O.M.P. (COMM) 286/2024 & connected matter Page 1 of 37

$~

* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Judgment reserved on: 03.02.2026

Judgment pronounced on: 06.04.2026

+ O.M.P. (COMM) 286/2024, I.A. 33341/2024 (Stay), I.A.

33342/2024 (Ex. from filing certified copies of the arbitral

record), I.A. 33343/2024 (Ex. from filing entire

original/certified copies of the arbitral tribunal record), I.A.

33344/2024 (Delay of 5 days in re-filing the petition) & I.A.

36363/2024 (Delay of 4 days in filing the short note)

INSTITUTE OF HUMAN BEHAVIOUR AND ALLIED

SCIENCES .....Petitioner

Through: Mr. Tushar Sannu, Standing

Counsel with Ms. Ankita

Bhadouriya and Mr. Umesh

Kumar, Advocates.

versus

MI 2 C SECURITIES AND FACILITIES .....Respondent

Through: Mr. Rajesh Gogna, Mr. Shivam

Tiwari, Ms. Rebina Rai and Ms.

Punita Jha, Advocates.

+ OMP (ENF.) (COMM.) 272/2024, EX.APPL.(OS) 2/2025

(Filed on behalf of the decree holder to place on record the new

certificate of incorporation dt. 29.04.2024) & EX.APPL.(OS)

59/2025 (Filed on behalf of the decree holder for amendment of

memo of parties)

MI2C SECURITY AND FACILITIES PVT LTD

.....Decree Holder

Through: Mr. Rajesh Gogna, Mr. Shivam

Tiwari, Ms. Rebina Rai and Ms.

Punita Jha, Advocates.

versus

INSTITUTE OF HUMAN BEHAVIOUR AND ALLIED

SCIENCES .....Judgement Debtor

O.M.P. (COMM) 286/2024 & connected matter Page 2 of 37

Through: Mr. Tushar Sannu, Standing

Counsel with Ms. Ankita

Bhadouriya and Mr. Umesh

Kumar, Advocates.

CORAM:

HON'BLE MR. JUSTICE HARISH VAIDYA NATHAN

SHANKAR

J U D G M E N T

HARISH VAIDYANATHAN SHANKAR, J.

1. The Objection Petition, being O.M.P. (COMM) 286/2024

1

, has

been instituted under Section 34 of the Arbitration and Conciliation

Act, 1996

2

, by Institute of Human Behaviour & Allied Sciences

3

,

assailing the Arbitral Award dated 26.02.2024

4

rendered by the

learned Sole Arbitrator in the arbitral proceedings initiated at the

instance of MI2C Securities and Facilities

5

.

2. The Claimant, in the above-stated arbitral proceedings vide the

Impugned Award, was awarded a principal sum of Rs. 1,37,05,429/-

towards the invoices raised along with Pre-reference Interest and

pendente lite interest at the rate of 18% and further, future interest at

the rate of 20% from the date of award until actual realisation.

3. For the sake of convenience, clarity and consistency, the parties

shall hereinafter be referred to in the same rank and nomenclature as

adopted in the above-stated Objection Petition.

1

Objection Petition

2

A&C Act

3

Petitioner

4

Impugned Award

5

Respondent

O.M.P. (COMM) 286/2024 & connected matter Page 3 of 37

4. Parallelly, an Enforcement Petition, being O.M.P. (COMM)

272/2024

6

has been filed by the Respondent/ Award Holder under

Section 36 of the A&C Act, read with Order XXI Rules 1, 11(2), 30,

43, 64 & 66, read with Section 151 of the Code of Civil Procedure,

1908, seeking enforcement and execution of the Impugned Award.

5. It is because the enforceability of the Impugned Award is directly

contingent upon the fate of the challenge laid by way of the Objection

Petition, and since both the proceedings are intrinsically interlinked

with the Impugned Award, the Objection Petition and the

Enforcement Petition were heard together contemporaneously, in

order to obviate the possibility of conflicting determinations.

6. It is accordingly clarified that the Enforcement Petition shall

necessarily abide by the outcome of the Objection Petition, and in the

event the challenge to the Impugned Award succeeds, the

Enforcement Petition would consequently not survive for

consideration.

BRIEF FACTS:

7. The Petitioner is stated to be an autonomous Government

Institution and Hospital under the aegis of the Government of N.C.T.

of Delhi and the Respondent, a private limited company registered as

Micro, Small and Medium Enterprises

7

, is stated to be an integrated

security and facility management service provider engaged in

providing manpower for security services.

6

Enforcement Petition

7

MSME

O.M.P. (COMM) 286/2024 & connected matter Page 4 of 37

8. The Petitioner issued a Notice inviting Tender dated

06.11.2015

8

seeking bids to provide security manpower to be

deployed at its premises. The Respondent participated in the said

bidding process and stood successful, in pursuance of which the

Petitioner issued an Offer Letter dated 08.08.2017

9

in favour of the

Respondent.

9. Consequent upon the issuance of the Offer Letter, the parties

entered into an Agreement dated 23.08.2017

10

, initially operative for

a period of one year from 24.08.2017 to 24.08.2018, however, the said

Agreement was thereafter extended from time to time and remained in

force till 31.07.2020.

10. It is the case of the Respondent that, in addition to the sanctioned

strength stipulated for the guards under the Agreement, they provided

deployment of additional guards, bouncers and gunmen to the

Petitioner, on their oral instructions, pursuant to a meeting held on

24.08.2017.

11. Accordingly, as per the Respondent, additional manpower

comprising additional guards, bouncers and gunmen was deployed on

several occasions as per the requirement of the Petitioner, in addition

to the originally agreed strength of the guards, bouncers and gunmen,

as per the Agreement.

12. The Respondent raised invoices towards the Petitioner against

the regular services provided as per the Agreement, as well as against

the additional manpower provided.

8

NIT

9

Offer Letter

10

Agreement

O.M.P. (COMM) 286/2024 & connected matter Page 5 of 37

13. It is the case of the Respondent that the Petitioner made a short

payment for the month of March, 2020 amounting to Rs. 5,01,000/-,

salary of the month of July, 2020 amounting to Rs. 57,45,826/- for the

sanctioned strength as per the Agreement and also no payment was

made with regards to the additional security guards, bouncers and

gunmen deployed on various occasions , amounting to

Rs.1,37,05,429/- even after various requests for the same was made to

the Petitioner.

14. Pursuant to the above-stated non-payment of the aggregate

amount of Rs. 1,99,52,255/-, the Respondent issued a Legal Notice

dated 25.12.2020 demanding therein the said due amounts, return of

performance bank guarantee amounting to Rs. 63,13,065/- and

invoked the Dispute Resolution Clause.

15. Pursuant to the Legal Notice, the Petitioners made the due

payment with regard to the short payment for the month of March,

2020 and salary due on sanctioned strength for the month of July,

2020.

16. Consequently, another Legal Notice dated 14.09.2021 was issued

by the Respondent to the Petitioner demanding dues of Rs.

1,37,05,429/- against deployment of additional security guards,

bouncers and gunmen, and invocation of the Dispute Resolution

Clause to refer the dispute with regards to non-payment of dues.

17. It is stated that the Petitioner failed to reply to the said Legal

Notice.

18. It is the case of the Respondent that the Petitioner made all the

payments with respect to the invoices raised against the regular

services rendered as per the Agreement, but did not make any

O.M.P. (COMM) 286/2024 & connected matter Page 6 of 37

payments against the invoices raised for the additional guards,

bouncers and gunmen provided to the Petitioners.

19. Subsequently, the Respondent approached this Court under

Section 11 of the A&C Act for the appointment of an Arbitrator by

way of a Petition, being Arb. P No. 186/2022, which was allowed vide

Order dated 23.03.2022 and thereby an Arbitrator was appointed to

adjudicate upon the disputes inter se the parties.

20. The Respondent, who was the Claimant before the Arbitral

Tribunal, filed their Statement of Claim, thereby pressing upon the

following Claims viz.,

(i) Claim A, for payment towards invoices raised for additional

deployment i.e., extra security guards, bouncers and gunmen;

(ii) Claim B, interest on Claim A;

(iii) Claim C, Cost of Arbitration;

(iv) Claim D, any other relief which the learned Arbitrator may think

proper.

21. Upon completion of the pleadings and after the parties had led

their respective evidence, the learned Sole Arbitrator, by way of the

Impugned Arbitral Award dated 26.02.2024, issued the following

directions in relation to the claims preferred by the Respondent herein:

(i) Direction A - Claim A was allowed in favour of the Respondent

for a sum of Rs. 1,37,05,429/- towards the payment on account of

deployment of extra security guards, bouncers and gunmen.

(ii) Direction B - Claim B was allowed, directing the Petitioner to

pay the Respondent interest at the rate of 18% with monthly rests

on the principal amount granted by way of direction A.

Furthermore, the Respondent was directed to compute the

O.M.P. (COMM) 286/2024 & connected matter Page 7 of 37

interest in terms of the Micro, Small and Medium Enterprises

Development Act, 2006

11

, till the date of the Award, and provide

the same to the Petitioner within 2 weeks from the date of the

Award.

(iii) Direction C - The learned Arbitrator awarded the Respondent

post award future interest at the rate of 20%, if the Petitioner

failed to pay the amounts directed as per Directions A and B,

within a period of 60 days from the date of the award till actual

payment.

(iv) Direction D - Claim C was rejected, thereby directing each party

to bear their respective costs of arbitration.

22. Aggrieved thereof, the Petitioner has approached this Court, by

way of the Objection Petition, seeking to set aside the Impugned

Award.

CONTENTIONS ON BEHALF OF THE PETITIONER :

23. Learned counsel appearing on behalf of the Petitioner would, at

the outset, contend that the Impugned Award suffers from the vice of

being patently illegal. It would be submitted that the conclusions

arrived at by the learned Sole Arbitrator are bereft of cogent reasons

and unsupported by the pleadings and evidence on record. It would be

urged that the Award discloses non-application of the mind to material

objections raised by the Petitioner and, records conclusions in the

absence of necessary evidentiary and contractual foundation.

Challenge to Direction A - Award of Principal Amount for Alleged

Additional Deployment

11

MSMED Act

O.M.P. (COMM) 286/2024 & connected matter Page 8 of 37

24. Learned counsel for the Petitioner would contend that the learned

Arbitrator was only empowered to adjudicate upon subject matters

within the terms of the Agreement as entered into between the parties

and disputes which arise thereof, and nothing beyond it.

25. Learned counsel for the Petitioner would, in this backdrop,

submit that the Agreement as between the parties was only restricted

to deployment of „security guards‟, and cannot be expanded to include

any other category, inter alia, bouncers or gunmen.

26. Learned counsel for the Petitioner would contend that the learned

Arbitrator has erred in interpreting the „variation clause‟ of

deployment at Annexure IV of the NIT Documents to mean additional

deployment.

27. It would be submitted that the „variation clause‟ of Annexure IV

of the NIT Documents only stipulates 25% “extra guards”, which

cannot be interpreted to include deployment of bouncers and gunmen.

This stipulation, if any meaning is to be assigned to it, would be

limited to 25% of the total number of guards (Total 247) which were

deployed as per the contract, and would be restricted to approximately

62 extra/additional guards.

28. It would be further contended that the Respondent produced no

evidence as to the market rates of the said additional bouncers and

gunmen, and raised invoices at rates that were inflated and which were

not agreed upon between the parties.

29. Learned counsel for the Petitioner would further assail the

Impugned award on the ground that the award travels beyond the

Statement of Claims of the Respondent, as before the learned Arbitral

Tribunal and grants reliefs which were not prayed for.

O.M.P. (COMM) 286/2024 & connected matter Page 9 of 37

30. Learned counsel would urge that the Arbitral Tribunal, being a

creature of reference, is bound by the pleadings of the parties and

cannot grant reliefs not sought, nor mould reliefs in a manner that

prejudices the opposite party.

31. Assailing the award on merits, learned counsel would contend

that the learned Arbitrator erred in allowing claims for the period

August 2017 to December 2017 without any supporting evidence. It

would be further submitted that, the Claimant‟s own case, as borne out

from the record, was that attendance sheets and deployment records

were duly verified only for the period January 2018 to July 2020.

Despite this, the learned Arbitrator awarded amounts for an earlier

period without any documentary substantiation, rendering the finding

perverse and contrary to the evidence on record.

Challenge to Direction B - Grant of Interest at 18% under the

MSMED Act

32. On this premise, with particular emphasis on the award of

interest, learned counsel for the Petitioner would submit that the

Respondent had itself limited and quantified its claim towards interest.

Leaned counsel for the Petitioner would draw the attention of this

Court to the Statement of Claim filed by the Respondent before the

Arbitral Tribunal and the accompanying documents, wherein the

Respondent had expressly computed interest at the rate of 12.5%,

aggregating to Rs. 64,06,296.36/-, for a specific period. However, the

learned Arbitrator proceeded to grant interest at the rate of 18% per

annum, purportedly under the MSMED Act, followed by future

interest at the rate of 20% per annum, without any pleading,

quantification, or reasoned analysis.

O.M.P. (COMM) 286/2024 & connected matter Page 10 of 37

33. Learned counsel for the Petitioner would further contend that the

learned Arbitrator has erroneously invoked the principles of the

MSMED Act without any foundational pleadings or proof.

34. Learned counsel would submit that the Respondent neither

pleaded nor established that it fulfilled the requirement of being a

„supplier‟ under the MSMED Act, nor was any determination made

with respect to the „appointed date‟ or the contractual trigger under

Sections 15 and 16 of the MSMED Act.

35. It would be urged that the mere assertion of MSME registration,

without pleading and proof of statutory compliance, cannot, ipso

facto, entitle a party to the penal rate of interest contemplated under

the MSMED Act.

36. Learned counsel for the Petitioner would further submit that the

statutory scheme of the MSMED Act was selectively and

impermissibly applied. It would be argued that the MSMED Act is a

self-sufficient statute that provides not only substantive benefits but

also a mandatory procedural mechanism under Section 18 of the

MSMED Act, including reference to the Micro and Small Enterprise

Facilitation Council

12

.

37. Learned counsel for the Petitioner would place reliance on the

decision of a Co-ordinate Bench of this Court in Idemia Syscom India

Private Limited vs. M/s Conjoinix Total Solutions Private Limited

13

to contend that recourse to the MSEFC is mandatory and that the

learned Arbitrator erred in simultaneously declining such recourse

while awarding interest under the MSMED Act and that the MSMED

12

MSEFC

13

2025:DHC:1205

O.M.P. (COMM) 286/2024 & connected matter Page 11 of 37

Act would have an overriding effect on the provisions of the A&C

Act.

38. Learned counsel would, in this backdrop, submit that the learned

Arbitrator erred in holding that recourse to the MSEFC was not

necessary, while simultaneously granting interest under the MSMED

Act. Such an approach, it would be urged, amounts to permitting a

party to approbate and reprobate, invoking the benefits of a special

statute while bypassing its mandatory procedure.

Challenge to Direction C - Award of Future Interest at 20% per

annum

39. Learned counsel for the Petitioner would seek to assail the award

of Future interest at the rate of 20% per annum on the ground of patent

illegality as being wholly arbitrary and unsupported by reasoning.

40. It would be urged that the Impugned Award does not disclose

any rationale, contractual stipulation or statutory basis for the grant of

such a high rate of future interest. It would further be submitted that

the absence of reasons renders this direction of awarding future

interest vulnerable under Section 31(3) of the A&C Act and

constitutes patent illegality apparent on the face of the award.

CONTENTIONS ON BEHALF OF THE RESPONDENT :

41. Per contra, learned counsel appearing on behalf of the

Respondent would contend that Section 34 of the A&C Act does not

envisage re-appreciation of evidence or facts, it does not constitute an

appeal on facts or law. It would be submitted that the ground of

„patent illegality‟ as contended by the Petitioner under Section 34(2A)

is a narrow ground and can be invoked to set aside an arbitral award

O.M.P. (COMM) 286/2024 & connected matter Page 12 of 37

only in exceptional circumstances, where the arbitral award exhibits

perversity that goes to the root of the matter.

Direction A- Award of Principal Amount for Alleged Additional

Deployment

42. Learned counsel for the Respondent would submit that the

finding of the learned Arbitrator allowing the claim towards invoices

raised for additional deployment of guards, gunmen and bouncers is

based on a holistic appreciation of the contractual framework, tender

conditions, contemporaneous correspondence and admitted conduct of

the parties.

43. It would be contended that the Agreement between the parties

cannot be read in a pedantic manner. The variation clause contained in

Annexure IV of the NIT documents was correctly interpreted by the

learned Arbitrator to permit deployment beyond the baseline

requirement, particularly in the emergent and sensitive circumstances,

and such interpretation is a possible and reasonable view.

44. As regards the challenge on alleged absence of proof of market

rates, learned counsel would submit that the Arbitrator has taken into

account the material placed on record, including invoices, deployment

details and the prevailing contractual rates, and has returned findings

of fact which are immune from interference under Section 34 of the

A&C Act.

45. It would be further urged that the contention that the award

travels beyond the Statement of Claim is wholly unfounded. The

reliefs granted fall squarely within the claims as pleaded, and the

learned Arbitrator has neither granted any relief de hors the pleadings

nor moulded relief in excess thereof.

O.M.P. (COMM) 286/2024 & connected matter Page 13 of 37

46. Addressing the challenge to the grant of the claims for

deployment for the period August 2017 to December 2017, learned

counsel would submit that the Arbitrator has recorded reasons for

allowing the claim based on cumulative material and oral evidence,

and the mere absence of certain documents does not render the finding

perverse. It would be contended that sufficiency or adequacy of

evidence is beyond the remit of Section 34 of the A&C Act.

Direction B- Grant of Interest at 18% under the MSMED Act

47. With respect to Direction B, learned counsel for the Respondent

would submit that the award of pendente lite interest at the rate of

18% is fully justified in law. It would be contended that the

Respondent is a registered MSME and had placed its registration on

record, which was duly considered by the learned Arbitrator.

48. Learned counsel would argue that once the Respondent is found

to be an MSME supplier and the payments are delayed beyond the

statutory period, the entitlement to interest under Sections 15 and 16

of the MSMED Act flows as a matter of law. It would be urged that

the learned Arbitrator was competent to apply the statutory mandate,

even if the exact computation was left to be finalised post-award.

49. It would further be submitted that the Petitioner cannot take

shelter behind technical pleas of pleading when the statutory

entitlement is clear and the delay in payment is undisputed.

50. The award of interest, it would be urged by the Respondent, is

compensatory in nature and intended to neutralise the economic

prejudice suffered by small enterprises.

51. On the issue of Section 18 of the MSMED Act, learned counsel

would submit that recourse to the MSEFC is an enabling mechanism

O.M.P. (COMM) 286/2024 & connected matter Page 14 of 37

and does not oust the jurisdiction of an arbitral tribunal constituted

under an existing arbitration Agreement. It would be contended that

the invocation of arbitration by consent of parties is legally

permissible, and the Petitioner cannot selectively rely on the MSMED

Act only to resist interest.

52. In this regard, learned counsel for the Respondent would also

place strong reliance on the decision of a Co-ordinate Bench of this

Court in Indian Highways Management Company Limited v. SOWiL

Limited

14

wherein the Court held that the buyer‟s obligation to pay

interest on delayed payments under Sections 15 and 16 of the

MSMED Act is absolute and not contingent upon the supplier

invoking the dispute resolution mechanism under Section 18 of the

MSMED Act.

Direction C - Award of Future Interest at 20% per annum

53. Assailing the challenge to Direction C, learned counsel for the

Respondent would submit that the award of future interest at the rate

of 20% is neither arbitrary nor illegal. It would be contended that the

rate has been awarded as a deterrent against continued default and

prolonged withholding of legitimate dues.

54. Learned counsel would argue that Section 31(7) of the A&C Act

vests wide discretion in the arbitral tribunal to award post-award

interest, and unless the rate is shown to be shockingly unconscionable

or prohibited by statute, the same cannot be interfered with under

Section 34 of the A&C Act.

55. It would be urged that the Petitioner, having enjoyed the benefit

of the Respondent‟s services and having withheld payment for years,

14

2021 SCC OnLine Del 5523

O.M.P. (COMM) 286/2024 & connected matter Page 15 of 37

cannot now plead hardship against the award of future interest. The

direction, it would be submitted, is equitable and intended to ensure

timely compliance with the award.

ANALYSIS:

56. This Court has heard the learned counsel appearing on behalf of

the parties at length and, with their able assistance, perused the

materials placed on record.

57. At the outset, it is apposite to note that this Court remains

conscious of the limited scope of its jurisdiction while examining an

objection petition under Section 34 of the A&C Act. There is a

consistent and evolving line of precedents whereby the Hon‟ble

Supreme Court has authoritatively delineated and settled the contours

of judicial intervention in such proceedings.

58. In this regard, a 3-Judge Bench of the Hon‟ble Supreme Court,

after an exhaustive consideration of a catena of earlier judgments, in

OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions

(India) (P) Ltd.

15

, while dealing with the grounds of conflict with the

public policy of India, perversity and patent illegality, grounds which

have also been urged in the present case, made certain pertinent

observations, which are reproduced hereunder:

“Relevant legal principles governing a challenge to an arbitral

award

30. Before we delve into the issue/sub-issues culled out above, it

would be useful to have a look at the relevant legal principles

governing a challenge to an arbitral award. Recourse to a court

against an arbitral award may be made through an application for

setting aside such award in accordance with sub-sections (2), (2-A)

and (3) of Section 34 of the 1996 Act. Sub-section (2) of Section 34

has two clauses, (a) and (b). Clause (a) has five sub-clauses which

are not relevant to the issues raised before us. Insofar as clause (b)

15

(2025) 2 SCC 417

O.M.P. (COMM) 286/2024 & connected matter Page 16 of 37

is concerned, it has two sub-clauses, namely, (i) and (ii). Sub-

clause (i) of clause (b) is not relevant to the controversy in hand.

Sub-clause (ii) of clause (b) provides that if the Court finds that the

arbitral award is in conflict with the public policy of India, it may

set aside the award.

Public policy

31. “Public policy” is a concept not statutorily defined, though it

has been used in statutes, rules, notification, etc. since long, and is

also a part of common law. Section 23 of the Contract Act, 1872

uses the expression by stating that the consideration or object of an

agreement is lawful, unless, inter alia, opposed to public policy.

That is, a contract which is opposed to public policy is void.

*****

37. What is clear from above is that for an award to be against

public policy of India a mere infraction of the municipal laws of

India is not enough. There must be, inter alia, infraction of

fundamental policy of Indian law including a law meant to serve

public interest or public good.

*****

The 2015 Amendment in Sections 34 and 48

42. The aforementioned judicial pronouncements were all prior to

the 2015 Amendment. Notably, prior to the 2015 Amendment the

expression “in contravention with the fundamental policy of Indian

law” was not used by the legislature in either Section 34(2)(b)(ii) or

Section 48(2)(b). The pre-amended Section 34(2)(b)(ii) and its

Explanation read:

*****

44. By the 2015 Amendment, in place of the old Explanation to

Section 34(2)(b)(ii), Explanations 1 and 2 were added to remove

any doubt as to when an arbitral award is in conflict with the public

policy of India.

45. At this stage, it would be pertinent to note that we are dealing

with a case where the application under Section 34 of the 1996 Act

was filed after the 2015 Amendment, therefore the newly

substituted/added Explanations would apply [Ssangyong Engg. &

Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131].

46. The 2015 Amendment adds two Explanations to each of the

two sections, namely, Section 34(2)(b)(ii) and Section 48(2)(b), in

place of the earlier Explanation. The significance of the newly

inserted Explanation 1 in both the sections is two-fold. First, it does

away with the use of words : (a) “without prejudice to the

generality of sub-clause (ii)” in the opening part of the pre-

amended Explanation to Section 34(2)(b)(ii); and (b) “without

prejudice to the generality of clause (b) of this section” in the

opening part of the pre-amended Explanation to Section 48(2)(b);

secondly, it limits the expanse of public policy of India to the three

specified categories by using the words “ only if”.

Whereas, Explanation 2 lays down the standard for adjudging

O.M.P. (COMM) 286/2024 & connected matter Page 17 of 37

whether there is a contravention with the fundamental policy of

Indian law by providing that a review on merits of the dispute shall

not be done. This limits the scope of the enquiry on an application

under either Section 34(2)(b)(ii) or Section 48(2)(b) of the 1996

Act.

47. The 2015 Amendment by inserting sub-section (2-A) in Section

34, carves out an additional ground for annulment of an arbitral

award arising out of arbitrations other than international

commercial arbitrations. Sub-section (2-A) provides that the Court

may also set aside an award if that is vitiated by patent illegality

appearing on the face of the award. This power of the Court is,

however, circumscribed by the proviso, which 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.

48. Explanation 1 to Section 34(2)(b)(ii), specifies that an arbitral

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.

49. In the instant case, there is no allegation that the making of the

award was induced or affected by fraud or corruption, or was in

violation of Section 75 or Section 81. Therefore, we shall confine

our exercise in assessing as to whether the arbitral award is in

contravention with the fundamental policy of Indian law, and/or

whether it conflicts with the most basic notions of morality or

justice. Additionally, in the light of the provisions of sub-section

(2-A) of Section 34, we shall examine whether there is any patent

illegality on the face of the award.

50. Before undertaking the aforesaid exercise, it would be apposite

to consider as to how the expressions:

(a) “in contravention with the fundamental policy of Indian law”;

(b) “in conflict with the most basic notions of morality or justice”;

and

(c) “patent illegality” have been construed.

In contravention with the fundamental policy of Indian law

51. As discussed above, till the 2015 Amendment the expression

“in contravention with the fundamental policy of Indian law” was

not found in the 1996 Act. Yet, in Renusagar Power Co.

Ltd. v. General Electric Co., 1994 Supp (1) SCC 644, in the

context of enforcement of a foreign award, while construing the

phrase “contrary to the public policy”, this Court held that for a

foreign award to be contrary to public policy mere contravention of

law would not be enough rather it should be contrary to:

(a) the fundamental policy of Indian law; and/or

(b) the interest of India; and/or

O.M.P. (COMM) 286/2024 & connected matter Page 18 of 37

(c) justice or morality.

*****

55. The legal position which emerges from the aforesaid discussion

is that after “the 2015 Amendments” in Section 34(2)(b)(ii) and

Section 48(2)(b) of the 1996 Act, the phrase “in conflict with the

public policy of India” must be accorded a restricted meaning in

terms of Explanation 1. The expression “in contravention with the

fundamental policy of Indian law” by use of the word

“fundamental” before the phrase “policy of Indian law” makes the

expression narrower in its application than the phrase “in

contravention with the policy of Indian law”, which means mere

contravention of law is not enough to make an award vulnerable.

To bring the contravention within the fold of fundamental policy of

Indian law, the award must contravene all or any of such

fundamental principles that provide a basis for administration of

justice and enforcement of law in this country.

56. Without intending to exhaustively enumerate instances of such

contravention, by way of illustration, it could be said that:

(a) violation of the principles of natural justice;

(b) disregarding orders of superior courts in India or the binding

effect of the judgment of a superior court; and

(c) violating law of India linked to public good or public interest,

are considered contravention of the fundamental policy of

Indian law.

However, while assessing whether there has been a contravention

of the fundamental policy of Indian law, the extent of judicial

scrutiny must not exceed the limit as set out in Explanation 2 to

Section 34(2)(b)(ii).

*****

Patent illegality

65. Sub-section (2-A) of Section 34 of the 1996 Act, which was

inserted by the 2015 Amendment, provides that an arbitral award

not arising out of international commercial arbitrations, may also

be set aside by the Court, if the Court finds that the award is visited

by patent illegality appearing on the face of the award. The proviso

to sub-section (2-A) 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.

66. In ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705, while

dealing with the phrase “public policy of India” as used in Section

34, this Court took the view that the concept of public policy

connotes some matter which concerns public good and public

interest. If the award, on the face of it, patently violates statutory

provisions, it cannot be said to be in public interest. Thus, an award

could also be set aside if it is patently illegal. It was, however,

clarified that illegality must go to the root of the matter and if the

illegality is of trivial nature, it cannot be held that award is against

public policy.

O.M.P. (COMM) 286/2024 & connected matter Page 19 of 37

67. In Associate Builders v. DDA, (2015) 3 SCC 49, this Court

held that an award would be patently illegal, if it is contrary to:

(a) substantive provisions of law of India;

(b) provisions of the 1996 Act; and

(c) terms of the contract [See also three-Judge Bench decision of

this Court in State of Chhattisgarh v. SAL Udyog (P) Ltd.,

(2022) 2 SCC 275].

The Court clarified that if an award is contrary to the substantive

provisions of law of India, in effect, it is in contravention of

Section 28(1)(a) of the 1996 Act. Similarly, violating terms of the

contract, in effect, is in contravention of Section 28(3) of the 1996

Act.

68. In Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019)

15 SCC 131 this Court specifically dealt with the 2015

Amendment which inserted sub-section (2-A) in Section 34 of the

1996 Act. It was held that “patent illegality appearing on the face

of the award” refers to such illegality as goes to the root of matter,

but which does not amount to mere erroneous application of law. It

was also clarified that 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 [ See Ssangyong Engg. &

Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131]. Further, it

was observed, reappreciation of evidence is not permissible under

this category of challenge to an arbitral award [See Ssangyong

Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131].

Perversity as a ground of challenge

69. Perversity as a ground for setting aside an arbitral award was

recognised in ONGC Ltd. v. Western Geco International Ltd.,

(2014) 9 SCC 263. Therein it was observed that an arbitral decision

must not be perverse or so irrational that no reasonable person

would have arrived at the same. It was observed that if an award is

perverse, it would be against the public policy of India.

70. In Associate Builders v. DDA, (2015) 3 SCC 49 certain tests

were laid down to determine whether a decision of an Arbitral

Tribunal could be considered perverse. In this context, it was

observed 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.

However, by way of a note of caution, it was observed that when a

court applies these tests it does not act as a court of appeal and,

consequently, errors of fact cannot be corrected. Though, a possible

view by the arbitrator on facts has necessarily to pass muster as the

arbitrator is the ultimate master of the quantity and quality of

O.M.P. (COMM) 286/2024 & connected matter Page 20 of 37

evidence to be relied upon. It was also observed that an award

based on little evidence or on evidence which does not measure up

in quality to a trained legal mind would not be held to be invalid on

that score.

71. In Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019)

15 SCC 131, which dealt with the legal position post the 2015

Amendment in Section 34 of the 1996 Act, it was observed that a

decision which is perverse, while no longer being a ground for

challenge under “public policy of India”, would certainly amount to

a patent illegality appearing on the face of the award. It was

pointed out that an award based on no evidence, or which ignores

vital evidence, would be perverse and thus patently illegal. It was

also observed that 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 [See Ssangyong Engg. & Construction

Co. Ltd. v. NHAI, (2019) 15 SCC 131].

72. The tests laid down in Associate Builders v. DDA, (2015) 3

SCC 49 to determine perversity were followed in Ssangyong

Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 and

later approved by a three-Judge Bench of this Court in Patel Engg.

Ltd. v. North Eastern Electric Power Corpn. Ltd., (2020) 7 SCC

167.

73. In a recent three-Judge Bench decision of this Court in DMRC

Ltd. v. Delhi Airport Metro Express (P) Ltd., (2024) 6 SCC 357,

the ground of patent illegality/perversity was delineated in the

following terms: (SCC p. 376, para 39)

“39. In essence, the ground of patent illegality is available

for setting aside a domestic award, if the decision of the

arbitrator is found to be perverse, or so irrational that no

reasonable person would have arrived at it; or the

construction of the contract is such that no fair or

reasonable person would take; or, that the view of the

arbitrator is not even a possible view. 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 under the head of “patent illegality”.

An award without reasons would suffer from patent

illegality. The arbitrator commits a patent illegality by

deciding a matter not within its jurisdiction or violating a

fundamental principle of natural justice.”

Scope of interference with an arbitral award

74. The aforesaid judicial precedents make it clear that while

exercising power under Section 34 of the 1996 Act the Court does

not sit in appeal over the arbitral award. Interference with an

arbitral award is only on limited grounds as set out in Section 34 of

the 1996 Act. A possible view by the arbitrator on facts is to be

O.M.P. (COMM) 286/2024 & connected matter Page 21 of 37

respected as the arbitrator is the ultimate master of the quantity and

quality of evidence to be relied upon. It is only when an arbitral

award could be categorised as perverse, that on an error of fact an

arbitral award may be set aside. Further, a mere erroneous

application of the law or wrong appreciation of evidence by itself is

not a ground to set aside an award as is clear from the provisions of

sub-section (2-A) of Section 34 of the 1996 Act.

75. In Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd.,

(2019) 20 SCC 1, paras 27-43, a three-Judge Bench of this Court

held that courts need to be cognizant of the fact that arbitral awards

are not to be interfered with in a casual and cavalier manner, unless

the court concludes that the perversity of the award goes to the root

of the matter and there is no possibility of an alternative

interpretation that may sustain the arbitral award. It was observed

that jurisdiction under Section 34 cannot be equated with the

normal appellate jurisdiction. Rather, the approach ought to be to

respect the finality of the arbitral award as well as party's autonomy

to get their dispute adjudicated by an alternative forum as provided

under the law.”

59. Having delineated the scope and ambit of Section 34 of the A&C

Act, this Court now proceeds to examine and analyze the specific

grounds urged by the Petitioner in respect of each of the directions

issued by the learned Arbitrator in the Impugned Award.

Direction A - Award of Principal Amount for Alleged Additional

Deployment

60. The primary ground on which the Petitioner assails Direction A

is that the learned Arbitrator travelled beyond the contractual

framework by awarding amounts towards deployment of additional

guards, gunmen and bouncers, whereas, according to the Petitioner,

the Agreement contemplated only deployment of „security guards‟. It

has thus been urged that such an award runs contrary to the

Agreement and, therefore, attracts the vice of patent illegality under

Section 34(2A) of the Act.

61. A careful perusal of the Impugned Award, however, reveals that

the learned Arbitrator did not proceed on an extraneous or arbitrary

O.M.P. (COMM) 286/2024 & connected matter Page 22 of 37

footing. On the contrary, the learned Arbitrator undertook a contextual

and holistic interpretation of the Agreement along with the contractual

documents, including the NIT conditions and the „variation clause‟

contained in Annexure IV of the NIT Documents.

62. The submission that the variation clause is restricted only to

“25% extra guards” and cannot include other categories such as

bouncers or gunmen, is, in essence, an invitation to this Court to adopt

a narrower interpretation in substitution of that adopted by the learned

Arbitrator. Such an exercise is impermissible under Section 34 of the

A&C Act. It is well settled that the interpretation of contractual terms

lies within the domain of Arbitral Tribunal, and where the view taken

is a plausible one, the same does not warrant interference. The view

taken by the learned Arbitrator is delineated in Paragraph No. 4.17 of

the Impugned Award. The said paragraph reads as under:

“4.17 Relevant paragraphs have been extracted herein above. From

the perusal of different clauses of the contract, the pleadings,

documents available on record, the evidence led by the parties it is

found by me that the deployment of extra security of guards,

gunmen and bouncers is part of the contract between the

parties. Annexure IV to the agreement titled DEPLOYMENT

provides as under:

“1. The contractor will provide following number of Security

Guards as mentioned hereunder:

Total number of Security guards required = 247 (25% extra

may be deployed as Extended requirement from time to time for

patient specific legal/ clinical obligations of the Institute)

Total No. of Gunmen required =03

Note: Detailed deployment of security personnel will be

provided at the time of award of contract. There will be no

additional payment towards relievers etc. In other words, the

above number will include deployment and roster of

deployment such that the relievers are subsumed in the total

no. of manpower required.

2. The above numbers may vary by 25% at the beginning of the

contract or any time during the course of the contract depending

upon the requirement. The pro rate additional payment on this

account will be calculated on the basis of wage component cost

O.M.P. (COMM) 286/2024 & connected matter Page 23 of 37

as defined in the next year three. No additional payment in

respect of material cost and administrative/service charges

component will be made for additional deployment over and

above the Number mentioned in the agreement. This coupled

with part B of Annexure xiv as appearing on page No. 74 of the

paper book, clauses x and xi clearly state that deployment

number may vary by 25% at any time during the course of

contract depending upon the requirement.”

(emphasis supplied)

63. In the present case, the interpretation adopted by the learned

Arbitrator is neither perverse nor one that no reasonable person would

arrive at. The contractual architecture itself supports the

aforementioned interpretation of the learned Arbitrator. Clause 2(c) of

the Agreement expressly stipulates that the NIT shall form part of the

Agreement between the parties. Once the NIT is contractually

incorporated, the annexures thereto, including Annexure IV, cannot be

selectively excluded or read in isolation. Merely because an

alternative interpretation is possible would not render the Award

vulnerable.

64. Further, the contention of the Petitioner that the „variation

clause‟, as read and interpreted by the learned Arbitrator to form part

of the Agreement, is without merit and equally untenable. Annexure

IV, which contains the said „variation clause‟, forms an integral part

of the NIT, which in turn, stands expressly incorporated into the

Agreement by virtue of Clause 2(c). Once such incorporation is

contractually acknowledged, the Arbitrator‟s reliance on Annexure IV

cannot be characterised as extraneous, perverse, or beyond the scope

of the Agreement. The interpretative exercise undertaken by the

learned Arbitrator, therefore, remains firmly anchored within the

contractual framework agreed upon by the parties and does not

O.M.P. (COMM) 286/2024 & connected matter Page 24 of 37

transgress into the realm of patent illegality. The relevant portion of

the Agreement, being Clause 2, is reproduced herein under:

“2. The following documents shall be deemed to form and be read

and constructed as part of this Agreement, viz.:

a. Letter of acceptance of award of contract;

b. General/Special conditions of contract and service level;

c. Notice inviting Tender;

d. Financial Bid;

e. Scope of service;

F. Addendums, if any; and

g. Standing Operating Procedures (SOPs).”

(emphasis supplied)

65. It is trite law that the interpretation of contractual terms lies

within the exclusive domain of the arbitral tribunal. Even if two views

are possible, the Court, in proceedings under Section 34 of the A&C

Act, cannot substitute its own interpretation for that of the Arbitrator,

so long as the view adopted is a plausible one. The jurisdiction under

Section 34 of the A&C Act does not permit the Court to don the

mantle of an appellate forum over contractual interpretation merely on

the ground that another view may appear more appealing.

66. Insofar as the contention of the Petitioner regarding alleged

inflation of invoices or insufficiency of evidence is concerned, the

same pertains to the appreciation of evidence. The Impugned Award

reflects that the learned Arbitrator has considered the invoices,

deployment records and other material placed on record before

arriving at the quantified amount. The sufficiency or adequacy of such

evidence, again, cannot be re-examined in proceedings under Section

34 of the A&C Act, unless it is demonstrated that the findings are

based on no evidence at all or that vital evidence has been ignored,

which is not the case here.

O.M.P. (COMM) 286/2024 & connected matter Page 25 of 37

67. Viewed thus, the findings returned by the learned Arbitrator are

based on plausible interpretation of the contract and an appreciation of

the material on record. The same do not suffer from perversity, patent

illegality, or any infirmity warranting interference under Section 34 of

the A&C Act.

68. In this regard, this Court deems it apposite to reference the

discussion as undertaken by the Hon‟ble Supreme Court in Ramesh

Kumar Jain vs. Bharat Aluminium Company Limited

16

, with respect

to when does an award fall into the ambit of being „patently illegal‟

vis-à-vis the appreciation of evidence and interpretation of contractual

terms. The Apex Court has clarified that patent illegality must be

something that goes to the root of the matter, such as an award that is

contrary to the contract, based on no evidence, or so irrational that it

shocks the judicial conscience. Mere erroneous appreciation of

evidence or adoption of one plausible interpretation over another does

not cross this high threshold. The relevant portion of the said

judgement is reproduced herein under fore ready reference:

“34. Thereafter, this court elucidated the meaning of the expression

„patent illegality‟ in Ssangyong Engg. & Construction Co. Ltd. v.

NHAI22 while taking into consideration the amendment act of

2015 and held it as a glaring, evident illegality that goes to the root

of the award. This includes: (a) an award deciding matters outside

the scope of the arbitration (beyond the contract or submission); (b)

an award contradicting the substantive law of India or the

Arbitration Act itself; (c) an award against the terms of the

contract; and (d) an award so unreasoned or irrational that it

manifests an error on its face.

35. Considering the aforesaid precedents, in our considered view,

the said terminology of „patent illegality‟ indicates more than one

scenario such as the findings of the arbitrator must shock the

judicial conscience or the arbitrator took into account matters he

shouldn‟t have, or he must have failed to take into account vital

matters, leading to an unjust result; or the decision is so irrational

16

2025 INSC 1457

O.M.P. (COMM) 286/2024 & connected matter Page 26 of 37

that no fair or sensible person would have arrived at it given the

same facts. A classic example for the same is when an award is

based on “no evidence” i.e., arbitrators cannot conjure figures or

facts out of thin air to arrive at his findings. If a crucial finding is

unsupported by any evidence or is a result of ignoring vital

evidence that was placed before the arbitrator, it may be a ground

the warrants interference. However, the said parameter must be

applied with caution by keeping in mind that “no evidence” means

truly no relevant evidence, not scant or weak evidence. If there is

some evidence, even a single witness‟s testimony or a set of

documents, on which the arbitrator could rely upon or has relied

upon to arrive at his conclusions, the court cannot regard the

conclusion drawn by the arbitrator as patently illegal merely

because that evidence has less probative value. This thin line is

stood crossed only when the arbitral tribunal‟s conclusion cannot

be reconciled with any permissible view of the evidence.

36. Having discussed the said law, we move ahead to another limb

of the submission which was espoused by the respondent

particularly with reference to obligations of the arbitrator to decide

the dispute in accordance with the terms of the contract. It is a

fundamental principle that the arbitrator cannot award anything that

is contrary to the contract. The arbitrator is bound by clear

stipulations inter se the parties, and an award ignoring such

stipulations would violate public policy by undermining freedom of

contract. However, that does not mean that not every award which

gives a benefit not expressly mentioned in the contract is in

violation. The arbitral tribunal in exercise of their power can very

well interpret the implied terms or fill gaps where the contract is

silent, so long as doing so does not contradict any express term. For

example, if a contract is silent on interest on delayed payments, an

arbitrator awarding reasonable interest is not contradicting the

contract rather it is a power exercised by the arbitrator to fulfill the

gap on the basis of equity which also mandated under Section

31(7)(a) of the A&C Act. Similarly, if a contract does not say either

way about compensating extra work done at request, the arbitrator

can imply a term or use principles of restitution to award a

reasonable sum, without violating the terms of contract. The thin

line is whether an express prohibition or restrictions in the contract

is breached by the award? If the answer is in affirmative, the award

is liable to struck down. However, where the contract is simply

silent on a legitimate claim which is inherently linked to the natural

corollary of contractual obligation of the parties the arbitrator will

be well within his powers to interpret the contract in the light of

principles of the contractual jurisprudence and apply the equity to

that situation. A contrary interpretation would lead to opening a

floodgate whereby a party who may have dominant position would

intentionally not ink down the natural obligation flowing from the

contract and subsequently; after obtaining the benefit the party

O.M.P. (COMM) 286/2024 & connected matter Page 27 of 37

would agitate absence of express terms to sway away from even

discharging his alternative obligation of compensating the party at

loss. Hence the question which arises in such situations is, can the

party who bears the brunt and suffers the loss due to silence under

the contract regarding the natural contractual obligation which

arises in usual course of business be left in limbo? In our view, that

is the very purpose why section 70 of the Contract Act, 1872, has

been an intrinsic part of our Contract Act. The said provision

creates a statutory right independent of contract, often termed

quantum meruit or unjust enrichment remedy. For ready reference

the said provision has been extracted hereinbelow:

“70. Obligation of person enjoying benefit of non-

gratuitous act.

Where a person lawfully does anything for another

person, or delivers anything to him, not intending to do

so gratuitously, and such other person enjoys the

benefit thereof, the latter is bound to make

compensation to the former in respect of, or to restore,

the thing so done or delivered.”

37. The close scrutiny of the aforesaid provision reveals that it

comes into play when one party confers a benefit on another in

circumstances not governed by 28a contract, without intent to act

gratuitously. Hence in such situation, the party taking the benefit is

bound to pay compensation to the party who had gratuitously taken

the benefits and the courts including arbitral tribunals, can award

compensation under Section 70 if the conditions are met.

(emphasis supplied)

69. In Hindustan Construction Company Ltd. Vs National

Highways Authority of India

17

, the Hon‟ble Supreme Court cautioned

that courts exercising jurisdiction under Section 34 of the A&C Act do

not sit in appeal over the findings of the arbitral tribunal and cannot

re-examine contractual interpretation unless the view taken is perverse

or wholly untenable. The Apex Court expressly held that where the

arbitral tribunal adopts a plausible view after considering the material

on record, judicial interference is unwarranted. The relevant portion,

being Paragraph No. 13 of the said judgment, is reproduced herein

under for ready reference:

17

(2024) 2 SCC 613

O.M.P. (COMM) 286/2024 & connected matter Page 28 of 37

“13. Now, we turn to the issue of whether the claim for the

construction of embankment forms part of the activity of clearing

and grubbing and was not payable as embankment work. We may

note here that two expert members of the Arbitral Tribunal held in

favour of the respondent on this point, whereas the third member

dissented. There cannot be any dispute that as far as the

construction of the terms of a contract is concerned, it is for the

Arbitral Tribunal to adjudicate upon. If, after considering the

material on record, the Arbitral Tribunal takes a particular view on

the interpretation of the contract, the Court under Section 34 does

not sit in appeal over the findings of the arbitrator. The Division

Bench has adverted to the findings recorded by the two members of

the Arbitral Tribunal. After considering the view taken by the

Arbitral Tribunal, the High Court observed that the real controversy

was whether the work of backfilling had been done and whether the

said work was liable to be excluded from the work of the

embankment construction by the respondent. The Division Bench

held that nothing is shown that indicates that the construction of the

embankment can be said to have been done in a manner where the

lower part of the embankment is made only by carrying out the

activity of backfilling. The High Court also noted that the appellant

sought to make deductions after initially paying the amounts for the

embankment. The Division Bench was right in holding that the

majority opinion of technical persons need not be subjected to a

relook, especially when the learned Single Judge had also agreed

with the view taken by the Arbitral Tribunal. We have also perused

the findings of the majority in the Award. We find nothing perverse

or illegal about it.”

(emphasis supplied)

70. Now turning to the contention of the Petitioner that the learned

Arbitrator awarded amounts for the period from August 2017 to July

2020 without supporting evidence. This contention is also equally

unpersuasive. Paragraph No. 4.2 of the Impugned Award

demonstrates that the learned Arbitrator relied upon attendance sheets

duly verified from January 2018 to July 2020, as well as the invoices

placed on record. The arbitral record further evidences that an invoice

dated 06.09.2017 was raised for additional deployment for the month

of August 2017 and was considered by the learned Arbitrator. The

O.M.P. (COMM) 286/2024 & connected matter Page 29 of 37

relevant paragraph, being Paragraph No. 4.2 of the Impugned Award,

is reproduced herein under for ready reference:

“4.2 Dispute is with regard to the deployment of extra security

guards, gunmen and bouncers, which is seen from Attendance

sheets being exhibit CW-1/A-5, duly verified from January 2018 to

July 2020 confirming the deployment prepared by Mr. Satish

Kumar and verified by Mr. Vijender. I have also perused the bills/

invoices placed as Exhibit CW-1/A-6.”

71. In light of this, the plea of insufficiency of evidence, in

substance, invites this Court to re-appreciate evidentiary material, a

course of action impermissible under section 34 of the A&C Act. As

consistently held by the Hon‟ble Supreme Court, including in Ramesh

Kumar Jain (supra), sufficiency or adequacy of evidence is not a

ground for setting aside an arbitral award unless the finding is based

on no evidence or is so perverse that no reasonable person could have

arrived at it. This threshold is clearly, in view of the foregoing

discussion, not crossed in the present case.

72. The further submission of the Petitioner that the learned

Arbitrator granted relief beyond the Statement of Claim is also devoid

of merit. A reading of the Award indicates that the relief granted falls

within the scope of the claims raised. The Arbitrator neither granted

relief which was not pleaded nor moulded the claims in a manner alien

to the reference. It bears reiteration that pleadings in arbitral

proceedings are not to be construed with the same rigidity as in civil

suits.

73. Viewed thus, this Court finds no patent illegality in Direction A

of the Impugned Award. The reasoning adopted by the learned

Arbitrator is grounded in the contractual documents and supported by

the material on record. Whether this Court might have arrived at a

different conclusion is wholly irrelevant. The Impugned Award does

O.M.P. (COMM) 286/2024 & connected matter Page 30 of 37

not disclose any perversity, irrationality, or violation of the contractual

framework warranting interference under Section 34 of the A&C Act.

74. In view of the foregoing discussion, the judicial precedents and

established threshold for interference under Section 34 of the A&C

Act, this Court is satisfied that the determination under the impugned

Direction does not merit interference. The view adopted by the

learned Arbitrator is founded on a plausible interpretation of the

contractual and statutory framework, supported by material on record,

and arrived at after due consideration of the rival submissions. The

impugned finding neither travels beyond the terms of reference nor

disregards any vital evidence, nor does it disclose such perversity or

irrationality as would shock the conscience of this Court. Interference

under Section 34, therefore, is plainly unwarranted.

Direction B - Grant of Interest at 18% under the MSMED Act

75. The challenge to Direction B is premised on the contention that

the learned Arbitrator improperly invoked the provisions of the

MSMED Act without foundational pleadings and without the

Respondent having first approached the MSEFC under Section 18 of

the MSMED Act, thereby rendering the award of interest patently

illegal.

76. This Court finds no infirmity in the approach adopted by the

learned Arbitrator. The Impugned Award records that the Respondent

had placed on record its MSME registration, which pre-dated the

execution of the Agreement between the parties, and that the

payments due were admittedly delayed. Once these foundational facts

stood established, the entitlement to interest under Sections 15 and 16

of the MSMED Act followed as a statutory sequitur.

O.M.P. (COMM) 286/2024 & connected matter Page 31 of 37

77. In this regard, the reliance placed by the learned counsel for the

Respondent on Indian Highways Management Company Limited

(supra) is squarely apposite and legally sound. The said decision

categorically holds that the buyer‟s obligation to pay interest on

delayed payments under Sections 15 and 16 of the MSMED Act is

absolute and not contingent upon the supplier invoking the dispute

resolution mechanism under Section 18 of the said Act. The Court

expressly observed that Sections 15 and 16 confer substantive rights

and impose statutory obligations, independent of the forum chosen for

adjudication. It was further clarified that by virtue of Section 18(3), an

arbitral tribunal constituted under the MSMED Act is competent to

award statutory interest under the said Act, even in cases where the

MSEFC route has not been invoked. The relevant portion of the said

judgment reads as follows:

“34. It is apparent from the above that the provisions of Sections

15 and 16 of the MSMED Act confer substantive rights and

impose obligations, which are not contingent upon recourse to

any dispute resolution mechanism. Section 18 of the MSMED Act

provides for a dispute resolution mechanism in respect of any

amount due under Section 17 of the MSMED Act. It is obvious

that it may not be necessary for a supplier to seek recourse to any

proceedings for recovery of the amounts that may be otherwise

due to it, if the buyer complies with its obligation under Sections

15 and 16 of the MSMED Act.

35. The import of the contentions advanced on behalf of IHMCL

is that the obligations of the buyer under Sections 15 and 16 of the

MSMED Act are contingent upon the supplier resorting to

Conciliation or the adjudicatory process under Section 18 of the

MSMED Act. The plain language of Sections 15, 16 and 17 of the

MSMED Act, does not support this proposition.

****

41. As pointed out by Ms Arora, one of the Statements and

Objects of enacting the MSMED Act was to “make further

improvements in the Interest on Delayed Payments to Small Scale

and Ancillary Industrial Undertakings Act, 1993 and making that

enactment a part of the proposed legislation and to repeal that

enactment.”

O.M.P. (COMM) 286/2024 & connected matter Page 32 of 37

43. In view of the above, it is clear that the MSMED Act is a

special legislation with regard to payment of interest and the

provisions of MSMED Act would override the provisions of the

A&C Act to the extent of any repugnancy. This view further

draws support from the non obstante provisions of Section 24 of

the MSMED Act, which reads as under: -

“24. Overriding effect. – The provisions of sections 15 to

23 shall have effect notwithstanding anything inconsistent

therewith contained in any other law for the time being in

force.”

45. Before concluding, it would also relevant to reiterate that the

scope of interference with an arbitral award is restricted. It is

permissible only on the grounds as set out under Section 34 of the

A&C Act. The view of an arbitral tribunal is final and binding

unless it is found that the impugned award is vitiated by patent

illegality or falls foul of the public policy of India. Even in those

cases, where it is found that the arbitral tribunal has erred in law,

interference with the arbitral award would not be permissible

unless it is found that the patent illegality goes to the root of the

matter and which vitiates the award [See: Delhi Airport Metro

Express Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd.: 2021

SCC OnLine SC 695]. Clearly, in this case, the impugned award

cannot be stated to be vitiated by patent illegality or in conflict

with the public policy of India.”

78. The reliance placed by the Petitioner on Idemia Syscom India

Private Limited (supra) to contend that recourse to the MSEFC is

mandatory and that the learned Arbitrator erred in simultaneously

declining such recourse while awarding interest under the MSMED

Act is misplaced and distinguishable on facts. The said decision arose

in the context of a petition under Section 11 of the A&C Act, where

proceedings before the MSEFC had already been initiated. The

observations therein regarding the overriding effect of the MSMED

Act were made in that specific factual backdrop and cannot be read as

laying down an inflexible rule that statutory interest under Sections 15

and 16 can be granted only through the Section 18 mechanism. The

relevant portion of the said judgement reads as under:

“12. While the A&C Act is the general law governing the field of

arbitration, MSMED Act governs a very specific nature of disputes

O.M.P. (COMM) 286/2024 & connected matter Page 33 of 37

concerning MSME's and it sets out a statutory mechanism for the

payment of interest on delayed payments. MSMED Act being the

specific law, and A&C Act being the general law, the specific law

would prevail over the general law. Even otherwise. MSMED Act

has been enacted subsequent to the A&C Act and the legislature is

presumed to have been aware about the existence of A&C Act

when the act was enacted. Sub-sections (1) and (4) of Section 18

contain non-obstante clauses which have the effect of overriding

any other law for the time being in force. Section 24 of the Act

states that the provisions of sections 15 to 23 shall have effect

notwithstanding anything inconsistent therewith contained in any

other law for the time being in force. Thus, the legislative intent is

clear that MSMED Act would have an overriding effect on the

provisions of A&C Act. The provisions of MSMED Act would

become ineffective if, by way of an independent arbitration

agreement between the parties, the process mandated in Section 18

of the MSMED Act is sidestepped. Moreover, the fact that the

petitioner has approached the Court under Section 11 of the A&C

Act first would be of no help to him as the MSMED Act does not

does not carve out any such exception to the non-obstante clause.”

(emphasis supplied)

79. In view of the foregoing discussion, this Court is unable to accept

the submission that recourse to the MSEFC under Section 18 of the

MSMED Act is a mandatory precondition for the grant of statutory

interest. The arbitration proceedings in the present case were initiated

pursuant to a valid arbitration Agreement, and the Petitioner

participated therein without demur. Once the Respondent‟s status as

an MSME supplier and the factum of delayed payment stood

established, the statutory consequence of interest followed inexorably.

The grant of pendente lite interest at the rate of 18% per annum,

therefore, does not suffer from patent illegality.

80. Accordingly, this Court finds that Direction B of the Impugned

Award is firmly anchored in the statutory mandate of Sections 15 and

16 of the MSMED Act and does not rest on any discretionary or

extraneous consideration. The learned Arbitrator has neither travelled

beyond the reference nor applied the law in a manner contrary to the

O.M.P. (COMM) 286/2024 & connected matter Page 34 of 37

contractual framework or the governing statute. The award of

pendente lite interest at the rate of 18% is a legal consequence flowing

from delayed payment to a registered MSME supplier and cannot be

characterised as arbitrary, excessive, or perverse. No element of patent

illegality, going to the root of the matter, is therefore made out so as to

warrant interference under Section 34 of the A&C Act.

Direction C- Award of Future Interest at 20% per annum

81. The challenge by the Petitioner to Direction C proceeds on the

footing that the grant of future interest at the rate of 20% per annum is

excessive, arbitrary, and unsupported by adequate reasons, and

therefore falls foul of the standard of patent illegality. This

submission, however, also does not withstand judicial scrutiny.

82. It is apposite to note that Section 31(7)(b) of the A&C Act

expressly empowers an Arbitral Tribunal to award post-award interest

at such rate as it deems reasonable, unless otherwise agreed by the

parties. The provision vests a wide discretion in the arbitral tribunal,

recognising that post-award interest serves a distinct purpose, namely,

to secure compliance with the award and to compensate the award-

holder for the time value of money during the period of non-payment.

Section 31(7) of the A&C Act reads as under:

“31. Form and contents of arbitral award. —

*****

(7) (a) Unless otherwise agreed by the parties, where and in so far

asm, an arbitral award is for the payment of money, the arbitral

tribunal may include in the sum for which the award is made

interest, at such rate as it deems reasonable, on the whole or any

part of the money, for the whole or any part of the period between

the date on which the cause of action arose and the date on which

the award is made.

(b) A sum directed to be paid by an arbitral award shall, unless the

award otherwise directs, carry interest at the rate of two per cent.

O.M.P. (COMM) 286/2024 & connected matter Page 35 of 37

higher than the current rate of interest prevalent on the date of

award, from the date of award to the date of payment.”

83. It is equally well settled that the mere fact that the rate of future

interest appears to be on the higher side does not, by itself, render the

award vulnerable to interference under Section 34 of the A&C Act.

Interference is warranted only where the rate awarded is either

expressly prohibited by statute, contractually interdicted, or so

unconscionable or irrational as to shock the judicial conscience. None

of these contingencies arises in the present case.

84. The Impugned Award discloses that the learned Arbitrator

granted future interest at a stepped-up rate only in the event of

continued non-compliance beyond the stipulated period of 60 days

post-award. The grant of future interest at 20% per annum is thus not

punitive in nature, but deterrent in design, intended to disincentivise

recalcitrance and to ensure timely satisfaction of the award. Such an

approach cannot be said to be alien to arbitral jurisprudence,

particularly in matters involving delayed payments despite

crystallisation of liability.

85. The contention that the learned Arbitrator failed to furnish

elaborate reasons for selecting the precise rate of 20% is also devoid

of merit. While Section 31(3) of the A&C Act mandates that reasons

be recorded for an arbitral award, it does not require a mathematical

exposition or granular justification for the exact percentage of interest

awarded, especially where the discretion exercised is statutorily

conferred and contextually justified. The requirement is of intelligible

reasoning, not forensic exactitude.

86. The objection that future interest at the rate of 20% per annum

was granted in the absence of a specific prayer in the Statement of

O.M.P. (COMM) 286/2024 & connected matter Page 36 of 37

Claim is equally unsustainable. It is well settled that the power of an

arbitral tribunal to award post-award interest flows directly from

Section 31(7)(b) of the A&C Act and does not depend upon a specific

pleading or prayer by the claimant. Once a monetary award is made,

the grant of future interest operates as a statutory incident to secure

enforcement and cannot be characterised as a relief de hors the

reference. The award of post-award interest, therefore, is not in the

nature of an independent or unpleaded claim, but a legal consequence

that follows the adjudication of liability. Consequently, the exercise of

such statutory discretion cannot be faulted on the ground that it was

not expressly sought in the Statement of Claim.

87. Viewed through the prism of the settled parameters governing

patent illegality, Direction C also does not suffer from any infirmity

that goes to the root of the matter. The learned Arbitrator has acted

within jurisdiction, exercised a discretion expressly vested by statute,

and adopted an approach that is neither capricious nor perverse.

88. This Court is therefore of the considered view that the award of

future interest at the rate of 20% per annum does not cross the high

threshold of „patent illegality‟ and does not warrant interference under

Section 34 of the A&C Act, which is a scalpel and not a

sledgehammer. It corrects jurisdictional aberrations, not discretionary

outcomes.

DECISION:

(i). O.M.P. (COMM) 286/2024

89. For the reasons recorded hereinabove, this Court is of the

considered view that none of the grounds urged by the Petitioner

satisfy the narrow and exacting threshold for interference under

O.M.P. (COMM) 286/2024 & connected matter Page 37 of 37

Section 34 of the A&C Act. The Impugned Award represents a

plausible and reasoned view taken by the learned Arbitral Tribunal

upon appreciation of the contractual framework, evidence on record,

and the applicable statutory regime.

90. Consequently, the Objection Petition is dismissed as devoid of

merit.

91. Accordingly, this Petition, being O.M.P. (COMM) 286/2024,

along with pending Application(s), if any, stands disposed of in the

aforesaid terms.

92. No Order as to costs.

(ii). O.M.P. (ENF.) (COMM.) 272/2024

93. In view of the dismissal of the Objection Petition, being O.M.P.

(COMM) 286/2024, in the aforesaid terms, the present Enforcement

Petition under Section 36 of the A&C Act shall proceed in accordance

with law.

94. In view of the Arbitral Award dated 26.02.2024 being in the

nature of a monetary decree, the Judgment Debtor is directed to

deposit, if not already deposited, the entire awarded sum, along with

accrued interest up to date with the Registry of this Court, within a

period of four (4) weeks from the date of this Judgement.

95. Accordingly, list the matter on 07.05.2026 for further

proceedings.

HARISH VAIDYANATHAN SHANKAR, J.

APRIL 06, 2026/ DJ