Orissa High Court
Union Of India vs Pyari Mohan Mohanty on 10 October, 2025
Author: Sanjeeb K Panigrahi
Bench: Sanjeeb K Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 10-Oct-2025 17:50:14
IN THE HIGH COURT OF ORISSA AT CUTTACK
ARBA No.10 of 2018
(From the judgment dated 24.10.2017 passed by the learned District
Judge, Khurda in ARB(P) No. 104 of 2011 arising out of the award dated
31.1.2011 passed by the Ld. Sole Arbitrator in Arbitration Proceeding
No. 1 of 2002)
Union of India .... Appellant(s)
-versus-
Pyari Mohan Mohanty .... Respondent (s)
Advocates appeared in the case through Hybrid Mode:
For Appellant (s) : Mr. S.S. Kaskhyap, Sr. P.C.
For Respondent (s) : Mr. J.K. Mohapatra, Adv.
CORAM:
DR. JUSTICE SANJEEB K PANIGRAHI
DATE OF HEARING:-21.08.2025
DATE OF JUDGMENT:-10.10.2025
Dr. Sanjeeb 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 24.10.2017 passed by the learned District Judge, Khurda in ARB(P) No.104 of 2011 arising out of award dated 31.1.2011passed by the Ld. Sole Arbitrator in Arbitration Proceeding No.1 of 2002. I. FACTUAL MATRIX OF THE CASE:
2. For the sake of brevity, the facts involved in the appeal are pithily discussed herein:
// 2 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 i. The Railways entered into an agreement dated 4.11.1992 with the present Respondent for executing the work i.e. roof treatment with Tar-felting to Service and Residential building pursuant to tender notice issued by the Railway.
ii. The work was awarded to the present Respondent vide letter of acceptance dated 7.4.1992 at the value of Rs.1,66,600/- for completion of work within three months from the date of the letter of acceptance.
The original date of completion was thus stipulated to be 3.7.1992.
iii. However, the present Respondent did not complete the work on time and made two requests for extension of time, which were allowed and the time for completion was extended up to 31.5.1993.
iv. Despite extension, it appears that the present Respondent neither completed the work, nor sought further extension and therefore, the present Petitioner-Railways rescinded the contract as per Clause 62 of the GCC at the cost and risk of the present Respondent.
v. Being aggrieved by the recission of contract, and a subsequent claim made by the Railways, the present Respondent approached the Petitioner-Railways for arbitration. The present Respondent claimed a total sum of Rs.7,32,512/- with interest under 14 claim heads. The present Petitioner filed a counter claim denying all claims demanded by the present Respondent and also made a counter claim of Rs.40,000/-.
vi. Vide award dated 31.1.2011, the Ld. Arbitrators awarded a total sum of Rs.6,66,724/- including interest at 12% per annum along with the cost of arbitration at Rs.30,000/- in favour of the present Respondent.
The said awarded amount was payable within three months from the // 3 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 date of award, failing which interest would accrue on the awarded amount at 12% per annum.
a. Aggrieved, the present Appellants approached the Court of the Ld. District Judge, Khurda at Bhubaneswar under Section 34 in ARB(P) No. 104 of 2011 seeking setting aside of the award for being beyond the terms of the contract and opposite to public policy of India.
b. The Ld. District Judge vide the impugned order dated 24.10.2017 was pleased to uphold the findings of the Ld. Arbitrators, resulting in the present Petition.
3. 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 Section 37 of the A&C Act. II. APPELLANT'S SUBMISSIONS:
4. The Ld. counsel for the Appellants strenuously urged that the Arbitral Tribunal had fallen into patent error, both on facts and in law, by misconstruing the express covenants of the agreement and thereby transgressing the limits of its jurisdiction. It was further contended that the Tribunal, in purporting to adjudicate and allow nearly all the claims of the Respondent, acted ultra vires the arbitral reference, particularly in view of the admitted position that the contractual execution period had lapsed on 31.05.1993, without any lawful extension having been granted thereafter, and that the contract had, in any event, stood terminated de facto on 05.06.1995. It was further submitted that, under Clause 62 of the General Conditions of Contract (GCC), the issuance of a notice of // 4 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 termination, succeeded by a formal communication of closure, constituted a mandatory precondition for ascertaining the continuance or cessation of contractual relations. The non-consideration of this foundational issue, which did not form part of the arbitral reference, is asserted to have rendered the impugned award wholly without jurisdiction and thus liable to be set aside.
5. Furthermore, the Appellant asserted that no formal request was ever made for an extension of the contract period, and by operation of law, it came to an end on 31.5.1993. Consequently, they argue that the Arbitrators erred in law by considering claims related to a period beyond the contract's validity. It is specifically alleged that claims numbered 6 and 7 were wrongly allowed, as they pertain to excess costs for waterproofing and taffelting works, which, under the contract, were to be executed with the contractor's own materials at the agreed rate of Rs.23 per square meter. This, the petitioners argue, goes against the express terms of the contract and amounts to a violation of public policy. For these reasons, they seek the setting aside of the arbitral award dated 31.1.2011.
III. RESPONDENT'S SUBMISSIONS:
6. Per contra, the Respondent, being the successor-in-interest to the original contractor, controverted the Appellant's contentions, asserting that the scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996, is inherently limited. It was urged that the court, while exercising jurisdiction under the said provision, does not sit in appeal over the findings of the Arbitral Tribunal, nor is it empowered to reappraise the evidence or substitute its own view merely because // 5 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 another interpretation is possible. Consequently, the impugned award, it was submitted, ought not to be disturbed on the nebulous and unsubstantiated grounds urged by the petitioners.
7. Additionally, the Respondent, on the other hand, contended that the learned Arbitrators had rightly and lawfully awarded interest on the adjudicated amount, such grant being in consonance with the settled principles of law governing arbitral discretion under Section 31(7) of the Arbitration and Conciliation Act, 1996. It was further urged that the mere existence of a stipulation in the General Conditions of Contract (GCC) prohibiting payment of interest could not, in the facts and circumstances of the case, operate to nullify the award, which was both just and equitable. The Respondents also maintained that the rates and prices awarded for the executed works were strictly in conformity with the contractual provisions, having due regard to the nature and extent of the work performed. Accordingly, it was asserted that the impugned award dated 31.01.2011 suffered from no legal infirmity warranting interference under Section 34 of the Act.
8. It is also submitted that there is no error evident on the face of the record, nor any patent illegality in the Ld. District Judge's order and therefore, the present Petition is liable to be dismissed. IV. ISSUE FOR CONSIDERATION:
9. Having heard the parties and perused the materials available on record, this court here has identified the following solitary issue to be determined:
// 6 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 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?
10.First things first, it would be apposite to refer to the provisions of Section 34 & 37 of the Act, which provisions read as under:
"34. Application for setting aside arbitral award. -(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with subsection (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if-
(a) the party making the application 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:
// 7 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 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-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may // 8 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 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 elaaed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.
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:--
((a) refusing to refer the parties to arbitration under Section 8;
(b) granting or refusing to grant any measure under Section 9;
// 9 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14
(c) setting aside or refusing to set aside an arbitral award under Section 34.) (2) An appeal shall also lie to a court from an order of the arbitral tribunal--
(a) accepting the plea referred to in sub-section (2) or sub-section(3) of Section 16; or
(b) granting or refusing to grant an interim measure under Section17.
(3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court."
11.Upon an assiduous scrutiny of the scheme of Section 34 of the Arbitration and Conciliation Act, 1996, it admits of no ambiguity that the jurisdiction of the Court to interdict an arbitral award is neither appellate nor supervisory in the ordinary sense, but is one of circumscribed and exceptional invocation, strictly delimited by the grounds enumerated under sub-sections (2) and (3) thereof. The statutory architecture unmistakably evinces a legislative intent to preserve the sanctity and finality of arbitral adjudication, subject only to narrowly tailored exceptions. An award may be rendered susceptible to judicial annulment solely where it is demonstrably in conflict with the "public policy of India" -- a conception of restricted import, embracing instances wherein the award stands tainted by fraud or corruption, is repugnant to the fundamental policy of Indian law, or is abhorrent to the basic notions of morality and justice. The contours of such interference, as judicially expounded, are to be construed with the // 10 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 utmost restraint, lest the Court transgress the legislative mandate of minimal curial intervention in arbitral affairs.
12.A bare perusal of the textual as well as contextual contour of Section 34 of the Arbitration and Conciliation Act, 1996, unmistakably circumscribes the ambit of curial interference within an exceedingly narrow and rigorously defined compass. The legislative design, as discernible from the provision, is to immunize arbitral adjudication from intrusive judicial re-examination and to obviate the possibility of the Court transmuting itself into an appellate forum. The Court, while exercising its supervisory jurisdiction under the said provision, is, therefore, enjoined to maintain a posture of judicial restraint and to abstain from any evaluative reassessment of the factual matrix or the interpretative propriety of the award. It is now trite in arbitral jurisprudence that even an award which, upon prima facie consideration, may appear wanting in reasoning or deficient in articulation, or which may not commend itself as entirely rational or equitable, does not, by that mere attribute, warrant judicial interdiction, provided the arbitral tribunal's conclusion rests upon a view that is plausible, possible, and within the bounds of permissible construction.
13.It is by now a well-entrenched and inviolable proposition of arbitral jurisprudence that the jurisdiction conferred upon the Court under Section 34 of the Arbitration and Conciliation Act, 1996, is neither appellate in character nor analogous to the revisional jurisdiction traditionally exercised under procedural statutes. The legislative scheme unequivocally circumscribes such jurisdiction within narrow // 11 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 confines, thereby precluding any reappraisal of the merits of the arbitral determination. It stands equally well ordained that an arbitral award is immune from challenge on grounds of factual or legal appreciation, save and except upon the limited grounds expressly enunciated in sub- sections (2), (2-A), and (3) of Section 34, which alone provide the statutory gateway for judicial intervention through an appropriately instituted application. The Court, therefore, is enjoined to exercise the power under the said provision with circumspection and restraint, in fidelity to the legislative policy of minimal interference with arbitral autonomy.
14.Having regard to the rival submissions advanced and the questions of law arising for determination, it would be apposite, at this juncture, to advert to the governing principles elucidated by the Supreme Court in a catena of authoritative pronouncements delineating the contours of judicial intervention in arbitral matters. These decisions, cited at the Bar, expound the scope and ambit of a challenge to an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, as well as the parameters of appellate scrutiny envisaged under Section 37 thereof. The enunciation of law by the apex Court in these precedents serves as a guiding beacon for determining the permissible extent of curial oversight over arbitral adjudications, while simultaneously reinforcing the legislative policy of minimal judicial interference.
15. In MMTC Ltd. v. Vedanta Ltd.1, the Supreme Court took note of various decisions including that in Associate Builders2 and exposited on 1 (2019) 4 SCC 163 // 12 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 the limited scope of interference under Section 34 and further narrower scope of appeal under Section 37 of the 1996 Act. The Supreme 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 the Hon'ble Supreme Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.
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 2 (2015) 3 SCC 49 // 13 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14
13. It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality.
Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under 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."
16.The limited scope of challenge under Section 34 of the Act was once again highlighted by the Supreme Court in PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust3 and the Supreme Court particularly explained the relevant tests as under : 3
2021 SCC OnLine SC 508 // 14 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 "40. It will thus appear to be a more than settled legal position, that in an application under Section 34, the Court is not expected to act as an appellate court and reappreciate the evidence. The scope of interference would be limited to grounds provided under Section 34 of the Arbitration Act. The interference would be so warranted when the award is in violation of "public policy of India", which has been held to mean "the fundamental policy of Indian law". A judicial intervention on account of interfering on the merits of the award would not be permissible. However, the principles of natural justice as contained in Sections 18 and 34(2)(a)(iii) of the Arbitration Act would continue to be the grounds of challenge of an award. The ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the "most basic notions of morality or justice". It is only such arbitral awards that shock the conscience of the Court, that can be set aside on the said ground. An award would be set aside on the ground of patent illegality appearing on the face of the award and as such, which goes to the roots of the matter. However, an illegality with regard to a mere erroneous application of law would not be a ground for interference. Equally, reappreciation of evidence would not be permissible on the ground of patent illegality appearing on the face of the award.
41. A decision which is perverse, though would not be a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. However, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
42. To understand the test of perversity, it will also be appropriate to refer to paras 31 and 32 from the judgment of this Court in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , which read thus : (SCC pp. 75-76) // 15 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 '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."
17.In Delhi Airport Metro Express (P) Ltd. v. DMRC4 , the Supreme Court again surveyed the case laws and explained the contours of the Courts' power to review the arbitral awards. Therein, the Supreme Court not only reaffirmed the principles aforesaid but also highlighted an area of serious concern while pointing out "a disturbing tendency" of the Courts in setting aside arbitral awards after dissecting and reassessing factual aspects. The Supreme Court also underscored the pertinent features and scope of the expression "patent illegality" while reiterating that the Courts do not sit in appeal over the arbitral award.
18.The position in Associate Builders (supra) was recently summarised as hereinbelow recorded by Indian Oil Corpn. Ltd. v. Shree Ganesh Petroleum5:
"42. In Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204 (two-Judge Bench)] , this Court held that an award 4 (2022) 1 SCC 131 5 (2022) 4 SCC 463 // 16 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 could be said to be against the public policy of India in, inter alia, the following circumstances:
42.1. When an award is, on its face, in patent violation of a statutory provision. 42.2. When the arbitrator/Arbitral Tribunal has failed to adopt a judicial approach in deciding the dispute. 42.3. When an award is in violation of the principles of natural justice.
42.4. When an award is unreasonable or perverse. 42.5. When an award is patently illegal, which would include an award in patent contravention of any substantive law of India or in patent breach of the 1996 Act.
42.6. When an award is contrary to the interest of India, or against justice or morality, in the sense that it shocks the conscience of the Court."
19.In Haryana Tourism Ltd. v. Kandhari Beverages Ltd.6, the Supreme Court yet again pointed out the limited scope of interference under Sections 34 and 37 of the Act; and disapproved interference by the High Court under Section 37 of the Act while entering into merits of the claim in the following words :
"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.6
(2022) 3 SCC 237 // 17 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14
9. As per settled position of law laid down by this Court in a catena of decisions, an award can be set aside only if the award is against the public policy of India. The award can be set aside under Sections 34/37 of the Arbitration Act, if the award is found to be contrary to :
(a) fundamental policy of Indian Law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. None of the aforesaid exceptions shall be applicable to the facts of the case on hand. The High Court has entered into the merits of the claim and has decided the appeal under Section 37 of the Arbitration Act as if the High Court was deciding the appeal against the judgment and decree passed by the learned trial court. Thus, the High Court has exercised the jurisdiction not vested in it under Section 37 of the Arbitration Act. The impugned judgment and order [Kandhari Beverages Ltd. v. Haryana Tourism Ltd., 2018 SCC OnLine P&H 3233] passed by the High Court is hence not sustainable."
20.As regards the limited scope of interference under Sections 34/37 of the Act, this Court also considers it apposite to refer to the following observations of a three-Judge Bench of the Supreme Court in UHL Power Co. Ltd. v. State of H.P.7:
"15. This Court also accepts as correct, the view expressed by the appellate court that the learned Single Judge committed a gross error in reappreciating the findings returned by the Arbitral Tribunal and taking an entirely different view in respect of the interpretation of the relevant clauses of the implementation agreement governing the parties inasmuch as it was not open to the said court to do so in proceedings under Section 34 of the Arbitration Act, by virtually acting as a court of appeal.
16. As it is, the jurisdiction conferred on courts under Section 34 of the Arbitration Act is fairly narrow, when 7 (2022) 4 SCC 116 // 18 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an appellate court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed."
21.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 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.8 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 8 1990 Supp SCC 727 // 19 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 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 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."
22.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.9; Sona Corpn. India (P) 9 2018 SCC OnLine Del 8273 // 20 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 Ltd. v. Ingram Micro India (P) Ltd.10; Manish Aggarwal v. RCI Industries & Technologies Ltd.11; Tahal Consulting Engineers India (P) Ltd. v. Promax Power Ltd.12 and Handicraft & Handlooms Exports Co. of India v. SMC Comtrade Ltd.13.
23.In Reliance Infrastructure Ltd. v. State of Goa14, the Apex Court noticing its previous decision in MMTC Ltd. v. Vedanta Ltd.15 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."10
2020 SCC OnLine Del 300 11 (2022) 3 HCC (Del) 289 12 2023 SCC OnLine Del 2069 13 2023 SCC OnLine Del 3981 14 (2024) 1 SCC 479 15 (2019) 4 SCC 163 // 21 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14
24.In Haryana Tourism Ltd. v. Kandhari Beverages Ltd.16 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:--
"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 16 2022) 3 SCC 237 // 22 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 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."
25.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."
26.It is observed in Punjab State Civil Supplies Corpn. Ltd. v. Sanman Rice Mills17 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 17 2024 SCC OnLine SC 2632 // 23 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 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 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 // 24 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14
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.
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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."
The Supreme Court has once again reiterated the settled canon that the scope of judicial interference with arbitral awards is exceedingly narrow and circumscribed. An award which may not, in the court's estimation, appear to be wholly reasonable, or which is partially nonspeaking or deficient in reasoning, cannot, for that reason alone, be subjected to judicial correction. It is now trite that where two plausible interpretations of the evidence or contractual provisions are reasonably possible, the arbitral tribunal's construction must prevail, for the court, in the exercise of its limited jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996, is not empowered to reassess the evidentiary substratum or to supplant its own view in substitution of that adopted by the arbitral forum. The arbitrator's interpretation, if not manifestly perverse, irrational, or vitiated by patent illegality apparent // 25 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 on the face of the record, is entitled to judicial deference and must, as a matter of principle, be allowed to stand, in keeping with the legislative policy of minimal curial intervention and the autonomy of the arbitral process.
27. In fact, , a circumspect perusal of the impugned Award indubitably discloses that the learned Arbitrator had scrupulously adverted to the pleadings and written submissions of the contesting parties, meticulously examined the documentary corpus adduced in evidence, and duly considered the oral testimonies and depositions bearing upon the substratum of the contractual transaction. The resultant findings on quantification and liability thus emanate from a discernible process of analytical reasoning, demonstrative of a conscious and judicious application of mind to the evidentiary materials and the operative contractual framework. The methodology adopted by the learned Arbitrator, viewed in its totality, manifests neither perversity nor arbitrariness, rather a reasoned adjudicatory exercise within the parameters of his jurisdictional competence.
28.This Court is of the considered view that the learned Arbitrator constitutes the primary and exclusive adjudicatory authority vested with the mandate to evaluate, interpret, and appreciate the evidentiary material adduced during the arbitral proceedings. The Arbitrator, being the chosen adjudicator of the parties, is statutorily and contractually entrusted with the solemn duty of assessing the probative worth, relevance, and credibility of the documentary as well as oral evidence in order to arrive at a reasoned and judicious determination. The findings // 26 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 and conclusions so rendered, being grounded in the evidentiary substratum of the record, partake of finality and are ordinarily immune from judicial reappraisal. It is a settled principle that a Court exercising jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996, cannot supplant its own evaluation of facts in substitution of that of the Arbitrator, save in cases disclosing a patent and demonstrable perversity or a manifest error apparent on the face of the record. The discretion of the Arbitrator in weighing and appreciating evidence is thus paramount, for he remains the sole arbiter of the factual matrix and the evidentiary appreciation underlying the arbitral determination.
29.It is equally well entrenched in arbitral jurisprudence that a Court, while exercising its limited supervisory jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996, is not empowered to undertake a reappraisal or re-evaluation of the evidence adduced before the Arbitral Tribunal, nor to reassess the factual findings recorded therein. The Court's remit is narrowly circumscribed to examining whether the award suffers from any patent illegality, manifest perversity, or procedural infirmity so grave as to vitiate the arbitral process. The judicial function at this stage is not that of an appellate authority tasked with a de novo evaluation of the factual matrix, but rather that of a supervisory forum ensuring the fidelity of the award to the statutory framework and principles of natural justice. Substitution of the Court's own conclusions for those of the Arbitrator is impermissible unless the findings are demonstrably irrational, implausible, or in flagrant contravention of settled legal principles.
// 27 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14
30.Interference with the impugned Arbitral Award dated 31.01.2011 can be justified only upon the fulfillment of the stringent preconditions prescribed under Section 34 of the Arbitration and Conciliation Act, 1996. It is a doctrinally settled proposition that a Court, while exercising jurisdiction thereunder, does not function as an appellate forum and is precluded from reassessing either the factual determinations or the interpretative conclusions of the Arbitral Tribunal. The legislative intent circumscribes judicial intervention to instances where the award is shown to be vitiated by patent illegality, contravention of the express terms of the contract, or where it stands in conflict with the public policy of India or the fundamental tenets of Indian law. Nevertheless, where material evidence of probative significance has been ignored or excluded, and such omission results in a manifest miscarriage of justice, the Court may, within the confines of Section 34, justifiably exercise its supervisory jurisdiction to set aside the award. The judicial exercise, therefore, entails a calibrated scrutiny--limited to ascertaining whether the award, on an overall conspectus of the pleadings, evidence, and findings, withstands the tests of legality, reasonableness, and procedural propriety, or whether it warrants annulment in law.
31.With respect to the duration of the contractual engagement, it is evident that although the initial completion period stipulated therein was three months, the execution of the work encountered delays, consequent upon which an extension of time was duly granted. Notwithstanding such extension, the contract came to be subsequently rescinded by the present Appellant. The pivotal question that therefore arises for judicial determination is whether, in the factual conspectus of the case, time // 28 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 could be regarded as having been of the essence of the contract, particularly in view of the extensions accorded, and whether the delay in execution was attributable to any default on the part of the Appellant. The learned Arbitral Tribunal, upon a comprehensive appraisal of the evidentiary and contractual materials, returned a categorical finding that the principal cause of delay was referable to the conduct and inaction of the Appellant, thereby rendering the subsequent rescission of the contract unjustified. The contention advanced by the Appellant that the delay ought not to have been fastened upon them was duly examined by the Tribunal and, upon reasoned consideration, found to be devoid of merit and accordingly repelled.
32.The learned Arbitral Tribunal also undertook a meticulous examination of the bifurcation of rates under Claims Nos. 6 and 7, and upon due consideration of the rival contentions, concluded that the contractor was legitimately entitled to additional remuneration towards taffelting and bitumen components. The Tribunal's determination in this regard was anchored in a careful interpretation of the contractual provisions governing pricing, read in conjunction with the technical specifications mandating the application of bitumen and gravel in conformity with the relevant ISI standards. The Arbitral Tribunal's construction of the pricing clauses was thus in harmony with the contractual framework and the intrinsic nature of the work executed, reflecting a judicious and reasoned appreciation of the contractual matrix. Consequently, this Court finds no infirmity, illegality, or perversity in the impugned // 29 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 findings warranting interference, the allowance of the contractor's claims having been made upon a cogent and well-founded basis.
33.This Court perceives no discernible infirmity in the judgment rendered by the learned District Judge in sustaining the arbitral award, the said determination evincing a judicious and well-reasoned appreciation of the evidentiary corpus, the factual substratum, and the governing principles delimiting the contours of judicial scrutiny under the arbitral regime. The learned District Judge has, with commendable fidelity to established jurisprudence, correctly applied the settled doctrine that curial interference with an arbitral award is circumscribed and may be invoked only upon a demonstrable showing of patent illegality, transgression of the fundamental policy of Indian law, or a procedural irregularity of such magnitude as to vitiate the fairness of the arbitral process itself. No such vitiating element, either factual or legal, has been substantiated by the petitioners in the present matter. The impugned award, being reasoned, internally coherent, and grounded upon a conscientious appraisal of the evidentiary and contractual materials, falls squarely within the parameters of the Arbitrator's jurisdictional competence. In the absence of any manifest perversity or error apparent on the face of the record, this Court is constrained to hold that no occasion arises for the exercise of its limited supervisory jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996. VI. CONCLUSION:
34.In light of the foregoing discussion, and upon a holistic consideration of the settled principles governing judicial interference with arbitral awards, this Court is of the considered and reasoned view that the // 30 // Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 10-Oct-2025 17:50:14 judgment dated 24.10.2017 rendered by the learned District Judge, Khurda in ARB (P) No. 104 of 2011, arising out of the arbitral award dated 31.01.2011 passed by the learned Sole Arbitrator in Arbitration Proceeding No.1 of 2002, is legally sound, well-reasoned, and unassailable in law. The said judgment, being in consonance with the statutory framework and judicial precedents delineating the circumscribed scope of review under Section 34 of the Arbitration and Conciliation Act, 1996, warrants no interference by this Court.
35. Accordingly, ARBA No.10 of 2018 is dismissed in the aforesaid terms, the impugned judgment and award being found to suffer from no infirmity warranting interference. There shall be no order as to costs.
36. Interim order, if any, passed earlier stands vacated.
(Dr. Sanjeeb K Panigrahi) Judge Orissa High Court, Cuttack, Dated the 10th Oct., 2025