Patna High Court
The Bihar State Food And Civil Supplies … vs Piyus Kumar on 23 May, 2026
Author: Mohit Kumar Shah
Bench: Mohit Kumar Shah, Arun Kumar Jha
IN THE HIGH COURT OF JUDICATURE AT PATNA
COMMERCIAL APPEAL No.7 of 2025
======================================================
1. The Bihar State Food and Civil Supplies Corporation Ltd. Sone Bhawan,
Daroga Prasad Rai Path, R. Block, Road No 2, Patna 800001, through its
Managing Director.
2. The Managing Director, The Bihar State Food and Civil Supplies
Corporation Ltd. Khadya Bhawan, R. Block, Rd. No. 2, Patna 800001.
3. The District Manager, The Bihar State Food and Civil Supplies Corporation
Ltd., Madhubani.
... ... Appellant/s
Versus
Piyus Kumar Son of Sanjeev Kumar Singh, Resident of Sinhma, P.S
Matihani, District Begusarai.
... ... Respondent/s
======================================================
with
COMMERCIAL APPEAL No. 14 of 2025
======================================================
1. The Bihar State Food and Civil Supplies Corporation Ltd. Khadya Bhawan,
5th Floor, Birchand Patel Path, Patna, at present Khadya Bhawan, R. Block,
Patna.
2. The Managing Director, The Bihar State Food and Civil Supplies
Corporation Ltd., Khadya Bhawan, Daroga Prasad Path, R. Block, Rd. No.-
2, Patna- 800001.
3. The District Manager, The Bihar State Food and Civil Supplies Corporation,
Madhubani, District- Madhubani.
... ... Appellant/s
Versus
Piyush Kumar Son of Sanjeev Kumar Singh Resident of Sihma, P.S.-
Matihani, District- Begusarai.
... ... Respondent/s
======================================================
Appearance :
(In COMMERCIAL APPEAL No. 7 of 2025)
For the Appellant/s :Mr.Shailendra Kumar Singh, Adv.
For the Respondent/s :Mr. Prashant Kumar, Adv.
Mr. Manish Prakash, Adv.
Mr. Kumar Anjaneya Shanu, Adv.
Mr. Rohit Raj, Adv.
(In COMMERCIAL APPEAL No. 14 of 2025)
For the Appellant/s :Mr.Shailendra Kumar Singh, Adv.
For the Respondent/s :Mr. Prashant Kumar, Adv.
Mr. Manish Prakash, Adv.
Mr. Kumar Anjaneya Shanu, Adv.
Mr. Rohit Raj, Adv.
Mr. Ranvir Pratap Singh, Adv.
======================================================
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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CORAM: HONOURABLE MR. JUSTICE MOHIT KUMAR SHAH
and
HONOURABLE MR. JUSTICE ARUN KUMAR JHA
CAV JUDGMENT
(Per: HONOURABLE MR. JUSTICE MOHIT KUMAR SHAH)
Date : 23-05-2026
COMMERCIAL APPEAL No. 7 of 2025
1. The present appeal has been filed under Section 13 (1A)
of the Commercial Courts Act, 2015 (herein after referred to as
the "Act, 2015") read with Section 37 of the Arbitration and
Conciliation Act, 1996 (herein after referred to as the "Act,
1996") against the Judgment dated 25.07.2025, passed by the
Ld. Court of Principal District Judge, Patna (herein after
referred to as the "learned PDJ, Patna") in Miscellaneous
(Arbitration) Case No. 158 of 2020.
Facts of the Case:
2. The genesis of the present appeal lies in an agreement
executed in between the appellants and the claimant-Respondent
herein dated 24.10.2016, pursuant to issuance of notice inviting
tender from eligible candidates, for being appointed as
transporting-cum-handling agent for a period of three years for
the revenue District-Madhubani and acceptance of the tender
submitted by the Respondent herein. The claimant-Respondent
was entrusted with the work of transportation of food-grains and
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other commodities including edible oil to the destinated
godown, as directed by or on behalf of the appellants and
according to the route chart fixed for the said purpose. The
period of contract was for three years pertaining to the District-
Madhubani. The claimant-Respondent is stated to have executed
the work of transporting-cum-handling agent under the
agreement and had submitted several bills in between the years
2017 to 2019.
3. It appears that disputes had erupted in between the
parties, leading to claims and counter claims being asserted as
also leading to issuance of several show cause notices to the
claimant-Respondent by the appellants, which were duly replied
to by the claimant-Respondent. Ultimately, the District
Manager, Bihar State Food and Civil Supplies Corporation Ltd.
(hereinafter referred to as "the BSFC"), Madhubani issued a
show cause notice dated 13.5.2019 to the claimant-Respondent,
as to why appropriate proceedings for cancellation of agreement
and blacklisting for five years be not taken in terms of Clause
4(f) of the agreement, which was replied to by the Respondent.
Thereafter, the District Transport Committee, Madhubani, vide
minutes of meeting dated 21.5.2019 decided to blacklist the
Respondent for a period of five years, forfeit the security
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deposit, terminate the agreement and invoke the Bank
guarantee. This led to issuance of a reasoned order dated
23.05.2019
, by which the claimant-Respondent was blacklisted
for five years, the security deposit was forfeited, the agreement
was terminated and the Bank guarantee was invoked. The said
order dated 23.5.2019 was challenged by the claimant-
Respondent by filing a writ petition bearing CWJC No. 12554
of 2019. A Ld. Single Judge of this Court by a judgment dated
21.08.2019 passed in CWJC No. 12554 of 2019 had quashed the
order of blacklisting of the claimant-Respondent, however
liberty was granted to the claimant-Respondent to seek his
remedy against the order of termination, forfeiture of security
deposit and invocation of Bank guarantee in a duly constituted
arbitration proceedings or as may be advised in accordance with
law.
4. The claimant-Respondent had then sent a notice to the
appellants on 29.05.2019 for appointing an arbitrator suggesting
three names, however the appellants did not respond to the said
notice as also failed to appoint any arbitrator within a reasonable
time, leading to filing of a request case bearing Request Case
No. 66 of 2019 under Section 11(6) of the Act, 1996 by the
claimant-Respondent, inter alia praying therein for appointment
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of an independent and impartial arbitrator, in view of Clause 21
of the agreement dated 24.10.2016. The Hon’ble Chief Justice
of this Court by an order dated 06.09.2019, passed in Request
Case No. 66 of 2019 and other analogous cases, in exercise of
the powers U/s. 11(6) of the Act, 1996 had appointed Hon’ble
Mr. Justice Sadananad Mukherjee, a retired Judge of the Patna
High Court as the sole Arbitrator to enter upon the disputes and
render his award in terms of the provisions of the Act, 1996.
5. The claimant-Respondent had then approached the Ld.
Sole Arbitrator on 13.09.2019 with a copy of the aforesaid order
dated 06.09.2019, passed in Request Case No. 66 of 2019 and
other analogous cases, leading to registration of Arbitration
Case No. 08 of 2019, whereafter the claimant-Respondent had
filed a detailed statement of claim on 11.10.2019, raising a
claim of a sum of Rs. 4,32,23,044.57.
6. The appellants had then filed statement of defence on
13.1.2020, inter alia stating therein that the claimant-
Respondent has submitted calculation chart at Annexure C-63,
page No. 137 of the claim petition without any supporting
documents and the admitted outstanding bills have already been
paid long back apart from the fact that as per Clause 22 of the
agreement, the claimant-Respondent is not entitled to claim any
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compensation for detention of trucks at the godown gates or by
law enforcing agencies during transit or at any other place. It
was also averred that the claimant-Respondent has engaged in
breach of the terms and conditions of the contract and he has
already received all the admissible outstanding amount against
the bills submitted by him, hence the claims raised by him is not
admissible in the eyes of law.
7. The Respondent-claimant had then filed a rejoinder to the
statement of defence on 11.2.2020, stating therein that in
support of the statement of claim annexed at Annexure C-63,
photo copies of several bills have been annexed as Annexure C-
2 to C-35 to the statement of claim wherein each and every fact
as well as supporting documents have been furnished in detail.
The claimant-Respondent had also filed a supplementary
statement of claim on 14.6.2020 wherein a sum of Rs.
21,00,000/- was claimed as compensation on account of
premature termination of contract, resulting in the claimant-
Respondent being prevented from transporting food-grains for
about seven months during the validity period of agreement,
apart from claiming a sum of Rs. 1,50,000/- as travelling
expenses for attending arbitral proceedings at Patna and a sum
of Rs. 1,60,000/- on the head of fees of the Ld. Advocate. It is a
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matter of record that no rebuttal was filed by the appellants to
the supplementary statement of claim.
8. The learned Sole Arbitrator had thereafter, framed the
following issues for consideration:-
“(i) Whether there is any cause of action for the present
proceeding.
(ii) Whether the claim is barred by limitation.
(iii) Whether the claimant has committed breach of
contract in violation of conditions of agreement/contract.
(iv) Whether the deductions from several bills of the
petitioner/claimant by the respondents are valid and
justified even without giving any opportunity to show
cause in this regard.
(v) Whether the petitioner/claimant is entitled to the
claims as per statement of claims, including the claim of
18 % interest per year on pending bills.
(vi) What relief or relief the petitioner is entitled?”
9. The Ld. Sole Arbitrator had finally passed the arbitral
award on 17.10.2020, holding that the claimant-Respondent
shall be entitled to the following award:-
“1. The claimant petitioner shall be paid an amount of
Rs. 2,67,37,638.62 paise (Two crore sixty-seven lakhs
thirty-seven thousand six hundred and thirty eighty) only
towards the claimed amount inclusive of security
amount.
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2. The claimant petitioner shall be entitled to
compensation amount of Rs. 45,00,000/- (Forty-five
lakhs) only under Section 54 of the Indian Contract Act.
3. The claimant petitioner shall be entitled to simple
interest @10% p.a. from 13.09.2019 till the date of
award and further 18% interest over awarded sum from
the date of award till realization over the awarded
amount.
4. The claimant petitioner shall be entitled to cost
towards fees and expenses of the Arbitrator and Courts
and other legal expenses.
5. Since the Arbitrator’s fees has not been paid by the
respondent, the same shall be treated as ‘unpaid cost’ of
the Award, under Section 39 of the Arbitration and
Conciliation Act, 1996, and accordingly Arbitrator shall
have lien over the award, the respondent shall be liable
for making payment of the fees of the Arbitrator before
pursuing the matter before the Court.”
10. The Ld. Sole arbitrator by the aforesaid award dated
17.10.2020 has though denied the claim of detention
charges/bills being contrary to Clause 22 of the agreement but
has not only awarded the aforesaid claim of Rs. 2,67,37,638.62/-
but also compensation amount to the tune of Rs. 45,00,000/- and
interest in favor of the claimant-Respondent.
11. The Ld. Sole Arbitrator had then by an order dated
13.11.2020 indicated that at page no. 17, paragraph no. 1 of the
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award dated 17.10.2020, there has been typographical error,
inasmuch as the compensation amount has been typed as Rs.
45,00,000/- instead of Rs. 25,00,000/- and since Section 33(3)
of the Act, 1996 postulates that the arbitral tribunal may correct
any error of the type referred to in Clause (a) of Sub-Section (1)
on its own initiation, within 30 days from the date of arbitral
award, the award portion at para-1 at page no. 17 and at para-1
at page no. 18, wherever compensation amount of Rs.
45,00,000/- has been mentioned, shall stand corrected and be
read as a sum of Rs. 25,00,000/-
12. The aforesaid award dated 17.10.2020, passed by the
learned Sole Arbitrator was challenged by the appellants before
the learned Court of Principal District Judge, Patna by filing a
petition on 24.12.2020 under Section 34 (2) & (2A) of the Act,
1996, which was numbered as Miscellaneous (Arbitration) Case
No. 158 of 2020 (arising out of award dated 17.10.2020 passed
in Arbitration Case No. 8 of 2019). The grounds which can be
culled out from the petition of the said Miscellaneous Case No.
158 of 2020 are enumerated herein below:-
(i) The Sole Arbitrator has passed the award only on the
basis of calculation chart produced by the claimant-
respondent without any supporting documents.
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(ii) The appellants had filed statement of defence before
the learned Sole Arbitrator and prayed for directing the
claimant-respondent to produce supporting documents
against his claims as also examine witnesses but the
learned Sole Arbitrator neither followed the provisions
contained in the Act, 1996 nor examined the records/
witnesses.
(iii) The learned Sole Arbitrator failed to consider that
several claims raised by the claimants are de hors the
agreement.
(iv) The learned Sole Arbitrator has awarded two
penalties against the appellants i.e. compensation amount
and interest on belated payment of the outstanding
amount although the admitted claims of the claimant-
respondent have already been paid by the appellants well
within time.
(v) The learned Sole Arbitrator failed to consider that the
claimant-respondent had failed to adhere to the terms of
the agreement regarding installing truck with GPS Load-
Cells at the time of lifting food grains, hence appropriate
deductions were made from the bills. The learned Sole
Arbitrator failed to consider that the appellants had
passed the admitted amount of bills of the claimant-
Respondent, which he had received without any
objection.
(vi) The impugned award is against the provisions of the
Act, 1996.
(vii) The learned Sole Arbitrator was though appointed to
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consider the disputes arising out of the agreement in
question, however he has considered several claims based
on different contracts and agreements.
13. The claimant-respondent had filed a reply on 23.12.2021
to the aforesaid Misc. Case No.158 of 2020, inter alia stating
therein that the said petition filed by the appellants is not
maintainable in view of the observations of the learned Sole
Arbitrator to the effect that since the arbitration fees has not
been paid by the appellants, same shall be treated as unpaid cost
of the award under Section 39 of the Act, 1996 and accordingly,
Arbitrator shall have lien over the award and the appellants shall
be liable to make payment of the fees of the Arbitrator before
pursuing the matter before the Court. The claimant-respondent
had also raised an objection regarding the aforesaid petition
filed by the appellants being in violation of the mandatory
provisions contained under Section 34 (5) of the Act, 1996, as
no prior notice was issued to the claimant-Respondent before
filing of the said petition. The claimant-respondent had also
raised the issue of jurisdiction inasmuch as the award under
challenge being in respect of commercial dispute as defined
under Section 2(1)(c)(xviii) of the Commercial Courts,
Commercial Division and Commercial Appellate Division of the
High Courts Act, 2015, the appellants were required to invoke
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the provisions of the Act, 2015, which has not been invoked,
thus the learned Court is not vested with the jurisdiction to
decide the case in hand. The claimant-respondent had refuted
the contentions made by the appellants in the aforesaid Misc.
(Arbitration) Case No. 158 of 2020 and had stated that in
pursuance to the agreement dated 24.10.2016 executed in
between the claimant-respondent and the appellants, the
claimant-respondent had diligently completed the assignment as
a Transporting-cum-Handling Agent within the framework of
the agreement dated 24.10.2016 and in fact the calculation chart
produced by the claimant-respondent with his claim petition is
supported by month-wise bills of transport and handling charges
as well as other relevant documents which were brought on
record before the learned Sole Arbitrator along with the
statement of claim filed by the claimant-respondent.
14. It has also been stated by the claimant-respondent in his
reply that proper opportunity was provided to the appellants by
the learned Sole Arbitrator to file relevant documents, however
no documents were filed by the appellants. It has also been
stated that as per Clause 12 A of the agreement, the appellants
were under contractual obligation to make payments of the bills
of the claimant-respondent herein within a period of 15 days of
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submission of bills, however none of the bills were paid within
time by the appellants. It has also been stated that the appellants
never received the bills with any objection. Nonetheless, huge
deductions were made by the appellants from the bills without
assigning any reason. It has also been stated that the appellants
did not file any affidavit of admission/denial of documents of
the claimant-respondent before the learned Sole Arbitrator,
hence all the documents filed by the claimant-respondent would
be deemed to have been accepted. It has further been stated that
the claims have only been raised with regard to the district
Madhubani for which the claimant-respondent was appointed as
a Transporting-cum-Handing Agent vide agreement dated
24.10.2016. Thus, it has been stated that the allegations
regarding award of such amount which were not pertaining to
the contract in question and were in connection with other
districts is baseless. Lastly, it has been stated in the reply filed
by the claimant-respondent that it is a well settled law, as held
by the Hon’ble Supreme Court in a catena of cases that any
error on the face of the award or in case there is any patent
illegality then the same can be examined by the learned Court
under Section 34 of the Act, 1996, however the facts/evidence
cannot be re-appreciated by the learned Court at the appellate
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stage.
15. It may be pertinent to mention here that in paragraph
No.17 of the reply filed by the claimant-respondent in Misc.
(Arbitration) Case No. 158 of 2020, it has been specifically
stated that claims have been raised only in connection with one
revenue district for which the claimant was appointed as
Transporting-cum-Handling Agent vide agreement dt.
24.10.2016, hence any allegation by the appellants to the effect
that claims over and above the agreement in question pertaining
to other districts have been raised by the claimant-respondent is
denied. At this juncture, it would be apt to reproduce paragraph
No. 5 (v) of the supplementary reply filed by the claimant-
Respondent herein below:-
“(v) For that the Hon’ble Sole Arbitrator has decided the
dispute within the scope of the agreement as disputes with
respect to only one agreement was adjudicated by the
Hon’ble Sole Arbitrator for which the Sole Arbitrator
was appointed but the plaintiff is trying to mislead this
Learned Court merely on the basis of the statement
without substantiating any documents in support of their
contention.”
16. The claimant-respondent, in his supplementary reply
dated 14.02.2022, filed in the said Misc. (Arbitration) Case No.
158 of 2020, inter alia stating therein that the statement of claim
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filed by the claimant-respondent before the learned Sole
Arbitrator is duly supported by relevant documents which had
already been submitted before the concerned officials of the
appellants from time to time in accordance with the terms and
conditions of the agreement. It has also been stated that interest
was claimed on the ground of delay and for the same notice
under Section 3 of the Interest Act was sent to the appellants
with regard to each and every outstanding amount of bills and
the same were also produced before the learned Sole Arbitrator.
It has further been stated that the calculation chart produced by
the claimant-respondent is duly supported by month-wise bill of
transport and handling charges as well as other documents
which were brought on record of the arbitral proceedings along
with the statement of claim filed by the claimant-respondent and
the monthly bills are contained in Annexures C-2 to C-35 of the
statement of claim, thus the contention of the appellants that no
proof/documents were produce is denied.
17. The learned court of PDJ, Patna by a judgment dated
25.07.2025, passed in Miscellaneous (Arbitration) Case No.158
of 2020, has been pleased to dismiss the said case holding that
no valid ground has been made out under Section (2) or (2A) of
Section 34 of the Arbitration and Conciliation Act, 1996 so as to
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warrant interference with the impugned arbitral award or the
findings of the learned Sole Arbitrator. At this juncture, it would
be relevant to enumerate in brief, the findings recorded by the
learned PDJ, Patna in the aforesaid judgement dated 25.07.2025,
herein below:-
(i) The learned PDJ, Patna has held that since the Ld. Sole
Arbitrator in his award dated 17.10.2020 has recorded
that no breach of contractual obligation was committed
by the claimant-respondent, rendering the deductions
from the bills not justified, the learned Sole Arbitrator has
rightly adjudicated that the deduction of
Rs.2,67,37,638.62/- was improper and unlawful, thus has
justifiably awarded the said amount in favor of the
claimant-respondent.
(ii) As regards compensation amount of Rs. 45 lakhs (sic
Rs. 25 lakhs) awarded by the learned Sole Arbitrator,
considering the provisions contained under Section 54 of
the Indian Contract Act, the learned PDJ, Patna has come
to a finding that since the claimant-respondent ought not
to have been subjected to loss arising from the default
committed by the appellants and on account of delayed
payments causing wrongful loss, as is reflected from the
arbitral award, the appellants failed to perform their part
of the agreement, hence they cannot claim the
performance of reciprocal promise from the claimant-
respondent, thus in view of the undue hardship and
financial loss suffered due to delayed payment and
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defaults on the part of the appellants, the learned Sole
Arbitrator has rightly and justifiably awarded
compensation of Rs.45 lakhs (sic Rs. 25 lakhs) in favour
of the claimant-respondent.
(iii) The learned PDJ, Patna has further held that it is well
settled established legal principal that a Court, while
adjudicating a petition under Section 34 of the Act, 1996
is empowered to set aside an arbitral award where it is
found to be devoid of reasoning, or where its outcome is
so unjust and irrational as to shock the judicial conscience
and similarly an award may be invalidated if it is based
on evidence and resulting conclusions which no prudent
or reasonable person could reasonably reach. The learned
PDJ, Patna has also held that the Arbitrator remains the
ultimate master of the quality and quantity of evidence
and unless the Arbitrator’s approach is demonstrably
arbitrary or capricious, the Court shall refrain from
revisiting or re-evaluating factual determinations already
placed on record.
(iv) The learned PDJ has come to a finding that none of
the grounds enumerated under sub-Sections (2) or (2A) of
Section 34 of the Act, 1996 have been substantiated in the
challenge to the arbitral award. It has also been held that
it is a settled law that the proceedings instituted under
Section 34 of the Act, 1996 do not partake the nature of
an appeal or revision and the jurisdiction conferred upon
the Court is inherently limited as also the Court is neither
empowered to re-evaluate the findings and conclusions
recorded in the award nor substitute its own views or
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effect any modification thereof and furthermore, the
Court is also not required to delve into or adjudicate the
merits of the award in a petition filed U/s. 34 of the Act,
1996.
(v) The learned PDJ, Patna has thus held that the learned
Sole Arbitrator has justifiably rendered the arbitral award
dated 17.10.2020, having duly considered and evaluated
the evidentiary material placed on record and delivered a
well-reasoned and a legally sound award.
(vi) In conclusion, the learned PDJ, Patna has held that
considering the materials on record, it is manifest that the
appellants have failed to establish any of the ground
enumerated under sub-Sections (2) or (2A) of Section 34
of the Act, 1996, hence the circumscribed jurisdiction
conferred under Section 34 of the Act, 1996 has not been
satisfied in the present case so as to warrant setting aside
of the impugned arbitral award. The learned PDJ, Patna
has also held that the Ld. Sole Arbitrator has adjudicated
the disputes strictly within the confines of the agreement
executed between the parties and the documents placed
on record in that regard as also the findings are clear and
the rationale adopted by the learned Sole Arbitrator in
arriving at the conclusion is sound, coherent and well-
reasoned, hence the award cannot be regarded as patently
illegal, perverse or contrary to the public policy of India.
18. The aforesaid judgment dated 25.07.2025 passed by the
learned PDJ, Patna has been challenged in the present appeal.
Submissions of the Ld. Counsel for the Appellants:
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19. The learned counsel for the appellants has submitted that
the Ld. Sole Arbitrator has passed the award dated 17.10.2020
only on the basis of the calculation chart produced by the
claimant-Respondent without any supporting documents and the
Ld. Principal District Judge, Patna has similarly erred by not
considering the said aspect of the matter. It has been stated that
the claimant-Respondent has failed to produce any supporting
documents against his claims like truck challan, store issue
order etc., apart from the fact that the claimant-Respondent did
not examine any witnesses in support of his claim. Thus, it has
been submitted that the impugned judgment dated 25.7.2025,
passed by the Ld. PDJ, Patna as also the arbitral award dated
17.10.2020, passed by the Ld. Sole Arbitrator, as far as award of
claim of a sum of Rs. 2,67,37,638.62/- to the claimant-
Respondent is concerned, is perverse, patently illegal and
beyond the parameters of the agreement entered into between
the parties. It is also submitted that the learned Ld. PDJ, Patna
had neither called for the arbitral records nor had examined the
records and in an arbitrary manner, has upheld the arbitral award
dated 17.10.2020 by the impugned judgment dated 25.7.2025.
In fact, the Ld. PDJ, Patna failed to consider that all the
admitted outstanding amount of bills/claims have been paid to
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the claimant-Respondent and part admitted outstanding dues to
the tune of Rs. 1,31,08,638/- (including the security deposit of
Rs. 10,00,000/-) has been paid on 10.5.2023, however the same
has not been accounted for in the impugned Judgment dt.
25.7.2025.
20. The learned counsel for the appellants has further
submitted that the Ld. Sole Arbitrator as also the Ld. PDJ Judge,
Patna in the impugned arbitral award and judgment dated
17.10.2020 and 25.7.2025 respectively, have failed to consider
that several claims raised by the claimant-Respondent are de
hors the agreement, apart from the fact that though there is no
provision for payment of interest and grant of compensation in
the agreement entered into between the parties, however both
the Ld. Sole Arbitrator as also the Ld. PDJ, Patna have, in utter
disregard to the provisions of the agreement allowed the claim
of the claimant-Respondent pertaining to grant of interest and
compensation. It is further submitted that the Ld. Sole Arbitrator
has though been appointed to consider the disputes arising out
of the agreement dated 24.10.2016 for the district-Madhubani,
however he has considered and allowed several claims based on
different contract and agreement. Thus, in nutshell,
it is the contention of the learned counsel for the appellants that
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the impugned judgment dated 25.7.2025, passed by the Ld.
Court of PDJ, Patna is in teeth of the mandate of the provisions
contained under Section 34(2)(a), (b) and (2)(A) of the Act,
1996.
21. The learned counsel for the appellants has referred to a
judgment rendered by the Hon’ble Apex Court in the case of
Gayatri Balasamy vs. ISG Novasoft Technologies Limited,
reported in (2025) 7 SCC 1 to submit that Section 34 Court can
apply the doctrine of severability and modify a portion of the
award while retaining the rest, however the same is subject to
parts of the award being separable, legally and practically. In
fact, the Courts are empowered to modify the arbitral award
under Section 34 and 37 of the Act, 1996, nonetheless the same
is limited and can be exercised when the award is severable, by
severing the “invalid” portion from the “valid” portion of the
award by correcting any clerical, computational or
typographical errors, which appear erroneous on the face of the
record and post-award interest can also be modified in some
circumstances as mentioned in the said judgment. Reference has
also been made to a judgment rendered by the Hon’ble Apex
Court in the case of North Delhi Municipal Corporation vs.
S.A. Builders Limited, reported in (2025) 7 SCC 132 to submit
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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that the arbitral tribunal does not have the power to award
interest upon interest or compound interest either for the pre-
award period or the post-award period.
22. The learned counsel for the appellants has also referred to
a judgment rendered by the Hon’ble Apex Court in the case of
Union of India vs. Ambica Construction, reported in (2016) 6
SCC 36 to submit that reference has been made in the said
judgment to a Constitution Bench judgment of the Hon’ble
Apex Court, rendered in the case of Secretary, Irrigation
Department, Government of Orissa & Ors. vs. GC Roy,
reported in (1992) 1 SCC 508, wherein it has been held that if
the arbitration agreement or the contract itself provides for
interest, the arbitrator would have the jurisdiction to award
interest, however where the agreement expressly provides that
no interest pendente lite shall be payable on the amount due, the
arbitrator has no power to award pendente lite interest. It would
be apt to reproduce paragraph nos. 12, 14 and 34 of the said
judgment, rendered in the case of Ambica Construction (supra),
herein below:-
“12. A Constitution Bench of this Court in G.C. Roy
[Irrigation Deptt., State of Orissa v. G.C. Roy, (1992) 1
SCC 508] has considered the question of power of the
arbitrator to award pendente lite interest and it has been
laid down that if the arbitration agreement or the
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
23/119contract itself provides for interest, the arbitrator would
have the jurisdiction to award the interest. Similarly,
where the agreement expressly provides that no interest
pendente lite shall be payable on the amount due, the
arbitrator has no power to award pendente lite interest.
In G.C. Roy [Irrigation Deptt., State of Orissa v. G.C.
Roy, (1992) 1 SCC 508] this Court has held thus : (SCC
p. 514, para 7)
“7. … If the arbitration agreement or the contract itself
provides for award of interest on the amount found due
from one party to the other, no question regarding the
absence of arbitrator’s jurisdiction to award the
interest could arise as in that case the arbitrator has
power to award interest pendente lite as well. Similarly,
where the agreement expressly provides that no interest
pendente lite shall be payable on the amount due, the
arbitrator has no power to award pendente lite interest.
But where the agreement does not provide either for
grant or denial of interest on the amount found due, the
question arises whether in such an event the arbitrator
has power and authority to grant pendente lite interest.
14. Ultimately, in G.C. Roy [Irrigation Deptt., State of
Orissa v. G.C. Roy, (1992) 1 SCC 508] , this Court has
answered the question whether the arbitrator has the
power to award interest pendente lite. Their Lordships
have reiterated that they have dealt with the situation
where the agreement does not provide for grant of such
interest nor does it prohibit such grant when the
agreement is silent as to award of interest. This Court
has laid down various principles in paras 43-44 of the
Report thus : (SCC pp. 532-34)
“43. The question still remains whether arbitrator has
the power to award interest pendente lite, and if so, on
what principle. We must reiterate that we are dealing
with the situation where the agreement does not
provide for grant of such interest nor does it prohibit
such grant. In other words, we are dealing with a case
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
24/119where the agreement is silent as to award of interest.
On a conspectus of the aforementioned decisions, the
following principles emerge:
(i) A person deprived of the use of money to which he
is legitimately entitled has a right to be compensated
for the deprivation, call it by any name. It may be
called interest, compensation or damages. This basic
consideration is as valid for the period the dispute is
pending before the arbitrator as it is for the period
prior to the arbitrator entering upon the reference.
This is the principle of Section 34 of the Civil
Procedure Code and there is no reason or principle to
hold otherwise in the case of arbitrator.
(ii) An arbitrator is an alternative form (sic forum) for
resolution of disputes arising between the parties. If
so, he must have the power to decide all the disputes
or differences arising between the parties. If the
arbitrator has no power to award interest pendente
lite, the party claiming it would have to approach the
court for that purpose, even though he may have
obtained satisfaction in respect of other claims from
the arbitrator. This would lead to multiplicity of
proceedings.
(iii) An arbitrator is the creature of an agreement. It is
open to the parties to confer upon him such powers
and prescribe such procedure for him to follow, as
they think fit, so long as they are not opposed to law.
(The proviso to Section 41 and Section 3 of the
Arbitration Act illustrate this point). All the same, the
agreement must be in conformity with law. The
arbitrator must also act and make his award in
accordance with the general law of the land and the
agreement.
(iv) Over the years, the English and Indian courts
have acted on the assumption that where the
agreement does not prohibit and a party to the
reference makes a claim for interest, the arbitrator
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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must have the power to award interest pendente lite.
Thawardas Pherumal v. Union of India [Thawardas
Pherumal v. Union of India, AIR 1955 SC 468] has not
been followed in the later decisions of this Court. It
has been explained and distinguished on the basis that
in that case there was no claim for interest but only a
claim for unliquidated damages. It has been said
repeatedly that observations in the said judgment were
not intended to lay down any such absolute or
universal rule as they appear to, on first impression.
Until Deptt. of Irrigation v. Abhaduta Jena [Deptt. of
Irrigation v. Abhaduta Jena, (1988) 1 SCC 418]
almost all the courts in the country had upheld the
power of the arbitrator to award interest pendente lite.
Continuity and certainty is a highly desirable feature
of law.
(v) Interest pendente lite is not a matter of substantive
law, like interest for the period anterior to reference
(pre-reference period). For doing complete justice
between the parties, such power has always been
inferred.
44. Having regard to the above consideration, we
think that the following is the correct principle which
should be followed in this behalf:
Where the agreement between the parties does not
prohibit grant of interest and where a party claims
interest and that dispute (along with the claim for
principal amount or independently) is referred to the
arbitrator, he shall have the power to award interest
pendente lite. This is for the reason that in such a case
it must be presumed that interest was an implied term
of the agreement between the parties and therefore
when the parties refer all their disputes–or refer the
dispute as to interest as such–to the arbitrator, he
shall have the power to award interest. This does not
mean that in every case the arbitrator should
necessarily award interest pendente lite. It is a matter
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
26/119within his discretion to be exercised in the light of all
the facts and circumstances of the case, keeping the
ends of justice in view.”
(emphasis in original)
The Constitution Bench of this Court has laid down that
where the agreement between the parties does not
prohibit grant of interest and where the party claims
interest and that dispute is referred to the arbitrator, he
shall have the power to award interest pendente lite. The
law declared has been held applicable prospectively.
34. Thus, our answer to the reference is that if the
contract expressly bars the award of interest pendente
lite, the same cannot be awarded by the arbitrator. We
also make it clear that the bar to award interest on
delayed payment by itself will not be readily inferred as
express bar to award interest pendente lite by the
Arbitral Tribunal, as ouster of power of the arbitrator
has to be considered on various relevant aspects referred
to in the decisions of this Court, it would be for the
Division Bench to consider the case on merits.”
23. The learned counsel for the appellants has next referred to
a judgment rendered by the Hon’ble Apex Court in the case of
Oil & Natural Gas Corporation Ltd. vs. Saw Pipes Ltd.,
reported in (2003) 5 SCC 705, paragraphs no. 13, 15 to 22 and
31 whereof are reproduced herein below:-
“13. The question, therefore, which requires
consideration is — whether the award could be set aside,
if the Arbitral Tribunal has not followed the mandatory
procedure prescribed under Sections 24, 28 or 31(3),
which affects the rights of the parties. Under sub-section
(1)(a) of Section 28 there is a mandate to the Arbitral
Tribunal to decide the dispute in accordance with the
substantive law for the time being in force in India.
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Admittedly, substantive law would include the Indian
Contract Act, the Transfer of Property Act and other such
laws in force. Suppose, if the award is passed in violation
of the provisions of the Transfer of Property Act or in
violation of the Indian Contract Act, the question would
be — whether such award could be set aside. Similarly,
under sub-section (3), the Arbitral Tribunal is directed to
decide the dispute in accordance with the terms of the
contract and also after taking into account the usage of
the trade applicable to the transaction. If the Arbitral
Tribunal ignores the terms of the contract or usage of the
trade applicable to the transaction, whether the said
award could be interfered. Similarly, if the award is a
non-speaking one and is in violation of Section 31(3), can
such award be set aside? In our view, reading Section 34
conjointly with other provisions of the Act, it appears that
the legislative intent could not be that if the award is in
contravention of the provisions of the Act, still however, it
couldn’t be set aside by the court. If it is held that such
award could not be interfered, it would be contrary to the
basic concept of justice. If the Arbitral Tribunal has not
followed the mandatory procedure prescribed under the
Act, it would mean that it has acted beyond its jurisdiction
and thereby the award would be patently illegal which
could be set aside under Section 34.
15. The result is — if the award is contrary to the
substantive provisions of law or the provisions of the Act
or against the terms of the contract, it would be patently
illegal, which could be interfered under Section 34.
However, such failure of procedure should be patent
affecting the rights of the parties.
16. The next clause which requires interpretation is clause
(ii) of sub-section (2)(b) of Section 34 which inter alia
provides that the court may set aside the arbitral award if
it is in conflict with the “public policy of India”. The
phrase “public policy of India” is not defined under the
Act. Hence, the said term is required to be given meaning
in context and also considering the purpose of the section
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and scheme of the Act. It has been repeatedly stated by
various authorities that the expression “public policy”
does not admit of precise definition and may vary from
generation to generation and from time to time. Hence,
the concept “public policy” is considered to be vague,
susceptible to narrow or wider meaning depending upon
the context in which it is used. Lacking precedent, the
court has to give its meaning in the light and principles
underlying the Arbitration Act, Contract Act and
constitutional provisions.
17. For this purpose, we would refer to a few decisions
referred to by the learned counsel for the parties. While
dealing with the concept of public policy, this Court in
Central Inland Water Transport Corpn. Ltd. v. Brojo Nath
Ganguly [(1986) 3 SCC 156] has observed thus: (SCC
pp. 217-19, paras 92-93)
“92. The Indian Contract Act does not define the
expression ‘public policy’ or ‘opposed to public policy’.
From the very nature of things, the expressions ‘public
policy’, ‘opposed to public policy’, or ‘contrary to
public policy’ are incapable of precise definition.
Public policy, however, is not the policy of a particular
Government. It connotes some matter which concerns
the public good and the public interest. The concept of
what is for the public good or in the public interest or
what would be injurious or harmful to the public good
or the public interest has varied from time to time. As
new concepts take the place of old, transactions which
were once considered against public policy are now
being upheld by the courts and similarly where there
has been a well-recognized head of public policy, the
courts have not shirked from extending it to new
transactions and changed circumstances and have at
times not even flinched from inventing a new head of
public policy. There are two schools of thought — ‘the
narrow view’ school and ‘the broad view’ school.
According to the former, courts cannot create new
heads of public policy whereas the latter countenances
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judicial law-making in this area. The adherents of ‘the
narrow view’ school would not invalidate a contract on
the ground of public policy unless that particular
ground had been well established by authorities.
Hardly ever has the voice of the timorous spoken more
clearly and loudly than in these words of Lord Davey in
Janson v. Driefontein Consolidated Gold Mines Ltd.
[1902 AC 484, 500: (1900-03) All ER Rep 426 : 87 LT
372 (HL)]: ‘Public policy is always an unsafe and
treacherous ground for legal decision.’ That was in the
year 1902. Seventy-eight years earlier, Burrough, J., in
Richardson v. Mellish [(1824) 2 Bing 229, 252 : 130
ER 294] described public policy as ‘a very unruly
horse, and when once you get astride it you never know
where it will carry you’. The Master of the Rolls, Lord
Denning, however, was not a man to shy away from
unmanageable horses and in words which conjure up
before our eyes the picture of the young Alexander the
Great taming Bucephalus, he said in Enderby Town
Football Club Ltd. v. Football Assn. Ltd. [1971 Ch 591,
606] : ‘With a good man in the saddle, the unruly horse
can be kept in control. It can jump over obstacles’. Had
the timorous always held the field, not only the doctrine
of public policy but even the common law or the
principles of equity would never have evolved. Sir
William Holdsworth in his ‘History of English Law’,
Vol. III, p. 55, has said:
‘In fact, a body of law like the common law, which has
grown up gradually with the growth of the nation,
necessarily acquires some fixed principles, and if it is
to maintain these principles it must be able, on the
ground of public policy or some other like ground, to
suppress practices which, under ever new disguises,
seek to weaken or negative them.’
It is thus clear that the principles governing public
policy must be and are capable, on proper occasion, of
expansion or modification. Practices which were
considered perfectly normal at one time have today
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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If there is no head of public policy which covers a case,
then the court must in consonance with public
conscience and in keeping with public good and public
interest declare such practice to be opposed to public
policy. Above all, in deciding any case which may not
be covered by authority our courts have before them
the beacon light of the preamble to the Constitution.
Lacking precedent, the court can always be guided by
that light and the principles underlying the
fundamental rights and the directive principles
enshrined in our Constitution.
93. The normal rule of common law has been that a
party who seeks to enforce an agreement which is
opposed to public policy will be non-suited. The case of
A. Schroeder Music Publishing Co. Ltd. v. Macaulay
[(1974) 1 WLR 1308 : (1974) 3 All ER 616 (HL)],
however, establishes that where a contract is vitiated as
being contrary to public policy, the party adversely
affected by it can sue to have it declared void. The case
may be different where the purpose of the contract is
illegal or immoral. In Kedar Nath Motani v. Prahlad
Rai [AIR 1960 SC 213 : (1960) 1 SCR 861], reversing
the High Court and restoring the decree passed by the
trial court declaring the appellants’ title to the lands in
suit and directing the respondents who were the
appellants’ benamidars to restore possession, this
Court, after discussing the English and Indian law on
the subject, said (at p. 873):
‘The correct position in law, in our opinion, is that
what one has to see is whether the illegality goes so
much to the root of the matter that the plaintiff cannot
bring his action without relying upon the illegal
transaction into which he had entered. If the illegality
be trivial or venial, as stated by Williston and the
plaintiff is not required to rest his case upon that
illegality, then public policy demands that the
defendant should not be allowed to take advantage of
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
31/119the position. A strict view, of course, must be taken of
the plaintiff’s conduct, and he should not be allowed to
circumvent the illegality by resorting to some
subterfuge or by misstating the facts. If, however, the
matter is clear and the illegality is not required to be
pleaded or proved as part of the cause of action and
the plaintiff recanted before the illegal purpose was
achieved, then, unless it be of such a gross nature as to
outrage the conscience of the court, the plea of the
defendant should not prevail.’
The types of contracts to which the principle
formulated by us above applies are not contracts which
are tainted with illegality but are contracts which
contain terms which are so unfair and unreasonable
that they shock the conscience of the court. They are
opposed to public policy and require to be adjudged
void.”
(emphasis supplied)
18. Further, in Renusagar Power Co. Ltd. v. General
Electric Co. [1994 Supp (1) SCC 644] this Court
considered Section 7(1) of the Arbitration (Protocol and
Convention) Act, 1937 which inter alia provided that a
foreign award may not be enforced under the said Act, if
the court dealing with the case is satisfied that the
enforcement of the award will be contrary to the public
policy. After elaborate discussion, the Court arrived at the
conclusion that public policy comprehended in Section
7(1)(b)(ii) of the Foreign Awards (Recognition and
Enforcement) Act, 1961 is the “public policy of India”
and does not cover the public policy of any other country.
For giving meaning to the term “public policy”, the
Court observed thus: (SCC p. 682, para 66)
“66. Article V(2)(b) of the New York Convention of
1958 and Section 7(1)(b)(ii) of the Foreign Awards Act
do not postulate refusal of recognition and enforcement
of a foreign award on the ground that it is contrary to
the law of the country of enforcement and the ground of
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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challenge is confined to the recognition and
enforcement being contrary to the public policy of the
country in which the award is set to be enforced. There
is nothing to indicate that the expression ‘public policy’
in Article V(2)(b) of the New York Convention and
Section 7(1)(b)(ii) of the Foreign Awards Act is not
used in the same sense in which it was used in Article
I(c) of the Geneva Convention of 1927 and Section 7(1)
of the Protocol and Convention Act of 1937. This would
mean that ‘public policy’ in Section 7(1)(b)(ii) has been
used in a narrower sense and in order to attract the bar
of public policy the enforcement of the award must
invoke something more than the violation of the law of
India. Since the Foreign Awards Act is concerned with
recognition and enforcement of foreign awards which
are governed by the principles of private international
law, the expression ‘public policy’ in Section 7(1)(b)(ii)
of the Foreign Awards Act must necessarily be
construed in the sense the doctrine of public policy is
applied in the field of private international law.
Applying the said criteria it must be held that the
enforcement of a foreign award would be refused on the
ground that it is contrary to public policy if such
enforcement would be contrary to (i) fundamental
policy of Indian law; or (ii) the interests of India; or
(iii) justice or morality.”
(emphasis supplied)
The Court finally held that: (SCC p. 685, para 76)
“76. Keeping in view the aforesaid objects underlying
FERA and the principles governing enforcement of
exchange control laws followed in other countries, we
are of the view that the provisions contained in FERA
have been enacted to safeguard the economic interests
of India and any violation of the said provisions would
be contrary to the public policy of India as envisaged
in Section 7(1)(b)(ii) of the Act.”
19. This Court in Murlidhar Aggarwal v. State of U.P.
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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[(1974) 2 SCC 472] while dealing with the concept of
“public policy” observed thus: (SCC pp. 482-83, paras
31-32)
“31. Public policy does not remain static in any given
community. It may vary from generation to generation
and even in the same generation. Public policy would
be almost useless if it were to remain in fixed moulds
for all time.
32. … The difficulty of discovering what public policy
is at any given moment certainly does not absolve the
Judges from the duty of doing so. In conducting an
enquiry, as already stated, Judges are not hidebound by
precedent. The Judges must look beyond the narrow
field of past precedents, though this still leaves open
the question, in which direction they must cast their
gaze. The Judges are to base their decisions on the
opinions of men of the world, as distinguished from
opinions based on legal learning. In other words, the
Judges will have to look beyond the jurisprudence and
that in so doing, they must consult not their own
personal standards or predilections but those of the
dominant opinion at a given moment, or what has been
termed customary morality. The Judges must consider
the social consequences of the rule propounded,
especially in the light of the factual evidence available
as to its probable results. … The point is rather that
this power must be lodged somewhere and under our
Constitution and laws, it has been lodged in the Judges
and if they have to fulfil their function as Judges, it
could hardly be lodged elsewhere.”
(emphasis supplied)
20. Mr Desai submitted that the narrow meaning given to
the term “public policy” in Renusagar case [1994 Supp
(1) SCC 644] is in context of the fact that the question
involved in the said matter was with regard to the
execution of the award which had attained finality. It was
not a case where validity of the award is challenged
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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before a forum prescribed under the Act. He submitted
that the scheme of Section 34 which deals with setting
aside the domestic arbitral award and Section 48 which
deals with enforcement of foreign award are not identical.
A foreign award by definition is subject to double
exequatur. This is recognized inter alia by Section 48(1)
and there is no parallel provision to this clause in Section
34. For this, he referred to Lord Mustill & Stewart C.
Boyd, Q.C.’s Commercial Arbitration 2001 wherein (at p.
90) it is stated as under:
“Mutual recognition of awards is the glue which holds
the international arbitrating community together, and
this will only be strong if the enforcing court is willing
to trust, as the convention assumes that they will trust
the supervising authorities of the chosen venue. It
follows that if, and to the extent that the award has
been struck down in the local court it should as a
matter of theory and practice be treated when
enforcement is sought as if to the extent it did not
exist.”
21. He further submitted that in foreign arbitration, the
award would be subject to being set aside or suspended
by the competent authority under the relevant law of that
country whereas in the domestic arbitration the only
recourse is to Section 34.
22. The aforesaid submission of the learned Senior
Counsel requires to be accepted. From the judgments
discussed above, it can be held that the term “public
policy of India” is required to be interpreted in the
context of the jurisdiction of the court where the validity
of award is challenged before it becomes final and
executable. The concept of enforcement of the award after
it becomes final is different and the jurisdiction of the
court at that stage could be limited. Similar is the position
with regard to the execution of a decree. It is settled law
as well as it is provided under the Code of Civil
Procedure that once the decree has attained finality, in an
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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execution proceeding, it may be challenged only on
limited grounds such as the decree being without
jurisdiction or a nullity. But in a case where the judgment
and decree is challenged before the appellate court or the
court exercising revisional jurisdiction, the jurisdiction of
such court would be wider. Therefore, in a case where the
validity of award is challenged, there is no necessity of
giving a narrower meaning to the term “public policy of
India”. On the contrary, wider meaning is required to be
given so that the “patently illegal award” passed by the
Arbitral Tribunal could be set aside. If narrow meaning
as contended by the learned Senior Counsel Mr Dave is
given, some of the provisions of the Arbitration Act would
become nugatory. Take for illustration a case wherein
there is a specific provision in the contract that for
delayed payment of the amount due and payable, no
interest would be payable, still however, if the arbitrator
has passed an award granting interest, it would be
against the terms of the contract and thereby against the
provision of Section 28(3) of the Act which specifically
provides that “Arbitral Tribunal shall decide in
accordance with the terms of the contract”. Further,
where there is a specific usage of the trade that if the
payment is made beyond a period of one month, then the
party would be required to pay the said amount with
interest at the rate of 15 per cent. Despite the evidence
being produced on record for such usage, if the arbitrator
refuses to grant such interest on the ground of equity, such
award would also be in violation of sub-sections (2) and
(3) of Section 28. Section 28(2) specifically provides that
the arbitrator shall decide ex aequo et bono (according to
what is just and good) only if the parties have expressly
authorised him to do so. Similarly, if the award is patently
against the statutory provisions of substantive law which
is in force in India or is passed without giving an
opportunity of hearing to the parties as provided under
Section 24 or without giving any reason in a case where
parties have not agreed that no reasons are to be
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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recorded, it would be against the statutory provisions. In
all such cases, the award is required to be set aside on the
ground of “patent illegality”.
31. Therefore, in our view, the phrase “public policy of
India” used in Section 34 in context is required to be
given a wider meaning. It can be stated that the concept
of public policy connotes some matter which concerns
public good and the public interest. What is for public
good or in public interest or what would be injurious or
harmful to the public good or public interest has varied
from time to time. However, the award which is, on the
face of it, patently in violation of statutory provisions
cannot be said to be in public interest. Such
award/judgment/decision is likely to adversely affect the
administration of justice. Hence, in our view in addition
to narrower meaning given to the term “public policy” in
Renusagar case [1994 Supp (1) SCC 644] it is required to
be held that the award could be set aside if it is patently
illegal. The result would be — award could be set aside if
it is contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality, or
(d) in addition, if it is patently illegal.
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 the public policy. Award could also be set aside
if it is so unfair and unreasonable that it shocks the
conscience of the court. Such award is opposed to public
policy and is required to be adjudged void.”
24. Thus, it is submitted by the learned counsel for the
appellants by relying on the aforesaid judgment rendered by the
Hon’ble Apex Court in the case of Saw Pipes Ltd. (supra) that
the arbitral award dated 17.10.2020, passed by the Ld. Sole
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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Arbitrator is patently illegal, hence is fit to be set aside and this
Court is fully empowered to do so by virtue of the provisions
contained under Section 37 of the Act, 1996.
25. The Ld. counsel for the appellants has lastly submitted,
by referring to Clause 22 of the agreement dated 24.10.2016 that
the claimant-Respondent is not entitled to any compensation for
detention of their trucks and in fact the Ld. Sole Arbitrator, in
the arbitral award dated 17.10.2020, at internal page no. 15 has
also held, while referring to the said Clause 22 of the agreement
dated 24.10.2016 that the detention charges shall not be payable
to the claimant and the detention bills shall stand deducted from
various bills, nonetheless the amount awarded in favor of the
claimant-Respondent to the tune of Rs. 2,67,37,638.62 also
contain detention charges, which is an error apparent on the face
of the records.
Submissions of the Ld. Counsel for the claimant-
Respondent:
26. Per contra, the Ld. counsel for the claimant-Respondent
has submitted that it is wrong to say that no supporting
documents were annexed by the claimant-Respondent in his
claim petition filed before the Ld. Sole Arbitrator in support of
his claims, inasmuch as the bills for various months have been
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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annexed as Annexure C-2 to C-35, wherein each and every fact
as well as supporting documents have been furnished in detail,
duly supported by month wise bills of transport and handling
charges as well as other relevant documents, however the
appellants did not file any affidavit/annexures/denial of
documents of the claimant-Respondent before the Ld. Sole
Arbitrator, hence all the documents filed by the claimant-
Respondent would be deemed to have been accepted. Thus, it is
submitted that the claim of a sum of Rs. 2,67,37,638.62 awarded
by the Ld. Sole Arbitrator, vide award dt. 17.10.2020 is not only
supported by bills / documents but also justified, which have not
been denied by the appellants, hence no interference is required.
27. The learned counsel for the claimant-Respondent has
further submitted that all the claims have been awarded within
the ambit of the agreement in question i.e. the one dated
24.10.2016, pertaining to the district-Madhubani. It is also
submitted that there is no bar under the agreement to award
interest and compensation, hence the arbitral award dated
17.10.2020 as upheld by the judgment dated 25.7.2025, passed
by the Ld. Court of PDJ, Patna under Section 34 of the Act,
1996 does not suffer from any infirmity.
28. The learned counsel for the claimant-Respondent has next
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
39/119
submitted that Section 34 of the Act, 1996 provides for certain
grounds on which the competent Court can interfere with the
arbitral award, however no interference is permissible if the
grounds urged for setting aside of arbitral award is not within
the contours of Section 34 of the Act, 1996. Reference has also
been made to Section 5 of the Act, 1996 to submit that an
arbitration award, which is governed by Part-I of the Act, 1996
can only be set aside on the grounds mentioned under Section
34 (2) and (3) and not otherwise. The Ld. Counsel has referred
to a judgment rendered by the Hon’ble Apex Court in the case
of Associate Builders vs. Delhi Development Authority,
reported in (2015) 3 SCC 49, paragraphs no. 33, 34, 52 and 56
whereof are reproduced herein below:-
“33. It must clearly be understood that when a court is
applying the “public policy” test to an arbitration
award, it does not act as a court of appeal and
consequently errors of fact cannot be corrected. 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. Thus 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 this score [Very often an
arbitrator is a lay person not necessarily trained in law.
Lord Mansfield, a famous English Judge, once advised a
high military officer in Jamaica who needed to act as a
Judge as follows:
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
40/119“General, you have a sound head, and a good heart;
take courage and you will do very well, in your
occupation, in a court of equity. My advice is, to make
your decrees as your head and your heart dictate, to
hear both sides patiently, to decide with firmness in the
best manner you can; but be careful not to assign your
reasons, since your determination may be substantially
right, although your reasons may be very bad, or
essentially wrong”.
It is very important to bear this in mind when awards of
lay arbitrators are challenged.]. Once it is found that the
arbitrators approach is not arbitrary or capricious, then
he is the last word on facts. In P.R. Shah, Shares & Stock
Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd. [(2012) 1
SCC 594], this Court held : (SCC pp. 601-02, para 21)
“21. A court does not sit in appeal over the award of an
Arbitral Tribunal by reassessing or reappreciating the
evidence. An award can be challenged only under the
grounds mentioned in Section 34(2) of the Act. The
Arbitral Tribunal has examined the facts and held that
both the second respondent and the appellant are
liable. The case as put forward by the first respondent
has been accepted. Even the minority view was that the
second respondent was liable as claimed by the first
respondent, but the appellant was not liable only on the
ground that the arbitrators appointed by the Stock
Exchange under Bye-law 248, in a claim against a non-
member, had no jurisdiction to decide a claim against
another member. The finding of the majority is that the
appellant did the transaction in the name of the second
respondent and is therefore, liable along with the
second respondent. Therefore, in the absence of any
ground under Section 34(2) of the Act, it is not possible
to re-examine the facts to find out whether a different
decision can be arrived at.”
34. It is with this very important caveat that the two
fundamental principles which form part of the
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
41/119
fundamental policy of Indian law (that the arbitrator
must have a judicial approach and that he must not act
perversely) are to be understood.
52. It is most unfortunate that the Division Bench did not
advert to this crucial document at all. This document
shows not only that the Division Bench was wholly
incorrect in its conclusion that the contractor has tried
to pull the wool over the eyes over the DDA but it should
also have realised that the DDA itself has stated that the
work has been carried out generally to its satisfaction
barring some extremely minor defects which are capable
of rectification. It is clear, therefore, that the Division
Bench obviously exceeded its jurisdiction in interfering
with a pure finding of fact forgetting that the arbitrator
is the sole Judge of the quantity and quality of evidence
before him and unnecessarily bringing in facts which
were neither pleaded nor proved and ignoring the vital
completion certificate granted by the DDA itself. The
Division Bench also went wrong in stating that as the
work completed was only to the extent of Rs 62,84,845,
Hudson’s formula should have been applied taking this
figure into account and not the entire contract value of
Rs 87,66,678 into account.
56. Here again, the Division Bench has interfered
wrongly with the arbitral award on several counts. It had
no business to enter into a pure question of fact to set
aside the arbitrator for having applied a formula of 20
months instead of 25 months. Though this would inure in
favour of the appellant, it is clear that the appellant did
not file any cross-objection on this score. Also, it is
extremely curious that the Division Bench found that an
adjustment would have to be made with claims awarded
under Claims 2, 3 and 4 which are entirely separate and
independent claims and have nothing to do with Claims
12 and 13. The formula then applied by the Division
Bench was that it would itself do “rough and ready
justice”. We are at a complete loss to understand how
this can be done by any court under the jurisdiction
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
42/119
exercised under Section 34 of the Arbitration Act. As has
been held above, the expression “justice” when it comes
to setting aside an award under the public policy ground
can only mean that an award shocks the conscience of
the court. It cannot possibly include what the court
thinks is unjust on the facts of a case for which it then
seeks to substitute its view for the arbitrator’s view and
does what it considers to be “justice”. With great respect
to the Division Bench, the whole approach to setting
aside arbitral awards is incorrect. The Division Bench
has lost sight of the fact that it is not a first appellate
court and cannot interfere with errors of fact.”
29. The learned counsel for the claimant-Respondent has
further submitted that it is a settled position of law that the
grounds for interference with the arbitral award under Section
37 of the Act, 1996 is narrower than those under Section 34 of
the Act, 1996, hence if an arbitral award has been upheld in
challenge under Section 34 of the Act, 1996, then the same
should not be disturbed by the Appellate Court. In this regard,
reliance has been placed on a judgment, rendered by the
Hon’ble Apex Court in the case of UHL Power Company Ltd.
vs. State of Himachal Pradesh, reported in (2022) 4 SCC 116
as also upon the one rendered by the Hon’ble Apex Court in the
case of Reliance Infrastructure Ltd. vs. State of Goa, reported
in (2024) 1 SCC 479, paragraphs no. 25 to 33 whereof are
reproduced herein below:-
“25. Having regard to the contentions urged and the
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
43/119issues raised, it shall also be apposite to take note of the
principles enunciated by this Court in some of the
relevant decisions cited by the parties on the scope of
challenge to an arbitral award under Section 34 and the
scope of appeal under Section 37 of the 1996 Act.
26. In MMTC [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC
163], this Court took note of various decisions including
that in Associate Builders [Associate Builders v. DDA,
(2015) 3 SCC 49] and exposited on the limited scope of
interference under Section 34 and further narrower scope
of appeal under Section 37 of the 1996 Act, particularly
when dealing with the concurrent findings (of the
arbitrator and then of the Court). This Court, inter alia,
held as under: [MMTC Ltd. v. Vedanta Ltd., (2019) 4
SCC 163], SCC pp. 166-67, paras 11-14)
“11. As far as Section 34 is concerned, the position is
well-settled by now that the Court does not sit in
appeal over the arbitral award and may interfere on
merits on the limited ground provided under Section
34(2)(b)(ii) i.e. if the award is against the public policy
of India. As per the legal position clarified through
decisions of this Court prior to the amendments to the
1996 Act in 2015, a violation of Indian public policy, in
turn, includes a violation of the fundamental policy of
Indian law, a violation of the interest of India, conflict
with justice or morality, and the existence of patent
illegality in the arbitral award. Additionally, the
concept of the “fundamental policy of Indian law”
would cover compliance with statutes and judicial
precedents, adopting a judicial approach, compliance
with the principles of natural justice, and Wednesbury
[Associated Provincial Picture Houses v. Wednesbury
Corpn., (1948) 1 KB 223 (CA)] reasonableness.
Furthermore, “patent illegality” itself has been held to
mean contravention of the substantive law of India,
contravention of the 1996 Act, and contravention of the
terms of the contract.
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
44/119
12. It is only if one of these conditions is met that the
Court may interfere with an arbitral award in terms of
Section 34(2)(b)(ii), but such interference does not
entail a review of the merits of the dispute, and is
limited to situations where the findings of the arbitrator
are arbitrary, capricious or perverse, or when the
conscience of the Court is shocked, or when the
illegality is not trivial but goes to the root of the matter.
An arbitral award may not be interfered with if the
view taken by the arbitrator is a possible view based on
facts. (See Associate Builders v. DDA [Associate
Builders v. DDA, (2015) 3 SCC 49] Also see ONGC
Ltd. v. Saw Pipes Ltd. [ONGC Ltd. v. Saw Pipes Ltd.,
(2003) 5 SCC 705]; Hindustan Zinc Ltd. v. Friends
Coal Carbonisation [(2006) 4 SCC 445]; and
McDermott International Inc. v. Burn Standard Co.
Ltd. [(2006) 11 SCC 181])
13. It is relevant to note that after the 2015 Amendment
to Section 34, the above position stands somewhat
modified. Pursuant to the insertion of Explanation 1 to
Section 34(2), the scope of contravention of Indian
public policy has been modified to the extent that it
now means fraud or corruption in the making of the
award, violation of Section 75 or Section 81 of the Act,
contravention of the fundamental policy of Indian law,
and conflict with the most basic notions of justice or
morality. Additionally, sub-section (2-A) has been
inserted in Section 34, which provides that in case of
domestic arbitrations, violation of Indian public policy
also includes patent illegality appearing on the face of
the award. The proviso to the same 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.
14. As far as interference with an order made under
Section 34, as per Section 37, is concerned, it cannot
be disputed that such interference under Section 37
cannot travel beyond the restrictions laid down under
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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Section 34. In other words, the Court cannot undertake
an independent assessment of the merits of the award,
and must only ascertain that the exercise of power by
the Court under Section 34 has not exceeded the scope
of the provision. Thus, it is evident that in case an
arbitral award has been confirmed by the Court under
Section 34 and by the Court in an appeal under Section
37, this Court must be extremely cautious and slow to
disturb such concurrent findings.”
27. In Ssangyong Engg. [Ssangyong Engg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131], this
Court has set out the scope of challenge under Section 34
of the 1996 Act in further details in the following words :
(SCC pp. 170-71, paras 37-41)
“37. Insofar as domestic awards made in India are
concerned, an additional ground is now available
under sub-section (2-A), added by the Amendment Act,
2015, to Section 34. Here, 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. In short, 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.
38. Secondly, it is also made clear that 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.
39. To elucidate, para 42.1 of Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49], namely,
a mere contravention of the substantive law of India, by
itself, is no longer a ground available to set aside an
arbitral award. Para 42.2 of Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49],
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
46/119however, would remain, for if an arbitrator gives no
reasons for an award and contravenes Section 31(3) of
the 1996 Act, that would certainly amount to a patent
illegality on the face of the award.
40. The change made in Section 28(3) by the
Amendment Act really follows what is stated in paras
42.3 to 45 in Associate Builders [Associate Builders v.
DDA, (2015) 3 SCC 49], namely, that 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. Also, if the arbitrator wanders
outside the contract and deals with matters not allotted
to him, he commits an error of jurisdiction. This ground
of challenge will now fall within the new ground added
under Section 34(2-A).
41. What is important to note is that a decision which is
perverse, as understood in paras 31 and 32 of
Associate Builders [(2015) 3 SCC 49], 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. Thus, 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. Additionally, 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.”
28. The limited scope of challenge under Section 34 of
the Act was once again highlighted by this Court in PSA
Sical Terminals [PSA Sical Terminals (P) Ltd. v. V.O.
Chidambranar Port Trust, (2023) 15 SCC 781] and this
Court particularly explained the relevant tests as under :
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
47/119(SCC paras 40 to 42)
“40. It will thus appear to be a more than settled legal
position, that in an application under Section 34, the
Court is not expected to act as an appellate court and
reappreciate the evidence. The scope of interference
would be limited to grounds provided under Section 34
of the Arbitration Act. The interference would be so
warranted when the award is in violation of “public
policy of India”, which has been held to mean “the
fundamental policy of Indian law”. A judicial
intervention on account of interfering on the merits of
the award would not be permissible. However, the
principles of natural justice as contained in Sections 18
and 34(2)(a)(iii) of the Arbitration Act would continue
to be the grounds of challenge of an award. The ground
for interference on the basis that the award is in
conflict with justice or morality is now to be
understood as a conflict with the “most basic notions of
morality or justice”. It is only such arbitral awards that
shock the conscience of the Court, that can be set aside
on the said ground. An award would be set aside on the
ground of patent illegality appearing on the face of the
award and as such, which goes to the roots of the
matter. However, an illegality with regard to a mere
erroneous application of law would not be a ground for
interference. Equally, reappreciation of evidence would
not be permissible on the ground of patent illegality
appearing on the face of the award.
41. A decision which is perverse, though would not be
a ground for challenge under “public policy of India”,
would certainly amount to a patent illegality appearing
on the face of the award. However, 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.
42. To understand the test of perversity, it will also be
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
48/119appropriate to refer to paras 31 and 32 from the
judgment of this Court in Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49], which read thus:
(SCC pp. 75-76)
’31. The third juristic principle is that a decision
which is perverse or so irrational that no reasonable
person would have arrived at the same is important
and requires some degree of explanation. It is settled
law 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.
32. A good working test of perversity is contained in
two judgments. In CCE & Sales v. Gopi Nath & Sons
[1992 Supp (2) SCC 312], it was held:
“7. … It is, no doubt, true that if a finding of fact is
arrived at by ignoring or excluding relevant
material or by taking into consideration irrelevant
material or if the finding so outrageously defies
logic as to suffer from the vice of irrationality
incurring the blame of being perverse, then, the
finding is rendered infirm in law.”
29. In Delhi Airport Metro Express [Delhi Airport Metro
Express (P) Ltd. v. DMRC, (2022) 1 SCC 131], this Court
again surveyed the case law and explained the contours
of the Courts’ power to review the arbitral awards.
Therein, this Court not only reaffirmed the principles
aforesaid but also highlighted an area of serious concern
while pointing out “a disturbing tendency” of the Courts
in setting aside arbitral awards after dissecting and
reassessing factual aspects. This Court also underscored
the pertinent features and scope of the expression “patent
illegality” while reiterating that the Courts do not sit in
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
49/119
appeal over the arbitral award. The relevant and
significant passages of this judgment could be usefully
extracted as under: [Delhi Airport Metro Express (P)
Ltd. v. DMRC, (2022) 1 SCC 131], SCC pp. 147-48, 150-
51 & 155-56, paras 26, 28-30 & 42)
“26. A cumulative reading of the UNCITRAL Model Law
and Rules, the legislative intent with which the 1996
Act is made, Section 5 and Section 34 of the 1996 Act
would make it clear that judicial interference with the
arbitral awards is limited to the grounds in Section 34.
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 reappreciation of
matters of fact as well as law. (See Uttarakhand Purv
Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd.
[(2020) 2 SCC 455], Bhaven Construction v. Sardar
Sarovar Narmada Nigam Ltd. [(2022) 1 SCC 75] &
Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram
Saran [(2012) 5 SCC 306].)
***
28. This Court has in several other judgments
interpreted Section 34 of the 1996 Act to stress on the
restraint to be shown by Courts while examining the
validity of the arbitral awards. The limited grounds
available to Courts for annulment of arbitral awards
are well known to legally trained minds. However, the
difficulty arises in applying the well-established
principles for interference to the facts of each case that
come up before the Courts. There is a disturbing
tendency of Courts setting aside arbitral awards, after
dissecting and reassessing factual aspects of the cases
to come to a conclusion that the award needs
intervention and thereafter, dubbing the award to be
vitiated by either perversity or patent illegality, apart
from the other grounds available for annulment of the
award. This approach would lead to corrosion of the
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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object of the 1996 Act and the endeavours made to
preserve this object, which is minimal judicial
interference with arbitral awards. That apart, several
judicial pronouncements of this 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.
29. Patent illegality should be illegality which goes to
the root of the matter. In other words, every error of
law committed by the Arbitral Tribunal would not fall
within the expression “patent illegality”. Likewise,
erroneous application of law cannot be categorised as
patent illegality. In addition, contravention of law not
linked to public policy or public interest is beyond the
scope of the expression “patent illegality”. What is
prohibited is for Courts to reappreciate evidence to
conclude that the award suffers from patent illegality
appearing on the face of the award, as 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, or interprets a clause in the contract in
such a manner which no fair-minded or reasonable
person would, or if the arbitrator commits an error of
jurisdiction by wandering outside the contract and
dealing with matters not allotted to them. An arbitral
award stating no reasons for its findings would make
itself susceptible to challenge on this account. The
conclusions of the arbitrator which are based on no
evidence or have been arrived at by ignoring vital
evidence are perverse and can be set aside on the
ground of patent illegality. Also, consideration of
documents which are not supplied to the other party is
a facet of perversity falling within the expression
“patent illegality”.
30. Section 34(2)(b) refers to the other grounds on
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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which a court can set aside an arbitral award. If a
dispute which is not capable of settlement by
arbitration is the subject-matter of the award or if the
award is in conflict with public policy of India, the
award is liable to be set aside. Explanation (1),
amended by the 2015 Amendment Act, clarified the
expression “public policy of India” and its
connotations for the purposes of reviewing arbitral
awards. It has been made clear that an award would be
in conflict with public policy of India only when it is
induced or affected by fraud or corruption or is in
violation of Section 75 or Section 81 of the 1996 Act, if
it is in contravention with the fundamental policy of
Indian law or if it is in conflict with the most basic
notions of morality or justice.
***
42. The Division Bench referred to various factors
leading to the termination notice, to conclude that the
award shocks the conscience of the Court. The
discussion in SCC OnLine Del para 103 of the
impugned judgment [DMRC v. Delhi Airport Metro
Express (P) Ltd., 2019 SCC OnLine Del 6562] amounts
to appreciation or reappreciation of the facts which is
not permissible under Section 34 of the 1996 Act. The
Division Bench further held that the fact of AMEL
being operated without any adverse event for a period
of more than four years since the date of issuance of
the CMRS certificate, was not given due importance by
the Arbitral Tribunal. As the arbitrator is the sole
Judge of the quality as well as the quantity of the
evidence, the task of being a Judge on the evidence
before the Tribunal does not fall upon the Court in
exercise of its jurisdiction U/s. 34. [State of Rajasthan
v. Puri Constr. Co. Ltd., (1994) 6 SCC 485] On the
basis of the issues submitted by the parties, the Arbitral
Tribunal framed issues for consideration and answered
the said issues. Subsequent events need not be taken
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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into account.”
(emphasis supplied)
30. In Haryana Tourism [Haryana Tourism Ltd. v.
Kandhari Beverages Ltd., (2022) 3 SCC 237 : (2022) 2
SCC (Civ) 87] , this Court yet again pointed out the
limited scope of interference under Sections 34 and 37 of
the Act; and disapproved interference by the High Court
under Section 37 of the Act while entering into merits of
the claim in the following words : (SCC p. 240, paras 8-
9)
“8. So far as the impugned judgment and order
[Kandhari Beverages Ltd. v. Haryana Tourism Ltd.,
2018 SCC OnLine P&H 3233] passed by the High
Court quashing and setting aside the award and the
order passed by the Additional District Judge under
Section 34 of the Arbitration Act are concerned, it is
required to be noted that in an appeal under Section 37
of the Arbitration Act, the High Court has entered into
the merits of the claim, which is not permissible in
exercise of powers U/s. 37 of the Arbitration Act.
9. As per settled position of law laid down by this Court
in a catena of decisions, an award can be set aside only
if the award is against the public policy of India. The
award can be set aside under Sections 34/37 of the
Arbitration Act, if the award is found to be contrary to:
(a) fundamental policy of Indian Law; or (b) the
interest of India; or (c) justice or morality; or (d) if it is
patently illegal. None of the aforesaid exceptions shall
be applicable to the facts of the case on hand. The High
Court has entered into the merits of the claim and has
decided the appeal under Section 37 of the Arbitration
Act as if the High Court was deciding the appeal
against the judgment and decree passed by the learned
trial court. Thus, the High Court has exercised the
jurisdiction not vested in it under Section 37 of the
Arbitration Act. The impugned judgment and order
[Kandhari Beverages Ltd. v. Haryana Tourism Ltd.,
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
53/1192018 SCC OnLine P&H 3233] passed by the High
Court is hence not sustainable.”
31. As regards the limited scope of interference under
Sections 34/37 of the Act, we may also usefully refer to
the following observations of a three-Judge Bench of this
Court in UHL Power Co. Ltd. v. State of H.P. [(2022) 4
SCC 116]: (SCC p. 124, paras 15-16)
“15. This Court also accepts as correct, the view
expressed by the appellate court that the learned Single
Judge committed a gross error in reappreciating the
findings returned by the Arbitral Tribunal and taking
an entirely different view in respect of the interpretation
of the relevant clauses of the implementation agreement
governing the parties inasmuch as it was not open to
the said court to do so in proceedings U/s. 34 of the
Arbitration Act, by virtually acting as a court of
appeal.
16. As it is, the jurisdiction conferred on courts under
Section 34 of the Arbitration Act is fairly narrow, when
it comes to the scope of an appeal under Section 37 of
the Arbitration Act, the jurisdiction of an appellate
court in examining an order, setting aside or refusing to
set aside an award, is all the more circumscribed.”
32. The learned Attorney General has referred to another
three-Judge Bench decision of this Court in SAL Udyog
[State of Chhattisgarh v. SAL Udyog (P) Ltd., (2022) 2
SCC 275], wherein this Court indeed interfered with the
award in question when the same was found suffering
from non-consideration of a relevant contractual clause.
In the said decision too, the principles aforesaid in Delhi
Airport Metro Express [(2022) 1 SCC 131], Ssangyong
Engg. [(2019) 15 SCC 131] and other cases were
referred to and thereafter, this Court applied the
principles to the facts of that case. We shall refer to the
said decision later at an appropriate juncture.
33. Keeping in view the aforementioned principles
enunciated by this Court with regard to the limited scope
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
54/119
of interference in an arbitral award by a Court in the
exercise of its jurisdiction U/s. 34 of the Act, which is all
the more circumscribed in an appeal under Section 37,
we may examine the rival submissions of the parties in
relation to the matters dealt with by the High Court.”
30. Thus, it is submitted by the learned counsel for the
claimant-Respondent that the law is now well-settled, inasmuch
as an arbitral award can be set aside only on the ground of
patent illegality, i.e. where illegalities go to the root of the
matter but re-appreciation of facts and evidence cannot be
permitted under the ground of patent illegality and the
jurisdiction conferred on Courts under Section 34/37 of the Act
is fairly narrow. It is equally a well-settled law that power of
Court under Section 37 of the Act, 1996 is not same as the
power of the Appellate Court under Code of Civil Procedure,
inasmuch as the learned Appellate Court can re-appreciate both
factual and legal position whereas the jurisdiction of the Court
under Section 37 is confined only to see that the power under
Section 34 has been rightly exercised. In fact, neither the Court
exercising jurisdiction under Section 34 nor under Section 37 of
the Act, 1996 can go into finding of facts recorded by the
arbitral Tribunal. Reference has been made to a judgment
rendered by the Hon’ble Apex Court in the case Bombay Slum
Redevelopment Corporation Ltd. vs. Samir Narain Bhojwani,
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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reported in (2024) 7 SCC 218 as also to the one rendered in the
case of Somdat Builders-NCC-NEC(JV) vs. National
Highways Authority of India & Others, reported in (2025) 6
SCC 757 and the one rendered in the case of Jan De Nul
Dredging India Private Ltd. vs. Tuticorin Port Trust, reported
in (2026) SCC Online SC 33.
Determination:
31. We have heard the learned counsel for the parties at
length and perused the voluminous records, including the
records of the arbitral proceedings, copies of Misc. (Arbitration)
Case No.158 of 2020 and the reply/supplementary reply filed
therein as also the arbitral award dated 17.10.2020 and the
impugned judgement passed by the learned PDJ, Patna dated
25.07.2025.
32. Shorn of unnecessary details, the facts of the present case
are that an agreement dated 24.10.2016 was entered into
between the parties for three years, whereby the claimant-
respondent was required to execute the work of Transporting-
cum-Handling Agent for the District Madhubani and he was
entrusted with the work of transportation of food-grains and
other commodities including edible oil to the destinated
godown, as directed by or on behalf of the appellants and
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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according to the route chart fixed for the said purpose. The
period of agreement was from 24.10.2016 to 23.10.2019,
however it appears that on account of one of the trucks of the
claimant-respondent, which was loaded with 550 bags of rice,
having been looted, an FIR bearing Khutaina P.S. Case No. 133
of 2018 dated 23.12.2018 was registered under Sections 379,
411, 409 and 120 B of the Indian Penal Code read with Section
7 of the Essential Commodities Act, 1955 and Section 37 (6) of
the Bihar Prohibition and Excise Act, 2016 against six persons
including the driver of the said truck. The said occurrence
resulted in the District Manager, BSFC, Madhubani issuing a
show cause dated 13.05.2019 to the claimant-respondent, as to
why in terms of Clause 4(f) of the Agreement, appropriate
proceedings for cancellation of agreement and blacklisting the
claimant-respondent for five years be not initiated, to which the
claimant-respondent had filed his reply dated 18.05.2019,
however the District Transport Committee, Madhubani vide
minutes of meeting dated 21.05.2019 decided to blacklist the
claimant-respondent for a period of five years, forfeit the
security deposit, terminate the agreement and invoke the bank
guarantee. This was followed by a reasoned order dated
23.05.2019 by which the claimant-respondent was blacklisted
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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for five years, the security deposit was forfeited, the agreement
was terminated and the bank guarantee was invoked. The said
order dated 23.05.2019 was though assailed by the claimant-
respondent before the learned Single Judge of this Court in
CWJC No. 12554 of 2019, however the learned Single Judge of
this Court vide order dated 21.08.2019 had though quashed the
order of blacklisting, however liberty was granted to the
claimant-respondent to seek his remedy against the order of
termination, forfeiture of security deposit and invocation of
bank guarantee in a duly constituted arbitration proceedings or
as may be advised in accordance with law.
33. The claimant-respondent had then sent a notice to the
appellants on 29.05.2019 for appointing an arbitrator suggesting
three names, however the appellants did not respond to the said
notice as also failed to appoint any arbitrator within a reasonable
time leading to the respondent filing a request case before this
Court bearing Request Case No. 66 of 2019, under Section 11(6)
of the Act, 1996 for appointment of an independent and
impartial arbitrator in lieu of the provisions in the agreement in
question, whereupon the Learned Chief Justice of this Court by
an order dated 06.09.2019 passed in Request Case No. 66 of
2019 and other analogous cases, had appointed Hon’ble Mr.
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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Justice Sadanand Mukherjee, a retired judge of the Patna High
Court as the Sole Arbitrator to enter upon the disputes and
render his award in terms of the provision of the Act, 1996.
34. The claimant-respondent had then filed a detailed
statement of claim before the learned Arbitrator on 11.10.2019,
being aggrieved with the order dated 23.05.2019, terminating
the agreement in question, forfeiting the security deposit and
invoking the bank guarantee and further raising claims on the
head of non-payment/short payment of the bills pertaining to
transportation and handling charges. The claimant-respondent
had prayed for the following reliefs in the statement of claim
filed before the learned Arbitrator:-
“(i) It be held and declared that the Termination of
agreement, Forfeiture of Security and Invocation of Bank
Guarantee in the Minutes of Meeting dated 21.05.2019
(contained in Annexure- C-48 to the Statement of
Claims) of the District Transport Committee, Madhubani
and reasoned order contained in Memo No. 681 dated
23.05.2019 issued under the signature of Managing
Director of the Corporation (contained in Annexure- C-
49 to the Statement of Claims) is inoperative, illegal,
unjustified and contrary to the terms of the agreement
and not binding on the claimant/petitioner.
(ii) By an interim order the operation of the reasoned
order contained in (contained in Annexure-C-49 to the
Statement of Claims) be stayed till the disposal and final
award in the present arbitral proceeding.
(iii) Respondents jointly and severely be directed to make
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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payment of the claims of the claimant amounting to Rs.
4,32,23,044.57 (four crore thirty two lakh twenty three
thousand forty four rupees and fifty seven paisa) towards
dues (Illegal deduction and withholding of bills of the
claimant/petitioner) with interest thereon @ 18% till
31.10.2019 as noted in Annexure C-63 to the statement
of claims, with further interest thereon at the rate of 18%
per annum from 01.11.2019 up to date of actual receipt
of the awarded amount with interest thereon by the
claimant.
(iv) The respondents jointly and severely be directed to
pay the cost of arbitration to the claimant.
(v) The Hon’ble Tribunal may grant any other relief or
reliefs which is deemed fit and proper in the ends of
justice to the claimant.”
35. The appellants had then filed statement of defence on
13.01.2020, whereafter the claimant-respondent had filed a
rejoinder dated 11.02.2020 as also a supplementary statement of
claim on 14.06.2020. The learned Sole Arbitrator had then
framed issues for consideration.
36. The learned Sole Arbitrator vide arbitral award dated
17.10.2020 has allowed the claim of the claimant-respondent on
the head of outstanding bills amount to the tune of Rs.
2,67,37,638.62, compensation to the tune of Rs. 25 lakhs,
simple interest @ 10% for the pendente lite period and further
18% interest over the awarded sum from the date of award till
realization of the awarded amount, cost towards fees and
expenses of the arbitrator and courts and other legal expenses
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apart from treating the arbitrator’s fees not paid by the
appellants as unpaid cost of the award under Section 39 of the
Act, 1996. We have already reproduced the entitlements of the
claimant-respondent, as awarded by the learned Sole Arbitrator
by the arbitral award dt. 17.10.2020, hereinabove in paragraph
No. 9. The said award dated 17.10.2020 was challenged by the
appellants before the learned Court of PDJ, Patna by filing
Misc. (Arbitration) Case No.158 of 2020 under Section 34 (2) &
(2A) of the Act, 1996, to which the claimant had filed a reply as
also a supplementary reply dt. 23.12.2021 & 14.2.2022,
respectively.
37. The learned PDJ, Patna by the impugned judgment dated
25.07.2025 has been pleased to dismiss the said Misc.
(Arbitration) Case No. 158 of 2020 holding that no valid ground
has been made out under Section (2) or (2A) of Section 34 of
the Act, 1996 so as to warrant interference with the impugned
arbitral award or findings of the learned Sole Arbitrator. The
findings recorded by the learned PDJ, Patna in the aforesaid
judgement dated 25.07.2025 has already been detailed
hereinabove in paragraph No. 17.
38. At the outset, it would be apt to reproduce the relevant
Clauses of the Agreement dt. 24.10.2016 entered into between
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the parties for the District of Madhubani, herein below:-
“12. The First Pary shall be liable to pay the second
Party remuneration for the undertaking in this
agreement at the rates specified below against each item.
No other charges shall be admissible to the second party
for the due performance to this agreement. These rates
are also subject to revision at any time at the discretion
of the First Party. If the Second Party agree to such
revisions either by express consent or by implied action
such rates would automatically be binding to the second
Party.
(Application of rate of Particular slab will be only upto
the maximum distance fixed for the beginning form Zero)
13. No separate handling and stacking charges is
payable in respect of handling work taking place at
F.C.I. depot or rail head/Godown. Schedule of approved
rates for transport and handling is indicated above in
this agreement.
14. The District Manager, Bihar state Food & Civil
Supplies Corporation Ltd. shall on completion of each
month, calculate the amount of remuneration for which
the Second Party is entitled to as aforesaid and pay the
same by Account Payee cheque within a reasonable
period after such accounting. However, after the
submission of bills by the Second Party and subject to
the completion of such other formalities as required by
the First party, the payment against bill submitted by the
Second-Party will be made by the first party in the
manner specified in the Head office Circular No. Audit-
IX 13/96-799 dated 07.02.2001. The First Party reserves
the right to amend the procedure of payment as and
when such is required. No interest shall be payable to the
Second Party for unavoidable delay in the payment. In
special circumstances, the payment may be made even
within the quarter at discretion of the District Manager
with prior approval of the Managing Director while
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
62/119making the payment the damage like shortage officially,
accident, theft etc. payable by the Second Party will be
deducted and if damage is claimed but not finally
determined, payment to that extent will be withheld till
final determination which is to be done at the shortest
possible time.
18. The agreement shall remain in operation for the
period of three years from the date of publication of
Tender notice by the contractor has been appointed and
it can be terminated any time by issuing 15 days prior
notice. This may be terminated earlier than the period
mentioned above on behalf of the First Party in case of
non-lifting of grains, sugar, edible oil etc. During the
specified period if there is any breach of any of the terms
of the agreement by the second party, the agreement may
be terminated and blacklisted as well as debarred for
next five years from future transportation work, security
deposits will be forfeited and Bank guarantee of 20 lacs
(twenty lac only) will be utilized and encashed at once by
the First Party. The responsibility of the second party
shall not cease with the termination of the agreement
unless he has redelivered the grains, sugar, edible oils
and etc., entrusted to him and rendered complete
accounts thereof to the satisfaction of the First Party.
21. All disputes arising under or in pursuance of this
agreement between the parties, except matters decision
of which herein expressly is otherwise provided, shall be
referred to sole arbitration of the C.M.D/Managing
Director of the Bihar State Food & Civil Supplies
Corporation Ltd. Patna or a person nominated by the
C.M.D/ Managing Director decision of such arbitrator
shall be final and binding on both the parties. The
provisions of the arbitration and conciliation Act, 1996
and rules framed there under and statuary modifications
thereof shall apply to the proceedings of arbitration and
all such disputes shall be subject to the jurisdiction of
courts at Patna.
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22. The second party would not be entitled to claim any
compensation for detention of their trucks at the godown
gates or detention by law enforcing agencies during
transit any other authorized places of the corporation
from where the delivery of any consignment is to be
obtained or where any delivery is to be given.”
39. At this juncture, we would like to delve upon the scope of
Sections 34 and 37 of the Act, 1996, as has been considered and
settled in a catena of cases by the Hon’ble Apex Court. In this
regard, we would first refer to the judgment rendered by the
Hon’ble Apex Court in the case of SEPCO Electric Power
Construction Corporation vs. GMR Kamalanga Energy
Limited reported in (2026) 2 SCC 542, paragraph Nos. 68, 114
to 116 whereof are reproduced herein below:-
“68. Furthermore, in the process of discussing the
jurisdiction and powers of courts under Sections 34 and
37 of the 1996 Act, a 3-Judge Bench of this Court, in
UHL Power Co. [UHL Power Co. Ltd. v. State of H.P.,
(2022) 4 SCC 116] while holding that the learned Single
Judge of the High Court concerned had exceeded his
jurisdiction through interference with the arbitral award,
explicated the reasons of such narrow scope of powers of
a court under Section 34 of the 1996 Act. Referencing
extensively on other decisions of this Court, namely,
MMTC [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163],
K. Sugumar v. Hindustan Petroleum Corpn. Ltd. [(2020)
12 SCC 539] , Dyna Technologies [(2019) 20 SCC 1] ,
and Parsa Kente Collieries [(2019) 7 SCC 236], it laid
down that the courts do not sit in appeal over arbitral
awards, therefore, the jurisdiction of the courts
concerned is confined to specific grounds as laid down
under Section 34 of the 1996 Act, for instance, violation
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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Furthermore, it is based on the principle of party
autonomy and the need to uphold the finality of an
arbitral award. Concluding, it iterated that when the
parties have, through conscious decision-making, opted
for arbitration as an alternative means of dispute
mechanism, the courts ought to refrain from
reappreciation of evidence or substitution of
interpretation(s), unless the award is perverse,
unreasonable, or contrary to the mandate of the statute
or decisions of court.
114. Summarising the principles as aforesaid, it is
undoubtful that the interference under jurisprudence laid
down under Sections 34 and 37 of the 1996 Act is
narrow, while aforementioned decisions do acknowledge
that, SEPCO has vehemently pushed so in an attempt to
persuade us to hold the Division Bench in error.
However, the jurisprudence, as also identified in the
aforesaid issues, clarifies that the principles of natural
justice, and the public policy of India are paramount and
cannot be ignored or sidelined in an attempt not to
frustrate the patent or latent commercial wisdom of the
parties to seek an alternative means of dispute
resolution. Such issues attack the root of the Indian legal
system and the courts cannot be made a mere spectator
to such gross violations.
115. The scope under Section 37, as rightly argued by
SEPCO, is slimmer than that under Section 34, but, in
the instant case, the Section 34 judgment had failed to
appreciate the gross violations of the basic principles of
adjudication of a dispute. While one may argue some of
those may be latent and not a prima facie violation,
thereby not mandating any interference, direct omission
of the mandate of Section 18 and Section 28 sub-section
(3) of the 1996 Act are clearly patent through a
skimming of arbitral award. No contentions appear on
behalf of SEPCO vis-à-vis waiver through the
circumstances arising in March 2012, and despite such a
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want, the Arbitral Tribunal exceeded the mandate to
deem a waiver on the part of GMRKE Limited for
contractual notices, without any explicit intent.
Thereafter, it patently discriminates against GMRKE
Limited to deny their claims for want of contractual
notice(s).
116. An attack on the fundamental policy of Indian law
allows for reappreciation and thereby, the impugned
judgment cannot be faulted with on the ground of having
exceeded its jurisdiction under Section 37 of the 1996
Act. The Division Bench was correct in this regard, as to
open up the necessary floodgates of reappreciation of the
arbitral award.”
40. Yet another judgment on the aforesaid issue is the one
rendered by the Hon’ble Apex Court in the case of UHL Power
Company Limited vs. State of Himachal Pradesh, reported in
(2022) 4 SCC 116, paragraph Nos. 16 to 19 and 21 whereof are
reproduced herein below:-
“16. As it is, the jurisdiction conferred on courts under
Section 34 of the Arbitration Act is fairly narrow, when it
comes to the scope of an appeal under Section 37 of the
Arbitration Act, the jurisdiction of an appellate court in
examining an order, setting aside or refusing to set aside
an award, is all the more circumscribed. In MMTC Ltd.
v. Vedanta Ltd. [(2019) 4 SCC 163], the reasons for
vesting such a limited jurisdiction on the High Court in
exercise of powers under Section 34 of the Arbitration
Act have been explained in the following words:
“11. As far as Section 34 is concerned, the position is
well-settled by now that the Court does not sit in
appeal over the arbitral award and may interfere on
merits on the limited ground provided under Section
34(2)(b)(ii) i.e. if the award is against the public policy
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66/119of India. As per the legal position clarified through
decisions of this Court prior to the amendments to the
1996 Act in 2015, a violation of Indian public policy, in
turn, includes a violation of the fundamental policy of
Indian law, a violation of the interest of India, conflict
with justice or morality, and the existence of patent
illegality in the arbitral award. Additionally, the
concept of the “fundamental policy of Indian law”
would cover compliance with statutes and judicial
precedents, adopting a judicial approach, compliance
with the principles of natural justice, and Wednesbury
[Associated Provincial Picture Houses Ltd. v.
Wednesbury Corpn., (1948) 1 KB 223 (CA)]
reasonableness. Furthermore, “patent illegality” itself
has been held to mean contravention of the substantive
law of India, contravention of the 1996 Act, and
contravention of the terms of the contract.”
17. A similar view, as stated above, has been taken by
this Court in K. Sugumar v. Hindustan Petroleum Corpn.
Ltd. [(2020) 12 SCC 539], wherein it has been observed
as follows : (SCC p. 540, para 2)
“2. The contours of the power of the Court under
Section 34 of the Act are too well established to require
any reiteration. Even a bare reading of Section 34 of
the Act indicates the highly constricted power of the
civil court to interfere with an arbitral award. The
reason for this is obvious. When parties have chosen to
avail an alternate mechanism for dispute resolution,
they must be left to reconcile themselves to the wisdom
of the decision of the arbitrator and the role of the
court should be restricted to the bare minimum.
Interference will be justified only in cases of
commission of misconduct by the arbitrator which can
find manifestation in different forms including exercise
of legal perversity by the arbitrator.”
18. It has also been held time and again by this Court
that if there are two plausible interpretations of the terms
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and conditions of the contract, then no fault can be
found, if the learned arbitrator proceeds to accept one
interpretation as against the other. In Dyna Technologies
(P) Ltd. v. Crompton Greaves Ltd. [(2019) 20 SCC 1],
the limitations on the Court while exercising powers
under Section 34 of the Arbitration Act has been
highlighted thus : (SCC p. 12, para 24)
“24. There is no dispute that Section 34 of the
Arbitration Act limits a challenge to an award only on
the grounds provided therein or as interpreted by
various Courts. We need to be cognizant of the fact that
arbitral awards should not be interfered with in a
casual and cavalier manner, unless the Court comes to
a conclusion that the perversity of the award goes to
the root of the matter without there being a possibility
of alternative interpretation which may sustain the
arbitral award. Section 34 is different in its approach
and cannot be equated with a normal appellate
jurisdiction. The mandate under Section 34 is to
respect the finality of the arbitral award and the party
autonomy to get their dispute adjudicated by an
alternative forum as provided under the law. If the
Courts were to interfere with the arbitral award in the
usual course on factual aspects, then the commercial
wisdom behind opting for alternate dispute resolution
would stand frustrated.”
19. In Parsa Kente Collieries Ltd. v. Rajasthan Rajya
Vidyut Utpadan Nigam Ltd. [(2019) 7 SCC 236],
adverting to the previous decisions of this Court in
McDermott International Inc. v. Burn Standard Co. Ltd.
[(2006) 11 SCC 181] and Rashtriya Ispat Nigam Ltd. v.
Dewan Chand Ram Saran [(2012) 5 SCC 306], wherein
it has been observed that an Arbitral Tribunal must
decide in accordance with the terms of the contract, but
if a term of the contract has been construed in a
reasonable manner, then the award ought not to be set
aside on this ground, it has been held thus:
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68/119“9.1. …It is further observed and held that
construction of the terms of a contract is primarily for
an arbitrator to decide unless the arbitrator construes
the contract in such a way that it could be said to be
something that no fair-minded or reasonable person
could do. It is further observed by this Court in the
aforesaid decision in para 33 that when a court is
applying the “public policy” test to an arbitration
award, it does not act as a court of appeal and
consequently errors of fact cannot be corrected. 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 is further
observed that thus 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
this score.
9.2. Similar is the view taken by this Court in NHAI v.
ITD Cementation India Ltd. [(2015) 14 SCC 21], SCC
para 25 and SAIL v. Gupta Brother Steel Tubes Ltd.
[(2009) 10 SCC 63], SCC para 29.”
21. An identical line of reasoning has been adopted in
South East Asia Marine Engg. & Constructions Ltd.
(Seamec Ltd.) v. Oil India Ltd. [(2020) 5 SCC 164] and
it has been held as follows:
“12. It is a settled position that a court can set aside
the award only on the grounds as provided in the
Arbitration Act as interpreted by the courts. Recently,
this Court in Dyna Technologies (P) Ltd. v. Crompton
Greaves Ltd. [(2019) 20 SCC 1] laid down the scope of
such interference. This Court observed as follows:
’24. There is no dispute that Section 34 of the
Arbitration Act limits a challenge to an award only on
the grounds provided therein or as interpreted by
various Courts. We need to be cognizant of the fact
that arbitral awards should not be interfered with in a
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69/119casual and cavalier manner, unless the Court comes
to a conclusion that the perversity of the award goes
to the root of the matter without there being a
possibility of alternative interpretation which may
sustain the arbitral award. Section 34 is different in
its approach and cannot be equated with a normal
appellate jurisdiction. The mandate under Section 34
is to respect the finality of the arbitral award and the
party autonomy to get their dispute adjudicated by an
alternative forum as provided under the law. If the
Courts were to interfere with the arbitral award in the
usual course on factual aspects, then the commercial
wisdom behind opting for alternate dispute resolution
would stand frustrated.’
13. It is also settled law that where two views are
possible, the Court cannot interfere in the plausible
view taken by the arbitrator supported by reasoning.
This Court in Dyna Technologies [(2019) 20 SCC 1]
observed as under :
’25. Moreover, umpteen number of judgments of this
Court have categorically held that the Court should
not interfere with an award merely because an
alternative view on facts and interpretation of
contract exists. The Courts need to be cautious and
should defer to the view taken by the Arbitral
Tribunal even if the reasoning provided in the award
is implied unless such award portrays perversity
unpardonable under Section 34 of the Arbitration
Act.”
41. We may also refer to the judgement rendered in the case
of Jan De Nul Dredging India Private Limited vs. Tuticorin
Port Trust reported in 2026 SCC OnLine SC 33, paragraph
Nos. 36, 37 whereof are reproduced herein below:-
“36. In other words, the scope of interference of the
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70/119court with the arbitral matters is virtually prohibited, if
not absolutely barred. The powers of the appellate court
are even more restricted than the powers conferred by
Section 34 of the Act. The appellate power under Section
37 of the Act is exercisable only to find out if the court
exercising power under Section 34 of the Act, has acted
within its limits as prescribed thereunder or has
exceeded or failed to exercise the power so conferred.
The appellate court exercising powers under Section 37
of the Act has no authority of law to consider the matter
in dispute before the Arbitral Tribunal on merits so as to
hold as to whether the award of the Arbitral Tribunal is
right or wrong. The appellate court in exercise of such
power cannot sit as an ordinary court of appeal and
reappraise the evidence to record a contrary finding. The
award of the Arbitral Tribunal cannot be touched by the
court unless it is contrary to the substantive provision of
law or any provision of the Act or the terms of the
agreement.
37. Undoubtedly, in the case at hand, the award of the
Arbitral Tribunal is not contrary to any substantive
provision of law or any provision of the Act. Yet, it has
been disturbed by the appellate court, apparently by
giving a different interpretation of the clauses of the
licence agreement which jurisdiction was not vested in it.
Ordinarily, the interpretation given by the Arbitral
Tribunal, as affirmed by the court in exercise of powers
under Section 34 of the Act ought to have been
accepted.”
42. We have already referred to the judgments rendered in the
cases of Saw Pipes Limited (supra), Associate Builders
(supra), Reliance Infrastructure Limited (supra), Bombay
Slum Re-development Corporation Limited (supra), Somdat
Builders-NCC-NEC (JV) (supra) and host of other judgments
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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referred to in the said judgements on the scope of interference
under Sections 34 and 37 of the Act, 1996. We find from the law
propounded in the aforesaid judgments, referred to hereinabove
that broadly as far as Sections 34 and 37 of the Act, 1996 are
concerned, the Court is not required to sit in appeal over the
arbitral award and reappreciate the evidence, however
interference would be permissible in the following situations:-
(i) When the award is in violation of Public Policy of
India i.e. the Fundamental Policy of Indian Law.
(ii) In case of violation of the Principles of Natural
Justice as envisaged under Sections 18 and 34 (2)(a)(iii)
of the Act, 1996.
(iii) If the award is in conflict with justice or morality i.e.
in conflict with the most basic notions of morality and
justice.
(iv) If the arbitral award shocks the conscience of the
Court.
(v) An arbitral award can also be set aside on the ground
of patent illegality appearing on the face of the award
which goes to the root of the matter.
43. Thus, in nutshell we find that an award can be challenged
on the grounds provided for under Section 34 (2) and (2A) of
the Act, 1996. It is a well settled law that where a finding is
based on no evidence or an arbitral tribunal takes into account
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something irrelevant to the decision which it arrives at or
ignores vital evidence in arriving at its decision, such decision
would necessarily be perverse and liable to be set aside on the
ground of patent illegality. A conspectus of the aforesaid
judgement rendered by the Hon’ble Apex Court would
demonstrate that award can be set aside under Sections 34 and
37 of the Act, 1996, if the award is found to be contrary to:-
(a) Fundamental policy of Indian Law; or
(b) The Interest of India; or
(c) Justice or morality and
(d) It is patently illegal.
44. Yet another issue which arises for consideration is
whether the powers of the Court under Sections 34 and 37 of the
Act, 1996 will include the power to modify an arbitral award
and if the power to modify the award is available, whether such
power can be exercised only where the award is severable and a
part thereof can be modified. The said issues have been
answered in a constitution bench judgment rendered by the
Hon’ble Apex Court in the case of Gayatri Balasamy vs. ISG
Novasoft Technologies Limited, reported in (2025) 7 SCC 1, to
the effect that the Court has a limited power under Sections 34
and 37 of the Act, 1996 to modify the arbitral award which may
be exercised under the following circumstances:-
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(i) When the award is severable, by severing the
“invalid” portion from the “valid” portion of the award;
(ii) By correcting any clerical, computational or
typographical errors which appear erroneous on the face
of the record.
(iii) By modifying post-award interest in some
circumstances;
45. It would be apropos to reproduce paragraph Nos. 32 to
34, 38, 39, 41 to 45, 49, 63, 65 and 87 of the judgment rendered
by the Hon’ble Apex in the case of Gayatri Balasamy (supra),
herein below:-
“II. Severability of awards
32. In the present controversy, the proviso to Section
34(2)(a)(iv) is particularly relevant. It states that if the
decisions on matters submitted to arbitration can be
separated from those not submitted, only that part of the
arbitral award which contains decisions on matters non-
submitted may be set aside. The proviso, therefore,
permits courts to sever the non-arbitrable portions of an
award from arbitrable ones. This serves a twofold
purpose. First, it aligns with Section 16 of the 1996 Act,
which affirms the principle of kompetenz-kompetenz, that
is, the arbitrators’ competence to determine their own
jurisdiction. Secondly, it enables the Court to sever and
preserve the “valid” part(s) of the award while setting
aside the “invalid” ones. [ The “validity” and
“invalidity”, as used here, does not refer to legal validity
or merits examination, but validity in terms of the
proviso to Section 34(2)(a)(iv) of the 1996 Act.] Indeed,
before us, none of the parties have argued that the Court
is not empowered to undertake such a segregation.
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33. We hold that the power conferred under the proviso
to Section 34(2)(a)(iv) is clarificatory in nature. The
authority to sever the “invalid” portion of an arbitral
award from the “valid” portion, while remaining within
the narrow confines of Section 34, is inherent in the
Court’s jurisdiction when setting aside an award.
34. To this extent, the doctrine of omne majus continet in
se minus–the greater power includes the lesser–applies
squarely. The authority to set aside an arbitral award
necessarily encompasses the power to set it aside in part,
rather than in its entirety. This interpretation is practical
and pragmatic. It would be incongruous to hold that
power to set aside would only mean power to set aside
the award in its entirety and not in part. A contrary
interpretation would not only be inconsistent with the
statutory framework but may also result in valid
determinations being unnecessarily nullified.
III. Difference between setting aside and modification
38. This distinction lies at the heart of many arguments
canvassed before us. The parties opposing the
recognition of a power of modification of the courts have
strenuously contended that modification and setting
aside are distinct and sui generis powers. While
modification involves altering specific parts of an award,
setting aside does not alter the award but results in its
annulment. Their primary concern is that recognising a
power of modification may invite judicial interference
with the merits of the dispute–something arguably
inconsistent with the framework of the 1996 Act.
39. We agree with this argument, but only to a limited
extent. It is true that modification and setting aside have
different consequences: the former alters the award,
while the latter annuls it. [ The words used in the statute
must be interpreted contextually, taking into account the
purpose, scope, and background of the provision. Many
words and expressions have both narrow and broad
meanings and thereby open to multiple interpretations.
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purpose of the legislation. Therefore, we may not strictly
apply a semantic differentiation while interpreting the
words “modification” or “setting aside”. Instead, a
holistic and purposive interpretation of these words will
be consistent with the intent behind the provision and the
1996 Act. Linguistically and even jurisprudentially, a
distinction can be drawn between the expressions —
“modification”, “partial setting aside”, and “setting
aside” of an arbitral award in its entirety. However, we
must note that the practical effect of partially setting
aside an award is the modification of the award.]
However, we do not concur with the view that
recognising any modification power will inevitably lead
to an examination of the merits of the dispute. It will
completely depend on the extent of the modification
powers recognised by us. In the following part of our
Analysis, we outline the contours of this limited power
and explain why, in our view, recognising it will
ultimately yield more just outcomes.
41. To deny courts the authority to modify an award–
particularly when such a denial would impose significant
hardships, escalate costs, and lead to unnecessary delays
–would defeat the raison d’être of arbitration. This
concern is particularly pronounced in India, where
applications under Section 34 and appeals under Section
37 often take years to resolve.
42. Given this background, if we were to decide that
courts can only set aside and not modify awards, then
the parties would be compelled to undergo an extra
round of arbitration, adding to the previous four stages:
the initial arbitration, Section 34 (setting aside
proceedings), Section 37 (appeal proceedings), and
Article 136 (SLP proceedings). In effect, this
interpretation would force the parties into a new
arbitration process merely to affirm a decision that could
easily be arrived at by the Court. This would render the
arbitration process more cumbersome than even
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43. Equally, Section 34 limits recourse to courts to an
application for setting aside the award. However, Section
34 does not restrict the range of reliefs that the Court
can grant, while remaining within the contours of the
statute. A different relief can be fashioned as long as it
does not violate the guardrails of the power provided
under Section 34. In other words, the power cannot
contradict the essence or language of Section 34. The
Court would not exercise appellate power, as envisaged
by Order 41 of the Code of Civil Procedure, 1908
(hereinafter referred to as “the Code”).
44. We are of the opinion that modification represents a
more limited, nuanced power in comparison to the
annulment of an award, as the latter entails a more
severe consequence of the award being voided in toto.
Read in this manner, the limited and restricted power of
severing an award implies a power of the Court to vary
or modify the award. It will be wrong to argue that
silence in the 1996 Act, as projected, should be read as a
complete prohibition.
45. We are thus of the opinion that the Section 34 Court
can apply the doctrine of severability and modify a
portion of the award while retaining the rest. This is
subject to parts of the award being separable, legally
and practically, as stipulated in Part II of our Analysis.
49. Notwithstanding Section 33, we affirm that a Court
reviewing an award under Section 34 possesses the
authority to rectify computational, clerical, or
typographical errors, as well as other manifest errors,
provided that such modification does not necessitate a
merits-based evaluation. There are certain powers
inherent to the Court, even when not explicitly granted
by the legislature. The scope of these inherent powers
depends on the nature of the provision, whether it
pertains to appellate, reference, or limited jurisdiction as
in the case of Section 34. The powers are intrinsically
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connected as they are part and parcel of the jurisdiction
exercised by the Court.
63. We are unable to accept the view taken in Kinnari
Mullick [Kinnari Mullick v. Ghanshyam Das Damani,
(2018) 11 SCC 328 : (2018) 5 SCC (Civ) 106] , which
insists that an application or request under Section 34(4)
must be made by a party in writing. The request may be
oral. Nevertheless, there should be a request which is
recorded by the Court. We are also unable to agree that
the request must be exercised before the application
under Section 34(1) is decided. Section 37 (Annexure A)
permits an appeal against any order setting aside or
refusing to set aside an arbitral award under Section 34.
To this extent, the appellate jurisdiction under Section 37
is coterminous with, and as broad as, the jurisdiction of
the Court deciding objections under Section 34. Hence,
the contention that the Tribunal becomes functus officio
after the award is set aside is misplaced. The Section 37
Court still possesses the power of remand stipulated in
Section 34(4). Of course, the appellate court, while
exercising power under Section 37, should be mindful
when the award has been upheld by the Section 34
Court. But the Section 37 Court still possesses the
jurisdiction to remand the matter to the Arbitral
Tribunal.
65. In Dyna Technologies (P) Ltd. v. Crompton Greaves
Ltd. [Dyna Technologies (P) Ltd. v. Crompton Greaves
Ltd., (2019) 20 SCC 1] , this Court emphasised that the
issuance of a reasoned award is not a mere formality
under the 1996 Act. For an award to be termed
“reasoned”, it must meet three essential yardsticks: it
must be proper, intelligible, and adequate. The purpose
behind Section 34(4) is clear: it allows for an award to
become enforceable after granting the Tribunal an
opportunity to cure any defects. This power is
exercisable when the Arbitral Tribunal has failed to give
any reasoning or the award exhibits gaps in reasoning
and these defects can be cured, thereby preventing
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unnecessary challenges. The underlying intent is to
provide an effective, expeditious forum for addressing
curable defects, which Section 34(4) facilitates.
Conclusions
87. Accordingly, the questions of law referred to by
Gayatri Balasamy [Gayatri Balasamy v. ISG Novasoft
Technologies Ltd., 2024 SCC OnLine SC 1681] are
answered by stating that the Court has a limited power
under Sections 34 and 37 of the 1996 Act to modify the
arbitral award. This limited power may be exercised
under the following circumstances:
87.1. When the award is severable, by severing the
“invalid” portion from the “valid” portion of the award,
as held in Part II of our Analysis;
87.2. By correcting any clerical, computational or
typographical errors which appear erroneous on the face
of the record, as held in Parts IV and V of our Analysis;
87.3. Post-award interest may be modified in some
circumstances as held in Part IX of our Analysis; and/or
87.4. Article 142 of the Constitution applies, albeit, the
power must be exercised with great care and caution and
within the limits of the constitutional power as outlined
in Part XII of our Analysis.”
46. Now coming back to the facts of the present case, we find
that the Ld. sole Arbitrator has by his award dated 17.10.2020
held that the claimant-respondent shall be paid a sum of
Rs.2,67,37,638.62/-, including the security amount to the tune of
Rs.10 lakhs. In this regard, it would be relevant to point out here
that the learned Arbitrator has come to a finding at internal page
No.13 of the award dated 17.10.2020 that the claimant-
respondent has not committed any breach of contract so as to be
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rendered liable under Section 4(f) of the agreement, hence he
cannot be saddled with any liability for any deduction of the
amount on account of theft and institution of FIR, however the
claimant-respondent has raised a claim of Rs.4,32,23,044.57
towards dues comprising of alleged illegal deduction and
withholding of bills of claimant-respondent and damages for
retention of trucks as noted in the tabular content of the
statement of claim filed by the claimant-respondent. The learned
Arbitrator, at internal page No.15 of the award dated 17.10.2020
has further come to a finding that from a perusal of the bills
submitted by the claimant-respondent it appears that a
substantial number of retention (sic detention) bills have been
added along with the amount fallen due, however under Clause
22 of the Contract, there is clear indication that no charges on
deduction arising out of detention of the trucks shall be payable,
thus all such amount are not fit to be reimbursed, hence the
detention bill shall stand deducted from various bills and such
amount shall not be payable. Thereafter, the learned Arbitrator at
internal page No. 16 of the award dated 17.10.2020 has come to
a finding that on computation of payable bills, a sum of Rs.
2,57,37,738.62 along with a sum of Rs. 10 lakhs on the head of
security money is payable to the claimant.
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The only issue which arises for consideration is as to
whether the learned Arbitrator has committed computational
error while deducting the detention bills. The records would
bear it out that the amount claimed by the claimant-respondent
on the head of “balance payment due” (Column 8 of the Chart
annexed at running page Nos.223 and 224) is a sum of Rs.
3,10,21,638.62 but claim to extent of a sum of Rs.
2,57,37,738.62 has been allowed, meaning thereby that a sum of
Rs.52,83,900/- has been deducted on the head of detention bills,
however if the amount of detention bills annexed as Annexures-
C-6, C-8, C-10, C-12, C-13, C-14, C-15, C-16, C-17, C-21, C-
23 and C-24 at running page Nos. 125, 127, 129, 131, 132, 133,
134, 135, 136, 140, 142 and 143 of the brief are totaled-up, the
amount of detention bills would add up to a sum of Rs.
58,55,100/-, hence the Ld. Sole Arbitrator ought to have
awarded a sum of Rs. 2,51,66,538.62 instead of sum of Rs.
2,57,37,738.62 apart from a sum of Rs. 10 lakhs on the head of
security deposit totaling to a sum of Rs.2,61,66,538.62/-, which
in any view of the matter is a computational error, erroneous on
the face of the record, hence we direct that the amount awarded
in favor of the claimant-Respondent by the Ld. Sole Arbitrator
vide award dated 17.10.2020, pertaining to item No.1 at internal
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page No.17 of the said award would stand corrected as follows:-
“(i) The claimant-respondent shall be paid an amount of
Rs. 2,61,66,578.62 towards the claimed amount inclusive
of security amount.”
47. It is a well-settled law that an Appellate Court cannot re-
appreciate the evidence. In the present case the bills submitted
by the claimant before the Ld. Sole Arbitrator along with the
statement of claim have been marked as Annexure-C-2 to C-35,
however the same have not been refuted by the appellants,
inasmuch as they did not file any affidavit of admission / denial
of documents of the claimant-Respondent before the Ld. Sole
Arbitrator, hence all the bills filed by the claimant before the Ld.
Sole Arbitrator would be deemed to have been accepted by the
appellants to be correct except to the extent of deduction of
detention bill from various bills, as aforesaid.
48. At this stage, we may hasten to add that an Arbitrator has
to act within the ambit of the contract, as has been held in the
case of Jayesh H. Pandya vs. Subhtex (India) Ltd. & Others,
reported in (2020) 17 SCC 383. In yet another judgement
rendered by the Hon’ble Apex Court in the case of SEPCO
Electric Power Construction Corporation (supra), it has been
held that the Arbitrator lacks the power to deviate from or to re-
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interpret the terms of the contract while making an award, the
award must be within the parameters of the agreement entered
into between the parties and the arbitrator is restricted to the
terms of the contract and cannot go outside its scope.
49. In one another judgment rendered by the Hon’ble Apex
Court in the case of State of Rajasthan vs. Nav Bharat
Construction Co., reported in (2006) 1 SCC 86, it has been held
that an Arbitrator cannot go beyond the terms of the contract
and when an agreement has been filed in the Court and order of
reference has been made then the claim has to be limited to that
relief and the Arbitrator cannot enlarge the scope of reference.
50. The other issue which arises for consideration in the
present case is regarding award of compensation to the tune of
Rs. 25 lakhs under Section 54 of the Indian Contract Act. The
findings of the learned Arbitrator in this regard can be found at
internal page No.17 of the award dated 17.10.2020, which is
reproduced herein below:-
“Since the contract between the parties consists of
reciprocal promises, in the circumstances of the case, in
view of the delayed payments causing wrongful loss to
the claimant-petitioner, the claimant-petitioner shall be
paid compensation amount of Rs. 45 lakhs (modified to
Rs. 25 lakhs vide order dated 13.11.2020) only as per
Section 54 of the Indian Contract Act.”
51. A bare perusal of the entire award rendered by the learned
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Sole Arbitrator dated 17.10.2020 would show that the prayer of
the claimant-respondent to declare the termination of agreement,
forfeiture of security deposit and invocation of bank guarantee
vide order dated 23.05.2019, issued by the Managing Director,
BSFC, Patna to be inoperative, illegal, unjustified and contrary
to the terms of the agreement, has not been allowed by the
learned Arbitrator and the only finding arrived at by the learned
Arbitrator is that the claimant cannot be saddled with any
liability for any deduction of the amount on account of theft and
institution of FIR and after deduction of the detention bills, the
outstanding claim of the claimant-respondent on the head of
outstanding bills has been allowed.
52. Now, it would be apt to refer to the pleadings made by the
claimant-respondent in the statement of claims filed before the
learned Arbitrator on the aforesaid aspect of the matter, which is
contained in paragraph Nos. 18 and 19 thereof and the same is
being reproduced herein below:-
“18. That the termination of agreement vide order
contained in Memo No. 681 dated 23.05.2019 issued
under the signature of Managing Director of the
Corporation (contained in Annexure C-49) is illegal,
unjustified and contrary to the terms of the agreement.
19. That due to premature termination of the contract by
the respondent contained in Annexure-C-49 the claimant/
petitioner has suffered a loss of Rs. 21,00,000/- (Rupees
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prevented from transporting the food grains for about
seven (07) months during the validity period of
agreement. The claimant/petitioner has to incur losses
due to unjustifiable reasons of the detention of trucks at
the time of unloading for which bills have been
submitted. Idling charges has been calculated at the rate
of Rs. 1,000/ per day for 6 wheels truck, Rs. 1,500/- per
day for 10 wheels truck, Rs. 2,000/- per day as idling
charges per truck for 12 wheels truck besides GPS Load
Cell rent.”
53. In the supplementary statement of claim, while the
aforesaid claim of loss of Rs. 21 lakhs has been reiterated, it has
been further stated that the trucks hired by the claimant-
respondent had remained idle, leading to him having paid
charges to the respective truck owners for ideal period of total
seven months i.e. May, 2019 to November, 2019, apart from the
claimant having incurred a sum of Rs.1,50,000/- on the head of
travelling expenses for travelling to Patna to attend the arbitral
proceedings and a sum of Rs.1,60,000/- on the head of the fees
of his learned Advocate. The law with regard to claim of loss of
profit and award of compensation is no longer res integra. In
this regard, we would first refer to a judgement rendered by the
Hon’ble Apex Court in the case of Unibros vs. All India Radio,
reported in 2023 SCC Online SC 1366, paragraph Nos. 15 to
21 whereof are reproduced herein below:-
“15. Considering the aforesaid reasons, even though
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address the appellant’s claim of loss of profit. In Bharat
Cooking Coal (supra), this Court reaffirmed the
principle that a claim for such loss of profit will only be
considered when supported by adequate evidence. It was
observed:
“24. … It is not unusual for the contractors to claim
loss of profit arising out of diminution in turnover on
account of delay in the matter of completion of the
work. What he should establish in such a situation is
that had he received the amount due under the
contract, he could have utilised the same for some
other business in which he could have earned profit.
Unless such a plea is raised and established, claim for
loss of profits could not have been granted. In this case,
no such material is available on record. In the absence
of any evidence, the arbitrator could not have awarded
the same.”
(emphasis ours)
16. To support a claim for loss of profit arising from a
delayed contract or missed opportunities from other
available contracts that the appellant could have earned
elsewhere by taking up any, it becomes imperative for the
claimant to substantiate the presence of a viable
opportunity through compelling evidence. This evidence
should convincingly demonstrate that had the contract
been executed promptly, the contractor could have
secured supplementary profits utilizing its existing
resources elsewhere.
17. One might ask, what would be the nature and quality
of such evidence? In our opinion, it will be contingent
upon the facts and circumstances of each case. However,
it may generally include independent contemporaneous
evidence such as other potential projects that the
contractor had in the pipeline that could have been
undertaken if not for the delays, the total number of
tendering opportunities that the contractor received and
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declined owing to the prolongation of the contract,
financial statements, or any clauses in the contract
related to delays, extensions of time, and compensation
for loss of profit. While this list is not exhaustive and
may include any other piece of evidence that the court
may find relevant, what is cut and dried is that in
adjudging a claim towards loss of profits, the court may
not make a guess in the dark; the credibility of the
evidence, therefore, is the evidence of the credibility of
such claim.
18. Hudson’s formula, while attained acceptability and is
well understood in trade, does not, however, apply in a
vacuum. Hudson’s formula, as well as other methods
used to calculate claims for loss of off-site overheads
and profit, do not directly measure the contractor’s exact
costs. Instead, they provide an estimate of the losses the
contractor may have suffered. While these formulae are
helpful when needed, they alone cannot prove the
contractor’s loss of profit. They are useful in assessing
losses, but only if the contractor has shown with
evidence the loss of profits and opportunities it suffered
owing to the prolongation.
19. The law, as it should stand thus, is that for claims
related to loss of profit, profitability or opportunities to
succeed, one would be required to establish the following
conditions : first, there was a delay in the completion of
the contract; second, such delay is not attributable to the
claimant; third, the claimant’s status as an established
contractor, handling substantial projects; and fourth,
credible evidence to substantiate the claim of loss of
profitability. On perusal of the records, we are satisfied
that the fourth condition, namely, the evidence to
substantiate the claim of loss of profitability remains
unfulfilled in the present case.
20. The First Award was interfered with by the High
Court for the reasons noted above. The Arbitrator, in
view of such previous determination made by the High
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Court, could have granted damages to the appellant
based on the evidence on record. There was, so to say,
none which on proof could have translated into an award
for damages towards loss of profit. A claim for damages,
whether general or special, cannot as a matter of course
result in an award without proof of the claimant having
suffered injury. The arbitral award in question, in our
opinion, is patently illegal in that it is based on no
evidence and is, thus, outrightly perverse; therefore,
again, it is in conflict with the “public policy of India”
as contemplated by section 34(2)(b) of the Act.
21. For the reasons aforesaid, we find no merit in this
appeal. The same stands dismissed. However, cost
awarded by the learned Single Judge is made easy.”
54. Yet another judgment on the aforesaid issue is the one
rendered by the Hon’ble High Court of Bombay in the case of
Hindustan Petroleum Corporation Ltd., Mumbai vs. Batliboi
Environmental Engineers Ltd, Mumbai and Another, reported
in (2007) SCC OnLine BOM 1016, paragraph Nos. 14, 21, 22,
26, 27, 28 and 29 whereof are reproduced herein below:-
“14. Arbitrator is creation of the contract between the
parties and he gets jurisdiction under the terms of
contract. He is expected to interpret and apply
provisions of the contract and pass an award
accordingly. While passing the award he has to bear in
mind the provisions of section 28 of the Act, which
clearly provides that in case of domestic arbitration in
India, the Arbitral Tribunal shall decide the dispute in
accordance with substantive law for the time in force in
India. If the Arbitrator ignores the substantive law in
force in India and passes an award, it is bound to cause
injustice and is liable to be set aside. For example law
requires that the claim should be within limitation. If the
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the limitation, that will be against the provisions of law
and the award cannot be sustained. In the present case,
it is the contention of the petitioner that the learned
Arbitrator ignored the terms of the contract, relevant
documents as well as the provisions of section 55 of the
Contract Act and, therefore, the award is liable to be set
aside. It will be necessary to examine the record to find
out in the light of this contention.
21. Section 55 of the Contract Act reads as follows:
“55. Effect of failure to perform at fixed time, in
contract in which time is essential.–
When a party to a contract promises to do a certain
thing at or before a specified time, or certain things at
or before specified times, and fails to do any such thing
at or before the specified time, the contract, or so much
of it as has not been performed, becomes voidable at
the option of the promisee, if the intention of the
parties was that time should be of the essence of the
contract.”
Effect of such failure when time is not essential.
If it was not the intention of the parties that time
should be of the essence of the contract, the contract
does not become voidable by the failure to do such
thing at or before the specified time; but the promisee
is entitled to compensation from the promisor for any
loss occasioned to him by such failure.
Effect of acceptance of performance at time other than
that agreed upon. If, in case of a contract voidable on
account of the promisor’s failure to perform his
promise at the time agreed, the promisee accepts
performance of such promise at any time other than
that agreed, the promisee cannot claim compensation
for any loss occasioned by the non-performance of the
promise at the time agreed, unless at the time of such
acceptance he gives notice to the promisor of his
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intention to do so.”
22. From this it is clear that if the promisor had accepted
the performance of the contract beyond the expiry of the
time fixed for the same, he cannot claim compensation
for any loss occasioned by the non-performance of the
terms at the time agreed unless at the time of such
acceptance, he gives notice to the promisor of his
intention to claim compensation for the delay.
26. It is material to note that total cost of the work was
Rs. 474 lakhs and 80% of the work was admittedly
completed for which the payment was also made. Thus,
when the work was stopped or abandoned by the
contractor, only 20% of the work was remaining and the
cost of the 20% work was only Rs. 114.80 lakhs. If the
contractor would have completed the work, he would be
entitled to receive Rs. 114.80 lakhs and according to his
own contention and as per the assessment made by the
arbitrator, he would be getting 10% on account of
overheads and 10% on account of profits. Thus, the gain
of the contractor would be 20% of the said amount,
which would be only Rs. 22.96 lakhs. Against this the
Arbitrator awarded Rs. 1,57,37,666/- which is much
more than 20% of even the total contract money and,
therefore, it can be said that compensation awarded by
the arbitrator was infact arbitrary against the terms of
the contract and perverse and, therefore, it may be held
that he acted beyond his jurisdiction. It cannot be termed
as a mere error within jurisdiction.
27. The arbitrator also awarded amount of Rs. 12 lakhs
towards compensation for idle machinery and equipment
for a period of 24 months at the rate of Rs. 50,000/- per
month. According to the Arbitrator it is based on the
inspection visit to the site. The petitioner has rightly
pointed out that no such site inspection report is
available on record nor it is made available to the
parties. There is no valid reason for grant of this award.
28. The learned Arbitrator also awarded compensation
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of Rs. 1,95,000/- for extra work. In fact, there is no
record to show that the contractor had issued any notice
to the petitioner about any such extra work, nor there is
any oral or documentary evidence to support this claim.
29. Taking into consideration the terms of the contract,
legal provisions and the award passed by the learned
Arbitrator, it is clear that the award is clearly against the
terms of the contract, provisions of law and infact, it is
perverse and cannot stand judicial scrutiny. In our
considered opinion, the award is liable to be set aside. At
the same time, we may also note that the petitioner is
also not entitled to any counter-claim on account of any
delays on the part of the contractor as the petitioner had
extended time on request of the contractor and that too
without indicating that the petitioner would claim any
compensation as required under section 55 of the
Contract Act. Though there was provision in terms of the
contract for liquidated damages, in fact as pointed out
above, the petitioner also could not establish that delay
was only on account of the contractor. In view of the
above, the appeal deserves to be allowed & the
impugned judgment and the award are liable to be set
aside.
55. The aforesaid judgement rendered in the case of Batliboi
Environmental Engineers Ltd. (supra) by the Hon’ble High
Court of Bombay has been upheld by a judgment rendered by
the Hon’ble Apex Court in the case of Batliboi Environmental
Engineers Limited vs. Hindustan Petroleum Corporation
Limited and Another, reported in (2024) 2 SCC 375, paragraph
Nos. 23, 44, 45 and 47 whereof are reproduced herein below:-
“23. Ordinarily, when the completion of a contract is
delayed and the contractor claims that s/he has suffered
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
91/119a loss arising from depletion of her/his income from the
job and hence turnover of her/his business, and also for
the overheads in the form of workforce expenses which
could have been deployed in other contracts, the claims
to bear any persuasion before the arbitrator or a court of
law, the builder/contractor has to prove that there was
other work available that he would have secured if not
for the delay, by producing invitations to tender which
was declined due to insufficient capacity to undertake
other work. The same may also be proven from the books
of accounts to demonstrate a drop in turnover and
establish that this result is from the particular delay
rather than from extraneous causes. If loss of turnover
resulting from delay is not established, it is merely a
delay in receipt of money, and as such, the builder/
contractor is only entitled to interest on the capital
employed and not the profit, which should be paid.
44. The decision of this Court in Associate Builders
[(2015) 3 SCC 49] elaborately examined the question of
public policy in the context of Section 34 of the A&C Act,
specifically under the head “fundamental policy of
Indian law”. It was firstly held that the principle of
judicial approach demands a decision to be fair,
reasonable and objective. On the obverse side, anything
arbitrary and whimsical would not satisfy the said
requirement.
45. Referring to the third principle in Western Geco
[ONGC Ltd. v. Western Geco International Ltd., (2014) 9
SCC 263], it was explained that the decision would be
irrational and perverse if (a) it is based on no evidence;
(b) if the Arbitral Tribunal takes into account something
irrelevant to the decision which it arrives at; or (c)
ignores vital evidence in arriving at its decision. The
standards prescribed in State of Haryana v. Gopi Nath &
Sons [1992 Supp (2) SCC 312] (for short Gopi Nath &
Sons) and Kuldeep Singh v. Delhi Police [(1999) 2 SCC
10] should be applied and relied upon, as good working
tests of perversity. In Gopi Nath & Sons [1992 Supp (2)
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
92/119SCC 312] it has been held that apart from the cases
where a finding of fact is arrived at by ignoring or
excluding relevant materials or taking into consideration
irrelevant material, the finding is perverse and infirm in
law when it outrageously defies logic as to suffer from
vice of irrationality. Kuldeep Singh [Kuldeep Singh v.
Delhi Police, (1999) 2 SCC 10] clarifies that a finding is
perverse when it is based on no evidence or evidence
which is thoroughly unreliable and no reasonable person
would act upon it. If there is some evidence which can be
acted and can be relied upon, however compendious it
may be, the conclusion should not be treated as perverse.
This Court in Associate Builders [(2015) 3 SCC 49]
emphasised that the public policy test to an arbitral
award does not give jurisdiction to the court to act as a
court of appeal and consequently errors of fact cannot
be corrected. Arbitral Tribunal is the ultimate master of
quality and quantity of evidence. An award based on
little evidence or no evidence, which does not measure
up in quality to a trained legal mind would not be held to
be invalid on this score. Every arbitrator need not
necessarily be a person trained in law as a Judge. At
times, decisions are taken acting on equity and such
decisions can be just and fair should not be overturned
under Section 34 of the A&C Act on the ground that the
arbitrator’s approach was arbitrary or capricious.
Referring to the third ground of public policy, justice or
morality, it is observed that these are two different
concepts. An award is against justice when it shocks the
conscience of the court, as in an example where the
claimant has restricted his claim but the Arbitral
Tribunal has awarded a higher amount without any
reasonable ground of justification. Morality would
necessarily cover agreements that are illegal and also
those which cannot be enforced given the prevailing
mores of the day. Here again interference would be only
if something shocks the court’s conscience. Further,
“patent illegality” refers to three sub-heads: (a)
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contravention of substantive law of India, which must be
restricted and limited such that the illegality must go to
the root of the matter and should not be of a trivial
nature. Reference in this regard was made to clause (a)
to Section 28(1) of the A&C Act, which states that the
dispute submitted to arbitration under Part I shall be in
accordance with the substantive law for the time being in
force. The second sub-head would be when the arbitrator
gives no reasons in the award in contravention with
Section 31(3) of the A&C Act. The third sub-head deals
with contravention of Section 28(3) of the A&C Act
which states that the Arbitral Tribunal shall decide all
cases in accordance with the terms of the contract and
shall take into account the usage of the trade applicable
to the transaction. This last sub-head should be
understood with a caveat that the arbitrator has the right
to construe and interpret the terms of the contract in a
reasonable manner. Such interpretation should not be a
ground to set aside the award, as the construction of the
terms of the contract is finally for the arbitrator to
decide. The award can be only set aside under this sub-
head if the arbitrator construes the award in a way that
no fair-minded or reasonable person would do.
47. We have extensively analysed the award, its patent
flaws and illegalities which emanate from it, like the
manifest lack of reasoning in arriving at the conclusions
and the calculation of amounts awarded, which, in fact,
amount to double or part-double payments, besides
being contradictory, etc. In view of our aforesaid
reasoning, the award has been rightly held [Hindustan
Petroleum Corpn. Ltd. v. Batliboi Environmental
Engineers Ltd., 2007 SCC OnLine Bom 1016] to be
unsustainable and set aside by the Division Bench of the
High Court exercising power and jurisdiction under
Section 37 read with Section 34 of the A&C Act.”
56. We may, at this juncture also quote Section 54 of the
Indian Contracts Act, 1872 herein below:-
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94/119“54. Effect of default as to that promise which should
be first performed, in contract consisting of reciprocal
promises–When a contract consists of reciprocal
promises, such that one of them cannot be performed, or
that its performance cannot be claimed till the other has
been performed, and the promisor of the promise last
mentioned fails to perform it, such promisor cannot
claim the performance of the reciprocal promise, and
must make compensation to the other party to the
contract for any loss which such other party may sustain
by the non-performance of the contract.”
57. Now coming back to the facts of the present case, we find
that the claimant-respondent has claimed a sum of Rs.21 lakhs
by way of compensation on the ground that he has suffered a
loss to the said extent since he was prevented from transporting
the food grains for about seven months during the validity
period of agreement on account of premature termination of the
contract/agreement by the appellants as well as on account of
detention of trucks. In this context, we find that first of all the
learned Arbitrator has not granted any relief to the petitioner as
far as the order dated 23.05.2019, issued by the Managing
Director, BSFC, Patna terminating the agreement in question is
concerned, hence unless and until the premature termination of
the contract/agreement by the appellants is set aside, the
claimant-respondent is not entitled to claim any compensation
on account of the loss suffered due to premature termination of
the contract.
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58. It is yet another aspect of the matter that the claimant-
respondent has failed to bring on record credible evidence to
substantiate the claim of loss of profitability and has in an ad
hoc manner averred in the statement of claim that a loss of Rs.
21 lakhs has been incurred on account of idling/detention of
trucks which in any view of the matter is barred under Clause 22
of the Agreement dated 24.10.2016, as has already been held by
the learned Arbitrator, which has been referred to hereinabove in
the preceding paragraphs. Thus, there is no proof much less any
evidence whatsoever, on the records of the arbitral proceedings
regarding the claimant-respondent having suffered any loss or
injury, hence the award of compensation to the tune of Rs.25
lakhs is based on no evidence, thus is outrightly perverse, hence
is set aside. This aspect of the matter stands fully covered by the
judgement rendered by the Hon’ble Apex Court in the case of
Unibors (supra).
59. The other issue, which arises for consideration is the
award of interest by the Ld. Sole Arbitrator vide arbitral award
dated 17.10.2020 in the following manner:-
“The claimant-petitioner shall be entitled to simple
interest at the rate of 10 per cent per annum from
13.9.2019 till the date of award and further 18 per cent
interest over awarded sum from the date of award till
realization over the awarded amount.”
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60. The findings of the Ld. Sole Arbitrator with regard to the
aforesaid aspect of the matter is as follows:-
“The claimant petitioner has claimed interest @ 18%
per annum upto the date of actual receipt of awarded
amount. Section 3 of the Interest Act does not provide
grant of interest @18% per annum.
The Arbitrator shall follow the provision of Section
31(7) (a) of the Arbitration and Conciliation Act 1996 as
amended in granting interest. It may be stated that
interest upon the interest is not payable. The Arbitrator
does not consider it proper to grant 18% interest on the
interim bills as made out in the tabular statement
(Annex-C-63). The Arbitrator shall grant interest on the
awarded amount during the pendency of the proceeding
and upon making the award.”
61. Thus, we find that the Ld. Sole Arbitrator vide arbitral
award dated 17.10.2020 has awarded interest pendente lite as
also interest from the date of award till realization of the
awarded amount. The law in this regard is no longer res integra,
inasmuch as the Hon’ble Apex Court has repeatedly held that if
the arbitration agreement or the contract itself provides for
interest, the Arbitrator would have the jurisdiction to award
interest, however when the agreement expressly provides that
no interest pendente lite shall be payable on the amount due, the
Arbitrator has no power to award pendente lite interest.
Reference in this connection be had to the judgments rendered
by the Hon’ble Apex Court in the case of Ambica Construction
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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(supra) and the one rendered in the case of GC Roy (supra). In
this regard, we would also refer to a judgment rendered by the
Hon’ble Apex Court in the case of Union of India & Ors. vs.
Larsen & Tubro Limited (L&T), reported in 2026 SCC Online
SC 327, para nos. 29, 31, 34, 36, 38, 40, 43, 45, 46, 47, 48, 52,
53, 55, 56, 59, 61 and 62 whereof are reproduced herein below:-
“29. We have heard learned counsel for the parties and
perused the material placed on record. The following
issues are raised for our consideration:–
A. Whether the AT is justified in awarding pre-
award/pendente lite interest, by way of compensation,
while passing the award in favour of the respondent-
claimant, and more particularly in view of Clause
16(3) and Clause 64(5) of GCC.
B. Whether the AT is justified in awarding post award
interest in favour of the respondent-claimant.
C. Whether the Courts below committed any error
while dealing with Issue (A) and Issue (B) referred
hereinabove while exercising the powers under Section
34 and Section 37 of the Act.
31. Clause 16(3) of the GCC reads as under:
“no interest will be payable upon the Earnest Money
and Security Deposit or amounts payable to the
Contractor under the Contract, but Government
Securities deposited in terms of Sub-Clause (1) of this
clause will be payable with interest accrued thereon”.
34. Section 31(7)(a) and 31(7)(b) further clarifies that
the power of the arbitral tribunal to award interest,
which reads as under:–
“31. Form and contents of arbitral award.–
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98/119………….
(7) (a) Unless otherwise agreed by the parties, where
and in so far as an arbitral award is for the payment of
money, the arbitral tribunal may include in the sum for
which the award is made interest, at such rate as it
deems reasonable, on the whole or any part of the
money, for the whole or any part of the period between
the date on which the cause of action arose and the
date on which the award is made.”
(b) A sum directed to be paid by an arbitral award
shall, unless the award otherwise directs, carry interest
at the rate of two per cent. higher than the current rate
of interest prevalent on the date of award, from the date
of award to the date of payment.
Explanation.–The expression “current rate of
interest” shall have the same meaning as assigned to it
under clause (b) of section 2 of the Interest Act, 1978
(14 of 1978).”
36. In the present case, Clause 16(3) of the GCC, as
referred hereinabove, expressly stipulates that no interest
will be payable upon earnest money and security
deposits or amounts payable to the contractor under the
contract.
38. This Court in the decision rendered in the case of
Manraj Enterprises (supra) has considered a similar
submission canvassed on behalf of the party concerned
and thereafter observed and held in para 12.1 as under:
“12.1. It is required to be noted that Clause 16(1) is
with respect to earnest money/security deposit.
However, Clause 16(2) is specifically with respect to
interest payable upon the earnest money or the security
deposit or amounts payable to the contractor under the
contract. The words used in Clause 16(2) is “or”.
Therefore, the expression “amounts payable to the
contractor under the contract” cannot be read in
conjunction with “earnest money deposit” or “security
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deposit” by applying the principle of ejusdem generis.
The expression “amounts payable to the contractor
under the contract” has to be read independently and
disjunctively to earnest money deposit and security
deposit as the word used is “or” and not “and”
between “earnest money deposit”, “security deposit”
and “amounts payable to the contractor under the
contract”. Therefore, the principle of ejusdem generis
is not applicable in the present case.”
40. At this stage, we would also like to refer to the
decision rendered by a three-judge bench of this Court in
Bright Power Projects (India) (P) Ltd. (supra), wherein
in para 10, 11 and 13, it was held as under:
“10. Thus, it had been specifically understood between
the parties that no interest was to be paid on the
earnest money, security deposit and the amount
payable to the contractor under the contract. So far as
payment of interest on government securities, which
had been deposited by the respondent contractor with
the appellant is concerned, it was specifically stated
that the said amount was to be returned to the
contractor along with interest accrued thereon, but so
far as payment of interest on the amount payable to the
contractor under the contract was concerned, there
was a specific term that no interest was to be paid
thereon.
11. When parties to the contract had agreed to the fact
that interest would not be awarded on the amount
payable to the contractor under the contract, in our
opinion, they were bound by their understanding.
Having once agreed that the contractor would not
claim any interest on the amount to be paid under the
contract, he could not have claimed interest either
before a civil court or before an Arbitral Tribunal.
………….
13. Section 31(7) of the Act, by using the words “unless
otherwise agreed by the parties”, categorically
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100/119specifies that the arbitrator is bound by the terms of the
contract so far as award of interest from the date of
cause of action to date of the award is concerned.
Therefore, where the parties had agreed that no interest
shall be payable, the Arbitral Tribunal cannot award
interest.”
43. Now, at this stage, it is pertinent to observe that this
Court, thereafter, in the case of Manraj Enterprises
(supra) had an occasion to consider similar issues
involved in the present matter and had considered all the
aforementioned decisions, including the decisions
rendered in the cases of Bright Power Projects (India)
(P) Ltd. (supra), Raveechee and Company (supra) and
Ambica Construction v. Union of India, (2017) 14 SCC
323 (a three-judge bench judgment of this Court). After
considering the aforesaid decisions as well as several
other decisions referred on the issue, this Court has
observed in para 8 and 11 as under:
“8. After considering various decisions on award of
interest pendente lite and the future interest by the
arbitrator and after discussing the decisions of this
Court in Ambica Construction v. Union of India
[Ambica Construction v. Union of India, (2017) 14
SCC 323 : (2018) 1 SCC (Civ) 257] and Raveechee &
Co. [Raveechee & Co. v. Union of India, (2018) 7 SCC
664 : (2018) 3 SCC (Civ) 711] and other decisions on
the point, this Court has observed in paras 9 to 18 as
under: (Garg Builders [Garg Builders v. BHEL, (2022)
11 SCC 697], SCC paras 9-19)
“9. On the other hand, Mr. Pallav Kumar, learned
counsel for the respondent, submitted that Section
31(7)(a) of the 1996 Act gives paramount importance
to the contract entered into between the parties and
categorically restricts the power of an arbitrator to
award pre-reference and pendente lite interest when the
parties themselves have agreed to the contrary. He
argued that if the contract itself contains a specific
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
101/119clause which expressly bars the payment of interest,
then it is not open for the arbitrator to grant pendente
lite interest. It was further argued that Ambica
Construction [Ambica Construction v. Union of India,
(2017) 14 SCC 323 : (2018) 1 SCC (Civ) 257] is not
applicable to the instant case because it was decided
under the Arbitration Act, 1940 whereas the instant
case falls under the 1996 Act. It was further argued
that Section 3 of the Interest Act confers power on the
court to allow interest in the proceedings for recovery
of any debt or damages or in proceedings in which a
claim for interest in respect of any debt or damages
already paid. However, Section 3(3) of the Interest Act
carves out an exception and recognises the right of the
parties to contract out of the payment of interest
arising out of any debt or damages and sanctifies
contracts which bars the payment of interest arising out
of debt or damages. Therefore, Clause 17 of the
contract is not violative of any the provisions of the
Contract Act, 1872. In light of the arguments advanced,
the learned counsel prays for dismissal of the appeal.
10. We have carefully considered the submissions of the
learned counsel for both the parties made at the Bar.
The law relating to award of pendente lite interest by
arbitrator under the 1996 Act is no longer res integra.
The provisions of the 1996 Act give paramount
importance to the contract entered into between the
parties and categorically restricts the power of an
arbitrator to award pre-reference and pendente lite
interest when the parties themselves have agreed to the
contrary.
11. Section 31(7)(a) of the 1996 Act which deals with
the payment of interest is as under:
’31.(7)(a) Unless otherwise agreed by the parties,
where and insofar as an arbitral award is for the
payment of money, the Arbitral Tribunal may include in
the sum for which the award is made interest, at such
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102/119rate as it deems reasonable, on the whole or any part of
the money, for the whole or any part of the period
between the date on which the cause of action arose
and the date on which the award is made.’
12. It is clear from the above provision that if the
contract prohibits pre-reference and pendente lite
interest, the arbitrator cannot award interest for the
said period. In the present case, clause barring interest
is very clear and categorical. It uses the expression
“any moneys due to the contractor” by the employer
which includes the amount awarded by the arbitrator.
13. In Sayeed Ahmed & Co. v. State of U.P. [Sayeed
Ahmed & Co. v. State of U.P., (2009) 12 SCC 26 :
(2009) 4 SCC (Civ) 629], this Court has held that a
provision has been made under Section 31(7)(a) of the
1996 Act in relation to the power of the arbitrator to
award interest. As per this section, if the contract bars
payment of interest, the arbitrator cannot award
interest from the date of cause of action till the date of
award.
14. In Sree Kamatchi Amman Constructions v.
Railways [Sree Kamatchi Amman Constructions v.
Railways, (2010) 8 SCC 767 : (2010) 3 SCC (Civ)
575], it was held by this Court that where the parties
had agreed that the interest shall not be payable, the
Arbitral Tribunal cannot award interest between the
date on which the cause of action arose to the date of
the award.
15. BHEL v. Globe Hi-Fabs Ltd. [(2015) 5 SCC 718],
is an identical case where this Court has held as
under : (SCC p. 723, para 16)
’16. In the present case we noticed that the clause
barring interest is very widely worded. It uses the
words “any amount due to the contractor by the
employer”. In our opinion, these words cannot be read
as ejusdem generis along with the earlier words
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“earnest money” or “security deposit”.’
16. In Chittaranjan Maity v. Union of India [ (2017) 9
SCC 611], it was categorically held that if a contract
prohibits award of interest for pre-award period, the
arbitrator cannot award interest for the said period.
17. Therefore, if the contract contains a specific clause
which expressly bars payment of interest, then it is not
open for the arbitrator to grant pendente lite interest.
The judgment on which reliance was placed by the
learned counsel for the appellant in Ambica
Construction [Ambica Construction v. Union of India,
(2017) 14 SCC 323 : (2018) 1 SCC (Civ) 257] has no
application to the instant case because Ambica
Construction [Ambica Construction v. Union of India,
(2017) 14 SCC 323 : (2018) 1 SCC (Civ) 257] was
decided under the Arbitration Act, 1940 whereas the
instant case falls under the 1996 Act. This has been
clarified in Chittaranjan Maity [Chittaranjan Maity v.
Union of India, (2017) 9 SCC 611 : (2017) 4 SCC (Civ)
693] as under: (SCC p. 616, para 16)
’16. Relying on a decision of this Court in Ambica
Construction v. Union of India [Ambica Construction v.
Union of India, (2017) 14 SCC 323 : (2018) 1 SCC
(Civ) 257], the learned Senior Counsel for the
appellant submits that mere bar to award interest on
the amounts payable under the contract would not be
sufficient to deny payment on pendente lite interest.
Therefore, the arbitrator was justified in awarding the
pendente lite interest. However, it is not clear from
Ambica Construction [(2017) 14 SCC 323] as to
whether it was decided under the Arbitration Act, 1940
(for short “the 1940 Act”) or under the 1996 Act. It has
relied on a judgment of Constitution Bench in
Irrigation Deptt., State of Orissa v. G. C. Roy [(1992) 1
SCC 508]. This judgment was with reference to the
1940 Act. In the 1940 Act, there was no provision
which prohibited the arbitrator from awarding interest
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for the pre-reference, pendente lite or post-award
period, whereas the 1996 Act contains a specific
provision which says that if the agreement prohibits
award of interest for the pre-award period, the
arbitrator cannot award interest for the said period.
Therefore, the decision in Ambica Construction cannot
be made applicable to the instant case.’
18. The decision in Raveechee & Co. [Raveechee &
Co. v. Union of India, (2018) 7 SCC 664] relied on by
the learned counsel for the appellant is again under the
Arbitration Act, 1940 which has no application to the
facts of the present case.
19. Having regard to the above, we are of the view that
the High Court [Garg Builders v. BHEL, 2017 SCC
OnLine Del 12871] was justified in rejecting the claim
of the appellant seeking pendente lite interest on the
award amount.”
……………
11. In the said decision in Bright Power Projects
[Union of India v. Bright Power Projects (India) (P)
Ltd., (2015) 9 SCC 695 : (2015) 4 SCC (Civ) 702], this
Court also considered Section 31(7)(a) of the 1996 Act.
It is specifically observed and held that Section 31(7) of
the 1996 Act, by using the words “unless otherwise
agreed by the parties” categorically specifies that the
arbitrator is bound by the terms of the contract insofar
as award of interest from the date of cause of action to
date of the award is concerned. It is further observed
and held that where the parties had agreed that no
interest shall be payable, the Arbitral Tribunal cannot
award interest. Thus, the aforesaid decision of a three-
Judge Bench of this Court is the answer to the
submission made on behalf of the respondent that
despite the bar under Clause 16(2) which is applicable
to the parties, the Arbitral Tribunal is not bound by the
same. Therefore, the contention raised on behalf of the
respondent that dehors the bar under Clause 16(2), the
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Arbitral Tribunal independently and on equitable
ground and/or to do justice can award interest
pendente lite or future interest has no substance and
cannot be accepted. Once the contractor agrees that he
shall not be entitled to interest on the amounts payable
under the contract, including the interest upon the
earnest money and the security deposit as mentioned in
Clause 16(2) of the agreement/contract between the
parties herein, the arbitrator in the arbitration
proceedings being the creature of the contract has no
power to award interest, contrary to the terms of the
agreement/contract between the parties and contrary to
Clause 16(2) of the agreement/contract in question in
this case.”
45. The provisions of the Act of 1996, including
provisions contained in Section 31(7)(a) give paramount
importance to the contract entered into between the
parties and categorically restrict the power of an
arbitrator to award pre-award/pendente lite interest
when the parties have themselves agreed to the contrary.
Thus, the AT cannot award pre-award/pendente lite
interest, even in the form of compensation, in view of
specific Cl. 16(3) of GCC read with Cl. 64(5) of GCC.
46. At this stage, it is also relevant to observe that the AT
itself acknowledged this prohibition by rejecting Claim
No. 7 seeking pendente lite interest. The relevant
paragraph of the Arbitral Award reads as under:–
“The Interest so claimed is therefore not admissible as
per Section 31(7)(a) of the Act read with Clause 64(5)
of the GCC & Clause 7.35 of SCC of the contract
agreement signed between the two parties. Tribunal did
not therefore consider to award any interest on the
award sum as claimed by the Claimant. Therefore,
Arbitral Tribunal declare Nil Award against this
claim.”
47. With regard to the post-award interest, Section 31(7)
(b) of the Act provides that unless the award otherwise
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directs, the sum awarded shall carry interest from the
date of the award till payment. The legislative intent
underlying this provision is twofold: first, to compensate
the successful party for delayed realization of the award,
and second, to ensure prompt compliance with the award
by the judgment-debtor.
48. Recently, this Court in the case of R.P. Garg (supra),
has observed and held in para 9, 11 and 12 as under:
“9. We are of the opinion that the judgment of High
Court is clearly erroneous. Firstly, the interest granted
by the First Appellate Court only related to post award
period, and therefore, for this period, the agreement
between the parties has no bearing. Section 31(7)(b)
deals with grant of interest for post award period i.e.,
from the date of the award till its realization. The
statutory scheme relating to grant of interest provided
in Section 31(7) creates a distinction between interest
payable before and after the award. So far as the
interest before the passing of the award is concerned, it
is regulated by Section 31(7)(a) of the Act which
provides that the grant of interest shall be subject to the
agreement between the parties. This is evident from the
specific expression at the commencement of the sub-
section which says “unless otherwise agreed by the
parties”.
…………..
11. So far as the entitlement of the post-award interest
is concerned, sub-Section (b) of Section 31(7) provides
that the sum directed to be paid by the Arbitral
Tribunal shall carry interest. The rate of interest can be
provided by the Arbitrator and in default the statutory
prescription will apply. Clause (b) of Section 31(7) is
therefore in contrast with clause (a) and is not subject
to party autonomy. In other words, clause (b) does not
give the parties the right to “contract out” interest for
the post-award period. The expression ‘unless the
award otherwise directs’ in Section 31(7)(b) relates to
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rate of interest and not entitlement of interest. The only
distinction made by Section 31(7)(b) is that the rate of
interest granted under the Award is to be given
precedence over the statutorily prescribed rate. The
assumption of the High Court that payment of the
interest for the post award period is subject to the
contract is a clear error.
12. The clear position of law that granting post-award
interest is not subject to the contract between the parties
was recently affirmed in the decision of this Court in
Morgan Securities & Credits (P) Ltd. v. Videocon
Industries Ltd.,6 wherein the court observed as follows:
“24. The issue before us is whether the phrase “unless
the award otherwise directs” in Section 31(7)(b) of the
Act only provides the arbitrator the discretion to
determine the rate of interest or both the rate of interest
and the “sum” it must be paid against. At this juncture,
it is crucial to note that both clauses (a) and (b) are
qualified. While, clause (a) is qualified by the
arbitration agreement, clause (b) is qualified by the
arbitration award. However, the placement of the
phrases is crucial to their interpretation. The words,
“unless otherwise agreed by the parties” occur at the
beginning of clause (a) qualifying the entire provision.
However, in clause (b), the words, “unless the award
otherwise directs” occur after the words “a sum
directed to be paid by an arbitral award shall” and
before the words “carry interest at the rate of eighteen
per cent”. Thereby, those words only qualify the rate of
post-award interest.
25. Section 31(7)(a) confers a wide discretion upon the
arbitrator in regard to the grant of pre-award interest.
The arbitrator has the discretion to determine the rate
of reasonable interest, the sum on which the interest is
to be paid, that is whether on the whole or any part of
the principal amount, and the period for which
payment of interest is to be made — whether it should
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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date on which the cause of action arose and the date of
the award. When a discretion has been conferred on the
arbitrator in regard to the grant of pre-award interest,
it would be against the grain of statutory interpretation
to presuppose that the legislative intent was to reduce
the discretionary power of the arbitrator for the grant
of post-award interest under clause (b). Clause (b) only
contemplates a situation where the arbitration award is
silent on post-award interest, in which event the award-
holder is entitled to a post-award interest of eighteen
per cent.”
52. We are of the view that the AT has committed serious
error by awarding pre-award/pendente lite interest qua
Claim Nos. 1, 3 & 6, though AT has observed that the
said amount are awarded by way of compensation,
however, in view of the peculiar clause of GCC as well
as provisions contained in Section 31(7)(a) of the Act of
1996 and the decisions rendered by this Court, the AT
could not have awarded the pre-award/pendente lite
interest.
53. For the above stated reasons, the Commercial Court
and the High Court failed to appreciate that the AT had
awarded pendente lite interest in violation of an express
contractual bar and such failure attracts interference
even within the limited scope of Sections 34 and 37 of the
Act. 55. There is no provision in the GCC which
expressly bars the grant of post-award interest. In the
absence of such an express exclusion, the statutory
mandate under Section 31(7)(b) of the Act must prevail.
56. In RP Garg (supra), in paragraph 11, this Court
reiterated that post-award interest flows as a matter of
law under Section 31(7)(b), unless the parties have
unequivocally agreed to exclude it.
59. In this context, the decision of this Court in Gayatri
Balasamy v. ISG Novasoft Technologies Limited, (2025)
7 SCC 1, is significant. In paragraphs 74 to 78, this
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Court has categorically held that courts retain the power
to modify post-award interest under Section 31(7)(b) of
the Act where the facts justify such modification. It has
been clarified that Section 31(7)(b) is a distinct
legislative creation which prescribes a statutory
standard to guide the determination of post-award
interest and since such interest is inherently future-
oriented, the courts may increase or decrease the rate of
post-award interest where compelling reasons exist. The
Court further observed that when the statute itself
benchmarks a standard, such benchmark must weigh in
the consideration of the rate awarded and that the power
of modification is necessary to avoid unnecessary setting
aside of the entire award merely on the question of
interest.
61. Accordingly, the answer to the issues framed in the
present matter is that:
A. The AT is not justified in awarding pre-
award/pendente lite interest, by way of compensation,
while passing the award in favour of the respondent-
claimant, and more particularly in view of Clause
16(3) and Clause 64(5) of the GCC. The award of such
interest is not in accordance with the agreement, and
liable to be set aside.
B. The AT is justified in awarding post award interest
in favour of the respondent-claimant, however, the rate
of post-award interest is modified from 12% per annum
to 8% per annum from the date of award till
realization.
C. The Courts below committed a serious error while
dealing with Issue (A) and Issue (B) referred
hereinabove while exercising the powers under Section
34 and Section 37 of the Act.
62. In view of the aforesaid discussion, the impugned
judgment dated 25.05.2023 passed by the High Court of
Judicature at Allahabad, the order dated 15.09.2022
passed by the Commercial Court, Jhansi, and the
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Arbitral Award dated 25.12.2018, are set aside, to the
extent of the grant of pre-award/pendente lite interest or
amounts in the nature of interest, qua Claim No. 1, 3 and
6. The Arbitral Award dated 25.12.2018 is further
modified to the extent of the rate of the post-award
interest from 12% per annum to 8% per annum from the
date of award till realization.”
62. It would be apposite to reproduce paragraphs no. 73 and
74 of the Constitution Bench judgment rendered by the Hon’ble
Apex Court in the case of Gayatri Balasamy vs. ISG Novasoft
Technologies Ltd., reported in (2025) 7 SCC 1 herein below:-
“73. The next question that arises is: Do courts possess
the power to declare or modify interest, especially post-
award interest? In respect of pendente lite interest,
Section 31(7)(a)(Annexure A), states that unless
otherwise agreed by the parties, the Arbitral Tribunal
may include in its sum for the award, interest, at such
rate it deems reasonable on whole or part of the money
for whole or part of the period on which the cause of
action arose and the date on which the award is made. In
respect of post-award interest, Section 31(7)(b)
(Annexure A) states that unless an award provides for
interest on a sum directed to be paid by it, the sum will
carry an interest at a 2% higher rate than the current
rate of interest prevalent on the date of the award, from
the date of the award till the date of payment. The
Explanation defines the expression “current rate of
interest”.
74. There can be instances of violation of Section 31(7)
(a), and the pendente lite interest awarded may be
contrary to the contractual provision. We are of the
opinion that, in such cases, the Court while examining
objections under Section 34 of the 1996 Act will have
two options. First is to set aside the rate of interest or
second, recourse may be had to the powers of remand
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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under Section 34(4).”
63. It would also be gainful to refer to a judgment rendered
by the Hon’ble Apex Court in the case of PAM Developments
Private Ltd. vs. State of West Bengal & Anr., reported in (2024)
10 SCC 715, paragraphs no. 23, 23.1 to 23.6 whereof are
reproduced herein below:-
“23. The power of the arbitrator to grant pre-reference
interest, pendente lite interest, and post-award interest
under Section 31(7) of the Act is fairly well-settled. The
judicial determinations also highlight the difference in
the position of law under the Arbitration Act, 1940. The
following propositions can be summarised from a survey
of these cases:
23.1. Under the Arbitration Act, 1940, there was no
specific provision that empowered an arbitrator to
grant interest. However, through judicial
pronouncements, this Court has affirmed the power of
the arbitrator to grant pre-reference, pendente lite, and
post-award interest on the rationale that a person who
has been deprived of the use of money to which he is
legitimately entitled has a right to be compensated for
the same. [State of Orissa v. G.C. Roy, (1992) 1 SCC
508, para 43(i). Also see State of Orissa v. N.C.
Budharaj, (2001) 2 SCC 721; Union of India v.
Krafters Engg. & Leasing (P) Ltd., (2011) 7 SCC 279 :
(2011) 3 SCC (Civ) 533] When the agreement does not
prohibit the grant of interest and a party claims
interest, it is presumed that interest is an implied term
of the agreement, and therefore, the arbitrator has the
power to decide the same. [State of Orissa v. G.C. Roy,
(1992) 1 SCC 508, paras 43 (iv) & 44]
23.2. Under the 1940 Act, this Court has adopted a
strict construction of contractual clauses that prohibit
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has the power to award interest unless there is an
express, specific provision that excludes the jurisdiction
of the arbitrator [Port of Calcutta v. Engineers-De-
Space-Age, (1996) 1 SCC 516, paras 4 and 5; Madnani
Construction Corpn. (P) Ltd. v. Union of India, (2010)
1 SCC 549 : (2010) 1 SCC (Civ) 168; Tehri Hydro
Development Corpn. Ltd. v. Jai Prakash Associates
Ltd., (2012) 12 SCC 10 : (2013) 2 SCC (Civ) 122,
paras 18-20; Union of India v. Ambica Construction,
(2016) 6 SCC 36 : (2016) 3 SCC (Civ) 36 (First
Ambica Construction Case); Ambica Construction v.
Union of India, (2017) 14 SCC 323 : (2018) 1 SCC
(Civ) 257 (Second Ambica Construction Case);
Raveechee & Co. v. Union of India, (2018) 7 SCC 664 :
(2018) 3 SCC (Civ) 711; Reliance Cellulose Products
Ltd. v. ONGC Ltd., (2018) 9 SCC 266 : (2018) 4 SCC
(Civ) 351] from awarding interest for the dispute in
question [State of U.P. v. Harish Chandra, (1999) 1
SCC 63].
23.3. Under the 1996 Act, the power of the arbitrator to
grant interest is governed by the statutory provision in
Section 31(7). This provision has two parts. Under
clause (a), the arbitrator can award interest for the
period between the date of cause of action to the date
of the award, unless otherwise agreed by the parties.
Clause (b) provides that unless the award directs
otherwise, the sum directed to be paid by an arbitral
award shall carry interest @ 2% higher than the
current rate of interest, from the date of the award to
the date of payment.
23.4. The wording of Section 31(7)(a) marks a
departure from the Arbitration Act, 1940 in two ways :
first, it does not make an explicit distinction between
pre-reference and pendente lite interest as both of them
are provided for under this sub-section; second, it
sanctifies party autonomy and restricts the power to
grant pre-reference and pendente lite interest the
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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it is not a specific bar against the arbitrator. [Sayeed
Ahmed & Co. v. State of U.P., (2009) 12 SCC 26, paras
14, 23, 24 : (2009) 4 SCC (Civ) 629; Union of India v.
Saraswat Trading Agency, (2009) 16 SCC 504 : (2011)
3 SCC (Civ) 499; Sree Kamatchi Amman Constructions
v. Railways, (2010) 8 SCC 767, para 19 : (2010) 3 SCC
(Civ) 575; Union of India v. Bright Power Projects
(India) (P) Ltd., (2015) 9 SCC 695, para 13 : (2015) 4
SCC (Civ) 702; Reliance Cellulose Products Ltd. v.
ONGC Ltd., (2018) 9 SCC 266, para 24 : (2018) 4 SCC
(Civ) 351; Jaiprakash Associates Ltd. v. Tehri Hydro
Development Corpn. (India) Ltd., (2019) 17 SCC 786,
paras 13-15 : (2020) 3 SCC (Civ) 605; Delhi Airport
Metro Express (P) Ltd. v. DMRC, (2022) 9 SCC 286,
paras 16-20, 24 : (2022) 4 SCC (Civ) 623]
23.5. The power of the arbitrator to award pre-
reference and pendente lite interest is not restricted
when the agreement is silent on whether interest can be
awarded [Jaiprakash Associates Ltd. v. Tehri Hydro
Development Corpn. (India) Ltd., (2019) 17 SCC 786,
para 13.2] or does not contain a specific term that
prohibits the same [Oriental Structural Engineers (P)
Ltd. v. State of Kerala, (2021) 6 SCC 150, paras 15-18:
23.6. While pendente lite interest is a matter of
procedural law, pre-reference interest is governed by
substantive law. [Central Bank of India v. Ravindra,
(2002) 1 SCC 367, para 39 following State of Orissa v.
G.C. Roy, (1992) 1 SCC 508, para 43(v)] Therefore, the
grant of pre-reference interest cannot be sourced solely
in Section 31(7)(a) (which is a procedural law), but
must be based on an agreement between the parties
(express or implied), statutory provision (such as
Section 3 of the Interest Act, 1978), or proof of
mercantile usage [Central Bank of India v. Ravindra,
(2002) 1 SCC 367, para 39; Central Coop. Bank Ltd. v.
S. Kamalaveni Sundaram, (2011) 1 SCC 790, para 13 :
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
114/119(2011) 1 SCC (Civ) 331] .
64. Thus, we find from the law laid down by the Hon’ble
Apex Court in the aforesaid judgments that the provisions of the
Act, 1996 including the provisions contained in Section 31(7)(a)
of the Act, 1996 gives paramount importance to the contract
entered into between the parties and categorically restricts the
power of an Arbitrator to pre-award / pendente lite interest when
the parties have themselves agreed to the contrary, hence an
Arbitral Tribunal cannot award pre-award or pendente lite
interest, even under the guise of compensation, where contract
expressly prohibits payment of interest on amounts payable
under the contract, however post-award interest is governed by
Section 31(7)(b) of the Act, 1996 and can be granted unless
expressly barred.
65. Now coming back to the present case, we find that Clause
14 of the agreement dated 24.10.2016 stipulates- “no interest
shall be payable to the second party for unavoidable delay in the
payment”. Therefore, it is amply clear that the agreement dated
24.10.2016 entered into between the parties expressly prohibits
payment of interest on amounts payable under the contract /
agreement, hence applying the principles laid down by the
Hon’ble Apex Court in the aforesaid cases, we hold that the Ld.
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Sole Arbitrator was not justified in awarding interest pendente
lite @ 10 % per annum from the date of start of the arbitral
proceedings i.e. 13.09.2019 till the date of award, hence is liable
to be set aside. Moreover, neither any pleading has been made
by the claimant-Respondent nor any evidence has been brought
on record to demonstrate the factum regarding unavoidable/
avoidable delay in the payments. However, award of interest @
18 % over the awarded sum from the date of award till
realization of the awarded amount being covered by the
provision contained in Section 31(7)(b) of the Act, 1996 does
not require any interference.
66. Having regard to the facts and circumstances of the case
discussed hereinabove in the preceding paragraphs and for the
foregoing reasons, the arbitral award dated 17.10.2020, passed
by the Ld. Sole Arbitrator as also the impugned judgment dated
25.7.2025, passed by the Ld. Principal District Judge, Patna is
corrected/modified/set aside in terms of this judgment as
follows:-
“(i) The amount of Rs. 2,67,37,638.62, awarded in favor
of the claimant-Respondent by the Ld. Sole Arbitrator,
pertaining to item No.1 at internal page No.17 of the
award dated 17.10.2020 shall stand corrected / modified
to a sum of Rs. 2,61,66,578.62 towards the claimed
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
116/119amount inclusive of security amount. Accordingly, the
finding of the Ld. Principal District Judge, Patna in the
impugned judgment dated 25.7.2025 to the said effect
shall also stands corrected / modified.
(ii). The award of the Ld. Sole Arbitrator at serial no. 2 at
internal page No.18 of the award dated 17.10.2020,
holding the claimant-Respondent entitled to
compensation of Rs. 25,00,000/- is set aside. Accordingly,
the impugned judgment dated 25.7.2025, passed by the
Ld. Principal District Judge, Patna, upholding this portion
of the award is also set aside.
(iii). The award of the Ld. Sole Arbitrator at serial no. 3 at
internal page No.18 of the award dated 17.10.2020
regarding grant of simple interest @ 10 % per annum
from 13.9.2019 till the date of award is set aside, however
award of interest @ 18 % over the awarded amount from
the date of award till realization of the awarded amount is
upheld. Accordingly, the impugned judgment dated
25.7.2025, passed by the Ld. Principal District Judge,
Patna, upholding this part of the award to the extent of
grant of simple interest @ 10 % per annum from
13.9.2019 till the date of award is also set aside.
67. In view of the aforesaid discussion, the award dated
17.10.2020, passed by the Ld. Sole Arbitrator and the impugned
judgment dated 25.7.2025, passed by the Ld. Court of Principal
District Judge, Patna are corrected/modified/set aside to the
above extent.
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68. Accordingly, the present appeal is partly allowed to the
aforesaid extent.
COMMERCIAL APPEAL No. 14 of 2025
69. The present appeal has been filed by the appellants under
Section 13 (1A) of the Act, 2015 read with Section 37 of the
Act, 1996 against the order dated 31.07.2025, passed by the
learned Principal District Judge, Patna (hereinafter referred to as
the “learned PDJ, Patna”) in Execution Case No.108 of 2021.
70. Shorn of the unnecessary details, it would suffice to state
here that the claimant-respondent had instituted execution
proceedings by filing the aforesaid Execution Case No.108 of
2021 under Section 36 of the Act, 1996 for execution of Arbitral
award dated 17.10.2020 read with order dated 13.11.2020,
passed by the learned Sole Arbitrator, Patna in Arbitration Case
No.8 of 2019. The appellants had filed rejoinder to the said
execution petition raising various objections and stating therein
that the aforesaid award passed by the learned Sole Arbitrator
has been challenged under Section 34 of the Act, 1996 by filing
Miscellaneous (Arbitration) Case No.158 of 2020, hence the
Execution Case be listed after disposal of the said miscellaneous
case filed by the appellants.
71. It appears that the learned PDJ, Patna by the impugned
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order dated 31.07.2025, passed in Execution Case No.108 of
2021, had on a petition filed by the claimant-respondent supported
by an affidavit dated 06.05.2025, attached the bank accounts of the
appellants and had directed the Office to issue warrant of attachment
in respect of the bank accounts mentioned in the said order dated
31.07.2025, in accordance with due process of law.
72. The Ld. Counsel for the claimant-respondent has further
pointed out that subsequently, the learned PDJ, Patna has passed
an order dated 26.11.2025 in Execution Case No.108 of 2021
whereby and whereunder the petition filed by the claimant-
respondent herein on 26.11.2025 has been allowed and the
authorities of the ICICI Bank, Frazer Road Branch, Patna have
been directed to effect transfer of amount of Rs.4,79,70,693/-
from the bank account standing in the name of the award debtor,
maintained at the said branch to the bank account of the
claimant-respondent maintained at State Bank of India,
Nagarpalika Chowk, Market Branch, Begusarai, whereafter the
matter had been directed to be listed on 11.12.2025.
73. Thus, it is submitted by the Ld. Counsel for the claimant-
respondent that the present petition has been rendered
infructuous on account of passing of the subsequent order dated
26.11.2025 by the learned PDJ, Patna in Execution Case No.108
Patna High Court COMMERCIAL APP No.7 of 2025 dt.23-05-2026
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of 2021, which has not yet been challenged by the appellants.
74. Having regard to the facts and circumstances of the case
and without going into the merits of the present appeal, we find
that since the award dated 17.10.2020 passed by the learned
Arbitrator (as modified vide order dated 13.11.2020), in
Arbitration Case No.8 of 2019 as also the judgment dated
25.07.2025 passed by the learned PDJ, Patna in Misc.
(Arbitration) Case No.158 of 2020, under Section 34 of the Act,
1996, dismissing the appeal filed by the appellants have now
been corrected/modified/set aside by the aforesaid judgment
being passed today in the connected Commercial Appeal No.7
of 2025, we are of the view that the present appeal has been
rendered infructuous, as such the parties would be well advised
to approach the Execution Court, especially in view of the fact
that the execution proceedings are still pending.
75. Accordingly, the present appeal stands disposed of.
(Mohit Kumar Shah, J)
I agree.
Arun Kumar Jha, J:
(Arun Kumar Jha, J)
Ajay/Gaurav
AFR/NAFR AFR
CAV DATE 15.05.2026
Uploading Date 23.05.2026
Transmission Date NA
