passing the
impugned award, learned Arbitrator has failed to
appreciate the fact that the respondent has not raised any
objection to the invoice no. 07-2671-2018 dated
16.01.2019 for a sum of Rs.38,94,000/- from 17.01.2019
to 02.11.2022.
4.5 It is further stated that learned Arbitrator
acted in excess of authority by allowing claim of the
respondent which was beyond the scop of reference
made under section 18 of MSMED Act 2006.
4.6 It is further stated that the impugned award
is against the public policy of India and not only defeats
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the legislative intent of MSMED Act 2006 but also goes
beyond the jurisdiction conferred by the Arbitral
Tribunal under MSMED Act 2006.
4.7 The impugned award is further stated to be
miscarriage of justice and misuse of process of law.
Setting-aside of the impugned award is therefore prayed
along with other reliefs.
5. The application is supported by Statement of
Truth.
RESPONDENT’S REPLY
6. Notice of the application was issued to the
respondent who filed its reply. Arbitration record was also
received. It is inter-alia stated in the reply that :-
6.1 By way of present application, applicant
seeks indulgence of the court in unlawful practice of
re-appreciating the evidence already considered by
learned Arbitrator; that no substantive or specific ground
mentioned in section 34 of The Act has been used in the
petition; that the application is barred by limitation.
6.2 In reply on merits, impugned award dated
12.06.2024 is defended and it is stated that well reasoned
award was passed by learned Arbitrator. Findings of
learned Arbitrator are quoted in the reply to application.
PETITIONER’S ADDITIONAL GROUNDS
7. Vide order dated 07.01.2026 learned counsel for
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applicant/objector filed additional grounds stating inter-
alia that impugned award is against the public policy of
India since learned Arbitrator failed to comply with the
principles of natural justice and failed to conduct cross-
examination for extracting the truth despite repeated
request made by the applicant. It is further stated that
learned Arbitrator even failed to record such request.
ARGUMENTS
8. Both the parties addressed their detailed oral
arguments and have also filed their respective written
submissions.
9. In his written submissions learned counsel for
applicant reiterated the stand taken in the application and
also relied upon following judgments :-
1) Associate Builders Vs Delhi Development
Authority (2015) 3 SCC 49.
2) Venkatesh Construct Company Vs
Karnataka Vidyut Karkhane Limited (Kavika), Civil
Appeal No. 461-462 of 2016.
3) Sukhbir Singh VS M/s Hindustan Petroleum
Corporatin, O.M.P. 1118/2014 decided on 16.01.2020.
10. Per-contra in his written submissions learned
counsel for respondent has relied upon following
judgments:-
1) Vastu Invest & Holdings Pvt Ltd. Vs
Gujarat Lease Financing Ltd., 2000 SCC OnLine Bom
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729.
2) Silpi Industries Vs Kerala State Road
Transport Corporation and Another, 2021 SCC OnLine
SC 439.
11. Arguments considered. Record perused.
FINDINGS
12. It is settled law that the objections to the Arbitral
Award are required to be strictly confined to the grounds
under section 34 (2) and 2A of The Arbitration and
Conciliation Act 1996.
13. Said provision is reproduced herein below:-
34.Application for setting aside
arbitral award
(1) Recourse to a Court against an
arbitral award may be made only by an
application for setting aside such award in
accordance with sub-section (2) and sub-
section (3).
(2) An arbitral award may be set aside
by the Court only if–
2(a) the party making the application
[establishes on the basis of the record of the
arbitral tribunal that]–
(i) a party was under some incapacity,
or
(ii) the arbitration agreement is not
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valid under the law to which the parties have
subjected it or, failing any indication
thereon, underthe law for the time being in
force; or
(iii) the party making the application
was not given proper notice of the
appointment of an arbitrator or of the arbitral
proceedings or was otherwise unable to
present his case; or
(iv) the arbitral award deals with a
dispute not contemplated by or not falling
within the terms of the submission to
arbitration, or it contains decisions on
matters beyond the scope of the submission
to arbitration:Provided that, if the decisions
on matters submitted to arbitration can be
separated from those not so submitted, only
that part of the arbitral award which contains
decisions on matters not submitted to
arbitration may be set aside; or
(v) the composition of the arbitral
tribunal or the arbitral procedure was not in
accordance with the agreement of the parties,
unless such agreement was in conflict with a
provision of this Part from which the parties
cannot derogate, or, failing such agreement,
was not in accordance with this Part; or
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(b) the Court finds that–
(i) the subject-matter of the dispute is
not capable of settlement by arbitration
under the law for the time being in force,or
(ii) the arbitral award is in conflict
with the public policy of India.
[Explanation 1.–For the avoidance of
any doubt, it is clarified that an 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.
Explanation 2.–For the avoidance of
doubt, the test as to whether there is a
contravention with the fundamental policy of
Indian law shall not entail a review on the
merits of the dispute.]
[(2A) An arbitral award arising out of
arbitrations other than international
commercial arbitrations, may also be set
aside by the Court, if the Court finds that the
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award is vitiated by patent illegality
appearing on the face of the award:
PROVIDED that an award shall not be
set aside merely on the ground of an
erroneous application of the law or by
reappreciation of evidence.] ………..
14. There is only limited scope of interference by the
court in the petitions under section 34 of the Arbitration
and Conciliation Act 1996. In the case of Associate
Builders Vs Delhi Development Authority (2015) 3 SCC
49, relied upon by learned counsel for applicant, it was
held by Hon’ble Supreme Court “the interference with
an arbitral award is permissible only when the findings
of the arbitrator are arbitrary, capricious or perverse or
when conscience of the Court is shocked or when
illegality is not trivial but goes to the root of the matter.
It is held that once it is found that the arbitrator’s
approach is neither arbitrary nor capricious, no
interference is called for on facts. The arbitrator is
ultimately a master of the quantity and quality of
evidence while drawing the arbitral award. Patent
illegality must go to the root of the matter and cannot be
of trivial nature.”
15. In the case of Navodaya Mass Entertainment Ltd
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VS J.M. Combines MANU/SC/0735/2014, it was held :-
“scope of interference of the Court is very limited.
Court would not be justified in reappraising the material
on record and substituting its own view in place of the
Arbitrator’s view. Where there is an error apparent on
the face of the record or the Arbitrator has not followed
the statutory legal position, then and then only it would
be justified in interfering with the award published by
the Arbitrator. Once the Arbitrator has applied his mind
to the matter before him, the Court cannot reappraise the
matter as if it were an appeal and even if two views are
possible, the view taken by the Arbitrator would prevail.
(See: Bharat Coking Coal Ltd. Vs. L.K. Ahuja, (2004) 5
SCC 109; Ravindra & Associates Vs. Union of India,
(2010) 1 SCC 80; Madnani Construction Corporation
Private Limited Vs. Union of India & Ors., (2010) 1
SCC 549; Associated Construction Vs. Pawanhans
Helicopters Limited, (2008) 16 SCC 128; and Satna
Stone & Lime Company Ltd. Vs. Union of India & Anr.,
(2008) 14 SCC”.
16. In the case of M/s Arosan Enterprises Ltd Vs
Union of India & Anr MANU/SC/0595/1999, it was
held:-
“that reappraisal of evidence by the
court is not permissible and as a matter of
fact exercise of power by the Court to
reappraise the evidence is unknown to a
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proceeding under Section 30 of the
Arbitration Act. In the event of there being
no reasons in the award, question of
interference of the court would not arise at
all. In the event, however, there are reasons,
the interference would still be not available
within the jurisdiction of the Court unless of
course, there exist a total perversity in the
award or the judgment is based on a wrong
proposition of law: In the event however two
views are possible on a question of law as
well, the Court would not be justified in
interfering with the award. The common
phraseology `error apparent on the face of
the record’ does not itself, however, mean
and imply closer scrutiny of the merits of
documents and materials on record: The
court as a matter of fact, cannot substitute its
evaluation and come to the conclusion that
the arbitrator had acted contrary to the
bargain between the parties. If the view of
the arbitrator is a possible view the award or
the reasoning contained therein cannot be
examined. In this context, reference may be
made to one of the recent decision of this
Court in the case of State of Rajasthan v.
Puri Construction Co. Ltd. (1994 (6) SCC
485) wherein this court relying upon the
decision of Sudarsan Trading Co.’s case case
(Sudarsan Trading Co. v. Government of
Kerala and Anr. (1989 (2) SCC 38) observed
in paragraph 31 of the Report as below:- “A
court of competent jurisdiction has both right
and duty to decide the lis presented before it
for adjudication according to the best
understanding of law and facts involved in
the lis by the judge presiding over the court.
Such decision even if erroneous either in
factual determination or application of law
correctly, is a valid one and binding inter
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parties. It does not, therefore, stand to reason
that the arbitrator’s award will be per se
invalid and inoperative for the simple reason
that the arbitrator has failed to appreciate the
facts and has committed error in appreciating
correct legal principle in basing the award.
An erroneous decision of a court of law is
open to judicial review by way of appeal or
revision in accordance with the provisions of
law. Similarly, an award rendered by an
arbitrator is open to challenge within the
parameters of several provisions of the
Arbitration Act. Since the arbitrator is a
judge by choice of the parties and more often
than not a person with little or no legal
background, the adjudication of disputes by
an arbitration by way of an award can be
challenged only within the limited scope of
several provisions of the Arbitration Act and
the legislature in its wisdom has limited the
scope and ambit of challenge to an award in
the Arbitration Act. Over the decades,
judicial decisions have indicated the
parameters of such challenge consistent with
the provisions of the Arbitration Act. By and
large the courts have disfavoured
interference with arbitration award on
account of error of law and fact on the score
of misappreciation and misreading of the
materials on record and have shown definite
inclination to preserve the award as far as
possible. As reference to arbitration of
disputes in commercial and other
transactions involving substantial amount
has increased in recent times, the courts were
impelled to have fresh look on the ambit of
challenge to an award by the arbitrator so
that the award does not get undesirable
immunity. In recent times, error in law and
fact in basing an award has not been given
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the wide immunity as enjoyed earlier, by
expanding the import and implication of
“legal misconduct” of an arbitrator so that
award by the arbitrator does not perpetrate
gross miscarriage of justice and the same is
not reduced to mockery of a fair decision of
the lis between the parties to arbitration.
Precisely for the aforesaid reasons, the
erroneous application of law constituting the
very basis of the award and improper and
incorrect findings of fact, which without
closer and intrinsic scrutiny, are
demonstrable on the face of the materials on
record, have been held, very rightly, as legal
misconduct rendering the award as invalid. It
is necessary, however, to put a note of
caution that in the anxiety to render justice to
the party to arbitration, the court should not
reappraise the evidences intrinsically with a
close scrutiny for finding out that the
conclusion drawn from some facts, by the
arbitrator is, according to the understanding
of the court, erroneous. Such exercise of
power which can be exercised by an
appellate court with power to reverse the
finding of fact, is alien to the scope and
ambit of challenge of an award under the
Arbitration Act. Where the error of finding
of facts having a bearing on the award is
patent and is easily demonstrable without the
necessity of carefully weighing the various
possible viewpoints, the interference with
award based on erroneous finding of fact is
permissible. Similarly, if an award is based
by applying a principle of law which is
patently erroneous, and but for such
erroneous application of legal principle, the
award could not have been made, such
award is liable to be set aise by holding that
there has been a legal misconduct on the part
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of the arbitrator. In ultimate analysis it is a
question of delicate balancing between the
permissible limit of error of law and fact and
patently erroneous finding easily
demonstrable from the materials on record
and application of principle of law forming
the basis of the award which is patently
erroneous. It may be indicated here that
however objectively the problem may be
viewed, the subjective element inherent in
the judge deciding the problem, is bound to
creep in and influence the decision. By long
training in the art of dispassionate analysis,
such subjective element is, however, reduced
to minimum. Keeping the aforesaid principle
in mind, the challenge to the validity of the
impugned award is to be considered with
reference to judicial decisions on the
subject.”
17. It is thus clearly established by catena of
judgments of Hon’ble Supreme Court and Hon’ble High
Courts that the interference with an arbitral award is
permissible only when the findings of the Arbitrator are
arbitrary, capricious or perverse or when conscience of
the court is shocked or when illegality is not trivial but
goes to the root of the matter. The Arbitrator is master of
the quality and quantity of the evidence. The court would
not be justified in re-appraising the material on arbitral
record and substitute its own view in place of the view of
learned Arbitrator. Once the Arbitrator has applied his
mind to the matter before him, the court cannot re-
appraise the matter as if it was an appeal and even if two
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views are possible, the view taken by Arbitrator would
prevail. No interference in the award is required unless
there is existence of total perversity in the award or the
judgment is passed on wrong proposition of law. Even
when the Arbitrator makes a mistake either in law or in
fact but such mistake does not appear on the face of
award, the award is good not withstanding the mistake
and would not be remitted or set-aside.
18. Further the court would not construe the nature of
claim by adopting too technical an approach or by
indulging into hair-splitting, otherwise the whole
purpose behind holding the arbitration proceedings as an
alternative to Civil Courts forum would stand defeated as
was held by Apex Court in the case of Sangamner Bhag
Sahakari Karkhana Ltd Vs Krupp Industries Ltd, AIR
2002 SC 2221. Further in the case of P.R. Shah, Shares
& Stock Brokers Pvt Ltd Vs B.H.H. Securities Pvt Ltd &
Ors, (2012) 1 SCC 594, it was held by Hon’ble Supreme
Court that in order to provide the balance and to avoid
excessive intervention, the arbitration award is not to be
set-aside merely on the ground of erroneous application
of law or by re-appreciating evidence.
19. In the case of NTPC Ltd Vs Maratho Electric
Motors India Ltd, 2012 SCC Online Del 3995, it was
held that appreciation of evidence by the Arbitrator is
never a matter which the court considers in the
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proceedings under section 34 of The Act as the court is
not sitting in appeal over the adjudication of the
Arbitrator and the court do not act as court of appeal. An
error relatable to interpretation of the contract by an
Arbitrator is an error within his jurisdiction and such
error is not amenable to the correction by courts as such
error is not an error on the face of the award.
20. In the recent judgment of Delhi Airport Metro
Express Pvt. Ltd Vs Delhi Metro Rail Corporation Ltd.,
Civil Appeal No. 5627 of 2021, AIR ONLINE 2021 SC
708, Hon’ble Apex Court, keeping in view the
amendment of the Arbitration and Conciliation laws by
the Arbitration & Conciliation Act 1996 decided the
Contours of the court’s power to review arbitral awards.
Relevant principles can be summarized amongst others,
as follows:-
– One of the principal objectives of the 1996
Act is to minimize the supervisory role of courts in the
arbitral process.
– An application for setting aside an arbitral
award can only be made in accordance with provisions
of Section 34 of the 1996 Act.
– While deciding applications filed under
Section 34 of The Act, courts are mandated to strictly act
in accordance with and within the confines of Section
34, refraining from appreciation or re-appreciation of
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matters of fact as well as law.
– As it is only such arbitral awards that shock
the conscience of the court that can be set aside on
grounds under section 34.
– There must be patent illegality appearing on
the face of the award, which refers to such illegality as
goes to the root of the matter but which does not amount
to mere erroneous application of the law.
– Reappreciation of evidence, which is what
an appellate court is permitted to do, cannot be permitted
under the ground of patent illegality appearing on the
face of the award.
– The construction of the terms of a contract
is primarily for an arbitrator to decide, unless the
arbitrator construes the contract in a manner that no fair-
minded or reasonable person would; in short, that the
arbitrator’s view is not even a possible view to take.
– A finding based on no evidence at all or an
award which ignores vital evidence in arriving at its
decision would be perverse and liable to be set aside on
the ground of patent illegality.
– There is a disturbing tendency of courts
setting aside arbitral awards, after dissecting and
reassessing factual aspects of the cases. This approach
would lead to corrosion of the object of the 1996 Act and
the endeavours made to preserve this object, which is
minimal judicial interference with arbitral awards.
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Several judicial pronouncements of the Court would
become a dead letter if arbitral awards are set aside by
categorising them as perverse or patently illegal without
appreciating the contours of the said expressions.
– Every error of law committed by the
Arbitral Tribunal would not fall within the expression
‘patent illegality’. In addition, contravention of law not
linked to public policy or public interest is beyond the
scope of the expression ‘patent illegality’.
– Courts do not sit in appeal against the
arbitral award. The permissible grounds for interference
with a domestic award under Section 34(2-A) on the
ground of patent illegality is when the arbitrator takes a
view which is not even a possible one.
21. In Indian Oil Corporation Vs Shree Ganesh
Petroleum Rajgurunagar, MANU/SC/0127/2022, it was
held by Hon’ble Supreme Court :-
44. An Arbitral Tribunal being a creature of
contract, is bound to act in terms of the contract under
which it is constituted. An award can be said to be
patently illegal where the Arbitral Tribunal has failed to
act in terms of the contract or has ignored the specific
terms of a contract.
45. However, a distinction has to be drawn
between failure to act in terms of a contract and an
erroneous interpretation of the terms of a contract. An
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Arbitral Tribunal is entitled to interpret the terms and
conditions of a contract, while adjudicating a dispute. An
error in interpretation of a contract in a case where there
is valid and lawful submission of arbitral disputes to an
Arbitral Tribunal is an error within jurisdiction.
46. The Court does not sit in appeal over the
award made by an Arbitral Tribunal. The Court does not
ordinarily interfere with interpretation made by the
Arbitral Tribunal of a contractual provision, unless such
interpretation is patently unreasonable or perverse.
Where a contractual provision is ambiguous or is
capable of being interpreted in more ways than one, the
Court cannot interfere with the arbitral award, only
because the Court is of the opinion that another possible
interpretation would have been a better one.
47. In Associate Builders (supra), this Court held
that an award ignoring the terms of a contract would not
be in public interest. In the instant case, the award in
respect of the lease rent and the lease term is in patent
disregard of the terms and conditions of the lease
agreement and thus against public policy. Furthermore,
in Associate Builders (supra) the jurisdiction of the
Arbitral Tribunal to adjudicate a dispute itself was not in
issue. The Court was dealing with the circumstances in
which a Court could look into the merits of an award.
48. In this case, as observed above, the impugned award
insofar as it pertains to lease rent and lease period is
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patently beyond the scope of the competence of the
Arbitrator appointed in terms of the dealership
agreement by the Director (Marketing) of the Appellant.
agreement and thus against public policy. Furthermore,
in Associate Builders (supra) the jurisdiction of the
Arbitral Tribunal to adjudicate a dispute itself was not in
issue. The Court was dealing with the circumstances in
which a Court could look into the merits of an award.
48. In this case, as observed above, the impugned
award insofar as it pertains to lease rent and lease period
is patently beyond the scope of the competence of the
Arbitrator appointed in terms of the dealership
agreement by the Director (Marketing) of the Appellant.
49. The lease agreement which was in force for a
period of 29 years with effect from 15th April, 2005
specifically provided for monthly lease rent of Rs.1750
per month for the said plot of land on which the retail
outlet had been set up. It is well settled that an Arbitral
Tribunal, or for that matter, the Court cannot alter the
terms and conditions of a valid contract executed
between the parties with their eyes open.
22. In Civil Appeal No. 369-3700 of 2018 decided on
28.07.2021, it was held :-
“85. It has been held that the role of the Arbitrator
is to arbitrate within the terms of the contract. He has no
power apart from what the parties have given him under
the contract. If he has travelled beyond the contract, he
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would be acting without jurisdiction.
86. It will also be apposite to refer to the
following observations of this Court in the case of Md.
Army Welfare Housing Organization v. Sumangal
Services (P) Ltd. MANU/SC/0797/2003 “43. An Arbitral
Tribunal is not a court of law. Its orders are not judicial
orders. Its functions are not judicial functions. It cannot
exercise its power ex debito justitiae. The jurisdiction of
the arbitrator being confined to the four corners of the
agreement, he can only pass such an order which may be
the subject-matter of reference.”
87. It has been held that an Arbitral Tribunal is not
a Court of law. Its orders are not judicial orders. Its
functions are not judicial functions. It cannot exercise its
powers ex debito justitiae. It has been held that the
jurisdiction of the arbitrator being confined to the four
corners of the agreement, he can only pass such an order
which may be the subject-matter of reference.
88. In that view of the matter, we are of the
considered view, that the impugned Award would come
under the realm of ‘patent illegality’ and therefore, has
been rightly set aside by the High Court.”
23. Now coming back to the facts of the present case,
after perusal of impugned award dated 12.06.2024, this
court is of the humble opinion that it is rightly submitted
by learned counsel for respondent that the additional
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ground raised in the application e-filed on 24.11.2025 is
an afterthought and are not supported by record.
24. Section 19 of the Arbitration and Conciliation Act
1996 provides as follows :-
19. Determination of rules of procedure
(1) The arbitral tribunal shall not be bound by the
Code of Civil Procedure, 1908 (5 of 1908) or the Indian
Evidence Act, 1872 (1 of 1872).
(2) Subject to this Part, the parties are free to
agree on the procedure to be followed by the arbitral
tribunal in conducting its proceedings.
(3) Failing any agreement referred to in sub-
section (2), the arbitral tribunal may, subject to this Part,
conduct the proceedings in the manner it considers
appropriate.
(4) The power of the arbitral tribunal under sub-
section (3) includes the power to determine the
admissibility, relevance, materiality and weight of any
evidence.
25. A bare reading of section 19 demonstrates that
learned Arbitrator is master of his proceedings and was
not bound by Code of Civil Procedure 1908 or with the
Indian Evidence Act 1872. It further provides that parties
are free to agree on the procedure followed by learned
Arbitrator in conducting its proceedings. Perusal of
arbitral record reflects that learned Arbitrator had issued a
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pre-hearing notice dated 18.10.2023 to the parties which
contained proposed schedule and practice directions to
conduct arbitration. Parties appeared before learned
Arbitrator on 30.10.2023 and consented to the said
practice directions. Practice directions no.4 is as
follows :-
“4. Any claims or counter-claims presented will
be considered as issues for arbitration. It should be noted
that the arbitration proceedings under the MSMED
(Micro, Small & Medium Enterprises Development)
Act, 2006 are statutory in nature and will be conducted
under a Summary Procedure mode. Accordingly, there
will be no provision for oral evidence, including both
chief and cross-examination of witnesses.” (emphasis
supplied).
26. Learned Arbitrator in minutes of proceedings dated
30.10.2023 specifically recorded “The practice directions
intended for integration into the current arbitration
proceedings were properly communicated and
understood, with the both parties present giving
consent.”
27. Reading the practice directions along with minutes
of proceedings dated 30.10.2023 clearly reflects that it
was agreed between the parties that there would be no
provision of oral evidence including chief and cross-
examination of witnesses and proceedings were to be
conducted in summary procedure.
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28. Learned counsel for applicant heavily relied upon
section 24 of The Arbitration and Conciliation Act, which
provides as follows :-
24. Hearings and written proceedings
(1) Unless otherwise agreed by the parties, the
arbitral tribunal shall decide whether to hold oral hearings
for the presentation of evidence or for oral argument, or
whether the proceedings shall be conducted on the basis
of documents and other materials:
PROVIDED that the arbitral tribunal shall hold
oral hearings, at an appropriate stage of the proceedings,
on a request by a party, unless the parties have agreed that
no oral hearing shall be held:
[Provided further that the arbitral tribunal shall, as
far as possible, hold oral hearings for the presentation of
evidence or for oral argument on day-to-day basis, and
not grant any adjournments unless sufficient cause is
made out, and may impose costs including exemplary
costs on the party seeking adjournment without any
sufficient cause.]
(2) The parties shall be given sufficient advance
notice of any hearing and of any meeting of the arbitral
tribunal for the purposes of inspection of documents,
goods or other property.
(3) All statements, documents or other information
supplied to, or applications made to the arbitral tribunal
by one party shall be communicated to the other party, and
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any expert report or evidentiary document on which the
arbitral tribunal may rely in making its decision shall be
communicated to the parties.
29. A bare reading of section 24 of the Act clearly
specifies that decision of Arbitrator to hold oral hearings
for presentation of evidence or for oral arguments is
subject to the agreement between the parties.
30. In the present case both the parties have agreed to
practice directions which specifies that there will be no
provision for oral evidence. Learned counsel for applicant
has argued that a request was made to learned Arbitrator
to hold oral evidence. He further argued that learned
Arbitrator did not record such request. No such request is
however available on record. Applicant filed written
submissions but there is no reference of any such request
even in the written submissions. Learned Arbitrator was
cautious enough to pass practice directions in writing. He
then communicated those practice directions to both the
parties. Thereafter, he recorded consent of both the parties
to follow the said practice directions. Any request
contrary to such practice directions from the applicant
should have been in writing. Hence, it can be safely said
that the plea taken in the additional grounds is an
afterthought.
31. After going through the award it can be safely said
that learned Arbitrator has considered each and every
aspect of the matter. The decision of learned Arbitrator is
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PANDEY Date: 2026.04.20
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passed on the admitted documents i.e. the work orders
dated 06.10.2018 and 21.01.2019. He had also considered
the communication or emails exchanged between the
parties. From page no. 24 of the award, learned Arbitrator
had examined the work orders and claims and observed as
follows :-
The tribunal has reviewed the
agreement/work order entered into between
the parties to ascertain the scope of work
allotted to the claimant for which the pending
payment is being claimed through the claim
petition.
It is undisputed between the parties
that the claimant entered into an
agreement/work order with the respondent on
06.10.2018 for the diamond cutting work of
the respondent’s project at Jooshiyara
Barrage, Uttarkashi. It is also an admitted
position between the parties that the said
agreement was revised on 21.01.2019.
Upon perusal of the terms of the
initial and revised order, the following
schedule of quantities and prices are found to
be incorporated in the work order :
SCHEDULE OF QUANTITIES & PRICES
SL. Item Description UOM Qty Unit Total
No. Price Amoun
t
1 Controlled Sqm 1500 9,900.00 1,48,50
demolition of RCC ,000.00
wall by Sqm HILIT
Diamond wire
sawing, wall
dimension 24 M
height, 30 M length
of uniform
thickness of 1 M. in
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pieces of 2 M X 1M
X 1M. Scope of
work shall include
core drilling in RCC
wall to pass wire
through it, cutting of
RCC pieces by wire
sawing.
2 Drilling of diameter RMT 155 650.00 1,00,75
25 mm depth 1 M 0.00
through the RC wall
to enable wire
sawing
3. Core Cutting of RMT 300 3,200.00 9,60,00
diameter 100 mm 0.00
depth 1 M through
the RCC wall to
enable wire sawing
4. Hydraulic Month 3 3,50,000. 10,50,0
Excavator with 00 00.00
breaker (Additional
hour pro-rata basis)
Total Amount (Rs.) 1,69,60,750.00The claimant alleged that they have
raised the first invoice dated 16.01.2019
amounting to Rs. 38,94,000/-, the second
invoice dated 16.01.2019 amounting to Rs.
98,50,711/-, and the third invoice dated
30.03.2019 amounting to Rs. 95,08,571/-,
totaling Rs. 2,32,53,282/-. Out of these three
invoices, the dispute in the matter relates only
to the first invoice, as its validity is
contested by the respondent.
Thus, the primary question that needs
to be answered is whether the invoice dated
16.01.2019 amounting to Rs. 38,94,000/- for
the purchase of Diamond wire is valid and
can be considered for payment as per the
terms of contract entered between the
parties?
The tribunal has reviewed and gone
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PANDEY Date: 2026.04.20
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through the above schedule of quantities and
rates as prescribed in the workorder, it is
found that the respondent had issued the said
work according to the quantities mentioned in
the schedule. The unit price of the quantity
was also clearly mentioned alongwith work
order. Even the unit of measurement for
measuring the quantity of work to be carried
out was also clearly mentioned as square
meters (sqm)/running meters. The said
workorder was issued for the total amount of
Rs. 1,69,60,750/-.
It was further observed that the invoice
dated 16.01.2019 amounting to Rs.
38,94,000/- was raised by the claimant for the
purchase and supply of Diamond wire DS-
W SI 10.5-100m C F2 MP for 5 units at the
rate of Rs. 6,60,000/- per unit. However, this
rate has not been specifically mentioned in
the schedule of quantities and prices included
as Annexure 1 to the contract. Annexure 1 is
an exhaustive list containing the rates of
various items to be used or jobs to be done for
the complete work by the claimant.
Furthermore, serial number 1 in Annexure 1
includes the scope of work for core drilling in
the RCC wall to pass the wire through it,
cutting of RCC pieces by wire sawing at a
unit price of Rs. 9,900/-. This makes it
unambiguous that the scope of work included
passing the wire along with the sawing work
at a fixed rate of Rs. 9,900/- per sqm.
The tribunal fails to identify or
corroborate any amount mentioned for the
procurement of Diamond wire in the given
schedule of quantities. No document or
additional purchase order was placed on
record by the claimant demonstrating that the
respondent was supposed to make payment
for this item as per the contract entered into
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between the parties. In the absence of such a
document or agreement, this claim of the
claimant cannot be substantiated either
through the terms of the work order or
through any communication between the
parties suggesting that the respondent had at
any point accepted the payment for this extra
item beyond the items mentioned in
schedule of quantities. The tribunal is of the
opinion that merely raising invoices for items
that were not part of the purchase
order/work contract cannot be accounted for
payment.
32. The court do not find any justification to interfere
in the findings of learned Arbitrator that no document or
additional purchase order was placed on record by
applicant demonstrating that respondent was supposed to
make payment for the supply of material. On the basis of
documents i.e. work orders dated 06.10.2018 and
21.01.2019, learned Arbitrator has observed that these
documents provide exhaustive list containing the rates of
various items to be used or jobs to be done for the
complete work by the applicant.
33. Learned Arbitrator further examined the work
completion certificate which tallied with the 2 nd invoice
dated 16.01.2019 amounting to Rs.98,50,111/- and 3rd
invoice dated 30.03.2019 amounting to Rs.95,08,571/-. It
was further observed that total value of the project
mentioned in the completion certificate dated 11.12.2019
corresponds to these two invoices. Learned Arbitrator
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observed as follows :-
Furthermore, the subsequent work
completion certificate dated 11.12.2019,
issued by the respondent also mentioned the
total value of the project as Rs. 1,64,06,171/-.
This fact is duly acknowledged by the
claimant as the claimant itself filed this
document alongwith its SOC. This value of
Rs. 1,64,06,171/- (excluding taxes) and Rs.
1,93,59,282/- (with taxes) corroborates with
the total of two invoices i.e. the second
invoice dated 16.01.2019 amounting to Rs.
98,50,711/-, and the third invoice dated
30.03.2019 amounting to Rs. 95,08,571/-.
The claimant’s claim of Rs.
2,32,53,282/- (including taxes) i.e total of all
3 invoices was neither acknowledged nor
accepted for payment by the claimant at any
point of time. The completion certificate
mentioned the value of the project based on
two invoices only. The claimant has raised no
objections against the value of the project and
has duly acknowledged it. Had the value of
the project been more, the claimant would not
have acknowledged the work completion
certificate at the value of Rs.1,64,06,171/-.
This makes it clear that the first invoice was
never the part of aggregate value of the
project. The respondent had already made
payment of Rs. 2,05,38,283/- to the claimant
i.e in excess of the aggregate value of the
project. The reasoning given by the
respondent for release of excess payments is
plausible.
Additionally, the claimant, to
demonstrate their bona fide intentions, has
not produced any email or WhatsApp
communication indicating that the invoice
dated 16.01.2019 was sent to the respondent
for their acknowledgment before receiving
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the work completion certificate. Instead, the
respondent has clearly mentioned the total
value of the work in the work completion
certificate as Rs. 1,64,06,171/- and promptly
replied to the claimant’s legal notice dated
12.10.2022 on 02.11.2022, making their
stand clear with respect to the invoice dated
16.01.2019 and the total value of the project.
34. Even before this court no document or additional
purchase order has been placed by the applicant
demonstrating that respondent was supposed to make
payment for extra items allegedly used in the diamond
cutting work. The work orders dated 06.10.2018 and
21.01.2019, quoted by learned Arbitrator are exhaustive
inclusive of material. In such circumstances, decision of
learned Arbitrator that the invoice no.1 07-2671-2018
dated 16.01.2019 was ultra-wire of the contract between
the parties, cannot be faulted. Learned Arbitrator had
observed that these invoices raised by the
applicant/claimant for charges towards diamond cutting
wire cannot be considered for payment. If this invoice no.
07-2671-2018 dated 16.01.2019 of Rs.38,94,000/- is
excluded, respondent had already made excess payment
of Rs.11,79,000/- to the applicant. Applicant cannot retain
extra amount paid by the respondent by mistake and
cannot be allowed to unlawfully act beyond the terms of
contract between the parties. Hence, it cannot be said that
any mistake on fact or law was done by learned Arbitrator
while allowing counter-claim of Rs.11,79,000/- of the
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respondent.
35. After consideration of material and evidence,
learned sole Arbitrator passed the impugned award in
favour of respondent.
36. In the case of McDermott International Inc. v.
Burn Standard Co. Ltd. (2006) 11 SCC 181, it was held
that interpreting the terms of a contract, even when it
involves legal questions, is a matter for the arbitrator to
decide. Relevant paragraphs of the judgment are
extracted as under:
“112. It is trite that the terms of the
contract can be express or implied. The
conduct of the parties would also be a relevant
factor in the matter of construction of a
contract. The construction of the contract
agreement is within the jurisdiction of the
arbitrators having regard to the wide nature,
scope and ambit of the arbitration agreement
and they cannot be said to have misdirected
themselves in passing the award by taking into
consideration the conduct of the parties. It is
also trite that correspondences exchanged by
the parties are required to be taken into
consideration for the purpose of construction
of a contract. Interpretation of a contract is a
matter for the arbitrator to determine, even if it
gives rise to determination of a question of
law.
113. Once, thus, it is held that the
arbitrator had the jurisdiction, no further
question shall be raised and the court will not
exercise its jurisdiction unless it is found that
there exists any bar on the face of the award.”
(emphasis added).
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37. In the case of Associate Builders v. Delhi
Development Authority (2015) 3 SCC 49, Hon’ble
Supreme Court held that the interference under Section
34 is limited and extremely circumscribed and is
permissible only when the award is tainted by patent
illegality, i.e. illegality going to the root, and not mere
erroneous application of law. In the case of Ssangyong
Engineering & Construction Co. Ltd. v. National
Highways Authority of India (2019) 15 SCC 131, the
Hon’ble Supreme Court narrowed the scope of “public
policy” under Section 34, observing that it is confined to
cases where the award is in conflict with the
fundamental policy of Indian law, is patently illegal, or is
in conflict with most basic notions of morality or justice.
Moreover, in the case of MMTC Ltd. v. Vedanta Ltd.
(2019) 4 SCC 163, the Hon’ble Supreme Court reiterated
that Section 34 is not a provision for appeal, and Courts
cannot reappreciate evidence or substitute their view for
that of the arbitrator. Interference is permissible only on
the limited grounds specified in the Act
38. No ground as required under section 34 (2) of The
Arbitration and Conciliation Act is made out calling for
any interference in the award dated 12.06.2024.
39. Neither the court see any error apparent on the
face of record nor any such error is pointed out in the
entire objection petition. All legal objections are vague
and unsubstantiated. The present objection petition is not
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covered within the limited scope of section 34 of The
Act.
40. Objection petition is accordingly dismissed.
41. Application under section 34 of The Arbitration &
Conciliation Act as well as application under section 36
(2) for stay of operation of impugned award are
accordingly dismissed with cost.
42. The FDR of Rs.11,79,000/- bearing seal of HDFC
Bank, Gurgaon which was filed on behalf of applicant on
16.02.2026 in the name of this court, be released to
respondent after endorsement of encashment in his
favour.
43. Arbitration record be sent back along with copy of
this order.
44. File be consigned to record room after due
compliance.
Announced in the open court AJAY Digitally signed by AJAY
PANDEY
on the 20th day of April, 2026 PANDEY Date: 2026.04.20
15:41:51 +0530
(Ajay Pandey)
District Judge
(Commercial Court-10)
Central, Tis Hazari Courts, Delhi.
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