Chattisgarh High Court
South Eastern Coalfields Limited vs M/ S Sri Balaji Metals And Minerals Pvt. ... on 5 May, 2026
Author: Rajani Dubey
Bench: Rajani Dubey
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2026:CGHC:20797-DB
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23-03-2026 05-05-2026 - 05-05-2026
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HIGH COURT OF CHHATTISGARH AT BILASPUR
ARBA No. 16 of 2022
South Eastern Coalfields Limited Seepath Road, Bilaspur (C.G.) Represented
Through-
1. The Chairman And Managing Director, SECL, Seepath Raod, Bilaspur
(Chhattisgarh)
2 - The General Manager, Kusmunda Area, PO Kusmunda, District : Korba,
Chhattisgarh
3 - The Staff Officer (Mining) SECL, Kusmunda Area, PO Kusmunda, District :
Korba, Chhattisgarh
... Appellant
versus
M/s Sri Balaji Metals And Minerals Pvt. Ltd. Through Raghav Lakhotia,
Director, 23-A, Netaji Subhas Road , 3rd Floor, Kolkata (WB)
... Respondent
For Appellants : Mr. Abhishek Sinha, Sr. Adv. with Mr. Pankaj
Singh and Ms. Jasleen Gulati, Advocates.
For Respondent : Mr. Ashish Shrivastava, Sr. Adv. with Mr. Ankit
Pandey, Advocate.
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Hon'ble Smt. Justice Rajani Dubey
Hon'ble Shri Justice Radhakishan Agrawal, JJ
CAV Judgment
Per Rajani Dubey, J
Challenge in this appeal is to the legality and validity of the Arbitral Award dated 28.1.2020 passed by the learned Sole Arbitrator and order dated 22.3.2022 passed by the learned Commercial Court (District Level), Nava Raipur, in Case No. Arb.MJC 14 of 2020 under the provisions of Section 34 of the Arbitration and Conciliation Act, 1996.
02. The genesis of the present cause lies with the NIT No.299, dated 10.01.2007 whereby the work was awarded to the respondent herein for "Hiring of HEMM for OB removal at Kusmunda OCM of SECL Kusmunda Area" through work order No: SECL/CGM/KSM/SO(M)/01, dated 16.07.2007 for a sum of Rs. 50,17,19,700/- @ 65.51 Cu. Meter. The work included excavation including drilling in all kind of strata/overburden, loading into tippers, transportation, unloading the excavated material and slit, dumping, dozing, scrapping/removal of bands, preparation/maintenance of Haul Roads, water sprinkling, spreading of material at Kusmunda OCM. The total work period assigned for the completion of work under the contract was three years with the stipulation of quantities to be executed in every year separately. The total quantity of overburden to be removed was 67,02,221 cubic meter and that of slit was 9,52,139 cubic meter.
03. After award of the said work, it was the duty cast upon the respondent herein for completion of the work within the time frame prescribed under the contract. However, owing to various acts of commission and omission of the respondent himself, the same could not be completed and the contract was terminated by the appellant vide order dated 31.8.2009. It was specifically 3 mentioned in the termination order that the unexecuted quantity of work of the respondent will be executed by another agency at the risk and cost of the defaulting contractor. Shortfall penalty will be levied as per clause no. 6.2 of the conditions of contract. Any amount payable to the respondent will be released only after adjustment of shortfall penalty, any other dues to the management including risk and cost recovery on account of quantity to be executed, by another contractor till 26.8.2010 i.e. the date of completion as per original schedule but limited to the executed quantity of the contract. Therefore, the respondent was advised to stop his operations against the work order No.SECL/CGM/KSM/SO(M)01 dated 16.7.2007, forthwith at Kusmunda OC Mines.
04. After termination of the contract, as per the terms of the contract, the remaining work was got done through another contractor by issuing short term notice at the risk and cost basis of the respondent. Consequently, the appellant issued recovery notice to the respondent herein claiming penalty amount and left over work completed through third party. The amount against the risk and cost was Rs.11,70,80,723/-, out of which an amount of Rs.6,94,51,670/- was lying with the appellant in the form of security deposit, unpaid bill of the respondent, over and above the said amount, demand was raised for an amount of Rs. 4,76,29,053/- towards this contract against the respondent.
05. The said action of recovery and termination was challenged by the respondent herein before the CMD of the appellant company, upon which a Committee was constituted by the Director (Technical Operations) consisting of their four officers ie., Chief General Manager (Production), General Manager (CMC), General Manager (Finance) and General Manager, 4 Kusmunda to resolve the dispute by assessing the penalties and dues recoverable from the respondent herein arising out of contract. Before the Committee could give its report, the respondent herein approached this Court in the context of penalties imposed and encashment of bank guarantee of the respondent vide Writ Petition (C) No.7046/2011. The said writ petition was finally disposed of on 05.07.2012 by this Court wherein a new committee was directed to be constituted with direction to reconsider all the grievances. Accordingly, a new Committee was constituted and the Committee, after hearing both the sides, passed the award dated 31.12.2012 holding that the decision of the appellant to terminate the contract was legal and correct. It was further held that the demand letter dated 16.11.2011 for an amount of Rs.4,76,29,053/- is correct. In the meanwhile, the respondent herein filed an application before this Court seeking modification of the order dated 05.07.2012. The said application was disposed of holding that the claimant (respondent herein) may raise objection before the appropriate forum under the Arbitration and Conciliation Act, 1996 (in short "the Act of 1996").
06. Aggrieved by the award of the Committee dated 31.12.2012, the respondent herein filed an application under Section 34 of the Act of 1996 before the learned Commercial Court (District Level), Naya Raipur, which, in turn, set aside the award by its order dated 24.01.2017 holding that since the Committee constituted was not in accordance with law, as there were certain vigilance enquiries against the officers of the Committee, thus, the award passed was patently illegal and the entire award was set aside. Being aggrieved by the order dated 24.01.2017 of the Commercial Court, the appellant herein approached this Court by way of filing an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 bearing Arbitration 5 Appeal No.14/2017 which was dismissed by this Court and the order passed by the Commercial Court was affirmed.
07. Being aggrieved, the appellant herein approached the Hon'ble Supreme Court by way of filing a SLP under Article 136 of the Constitution of India and the Hon'ble Supreme Court vide its order dated 20.07.2018 quashed the order passed by the Settlement Committee and the High Court and consequently, appointed sole arbitrator. On such appointment being made by the Hon'ble Supreme Court, the matter was taken up by the learned Sole Arbitrator and two issues were framed which read as under:
"(1) Whether the termination of contract by the respondent was justified or not and the demand raised by the respondent by letter dated 16.11.2000 is valid or not?
(ii) Whether the South Eastern Coalfield Ltd. is entitled to consequential benefits or not?"
08. The parties were allowed to lead oral evidence in pursuance of their claims, which were duly filed and cross-examined by both the sides. Consequently, while quoting various letters filed by both the sides and cross- examination and oral evidence of the witnesses, the learned Arbitrator has come to the conclusion that the claim of the claimant to the extent of Rs. 10,45,65,360/- is allowed with interest @ 9% from the date of claim petition and, if the amount is not paid within three months, the claimant would be entitled to interest of post pendent @ 12%. Further, litigation expenses to the tune of Rs. 20 lakhs for fighting against the Public Sector Company was also allowed. The Appellant filed application under Section 34 application challenging the said Arbitral Award dated 28.01.2020, however, the 6 Commercial Court, Nava Raypur refused to interfere with the Award and passed its order dated 22.03.2022. Hence this appeal.
09. Learned counsel for the appellants would contend that the impugned award dated 28.1.2020 fails the scrutiny of Section 34 of the Act of 1996 which enumerates various grounds against which an arbitral award could be assailed. As the law stands, an award passed under the Act of 1996 can be set aside on the grounds mentioned under Section 34 of the Act. In the present appeal, the award is liable to be set aside as the same is inherently self-contradictory and inconsistent as also patently illegal and in conflict with the fundamental policy of Indian law and basic notions of justice. On the one hand, the learned Tribunal held the termination to be illegal and unlawful and on the other hand, recorded a finding of fact that the claimant has abandoned the work. While repelling the contention of the appellant that there was no provision in Clause 6.4 of the conditions of contract under which time could have been extended, the learned Tribunal held that non-extension of time was arbitrary and hence termination of contract by the appellant is illegal and unlawful which was subsequently struck down for the reasons mentioned in paras 20 & 21 of the impugned award. Thereafter, in later part of the award (para 24), the learned Tribunal held that the claimant has abandoned the work out of disgust and harassment because of non-cooperation of the appellant thereby the legitimate claim of the appellant for the work done at the risk and cost of the respondent cannot be denied which was but a consequence of termination in terms of Clause 9.2 of the conditions of contract. Such self-contradiction and inconsistency renders an award vulnerable.
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10. Learned counsel further argued that so far as recovery of amount towards risk and cost consequent to termination is concerned, the learned Tribunal held the same to be legitimate claim of the appellant, however, amount actually spent by the appellant to the tune of Rs.11,70,80,723/- has been reduced by 50% and thereby the learned Tribunal deducted the amount so reduced i.e. Rs.5,85,40,361/- from the claim of the respondent which was otherwise allowed i.e. Rs.16,31,05,721/. The said deduction by 50% by the learned Tribunal is without any evidence and is patently illegal. Once the Tribunal recorded a finding of fact that the work in question was abandoned by the respondent, the appellant was entitled to recover the amount due and payable towards the risk and cost in view of Section 73 of the Indian Contract Act, 1872 as the amount due towards risk and cost arose naturally in the usual course of things from the breach committed by the respondent. Failure on the part of the Tribunal to adhere to the mandate of Section 73 amounts to violation of Section 28 of the Act of 1996 which provides that the Arbitrator shall decide the dispute in accordance with the substantive law for the time being in force in India.
11. Learned counsel for the appellants contended that in terms of Clause 9.2 of the conditions of contract, the appellant was entitled to carry out the incomplete work by any means at the risk of the contractor. Therefore, by denying the appellant to recover the amount under this head despite upholding its right to execute the balance work, the learned Tribunal has traveled beyond the terms of the contract and has sought to re-write the terms thereof. Further, the claim of the respondent in respect of 'Cost of work done, not measured, not billed and not paid' was allowed by learned Tribunal to the tune of Rs.1187.56 lacs in absence of any evidence, merely on the 8 askance of the respondent. It is well settled that determination of an issue in absence of evidence or in ignorance of evidence would amount to patent illegality and the same shall also be opposed to the fundamental policy of Indian law.
12. Learned Tribunal discarded Clause 6.6 of the conditions of contract which specifically provides that issue of extension of time shall be considered when the period fixed for completion of contract is about to expire. The Tribunal sought to re-write the contract between the parties. While dwelling upon the issue of extension of time for execution of work, learned Tribunal heavily relied upon the public law principles of fairness, equity, proportionality as also Article 14 of the Constitution thereby importing the said public principles as well as Article 14 into the domain of private contract. He submitted that termination of contract by the appellant, by no stretch of imagination, would qualify as an illegality because of stoppage/abandonment of work by the respondent. The agreement fell within the purview of Section 39 of the Indian Contract Act and by issuing termination letter dated 31.8.2009, the appellant merely notified its intent not to acquiescence the abandonment/stoppage of work by the respondent. Therefore, the issuance of termination notice in terms of Clause 9 of the conditions of contract was rendered to be an empty/technical formality, superfluous and an exercise in futility. Even otherwise, prior to issuance of termination notice, the appellant had repeatedly and desperately by way of multiple communication urged the respondent to resume/pace-up the work which was greeted only with attempts of stone-walling and stoicism, hence by no stretch of imagination, it could be held that the respondent was not afforded opportunity of hearing and 9 the termination letter suffers from the vice of violation of principle of natural justice.
13. Learned counsel for the appellants also argued that the monetary claims of the respondent were adjudicated and an award in respect of the same was passed by the Tribunal without framing an issue on the said subject which amounts to non-judicial approach and for this reason, the award is liable to be set aside in terms of Section 34(2-A)(iv) of the Act of 1996. Learned Tribunal awarded amount under various heads to the respondent even though there exists no categorical finding that they have been proved by way of pleadings and evidence. Therefore, it is a fit case for remand to the learned Court for fresh consideration or in the alternative, the impugned award is liable to be set aside/quashed. As the appellant has met out the grounds to interfere with the impugned award, this Court may severe such part(s) of the impugned award as is deemed legal/appropriate and remand the remaining part for fresh consideration.
Reliance has been placed on the decisions in the matters of State of Gujarat Vs. Meghji Pethraj Shah Charitable Trust, (1994) 3 SCC 552; SAIL Vs. JC Budharaja, (1999) 8 SCC 122; Union of India Vs. Pundarikakshudu & sons, (2003) 8 SCC 168; McDermott International Inc. Vs. Burn Standard Co. Ltd., (2006) 11 SCC 181; State of Rajasthan Vs. Nav Bharat Construction Co., (2006) 1 SCC 86; Hindustan Zinc Ltd. Vs. Friends Coal Carbonisation, (2006) 4 SCC 445; DLF Universal Limited Vs. Atul Limited, 2009 SCC OnLine Guj 8084; Associate Builders Vs. DDA, (2015) 3 SCC 49; Air India Ltd. Vs. Gati Ltd., (2015) 4 Arb LR 335; Kailash Nath Associates Vs. DDA, (2015) 4 SCC 136; Patel Engg. Ltd. Vs. North Eastern Electric Power Corpn. Ltd., (2020) 7 SCC 167; 10 PSA SICAL Terminals Pvt. Ltd. Vs. Board of Trustees of VO Chidambaram Port Trust, Tuticorin, 2021 SCC OnLine 508; State of CG Vs. Sal Udyog Pvt. Ltd., (2022) 2 SCC 275; State of MP Vs. SMEC International Pvt. Ltd., 2023(1) MPLJ 136 (MP); Bombay Slum Redevelopment Corpn. (P) Ltd. Vs. Samir Narain Bhojwani, (2024) 7 SCC 218; SV Samudram Vs. State of Karnataka, (2024) 3 SCC 623; and Gayatri Balasamy Vs. ISG Novasoft Technologies Ltd., (2025) 7 SCC 1.
14. Per contra, learned counsel appearing for the respondent vehemently opposed the aforesaid submission of the appellants and contended that looking to the pleadings of the appellants, the learned Commercial Court rightly held that the petition u/s 34 of the Arbitration and Conciliation Act has been drafted by the appellants like a civil appeal and there is no pleading regarding violation of public policy of India, violation of fundamental policy of India or violation of morality of justice. In the memo of appeal u/s 37, the appellants have nowhere stated that the point submitted by the appellants in Memo of Appeal was actually argued before the learned Commercial court but not dealt with by the Commercial Court in the order dated 22.3.2022. In absence of such an assertion in the Memo of Appeal, the grounds raised by the appellants which were not raised/pressed upon/argued before the Commercial Court in support of the application u/s 34 cannot be considered. In paras 12, 13 & 14 the learned Commercial Court has observed as to what was argued by the appellants in support of the application u/s 34. Hence the argument which was never advanced before the learned Commercial Court during hearing is deemed to be abandoned and the same cannot be made before this Court in appeal u/s 37.
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15. Learned counsel for the respondent argued that when the arbitrator has taken a plausible and reasonable view, the Court cannot capriciously substitute the view of the arbitrator with its own just because it has a different view of opinion. He submitted that setting aside of an arbitral award on the ground of public policy is limited to a rare situation where the award shocks the conscience of the Court and this would not include what the court thinks would be unjust on the facts of the case. If there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found if the learned arbitrator proceeds to accept one interpretation as against the other. He would submit that where there are concurrent findings of fact and law, first by the arbitration tribunal which are then confirmed by the Commercial Court while dealing with objections u/s 34, then the appellate Court in an appeal u/s 37 should be cautious and reluctant to interfere in the findings and be slow to disturb such concurrent findings. He submitted that the appellants have utterly failed to point out any illegality or infirmity in the impugned award and order warranting interference by this Court and therefore, the instant appeal being without any substance is liable to be dismissed with cost.
Reliance has been placed on the decisions in the matters of Karim Bakhsh Vs. Qadir Baksh and others, 1950 SCC OnLine Lah 10; Kapil Deo Shukla Vs. State of UP, MANU/SC/0047/1957; Bachhaj Nahar Vs. Nilima Mandal and others, MANU/SC/8199/2008; Amanullah Vs. State of UP, AIR 1973 SC 1370; RS Jiwani (M/s), Mumbai Vs. Ircon International Ltd., Mumbai, 2009 SCC OnLine Bom 2021; Jamesh Joseph Vs. State of Kerala, (2010) 9 SCC 642; Ramachandra Narayan Nayak Vs. Karnataka Neeravari Nigam Ltd., (2013) 15 SCC 140; Kamlesh Sherawat and 12 another Vs. Lalji Patel & others, 2016 SCC OnLine Del 3488; Venture Global Engineering LLC Vs. Tech Mahindra Ltd. and another, (2018) 1 SCC 656; Sutleg Construction Ltd. Vs. Union Territory of Chandigarh, (2018) 1 SCC 718; Parsa Kente Collieries Ltd. Vs. Rajasthan Rajya Vidyut Utpadan Nigam Ltd., (2019) 7 SCC 236; Ssangyong Engineering and Construction Co. Ltd. Vs. National Highways Authority of India, (2019) 15 SCC 131; MMTC Ltd. Vs. Vedanta Ltd., (2019) 4 SCC 163; Bhilai Steel Plant Steel Authority of India Ltd. & another Vs. International Commerce Ltd., 2020 SCC OnLine Chh 76; Punjab State Civil Supplies Corpn. Ltd. Vs. Ramesh Kumar and Co. and others, 2021 SCC OnLine SC 1056; Navayuga Engineering Co. Ltd. Vs. UOI, 2021 SCC OnLine Ker 5197; Haryana Tourism Ltd. Vs. Kandhari Beverages Ltd., (2022) 3 SCC 237; Delhi Airport Metro Express Pvt. Ltd. Vs. Delhi Metro Rail Corporation Ltd., (2022) 1 SCC 131; UHL Power Co. Ltd. Vs. State of HP, (2022) 4 SCC 116; Reliance Infrastructure Ltd. Vs. State of Goa, MANU/SC/0553/2023; and Batliboi Environmental Engineers Ltd. Vs. Hindustan Petroleum Corpn. Ltd., 2023 SCC OnLine SC 1208.
16. Heard learned counsel for the parties and perused the material available on record.
17. It would be apt to quote Section 34 of the Act of 1996 for ready reference:
"34. Application for setting aside arbitral award.-(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3).
(2) An arbitral award may be set aside by the Court only if--13
(a) the party making the application establishes on the basis of the record of the arbitral tribunal that-
(1) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that--
i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation -For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if.-
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81: or
(ii) it is in contravention with the fundamental policy of Indian law, or
(iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.-For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court 14 finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence. (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. (5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.
(6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party."
Section 37 of the Act of 1996 reads as under:
"37. Appealable orders. (1) [Notwithstanding anything contained in any other law for the time being in force, an appeal] shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:-
2[(a) refusing to refer the parties to arbitration under section 8;15
(b) granting or refusing to grant any measure under section 9;
(c) setting aside or refusing to set aside an arbitral award under section
34.] (2) An appeal shall also lie to a Court from an order of the arbitral tribunal.-
(a) accepting the plea referred in sub-section (2) or sub-section (3) of section 16; or
(b) granting or refusing to grant an interim measure under section 17. (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court."
18. The Hon'ble Supreme Court in the matter of Punjab State Civil Supplies Corporation Ltd. and another Vs. Sanman Rice Mills and others, 2024 SCC OnLine SC 2632 considered the scope of Section 34 of the Act of 1996 and held in paras 10, 11, 12, 13, 19 & 20 as under:
"10. Section 34 of the Act provides for getting an arbitral award set aside by moving an application in accordance with sub-Section (2) and sub- Section (3) of Section 34 of the Act which inter-alia provide for the grounds on which an arbitral award is liable to be set aside. One of the main grounds for interference or setting aside an award is where the arbitral award is in conflict with the public policy of India ie. if the award is induced or affected by fraud or corruption or is in contravention with the fundamental policy of Indian law or it is in conflict with most basic notions of morality and justice. A plain reading of Section 34 reveals that the scope of interference by the court with the arbitral award under Section 34 is very limited and the court is not supposed to travel beyond the aforesaid scope to find out if the award is good or bad.
11. Section 37 of the Act provides for a forum of appeal inter-alia against the order setting aside or refusing to set aside an arbitral award under Section 34 of the Act. The scope of appeal is naturally akin to and limited to the grounds enumerated under Section 34 of the Act.16
12. It is pertinent to note that an arbitral award is not liable to be interfered with only on the ground that the award is illegal or is erroneous in law that too upon reappraisal of the evidence adduced before the arbitral trial. Even an award which may not be reasonable or is non-speaking to some extent cannot ordinarily be interfered with by the courts. It is also well settled that even if two views are possible there is no scope for the court to reappraise the evidence and to take the different view other than that has been taken by the arbitrator. The view taken by the arbitrator is normally acceptable and ought to be allowed to prevail.
13. In paragraph 11 of Bharat Coking Coal Ltd. v. L.K. Ahuja, it has been observed as under:
"11. There are limitations upon the scope of interference in awards passed by an arbitrator. When the arbitrator has applied his mind to the pleadings, the evidence adduced before him and the terms of the contract, there is no scope for the court to reappraise the matter as if this were an appeal and even if two views are possible, the view taken by the arbitrator would prevail. So long as an award made by an arbitrator can be said to be one by a reasonable person no interference is called for. However, in cases where an arbitrator exceeds the terms of the agreement or passes an award in the absence of any evidence, which is apparent on the face of the award, the same could be set aside."
xxx xxx xxx
19. In Bombay Slum Redevelopment Corporation Private Limited v. Samir Narain Bhojwani, a Division Bench of this Court followed and reiterated the principle laid down in the case of MMTC Limited (supra) and UHL Power Company Limited v. State of Himachal Pradesh. It quoted and highlighted paragraph 16 of the latter judgment which extensively relies upon MMTC Limited (supra). It reads as under:
"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 17 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. [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163: (2019) 2 SCC (Civ) 293], 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: (SCC pp. 166-67, para 11) "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 Ltd. v.
Wednesbury Corpn., [1948] 1 K.B. 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."
20. In view of the above position in law on the subject, the scope of the intervention of the court in arbitral matters is virtually prohibited, if not absolutely barred and that the interference is confined only to the extent envisaged under Section 34 of the Act. The appellate power of Section 37 of the Act is limited within the domain of Section 34 of the Act. It is 18 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 has no authority of law to consider the matter in dispute before the arbitral tribunal on merits so as to find out as to whether the decision of the arbitral tribunal is right or wrong upon reappraisal of evidence as if it is sitting in an ordinary court of appeal. It is only where the court exercising power under Section 34 has failed to exercise its jurisdiction vested in it by Section 34 or has travelled beyond its jurisdiction that the appellate court can step in and set aside the order passed under Section 34 of the Act. Its power is more akin to that superintendence as is vested in civil courts while exercising revisionary powers. The arbitral award is not liable to be interfered unless a case for interference as set out in the earlier part of the decision, is made out. It cannot be disturbed only for the reason that instead of the view taken by the arbitral tribunal, the other view which is also a possible view is a better view according to the appellate court."
19. In the present case, it is not in dispute that consequent upon a tender being floated by SECL, a contract under NIT No.299 dated 10.1.2007 was entered into by and between the parties for work namely "Hiring of HEMM for OB removal at Kusmunda OCM of SECL Kusmunda Area" for a total consideration of Rs.50,17,19,700/- (Rupees Fifty crore seventeen lakhs nineteen thousand seven hundred). The timeline for completion of the said work is said to be three months. However, during execution of the contract work, a dispute arose between the parties which led to termination of the contract on 31.8.2009 by SECL i.e. after two years of signing of the contract. The termination was opposed by Sri Balaji. To resolve the said dispute, arbitral proceedings were held by the Special Committee of SECL as per terms and conditions of the contract which resulted in the arbitration award dated 31.12.2012. The said award was challenged by M/s Sri Balaji Metals 19 and Minerals Pvt. Ltd. before the Commercial Court, Raipur in MJC No.06/2016 and it was decided vide order dated 24.1.2017. Thereafter, the SECL instituted an arbitration appeal No.14/2017 before this Court, which came to be dismissed vide judgment dated 14.12.2017· The SECL then challenged the said judgment before the Hon'ble Supreme Court by filing Civil Appeal No.6852/2018 (arising out of SLP(c) No.16988/2018) titled as SECL Vs. Sri Balaji Metals & Minerals Pvt. Ltd. However, before the Hon'ble Supreme Court, the matter was not decided on merits, rather with the consent of both the parties, Hon'ble Mr. Justice Ashok Kumar Mathur, a former Judge of the Hon'ble Supreme Court, was appointed as an Arbitrator by the Hon'ble Supreme Court vide order dated 20.7.2008, who passed the impugned award dated 28.1.2020. This award was challenged by SECL before the learned Commercial Court, Raipur by filing an application under Section 34 of the Act of 1996 and the same was dismissed by the learned Commercial Court vide order dated 22.3.2022. Hence this appeal by SECL.
20. Before the learned Commercial Court, the appellant objected on many points but it is well settled principle of law that an appeal can be filed only on the grounds enumerated under Section 34 of the Act of 1996. Learned Commercial Court observed in para 13 of its order as under:
"13. When I peruse the pleadings of the petitioner, I could not find the specific ground of challenge. The petition is drafted like a Civil Appeal. Specific pleadings regarding violation of public policy of India, violation of fundamental policy of India, violation of morality of justice, have not been pleaded by the petitioner. On query, Learned counsel for the petitioner submitted that the Court should not go for specific pleadings and should ignore these non-pleadings as inadvertent mistake. He argued that the Court should presume all the grounds mentioned in 20 Section 34 of the Arbitration Act, only on the basis of heading of the petition."
In its written submission also, the appellants raised various grounds. Learned Commercial Court minutely appreciated the terms and conditions of the contract and decided the application u/s 34 of the Act of 1996. It is also clear from the award that the learned Arbitral Tribunal minutely appreciated several letters as also the terms of the contract, discussed all the conditions thereof and the evidence adduced before it and thereafter passed the impugned award dated 28.1.2020.
21. The Hon'ble Apex Court in the matter of Ramesh Kumar Jain (supra) after observing several earlier judgments holding the field, held in paras 27 to 36 as under:
"27. The Arbitration and Conciliation Act, 1996 avows to provide a speedy, cost-effective & efficacious mode of alternative dispute resolution with a policy of minimal judicial intervention. The same is apparent from the legislative intent explicitly mandated under section 5 of ABC Act which envisages an embargo upon the judiciary to interfere in arbitral proceedings save in circumstance expressly stipulated under Part I of the Act. Hence, it is clear that judicial interference is circumscribed with only exception being the statutorily mandated remedies which we find under section(s) 34 and 37 of the A&C Act.
28. The bare perusal of section 34 mandates a narrow lens of supervisory jurisdiction to set aside the arbitral award strictly on the grounds and parameters enumerated in sub-section (2) & (3) thereof. The interference is permitted where the award is found to be in contravention to public policy of India; is contrary to the fundamental policy of Indian Law, or offends the most basic notions of morality or justice. Hence, a plain and purposive reading of the section 34 makes it abundantly clear that the scope of interference by a judicial body is extremely narrow. It is a settled proposition of law as has been 21 constantly observed by this court and we reiterate, the courts exercising jurisdiction under section 34 do not sit in appeal over the arbitral award hence they are not expected to examine the legality, reasonableness or correctness of findings on facts or law unless they come under any of grounds mandated-in-the-said provision. In ONGC Limited. v. Saw Pipes Limited, this court held that an award can be set aside under Section 34 on the following grounds:"(a) contravention of 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.
29. When it comes to section 37 of the A&C Act it provides for a limited appellate remedy against an order either setting aside or refusing to set aside an arbitral award passed by civil court in exercise of its power under section 34. This court in MMTC Ltd. v. Vedanta Ltd., at Paragraph 14 observed that interference with an order made under section 37 cannot travel beyond the restrictions laid down in section 34. Further in Konkan Railway Corporation Limited v. Chenab Bridge Project Undertaking this court at Paragraph 18 observed that the scope of appellate scrutiny under section 37 is necessarily co-extensive with the parameters mandated under section 34 of the Act and hence the said provision does not enlarge the jurisdiction of the appellate court. Even this court has observed in Hindustan Construction Company Limited v. National Highways Authority of India, wherein one of us (Justice Aravind Kumar) was part of the bench at Paragraph 26 that the standard of scrutiny of an arbitral award is very narrow and it is not the judicial review of an award. Further in Paragraph 27 it was observed that awards which contains reasons, especially when they interpret contractual terms, ought not to be interfered with lightly. This court has also observed in Larsen Air Conditioning and Refrigeration Company v. Union of India at Paragraph 15 that the scope of interference in exercise of appellate power under section 37 is even narrower to review the findings of the awards, if it has been upheld or substantially upheld under section 34. Hence, It is very well settled that arbitral awards are not liable to be set aside merely on the ground of erroneous in law or alleged misappreciation of evidence and there is a threshold that the party seeking for the award to be set aside has to satisfy, 22 before the judicial body could enter into the realm of exercising its power under section(s) 34 & 37. It is also apt and appropriate to note that re-assessment or re-appreciation of evidence lies outside the contours of judicial review under section(s) 34 and 37. This court in Punjab State Civil Supplies Corporation Limited v. Sanman Rice Mills, at Paragraph 12 observed that even when the arbitral awards may appear to be unreasonable and non-speaking that by itself would not warrant the courts to interfere with the award unless that unreasonableness has harmed the public policy or fundamental policy of Indian law. It might be a possibility that on re-appreciation of evidence, the courts may take another view which may be even more plausible but that also does not leave scope for the courts to reappraise the evidence and arrive at a different view. This court in Batliboi Environmental Engineers Limited v. Hindustan Petroleum Corporation Limited held that the arbitrator is generally considered as ultimate master of quality and quantity of evidence. Even an award which is based on little or no evidence would not be held to be invalid on this score. At times, the decisions are taken by the arbitrator acting on equity and such decisions can be just and fair therefore award should not be overridden under Section 34 and 37 of the A&C Act on the ground that the approach of the arbitrator was arbitrary or capricious.
30. Hence, in the light of the aforesaid discussion, we would deal with the submissions made by the learned senior counsels on behalf of the parties. But there is yet another aspect that warrants our attention before delving into the analysis of submission and that is the setting aside of the impugned order by the High Court by placing reliance on the ground of "patent illegality" therefore, it becomes imperative to understand the true import of the said term before we move further.
31. Prior to 2015 amendment, the ground of "patent illegality" emerged as result of judicial interpretation in ONGC Ltd. (supra) while interpreting "public policy" mandated under section 34(2)(b)(ii) of A&C Act wherein this court for the first time read patent illegality as a sub- ground to set aside the award on the broader purport of "public policy 23 In Paragraph 22 of the decision this court observed: 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." This court went on to illustrate what would constitute patent illegality at Paragraph 22 and we extract the same for easy reference:
"... 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 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"."
32. In Associate Builders v. Delhi Development Authority, this court attempted to filter out what contemplated patent illegality in paras 42.1 to 42.3 under the following three subheads: firstly, contravention of the 24 substantive law of India; secondly, contravention of the Arbitration Act itself and thirdly, contravention of Section 28(3) of the Arbitration Act which mandates the Arbitral Tribunal to decide the case in accordance with the terms of the contract, taking into account the usages of the trade applicable to the transaction. With regard to the third sub-head Justice R.F. Nariman, observed by stating that if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of term 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.
33. In 2015, by way of the Arbitration and Conciliation (Amendment) Act a new sub-section (2A) to section 34 of A&C Act was inserted which in addition to statutorily recognizing the 'patent illegality' ground for setting aside a domestic arbitral award made it an independent and distinct ground from 'public policy' under section 34. The proviso to the newly inserted clause further provided that an award "shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence". The legislative intent behind insertion of this proviso was to avoid excessive intervention to arbitral award by the courts under the ground of 'patent illegality'. However, the Amendment clarified that "an erroneous application of the law" or "re-appreciation of evidence" does not fall under patent illegality. Hence, the courts are not to treat every factual error or every divergent interpretation as an illegality. The illegality must be of a kind that strikes at the heart of the award's validity. For instance, if an arbitrator ignores a binding precedent or a clear prohibition in the contract, that may be patent illegality. Likewise, a finding based on no evidence at all can be said to be perverse and thus patently illegal. But where there is some evidence and a reasonably plausible inference has been drawn by the arbitrators, the courts should ordinarily refrain themselves from supplanting the views arrived by the arbitrator as that would be the true import of the legislative intent inherent in the Amendment Act. 25
34. Thereafter, this court elucidated the meaning of the expression patent illegality' in Ssangyong Engg. & Construction Co. Ltd. v. NHAI while taking into consideration the amendment act of 2015 and held it as a glaring, evident illegality that goes to the root of the award. This includes: (a) an award deciding matters outside the scope of the arbitration (beyond the contract or submission); (b) an award contradicting the substantive law of India or the Arbitration Act itself; (c) an award against the terms of the contract; and (d) an award so unreasoned or irrational that it manifests an error on its face.
35. Considering the aforesaid precedents, in our considered view, the said terminology of patent illegality indicates more than one scenario such as the findings of the arbitrator must shock the judicial conscience or the arbitrator took into account matters he shouldn't have, or he must have failed to take into account vital matters, leading to an unjust result; or the decision is so irrational that no fair or sensible person would have arrived at it given the same facts. A classic example for the same is when an award is based on "no evidence" i.e., arbitrators cannot conjure figures or facts out of thin air to arrive at his findings. If a crucial finding is unsupported by any evidence or is a result of ignoring vital evidence that was placed before the arbitrator, it may be a ground the warrants interference, However, the said parameter must be applied with caution by keeping in mind that "no evidence" means truly no relevant evidence, not scant or weak evidence. If there is some evidence, even a single witness's testimony or a set of documents, on which the arbitrator could rely upon or has relied upon to arrive at his conclusions, the court cannot regard the conclusion drawn by the arbitrator as patently illegal merely because that evidence has less probative value. This thin line is stood crossed only when the arbitral tribunal's conclusion cannot be reconciled with any/permissible view of the evidence.
36. Having discussed the said law, we move ahead to another limb of the submission which was espoused by the respondent particularly with reference to obligations of the arbitrator to decide the dispute in accordance with the terms of the contract. It is a fundamental principle 26 that the arbitrator cannot award anything that is contrary to the contract. The arbitrator is bound by clear stipulations inter se the parties, and an award ignoring such stipulations would violate public policy by undermining freedom of contract. However, that does not mean that not every award which gives a benefit not expressly mentioned in the contract is in violation. The arbitral tribunal in exercise of their power can very well interpret the implied terms or fill gaps where the contract is silent, so long as doing so does not contradict any express term. For example, if a contract is silent on Interest on delayed payments, an arbitrator awarding reasonable interest is not contradicting the contract rather it is a power exercised by the arbitrator to fulfill the gap on the basis of equity which also mandated under Section 31(7)(a) of the A&C Act. Similarly, if a contract does not say either way about compensating extra work done at request, the arbitrator can imply a term or use principles of restitution to award a reasonable sum, without violating the terms of contract. The thin line is whether an express prohibition or restrictions. in the contract is breached by the award? If the answer is in affirmative, the award is liable to struck down. However, where the contract is simply silent on a legitimate claim which is inherently linked to the natural corollary of contractual obligation of the parties the arbitrator will be well within his powers to interpret the contract in the light of principles of the contractual jurisprudence and apply the equity to that situation. A contrary interpretation would lead to opening a floodgate whereby a party who may have dominant position would intentionally not ink down the natural obligation flowing from the contract and subsequently; after obtaining the benefit the party would agitate absence of express terms to sway away from even discharging his alternative obligation of compensating the party at loss. Hence the question which arises in such situations is, can the party who bears the brunt and suffers the loss due to silence under the contract regarding the natural contractual obligation which arises in usual course of business be left in limbo? In our view, that is the very purpose why section 70 of the Contract Act, 1872, has been an intrinsic part of our Contract Act. The said provision creates a statutory right independent of contract, often termed quantum 27 meruit or unjust enrichment remedy. For ready reference the said provision has been extracted hereinbelow:
"70. Obligation of person enjoying benefit of non-gratuitous act. Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered."
22. In light of the above, in the present case also it is clear that all the grounds raised by the appellants are purely factual in nature and as observed by the Hon'ble Apex Court in its several judgments, Arbitrator is considered as the mater on question of facts and even an erroneous interpretation of facts would not lead invocation of our extra-ordinary jurisdiction. The Hon'ble Apex Court in the aforesaid matter of Ramesh Kumar Jain held in para 38 as under:
"38. Coming to submissions of the parties, we refrain ourselves from meticulously examining each submission made by the parties since most of the submissions raised are purely factual in nature and as observed hereinabove, the arbitrator is considered as the master on question of facts and even an erroneous interpretation of facts would not lead us to invoke our extra- ordinary jurisdiction, the only caveat being the said interpretation of facts is patently illegal that is it is based on no evidence or beyond the scope of contract."
23. In the case in hand also, the learned Arbitral Tribunal scrutinized and appreciated all the documents and evidence placed before it in paras 17, 18, 20 & 21 of the impugned award. In para 21 the learned Tribunal opined that the order of termination dated 30.8.2009 issued by SECL is illegal and unlawful, and struck down the same. As per terms and conditions of the 28 contract, SECL was required to issue a notice to the effect that after expiry of a specific period, the contract would be terminated and the learned Arbitral Tribunal rightly found that no such notice mentioning the specified period after which the contract may be terminated, was issued by SECL to the contractor.
24. Learned Commercial Court also appreciated all the grounds enumerated under Section 34 and raised by the appellants. It is clear from the application u/s 34 of the Act of 1996 filed by the appellant/SECL that no specific ground was mentioned by the SECL as provided under Section 34 and the learned Commercial Court rightly held that the petition is drafted like a civil appeal and there is no pleading regarding violation of public policy of India, violation of fundamental policy of India or violation of morality of justice. Even otherwise, looking to the terms and conditions of the contract and various correspondences between the parties, we do not find any perversity or material illegality in the impugned award passed by learned Arbitrator and the order of the learned Commercial Court. It is also well settled principle of law that where there are concurrent findings of fact and law, first by the arbitration tribunal which are subsequently confirmed by the Commercial Court while dealing with objections u/s 34, then the appellate Court in an appeal u/s 37 should be cautious and reluctant to interfere in the findings.
25. The Hon'ble Apex Court in the matter of UOI Vs. Susaka Pvt. Ltd. and others, (2018) 2 SCC 182 held that if a plea is available, whether on facts or law, it has to be raised by the party at an appropriate stage in accordance with law. If not raised or/and given up with consent, the party would be precluded from raising such plea at a later stage of the proceedings on the principle of waiver. If permitted to raise, it causes prejudice to other party. It is well settled that the issue raised for the first time in appeal u/s 37 of the Act of 29 1996 which could have been raised before the Commercial Court, would amount to waiver u/s 4 of the Act. From the memo of appeal it is evident that the appellant raised various grounds for the first time in appeal which were never raised before the Arbitral Tribunal or in the application u/s 34 of the Act of 1996 or in the first round of litigation.
26. On the basis of aforesaid discussion, and looking to the limited scope of interference under Section 37 of the Act of 1996, this Court finds no substance in this appeal. It is liable to be and is hereby dismissed. Consequently, the interim order dated 3.8.2022 passed by this Court stands vacated.
Sd/ Sd/
(Rajani Dubey) (Radhakishan Agrawal)
Judge Judge
Digitally signed
MOHD by MOHD
AKHTAR KHAN
AKHTAR Date:
2026.05.05
KHAN 13:22:11
+0530
Khan