Delhi District Court
The Handicrafts And Handlooms Exports ... vs M/S Jainsons Jewellers And on 14 August, 2025
IN THE COURT OF SH. PULASTYA PRAMACHALA
DISTRICT JUDGE, (COMMERCIAL COURT)-01,
PATIALA HOUSE COURT, NEW DELHI
OMP (COMM) No.125/2019
In the matter of: -
The Handicraft & Handlooms Exports
Corporation of India Ltd. (HHEC)
Having office at Jawahar Vyapar Bhawan,
Annexe-1, Tolstoy Marg, New Delhi
110001.
Through its Chief Finance Manager
& Authorized Representative, Sh. Ujjal Datta
...Petitioner
Versus
M/s Jainsons Jewellers
3421/1 Regharpura
D.B. Gupta Road, Karol Bagh,
New Delhi-110005
...Respondent
Date of Institution : 15.07.2019
Arguments heard on : 29.07.2025
Decided on : 14.08.2025
Decision : Rejected
JUDGMENT
1. Petitioner i.e.The Handicraft & Handlooms Exports Corporation of India Ltd., has filed this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') challenging the arbitral award dated 13.04.2019 as passed by the Sole Arbitrator, whereby Arbitral Tribunal proceeded to allow the application of the respondent under Section 16 of the Act and passed the Award to reject the claim. It is pleaded that as a consequence of the same, the claims of the Digitally signed by PULASTYA OMP (Comm) No.125/2019 (Pulastya Pramachala) PRAMACHALA District Judge (Commercial Court)-01, PULASTYA PRAMACHALA Date:
2025.08.14 17:24:32 +0530 Page No.1 of 14 Patiala House Court, New Delhi petitioner had not at all been adjudicated on merits and the arbitral award is inter-alia in violation of Section 34(2) (a) (v) and Section 34 (2) (b) (ii) and 16 (5) of the Act.
2. In the present case, it has been mentioned in the award that copy of the award dated 13.04.2019 was received by the petitioner on 13.04.2019. The present petition was filed on 15.07.2019 and the Court issued the notice of this petition to the opposite party/respondent.
3. The brief facts of the case are that the petitioner is a Government of India Company and has been established with the objective to promote export of Handicrafts and Handloom textile products and is engaged in the business of import of bullions etc. It is averred that respondent firm approached the petitioner for import of bullion as the petitioner is a designated agency for import of bullion. It is alleged that respondent assured that he would pay 10% of the value of bullion at the time of booking of each order and balance on the arrival of bullion. It was agreed by the respondent that it would pay pre-determined margin of profit on the landed cost of Bullion (CIP), which includes cost of bullion, freight, insurance and supplier's premium excluding custom duty and sales tax as applicable from time to time. Two agreements were executed between the parties on 01.12.2004. First agreement was a short agreement containing general terms and conditions and second agreement was detailed agreement containing terms and conditions. It was agreed between the parties that 10% of the value of bullion would be paid by the respondent to the claimant at the time of placing the order. Thereafter, the claimant was to import gold, wherein the OMP (Comm) No.125/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.2 of 14 Patiala House Court, New Delhi ownership of the goods was to rest with the supplier and the importer/claimant was to act as an agent of the supplier. Thereafter, respondent was to take delivery of gold on the basis of unfixed price. The respondent was to pay provisional price of the gold along with margin money to the extent of 5-10% of the provisional price of the gold and had to later adjust the account on the basis of price fixed by the respondent itself with foreign suppliers. It is the case of the petitioner that respondent in order to make the transactions between the claimant & the respondent a fair and transparent one, offered a cheque of Rs.3,50,00,000/- dated 09.12.2004 bearing no.440144 drawn on Jammu & Kashmir Bank towards security money. It is averred that respondent also assured that the said cheque would be renewed time to time by the respondent during transactions with the claimant. It is averred that during the financial year during 1.04.2005 to 28.11.2005, respondent purchased 1221 kg of gold on consignment basis, for which the respondent had been remitting provisional price of the gold. It is averred that the last price fixed by the respondent was on 19.12.2005. It is averred that respondent did not fix the price of 25 Kg of gold as on date and subsequently there was price escalation in the price of the gold and due to the price escalation which resulted to loss of Rs.82 Lakhs (approx.) to the petitioner. It is averred that petitioner requested the respondent for payment of remaining amount, but respondent denied its liability. Thereafter, legal notice was issued to the respondent and petitioner filed a suit before Hon'ble Delhi High Court. The said suit was disposed off as non-maintainable with the directions to initiate the arbitration OMP (Comm) No.125/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.3 of 14 Patiala House Court, New Delhi proceedings and referred the matter to Arbitration under the aegis of Indian Council of Arbitration, FICCI. In arbitration proceedings, on 17.09.2008, respondent preferred an application under Section 16 of the Act. Initially the respondent contested the application under Section 16 of the Act, but vide order dated 07.01.2010, ld. Tribunal recorded that parties did not wish to press this application as any expression of opinion by the Tribunal on the controversy at that stage might prejudice the case of either party on merit. Thereafter, arbitral proceedings proceeded on merits and evidence was led from both sides between 2010-2018. Thereafter, merely on the request of the respondent, ld. Arbitral Tribunal proceeded to hear and allow the application under Section 16 preferred by the respondent. Thereafter, award came to be published on 13.04.2019.
4. Aggrieved by the said award dated 13.04.2019, present objection petition has been filed by the petitioner mainly on following grounds: -
i. That award has been rendered without following the mandatory procedure prescribed under Section 21, 43(1) and 43(2) of the Act;
ii. Award has been passed contrary to the provisions of Contract Act;
iii. That the procedure adopted by the Tribunal, apart from being illegal, was wholly unconscionable and inexplicable. iv. That the Arbitral Tribunal completely ignored the order dated 21.08.2008 passed by the Hon'ble High Court of Delhi;
v. That the award passed by the Arbitral Tribunal is against the Public Policy of India and Fundamental Policy of Indian Law; vi. That the award is perverse and bad in law.
OMP (Comm) No.125/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.4 of 14 Patiala House Court, New Delhi
5. Reply to the petition was filed by the respondent, denying the averments, allegations and contentions made in the petition. It is averred that the petition is bad in law and liable to dismissed.
6. Respondent also filed written synopsis along with judgments relied upon by it. Ld. counsels for the parties made their arguments. I have examined the rival contentions and the record of arbitration proceedings.
7. Ld. counsel for the petitioner argued that the case of the petitioner rests upon two agreements both dated 01.12.2004. The first agreement was a Consignment Agreement containing general terms and defining various provisions of the contract and the second agreement is a LC Business Agreement containing specific clauses including Arbitration clause. Both the Agreements were integral parts of each other and used interchangeably. Petitioner relied upon the decision of Hon'ble Supreme Court in Chloro Controls India (P) Ltd. vs. Severn Trent Water Purification Inc. (2013) 1 SCC 641. It was argued that the impugned award is an embarrassment to the judicial process, since Section 16 application was filed in the year 2009, and was decided almost after a decade without following the due procedure. The award passed by the Arbitral Tribunal is against the Public Policy of India and against the legislative intent of the Arbitration and Conciliation Act, 1996, which aimed to promote arbitration as a speedy means to settle commercial disputes. Ld. Counsel relied upon Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705. He submitted that there is not a whisper of justification as to how and why the 'delay' was justified by the arbitral tribunal. Hon'ble Allahabad High Court OMP (Comm) No.125/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.5 of 14 Patiala House Court, New Delhi in Union of India Through Garrison Engineer AF v. M/s Yauk Engineers explained the scope of Public Policy of India while relying on Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd. (supra). It was argued that all the members of Tribunal were not present in every proceeding. It was further argued that in Patil Engineering v. North Eastern Electric Power Corporation, AIR 2020 SC 2488, award was held to have rightly been set aside on the newly added ground of patent illegality [Section 34(2A)]. The High Court had held the view taken by the Arbitrator to be so irrational and perverse that no reasonable person would have arrived at that while interpreting different provisions of the contract. The High Court had also held, and Supreme Court approved, that the impugned award resulted in unjust enrichment of the contractor and huge loss to Government Corporation which was contrary to the Fundamental Policy of Indian Law. Hon'ble Madras High Court in Arb. O.P. (Com. Div.) No. 195 of 2021 M/s Sunwin Papers vs. M/s Sivadarshini Papers Pvt. Ltd. allowed a petition under section 34 of the Arbitration and Conciliation Act, 1996 wherein a challenge was to an award passed under section 16 of the Act. Ld. Counsel has also relied upon following case laws: -
i. Raymond Ltd. vs. Miltex Apparels and Ors. 2025 SCC OnLine Bom 333;
ii. Reva Electric Car Co. (P) Ltd. vs. Green Mobil, 2012 (2) SCC 93;
iii. Surender Kumar Singhal vs. Arun Kumar Bhalotia; 2021 SCC OnLine Del 3708;
iv. Scholastic India Pvt. Ltd. vs. Kanta Batra, 2022 SCC Online Del 2351;
OMP (Comm) No.125/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.6 of 14 Patiala House Court, New Delhi v. McDermott International Inc. vs. Burn Standard Co. Ltd., (2006) 11 SCC 181;
vi. Rhiti Sports Management Pvt. Ltd. vs. Power Play Sports and Events Ltd., 2018 SCC OnLine Del 8678;
vii. Dashin Haryana Bijli Vitran Nigam Ltd. Vs Navigant Technologies (P) Ltd. (2021)7 SCC 657;
viii. Avdhesh Mittal vs. Deepak Vig. OMP (COMM) No. 271/2023 dated 06.03.2024.
ARGUMENTS OF RESPONDENT
8. Ld. counsel for respondent submitted that petition in hand is barred by limitation. He submitted that petitioner should have challenged the order dt. 05.11.2018 u/s 37 of the Act. But petitioner failed to do so and filed this petition after lapse of 60 days, as per limitation for appeal u/s 37 of the Act. Ld. counsel submitted that this petition u/s 34 is not maintainable. It was further argued that even otherwise, there is no merit in this petition. The Arbitral Tribunal decided the application u/s 16 of the Act, as per the assessment of the terms and condition of the agreement between the parties. He argued that reliance upon the second agreement by the petitioner, is misplaced because same was not related to subject matter of the dispute. Ld. counsel submitted that the second agreement was meant for different transaction and tenure of both the agreements were for different period. Second agreement lapsed on 31.10.2005. The disputed transaction took place after 31.05.2005. Therefore, even otherwise on the basis of second agreement also arbitration clause was no more in operation.
APPRECIATION OF ARGUMENTS, FACTS & LAW
9. The scope of enquiry under section 34 is restricted to OMP (Comm) No.125/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.7 of 14 Patiala House Court, New Delhi consideration whether any one of the grounds mentioned in section 34 exists for setting-aside the award. Section 34 of the Act reads 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 sub- section (2) and sub- section (3).
(2) An arbitral award may be set aside by the court only if-(a) the party making the application furnishes proof 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.
OMP (Comm) No.125/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.8 of 14 Patiala House Court, New Delhi 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. (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 re- appreciation of evidence."
10. The general principles are that Arbitrator is a Judge of the choice of the parties and his decision, unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even by the Court, even if the Court of law could come to a different conclusion on the same facts. The Court cannot reappraise the evidence and it is not open to the Court to sit in appeal over the conclusion of the Arbitrator. It is not open to the Court to set aside a finding of fact arrived at by the Arbitrator and only grounds on which the award can be set aside are mentioned in the Arbitration Act. Where the Arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the Court in exercise of the power vested in it. Where the Arbitrator is a qualified technical person and expert, who is competent to make assessment by taking into consideration the OMP (Comm) No.125/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.9 of 14 Patiala House Court, New Delhi technical aspects of the matter, the Court would generally not interfere with the award passed by the Arbitrator.
11. Hon'ble Supreme Court in the case of Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It was held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
12. Hon'ble Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, 2019 SCC OnLine SC 677 held that under Section 34 (2A) of the Act, a decision which is perverse 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. A finding based on the 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 characterized as perverse. It was held that 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.
OMP (Comm) No.125/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.10 of 14 Patiala House Court, New Delhi
13. Hon'ble Supreme Court in the matter of PSA SICAL Terminals Pvt. Ltd. Vs. Board of Trustees of V.O Chidambranar Port Trust Tuticorin reported as 2021 SCC OnLine SC 508, reiterated its view as taken in MMTC Limited Vs. Vedanta Limited reported as (2019) 4 SCC 163, and held as follows: -
"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 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."
14. Coming back to the grounds raised by petitioner herein, first of all I shall deal with the argument of respondent against maintainability of this petition, for want of challenge to order on application u/s 16 of the Act. S. 37 (2) (a) of the Act provides that OMP (Comm) No.125/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.11 of 14 Patiala House Court, New Delhi appeal shall lie to a Court from an order granting of the arbitral tribunal accepting the plea referred in sub section (2) or sub section (3) of section 16. Sub section (2) of section 16 of the Act provides as under: -
"A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator."
15. It is worth to note here that S. 37 does not provide for an appeal against order of rejection of plea referred in S.16 (2) of the Act. Appeal is possible only when such plea is accepted. Meaning thereby if arbitrator rules that he has no jurisdiction to conduct arbitration proceedings, the aggrieved party has the remedy to appeal against such order.
16. In the present case, it admitted fact that petitioner did not challenge the order dated 05.11.2018, vide which arbitral tribunal had ruled that arbitration was not maintainable. Issue before this court is that in absence to any challenge to order u/s 37 of the Act, can petitioner challenge the legality of that order u/s 34 on the basis of Award being passed in terms of such order. S. 34 of the Act in fact does not create any bar by making classification of the Awards, so as to provide for challenge to any particular class of the Award. It must be kept in mind that legislature was well aware of situations arising out of acceptance of a plea taken u/s 16 (2) of the Act. Legislature though provided for a remedy against such order but did not create a bar against challenge to an Award based on such order. On acceptance of plea u/s 16 (2) of the Act, the inevitable conclusion has to be rejection of the claim OMP (Comm) No.125/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.12 of 14 Patiala House Court, New Delhi and passing Award accordingly. Still, despite providing remedy u/s 37 of the Act against such order, legislature did not create any bar against challenge to an Award based on such order. In that situation, I find that this petition is maintainable u/s 34 of the Act, against the Award passed in the matter.
17. Next question is that whether order dated 05.11.2018 suffers from perversity, so as to require interference u/s 34 of the Act? First attack against that order is based on plea that application u/s 16 could not have been entertained at such belated stage, after conducting evidence in the matter. The said order shows that this plea was raised by the petitioner before arbitral tribunal as well. Arbitral tribunal referred to order dated 07.01.2010 as passed in that proceedings. Said order well reflects that both the parties to arbitration i.e. petitioner and respondent herein agreed not to press for their respective applications, on the grounds that any expression of opinion of the tribunal could prejudice the case of either of the parties on merits. If petitioner was party to such proceedings and plea taken before the tribunal, then it is estopped from challenging the decision of tribunal for entertaining that application subsequently. After loosing the game, reminding the objective behind enactment of arbitration laws being speedy remedial mechanism, and claim that application should not have been entertained at belated stage, does not sound fair. Application was kept in abeyance at the request of respective parties and petitioner did not raise any objection for keeping this application in abeyance. Therefore, this objection is found to be frivolous.
18. Another contention raised before tribunal and before this court, related to reading of two agreements in combined manner.
OMP (Comm) No.125/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.13 of 14 Patiala House Court, New Delhi Arbitral tribunal dealt with this plea also and gave finding that there was no arbitration clause in the first agreement and both the agreements had different intentions behind them. In this respect it is worth to refer to pleading of petitioner itself, wherein it has mentioned about approaching High Court of Delhi with a suit, before initiation of arbitration proceedings. There was clause in first agreement in following terms: -
"All disputed arising out of or concerning this agreement are subject to the jurisdiction of Delhi High Court only."
19. In the backdrop of aforesaid clause and absence of any arbitration clause, findings given by the tribunal to say that "In the agreement, specially the parties have ousted the jurisdiction of the arbitral process and have specifically mentioned that the disputes be referred to Civil Court." cannot be questioned at all. If one agreement provided for exclusive jurisdiction of Delhi High Court i.e. a Civil Court, then by no stretch of imagination one can say that parties intended to read arbitration clause incorporated in the other agreement, which had no relation with the subject matter of dispute.
20. Therefore, I do not find any illegality or breach of public policy in the Award in question, so as to reject the claim on the basis of order dated 05.11.2018. Accordingly, present petition is found devoid of any merit and hence, same is rejected.
21. File be consigned to Record Room after due compliance.
Digitally signed by PULASTYA PULASTYA PRAMACHALA PRAMACHALA Date: 2025.08.14 17:24:49 +0530 Pronounced in the (PULASTYA PRAMACHALA) Open Court on this District Judge (Commercial Court)-01, 14 day of August, 2025 th Patiala House Court, New Delhi OMP (Comm) No.125/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.14 of 14 Patiala House Court, New Delhi