Orissa High Court
M/S. National Aluminium Company vs Indo Power Projects Limited on 24 July, 2025
Author: S.K. Panigrahi
Bench: S.K. Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 28-Jul-2025 17:28:24
IN THE HIGH COURT OF ORISSA AT CUTTACK
ARBA No.16 of 2023
(From the judgment dated 18.05.2023 passed by the learned District
Judge, Koraput at Jeypore in Arbitration Proceeding No.1 of 2020)
M/s. National Aluminium Company .... Appellant (s)
Limited, Bhubaneswar, Odisha
-versus-
Indo Power Projects Limited, .... Respondent (s)
Kolkata
Advocates appeared in the case through Hybrid Mode:
For Appellant (s) : Ms. Pami Rath, Senior Advocate
Along with
Miss. Guman Singh, Adv.
For Respondent (s) : Mr. Dayananda Mohapatra,
Senior Advocate
Along with
Mr. Subhasis Sarkar, Advocate
CORAM:
DR. JUSTICE S.K. PANIGRAHI
DATE OF HEARING:-22.07.2025
DATE OF JUDGMENT: -24.07.2025
Dr. S.K. Panigrahi, J.
1. This Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "A&C Act") has been filed against the judgment dated 18.05.2023 passed by the learned District Judge, Koraput at Jeypore in Arbitration Proceeding No.1 of 2020 wherein the learned District Judge has dismissed the petition filed under Section 34 Page 1 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 of the A&C Act thereby confirming the award dated 17.12.2019 passed by the learned Sole Arbitrator in Arbitration Proceeding No.5 of 2017. I. FACTUAL MATRIX OF THE CASE:
2. Pursuant to an invitation to tender floated by the present Appellant for execution and completion of the work of Electrical works for Phase-2 Expansion Project of Alumina Refinery at Damonjodi (Orissa). The present Respondent participated in the tender and was declared successful. Formal agreement between the parties was executed on 10.10.2007 with the stipulation that the work in question would be completed within a period of 12 months beginning from 15.9.2007.
3. However, the work could not be completed by the Respondent within the time stipulated i.e. 12 months. As many as 12 extensions were granted by the Appellant and the work was completed by the Respondent on 31.7.2012. The Designated Engineer- in-Charge issued a letter of completion on 1.7.2015 indicating that the work of the Respondent amounted to a total of Rs. 9,53,61,442/- The Engineer-in- Charge recommended payment of the 24th R.A. bill for an outstanding amount of Rs. 1,59,40,585 subject to statutory deductions and other legal recoveries to be decided by the present Appellant. Soon thereafter, the Appellant replied vide letter dated 30.9.2015 that this recommended amount was tentative and several deductions towards liquidated damages, cost of unreturned free issue materials and scraps, rebate items, cost of the items lost, etc. would be deducted from the Respondent. Upon calculation, the Appellant determined that the Page 2 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 Respondent was liable to pay an amount of Rs. 89,63,093/- to the Respondent. And at this juncture, the dispute arose.
4. The Respondent questioned the proposed deductions terming them as illegal and beyond the terms of the contract. The Respondent issued a notice raising several claims and demanded reference of the matter for arbitration. As the Appellant did not respond to the notice, the Respondent approached the High Court of Orissa in ARBP No. 42 of 2016 u/s 11 of the Act. This Court was pleased to appoint former Judge of Orissa High Court Justice A.K. Parichha as the Sole Arbitrator in the matter.
5. Before the Sole Arbitrator both the parties, tendered oral and documentary evidence. Upon analysis and consideration of the evidence adduced by the parties, the Sole Arbitrator was pleased to pass an award in favour of the present Respondent vide award dated 17.12.2019.
6. Aggrieved, the present Appellant preferred an application u/s 34 of the A&C Act. Vide judgment dated 18.5.2023 in Arbitration Proceeding No.1 of 2020, the Ld. District Judge, Koraput at Jeypore was pleased to dismiss the said application on the ground that the Appellant has failed to point out any illegality in the Award. Hence, the present petition.
7. Now that the facts leading up to the instant Appeal has been laid down, this Court shall endeavour to summarise the contentions of the Parties and the broad grounds that have been raised to seek the exercise of this Court's limited jurisdiction available under S. 37 of the A&C Act. Page 3 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 II. APPELLANT'S SUBMISSIONS:
8. During course of hearing, learned counsel for the Appellants submitted that the award dated 17.12.2019 suffers from patent illegality due to the fact that the Ld. Tribunal had awarded the claim towards escalation of price of materials and labour costs during the extended period of execution of work, thereby completely ignoring that the works contract is a firm/fixed contract.
9. Furthermore, it was submitted that the Ld. District Judge passed the impugned order without applying its independent mind and has only reiterated what the arbitrator has held and copy pasted the award without application of its own judicial mind.
III. RESPONDENT'S SUBMISSIONS:
10.On the contrary, learned counsel for the Respondent contends that while considering an application under Section 37 of the Act, the Court is not to act as an Appellate Court. The Court is to see as to whether challenge to the award comes within the grounds contained in sub- Section (2) of Section 34 of the Act. According to the learned counsel, the contentions advanced on behalf of the Appellants for challenging the award are factual in nature and, more or less, are pure surmises. None of such contentions come within the purview of Section 34(2) of the Act. Therefore, the award may not be interfered with.
11.It was earnestly contended that there is absolutely no illegality in the award for which the Court may feel inclined to interfere with the same. Page 4 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 IV. ISSUE FOR CONSIDERATION:
12.Having heard the parties and perused the materials available on record, this court here has identified the following solitary issue to be determined:
A. Whether the order of the Ld. District Judge warrants interference keeping in mind the limitations of this court's powers under Section 37 of the A&C Act?
V. ISSUE A: WHETHER THE ORDER OF THE LD. DISTRICT JUDGE WARRANTS ANY INTERFERENCE KEEPING IN MIND THE LIMITATIONS OF THIS COURT'S POWERS UNDER SECTION 37 OF THE A&C ACT?
13. Before going into the merits of the contentions, it is necessary to outline the ambit and scope of Section 37(2)(b) of the 1996 Act. The said section is extracted below:
"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) Appeal shall also lie to a court from an order of the Arbitral Tribunal--
(a) accepting the plea referred to in sub-section (2) or sub- section (3) of Section 16; or
(b) granting or refusing to grant an interim measure under Section 17."
14.The Supreme Court and this Court in catena of judgments have held that the powers of appellate court while exercising jurisdiction under Section 37(2)(b) of the 1996 Act against orders passed by the Arbitral Page 5 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 Tribunal is very restricted and narrow and the same should be exercised when the orders seems to be perverse, arbitrary and contrary to law. The judgment of Wander Ltd. v. Antox India (P) Ltd.1 passed by the Apex Court, elaborates the ambit and scope of the appeals. Although the aforesaid judgment is not dealing with the arbitration proceedings but the same deals with the power of appellate court in the Civil Procedure Code, 1908 (CPC). Operative paragraphs of the aforesaid judgment are extracted below:
"13. On a consideration of the matter, we are afraid, the Appellate Bench fell into error on two important propositions. The first is a misdirection in regard to the very scope and nature of the appeals before it and the limitations on the powers of the appellate court to substitute its own discretion in an appeal preferred against a discretionary order. The second pertains to the infirmities in the ratiocination as to the quality of antox's alleged user of the trade mark on which the passing-off action is founded. We shall deal with these two separately.
14. The appeals before the Division Bench were against the exercise of discretion by the Single Judge. In such appeals, the appellate court will not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court 1 1990 Supp SCC 727 Page 6 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion. After referring to these principles Gajendragadkar, J. in Printers (Mysore) (P) Ltd. v. Pothan Joseph (SCC OnLine SC para 9) '9. ...These principles are well established, but as has been observed by Viscount Simon in Charles Osenton & Co. v. Johnston "the law as to the reversal by a court of appeal of an order made by a Judge below in the exercise of his discretion is well established and any difficulty that arises is due only to the application of well-settled principles in an individual case."' The appellate judgment does not seem to defer to this principle."
15.The said judgment is consistently followed in adjudicating petitions pertaining to the A&C Act by Courts across the Country in Green Infra Wind Energy Ltd. v. Regen Powertech (P) Ltd.2; Sona Corpn. India (P) Ltd. v. Ingram Micro India (P) Ltd.3; Manish Aggarwal v. RCI Industries & Technologies Ltd.4; Tahal Consulting Engineers India (P) Ltd. v. Promax Power Ltd.5 and Handicraft & Handlooms Exports Co. of India v. SMC Comtrade Ltd.6.
2 2018 SCC OnLine Del 8273 3 2020 SCC OnLine Del 300 4 (2022) 3 HCC (Del) 289 5 2023 SCC OnLine Del 2069 6 2023 SCC OnLine Del 3981 Page 7 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24
16.In Reliance Infrastructure Ltd. v. State of Goa7, the Apex Court noticing its previous decision in MMTC Ltd. v. Vedanta Ltd.8 has noted the limited scope of interference under Section 34 and further narrower scope of appeal under Section 37 of the Act particularly when dealing with the concurrent findings of the arbitrator and that of the Court. Relevant paragraph '14' of MMTC Ltd.(supra) as noted in paragraph '26' in Reliance Infrastructure Ltd.(supra) is to be extracted hereinunder:--
"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 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 Section34 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."
17.The same view has been expressed in UHL Power Company Ltd. v. State of Himachal Pradesh9 in paragraph '16' while noticing paragraph '11' in MMTC Ltd.(supra):--
"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 7 (2024) 1 SCC 479 8 (2019) 4 SCC 163 9 (2022) 4 SCC 116 Page 8 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 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."
18.In Haryana Tourism Ltd. v. Kandhari Beverages Ltd.10 as noted in paragraph '30' in Reliance Infrastructure Ltd.(supra), it was held on the scope of interference under Sections 34 and 37 of the Act' 1996 as under:--
10
2022) 3 SCC 237 Page 9 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 "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 and37 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 under Section 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 andorder [Kandhari Beverages Ltd. v. Haryana Tourism Ltd., 2018 SCC OnLine P&H 3233] passed by the High Court is hence not sustainable." Page 10 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24
19.It was, thus, observed in paragraph '33' of Reliance Infrastructure Ltd.(supra) as under:--
"33. Keeping in view the aforementioned principles enunciated by this Court with regard to the limited scope of interference in an arbitral award by a Court in the exercise of its jurisdiction under Section34 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."
20.It is observed in Punjab State Civil Supplies Corpn. Ltd. v. Sanman Rice Mills11 that:
"9. The object of the Act is to provide for a speedy and inexpensive alternative mode of settlement of dispute with the minimum of intervention of the courts. Section 5 of the Act is implicit in this regard and prohibits interference by the judicial authority with the arbitration proceedings except where so provided in Part-I of the Act. The judicial interference, if any, is provided inter-alia only by means of Sections 34 and 37 of the Act respectively.
10. Section 34 of the Act provides for getting an arbitral award set aside by moving an application in accordance with sub-Section (2) andsub-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 i.e. 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 11 2024 SCC OnLine SC 2632 Page 11 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 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 andlimited to the grounds enumerated under Section 34 of the Act.
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. xxxxxx
14. It is equally settled law that the appellate power under Section 37of the Act is not akin to the normal appellate jurisdiction vested in the civil courts for the reason that the scope of interference of the courts with arbitral proceedings or award is very limited, confined to the ambit of Section 34 of the Act only and even that power cannot be exercised in a casual and a cavalier manner.
xxxxxx
16. It is seen that the scope of interference in an appeal under Section37 of the Act is restricted and subject to the same grounds on which an award can be challenged under Section 34 of the Act. In other words, the powers under Section 37 vested in the court of appeal are not beyond the scope of interference provided under Section 34 of the Act."Page 12 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 Here, the Supreme Court has once again reiterated that even an award which may not be reasonable or is nonspeaking 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.
21.In Konkan Railway Corpn. Ltd. v. Chenab Bridge Project12 referring to MMTC Limited (supra) it has been held that:
"19....The scope of jurisdiction under Section 34 and Section 37 of the Act is not akin to normal appellate jurisdiction. It is well-settled that courts ought not to interfere with the arbitral award in a casual and cavalier manner. The mere possibility of an alternative view on facts or interpretation of the contract does not entitle courts to reverse the findings of the arbitral tribunal..."
22.In Dyna Technology Private Limited v. Crompton Greaves Limited13, the Apex Court observed as under:
"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 12 (2023) 9 SCC 85 13 (2019) 20 SCC 1 Page 13 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 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.
25. Moreover, umpteen number of judgments of this Court have categorically held that the courts 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."
23.Judicial scrutiny of arbitral awards is quite limited in nature under Indian law. Section 34 of the Arbitration and Conciliation Act, 1996, prescribes the exclusive grounds upon which an arbitral award can be challenged. Courts, therefore, are very conservative in interfering merely because another interpretation or outcome may seem more reasonable. The jurisdiction under Section 34 is confined to procedural and legal infirmities such as lack of jurisdiction, violation of natural justice, or patent illegality. Consequently, appellate jurisdiction under Section 37 is even narrower in its scope. Its purpose is to evaluate whether the court adjudicating under Section 34 has remained within the permissible statutory boundaries. The appellate court cannot re- evaluate evidence or reconsider the factual matrix afresh. The statutory framework thus reflects an overarching legislative intent to insulate Page 14 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 arbitral decisions from excessive judicial intervention. The entire architecture of Sections 34 and 37 reinforces the finality and autonomy of arbitral proceedings. Arbitration is designed to offer an efficient, expert-led, and expedited alternative to litigation. Courts must therefore resist the temptation to intervene unless the decision by the court under Section 34 itself amounts to a significant transgression of the well-defined legal boundaries.
24.It is now firmly established in law that appellate review under Section 37 of the Act does not permit the court to act as a second court of first instance. The appellate Court's task is not to reassess the arbitral tribunal's findings on merits or evidence, but only to determine whether the court under Section 34 has exercised its discretion legally and within its jurisdiction. This means the appellate court must limit itself to checking if the Section 34 court has adhered to the narrow scope prescribed by the Act. It is not sufficient for the appellate court to identify an alternative or even preferable view--interference is justified only if the lower court has committed a jurisdictional error, or it has failed to apply the law correctly. The structure of the Act ensures that arbitration remains an autonomous dispute resolution mechanism, minimally impacted by judicial oversight. The Court under Section 37 is not an appellate authority like the conventional civil law sense; it cannot substitute its own interpretation for that of the arbitrator unless a clear and grave legal error is demonstrated. In essence, the appellate court serves as a watchdog over the procedural fidelity of the Section 34 court--not the substantive reasoning of the arbitrator. Page 15 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24
25.When interpreting Section 37, it is imperative to contextualize it alongside the Section 5 of the Act, which serves as a foundational provision reinforcing the ethos of minimal interference. Section 5 makes it clear that courts shall not intervene in arbitral issue except as expressly provided in the Act. This legislative mandate is not merely procedural--it is a substantive limitation on judicial power. Appeals under Section 37, especially those arising under Section 37(2)(b), are therefore constrained by both the statutory scheme and overarching judicial philosophy. Unlike appeals under other civil statutes, where courts may dive deep into factual findings or discretionary decisions, the Arbitration Act imposes a tight statutory leash. The objective is to prevent the unraveling of arbitration outcomes through prolonged court battles. Any order passed by an arbitral tribunal, particularly at interlocutory stages, must be accorded due deference unless it reveals clear arbitrariness, irrationality, or breach of the fundamental legal principles. Courts must, therefore, resist the impulse to interfere merely because a different view appears plausible or even more just in hindsight. Arbitration focuses on party autonomy, and any judicial incursion must align strictly with the boundaries demarcated by Sections 5, 34, and 37.
26.The judiciary's intervention in arbitral matters must be exercised with utmost caution, especially where the arbitral tribunal's decisions reflect reasonable interpretations of contractual terms or factual matrices. The 1996 Act was introduced with the explicit objective of limiting the role of courts, ensuring faster and more efficient resolution of disputes Page 16 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 outside traditional litigation. Consequently, appellate courts under Section 37 must act with deliberate restraint, only intervening when the arbitral process has clearly deviated from established legal standards. This includes instances of perversity, gross arbitrariness, or when settled legal principles have been ignored or misapplied. Importantly, arbitral decisions--even at interim stages--deserve judicial respect unless a substantial illegality is apparent. The appellate court's function is supervisory, not substitutive. It is not tasked with forming a fresh opinion but must ensure that the arbitral tribunal's discretion has been exercised within legal bounds. In other words, Section 37 does not allow for wholesale re-litigation of disputes that have already been adjudicated by an arbitral forum. The credibility of the arbitration system hinges on this judicial discipline. Allowing appeals to turn into de facto retrials would defeat the very purpose of choosing arbitration over courtroom adjudication.
27.The foundational framework of the Arbitration Act reflects an express intent to exclude ordinary civil appellate practices in arbitral matters. The powers conferred under Section 37(2)(b) are not akin to those under civil appellate jurisdiction, where factual reappraisal and discretionary judgments are routine. Rather, the Act envisions a system where arbitral orders are largely immune from judicial revisitation unless a serious and demonstrable breach of procedure or law occurs. This philosophy is rooted in the recognition that arbitration is a consensual mechanism designed to bypass the complexities and delays of civil litigation. Courts, therefore, must respect the principle of Page 17 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 finality, stepping in only where an order of the arbitral tribunal is tainted by evident perversity or gross misapplication of law.
28.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 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. Page 18 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24
29.It must also be remembered that proceedings under Section 34 of the Act are summary in nature and are not like a full-fledged regular civil suit. Therefore, the scope of Section 37 of the Act is much more summary in nature and not like an ordinary civil appeal. The award as such cannot be touched unless it is contrary to the substantive provision of law; any provision of the Act or the terms of the agreement.
30.It is within this statutory and jurisprudential framework that the present appeal must be evaluated. The core issue for consideration here is whether the Arbitral Award, as upheld by the Ld. District Court, suffers from patent illegality warranting interference under Section 37 of the Act.
31.At the outset, the contentions raised by the Appellants fail to establish any of the statutory grounds for setting aside an arbitral award as outlined in Section 34(2) of the Arbitration and Conciliation Act, 1996. The objections do not invoke violation of the fundamental policy of Indian law, public interest, or morality, nor is there any indication that the award is in conflict with justice in a manner envisaged by the Act.
32.A careful examination of the impugned arbitral award demonstrates that the Sole Arbitrator has undertaken a detailed evaluation of the rival contentions advanced by both the Appellant and the Respondent. The award appears to be the outcome of thorough consideration of the oral and documentary evidence presented by the parties. It reflects reasoned findings on the respective claims and counterclaims, without any indication of oversight or arbitrariness. The Appellant, while seeking to assail the award, has not been able to highlight any element Page 19 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 that would place the award in conflict with the public policy of India, a prerequisite under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside an arbitral award.
33.The Appellant, in an attempt to repudiate the claims allowed in favour of the Respondent, had placed reliance on five principal grounds. The first of these was that although the Respondent was contractually obliged to complete the work within a period of 12 months, it allegedly took 57 months and 12 extensions to conclude the same. Consequently, the Appellant contended that the Respondent was liable to pay liquidated damages amounting to Rs.19,07,228.80 (Counter Claim No.
1). This delay, in the Appellant's view, was attributable solely to the Respondent and not to any default on the Appellant's part.
34.Secondly, the Appellant claimed that the Respondent failed to return or properly account for free-issue materials and scrap provided during the execution of the work. It was alleged that this resulted in a financial loss, for which the Respondent was liable to compensate the Appellant to the tune of Rs.74,13,396.00 (Counter Claim No.2). The third counterclaim involved a rebate of Rs.21,202/- (Counter Claim No. 3), which the Appellant asserted had not been accounted for. Each of these counterclaims was presented with the assertion that they arose out of breaches of contractual obligations by the Respondent.
35.The fourth counterclaim raised by the Appellant was a demand for compensation amounting to Rs.1,39,48,190/- on account of loss of materials allegedly stolen while in the custody of the Respondent (Counter Claim No. 4). Lastly, under Counter Claim No. 5, the Page 20 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 Appellant sought recovery of statutory dues, comprising Rs.3,32,179/- towards income tax, Rs.6,64,357/- towards VAT on WCT, and Rs.5,00,000/- towards RF dues. The aggregate of these counterclaims formed the core of the Appellant's challenge to the award, with the Appellant asserting that these claims were either not addressed or inadequately considered by the Sole Arbitrator.
36.In response to these allegations, the Respondent argued that the Sole Arbitrator had comprehensively dealt with the issues raised, including all claims and counterclaims. It was contended that the Arbitrator had extensively deliberated upon the evidence, both oral and documentary, and delivered a well-reasoned award. The argument put forth was that the Court, in exercise of its jurisdiction under Section 34, cannot act as an appellate forum and re-evaluate the evidence or second-guess the reasoning of the Arbitrator merely because another view is possible on the same set of facts.
37.This Court, upon reviewing the award, finds that the Arbitrator had specifically considered the Appellant's counterclaims in para 6 of the award while dealing with Issue Nos.1 and 10 to 14. It is clearly recorded that the Arbitrator took into account all relevant facts and circumstances. Notably, Counter Claims No. 1, 4, and 6 (interest) were rejected after a reasoned analysis. Conversely, Counter Claims No. 2, 3, and 5 were allowed either wholly or in part. This balanced treatment of claims, accompanied by justifications grounded in the record, shows that the award is not arbitrary or perverse.
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38.Regarding Counter Claim No. 1 on liquidated damages, the Arbitrator relied on Clause 24 of the General Conditions of Contract (GCC), which stipulated liability for delay. However, after evaluating the factual matrix, it was found that the delays were largely due to the Appellant's lapses. The Arbitrator noted that by 15.6.2010, only 77.03% of work fronts had been made available to the Respondent, and it was only by 2012 that full access was granted. The Appellant had also agreed to pay Rs. 2.4 lakhs per month as compensation for idle labour and equipment, which indicated acknowledgment of its own responsibility in causing the delay.
39.The Arbitrator's rejection of Counter Claim No. 4 (loss due to theft) is also based on cogent reasoning. It was held that the Appellant failed to furnish specific evidence regarding the identity or value of the missing materials. Reference was made to the 22nd R.A. Bill, where a sum of Rs.3,23,265/- had already been recovered on this count. Further, it was observed that Rs.5,03,706/- was to be recovered from the final bill, indicating a total assessed loss of Rs.8,27,971/-. This was found to be significantly lower than the claimed amount of Rs.1,39,48,190/-, and thus, the Arbitrator rightly refused to allow the inflated claim.
40.The award also demonstrates that the Arbitrator did not indiscriminately accept all claims of the Respondent. It is evident from the record that Claim Nos.2, 3, 7, 8, and 10 of the Respondent were disallowed after due consideration. This further dispels the Appellant's allegation of bias or one-sided adjudication. The detailed approach adopted by the Arbitrator reflects a judicious application of mind. The Page 22 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 reasoning, even if not aligned with the Appellant's views, does not in any way reflect perversity or patent illegality that would warrant intervention by the Court under the limited grounds available for setting aside an arbitral award.
41.Moreover, with regards to the cost escalation that was awarded in favour of the present Respondent, the Respondent had raised a claim amounting to Rs.76,56,856/-, which included Rs.31,87,740/- towards escalation in labour cost and Rs.41,76,357/- for escalation in material cost, asserting that the delay in project execution up to 31.07.2012 was attributable to the Appellant's failure to provide timely and adequate work fronts. It is submitted that the Respondent had to retain its workforce and establishment until the issuance of the completion certificate on 9.10.2015 by the Engineer-In-Charge, thereby incurring increased costs during the extended period. The claim was based on compensation due to prolonged execution arising out of the Appellant's contractual defaults.
42.The Appellant resisted the claim on the ground that the contract was a fixed-price agreement with an explicit clause disallowing price escalation. It is further argued that the Respondent had provided a written undertaking confirming that it had no claims beyond the final bill, and thus the demand for escalation in costs was contractually barred. The Appellant also alleged that delays occurred due to the Respondent's inability to mobilize sufficient labour, material, and finances, suggesting that the Respondent bore responsibility for the delay and therefore was not entitled to any such compensation. Page 23 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
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43.In rebuttal, the Respondent relied on Sections 55 and 73 of the Indian Contract Act and submitted that a contractor may still claim compensation if the delay was due to the employer's fault and the contractor incurred loss performing work during the extended period. The Respondent also submitted that "no claim certificates" do not automatically preclude genuine post-contractual claims if they can be substantiated.
44.In the present matter, although the Respondent did submit a "no claim certificate" along with the 24th R.A.-cum-final bill, the Ld. Arbitrator found that this did not preclude the Respondent from seeking legitimate compensation. The delay of approximately 46 months was found to be primarily due to the Appellant's failure to provide necessary work fronts, which justified the Respondent's continued incurrence of labour and material costs. Although there was some evidence of minor lapses by the Respondent--such as failure to promptly pay subcontractors and insufficient resource deployment-- the Ld. Arbitrator held that the predominant cause of delay lay with the Appellant. Consequently, the Arbitrator determined that the Appellant bore major liability for the increased cost incurred during the extended period despite the clause disallowing price escalation and considering both parties' contributions to the delay, the Arbitrator judiciously awarded 50% of the revised escalation amounts to the Respondent--Rs.15,93,870/- for labour cost escalation and Rs.20,88,178/- for material cost escalation. This Court finds no error in the Arbitrator's interpretation of the contractual terms or in the Page 24 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 application of relevant legal provisions. Clause 88(b) of the General Conditions of Contract states that the contract shall be governed by the relevant laws of India and therefore, the Ld. Arbitrator's reliance on the Indian Contract Act is tenable in law.
45.The fact that the underlying agreement was a fixed-price contract does not, in any manner, imply that the Appellant was at liberty to delay the execution of the contractual obligations without facing any financial or legal consequences. A fixed-price contract merely stipulates that the consideration for the work to be performed remains predetermined and unaltered under normal circumstances; it does not operate as a blanket protection against repercussions arising from breaches or defaults committed by either party. If the delay in completion of the contract is attributable, either wholly or substantially, to the Appellant's own lapses--such as failure to provide timely work fronts, inadequate coordination, or delays in releasing payments--then the Appellant cannot claim immunity merely on the ground of the fixed-price nature of the contract. Parties to a contract are expected to act in good faith and adhere to their respective obligations, and any deviation attracting loss to the other side invites proportionate legal and contractual liability.
46.In view of the above analysis, it is clear that the award has been passed after a careful and reasoned consideration of the evidence on record. The Arbitrator has acted within his jurisdiction and has not committed any illegality--much less a patent illegality--that would justify setting aside the award. This Court cannot interfere merely because a different conclusion could be drawn from the same evidence. The Arbitrator is Page 25 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 the sole judge of the quality and sufficiency of the evidence presented before him, and unless the findings are perverse or shock the conscience of this Court, no interference is warranted. The appeal, therefore, fails to make out any valid ground for intervention. VI. CONCLUSION:
47.In light of the above discussion, it is evident that the Appellant has not identified any infirmity in the arbitral award that would rise to the level of patent illegality or jurisdictional error as contemplated under Section 34(2A) of the Act. The Arbitrator has provided reasoned findings, grounded in documentary evidence and consistent with legal principles applicable to contractual breaches and delay. These findings were not only comprehensive but were also examined and upheld by the District Court. It is now well settled that neither the re-evaluation of facts nor the mere possibility of a more favourable interpretation can form the basis for setting aside an award. The appellate court, particularly while exercising powers under Section 37, must adhere strictly to the limited scope of judicial review. It cannot act as a court of first appeal, nor can it re-assess the arbitral process as if the award is being tried afresh. Given that the Arbitrator acted within his jurisdiction, followed due process, and arrived at a decision through a reasoned and evidentiary process, there is no warrant for interference. The appeal, therefore, lacks merit and must be dismissed in keeping with the principles governing limited judicial oversight in arbitration.
48.In the circumstances, there is no justification to interfere with the findings in the impugned award in respect of the aforesaid claims, Page 26 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 28-Jul-2025 17:28:24 having regard to the scope of jurisdiction under Section 34 and/or 37 of the A&C Act.
49.ARBA No.16 of 2023 is disposed on the abovementioned terms. No order as to costs.
50. Interim order, if any, passed earlier stands vacated.
(Dr.S.K. Panigrahi) Judge Orissa High Court, Cuttack, Dated the 24th July, 2025/ Page 27 of 27