Delhi High Court
Shriram Pistons & Rings Ltd vs Usha International Ltd on 6 July, 2026
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 20.05.2026
Judgment pronounced on: 06.07.2026
+ O.M.P. (COMM) 161/2016
SHRIRAM PISTONS & RINGS LTD .....Petitioner
Through: Mr. Amit Agrawal, Mr. Rahul
Kukreja, Mr. Jatin Shrivastava
and Ms. Akanksha Chauhan,
Advocates
versus
USHA INTERNATIONAL LTD .....Respondent
Through: Mr. J. Sai Deepak, Senior
Advocate along with Ms. Divya
Bhalla, Mr. Abhishek Chauhan,
Mr. Devansh Jain and Mr.
Abhishek, Advocates.
CORAM:
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
JUDGMENT
HARISH VAIDYANATHAN SHANKAR, J.
1. The present Petition, filed by Shriram Pistons and Rings
Limited1 under Section 34 of the Arbitration and Conciliation Act,
19962, seeks setting aside of the Arbitral Award dated 04.05.20133
passed by the learned Sole Arbitrator in favour of Usha International
1
Petitioner
2
A&C Act
3
Impugned Award
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Limited4 in the Arbitral proceedings titled “M/s Usha International
Limited versus M/s Shriram Pistons & Rings Limited”.
2. By way of the Impugned Award, the Petitioner was directed to
pay an amount of Rs. 17.76 lakhs, along with 10% pre-award,
pendente-lite and post-award Interest, calculated simply. Further, the
Petitioner was directed to pay Rs. 50,000/- as Costs for the Arbitral
proceedings to the Respondent.
FACTUAL MATRIX:
3. The Petitioner is engaged in the manufacture and export of
automotive components, inter alia, engine valves, valve guides and
valve train components, EV Kit sets, whereas the Respondent is
engaged, inter alia, in marketing and procuring business opportunities
for various products in domestic and international markets.
4. The parties entered into an Agreement dated 30.04.19995
whereby the Respondent was appointed as an agent for export sales of
the engine valves, valve guides & valve train components and EV Kit
sets, manufactured by the Petitioner on certain terms and conditions as
per the Agreement. The Agreement was to remain operative from
01.05.1999 till 30.04.2004 and contained provisions governing
commission, territorial exclusions, obligations of the Respondent and
dispute resolution through arbitration.
5. The parties are stated to have entered into another Agreement
dated 31.03.20006, in respect of the same time period and subject
matter as the previous Agreement, whereby purportedly certain terms
4
Respondent
5
1999 Agreement
6
2000 Agreement
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of the Agreement between the parties were modified.
6. Upon expiry of the contractual period, the Petitioner, vide
communication dated 27.03.2004, informed the Respondent that the
agency arrangement would not be renewed beyond the contractual
period, i.e., 30.04.2004.
7. Thereafter, disputes arose between the parties regarding
commission allegedly payable on export orders procured by the
Respondent, including commission on pending orders, shipments
awaiting execution and orders allegedly secured prior to expiry of the
contractual relationship.
8. In this regard, the Respondent claimed that substantial
commission remained unpaid notwithstanding repeated demands,
whereas the Petitioner maintained that all legitimate dues had already
been settled and further alleged that the Respondent had acted in
breach of its obligations under the Agreements.
9. On 25.05.2005, the Respondent invoked Arbitration before the
Federation of Indian Chambers of Commerce and Industry7,
relying upon the Arbitration clause allegedly contained in the 1999
Agreement, being Clause 18 thereof.
10. The Respondent simultaneously lodged its Statement of Claim
seeking recovery of approximately Rs.21.22 lakhs along with
rendition of accounts and other consequential reliefs. The Petitioner
immediately objected to the invocation of arbitration, contending that
there existed no valid arbitration agreement based on the alleged 1999
Agreement and that the arbitral proceedings were therefore without
jurisdiction.
7
FICCI
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11. Despite the aforesaid objections, FICCI proceeded to appoint a
Sole Arbitrator. The Petitioner challenged the constitution of the
learned Tribunal by filing an Application under Section 12 of the
A&C Act, inter alia questioning the validity of the appointment
process and seeking disclosure of the material considered by FICCI
while appointing the learned Arbitrator. The said Application came to
be dismissed by the learned Arbitrator by Order dated 14.03.2006.
12. Thereafter, the Petitioner also filed an Application under
Section 16 of the A&C Act raising objections to the existence and
validity of the Arbitration agreement as well as the jurisdiction of the
learned Tribunal.
13. During the pendency of the proceedings, the Respondent sought
amendment of its Statement of Claim on the premise that the 2000
Agreement constituted a modification of the earlier 1999 Agreement.
The amendment was allowed by the learned Arbitrator and the
jurisdictional objections raised by the Petitioner were ultimately
rejected.
14. Following completion of pleadings, the learned Arbitrator
framed issues concerning the maintainability of the claims, entitlement
to commission, rendition of accounts, reciprocal obligations of the
parties, liability in respect of pending orders, damages, interest and
costs.
15. Both parties led oral and documentary evidence in support of
their respective cases. The Respondent examined multiple witnesses in
support of its claims, whose testimonies were subjected to cross-
examination by the Petitioner. The proceedings remained pending for
several years and ultimately culminated in the Impugned Award dated
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04.05.2013.
16. By the Impugned Award, the learned Arbitrator accepted the
Respondent’s contention that the 1999 Agreement was valid and
subsisting, which stood modified by the 2000 Agreement.
17. The learned Arbitrator further held that the Respondent was
entitled to commission under various heads in respect of export orders
procured during the subsistence of the contractual relationship and
consequently awarded a sum of approximately Rs.17.76 lakhs together
with interest and costs.
18. Aggrieved thereby, the Petitioner has instituted the present
proceedings under Section 34 of the A&C Act.
SUBMISSIONS ON BEHALF OF THE PETITIONER:
19. Learned counsel for the Petitioner would submit that the very
initiation of the arbitral proceedings was founded upon the alleged
1999 Agreement, which according to the Petitioner never fructified
into a binding contract between the parties. It would be contended that
the said document admittedly did not bear the signatures of the
Respondent/Claimant and, therefore, could not be regarded as a
concluded agreement capable of conferring arbitral jurisdiction.
20. Learned counsel for the Petitioner would therefore contend that
the only binding agreement between the parties was the 2000
Agreement, which had been duly executed by both parties and which
operated independently in its own right.
21. It would further be submitted that the 2000 Agreement neither
referred to the alleged 1999 Agreement nor described itself as a
modification thereof. Learned counsel would contend that even
assuming, without admitting, that any prior arrangement existed, the
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execution of the 2000 Agreement constituted a fresh and independent
contract governing the rights and obligations of the parties.
Consequently, the invocation of arbitration on the basis of the alleged
1999 Agreement was itself fundamentally misconceived.
22. Learned counsel would further submit that the Petitioner had
repeatedly raised objections regarding the existence and validity of the
alleged 1999 Agreement. Learned counsel would place particular
emphasis on the Order dated 22.08.2006, whereby the learned
Arbitrator, while allowing the amendment Application filed by the
Respondent, expressly observed that the question concerning the
validity of the 1999 Agreement and the existence of the Arbitration
Agreement would be decided after evidence was led and at the stage
of the final Award. It would be contended that notwithstanding the
aforesaid observation, no specific issue came to be framed or
adjudicated on the said aspect.
23. In this regard, it would further be submitted that the Impugned
Award nevertheless proceeds in Paragraph No. 19 to uphold the
existence of the alleged 1999 Agreement on wholly erroneous
premises. Learned counsel would contend that the finding is based
upon an assumption that the parties had acted under the said
Agreement, whereas the parties had, in fact, admittedly operated under
the 2000 Agreement.
24. It would further be submitted that the Impugned Award
erroneously relies upon certain correspondence as constituting an
admission by the Petitioner regarding the existence of the 1999
Agreement, although one of the documents relied upon is stated to be
a letter issued by the Respondent itself and the remaining
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correspondence contains no such admission.
25. On the aforesaid basis, learned counsel for the Petitioner would
contend that the finding returned by the learned Arbitrator regarding
the existence and effect of the alleged 1999 Agreement is unsupported
by the record, suffers from patent perversity and has resulted in the
Impugned Award being rendered on a fundamentally erroneous
jurisdictional premise.
26. Learned counsel for the Petitioner would further submit that the
constitution of the learned Tribunal itself was under challenge from
the inception of the proceedings. It would be contended that the
Petitioner had consistently disputed the existence of a valid
Arbitration agreement and had sought disclosure regarding the manner
in which the learned Arbitrator came to be appointed.
27. Learned counsel for the Petitioner would submit that, despite
repeated requests, neither FICCI nor the learned Arbitrator disclosed
the basis of such appointment, thereby depriving the Petitioner of an
effective opportunity to challenge the constitution of the learned
Tribunal.
28. It would further be submitted that the Petitioner’s Application
under Section 12 of the A&C Act, seeking disclosure of the
nomination and records pertaining to the appointment of the learned
Arbitrator, was rejected without any meaningful consideration of the
issues raised therein. Learned counsel would contend that the
challenge raised by the Petitioner went to the root of the arbitral
process and could not have been brushed aside without a proper
adjudication.
29. Learned counsel would further submit that the Petitioner had
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also invoked Section 16 of the A&C Act and specifically challenged
the jurisdiction of the learned Tribunal on the ground that the
Arbitration Agreement relied upon by the Respondent was itself
invalid and incapable of conferring jurisdiction. It would be contended
that while the learned Arbitrator, in earlier orders, observed that the
issue regarding the existence and validity of the arbitration agreement
would be considered at the stage of the Award, no independent
determination thereof was ultimately rendered.
30. It would thus be contended that the Petitioner’s objections
under Sections 12 and 16 of the A&C Act were never effectively
adjudicated in accordance with law. The Impugned Award, therefore,
proceeds on the assumption of a validly constituted Tribunal
possessing jurisdiction over the disputes without first conclusively
determining the foundational objections raised by the Petitioner.
31. It would accordingly be contended that the failure to effectively
adjudicate the Petitioner’s objections under Sections 12 and 16 of the
A&C Act strikes at the very foundation of the arbitral proceedings.
32. According to the Petitioner, the questions concerning the
constitution of the learned Tribunal and the existence of a valid
arbitration agreement were jurisdictional issues which required a clear
and reasoned determination before the disputes could be adjudicated
on merits, and the learned Tribunal erroneously proceeded to render
the Impugned Award without conclusively deciding the foundational
objections raised by the Petitioner. The Impugned Award is therefore
stated to be liable to be set aside under Sections 34(2)(a)(v) and
34(2A) of the A&C Act, being an Award rendered by a Tribunal
whose constitution and jurisdiction were specifically under challenge
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and which objections, according to the Petitioner, were not
adjudicated in accordance with law.
33. Learned counsel for the Petitioner would further submit that the
Impugned Award suffers from a fundamental error in the application
of the principles governing burden of proof. It would be contended
that the learned Arbitrator proceeded on the premise that the Petitioner
had failed to disprove the case set up by the Respondent, instead of
first examining whether the Respondent had discharged its primary
burden of establishing the claims made before the learned Tribunal.
34. Learned counsel would submit that it is a settled principle that
the burden of proving a claim lies upon the party asserting it and does
not shift merely because the opposite party is unable to adduce
evidence to the contrary.
35. Learned counsel for the Petitioner would submit that the learned
Arbitrator, while returning findings in favour of the Respondent,
repeatedly observed that the Petitioner had failed to rebut or disprove
the assertions advanced by the Respondent and thereby effectively
shifted the burden of proof upon the Petitioner.
36. It would therefore be contended that the learned Arbitrator was
required to independently examine whether the Respondent had
established the existence of the alleged transactions, the amounts
claimed and the entitlement thereto on the basis of reliable and
admissible evidence. However, instead of insisting upon strict proof
from the Respondent, the learned Arbitrator proceeded to draw
adverse conclusions against the Petitioner for its inability to dislodge
the Respondent’s version.
37. Learned counsel would therefore submit that the findings
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recorded in the Impugned Award stand vitiated by a reversal of the
settled burden of proof and are consequently unsustainable in law.
Learned counsel for the Petitioner would therefore submit that the
Impugned Award proceeds on an erroneous legal premise that the
weakness of the Petitioner’s defence, before the learned Tribunal,
could compensate for deficiencies in the Respondent’s evidence,
which is contrary to the fundamental principles governing
adjudication of civil claims.
38. Learned counsel for the Petitioner would further submit that the
Impugned Award is rendered suspect from the face of the record
inasmuch as the stamp papers upon which the Impugned Award was
engrossed bear dates preceding the date on which the Impugned
Award itself is stated to have been pronounced.
39. It would be contended that the Impugned Award records one
date of pronouncement whereas the stamp papers used for engrossing
the Impugned Award appears to have been purchased much prior
thereto, thereby giving rise to serious doubts regarding the actual date
on which the Award was made and signed.
40. Learned counsel would further submit that the Impugned Award
is also liable to be set aside on account of the inordinate and
unexplained delay in its pronouncement. It is contended that the
arbitral proceedings stood concluded and the Award was reserved;
however, the same ultimately came to be rendered after an
extraordinary lapse of approximately eighteen months. Learned
counsel for the Petitioner would therefore contend that such prolonged
delay defeats the very objective of arbitration as an expeditious
dispute resolution mechanism and raises a legitimate apprehension
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that the learned Arbitrator may not have retained a proper recollection
of the evidence, submissions and issues that arose for consideration.
41. It would further be submitted that the delay in pronouncement
of the Award has not been explained either in the Impugned Award
itself or otherwise on record. Learned counsel would contend that an
Award rendered after such an inordinate lapse of time stands vitiated
as the delay itself causes serious prejudice to the parties and
undermines confidence in the adjudicatory process.
42. Learned counsel for the Petitioner would accordingly contend
that the circumstances surrounding the rendering of the Impugned
Award, namely the apparent discrepancy in the dates borne on the
stamp papers and the Impugned Award, coupled with the unexplained
delay of approximately eighteen months in its pronouncement, cast
serious doubt upon the integrity and validity of the arbitral process.
43. Learned counsel for the Petitioner would therefore submit that
an Award rendered after such an inordinate lapse of time, without any
explanation whatsoever, defeats the fundamental objective of
arbitration as an expeditious mechanism for dispute resolution and
gives rise to a legitimate apprehension that the adjudication may not
have been based upon a contemporaneous consideration of the
evidence and submissions advanced by the parties. It would
accordingly be submitted that the Impugned Award suffers from
patent illegality and is contrary to the fundamental policy of Indian
law, thereby warranting interference under Sections 34(2)(b)(ii) and
34(2A) of the A&C Act.
44. Learned counsel for the Petitioner would further submit that the
Impugned Award is also liable to be set aside on the ground that the
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learned Arbitrator failed to adjudicate upon material issues
specifically framed for determination between the parties.
45. It would be contended that after completion of pleadings, the
learned Arbitrator framed thirteen issues for adjudication, including
Issue No. IV and Issue No. VII, which went to the root of the disputes
raised by the parties. However, despite framing the said issues, no
findings whatsoever have been returned thereon in the Impugned
Award.
46. Learned counsel would submit that Issue No. IV specifically
required determination of whether the Respondent was entitled to
commission in respect of exports for which sub-agents appointed by
the Respondent had already received payment directly from the
Petitioner. Likewise, Issue No. VII required adjudication of the
Petitioner’s defence that the Respondent was under reciprocal
contractual obligations under the Agreement dated 31.03.2000 and
whether such obligations had in fact been performed. Both issues were
framed on the basis of rival pleadings and constituted substantive
defences raised by the Petitioner. Despite the same, the learned
Arbitrator has proceeded to allow the claims without rendering any
finding on either of the aforesaid issues.
47. It would contended be that once issues are framed, the
adjudicatory authority is under an obligation to return findings
thereon. Failure to decide issues which arise from the pleadings and
which have a direct bearing on the rights and liabilities of the parties
amounts to a failure to adjudicate material disputes referred to
arbitration. According to the Petitioner, the Award proceeds as though
Issue Nos. IV and VII did not exist, thereby leaving vital questions
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completely unanswered.
48. Learned counsel would further submit that the omission is not a
mere irregularity but strikes at the very foundation of the Award. Had
the learned Arbitrator examined the aforesaid issues, the conclusions
ultimately reached may have been materially different. The Impugned
Award therefore suffers from patent illegality apparent on the face of
the record and is liable to be set aside for non-consideration of
material issues which formed part of the reference before the learned
Arbitrator.
SUBMISSION ON BEHALF OF THE RESPONDENT:
49. Learned senior counsel appearing on behalf of the Respondent
would submit that the present Petition is entirely misconceived and
seeks to convert proceedings under Section 34 of the A&C Act into a
full-fledged appeal against the findings returned by the learned
Arbitrator. It would be contended that the Impugned Award is a
detailed and reasoned Award rendered after consideration of the
pleadings, oral evidence and documentary material placed on record
by both parties and does not warrant interference within the limited
parameters of Section 34 of the A&C Act.
50. Learned senior counsel would submit that the challenge
founded upon the alleged invalidity of the 1999 Agreement is wholly
devoid of merit. It would be contended that the learned Arbitrator has
specifically considered the rival contentions concerning the said
Agreement and has returned a categorical finding that the parties had
acted upon the terms thereof for several years.
51. According to the Respondent, the mere absence of the signature
of one party on the Agreement dated 30.04.1999 could not, by itself,
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negate the existence of a binding contractual arrangement when the
conduct of the parties unequivocally demonstrated acceptance and
performance of the contractual terms.
52. It would further be submitted that the Agreement dated
31.03.2000 did not supersede or extinguish the earlier arrangement but
merely modified certain commercial terms governing the relationship
between the parties. Learned counsel would contend that the
arbitration clause contained in the original arrangement continued to
govern the disputes between the parties and that the learned Arbitrator
rightly concluded that a valid and enforceable arbitration agreement
existed between them. It would further be submitted that the finding
returned by the learned Arbitrator on this aspect is a pure finding of
fact based on the documentary record and conduct of the parties and is
therefore not amenable to interference under Section 34 of the A&C
Act.
53. Learned senior counsel would further submit that the
Petitioner’s grievance regarding non-framing of a specific issue
concerning the validity of the 1999 Agreement is equally
unsustainable. It would be contended that the learned Arbitrator
specifically considered the question concerning the existence of the
contractual relationship and the arbitration agreement while
adjudicating the disputes and ultimately returned findings thereon in
the Award itself. According to the Respondent, mere absence of a
separately numbered issue would not vitiate the Award when the
controversy itself stood considered and adjudicated upon.
54. Learned senior counsel would further submit that the objections
raised by the Petitioner under Sections 12 and 16 of the A&C Act
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were duly considered and rejected by the learned Arbitrator during the
course of the proceedings. It would be contended that the Petitioner
was afforded full opportunity to agitate all objections regarding the
constitution of the learned Tribunal and the existence of arbitral
jurisdiction. The mere fact that such objections were not accepted
cannot furnish a ground for setting aside the Award.
55. It would further be submitted that the challenge raised under
Section 12 of the A&C Act was not based upon any legally recognised
ground giving rise to doubts regarding the independence or
impartiality of the learned Arbitrator. Learned senior counsel would
contend that the Petitioner merely sought disclosure regarding the
process of appointment and, after due consideration, the learned
Arbitrator found no basis to sustain such objections. According to the
learned senior counsel, the Petitioner has failed to demonstrate any
circumstance falling within the scope of Section 12 of the A&C Act
which could render the constitution of the learned Tribunal invalid.
56. Learned senior counsel would further submit that the challenge
under Section 16 of the A&C Act was likewise considered and
rejected. It would be contended that the learned Arbitrator expressly
dealt with the question of jurisdiction while examining the existence
of the contractual arrangement and the arbitration agreement between
the parties. The Impugned Award itself records findings on the
existence of the agreement and the maintainability of the claims.
57. It would therefore be contended that the constitution of the
learned Tribunal and the jurisdiction exercised by it stood squarely
within the framework contemplated by the parties and the governing
arbitration rules. No infirmity falling within Section 34(2)(a)(v) of the
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A&C Act has been established and the challenge on this ground is
liable to be rejected.
58. Learned senior counsel would next submit that the allegation
regarding reversal of the burden of proof is founded upon a complete
misreading of the Award. It would be contended that the learned
Arbitrator examined the documentary and oral evidence adduced by
the Respondent and, only upon being satisfied that the Respondent
had established its case, proceeded to evaluate the defence raised by
the Petitioner.
59. Learned senior counsel for the Respondent would submit that
the Impugned Award does not proceed on the basis that the Petitioner
was required to prove its innocence or disprove the Respondent’s
claims in the first instance. Rather, the observations relied upon by the
Petitioner merely reflect the learned Arbitrator’s conclusion that the
evidence led by the Respondent remained un-rebutted despite
adequate opportunity being afforded to the Petitioner. Learned counsel
would submit that appreciation of evidence and determination of the
evidentiary value of material placed on record falls squarely within the
domain of the learned Arbitrator and cannot be reopened in
proceedings under Section 34 of the A&C Act.
60. Learned counsel would further contend that the challenge
founded upon alleged errors in appreciation of evidence, including the
findings concerning TDS deductions and the documentary record
relied upon by the learned Arbitrator, amounts to nothing more than
an invitation to this Court to undertake a fresh re-appreciation of the
evidence. Such an exercise, according to the learned senior counsel for
the Respondent, is expressly impermissible within the limited scope of
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judicial review available under Section 34 of the A&C Act.
61. Learned senior counsel would further submit that the contention
regarding the dates borne on the stamp papers used for engrossing the
Impugned Award is wholly frivolous and does not affect the validity
of the Impugned Award in any manner. It would be contended that the
Petitioner has failed to demonstrate how the alleged discrepancy has
caused any prejudice or has any bearing upon the adjudication of the
disputes between the parties. According to the learned senior counsel
for the Respondent, the challenge is founded on mere conjecture and
speculation unsupported by any substantive material.
62. Learned senior counsel would further submit that the challenge
based on the alleged delay in pronouncement of the Award is equally
untenable. It would be contended that mere delay in rendering an
Award, by itself, does not furnish an independent ground for setting
aside the Impugned Award unless actual prejudice is demonstrated.
The Petitioner has neither pleaded nor established any prejudice
arising from the alleged delay.
63. It would further be submitted that the Impugned Award runs
into considerable detail, analyses the pleadings and evidence
extensively and returns reasoned findings on each claim and defence.
According to the learned senior counsel, the nature and quality of the
reasoning contained in the Award itself dispels any suggestion that the
learned Arbitrator failed to properly consider the material on record.
64. Learned senior counsel would further submit that the challenge
founded upon non-adjudication of Issue Nos. IV and VII is likewise
misconceived. It would be contended that an arbitral award must be
read as a whole and not in a fragmented or hyper-technical manner.
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According to the learned senior counsel for the Respondent, the
findings recorded by the learned Arbitrator while adjudicating the
claims and defences substantially answer the issues framed and
disclose the reasoning which led to the conclusions ultimately
reached.
65. It would further be submitted that the law does not require an
arbitral award to contain a separate heading or issue-wise
determination corresponding to every issue framed during the
proceedings. What is required is that the disputes referred to
arbitration are adjudicated and reasons are furnished for the
conclusions reached. Learned senior counsel would contend that a
holistic reading of the Impugned Award clearly demonstrates that all
material controversies between the parties stood considered and
determined by the learned Arbitrator.
66. Learned senior counsel would therefore submit that the
Petitioner has failed to establish that any dispute forming part of the
reference remained undecided or that any omission in the Award has
occasioned prejudice affecting the merits of the adjudication. The
challenge based upon Issue Nos. IV and VII is accordingly stated to be
devoid of merit.
67. In conclusion, learned senior counsel for the Respondent would
submit that every challenge raised by the Petitioner ultimately seeks a
re-examination of factual findings, appreciation of evidence and
conclusions arrived at by the learned Arbitrator after a full-fledged
adjudication.
68. It would be contended that none of the grounds urged by the
Petitioner disclose any patent illegality, jurisdictional error, violation
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of natural justice or conflict with the fundamental policy of Indian
law. The Impugned Award, being a reasoned and plausible view
arising from the material on record, is therefore entitled to judicial
deference and warrants no interference under Section 34 of the A&C
Act. Accordingly, dismissal of the present Petition is prayed for.
ANALYSIS:
69. 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.
70. At the outset, it is apposite to note that this Court is conscious
of the limited scope of its jurisdiction while examining an objection
petition under Section 34 of the A&C Act. The contours of judicial
intervention in such proceedings have been authoritatively delineated
and settled by a consistent and evolving line of precedents of the
Hon’ble Supreme Court.
71. 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.8, 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 principles8
(2025) 2 SCC 417
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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 view
countenances judicial law making in these areas. In the field of
private international law, it was pointed out, courts refuse to apply
a rule of foreign law or recognise a foreign judgment or a foreign
arbitral award if it is found that the same is contrary to the public
policy of the country in which it is sought to be invoked or
enforced. However, it was clarified, a distinction is to be drawn
while applying the rule of public policy between a matter governed
by domestic law and a matter involving conflict of laws. It was
observed that the application of the doctrine of public policy in the
field of conflict of laws is more limited than that in the domestic
law and the courts are slower to invoke public policy in cases
involving a foreign element than when a purely municipal legal
issue is involved. It was held that contravention of law alone will
not attract the bar of public policy, and something more than
contravention of law is required.
*****
37. What is clear from above is that for an award to be against
public policy of India a mere infraction of the municipal laws of
India is not enough. There must be, inter alia, infraction of
fundamental policy of Indian law including a law meant to serve
public interest or public good.
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*****
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. In Associate Builders v. DDA, (2015) 3 SCC 49, a two-Judge
Bench of this Court, held that audi alteram partem principle is
undoubtedly a fundamental juristic principle in Indian law and is
enshrined in Sections 18 and 34(2)(a)(iii) of the 1996 Act. In
addition to the earlier recognised principles forming fundamental
policy of Indian law, it was held that disregarding:
(a) orders of superior courts in India; and
(b) the binding effect of the judgment of a superior court would
also be regarded as being contrary to the fundamental policy of
Indian law.
Further, elaborating upon the third juristic principle (i.e. qua
perversity), as laid down in ONGC Ltd. v. Western Geco
International Ltd., (2014) 9 SCC 263, it was observed that where:
(i) a finding is based on no evidence; or
(ii) an Arbitral Tribunal takes into account something irrelevant to
the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, such decision
would necessarily be perverse [Associate Builders case, (2015) 3
SCC 49, para 31].
To this a caveat was added by observing that when a court applies
the “public policy test” to an arbitration award, it does not act as a
court of appeal and, consequently, errors of fact cannot be
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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
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
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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
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
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“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.
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].
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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 SsangyongEngg. & Construction Co. Ltd. v. NHAI, (2019)
15 SCC 131 this Court specifically dealt with the 2015
Amendment which inserted sub-section (2-A) in Section 34 of the
1996 Act. It was held that “patent illegality appearing on the face
of the award” refers to such illegality as goes to the root of matter,
but which does not amount to mere erroneous application of law. It
was also clarified that what is not subsumed within “the
fundamental policy of Indian law”, namely, the contravention of a
statute not linked to “public policy” or “public interest”, cannot be
brought in by the backdoor when it comes to setting aside an award
on the ground of patent illegality [See SsangyongEngg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131]. Further, it
was observed, reappreciation of evidence is not permissible under
this category of challenge to an arbitral award
[See SsangyongEngg. & Construction Co. Ltd. v. NHAI, (2019)
15 SCC 131].
Perversity as a ground of challenge
69. Perversity as a ground for setting aside an arbitral award was
recognised inONGC Ltd. v. Western Geco International Ltd.,
(2014) 9 SCC 263. Therein it was observed that an arbitral
decision must not be perverse or so irrational that no reasonable
person would have arrived at the same. It was observed that if an
award is perverse, it would be against the public policy of India.
70. InAssociate Builders v. DDA, (2015) 3 SCC 49 certain tests
were laid down to determine whether a decision of an Arbitral
Tribunal could be considered perverse. In this context, it was
observed that where:
(i) a finding is based on no evidence; or
(ii) an Arbitral Tribunal takes into account something irrelevant to
the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, such decision
would necessarily be perverse.
However, by way of a note of caution, it was observed that when a
court applies these tests it does not act as a court of appeal and,
consequently, errors of fact cannot be corrected. Though, a
possible view by the arbitrator on facts has necessarily to pass
muster as the arbitrator is the ultimate master of the quantity and
quality of evidence to be relied upon. It was also observed that an
award based on little evidence or on evidence which does not
measure up in quality to a trained legal mind would not be held to
be invalid on that score.
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71. In SsangyongEngg. & Construction Co. Ltd. v. NHAI, (2019)
15 SCC 131, which dealt with the legal position post the 2015
Amendment in Section 34 of the 1996 Act, it was observed that a
decision which is perverse, while no longer being a ground for
challenge under “public policy of India”, would certainly amount
to a patent illegality appearing on the face of the award. It was
pointed out that an award based on no evidence, or which ignores
vital evidence, would be perverse and thus patently illegal. It was
also observed that a finding based on documents taken behind the
back of the parties by the arbitrator would also qualify as a
decision based on no evidence inasmuch as such decision is not
based on evidence led by the parties, and therefore, would also
have to be characterised as perverse [See SsangyongEngg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131].
72. The tests laid down in Associate Builders v. DDA, (2015) 3
SCC 49 to determine perversity were followed in SsangyongEngg.
& Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 and later
approved by a three-Judge Bench of this Court in Patel Engg.
Ltd. v. North Eastern Electric Power Corpn. Ltd., (2020) 7 SCC
167.
73. In a recent three-Judge Bench decision of this Court 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
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
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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].
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
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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)
72. In light of the aforesaid principles, this Court is required to
examine whether the Impugned Award suffers from any jurisdictional
infirmity, patent illegality apparent on the face of the Award,
perversity in the sense recognised by law, violation of the principles of
natural justice or conflict with the fundamental policy of Indian law.
Equally, this Court must remain conscious that it cannot undertake a
re-appreciation of evidence or substitute its own view for a plausible
view adopted by the learned Arbitrator merely because another view
may also be possible.
73. Examined in the aforesaid backdrop, the principal challenge
raised by the Petitioner concerns the validity and effect of the 1999
Agreement and the existence of a valid arbitration agreement between
the parties.
74. It is the case of the Petitioner that the 1999 Agreement never
fructified into a binding contract as it did not bear the signatures of
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both parties and, therefore, could not constitute the source of arbitral
jurisdiction and that the 2000 Agreement was an independent contract
which neither referred to nor incorporated the earlier 1999 Agreement.
75. This Court is unable to accept the aforesaid submission.
76. A perusal of the Impugned Award demonstrates that the learned
Arbitrator specifically noticed the objection raised by the Petitioner
regarding the alleged non-existence of the 1999 Agreement. In fact,
Paragraph No. 11 of the Impugned Award records in considerable
detail the very contentions which are now sought to be reiterated
before this Court, namely, that the 1999 Agreement was unsigned, that
the 2000 Agreement did not refer to the earlier 1999 Agreement and
that the latter 2000 Agreement amounted to novation of the former.
77. The learned Arbitrator thereafter proceeded to examine the
documentary record and returned a categorical finding in Paragraph
No. 19 of the Impugned Award that the objection regarding non-
existence of the 1999 Agreement was liable to be rejected. The
learned Arbitrator observed that both parties had acted under the
Agreement, that payments had been made thereunder, that the
modifications under the 2000 Agreement had been signed by both
parties and that various communications exchanged between the
parties acknowledged the subsisting arrangement between them.
Paragraph 19 of the Impugned Award is reproduced herein under for
ready reference:
“19. The objection taken by the Respondent regarding the
nonexistence of the agreement of 30.4.1999 and its modification on
31.03.2000, the same is rejected, as the claimant and the
Respondent have both worked under the agreement and have acted
upon the same, and the Respondent has made payments to the
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31.03.2000 have been signed by both the parties. The Respondent
vide its letters of 01.04.2004, 13.07.2004 and 04.02.2004 has
admitted the liability to make payments to the claimant. The
Respondents were sending the statements of commission regularly
for the export orders to the Claimants as per the agreement between
themselves.”
78. The challenge raised by the Petitioner therefore proceeds on an
incorrect factual premise that the issue concerning the existence and
validity of the 1999 Agreement remained undecided. The Impugned
Award itself demonstrates that the issue was consciously considered
and adjudicated upon.
79. Whether the conclusion reached by the learned Arbitrator on the
basis of the correspondence exchanged between the parties and their
conduct is the only possible conclusion is not the question before this
Court. The question under Section 34 of the A&C Act is whether the
view adopted by the learned Arbitrator is a possible view arising from
the material on record. This Court finds that it undoubtedly is.
80. Significantly, the learned Arbitrator relied not merely upon the
existence of the Agreement itself but also upon the conduct of the
parties in acting thereunder for several years, generation of
commission statements, payment of commission and admissions
contained in the correspondence exchanged between the parties. Such
appreciation of evidence falls squarely within the domain of the
Arbitral Tribunal and cannot be revisited in proceedings under Section
34 of the A&C Act.
81. Even assuming that one or more of the communications referred
to by the learned Arbitrator were incorrectly described or that the
evidentiary value attributed to a particular document is open to debate,
the finding regarding the existence of the contractual relationship does
not rest upon any single document in isolation. The Impugned Award
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demonstrates that the conclusion was founded upon the cumulative
effect of the parties’ conduct, admitted commercial dealings, payment
of commission and contemporaneous correspondence. Consequently,
even if an individual piece of evidence is viewed differently, the
finding itself cannot be characterised as one based on no evidence or
as suffering from patent perversity.
82. This Court, therefore, finds no merit in the challenge founded
upon the ground of patent illegality sought to be invited on the
premise of alleged invalidity of the 1999 Agreement or alleged non-
existence of the Arbitration agreement.
83. The next limb of challenge mounted by the Petitioner concerns
the objections raised by the Petitioner by way of Applications under
Sections 12 and 16 of the A&C Act before the learned Tribunal and
rejection thereof.
84. The Petitioner contends that the constitution of the learned
Tribunal itself was under challenge and that its objections regarding
the appointment of the learned Arbitrator and the existence of arbitral
jurisdiction were not effectively adjudicated.
85. This Court is unable to accept the aforesaid contention. The
record reveals that the arbitral proceedings continued for several years
and that the Petitioner actively participated therein. The Applications
preferred by the Petitioner under Sections 12 and 16 of the A&C Act
were considered during the course of the proceedings and orders came
to be passed thereon.
86. More importantly, the Petitioner has failed to demonstrate
before this Court any circumstance giving rise to justifiable doubts
regarding the independence or impartiality of the learned Arbitrator.
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No case of ineligibility under Section 12(5) of the A&C Act has been
made out. Equally, no violation of the agreed procedure for
constitution of the learned Tribunal has been established.
87. The grievance of the Petitioner essentially appears to be that the
arbitral institution and the learned Arbitrator did not furnish the
disclosures and records sought by it regarding the process of
appointment. However, mere dissatisfaction with the response
furnished to such requests cannot, by itself, invalidate the constitution
of the learned Tribunal. More so, when the learned Arbitrator was
appointed under the institutional rules of FICCI, particularly Rule 22
thereof.
88. Furthermore, insofar as the jurisdictional objection is
concerned, the same ultimately rested upon the Petitioner’s challenge
to the existence of a valid arbitration agreement. Once the learned
Arbitrator examined the contractual relationship between the parties
and returned a finding affirming the existence of the Agreement and
arbitration clause, the jurisdictional objection necessarily stood
answered. This Court therefore finds no infirmity attracting Section
34(2)(a)(v) of the A&C Act.
89. It is also pertinent to note that the Petitioner has not
demonstrated how the alleged procedural deficiencies in the
appointment process translated into any actual prejudice during the
conduct of the arbitral proceedings. The Petitioner actively
participated in the proceedings, filed detailed pleadings, examined
witnesses, cross-examined the witnesses produced by the Respondent
and fully contested the claims on the merits. In the absence of any
demonstrated prejudice, the challenge cannot succeed merely on
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speculative assertions concerning the process of appointment.
90. The next contention advanced by the Petitioner relates to the
alleged reversal of the burden of proof by the learned Arbitrator.
According to the Petitioner, the learned Arbitrator proceeded on the
premise that the Petitioner had failed to disprove the case of the
Respondent rather than requiring the Respondent to establish its claim
in the first instance.
91. A reading of the Impugned Award along with the record of the
evidence in its entirety does not support the aforesaid submission.
92. The Impugned Award discloses a detailed examination by the
learned Arbitrator of the documentary evidence produced by the
Claimant, including commission statements, correspondence
exchanged between the parties, payment advices, TDS certificates and
admissions emerging from the oral testimony of witnesses.
93. The learned Arbitrator specifically relied upon the Petitioner’s
own communication dated 27.03.2004 acknowledging liability to pay
commission on pending orders, the statement of dues furnished by the
Respondent, the calculation sheets generated by the Petitioner itself
and the admissions made during cross-examination.
94. It is only after discussing the aforesaid material that the learned
Arbitrator observed that the Petitioner had failed to disprove the
amount claimed by the Respondent and had failed to produce any
documentary material in support of its defence.
95. The observations relied upon by the Petitioner cannot therefore
be read in isolation. The Impugned Award does not proceed on the
basis that the burden of proof rested upon the Petitioner from the
inception. Rather, the Award first records reasons for accepting the
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evidence adduced by the Respondent and thereafter notices that the
same remained substantially unrebutted.
96. In the considered opinion of this Court, the challenge on this
ground amounts to nothing more than an invitation to reassess the
evidentiary value assigned by the learned Arbitrator to the material on
record, an exercise which is wholly impermissible under Section 34 of
the A&C Act.
97. The Petitioner has next assailed the Impugned Award on the
ground that the stamp papers upon which the Award was engrossed
bear dates preceding the date of pronouncement of the Award.
98. Apart from drawing an inference on the basis of the dates borne
on the stamp papers, the Petitioner has placed no material whatsoever
on record to establish that the Impugned Award was in fact signed or
rendered on a date different from the date recorded therein.
99. Mere suspicion, conjecture or surmise cannot constitute a
ground for setting aside an arbitral award under Section 34 of the
A&C Act. The Petitioner has neither demonstrated prejudice nor
established any illegality flowing from the alleged discrepancy. This
contention therefore merits rejection.
100. The next submission concerns the delay of approximately
eighteen months in pronouncement of the Impugned Award.
101. There can be no dispute that arbitral proceedings are expected
to culminate in a timely determination and that unexplained delays in
rendering awards are undesirable. However, it is equally well settled
that delay by itself does not constitute an independent ground for
setting aside an award. The party challenging the award must
additionally demonstrate that such delay has resulted in prejudice
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affecting the adjudicatory process.
102. In the present case, apart from a general apprehension that the
learned Arbitrator may not have retained a proper recollection of the
proceedings, no specific prejudice has been demonstrated.
103. On the contrary, the Impugned Award runs into considerable
detail and reflects an extensive examination of the pleadings,
documentary evidence, oral testimony and rival submissions. In the
considered opinion of this Court, the reasoning contained in
Paragraphs 13 to 30 of the Impugned Award demonstrates active
engagement with the material placed on record and dispels the
suggestion that the adjudication suffered on account of lapse of time.
104. In the absence of any demonstrated prejudice, this Court is
unable to hold that the delay in pronouncement, by itself, renders the
Impugned Award liable to be set aside. Mere delay, without anything
more, cannot lead to an automatic inference that the learned Arbitrator
failed to consider the evidence or submissions advanced by the parties.
Such a presumption would run contrary to the settled principle that
arbitral awards carry a presumption of regularity. Unless the
challenging party is able to point out specific findings demonstrably
attributable to such delay, interference under Section 34 of the A&C
Act would be unwarranted.
105. The final challenge raised by the Petitioner concerns Issue Nos.
IV and VII framed by the learned Arbitrator. According to the
Petitioner, the learned Arbitrator framed the said issues but failed to
return findings thereon.
106. It is true that the Award does not contain separately captioned
findings corresponding to Issue Nos. IV and VII. However, an arbitral
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award must be read as a whole and not in a fragmented manner.
107. Issue No. IV concerned the entitlement of the Respondent to
commission in respect of exports where sub-agents had allegedly
received payment. Issue No. VII concerned the reciprocal obligations
of the Respondent under the Agreement and the consequences of any
alleged failure to perform such obligations.
108. A reading of the Impugned Award demonstrates that the learned
Arbitrator considered the allegations regarding breach of obligations
by the Respondent, the defence founded upon exports through
collaborators and the objections regarding entitlement to commission
before ultimately rejecting the Petitioner’s defence.
109. The law does not require an arbitral award to mirror the format
of a civil court judgment or to contain separately numbered findings
corresponding to every issue framed during the proceedings. What is
required is that the disputes referred to arbitration stand adjudicated
and that reasons are furnished for the conclusions reached.
110. In the present case, this Court finds that the substance of the
controversies underlying Issue Nos. IV and VII stood considered
while adjudicating the claims and defences of the parties. Merely
because the findings are not structured issue-wise cannot furnish a
ground for interference under Section 34 of the A&C Act.
111. The remaining submissions advanced by the Petitioner,
including those relating to TDS deductions, exports to allegedly
excluded territories, entitlement to commission in respect of pending
orders, payments made to sub-agents, collaborator transactions and
interpretation of Clause 9 of the Agreements, are all founded upon the
Petitioner’s preferred reading of the contractual provisions and
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evidentiary record.
112. The learned Arbitrator has considered the material placed
before it and adopted a particular view on such issues. Whether
another interpretation was possible is immaterial. None of the
aforesaid contentions demonstrate that the view adopted by the
learned Arbitrator was one which no reasonable person could have
taken or that the Award is contrary to the terms of the contract in a
manner attracting Section 34(2A) of the A&C Act.
113. It is equally well settled that interpretation of contractual
clauses falls primarily within the province of the Arbitral Tribunal.
Unless the construction adopted by the learned Arbitrator is one that
no reasonable person could have arrived at or is plainly contrary to the
contractual stipulations, interference under Section 34 of the A&C Act
would not be warranted.
114. Ultimately, every ground urged by the Petitioner seeks either a
re-appreciation of evidence, reconsideration of findings of fact or
substitution of the view adopted by the learned Arbitrator with another
possible view.
115. The Impugned Award reflects due consideration of the
pleadings, documentary evidence and rival submissions advanced
before the learned Arbitrator. The findings returned therein are
founded upon material available on record and cannot be characterised
as perverse, irrational or unsupported by evidence.
116. This Court is therefore unable to discern any patent illegality
appearing on the face of the Award, any violation of the fundamental
policy of Indian law, any breach of principles of natural justice or any
jurisdictional infirmity warranting interference under Section 34 of the
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A&C Act. The challenge raised by the Petitioner accordingly fails.
DECISION:
117. In view of the foregoing discussion, the present Petition under
Section 34 of the A&C Act is dismissed.
118. Accordingly, the present Petition, along with pending
Application(s), if any, is disposed of.
119. There shall be no Order as to the costs.
HARISH VAIDYANATHAN SHANKAR, J.
JULY 06, 2026/DJ
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