Gujarat High Court
Sardar Sarovar Narmada Nigam Ltd vs Recondo Limited on 30 June, 2025
Author: Sunita Agarwal
Bench: Sunita Agarwal
NEUTRAL CITATION
C/FA/845/2025 ORDER DATED: 30/06/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 845 of 2025
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2024
In R/FIRST APPEAL NO. 845 of 2025
With
R/FIRST APPEAL NO. 847 of 2025
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2024
In R/FIRST APPEAL NO. 847 of 2025
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SARDAR SAROVAR NARMADA NIGAM LTD. & ANR.
Versus
RECONDO LIMITED
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Appearance:
MR. G.H.VIRK, ADV. WITH MR MB GOHIL(2702) for the Appellant(s) No. 1,2
MR. ARIF BOOKWALA, SR. ADV. WITH K.G.SUKHWANI, PARAS K
SUKHWANI, C.K.SUKHWANI(8284) for the Defendant(s) No. 1
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CORAM:HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA
AGARWAL
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 30/06/2025
COMMON ORAL ORDER
(PER : HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL) Both the appeals arise out of the common award passed under Section 34 of the Arbitration and Conciliation Act, 1996. With the consent of the learned counsels for the parties, they have been heard together and are being decided by this common order.
2. Heard the learned counsel Mr. G.H.Virk assisted by the learned advocate Mr. M.B.Gohil for the appellants and Mr. Arif Page 1 of 20 Uploaded by C.M. JOSHI(HC01073) on Mon Jul 07 2025 Downloaded on : Mon Jul 07 21:29:12 IST 2025 NEUTRAL CITATION C/FA/845/2025 ORDER DATED: 30/06/2025 undefined Bookwala, the learned senior advocate assisted by Mr. K.G.Sukhwania, the learned advocate appearing for the respondent.
3. By means of the present appeal under Section 37 of the Arbitration and Conciliation Act, 1996, the appellant namely Sardar Sarovar Narmada Nigam Limited (SSNL) seeks to challenge the arbitral award dated 13.11.2023 with respect to claim No.5 restricting the challenge to claim No.5 pertaining to "Earth Work of embankment (Construction of AV.Lead = 1/5 Km.).
4. The first submission made by the learned counsel for the appellant to challenge the Arbitral Award with respect to the claim No.5 is that the Arbitrator has committed a patent illegality in awarding more than what was originally claimed by the claimants in the Statement of Claim submitted before it. It was further argued that no reason has been given in the Statement of Claim as to how the claimant had reached at the computation indicated therein. The submission is that the claim made by the claimant was bereft of any substantial material disclosed in the Statement of Claim or filed during the course of arbitration. It is submitted that the award suffers from not only patent illegality but is in conflict with the public policy for the reason that what was due and payable was much less than what has been awarded by the Arbitrator towards the claim No.5.
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5. We may record, at the outset, that it is fairly submitted by the learned counsel Mr. G. H. Virk appearing for the appellants that the appellants are not contesting on any other claims awarded by the Arbitrator and the findings of the Court under Section 34 upholding the award in toto on the issue of termination of contract by the appellant.
6. The challenge is confined to the amount awarded under claim No.5. Reading the findings returned by the Arbitrator in paragraph No. 51 in the award with respect to the claim No.5 , we are required to quote the discussion as a whole:-
"51. This Claim No.5 pertains to "Earth Work of embankment (construction of AV. Lead = 1.5 Km.). On the side of the claimant-Recondo Ltd., Shri Sukhwani, Learned Counsel for the claimant-Recondo Ltd during the course of oral arguments and as stated in the Written Arguments submitted on behalf of the claimant-Recondo Ltd, it has been submitted that respondent-Recondo Ltd was requested to revise rates for items like earthwork in embankment, structure concrete, cement concrete lining and steel, etc. and rate analysis were also submitted. It is based on BOQ Item No.4 (Earth work in embankment by bringing suitable earth from borrow area/pits including breaking clods, depositing in uniform layers of 15 to 23 cm, dressing to designed sections with all lift and lead up to 100 m. clearing the site etc. complete.) It is further submitted that as can be seen from letter dated 05/03/1990 (Ex.101, page-298) directions were given to borrow earth from leads varying from 0.5 Kms to 5 Kms, since such leads were not mentioned in any of tender items which required excess machineries such as excavators, loaders, dozer, tippers, etc. therefore Respondent No.2 the Executive Engineer was requested to provide certain instructions. It is further submitted on behalf of the claimant that as can be seen from letter dated 12/3/1990 (Ex.102 Page-300), once again attention of Respondent No.2 the Executive Engineer was drawn to the fact that as per tender items, earth required for embankment was to be borrowed from side borrow pits Page 3 of 20 Uploaded by C.M. JOSHI(HC01073) on Mon Jul 07 2025 Downloaded on : Mon Jul 07 21:29:12 IST 2025 NEUTRAL CITATION C/FA/845/2025 ORDER DATED: 30/06/2025 undefined with a maximum lead of 100 Mtrs, and accordingly the claimant had arranged machineries and equipments to cater for 100 Mtrs, lead. Since Respondent No.2 the Executive Engineer had proposed to bring earth from village tanks (ponds) with leads varying from 0.5 to 5.0 Kms. certain information was sought for. Therefore, the claimant by letter dated 5/4/1990 (Ex. 108, Page-312) sought confirmation regarding acceptance of quoted rates which were based on quantity to be executed, condition of haul roads, resources available and to be specially arranged for execution of this work so as to enable the claimant to arrange resources within 2 to 3 weeks to start the work. It is further submitted that claimant by letter dated: 9/4/1990 (Ex/109, Page-314) provided extra rate for extra lead per CM. Thereafter, the claimant by letter dated 30/4/1990 (Ex.115, Page-334) provided the statement showing the extra cost and vide letter dated 12/7/1990 (Ex.126, Page-362) requested Chief Engineer to finalize extra items/issues which were not settled till date.
Moreover, the claimant by Letter dated 16/7/1990 (Ex.128, Page-367) requested Respondent No.2 the Executive Engineer as well to finalize extra items/issues which were not settled till date. That the reminders were sent by the claimant to the Chief Engineer by letter dated 12/09/1990 (Ex.134, page-381) and to the Executive Engineer by letter dated 28/09/1990 (Ex. 139, page-389) to finalize extra items / issues which were not settled till 2 date.
It is submitted that with respect to 'Pending Extra Items', Respondent No.2 the Executive Engineer replied by letter dated. 8/10/1990 (Ex. 191 Colly in Volume-R, produced by the respondent-SSNN Ltd. relevant page 28-29) and in para 5 on page-29, it is stated as under:
"(5) You are well aware that the proposal of your pending extra items which are considered by this Office are submitted to higher authorities for finalizing the same. You are also being kept aware of the position of each case and its compliance. However, this being a policy questions, requiring order and approval from top authorities, the finalization will take some time.
Summing up the issues, it is to assure you that all the possible co-operation will be imparted to you and it will be seen that work may not suffer want of any reason, All your pending/extra items are already submitted to higher authorities for finalization and will be perused vigorously so as Page 4 of 20 Uploaded by C.M. JOSHI(HC01073) on Mon Jul 07 2025 Downloaded on : Mon Jul 07 21:29:12 IST 2025 NEUTRAL CITATION C/FA/845/2025 ORDER DATED: 30/06/2025 undefined to finalize them as early as possible. In the meanwhile, it is requested to start with the work without losing the time so as to complete the work even in the extended time limit."
It is therefore submitted on behalf of the claimant-Recondo Ltd that thus as per directions given by Respondent No.2 the Executive Engineer in view of Clause-32 (Extra Items) of General Condition of Contract contained in the Agreement Ex. 38 and fact that rates were considered by office of Respondent No.2 Executive Engineer and submitted to higher authorities for finalization and since it will take some time for finalization, the claimant executed total Earth Work of 1520371.60 CM of BOQ 'Item No.4-Earth work' (Ex.188, R A Bill No.119 dated: 29/06/1995, relevant page no.-3) and for which, the payment was made at the rate of Rs.6.80p, Rs.6.65p and Rs.6.40p respectively on 10/07/1995 for quantities of 780430.40; 676769.14 and 63172.06 against rate analysis of Rs.87/- per CM. It is therefore submitted that considering rate of Rs.87/- for total quantity of 1520371.60 CM, an amount of Rs.13,22,72,329.20 was required to be paid, however, an amount of Rs.1,02,11,742.68 was paid in R. A. Bill No.119 dated: 29/6/1995 and paid on 10/7/1995. Ultimately, it is submitted considering the undisputed rate quoted by the claimant and the rate applied by the respondent-SSNN Ltd in the said R.A. Bill; an amount of Rs. 13,22,72,329.20 is required to be paid by the respondent-SSNN Ltd to the claimant-Recondo Ltd. but, an amount of Rs.1,02,11,742.68 was paid in R. A. Bill No. 119 dated 29/06/1995, paid on 10/07/1995 and therefore the claim should be of Rs.12,20,60,586.52 which is required to be paid to the claimant-Recondo Ltd. However, since the claimant-Recondo Ltd. has claimed Rs.12,16,29,760/-(rounded off to Rs.12,16,30,000/-) under this head in their Statement of Claims, therefore, the claimant restricts the claim for Rs. 12,16,30,000/-as claimed in the Statement of Claims. However, it is submitted that in fact the claimant-Recondo Ltd had executed the work between 28/6/1995 to 5/12/1995 which is reflected in the Annexure -1 of the letter dated 05/12/1995 by the respondent-SSNN Ltd terminating the contract with the claimant- Recondo Ltd, at Ex. 182, relevant page-511, and up to date quantity is 16 lakhs CM for 'Earth work' as admitted by Respondent-SSNN Ltd in said letter; however claim has restricted for the quantity up to RA Bill No.119 dated 29/6/1995, i.e. as detailed above and as pleaded and claimed in the Statement of Claims with regard to this Claim No. 5. It is therefore submitted that the Claim No.5 be allowed and Rs. 12,16,30,000/- be awarded to the Page 5 of 20 Uploaded by C.M. JOSHI(HC01073) on Mon Jul 07 2025 Downloaded on : Mon Jul 07 21:29:12 IST 2025 NEUTRAL CITATION C/FA/845/2025 ORDER DATED: 30/06/2025 undefined claimant Recondo Ltd.
52. On the side of the respondent-SSNN Ltd, I have heard Shri Shah, Learned Counsel for the respondent-SSNN Ltd and I have considered the Written Arguments filed on behalf of the respondent-SSNN Ltd as well as I have considered the Written Statement filed by the respondent-SSNN Ltd in connection with this Claim No.5 made by the claimant-Recondo Ltd. In the Written Statement filed by the respondent-SSNN Ltd, regarding the Claim No. 5 made by the claimant- Recondo Ltd, it is pleaded as under:
"Earthwork of Embankment was as per the tender agreement. So whatever rates have been paid, they are legal and just and no more rate can be legally paid and hence, this claim for Rs.12,16,29,760/- is not legally maintainable under the provisions of law and as per the provision of the tender agreement and hence, it is denied and it may be rejected."
Shri Shah, Learned Counsel for the respondent-SSNN Ltd submitted that once the respondent-SSNN Ltd had considered the request of the claimant-Recondo Ltd for the payment towards Extra Work as per Cl.32 of the Agreement Ex.38 and paid as per the final decision taken by the competent authority of the respondent-SSNN Ltd, the claimant is not entitled to claim any more amount by quoting exorbitant rate than what was paid to the claimant. Thus, the very demand made by the claimant is illegal and contrary to the terms and conditions of the Agreement. It is therefore submitted that this Claim No.5 may be disallowed and dismissed.
53 . I have considered the pleadings of the parties as referred above this Award. I have considered the letter correspondence relied upon both the sides during oral arguments as well as referred in their Written Arguments in connection with this Claim No. 5 made by the claimant. I have considered the documents referred on behalf of both the sides in connection with this claim.
54. First of all, looking to the letter correspondence referred on behalf of the claimant-Recondo Ltd and as briefly narrated in above para 51 of this Award, it is clear that the claimant had drew the attention of the respondent about the difficulty faced by the claimant so far as the Earthwork of embankment was concerned. It transpires that for the earthwork of embankment, as per the agreement, the earth required for Page 6 of 20 Uploaded by C.M. JOSHI(HC01073) on Mon Jul 07 2025 Downloaded on : Mon Jul 07 21:29:12 IST 2025 NEUTRAL CITATION C/FA/845/2025 ORDER DATED: 30/06/2025 undefined embankment was to be borrowed from side borrow pits with a maximum lead of 100 Mtrs. and accordingly, the claimant had deployed machinery, equipments etc. but as further transpires from the letter correspondence that in fact the claimant was directed to procure earth from the tank (pond) of village and the distance between the earthwork of embankment and the procure area was varying from 0.5 Km. to 5.0 Km. This fact was brought to the notice of the concerned Executive Engineer as well as Chief Engineer of the respondent-SSNN Ltd as reflected from the above referred letter correspondence. Even it has been conveyed by the letter correspondence by the claimant to the respondent about the requirement to deploy more machines, vehicles etc. to procure earth from the distance varying between 0.5 Km to 5.0 Km. The claimant had also annexed required statements along with their letters showing the extra cost which the claimant had to bear to procure earth from such a far distance than the distance of 100 M mentioned in the tender agreement. Rate analysis was also forwarded by the claimant to the respondent along with their letter correspondence. Looking to the letter dated 09/12/1994 at Ex.167 (page 467 to page 472) forwarded to the respondent, the rate analysis in detail is given by the claimant and the relevant statement is at page 469-470. Looking to it, it transpires that Rs. 79/- per cu.m. up to 1 Km. lead; Rs.87/- per cu.m., up to 2 Km. lead. and Rs. 96/- per cu.m. up to 3 Km. and onward lead is mentioned. It is pertinent to note that there is not a single correspondence from the side of the respondent disputing the rate analysis of Rs.87/- quoted by the claimant for the extra work. It may also be noted that the stand taken by the Executive Engineer of the respondent-SSNN Ltd in his letter addressed to the claimant dated 8/10/1990 (Ex. 191 produced by the Colly in Volume-R. respondent-SSNN Ltd. relevant page 28-29) and in para 5 on page-29 is most relevant to answer this claim no. 5 made by the claimant. As the relevant para 5 of this letter by the Executive Engineer has been reproduced in above para 51, I need not again reproduce the same here. Suffice it to say that instead of disputing the rate analysis made by the claimant and alleging anything against the rate analysis, the claimant was directed to go ahead of the work. That the rate analysis and demand made by the claimant was forwarded for finalizing the same. It is clearly stated in this letter by the Executive Engineer that, "In the meanwhile, you should now start with the work without waiting for the finalization of the cases and losing the time." Now subsequently when the R. A. Bill No.119 was prepared on 29/06/1995, the rates awarded to the claimant was Rs.6.80p;
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Rs.6.65p and Rs.6.40p and not according to the rate analysis submitted by the claimant. When the claimant was advised by the Executive Engineer by his letter dated 08/10/1990, Ex. 191 Colly in Volume-R, produced by the respondent-SSNN Ltd. relevant para 5 page 28-29, to start the work without waiting for finalization of the rate analysis submitted by the claimant, this itself was sufficient for the claimant to believe that their rate analysis was to be finalized soon. As a matter of fact, when the rate analysis already submitted by the claimant to the respondent, the respondent would have known the financial implication in it and in that case, it was the duty of the respondent to inform the claimant before execution of work to wait till the final orders are received. On the contrary, the situation that has been created in this case is such that any contractor will believe that his rate is likely to be sanctioned. The claimant was directed to go ahead with the work without waiting for the sanction. As a matter of fact, it was necessary for the respondent to have communicated the rates to the claimant before getting the work done. Here, the Executive Engineer had already communicated his intention and asked the claimant to go ahead with the work without waiting for the sanction. Even in this case, the claimant had also made letter communication about their rate analysis with Chief Engineer but even the Chief Engineer did not stop the Executive Engineer from taking such step. Furthermore, in this case, looking to Cl. 32 of the Agreement, there is a provision to compensate contractor for extra work. Moreover, there is no dispute that pursuant to this letter dated 08/10/1990 by the Executive Engineer to the claimant, the claimant actually executed the work. This is reflected from the Annex. I attached to the respondent's letter dated 05/12/1995 Exh. 182,containing the termination of contract order. Even in R. A. Bill No. 119, the part payment for the Earthwork has been made to the claimant at Rs.1,02,11,742. 68p. The only dispute is about the rate made applicable by the respondent in making the part payment to the claimant. The stand taken by the respondent-SSNN Ltd in their Written statement in connection with this claim no. 5 has been reproduced above in this Award in para 52 and their stand is that whatever payment was made and whatever rate was made applicable was legal and valid. No other stand is taken. No reason is given as to how the rate made applicable by them was legal and valid. Last but not the least, it may be noted that as per the Annex. -I attached to the letter dated 05/12/1995 Ex. 182 regarding the termination of the contract, the earthwork done is shown to be 16 lacs CM, whereas in the R. A. Bill No.119, Ex. 188, the earthwork done is shown to be 1520371.60 CM. Still Page 8 of 20 Uploaded by C.M. JOSHI(HC01073) on Mon Jul 07 2025 Downloaded on : Mon Jul 07 21:29:12 IST 2025 NEUTRAL CITATION C/FA/845/2025 ORDER DATED: 30/06/2025 undefined however, the claimant did not make this claim no. 5 on the basis of the earthwork done at 16 lacs CM but at the rate earthwork is shown in the R. A. Bill No.119 at 1520371.60 CM. The total amount at the rate apply by the claimant comes to Rs. 13,22,72,329.20p but deducting Rs.1,02,11,742.68 p already paid by the respondent to the claimant, the net amount would come to Rs 12,20,60,586.52p. It may be noted that in the Statement of Claims, for Claim No.5 the claimant Recondo Ltd has claimed Rs.12,16,29,760/- (rounded off to Rs.12,16,30,000/-) and therefore, the claimant claimed Rs.12,16,30,000/- under the Claim No.5.
55. In light of the entire above discussions, the claimant- Recondo Ltd is held to be entitled to recover Rs.12,16,30,000/- from the respondents towards the Claim No.5."
6. A perusal of the discussion made by the Arbitrator considering the documentary evidences filed by the claimants clearly show that the claimants made correspondences as early as on 12.03.1990, 05.04.1990, 09.04.1990, 30.04.1990, 12.07.1990 and 16.07.1990 to draw the attention of the Executive Engineer, SSNL that as per the agreement, the earth required for embankment was to be borrowed from side borrow pits with a maximum lead of 100 Mtrs. and accordingly, the claimant had arranged machinery and equipments. However, since the respondent No.2 namely Executive Engineer had proposed to bring earth from village tanks (ponds) with leads varying from 0.5 Km. to 5.0 Km. certain information was sought for. The confirmation regarding acceptance of the quoted rates which were based on the quantity to be executed, condition of haul roads, resources available and to be specially arranged for execution of the work, was requested. It is noted in the award that in response to the said communications, the Executive Engineer by its letter dated 08.10.1990 had requested the petitioner to start Page 9 of 20 Uploaded by C.M. JOSHI(HC01073) on Mon Jul 07 2025 Downloaded on : Mon Jul 07 21:29:12 IST 2025 NEUTRAL CITATION C/FA/845/2025 ORDER DATED: 30/06/2025 undefined the work without waiting for finalization of cases forwarded to the higher authorities. The findings returned by the Arbitrator is that the earth work done by the claimant as shown in the letter dated 05.12.1995, Exh. 182, regarding termination of the contract though was 16 lakhs cubit meters (cm), whereas, the claimant is entitled for the claim as per the RA Bill No. 119 Exh.
188., where the work done was shown to be 15.20.371.06 cm.
7. Having reached at the above conclusion, the Arbitrator awarded a sum of Rs. 12,15,29,770/- rounded off to 12.16.30,000/- under claim No.5.
8. Taking note of the findings returned by the Arbitrator, all the arguments made to assail the award with respect to claim No.5 are found to be misconceived and untenable. Suffice it to note that what was due and payable and was quoted by the claimant in its communications sent in the year 1990, was the claim in the Statement of Claim, which has been duly awarded by the Arbitrator. On the submissions made by the learned counsel for the appellant to assail the aforesaid findings based on certain material brought on record before us, suffice it to say that within the limited scope of Section 37 of the Act, 1996, it is not permissible for us to reappreciate the evidence to reach at a conclusion other than what has been arrived at by the Arbitrator based on the evidence on record.
9. Before parting with this order, it may also be relevant to note that no such argument has been placed before the Court under Section 34 and the arguments with respect to the award Page 10 of 20 Uploaded by C.M. JOSHI(HC01073) on Mon Jul 07 2025 Downloaded on : Mon Jul 07 21:29:12 IST 2025 NEUTRAL CITATION C/FA/845/2025 ORDER DATED: 30/06/2025 undefined of claim No. 5 are the submissions made for the first time in this appeal under Section 37 of the Act, 1996. The grounds to challenge the arbitral award under Section 34 are all on merits of the case of the parties, which have been duly dealt with by the Court under Section 34. We, therefore, do not find any error in the decision of the Court under Section 34 in rejecting the application and affirming the award.
10. The Hon'ble Apex Court in Delhi Airport Metro Express Private Limited vs. Delhi Metro Rail Corporation Limited [(2022) 1 SCC 131], has laid down the contours of the Court's powers to review the arbitral awards in the following terms :-
"22. The 1996 Act was enacted to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards and also to define the law relating to conciliation and for matters connected therewith, by taking into account the United Nations Commission on International Trade Law ("UNCITRAL") Model Law on International Commercial Arbitration and the UNCITRAL Conciliation Rules. One of the principal objectives of the 1996 Act is to minimise the supervisory role of Courts in the arbitral process. With respect to Part I of the 1996 Act, Section 5 imposes a bar on intervention by a judicial authority except where provided for, notwithstanding anything contained in any other law for the time being in force. An application for setting aside an arbitral award can only be made in accordance with provisions of Section 34 of the 1996 Act.
23. Relevant provisions of Section 34 [as they were prior to the Arbitration and Conciliation (Amendment) Act, 2015] 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 sub-section (2) and sub-section (3).
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(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.
Explanation.--Without prejudice to the generality of sub- clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section
81."
24. An amendment was made to Section 34 of the 1996 Act by the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter "the 2015 Amendment Act"). A perusal of the Statement of Objects and Reasons of the 2015 Amendment Act would disclose that the amendment to the 1996 Act became necessary in view of the interpretation of the Page 12 of 20 Uploaded by C.M. JOSHI(HC01073) on Mon Jul 07 2025 Downloaded on : Mon Jul 07 21:29:12 IST 2025 NEUTRAL CITATION C/FA/845/2025 ORDER DATED: 30/06/2025 undefined provisions of the 1996 Act by Courts in certain cases which had resulted in delay of disposal of arbitration proceedings and increase in interference by Courts in arbitration matters, which had the tendency to defeat the object of the 1996 Act. Initially, the matter was referred to the Law Commission of India to review the shortcomings in the 1996 Act in detail. The Law Commission of India submitted its 176th Report, recommending various amendments to the 1996 Act. However, the Justice Saraf Committee on Arbitration constituted by the Government, was of the view that the proposed amendments gave room for substantial intervention by the court and were also contentious. Thereafter, on reference, the Law Commission undertook a comprehensive study of the amendments proposed by the Government, keeping in mind the views of the Justice Saraf Committee and other stakeholders. The 246th Report of the Law Commission was submitted on 5-8-2014. Acting on the recommendations made by the Law Commission in its 246th Report, amendments by way of the 2015 Amendment Act were made to several provisions of the 1996 Act, including Section 34.
25. The amended Section 34 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 Page 13 of 20 Uploaded by C.M. JOSHI(HC01073) on Mon Jul 07 2025 Downloaded on : Mon Jul 07 21:29:12 IST 2025 NEUTRAL CITATION C/FA/845/2025 ORDER DATED: 30/06/2025 undefined
(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 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."
26. A cumulative reading of the UNCITRAL Model Law and Rules, the legislative intent with which the 1996 Act is made, Section 5 and Section 34 of the 1996 Act would make it clear that judicial interference with the arbitral awards is limited to the grounds in Section 34. While deciding applications filed under Section 34 of the Act, Courts are mandated to strictly act in accordance with and within the confines of Section 34, refraining from appreciation or reappreciation of matters of fact as well as law. (See Uttarakhand Purv SainikKalyan Nigam Ltd. v. Northern Coal Field Ltd. [Uttarakhand Purv Sainik Page 14 of 20 Uploaded by C.M. JOSHI(HC01073) on Mon Jul 07 2025 Downloaded on : Mon Jul 07 21:29:12 IST 2025 NEUTRAL CITATION C/FA/845/2025 ORDER DATED: 30/06/2025 undefined Kalyan Nigam Ltd. v. Northern Coal Field Ltd., (2020) 2 SCC 455 : (2020) 1 SCC (Civ) 570] , Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd. [Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75] and Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran [Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5 SCC 306] .)
27. For a better understanding of the role ascribed to Courts in reviewing arbitral awards while considering applications filed under Section 34 of the 1996 Act, it would be relevant to refer to a judgment of this Court in Ssangyong Engg. & Construction Co. Ltd. v. NHAI [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] wherein R.F. Nariman, J. has in clear terms delineated the limited area for judicial interference, taking into account the amendments brought about by the 2015 Amendment Act. The relevant passages of the judgment in Ssangyong [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] are noted as under : (SCC pp. 169-71, paras 34-41) "34. What is clear, therefore, is that the expression "public policy of India", whether contained in Section 34 or in Section 48, would now mean the "fundamental policy of Indian law" as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to "Renusagar" understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 :
(2014) 5 SCC (Civ) 12] , as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] .Page 15 of 20 Uploaded by C.M. JOSHI(HC01073) on Mon Jul 07 2025 Downloaded on : Mon Jul 07 21:29:12 IST 2025
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35. It is important to notice that the ground for interference insofar as it concerns "interest of India" has since been deleted, and therefore, no longer obtains. Equally, 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". This again would be in line with paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] . Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] , as understood in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , and paras 28 and 29 in particular, is now done away with.
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 Page 16 of 20 Uploaded by C.M. JOSHI(HC01073) on Mon Jul 07 2025 Downloaded on : Mon Jul 07 21:29:12 IST 2025 NEUTRAL CITATION C/FA/845/2025 ORDER DATED: 30/06/2025 undefined 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 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."
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.
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This approach would lead to corrosion of the object of the 1996 Act and the endeavours 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.
29. Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression "patent illegality". Likewise, erroneous application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression "patent illegality". What is prohibited is for Courts to reappreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as Courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression "patent illegality".
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 Page 18 of 20 Uploaded by C.M. JOSHI(HC01073) on Mon Jul 07 2025 Downloaded on : Mon Jul 07 21:29:12 IST 2025 NEUTRAL CITATION C/FA/845/2025 ORDER DATED: 30/06/2025 undefined 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 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]"
11. The aforesaid view has once again been affirmed in the judgment in Curative Petition (C) Nos. 1158-1159 of 2021 in the case of Delhi Metro Rail Corporation Ltd. v/s. Delhi Airport Metro Express Pvt. Ltd. (2024 INSC 292). We are of the opinion that the appellant before us has failed to place its case within the narrow compass of the law as demarcated by the Hon'ble Apex Court in the aforesaid decisions, which can be called for examination under Section 37 of the Act.
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12. With the above, the appeals stand dismissed. No order as to costs. The Civil Applications stand disposed of.
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