Orissa High Court
Rasmi Ranjan Mohapatra vs State Of Odisha & Ors on 18 July, 2025
Author: S.K. Panigrahi
Bench: S.K. Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 21-Jul-2025 16:59:40
IN THE HIGH COURT OF ORISSA AT CUTTACK
ARBA No.21 of 2022
(From the judgment dated 22.3.2022 passed by the learned District
Judge, Puri in Arbitration Misc. Case No.134 of 2016, arising out of
award dated 8.3.2016 passed by the Ld. Sole Arbitrator in Arbitration
Proceeding No.5 of 2012)
Rasmi Ranjan Mohapatra .... Appellant(s)
-versus-
State of Odisha & Ors. .... Respondent(s)
Advocates appeared in the case through Hybrid Mode:
For Appellant (s) : Mr. Jatindra Kumar Mohapatra, Adv.
For Respondent (s) : Mr. Debasish Nayak, AGA
CORAM:
DR. JUSTICE S.K. PANIGRAHI
DATE OF HEARING:-08.05.2025
DATE OF JUDGMENT:-18.07.2025
Dr. S.K. Panigrahi, J.
1. This Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "A&C Act") has been filed against the judgment dated 22.3.2022 passed by the learned District Judge, Puri in Arbitration Misc. Case No.134 of 2016, arising out of award dated 8.3.2016 passed by the Ld. Sole Arbitrator in Arbitration Proceeding No.5 of 2012.
Page 1 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 I. FACTUAL MATRIX OF THE CASE:
2. For the sake of brevity, the facts involved in the appeals are pithily discussed herein:
a. In pursuance to the tender call notice invited by the Respondents for the work "Construction of Multi-Purpose School-Cum-Cyclone Building at Ramachandi Sahi Girls Nodal U.P. School and at Rebana Nuagaon Nodal U.P. School", the Appellant submitted its bid.
b. The bid submitted by the Appellant was the lowest valid bid for contract value of Rs. 33,45,799/- and therefore, the tender was awarded in his favour.
c. Accordingly, agreement for work was executed on 16.11.2004 and the work order was subsequently issued on 18.11.2004. As per the terms of the agreement, the work was to be completed by 17.4.2005.
d. However, work did not commence in its true spirit due to certain exigent circumstances which led to the Respondents terminating the agreement on 13.10.2006.
e. The order of termination intimated to the Appellant that it could make any claims, it had qua the work, which the Appellant did. However, disputes arose pertaining to the quantum of the claims raised by the Appellant.
f. Thereafter, the Appellant approached this Court u/s 11(6) of the A&C Act in ARBP No. 9 of 2010 for appointment of an Page 2 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 arbitrator. Accordingly, vide order dated 5.10.2022 in ARBP No.
9 of 2010, this Court appointed Sri. S.F. Ahmed, Retired District Judge as the Sole Arbitrator for adjudication of the disputes between the Parties.
g. Accordingly, the Ld. Sole Arbitrator after hearing both sides and considering the documents as well as the oral evidences of the Parties was pleased to pass award dated 8.3.2016. In the said award, the Ld. Sole Arbitrator has been pleased to allow 6 of the 12 claims resulting in an amount of Rs. 5,97,084/- along with pre-reference and pendente lite interest @ 10% and future interest till the date of actual payment.
h. Aggrieved, the present Respondents preferred an application u/s 34 of the A&C Act before the Court of the Ld. District Judge, Puri. The Ld. District Judge vide the impugned order dated 22.3.2022 was pleased to uphold the findings of the Ld. Sole Arbitrator but has modified the amount of the award, resulting in the present Petition.
1. Now, the facts leading to the instant Appeals have been laid down, this Court shall endeavour to summarise the contentions of the Parties and the broad grounds that have been raised to seek the exercise of this Court's limited jurisdiction available under S. 37 of the A&C Act.
II. APPELLANT'S SUBMISSIONS:
3. The counsel for the Claimant assails the judgment of the Ld. District Judge mainly on the ground that though the Ld. District Judge has Page 3 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 held that the non-execution of the contract work was due to the fault of the Respondents and has acknowledged that the Court while exercising power u/s 34 cannot act as an appellate authority, the Ld. District Judge has still proceeded to modify the award amount on the sole ground that the same seem to be on the higher side.
4. Further, it is submitted that barring the few limited exceptions carved out by the Apex Court, Courts in exercise of their powers u/s 34 and 37 of the A&C Act cannot modify the award. Therefore, the impugned order is bad in law and liable to be set aside.
III. RESPONDENT'S SUBMISSIONS:
5. Per contra, learned counsel for the Respondent's main thrust of the argument is that the Appellant has violated the terms and conditions of the agreement which he had entered into and thereby he is not entitled to get any damage/compensation for his own wrong.
6. It is further argued that the Ld. Sole Arbitrator failed to appreciate the averments made in the claim application which were not tallying with the evidence affidavit but awarded compensation in an arbitrary manner and the same ought to have been interfered with.
7. 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
8. Having heard the parties and perused the materials available on record, this Court has identified the following solitary issue to be determined:Page 4 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 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?
9. 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 Page 5 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v.) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1.--For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-
(i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.--For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
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Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 (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.
(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;Page 7 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40
(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."
10. On a careful perusal of Section 34 of the Act, it is clear that an arbitral award can only be set aside by moving an application on grounds mentioned under sub-section (2) and sub-section (3) of Section 34 of the Act. An award can be interfered with where it 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 of the fundamental policy of Indian law, or if it is in conflict with basic notions of morality and justice.
11. 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 determine whether the award is good or bad. Even an award that may not be reasonable or is non-speaking to some extent cannot ordinarily be interfered with by the Courts.
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Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40
12. It is also a well settled proposition in law that the jurisdiction of the Court under Section 34 of the Act is neither in the nature of an appellate remedy or akin to the power of revision. It is also well ordained in law that an award cannot be challenged on merits except on the limited grounds that have been spelt out in sub-sections (2), (2- A) and (3) of Section 34 of the Act, by way of filing an appropriate application.
13. Having regard to the contentions urged and the issues raised, it shall also be apposite to take note of the principles enunciated by the Supreme Court in some of the relevant decisions cited by the parties on the scope of challenge to an arbitral award under Section 34 and the scope of appeal under Section 37 of the 1996 Act.
14. In MMTC Ltd. v. Vedanta Ltd.1, the Supreme Court took note of various decisions including that in Associate Builders2 and exposited on 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 1 (2019) 4 SCC 163 2 (2015) 3 SCC 49 Page 9 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 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
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. Page 10 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40
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."
15. 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 :
"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 2021 SCC OnLine SC 508 3 Page 11 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 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) '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."
16. In Delhi Airport Metro Express (P) Ltd. v. DMRC4 , the Supreme Court again surveyed the case law and explained the contours of the Courts' power to review the arbitral awards. Therein, the Supreme Court not (2022) 1 SCC 131 4 Page 12 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 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.
17. 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 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."
(2022) 4 SCC 463 5 Page 13 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40
18. 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.
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 (2022) 3 SCC 237 6 Page 14 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 SCC OnLine P&H 3233] passed by the High Court is hence not sustainable."
19. 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 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."
20. Section 34 of the Arbitration and Conciliation Act, 1996, governs the setting aside of awards arising from arbitrations seated in India. This provision was held to not provide any powers for the setting aside court to vary or modify portions of the award. This was the legal position in vogue under Indian law, until the Supreme Court's reinterpretation of Section 34, by its judgment in Gayatri (2022) 4 SCC 116 7 Page 15 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 Balasamy v. ISG Novasoft Technologies Ltd. (Balasamy)8.In the decision by 5-Judge Bench (by a majority of 4:1) Section 34 has been "reinterpreted to include a limited power to modify awards". The Supreme Court has also explained the limitations on such power, while also touching upon several allied issues, such as the severability of awards and the specific power to modify the interest awarded by a tribunal.
21. In a previous decision by a two-Judge Bench of the Supreme Court in NHAI v. M. Hakeem (Hakeem)9 the Apex Court declared that no power to modify an award could be derived from Section 34, holding as follows:
"48. Quite obviously if one were to include the power to modify an award in Section 34, one would be crossing the Lakshman Rekha and doing what, according to the justice of a case, ought to be done. In interpreting a statutory provision, a Judge must put himself in the shoes of Parliament and then ask whether Parliament intended this result. Parliament very clearly intended that no power of modification of an award exists in Section 34 of the Arbitration and Conciliation Act, 1996. It is only for Parliament to amend the aforesaid provision in the light of the experience of the courts in the working of the Arbitration and Conciliation Act, 1996 and bring it in line with other legislations the world over."
22. The Supreme Court in Hakeem (supra) also reconciled earlier decisions wherein awards were modified with the above statement of law -- 8 2025 SCC OnLine SC 986 9 (2021) 9 SCC 1 Page 16 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 holding that those decisions were rendered under the extraordinary jurisdiction of the Supreme Court under Article 142of the Constitution of India.
23. Subsequently, several judgments further clarified that even despite the lack of power to modify an award, a setting aside court could "partially set aside" severable portions of an award. This would not amount to modification but merely setting aside a divisible part of an award (to the extent such division is possible). As explained by the Delhi High Court in NHAI v. Trichy Thanjavur Expressway Ltd.10:
"43. ... The expression "modify" would clearly mean a variation or modulation of the ultimate relief that may be accorded by an Arbitral Tribunal (AT). However, when a Section 34 Court were to consider exercising a power to partially set aside, it would clearly not amount to a modification or variation of the award. It would be confined to an offending part of the award coming to be annulled and set aside. It is this distinction between a modification of an award and its partial setting aside that must be borne in mind."
24. The Supreme Court in Balasamy (supra) while recognising that the Act "does not expressly empower courts to modify or vary an arbitral award" has clarified that such power exists, albeit in a limited context, as an inherent power of courts.
25. Interestingly, although not a dispositive part of the decision, the approach adopted by the majority of Judges is reflected in the question posed by them as: "to what extent can we weave the principles of 2023 SCC OnLine Del 583 10 Page 17 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 equity and justice while not offending the jurisdictional fabric of Section 34?" The majority in Balasamy (supra) thereafter came to the following conclusions in relation to the question of modification.
a. Partial setting aside of severable portions of an award The majority held that an award may be partially set aside (to the extent that the invalid portion of the award is severable from the remainder of the award). The Court reasoned that:
"33. ... The authority to sever the "invalid" portion of an arbitral award from the "valid" portion, while remaining within the narrow confines of Section 34, is inherent in the court's jurisdiction when setting aside an award."
This ruling reaffirms several decisions of High Courts wherein awards have been partially set aside, despite the absence of powers to modify an award.
b. Modification in principle Squarely departing from the view in Hakeem (supra), the majority also found that a limited power of modification is inherent within Section
34. The majority in Balasamy (supra) arrived at this conclusion on two bases:
First, that Section 34 is merely silent on and does not expressly prohibit modification. This is evident from the majority ruling that:
"43. ... Section 34 does not restrict the range of reliefs that the court can grant, while remaining within the contours of the statute. A different relief can be fashioned as long as it Page 18 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 does not violate the guardrails of the power provided under Section 34....
44. ... It will be wrong to argue that silence in the Arbitration and Conciliation Act, 1996, as projected, should be read as a complete prohibition."
Second, that the policy of arbitration being an expeditious mechanism would be undermined if the setting aside court was forced to only set aside the award, requiring a fresh arbitration to be commenced, followed by consequential litigation. As explained by the majority:
"42. Given this background, if we were to decide that courts can only set aside and not modify awards, then the parties would be compelled to undergo an extra round of arbitration, ... In effect, this interpretation would force the parties into a new arbitration process merely to affirm a decision that could easily be arrived at by the Court. This would render the arbitration process more cumbersome than even traditional litigation."
c. Extent of modification permissible Interestingly, the majority, when elaborating on the extent of modification which is permissible under Section 34, appears to have restricted such powers to issues of procedural errors of the kind contemplated under Section 33 (i.e. those involving computational or typographical errors).
In its analysis, the majority decision affirmed that:
"49. ... a court reviewing an award under Section 34 possesses the authority to rectify computational, clerical, or typographical errors, as well as other manifest errors, Page 19 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 provided that such modification does not necessitate a merits-based evaluation. There are certain powers inherent to the Court, even when not explicitly granted by the legislature."
The words "as well as other manifest errors" could have opened a debate on the extent of modification powers recognised by the Supreme Court. However, perhaps intentionally, these words do not find a mention in the dispositive part of the decision in Balasamy (supra), wherein, in its ultimate conclusions, the Court limits the powers of modification to "correcting any clerical, computational or typographical errors which appear erroneous on the face of the record".
Furthermore, the intent to limit the use of such modification powers to patent errors (not involving reappreciation of merits) is evident from :
(a) the Court's ruling that the limited modification power recognised by it does not entail a review on merits; and (b) the Court setting out at an extremely high threshold for applying such powers, holding that the appropriateness of the modification should not be "debatable" or in "doubt". Differentiating between a "procedural review" and a "review on merits", the majority holds that:
"54. ... inadvertent errors, including typographical and clerical errors can be modified by the Court in an application under Section 34. However, such a power must not be conflated with the appellate jurisdiction of a higher court or the power to review a judgment of a lower court. The key distinction between Sections 33 and 34 lies in the fact that, under Section 34, the Court must have no uncertainty or doubt when modifying an award. If the Page 20 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 modification is debatable or a doubt arises regarding its appropriateness i.e. if the error is not apparent on the face of the record, the court will be left unable to proceed, its hands bound by the uncertainty."
By reducing the power of modification to typographical or similar errors and increasing the threshold for its application to one of "no uncertainty or doubt", "non-debatable", the majority has, while granting recognition to such power, also leashed it considerably.
d. Interest The power of modification in relation to interest (both forming part of an award, and interest on the awarded sums) has also been clarified by the Supreme Court. First, in relation to pendente lite interest (i.e. interest for the period spent during the arbitration) the majority appears to have held that there can be no power of modification exercised by the setting aside court. Since the correctness of the rate of pendente lite interest would entail a review on merits, this would therefore not be strictly subject to a "modification" in the limited extent recognised by the Court. Therefore, the majority reasoned that in cases where the pendente lite interest has been awarded in violation of Section 31(7)(a) (for example, where the rate of interest awarded is contrary to a contractual provision) -- this could only entail either a setting aside or a remand, by asking the Tribunal to redetermine the rate of interest under Section 34(4) of the Arbitration and Conciliation Act, 1996.
Page 21 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 However, in relation to "post-award interest" in terms of Section 31(7)(b)of the Arbitration and Conciliation Act, 1996, the Court reaffirmed that it would have the power to modify the interest "where the facts justify such modification". While at first glance, this appears to depart from the limitations set by the majority on the power of modification -- such power in relation to post-award interest appears to have been recognised on the reasoning that:
"76. ... Arbitral Tribunals, when determining post-award interest, cannot foresee future issues that may arise. Post- award interest is inherently future-oriented and depends on facts and circumstances that unfold after the award is issued. ... Therefore, it is appropriate for Section 34 Court to have the authority to intervene and modify the post- award interest if the facts and circumstances justify such a change."
In this context, therefore, there is no "reappreciation" of facts considered by the Tribunal, but rather a power of modification of the post-award based on new facts that may emerge.
26. To summarise, the majority in Balasamy (supra)asserting that "the setting aside of an award, should be read as inherently including a limited power to modify the award" held that Court has power to modify arbitral award under Sections 34 and 37 in the following manner : (i) when the award is severable, allowing the "invalid" portion to be separated from the "valid" portion; (ii) for correcting any clerical, computational or typographical errors; (iii) to declare or Page 22 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 modify post-award interest; and (iv) to apply Article 14220 of the Constitution where it is required and necessary to bring the litigation or dispute to an end.
27. Keeping in view the aforementioned principles enunciated by the Supreme Court with regard to the limited scope of interference in an arbitral award by a Court in the exercise of its jurisdiction under Section 34 of the Act, which is all the more circumscribed in an appeal under Section 37, this Court may examine the rival submissions of the parties in relation to the matters dealt with by the High Court.
28. Prima facie, a perusal of the Award unequivocally demonstrates that the Arbitrator relied upon written submissions, documentary evidence, and the statements of the parties involved in the transaction to determine and quantify the claims.
29. However, the Ld. District Judge after adverting to the settled position of law as enumerated by the Apex Court in PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust (supra) has gone on to conclude the matter in the following manner:
"7. With the touchstone of the above established principle, if the case in hand is to be looked into, it can be safely concluded that there is no scope for this Court to re- appreciate the evidence on record for the purpose of deciding the appeal in terms of Sec.34 of Arbitration and Conciliation Act, 1996. The work in question has not been completed within the stipulated date i.e. 17.04.2005admits no doubt. There are enormous amount of evidence available on the record that due to the failure of the appellants to give lay out at the site of construction, drawing and designing to start execution of work which resulted in non-completion of the Page 23 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 work within the fixed period. The learned Sole Arbitrator has discussed the evidence i.e. oral as well as documentary in great detail, attributing the fault to the petitioners- appellants for failure of completing the project work. The stand of the petitioners-appellants is that after lapse of the agreed period i.e. 17.04.2005, there exists no contractual obligation between the parties and hence the question of determining the compensation or damages does not arise at all.
The evidence on record is crystal clear even after expiry of the stipulated period i.e. 17.4.2005, there have been a lot of correspondences relating to the existence of contractual obligation in between the parties. Therefore, it cannot be said that after the date i.e. 17.04.2005, the contractual relationship had come to an end. Only the question of compensation awarded to the claimant is to be reassessed in this appeal. The learned Arbitrator has awarded the claimant a sum of Rs.2,67,584/- as a loss of profit on the basis of the anticipation that the claimant would have earned 8% of the contract value if he was allowed to complete the work. In my opinion such a huge amount in favour of the claimant appears to be unjust, unreasonable and unwarranted. The same should be confined within Rs.1,00,000/- (Rupees one lakh) as a lump sum amount and not more than that. Therefore, this Appellate Court modified the order on heading "Loss of Profit" fromRs.2,67,584/- to Rs.1,00,000/-. Similarly on the ground of "loss of construction materials" a compensation to the tune of Rs. 37,500/- has been awarded to the O.P.-claimant by giving observation that the claimant has stacked the construction materials for construction purpose but the same could not be utilized for this project due to termination of the contract. It is the stand of the appellants that the S.T.C had visited the site during which he could not find any construction materials nor temporary tent and office proposed site. In view of the aforesaid evidence on record, there is no justification to award Rs.37,500/- to the O.P.- claimant on Page 24 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 heading "loss of construction materials". The award of Rs.54,000/- on heading "ward and watch" is unwarranted in as much as the S.T.C found the absence of construction materials and office over the proposed site for which granting of compensation on the heading "ward and watch"
is unjustified. So far as award to the tune of Rs.6,000/- on the heading "tender papers" is concerned, this being a purchased stamp paper on record which form part of the contract, granting of such amount does not require any sort of interference. The learned Arbitrator has awarded Rs.92,000/- on heading "hire charges for concrete mixture machine" by relying on the documentary evidence available on the record. On conjoint reading of the evidence on record and the observation made above in allowing/disallowing the other heads, this Court is not inclined to grant such expenditure to the O.P.-claimant. When the construction materials and site office were not in existence, the question of keeping the mixture machine over the site does not arise a tall. Therefore, there is no justification in granting such damage in favour of the O.P-claimant. With regard granting of damage of Rs.1,40,000/- on the heading "cost of test piling", this Appellate Court is in conformity with the observation of the learned Arbitrator but the amount of such compensation has become high and disproportionate to the quantum of construction. After assessing the evidence available on record and other facts and circumstances of the case, this Court is in a considered opinion to reduce the same to the tune of Rs.1,00,000/- (rupees one lakh). ..."
(emphasis is ours)
30. The learned District Judge, under the guise of deciding an appeal under Section 34, has impermissibly re-appreciated the entire evidence and substituted his own assessment of quantum for that of the Arbitrator. Section 34 allows the Court to set aside an arbitral award only on limited grounds such as patent illegality, fraud, or breach of Page 25 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 natural justice; it does not empower the Court to reassess evidence or re-calculate the amount awarded merely because it appears excessive or unreasonable in its subjective view. By reducing amounts awarded under heads like "loss of profit", "cost of test piling", and "loss of construction materials" based solely on perceived proportionality, the District Judge has exceeded the statutory limits. This approach undermines the finality and binding nature of arbitral awards envisaged under the Act and effectively converts a supervisory jurisdiction into an appellate re-examination, which the law explicitly prohibits.
31. It is well settled that Section 34 does not confer appellate powers to modify an award by reassessing the adequacy of evidence or substituting the Court's own determination for that of the Arbitrator. The learned District Judge's detailed recalculation and modification of amounts awarded under multiple heads clearly reflect a merit-based review that is beyond the limited scope of interference under the Act. The role of the Court under Section 34 is not to sit in appeal or second- guess the Arbitrator's factual conclusions, but only to test the award against specific procedural and jurisdictional grounds. By assuming the role of an appellate body and conducting a head-to-head reassessment of quantum, the District Judge has overstepped the jurisdiction conferred and violated the principle of minimal judicial intervention that underpins the Arbitration and Conciliation Act, 1996.
32. The learned District Judge's order effectively rewrites the arbitral award by selectively reducing compensation under various heads, Page 26 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 purely because he considered the amounts excessive or not supported by his own evaluation of the evidence. Such intervention directly contravenes the statutory scheme under Section 34, which bars Courts from re-evaluating the merits or quantum of an award unless it is shown that the award is patently illegal, wholly unsupported by evidence, or contrary to the terms of the contract. The District Judge did not record any finding of perversity or patent illegality but proceeded as though exercising full appellate jurisdiction. This revaluation transforms the narrow supervisory power into a broad merits review, negating party autonomy and the finality of arbitral decisions, and cannot be legally sustained.
33. The reasoning employed by the learned District Judge -- that certain awarded amounts "appear to be unjust, unreasonable and unwarranted" or "high and disproportionate" -- highlights a classic case of subjective reassessment, not judicial review. Under Section 34, mere disagreement with the Arbitrator's quantification or methodology is not a ground to modify the award; the Court must find a clear violation of law or procedure. Here, the Arbitrator had based the award on oral and documentary evidence and provided detailed reasons. The District Judge's interference, based on what he felt would have been a fairer sum, shows a substitution of opinion rather than scrutiny for illegality. This approach usurps the function of the Arbitrator and conflicts with the legislative intent to insulate arbitral awards from full merits-based review by Courts. Page 27 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40
34. The Supreme Court in Balasamy (supra), clarified that while courts have a limited inherent power to correct clerical, computational, or typographical errors, this does not extend to reassessing quantum or substituting findings on merits. Modification must be confined to non- debatable, patent errors apparent on the face of the record. The District Judge's order, which recasts quantum under each head on a subjective view of what is "just," goes far beyond this narrow power.
35. By dissecting the award head by head and reducing compensation solely because he/she believed lower sums were more appropriate, the learned District Judge has acted outside the jurisdiction contemplated by Section 34. The Arbitrator, as the sole judge of facts and evidence, had already exercised discretion in assessing damages based on the record. The District Judge did not identify perversity, fraud, or breach of natural justice -- the only grounds that could justify intervention. Instead, he merely replaced the Arbitrator's factual conclusions with his own assessment of what would be "reasonable." Such modification of quantum, absent statutory grounds, amounts to re-adjudication of the dispute itself and defeats the very object of arbitration as a speedy and final alternative dispute resolution mechanism. Consequently, the order of modification is unsustainable in law.
36. A perusal of the arbitral award would elucidate that the sole Arbitrator has considered the facts of the case, the contentions of both the parties and other documentary and oral evidence on record to take a decision. Now, even if one might feel that the evidence could be clearer and its quality could be higher to buttress the award, however, Page 28 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 the same does not by itself warrant interference by this Court given the restrictive scope of this Court's powers u/s 37 of the A&C Act.
37. What the Arbitral Tribunal has held in the Award has exclusively been its view on the evidence on record and the relevant surrounding facts/factors. The view so taken by the Arbitral Tribunal cannot be said to be wholly perverse or suffering from patent illegality so as to be interfered with. Needless to observe that even if two views are possible, the Court cannot substitute its own view with that of the Arbitral Tribunal.
VI. CONCLUSION:
38. In light of the discussion above, keeping the settled principles of law in mind and for the reasons given above, this Court is of the considered view that judgment dated 22.3.2022 passed by the learned District Judge, Puri in Arbitration Misc. Case No. 134 of 2016 arising out of award dated 8.3.2016 passed by the Ld. Sole Arbitrator in Arbitration Proceeding No. 5 of 2012 is legally untenable and is therefore, set aside.
39. The award dated 8.3.2016 passed by the Ld. Sole Arbitrator in Arbitration Proceeding No. 5 of 2012 is reinstated in its entirety.
40. ARBA No. 21 of 2022 is disposed on the abovementioned terms. No order as to costs.
41. Interim order, if any, passed earlier stands vacated.
(Dr.S.K. Panigrahi) Judge Orissa High Court, Cuttack, Dated the 18th July, 2025/ Page 29 of 29