2025 INSC 574

1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5383 OF 2024

CONSOLIDATED CONSTRUCTION

CONSORTIUM LIMITED APPELLANT(S)

VERSUS

SOFTWARE TECHNOLOGY PARKS

OF INDIA RESPONDENT(S)

J U D G M E N T

UJJAL BHUYAN, J.

This appeal by special leave is directed against the

judgment and order dated 08.08.2019 passed by the High

Court of Judicature at Madras in O.S.A. No. 157 of 2019.

2. Be it stated that by the judgment and order dated

08.08.2019 (‘impugned judgment’ hereinafter), Division Bench

of the High Court of Judicature at Madras (briefly ‘the High

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Court’ hereinafter) allowed the appeal of the respondent filed

under Section 37 of the Arbitration and Conciliation Act, 1996

(briefly ‘the 1996 Act’ hereinafter) by setting aside the judgment

and order dated 02.01.2019 passed by the learned Single Judge

of the High Court in O.P. No. 433 of 2010 which was filed by

the appellant under Section 34 of the 1996 Act setting aside the

arbitral award dated 05.01.2010.

3. Relevant facts may be briefly noted.

4. Software Technology Parks of India i.e. the

respondent following a tender process had awarded a contract

to M/s Consolidated Construction Consortium Ltd. i.e. the

appellant for construction of office building, incubation centre

etc. of the respondent. As per the Letter of Intent dated

09.03.2006 issued by the respondent, the total cost of the

project was Rs. 16,48,69,970.00. The scheduled date for

completion of construction was 15.01.2007. Appellant could

complete the construction only by 30.11.2007. There was thus

a delay of about 10 months.

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4.1. Appellant after handing over the project site to the

respondent claimed a sum of Rs. 1,40,12,786.00 including

retention money and interest thereon. However, because of the

delay in completion, respondent levied and deducted liquidated

damages to the tune of Rs. 82,43,499.00 by invoking clause 26

of the contract agreement entered into between the parties.

Respondent also made other deductions. After such deductions,

balance amount of Rs. 3,70,992.00 was paid to the appellant

by the respondent.

4.2. Aggrieved appellant invoked the arbitration clause of

the contract agreement and initiated arbitral proceedings

challenging deduction of liquidated damages by the respondent

and also lodged other claims. Respondent also lodged counter

claims.

4.3. Learned arbitrator vide the award dated 10.05.2010

upheld the deduction of liquidated damages by the respondent.

That apart, learned arbitrator dismissed the claims and counter

claims of the parties. Learned arbitrator held that he did not

find any of the claims or counter claims to have been

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established and, therefore, declared the award as nil against all

the claims and counter claims.

5. Appellant filed a petition before the High Court under

Section 34 of the 1996 Act to set aside the award which was

registered as Original Petition (O.P.) No. 433 of 2010. A learned

Single Judge of the High Court vide the judgment and order

dated 02.01.2019 held that there was extension of the work

period. Appellant had completed the work during the extended

period of time. Therefore, deduction of liquidated damages was

not justified. Consequently, the arbitral award dated

10.05.2010 was set aside.

6. Aggrieved by the aforesaid judgment and order dated

02.01.2019, respondent preferred an appeal before the High

Court under Section 37 of the 1996 Act which was registered

as O.S.A. No. 157 of 2019. A Division Bench of the High Court

vide the impugned judgment and order dated 08.08.2019

opined that learned Single Judge was not justified in setting

aside the award. The award was set aside purely on

assumptions and surmises. Grounds on which the award was

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set aside were beyond the scope of Section 34 of the 1996 Act.

Accordingly, the judgment and order of the learned Single

Judge dated 02.01.2019 was set aside, thereby allowing the

appeal of the respondent.

7. Aggrieved thereby appellant had filed the related

special leave petition on which notice was issued on 05.02.2021.

When the matter was heard on 23.04.2024, leave was granted.

8. Learned counsel for the appellant submits that

Division Bench of the High Court was not at all justified in

exercising power under Section 37 of the 1996 Act by reversing

the decision of the learned Single Judge passed under Section

34 of the 1996 Act. He submits that scope of interference under

Section 37 is extremely limited and, therefore, the Division

Bench committed a manifest error in setting aside the order

passed under Section 34 of the 1996 Act. In the process, the

Division Bench committed a further error by restoring the

award which had upheld deduction of liquidated damages by

the respondent.

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8.1. Learned Single Judge had rightly exercised power

within the broad parameters of Section 34 of the 1996 Act while

setting aside the award in question. It is the Division Bench

which acted like an appellate court beyond the scope of Section

37 of the 1996 Act while setting aside the order passed under

Section 34 of the 1996 Act and restoring the award.

8.2. Learned counsel submits that the respondent had

extended the time for completion of the contractual work.

Appellant had completed the construction within the extended

period. Therefore, there was no delay in the contractual

performance. Extension of time and levy of liquidated damages

cannot go hand-in-hand. In the circumstances, respondent was

not justified in deducting liquidated damages from the

contractual dues of the appellant.

8.3. He submits that the instant contract between the

appellant and the respondent was a contract relating to

construction. In such a contract, time is never of the essence.

Such a contract is governed by the principles laid down in

Sections 55, 73 and 74 of the Indian Contract Act, 1872. In any

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view of the matter, the employer would be entitled to liquidated

damages to compensate for the delay provided the delay had

caused loss or damage to the employer. No such deduction can

be made if the delay does not cause any loss or damage.

8.4. Division Bench had ignored the letter dated

26.09.2008 issued by the respondent to the appellant extending

the time to complete the contract upto 30.11.2007. This letter

of extension was written pursuant to the application of the

appellant dated 14.12.2007 seeking such extension. Thus,

appellant had completed the work within the extended time

granted by the respondent. Therefore, there was no delay in

executing the contract. Further, no loss ensued to the

respondent which would justify any deduction on account of

liquidated damages.

8.5. That being the position, there was no justification for

invoking clause 26 of the contract agreement by the respondent.

8.6. Learned counsel submits that learned Single Judge

had rightly noted that appellant could not complete the contract

work within the initial time frame because of reasons which

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were beyond its control. When the respondent had extended the

time frame, it was obvious that the delay could not be attributed

to the appellant. Extension of time to complete the contract

does not imply a delay in execution. No loss was suffered by the

respondent.

8.7. Learned counsel submits that when the respondent

recognized the difficulties faced by the appellant in executing

the contract it extended the time limit for completion of the

contract till 30.06.2007. When the appellant was still unable to

complete the contract by 30.06.2007, respondent had allowed

the appellant to carry on with the work and to complete the

contract by 30.11.2007 which was accepted by the respondent,

of course, reserving its right to levy liquidated damages.

Learned counsel further submits that on the one hand

respondent had allowed the appellant extended time to

complete the construction work, but on the other hand levied

liquidated damages on the appellant by invoking clause 26 of

the contract agreement. However, no advance notice was issued

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to the appellant indicating any intention on the part of the

respondent to levy liquidated damages.

8.8. Lastly, learned counsel submits that in any view of

the matter, the impugned order is wholly unsustainable in law

as well as on facts and, is, thus liable to be appropriately

interfered with.

9. On the other hand, learned counsel for the

respondent submits that liquidated damages were rightly levied

by the respondent. Such liquidated damages are in conformity

with Section 55 of the Indian Contract Act, 1872 (briefly ‘the

Contract Act’ hereinafter). Respondent was presented with such

a situation by the appellant that it had no other option but to

grant extension of time on account of appellant’s admitted

inability to complete the work within the stipulated time. In the

review meeting held on 18.12.2006, just twenty eight days

before the stipulated date for completion of the work i.e.

15.01.2007, appellant expressed its inability to complete the

work within the stipulated date. Respondent was left with no

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option other than to fix a revised date for completion of the work

and grant extension of time.

9.1. Pursuant to the review meeting dated 18.12.2006,

respondent vide letter dated 12.01.2007 had granted the first

extension of time for completion of the contract work upto

28.02.2007. However, appellant failed to complete the work

within this extended period of time. As a result, respondent was

compelled to grant further extensions of time to the appellant

upto 30.06.2007 in order to have the contract work completed.

This was because of appellant’s continued failure to meet even

the revised timelines despite repeated requests and warnings

from the respondent and its architect.

9.2. Learned counsel for the respondent submits that in

the review meeting held on 18.12.2006 , appellant was

unequivocally forewarned that grant of extension of time for

completion of the contract work would be without prejudice to

the right of the respondent to recover liquidated damages. Each

time extension was granted it was made clear to the appellant

that such extension of time was without prejudice to the right

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of the respondent to recover liquidated damages. Therefore,

appellant had full prior notice of the respondent’s intention to

levy liquidated damages. In the circumstances, it is not open to

the appellant to now contend that the respondent is not entitled

to recover liquidated damages on the ground that time for

performance of the contract was extended.

9.3. Learned counsel has refuted the contention of

learned counsel for the appellant that time was not the essence

of the contract. On the contrary, he asserts that time was very

much of essence for performance of the contract. Because of

admitted inability of the appellant to complete the contract

work within time, respondent was compelled to grant multiple

extensions of time but each time, appellant was forewarned that

such extension of time was without prejudice to the right of the

respondent to recover liquidated damages.

9.4. Learned counsel has also denied the contention of

learned counsel for the appellant that respondent could not

furnish or show any loss or damage suffered by it because of

the delay in execution of the contract. He submits that the

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arbitral tribunal had minutely examined this aspect of the

matter and after considering the evidence on record rejected

such contention of the appellant. Arbitral tribunal held that

liquidated damages were validly deducted; the quantum was

fair and reasonable.

9.5. Learned counsel for the respondent, therefore,

submits that the appellate court i.e. Division Bench of the High

Court had rightly set aside the order of the learned Single Judge

thereby restoring the award. Learned Single Judge had set

aside the award in complete disregard to Section 34 of the 1996

Act. He submits that there is no merit in the appeal.

Consequently, the appeal should be dismissed.

10. Submissions made by learned counsel for the parties

have received the due consideration of the Court.

11. Let us first deal with the award. In this case, the

arbitral tribunal comprised of a sole arbitrator Shri K.

Srinivasan. He was appointed as the arbitrator on 05.01.2009.

In the arbitral proceedings, as many as five claims were made

on behalf of the appellant. On the other hand, the respondent

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made three counter claims. In so far the appellant is concerned,

the major claim was relating to refund of Rs. 82,43,499.00

deducted by the respondent as liquidated damages. This claim

was framed as issue No. 3 by the arbitral tribunal. In so far

respondent is concerned, it raised counter claims relating to

reimbursement of rent paid by it for the period of delay in

completion of the contract work as well as for loss of rent in the

new complex due to delayed construction. As alluded to

hereinabove, issue No. 3 pertains to claim of the appellant for

refund of Rs. 82,43,499.00 deducted by the respondent as

liquidated damages i.e. as compensation for the delay in

execution of the contract. Both appellant and the respondent

had submitted their relied upon documents and advanced their

respective contentions. Arbitral tribunal had framed two

questions:

(i) Whether the delay had occurred due to default on

the part of the claimant(appellant)? and

(ii) Whether the respondent was entitled in terms of the

contract to levy liquidated damages for the delay?

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11.1. After going through the materials on record,

arbitral tribunal held that respondent had produced documents

to show that the delay in moving to the new premises had

caused them direct financial loss in two ways:

(i) in having to continue to pay rent for ten and half

months in the old premises; and

(ii) in having lost ten and half months in letting out

portions of the new premises on rent.

11.2. Such a loss was on account of the breach of contract

by the appellant. Respondent had established that the loss

suffered by it indeed occurred due to delay in handing over the

new premises. Clause 26 of the contract agreement permitted

the respondent to levy liquidated damages. It also provided as

to how the quantum of liquidated damages should be arrived at.

According to the arbitral tribunal, the quantum was at the rate

of 0.5% per week of delay. Delay in this case was more than ten

months. Bulk of the delay was for reasons within the control of

the appellant. The figure of Rs. 82,43,499.00 was correctly

quantified and deducted as liquidat ed damages by the

respondent. Therefore, the arbitral tribunal held that the

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liquidated damages were legally and contractually valid. It was

reasonable compared to the loss occasioned to the respondent

due to default by the appellant. Therefore, arbitral tribunal held

as under:

In view of all that has been stated above I conclude that

recovery of LD was valid contractually and legally. It was

levied by a competent authority and the levied amount

was fair and reasonable. I therefore award Nil amount

against this claim.

11.3. Thereafter, the arbitral tribunal rejected the other

claims of the appellant as well as the counter claims of the

respondent. Summary of the award dated 10.05.2010 reads as

under:

In sum therefore I do not find that any of the claims by

the claimant or counter claims by the respondents have

been established and the award is NIL against all the

claims and counter-claims.

12. Clause 26 of the contract agreement deals with

liquidated damages. Clause 26 reads thus:

26. Liquidated damages

If the contractor fails to complete the work by the date

stated in the Appendix or within any extended time

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under clause 28 hereof the contractor shall pay or allow

the employer to deduct the sum named in the Appendix

as “Liquidated Damages” for the period during which

the said works shall remain incomplete and the

employer may deduct such damages from any money

due or that may become due to the contractor.

12.1. Thus, what clause 26 says is that if the contractor

fails to complete the work within the stipulated period or within

the extended time as provided under clause 28 then the

employer shall be entitled to deduct the sum named in the

Appendix as liquidated damages for the period during which

the contract work remained incomplete. The employer may

deduct such liquidated damages from any money due or that

may become due to the contractor.

12.2. In the Appendix, the time for completion was

provided as 10 months from the 10

th day of the written order

to commence work or after the date on which the site was

handed over to the contractor whichever was later. In so far

determination of liquidated damages is concerned, it was

mentioned in the Appendix that the same would be calculated

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at the rate of Rs. 0.5 percent of the contract value per week

subject to a maximum of 5 percent of the value of the contract.

13. Clause 27 provides for extension of time. Clause 27

reads as under:

27. Extension of time

If the contractor shall desire an extension of time for

completion of the work on the grounds of his having

been unavoidably hindered (a) by force majeure or (b)

by reason of any exceptional inclement weather or (c)

reason of any proceedings taken or threatened by or

dispute with adjoining or neighbouring employers or

public authorities arising otherwise than through the

contractor’s own defaults or (d) by the work or delays

of other contractors or tradesmen engaged or

nominated by the employer or the architect and not

referred to in the Schedule of Quantities and/or

specifications or (e) by strikes or lockout affecting any

of the building trades or (f) by reason of delays in the

supply of materials stipulated to be supplied by the

employer he shall apply in writing to the

architect/employer within 15 days of such hindrance

on account of which he desires such extension as

aforesaid and the architect/employer, if in his opinion

reasonable grounds have been shown therefor, may

make a fair and reasonable extensi on of time for

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completion of the contract works, but the contractor

shall nevertheless constantly use his endeavours to

prevent delay and shall do all that may reasonably be

required of him to proceed with the work expeditiously

provided.

(a) that the contractor shall have no claim other than

extension of time for the delay in completion of the

work due to such hindrance and nothing else and

(b) that the contractor shall suspend the works

whenever called upon to do so in writing by the

architect/employer and shall be allowed reasonable

extension of time for completion of work due to such

suspension of work and nothing else.

13.1. What clause 27 provides for is that if the contractor

wants an extension of time for completion of the work on the

ground that the work has been unavoidably hindered:

(i) by force majeure; or

(ii) by reason of any exceptional inclement weather; or

(iii) by reason of any proceedings taken or dispute etc.

with neighbours otherwise then the contractor’s

own default; or

(iv) due to the work or delay of other contractors or

tradesmen engaged or nominated by the employer

or the architect; or

(v) by strike or lock out affecting any of the building

trades; or

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(vi) by reason of delay in supply of materials stipulated

to be supplied by the employer; or

(vii) if the contractor wanted extension of time, he was

required to apply to the employer/architect for

such extension within the period specified and if

the employer/architect was of the opinion that

reasonable grounds were shown, it would make a

fair and reasonable extension of time for

completion of the contract work.

14. Since, there is a reference to clause 28 in clause 26,

we may as well consider clause 28. It deals with consequence

of failure of the contractor to comply with the instructions of

the architect or the employer. Clause 28 reads thus:

28. Failure of contractor to comply with

Architect’s/Employer’s Instructions

If the contractor after receipt of written notice from the

architect/employer requiring compliance within ten

days fails to comply with such further drawings and/or

architect/employer’s instructions the employer may

employ and pay other persons to execute any such work

whatsoever that may be necessary to give effect thereto,

and all costs incurred in connection therewith shall be

recoverable from the contractor by the employer on the

certificate of the architect as a debt or may be deducted

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by him from any money due to or become due to the

contractor.

15. From a conjoint analysis of clauses 26, 27 and 28 it

is evident that if the contractor fails to complete the work within

the stipulated period or within the extended time as may be

provided, he would be liable to pay liquidated damages which

may be deducted by the employer from any due to be paid by

the employer to the contractor. How the liquidated damages is

to be determined is provided in the Appendix as noted above. If

the contract work is hindered beyond the control of the

contractor such as the examples given in clause 27, the

contractor may seek extension of time and if the same is found

to be reasonable, the employer may make a fair and reasonable

extension of time. On a combined reading of the above clauses,

a plausible view may be taken that clause 26 is not controlled

by clause 27.

16. What the arbitrator noted in this case is that on a

number of occasions, appellant had sought for time. On each

occasion respondent was compelled to allow the appellant to

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carry on with the work beyond the extended time period by

granting further extension, reserving its right to levy liquidated

damages. It has come on record that in the review meeting held

on 18.12.2006, respondent had put the appellant to notice that

grant of extension of time for completion of the contract work

would be without prejudice to the right of the respondent to

recover liquidated damages. Though the first extended time

limit was till 28.02.2007, further time had to be granted by the

respondent on a number of occasions thereafter till 30.06.2007,

on each occasion reserving the right to levy liquidated damages.

17. At this stage we may mention that appellant had

continued execution of the work beyond 30.06.2007 and

completed the same only on 30.11.2007 though the last

extended period had expired on 30.06.2007. It was only after

completion of the contract work that the appellant wrote letter

dated 14.12.2007 to the respondent seeking extension of time.

Respondent issued letter dated 26.09.2008 granting extension

of time. So it was an ex post facto approval on the part of the

respondent. Thus, appellant had continued with the contract

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work even after the extended period had expired on 30.06.2007.

Be it stated that all throughout respondent had put the

appellant to notice that notwithstanding extension of time it

reserved the right to levy liquidated damages.

18. Section 55 of the Indian Contract Act says that when

a party to a contract promises to do a certain thing within a

specified time but fails to do so, the contract or so much of it as

has not been performed, becomes voidable at the option of the

promisee if the intention of the parties was that time should be

of the essence of the contract. If time is not the essence of the

contract, the contract does not become voidable by the failure

to do such thing on or before the specified time but the promisee

is entitled to compensation from the promisor for any loss

occasioned to him by such failure. Further, if in case of a

contract voidable on account of the promisor’s failure to

perform his promise within the time agreed and the promisee

accepts performance of such promise at any time other than

that agreed, the promisee cannot claim compensation for any

loss occasioned by the non-performance of the promise at the

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time agreed, unless, at the time of such acceptance he gives

notice to the promisor of his intention to do so.

19. Sections 73 and 74 deal with consequences of breach

of contract. Heading of Section 73 is compensation for loss or

damage caused by breach of contract. When a contract is

broken, the party who suffers by such breach is entitled to

receive from the party who has broken the contract

compensation for any loss or damage caused to him thereby

which naturally arose in the usual course of things from such

breach or which the parties knew when they made the contract

to be likely to result from the breach of it. On the other hand,

Section 74 deals with compensation for breach of contract

where penalty is stipulated for. When a contract is broken, if a

sum is mentioned in the contract as the amount to be paid in

case of such breach or if the contract contains any other

stipulation by way of penalty, the party complaining of the

breach is entitled whether or not actually damage or loss is

proved to have been caused thereby, to receive from the party

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who has broken the contract reasonabl e compensation not

exceeding the amount so named or the penalty stipulated for.

20. A conjoint reading of Sections 55, 73 and 74 would

indicate that in a contract whether time is of the essence or not,

if the contractor fails to execute the contract within the

specified time, the contract becomes voidable at the option of

the promisee and the promisee would be entitled to

compensation from the promisor for any loss occasioned to him

by such failure. However, in case of a contract where time is of

the essence, the contract becomes voidable on account of the

contractor’s failure to execute the contract within the agreed

time. The promisee cannot claim compensation for any loss

occasioned by such breach of the contract unless he gives

notice to the promisor of his intention to claim compensation.

This is made more specific in Section 73. Section 74

contemplates a situation where penalty is provided for and

quantified as compensation for breach of contract. In such a

case, the party complaining of the breach is entitled to

compensation whether or not actual damage or loss is proved

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to have been caused thereby but such compensation shall not

exceed the quantum of penalty stipulated.

21. Before we deal with the order of the learned Single

Judge dated 02.01.2019 passed under Section 34 of the 1996

Act, it would be apposite to advert to Section 34 of the 1996 Act

which is as follows:

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 [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

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(iv) the arbitral award deals with a dispute not

contemplated by or not falling within the terms of the

submission to arbitration, or it contains decisions on

matters beyond the scope of the submission to

arbitration:

Provided that, if the decisions on matters

submitted to arbitration can be separated from

those not so submitted, only that part of the

arbitral award which contains decisions on

matters not submitted to arbitration may be set

aside; or

(v) the composition of the arbitral tribunal or the

arbitral procedure was not in accordance with the

agreement of the parties, unless such agreement was

in conflict with a provision of this part from which the

parties cannot derogate, or, failing such agreement,

was not in accordance with this part; or

(b) the court finds that—

(i) the subject-matter of the dispute is not capable of

settlement by arbitration under the law for the time

being in force, or

(ii) the arbitral award is in conflict with the public

policy of India.

[Explanation 1.—For the avoidance of any doubt, it is

clarified that an award is in conflict with the public policy

of India, only if,—

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(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 arbitration other

than international commercial arbitration, may also be

set aside by the court, if the court finds that the award is

vitiated by patent illegality appearing on the face of the

award:

Provided that an award shall not be set aside

merely on the ground of an erroneous application

of the law or by reappreciation of evidence.]

(3) An application for setting aside may not be made after

three months have elapsed from the date on which the

party making that application had received the arbitral

award or, if a request had been made under Section 33,

from the date on which that request had been disposed

of by the arbitral tribunal:

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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.

[(5) An application under this section shall be filed by a

party only after issuing a prior notice to the other party

and such application shall be accompanied by an

affidavit by the applicant endorsing compliance with the

said requirement.

(6) An application under this section shall be disposed of

expeditiously, and in any event, within a period of one

year from the date on which the notice referred to in sub-

section (5) is served upon the other party.]

22. Sub-section (1) of Section 34 provides that an

application may be made to the competent court for setting

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aside an arbitral award. This is the only remedy available for

setting aside an arbitral award. The conditions for setting aside

an arbitral award are mentioned in sub-sections (2) and (2A).

Sub-section (2) provides for situations such as the agreed party

was under some incapacity or the arbitration agreement is not

valid under the law or the aggrieved party did not receive proper

notice regarding appointment of arbitrator or of the arbitral

proceedings which prevented it from presenting its case or the

arbitral award deals with a dispute not contemplated by or not

falling within the terms of arbitration or the composition of the

arbitral tribunal or the procedure adopted in arbitration were

not in accordance with the agreement of the parties or the

subject matter of dispute is not capable of settlement by

arbitration or the arbitral award is in conflict within the public

policy of India. In terms of sub-section (2A), an arbitral award

may also be set aside on the ground of patent illegality

appearing on the face of the award. Sub-section (3) provides for

the time limit for filing of an application for setting aside arbitral

award. Therefore, the grounds on which an arbitral award can

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be set aside are clearly mentioned in Sections 34(2) and 34(2A)

of the 1996 Act. An arbitral award cannot be set aside on a

ground which is beyond the grounds mentioned in sub-sections

(2) and (2A) of Section 34.

23. Scope of Section 34 of the 1996 Act is now well

crystallized by a plethora of judgments of this Court. Section 34

is not in the nature of an appellate provision. It provides for

setting aside an arbitral award that too only on very limited

grounds i.e. as those contained in sub-sections (2) and (2A) of

Section 34. It is the only remedy for setting aside an arbitral

award. An arbitral award is not liable to be interfered with only

on the ground that the award is illegal or is erroneous in law

which would require re-appraisal of the evidence adduced

before the arbitral tribunal. If two views are possible, there is

no scope for the court to re-appraise the evidence and to take

the view other than the one taken by the arbitrator. The view

taken by the arbitral tribunal is ordinarily to be accepted and

allowed to prevail. Thus, the scope of interference in arbitral

matters is only confined to the extent envisaged under Section

31

34 of the Act. The court exercising powers under Section 34 has

perforce to limit its jurisdiction within the four corners of

Section 34. It cannot travel beyond Section 34. Thus,

proceedings under Section 34 are summary in nature and not

like a full-fledged civil suit or a civil appeal. The award as such

cannot be touched unless it is contrary to the substantive

provisions of law or Section 34 of the 1996 Act or the terms of

the agreement.

24. Therefore, the role of the court under Section 34 of

the 1996 Act is clearly demarcated. It is a restrictive jurisdiction

and has to be invoked in a conservative manner. The reason is

that arbitral autonomy must be respected and judicial

interference should remain minimal otherwise it will defeat the

very object of the 1996 Act.

25. Keeping the above in view, let us now deal with the

order of the learned Single Judge dated 02.01.2019 passed

under Section 34 of the 1996 Act.

26. In the aforesaid order, learned Single Judge noted

that the contract work was required to be executed within a

32

period of 10 months. Appellant could not complete the work

within the contract period due to land slides and rains.

Ultimately, appellant could complete the work on 30.11.2007

by seeking extension of time which was granted by the

respondent. There is no complaint about the construction.

Learned Single Judge also noted that there were rains and land

slides during the contract period which is not in dispute.

Thereafter, learned Single Judge observed as under:

If the building had been erected and there were landslides,

it would affect the building constructed and there would

not only have been loss of money, but also loss of lives

and that the 1

st respondent should thank the stars that

no untoward event took place.

27. Learned Single Judge also observed that clause 26 of

the contract agreement could not be read in isolation without

reference to clause 27. The fact that appellant was allowed to

carry on the contract work and to subsequently complete the

same cannot be denied. Once there is extension of time, there

cannot be a narrow interpretation to clause 26. Purpose of

extension of time was only for completion of work. Extension of

33

time and levy of liquidated damages cannot go hand in hand.

Contention of the respondent would have been acceptable had

there been no extension in time or the work remained

incomplete even after the extended period. In such an event,

respondent would have been justified to levy and recover

liquidated damages. Once the appellant had completed the

work during the extended period of time, claim of liquidated

damages by the respondent could not be accepted. Therefore,

the arbitral award dated 10.05.2010 was set aside.

28. We are afraid learned Single Judge had clearly gone

beyond the grounds provided in Section 34 of the 1996 Act to

set aside the arbitral award. Learned Single Judge exceeded the

jurisdiction under Section 34 of the 1996 Act. There was no

justification for setting aside the arbitral award by taking a

different view. View taken by the arbitral tribunal is certainly a

possible and plausible view. A different interpretation of clause

26 other than the one taken by the arbitral tribunal is possible

but that will not bring the challenge to the arbitral award within

the four corners of Section 34. In any view of the matter, mere

34

setting aside of the arbitral award did not confer any benefit to

the appellant. In the circumstances, the Division Bench was

justified in reversing the order of the learned Single Judge

under Section 37 of the 1996 Act.

29. That being the position, we do not find any merit in

this appeal. Consequently, the appeal is dismissed. However,

there shall be no order as to cost.

………………………………J.

[ABHAY S. OKA]

.……………………………J.

[UJJAL BHUYAN]

NEW DELHI;

APRIL 28, 2025.