Delhi District Court
M/S Ess Kay Constructions vs Union Of India on 17 November, 2025
IN THE COURT OF SH. SACHIN SOOD
DISTRICT JUDGE-01 (CENTRAL), THC, DELHI.
ARB No. 85052/2016
CNR No : DLCT01- 015132 2016
M/s Ess Kay Constructions
A Partnership Firm
through its partner Sh S K Jindal
D-1A/90, Janak Puri,
New Delhi-110058 PETITIONER
VERSUS
Union of India, through
Executive Engineer,
M-322, PWD, Under ISBT Flyover
Kashmere Gate, Delhi-110054 RESPONDENT
Date of Institution: 27.10.2016
Date of Reserving Judgment: 14.10.2025
Date of Judgment: 17.11.2025
JUDGMENT
1. The present petition has been filed by the petitioner under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the award dated 30.07.2016 passed by the Ld. Sole Arbitrator.
2. Brief facts of the case are as under:
i. That the petitioner, a Partnership Firm was awarded the work of (A) EOR to the Residential Quarters at Gulabi Bagh, Delhi; SH:
Replacement of old and rusted CI/GI water supply line for tank No. 1, Gulabi Bagh, Delhi for Quarter No. 1252 and (B) EOR to residential Quarter No. 1 to 2128, Gulabi Bagh, Delhi during 2007-08; SH:Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 1/28
Replacement of old and rusted main CI/GI water supply line for tank no. 2, Gulabi Bagh, Delhi from Quarter no. 1253 to 2128.
ii. That the work was awarded by the respondent to the petitioner after negotiations as per Award Letter dated 20.08.2008 and thereafter a formal agreement bearing no. 22/EE/CBMD/N-322/2008-09 was executed between the parties and that the salient features of the said work were as under :-
● Date of Start: 28.08.2008
● Period of completion: 270 days
● Stipulated date of completion: 24.05.2009
● Actual date of completion: 26.11.2010
● Tendered Amount: Rs. 3,05,07,357/-
● Estimated cost: Rs. 1,93,60,955/-
● Date of final bill: 04.05.2012
● Arbitration invoked on: 09.01.2013
● Arbitration appointed on: 27.02.2015
● Ld. Arbitrator entered upon
the reference on: 16.03.2015
iii. That pursuant to the award of the aforesaid work on 20.08.2008 the petitioner started execution of work at the aforesaid site by mobilizing the requisite labour, material, T&T etc. iv. That the aforesaid work was duly completed by the petitioner on 26.11.2010 to the satisfaction of the respondent and after granting EOT till the aforesaid period, completion of the work was also recorded till the said date i.e. 26.11.2010 without levy of any compensation.
v. That as per the petitioner the delay in execution of the entire work was due to increase in scope of work and some hindrances solely Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 2/28 attributable to the respondent.
vi. That as per the agreement, the petitioner was entitled to the payment of its final bill (6th running account and final bill) within six months from the date of actual completion of work however the respondent did not settle the final bill within the said period and final final bill was prepared and passed on 21.02.2012 and the payment under the said bill was released to the petitioner on 04.05.2012 and that the said bill was accepted and the amount was received by the petitioner under protest.
vii. That prior to and even after settling the final bill and remittance of payment, the petitioner had been repeatedly requesting the respondent to make payment to it qua the other legitimate dues and reminders which were not paid heed to.
viii. That it is submitted that despite completion of the entire project to the satisfaction of the respondent and despite expiry of the defect liability period, the respondent failed and neglected in releasing the due and payable amount to the petitioner and that the petitioner was constrained to write various letters to the respondent demanding the due and payable amount and has been requesting the respondent to release the security deposit and other claims payable to the petitioner.
ix. That having no other option, the petitioner sent a letter/notice dated 09.01.2013 which was duly served upon the respondent thereby requesting it to appoint an arbitrator in terms of the agreement executed by and between the parties and that alongwith the said letter/notice, the petitioner had also mentioned the details, the list of claims and the amount due thereunder and that the said letter/notice had been duly received by the respondent.
x. That despite the receipt of the said letter, the respondent failed in Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 3/28 either appointing the arbitration in terms of the stipulations contained in the agreement or to pay the outstanding amount.
xi. That despite repeated requests and reminder, the respondent failed to pay the amount due and payable as stated above amounting to Rs. 1,45,60,000/- inclusive of the interest, the petitioner was constrained to send various letters and reminders thereby invoking the arbitration clause and with the request to the respondent to appoint an arbitrator for adjudication of the dispute between the parties and award the claims in favour of the petitioner.
xii. That belatedly, the respondent appointed Sh. K.K Verma as the Ld. Sole Arbitral Tribunal in the aforesaid matter vide communication dated 27.02.2015 and the Ld. Sole Arbitral Tribunal entered upon the said reference on 16.03.2015 and that the Ld. Sole Arbitral Tribunal, pursuant to entering upon the reference, called upon the petitioner to file the statement of claim and counter statement of facts to the respondent.
2. That in the statement of claim, the claimant i.e. Petitioner herein had raised the following claims :
Claim No. 1 : Claim for an amount of Rs. 30,00,000/- on account of withheld amounts.
Claim No. 2 : Claim for an amount of Rs. 20,00,000/- for work actually executed but not paid.
Claim No. 3 : Claim for an amount of Rs. 22,00,000/- in terms of clause 10 C of the agreement on account of escalation payment for labour and material.
Claim No. 4 : Claim for an amount of Rs. 30,00,000/- in terms of clause 10C/10CC for escalation cost of material and labour during the extended period of the contract.
Claim No. 5 : Claim for an amount of Rs. 4,00,000/- on account of Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 4/28 sanctioning of under payment/less rate in various EIS/SIS. Claim No. 6 : Claim for an amount of Rs. 60,000/- on account of testing charges.
Claim No. 7 : Claim for an amount of Rs. 15,00,000/- on account of loss of profit @ 15%.
Claim No. 8 : Claim for an amount of Rs. 20,00,000/- on account of damages/compensation towards staff establishment for the extended period of the contract.
Claim No. 9 : Claim for an amount of Rs. 2,00,000/- on account of interest @ 18% per annum for the period of delayed/withheld payments. Claim No. 10 : Claim on account of service tax plus interest & penalty. Claim No. 11 : Claim towards interest @ 18% per annum for the amount due for pre-suit, pendente-lite and future.
Claim No. 12 : Claim for an amount of Rs. 2,00,000/- on account of Arbitration costs/legal fee.
3. The respondent filed its counter statement of facts/statement of defence disputing all the claims as preferred by the petitioner. The respondent took the stand that none of the claims as raised by the petitioner are covered by the provisions of the agreement and also that no amount is due and payable to the petitioner. It was submitted that the claim petition is devoid of merits and also that the petitioner delayed the execution of the work and has been throughout negligent and has acted irresponsible. It was further submitted that the petitioner has already received and accepted the final bill who is estopped from making any additional claim at a belated stage.
4. The petitioner thereafter filed a detailed rejoinder to the counter statement of facts as filed by the respondent reiterating the claims as preferred vide the statement of the claims.
Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 5/285. That thereafter, the parties filed their written arguments and the Ld. Sole Arbitrator passed the award dated 30.07.2016.
6. The Ld. Sole Arbitrator out of the 12 claims as raised by the petitioner allowed claim no. 1 holding that the date of completion of work was 26.11.2010 and the defect liability period of one year expired on 25.11.2011. It was further held that the respondents have given no cogent reasons for withholding the amount of the petitioner and accordingly awarded a sum of Rs 25,16,714/- to the petitioner.
7. On account of claim no 2 i.e. towards account of work actually executed but not paid, it was held by the Ld Sole Arbitrator that during the execution of the work or at the time of payment of RA bills the claimant has not brought to the notice of the respondent any discrepancy in the measurement of the quantities who has failed to prove the said claim accordingly rejected the same.
8. On account of claim no 3 i.e. towards non payment in terms of clause 10C Ld Sole Arbitrator disallowed the said claim by holding that the claimant has failed to give any notice under clause 10 C and thus failed to comply with its mandatory provisions thereby denying the respondent to ascertain the payment of increased statutory minimum wages.
9. On account of claim no 4 i.e. escalation of cost of construction due to prolongation of work on the basis of clause 10 CC of the GCC. It was held by Ld Sole Arbitrator that the claimant has not submitted the final bill which was thus prepared by the respondent and the claim of delayed damages could not have been made a part of 7th and final bill by the respondent. It was further held by Ld Sole Arbitrator that since the date of completion of work (26.11.2010) and the date of invoking arbitration (10.02.2015) is more than 3 years the claim being time barred was rejected. The Ld Sole Arbitrator held that in respect of the present claim Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 6/28 the said claim to be live the notice invoking arbitration was required to be served on or before 25.11.2013 and since the same was served on 10.02.2015 the claim was ex-facie time barred.
10 On account of claim no 5 i.e. on account of under payment/less rate in sanctioned extra item it was held that the claims were unsubstantiated and were accordingly rejected.
11. On account of claim no 6 i.e. testing charges it was held that there was no documentary evidence to substantiate the same and accordingly the claim was rejected.
12. On account of claim no 7 i.e. on account of loss of profit the same was found to be baseless and accordingly rejected.
13. On account of claim no 8 i.e. on account of damages for idle staff and establishment in sync that the finding on issue no 4 the said claim was rejected being time barred.
14. On account of claim no 9 i.e. on account of interest for the period of delay/withheld payments, it was held that vide claim no 1 the interest has awarded on the present amount and there is a bar in the agreement on the payment of interest under clause 7 of the agreement.
15. On account of claim no 10 i.e. on account of service tax it was held that since the claim under adjudication before the service tax department.
16. On account of claim no 11 i.e. on account of interest for the pre-suit, pendente-lite and future interest it was held that the claimant is entitled to simple interest on the withheld amount @ 10% per annum w.e.f. 04.05.2012 up to the date of making of the award and thereafter @ 12% per annum till the date of the payment.
17. On account of claim no 12 i.e. towards cost. The Ld Sole Arbitrator awarded an amount of Rs 50,000/- towards costs.
18. That the petitioner aggrieved by the rejection of the claims has filed the Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 7/28 present petition challenging the said award primarily on the ground that the award is liable to be set aside as the same is against the public policy and is against the law of the land since the Ld. Sole Arbitrator has wrongfully rejected claims No. 4 and 8 on the ground that the same was barred by limitation.
19. The petitioner has also taken the ground that no reasons have been given for the rejection of the other claims and as such the award is liable to be set aside on the ground of illegality. The petitioner has also taken the ground that the petitioner was not afforded an opportunity to respond to the plea of limitation since such a plea was not taken in the counter statement of facts as filed by the respondent. The petitioner has also taken the ground that Ld Sole Arbitrator has rejected the other claims of the petitioner without appreciating the facts and circumstances of the case.
20. The respondent has filed its reply supporting the Arbitral Award on the ground that the present petition is not covered by any of the grounds specified under Section 34 of Arbitration and Conciliation Act, 1996 and that the court does not exercise appellate power over the award and also that the views taken by the Arbitral Tribunal are correct. It has further stated by the respondent that the court u/s 34 of Arbitration and Conciliation Act, 1996 does not have the power to reassess and re- appreciate the evidence.
21. I have carefully gone through the record and perused the same.
22. The petitioner before this Court has invoked Section 34 of the Act, 1996, to challenge the impugned Award. The relevant portion of the said provision is reproduced hereunder for perusal and consideration:
"Section 34 - Application for setting aside arbitral awards---
(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).Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 8/28
(2) An arbitral award may be set aside by the Court only if--
(a) the party making the application 1[establishes on the basis of the record of the arbitral tribunal that]--
(i) a party was under some incapacity, or (ii) the arbitration agreement is not 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 1.--For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,--(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
[Explanation 2.--For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.] 2[(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the 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 Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 9/28 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.].."
23. The law regarding patent illegality, public policy, and fundamental policy of India is no longer res-integra. The Act, 1996 has been well interpreted with regard to Section 34 through various judicial precedents. The scope of Section 34 being very limited in nature, has been thoroughly explored by the Indian legal system.
24. The challenge of an Award under Section 34 arising out of Arbitration proceedings must satisfy the tests laid down by virtue of the provisions of the Act, 1996, and the law settled by way of pronouncements by the Hon'ble Supreme Court. The Act, 1996 has been set forth with the intention to limit the interference of the Courts in the arbitral proceedings.
25. The Arbitral Tribunal, who in its wisdom, passes an Award, upon conducting the arbitration proceedings with the participation of parties to the dispute, considering the Statement of Claim and Statement of Defence presented by and on behalf of the parties, the relevant documents placed on record by the parties, is considered as Court for the purposes of adjudicating the dispute before it. An unfettered scope of intervention in its functioning would defeat the spirit and purpose of the Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 10/28 Act, 1996. Therefore, the Hon'ble Supreme Court has time and again reiterated that the scope of intervention of the Courts is limited in the cases of challenge under Section 34.
26. The Hon'ble Supreme Court in Delhi Airport Metro Express (P) Ltd.v.
DMRC, (2022) 1 SCC 131, has observed as under:
"28. This Court has in several other judgments interpreted Section 34 of the 1996 Act to stress on the restraint to be shown by Courts while examining the validity of the arbitral awards. The limited grounds available to Courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the well-established principles for interference to the facts of each case that come up before the Courts. There is a disturbing tendency of Courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. This approach would lead to corrosion of the object of the 1996 Act and the endeavors made to preserve this object, which is minimal judicial interference with arbitral awards. That apart, several judicial pronouncements of this Court would become a dead letter if arbitral awards are set aside by categorising them as perverse or patently illegal without appreciating the contours of the said expressions.
xxx
30. Section 34(2)(b) refers to the other grounds on which a court can set aside an arbitral award. If a dispute which is not capable of settlement by arbitration is the subject-matter of the award or if the award is in conflict with public policy of India, the award is liable to be set aside. Explanation (1), amended by the 2015 Amendment Act, clarified the expression "public policy of India" and its connotations for the purposes of reviewing arbitral awards. It has been made clear that an award would be in conflict with public policy of India only when it is induced or affected by fraud or corruption or is in violation of Section 75 or Section 81 of the 1996 Act, if it is in contravention with the fundamental policy of Indian law or if it is in conflict with the most basic notions of morality or justice.
31. In Ssangyong [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] , this Court held that the meaning of the expression "fundamental policy of Indian law" would be in accordance with the understanding of this Court in Renusagar Power Co. Ltd. v. General Electric Co. [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] . In Renusagar [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] , this Court observed that violation of the Foreign Exchange Regulation Act, 1973, a statute enacted for the "national Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 11/28 economic interest", and disregarding the superior Courts in India would be antithetical to the fundamental policy of Indian law. Contravention of a statute not linked to public policy or public interest cannot be a ground to set at naught an arbitral award as being discordant with the fundamental policy of Indian law and neither can it be brought within the confines of "patent illegality" as discussed above. In other words, contravention of a statute only if it is linked to public policy or public interest is cause for setting aside the award as being at odds with the fundamental policy of Indian law. If an arbitral award shocks the conscience of the court, it can be set aside as being in conflict with the most basic notions of justice. The ground of morality in this context has been interpreted by this Court to encompass awards involving elements of sexual morality, such as prostitution, or awards seeking to validate agreements which are not illegal but would not be enforced given the prevailing mores of the day. [Ssangyong Engg. & Construction Co. Ltd. v.
NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213]"
27. The above-mentioned judgment by the Hon'ble Supreme Court states that the concepts which are to be followed under Section 34 of the Act, 1996 is crystal clear. When a court applies the "public policy‟ test to an arbitration award, the court does not function as a court of appeal, and as a result, any mistakes of fact that may have been made, cannot be rectified. This is something that must be recognized very well. Since, the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when delivering his arbitral award, each possible view that the arbitrator may have on the facts needs to pass his approval in order for it to be considered. Therefore, an award that is based on scanty evidence or on evidence that a trained legal mind deems to be of insufficient quality would not be deemed to be invalid on the basis of this criterion. After it has been established that the arbitrator's method is neither arbitrary nor capricious, then it can be said that he has the final word on the facts. There is also no dispute on the position of law that an Arbitrator being creature of a Contract, has to confine himself to the provisions of the Contract while deciding the dispute.
28. Under Section 34 of the Act 1996, it is a well-settled position that the Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 12/28 Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground as provided under Section 34(2)(b)(ii) of the Act, 1996, 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 in the 1996 Act in 2015, a violation of India 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 existence of patent illegality in the arbitral award. The concept of the fundamental policy of Indian Law would cover the compliance with the statutes under judicial precedents adopting a judicial approach, compliance with the principles of natural justice, and reasonableness.
29. It is only if one of the conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii) of the Act, 1996, but the said interference does not entail a review of the merits of the dispute as it is limited to the situations where the findings of the arbitration are arbitrary, capricious, or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with, if the view taken by the Ld arbitrator is a possible view based on the facts.
30. Hence, there is a limitation on the powers of this Court while examining its jurisdiction under Section 34 of the Act, 1996, however, at the same time, if the interpretation put forward by the Arbitral Tribunal, on the face of it is incorrect and rendering a Clause in the Agreement to be redundant, such interpretation cannot be sustained.
31. In the case of Reliance Infrastructure Ltd. v. State of Goa, 2023 SCC OnLine SC 604, wherein, the Hon'ble Supreme Court held as under:
"47. Having regard to the contentions urged and the issues raised, it shall also be apposite to take note of the principles enunciated by this Court in some of Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 13/28 the relevant decisions cited by the parties on the scope of challenge to an arbitral award under Section 34 and the scope of appeal under Section 37 of the Act of 1996.
48. In MMTC Limited (supra), this Court took note of various decisions including that in the case of Associate Builders (supra) and exposited on the limited scope of interference under Section 34 and further narrower scope of appeal under Section 37 of the Act of 1996, particularly when dealing with the concurrent findings (of the Arbitrator and then of the Court). This Court, inter alia, held as under:--
"11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law"
would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., [1948] 1 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.
12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. (See Associate Builders v. DDA [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204]. Also see ONGC Ltd. v. Saw Pipes Ltd. [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705]; Hindustan Zinc Ltd. v. Friends Coal Carbonisation [Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445]; and McDermott International Inc. v. Burn Standard Co. Ltd. [McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181]).
13. It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 14/28 most basic notions of justice or morality. Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings."
32. In the case of Ssangyong Engineering (supra), the Hon'ble Supreme Court of India has set out the scope of challenge under Section 34 of the Act of 1996 in further details in the following words:--
"37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within "the fundamental policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
39. To elucidate, para 42.1 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Builders [Associate Builders v.
DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], namely, that the Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 15/28 construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2- A).
41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse."
33. The limited scope of challenge under Section 34 of the Act was once again highlighted by Hon'ble Apex Court Court in the case of PSA SICAL Terminals (supra) which explained the relevant tests as under:
"43. It will thus appear to be a more than settled legal position, that in an application under Section 34, the court is not expected to act as an appellate court and reappreciate the evidence. The scope of interference would be limited to grounds provided under Section 34 of the Arbitration Act. The interference would be so warranted when the award is in violation of "public policy of India", which has been held to mean "the fundamental policy of Indian law". A judicial intervention on account of interfering on the merits of the award would not be permissible. However, the principles of natural justice as contained in Section 18 and 34(2)(a)(iii) of the Arbitration Act would continue to be the grounds of challenge of an award. The ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the "most basic notions of morality or justice". It is only such arbitral awards that shock the conscience of the court, that can be set aside on the said ground. An award would be set aside on the ground of patent illegality appearing on the face of the award and as such, which goes to the roots of the matter. However, an illegality with regard to a mere erroneous application of law would not be a ground for interference. Equally, reappreciation of evidence would not be permissible on the ground of patent illegality appearing on the face of the award.
44. A decision which is perverse, though would not be a ground for challenge Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 16/28 under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. However, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
45. To understand the test of perversity, it will also be appropriate to refer to paragraph 31 and 32 from the judgment of this Court in Associate Builders (supra), which read thus:
"31. The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where:
(i) a finding is based on no evidence, or(ii) an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at; or(iii) ignores vital evidence in arriving at its decision, such decision would necessarily be perverse.
32. A good working test of perversity is contained in two judgments. In Excise and Taxation Officer cum-Assessing Authority v. Gopi Nath & Sons [1992 Supp (2) SCC 312], it was held : (SCC p. 317, para 7) "7. ... It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law."...."
34. Keeping the principles observed in the foregoing paragraphs, this Court will now examine the present case. In the present case in as much as 12 claims were referred for adjudication before Ld Sole Arbitrator under the cover of letter dt 27.02.2015 under Clause 25 of the agreement as reproduced herein above (Supra). The Ld Sole Arbitrator vide his award dt 30.07.2016 awarded an amount of Rs 25,66,714/- (claim no 1 towards release of withheld amount) together with simple interest @ 10 % per annum w.e.f 04.05.2012 up to the date of making of the award and @ 12% from the date of the award till the date of the payment.
35. With respect to Claim No. 2 i.e. Claim for an amount of Rs. 20,00,000/-
for work actually executed but not paid, it was held by the Ld Sole Arbitrator that the burden to prove the execution of additional quantities Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 17/28 in respect of 5 agreement items (28 to 33) was upon the claimant. It has further been held by Ld Sole Arbitrator that the parties had submitted during the 4th hearing that it was not feasible to determine the disputed quantities actually executed. It has further been held by Ld Sole Arbitrator that at any prior point in time during the execution of the work or at the time of payment of RA bills the claimant had not brought to the notice of the respondent about any discrepancy in the measurement of the quantities of the said item numbers nor the claimant had submitted its final bill. It was thus held by Ld Sole Arbitrator that the claimant had failed to substantiate the said claim who accordingly rejected the same.
36. With respect to Claim No. 3 i.e. Claim for an amount of Rs. 22,00,000/-
in terms of clause 10 C of the agreement on account of escalation payment for labour and material. The said claim was premised upon clause 10C of the agreement. Clause 10C is reproduced herein as follows:
" If after submission of the tender, the price of any material incorporated in the works (not being a material supplied from the Engineer-in-Charge's stores in accordance with Clause 10 thereof) and/or wages of labor increases as a direct result of the coming into force of any fresh law or statutory rule or order (but not due to any changes in sales tax/VAT) and such increase in the price and/or wages prevailing at the time of the last stipulated date for receipt of the tenders, including extensions if any, for the work, and the contractor thereupon necessarily and properly pays in respect of that material (incorporated in the works) such increased price and/or in respect of labour engaged on the execution of the work such increased wages, then the amount of the contract shall accordingly be varied and provided further that any such increase shall not be payable if such increase has become operative after the stipulated date of completion of the work in question.
If after submission of the tender, the price of any material incorporated in the works (not being a material supplied from the Engineer-in-Charge's stores in accordance with Clause 10 thereof) and/or wages of labor is decreased as a direct result of the coming into force of any new law or statutory rules or order (but not due to any changes in sales tax/VAT) and such decrease in the prices and/or wages prevailing at the time of receipt of the tender for the work The Government shall, with respect to materials incorporated in the works (not being materials supplied from the Engineer-in-Charge's stores in accordance with Clause 10 hereof) and/or labor engaged on the execution of the work Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 18/28 after the date of coming into force of such law, statutory rule, or order, be entitled to deduct from the dues of the contractor such an amount as shall be equivalent to the difference between the prices of the materials and/or wages as prevailing at the time of the last stipulated date for receipt of tenders, including extensions if any, for the work and the prices of materials and/or wages of labor on the coming into force of such law, statutory rule, or order. The contractor shall, for the purpose of this condition, keep such books of account and other documents as are necessary to show the amount of any increase claimed or reduction available and shall allow inspection of the same by a duly authorized representative of the Government, and further shall, at the request of the Engineer-in-Charge, may require any documents so kept and such other information as the Engineer-in-Charge may require. The contractor shall, within a reasonable time of becoming aware of any alteration in the price of any such materials and/or wages of labor, give notice thereof to the Engineer-in-Charge, stating that the same is given pursuant to this condition, together with all information relating thereto which he may be in a position to supply.
37. The Ld Sole Arbitrator held that since the claimant had failed to give any notice under Clause 10C to the respondent at the relevant time has thus deprived the respondent from the opportunity to verify from the books of accounts to ascertain whether the increased statutory minimum wages were paid or not. Thus the Ld Sole Arbitrator for non compliance of the mandatory requirement of Clause 10C rejected the said claim. The petitioner has failed to show that it has issued any notice under clause 10C to the respondent hence the Ld Sole Arbitrator has rejected the said claim.
38. With respect to Claim No. 5 i.e. Claim for an amount of Rs. 4,00,000/-
on account of sanctioning of under payment/less rate in various EIS/SIS. The Ld Sole Arbitrator minutely going through the provisions of Clause 12.2 came to the conclusion that the petitioner has failed to establish that it fulfilled the contractual obligations of Clause 12.2 for the deviation items or that the rates for the deviation items had been approved by the executive engineer.
Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 19/2839. With respect to Claim No. 6 i.e. Claim for an amount of Rs. 60,000/- on account of testing charges. It was held by Ld Sole Arbitrator that since the claimant has failed to substantiate the said claim by filing any documentary evidence accordingly rejected the same.
40. With respect to Claim No. 7 i.e. Claim for an amount of Rs. 15,00,000/-
on account of loss of profit @ 15%. While rejecting the said claim the Ld Sole Arbitrator has elaborately dealt with the provisions of Clause 12 of the agreement. The Ld Sole Arbitrator rejected the said claim since the cost of the work stood increased to Rs 3,73,09,814/- than the original contractual value of Rs 3,03,07,057/-.
41. With respect to Claim No. 9 i.e. Claim for an amount of Rs. 2,00,000/-
on account of interest @ 18% per annum for the period of delayed/withheld payments. The Ld Sole Arbitrator rejected the said claim on the ground that the petitioner had failed to submit the bills in terms of the provisions of Clause 7 & 9 of the agreement. 42 With respect to Claim No. 10 i.e. Claim on account of service tax plus interest & penalty was rejected since the claimant has stated that the said claim was under adjudication before the Service Tax department.
43. With respect to Claim No. 11 i.e Claim towards interest @ 18% per annum for the amount due for pre-suit, pendente-lite and future. The said claim was allowed by the Ld Sole Arbitrator who granted interest @ 10% per annum till the date of making of the award and thereafter @ 12% from the date of the award till its realization.
44. With respect to Claim No. 12 i.e Claim for an amount of Rs. 2,00,000/-
on account of Arbitration costs/legal fee. The Ld Sole Arbitrator granted cost of arbitration calculated at Rs 50,000/-.
45. Thus from the perusal of the aforesaid claims allowed/rejected it is clear that the Ld Sole Arbitrator has given reasons for allowing/disallowing the Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 20/28 claims and in the exercise of the powers u/s 34 of the Arbitration and Conciliation Act, 1996 the court does not at as an appellate court. Thus, the said claims are not liable to be interfered with in the exercise of powers u/s 34 of the Arbitration and Conciliation Act, 1996 since the court in exercise of powers u/s 34 of the Arbitration and Conciliation Act, 1996 does not act as an appellate court in accordance with the ratio of the judgment passed in the matter of Reliance Infrastructure Ltd Vs State of Goa (Supra) and also in the judgment passed in the matter of Ssangyong [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213].
46. With respect to the rejection of the Claims i.e. claim No. 4 & Claim no 8 on the ground of limitation.
The petitioner had preferred two claims i.e. Claim no 4 for an amount of Rs. 30,00,000/- in terms of clause 10C/10CC for escalation cost of material and labour during the extended period of the contract and also Claim No. 8 i.e. Claim for an amount of Rs. 20,00,000/- on account of damages/compensation towards staff establishment for the extended period of the contract.
47. The Ld Sole Arbitrator rejected both the claims on the ground that the same are ex-facie time barred under the provisions of Article 137 of the Schedule to the limitation Act. Claim no 4 had been preferred by the claimant on account of escalation of the cost of material and labour during the extended period of the contract i.e. delay of 18 months from the date of its scheduled completion till the time the work was actually completed. The respondent had granted extension of time without the levy of any compensation. The petitioner alleged that the work was delayed for over 18 months due to the lapses and breaches on the part of the respondent. While dealing with claim no 4 the Ld Sole Arbitrator has Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 21/28 observed that the petitioner /claimant had not submitted the final bill hence the present claim could not be made part of the 7 th and final bill by the respondent. The Ld Sole Arbitrator dehors the merits of the claim proceeded to examine the issue of limitation who thereafter proceeded to examine Clause 25 (i) and accordingly held that the claim towards delay damages accrued to the claimant for the first time on completion of work i.e. on 26.11.2010 and the petitioner ought to have served the notice on the respondent for invocation of arbitration on or before 25.11.2013 i.e. within 3 years and since a notice was not given the claim had become time barred. A similar finding has been returned while adjudicating claim no 8 which too has not been dealt on merits.
48. The Ld Sole Arbitrator while returning the findings on the said issues has reproduced Clause 25 (i) & Clause 25 (ii) of the agreement who held that the date of commencement of the Arbitral proceedings to be 10.02.2015 and not 09.01.2013.
49. Ld. counsel for the petitioner submits that the petitioner was awarded the work of replacement of old and rusted main CI/GI water supply line for tank no. 1, Gulabi Bagh, Delhi from Quarter no. 1252 and also for Quarter no. 1253-2128 on 20.08.2008. The schedule of start of the work was 28.08.2008 and its completion date was 24.05.2009 i.e. 270 days. It is submitted by the Ld. Counsel for the petitioner that the actual date of completion of the work was 26.11.2010 in line with the extension of time having been granted by the respondent upto the said date without levy of compensation.
SUBMISSIONS OF THE COUNSEL FOR THE PETITIONER
50. Ld. counsel for the petitioner also submits that the final bill was prepared by the department and paid the same to the petitioner on 04.05.2012 and the petitioner thereafter under the provisions of Clause 25.1 of the Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 22/28 agreement pertaining to settlement of disputes and arbitrations invoked the said clause on 09.01.2013.
51. It is further submitted that vide the aforesaid letter dated 09.01.2013, the petitioner raised in as much as 14 claims and has duly intimated the respondent that in case the payment of the aforesaid claims is not made within 15 days from the date of receipt of the said letter, the same shall be treated as a dispute and be referred to the concerned Superintendent Engineer and Chief Engineer, PWD in terms of Clause-25(i) of the agreement.
52. The counsel has drawn the attention to Clause-25 of the agreement pertaining to settlement of disputes and arbitration to read as follows :-
"Except where otherwise provided in the contract, all questions and disputes relating to the meaning of the specifications, design, drawings and instructions here in above mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof shall be dealt with as mentioned hereinafter:
"(i)If the contractor considers any work demanded of him to be outside the requirements of the contract, or disputes any drawing, record or decision given in writing by the Engineer-in-chief on any matter in connection with or arising out of the contract or carrying out the work, to be unacceptable, he shall promptly within 15 days request the superintending Engineer in writing for written instructions or decision. Thereupon, the Superintending Engineer shall give his written instructions or decision within a period of one month from the receipt of the contractor's letter.
If the Superintending Engineer fails to give his instructions or decision in writing within the aforesaid period or if the contractor is dissatisfied with the instructions or decision of the Superintending Engineer, the contractor may within 15 days of the receipt of Superintending Engineer's decision, appeal to the Chief Engineer who shall afford an opportunity to the contractor to be heard, if the latter so desires, and to offer evidence in support of his appeal. The Chief Engineer who shall give his decision within 30 days of receipt of contractor's appeal. If the contractor is dissatisfied with this decision, give notice to the Chief Engineer for appointment of arbitrator failing which the said decision shall be final binding and conclusive and not referable to Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 23/28 adjudication by the arbitrator."
53. Ld. counsel for the petitioner has further drawn the attention to Clause 25(ii) of the agreement which prescribes for settlement for disputes through arbitration as follows :-
"Except where the decision has become final, binding and conclusive in terms of Sub Para (i) above, disputes or difference shall be referred for adjudication through arbitration by a sole arbitrator appointed by the the Chief Engineer, CPWD in charge of the work or if there be no Chief Engineer, the Additional Director General of the concerned region of CPWD or if there by no Additional Director General, the Director General of Works, CPWD. If the arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever, another sole arbitrator shall be appointed in the manner aforesaid. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor."
54. He further submits that since the final bill was prepared and paid by the respondent on 04.05.2012 and since the arbitration in respect of the claims was invoked vide letter dated 09.01.2013, the finding of the Ld. Arbitrator that the date of commencement of Arbitration to be on 10.02.2015 is clearly erroneous and the arbitrator has perversely held that the date of commencement of arbitral proceedings is 10.02.2015 and not 09.01.2013 who was not justified in rejecting claim no. 4 & 8 on the basis of said perverse finding.
55. Ld. counsel for the petitioner in support of his contention on the aspect of rejection of claim no. 4 being barred by limitation has relied upon on Pandit Munshi Ram vs. Delhi Development Authority, AIR 2001, Delhi 82 (Para 7, 8 and 9) to contend that the starting point of limitation would be the date on which the disputes arose between the parties and not the date of completion of work.
56. Ld. counsel for the plaintiff has further relied upon the judgment of Pandit Construction Company vs. DDA (2007) 143 DLT 270 in support Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 24/28 of the contention that award can be partly set aside on the ground of part of the claims being barred by limitation.
57. He has further relied upon a recent judgment passed by the Hon'ble High Court of Delhi in the case of M/s Welspun Enterprises Ltd vs. M/s NCC Ltd FAO (OS) Comm. No. 09/2019 to contend that the award can be set aside in case an erroneous finding has been returned by the arbitral tribunal and also that the award can be partly set aside which has been dismissed on the basis of an erroneous finding.
SUBMISSIONS OF THE COUNSEL FOR THE RESPONDENT
58. Ld counsel for the respondent has submitted that the Ld Sole Arbitrator has correctly passed the impugned award and the same is not liable to be interfered in the exercise of powers u/s 34 of the Arbitration and Conciliation Act. It has further been submitted that this court in exercise of powers u/s 34 does not exercise the powers as are vested in the appellate court. It has further been submitted that even if the Ld Sole Arbitrator has reached at a wrong conclusion the same is not liable to be interfered with since the Ld Sole Arbitrator has been made the final arbiter.
59. Perusal of the record show that the final bill was paid to the petitioner on 04.05.2012. The respondent has nowhere disputed that its received letter dt 09.01.2013 whereby the petitioner after the payment of the final bill has raised 14 claims. The petitioner vide the aforesaid letter has clearly stated that in case its claims are not settled within 15 days the matter may be treated as dispute and be referred to the concerned superintendent engineer and chief engineer in terms of clause 25 (i) of the agreement. Clause 25 specifically deals with the dispute resolution mechanism and arbitration where all questions and disputes including the claims rights concerning the execution of the work or its termination, completion etc Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 25/28 has to be dealt with in accordance with clause 25 (i) and clause 25 (ii) of the contract. Vide clause 25 (i) the contractor is required to make a request to the superintendent engineer for a decision which is required to be appealed before the chief engineer and only thereafter against the order of the chief engineer appointment of an arbitrator is permissible under clause 25 (ii) of the contract and it is the respondent who is required to appoint the sole arbitrator. The petitioner who had issued the letter dt 09.01.2013 as evidenced by the letter dt 28.07.2014 which has been issued by the petitioner in reply to the letter dt 18.07.2014 had duly requested the office of the superintendent engineer as well as the chief engineer for the settlement of the disputes.
60. The Ld Sole Arbitrator has failed to appreciate that in terms of clause 25
(ii) referring the matter straightway to arbitration is not permissible and the contractor is first required to make a request to the office of superintendent engineer and thereafter to the chief engineer which infact was made by the petitioner vide its letter dt 09.01.2013. Thus the Ld Sole Arbitrator has wrongly returned a finding that the arbitration was infact commenced only on 10.02.2015 and not 09.01.2013. Admittedly the final bill was paid on 04.05.2012 from which date the period of limitation has to be reackoned and not from the date of the completion of the work i.e. on 26.11.2010. The said error committed by Ld Sole Arbitrator since goes to the root of the aforesaid claims i.e claim no 4 & 8 which have not been decided on merits but have been decided on the basis of an error committed by Ld Sole Arbitrator hence the said findings on claims 4 & 8 are clearly perverse and are liable to be interfered being vitiated by patent illegality.
61. The Hon'ble High Court of Delhi in the matter of M/s Pandit Construction Company Vs Delhi Development Authority 2007 (143) Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 26/28 DLT 270 has held that the award to the extent it holds that the claim of the petitioner is barred by time is liable to be set aside.
62. The Hon'ble High Court of Delhi in the matter of M/s Welspun Enterprises Ltd vs M/s NCC Ltd (FAO OS Comm No 9/2019) answering the question of limitation has vide para 57 clearly held that if the arbitration agreement requires the parties to exhaust the dispute resolution process as a pre condition for invoking the arbitration, the right to refer the dispute to arbitration would arise after the parties have exhausted the said procedure. Vide para 63 of the said judgment, it has clearly been held that a party cannot be expected to commence arbitration without exhausting the pre reference procedure. Vide para 66 of the said judgment, it has been held that the period of limitation for referring the disputes to arbitration cannot commence till the parties have exhausted the necessary pre reference procedure which are required to run the full course.
63. The Hon'ble Supreme Court of India in the matter of Gayatri Balasamy Vs M/s ISG Novasoft Technologies Ltd (2025 INSC 605) has permitted to sever the invalid portions of an arbitral award from the valid portions while remaining within the narrow confines of Section 34 of the Arbitration and Conciliation Act, 1996. In the present case findings on issue no 4 and issue no 8 are clearly separable from the rest of the award and qua these issues only no findings on merits has been returned by the Ld Sole Arbitrator.
64. Thus on the basis of the decision rendered by the Hon'ble High Court of Delhi in the matter of M/s Welspun Enterprises Ltd (Supra), it is clear that the decision of Ld Sole Arbitrator to reject the claims i.e. claim no 4 & 8 as being barred by limitation is erroneous and suffers from patent illegality and accordingly the impugned award is liable to be set aside to Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 27/28 that extent. Accordingly, the present application u/s 34 of the Arbitration and Conciliation Act, 1996 is partly allowed and the findings on claim no 4 & 8 are set aside which are clearly severable from the rest of the findings.
65. File be consigned to record room after due compliance.
Digitally
Announced in the open court (Sachin Sood)
SACHIN
signed by
SACHIN
SOOD
on 17.11.2025. DJ-01 (Central)
SOOD Date:
2025.11.17
17:49:04
THC, Delhi. +0530
Arb No 85052/16 M/s Ess Kay Constructions Vs Union of India Page 28/28