O.M.P. (COMM) 149/2023 Page 1 of 17

* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Judgment reserved on: 20 January 2026

Judgment pronounced on: 2/2/26

+ O.M.P. (COMM) 149/2023 & I.A. 7531/2023

M/S JAY FE CYLINDERS LTD. .....Petitioner

Through: Mr. V.K. Garg, Senior Adv.

with Mr. Kaushal Gautam, Mr.

Rishi Jindal, Mr. Mrinal

Sharma, Ms. Snehpreet Kaur,

Ms. Hemant Dalal & Mr. K.S.

Rekhi, Advs.

versus

MANISH JAIN .....Respondent

Through: Mr. Sanjeev Mahajan, Adv.

CORAM:

HON'BLE MR. JUSTICE AVNEESH JHINGAN

J U D G M E N T

1. This petition under Section 34 of the Arbitration & Conciliation

Act, 1996 (for short „the Act‟) is filed aggrieved of the arbitral award

dated 14.12.2022.

2. The petitioner is a Company incorporated under the Companies

Act, 1956 and engaged in the business of manufacturing Compressed

Natural Gas (CNG), Liquefied Petroleum Gas (LPG) and Gas

Cylinders. The petitioner approached a foreign collaborator RT

Chemical Technologies and Composite Materials, a Joint Stock

Company for manufacturing Polymer Composite Gas

Balloons/Cylinders for storage and transportation of CNG & LPG. On

02.09.2016 Memorandum on Joint Participation in Investment Project

O.M.P. (COMM) 149/2023 Page 2 of 17

(for short „MOJP‟) was executed between the petitioner and the

foreign collaborator. The MOJP was valid for two years and could be

terminated earlier with mutual consent. A Memorandum of

Understanding (for brevity „MOU‟) dated 03.08.2017 was entered

between the respondent and the petitioner. The respondent was to be

instrumental in execution of the Joint Venture Agreement (JVA)

between the petitioner and the foreign collaborator; to arrange funds;

to provide consultancy for establishment of the plant in India pursuant

to the JVA and to assist in the successful implementation of the

project as well as in ensuring regulatory compliances. The

remuneration of the respondent was on commission basis as mutually

agreed between the parties under clause 3 of the MOU.

3. The first instalment of sixty lakhs plus taxes towards

commission was paid against Invoice no. 1 dated 06.09.2017. The

JVA was not signed and on 08.06.2018 the MOJP was terminated by

the petitioner. The arbitration proceedings were initiated at the

instance of the petitioner for seeking refund of first instalment along

with interest. The respondent filed a counter claim for release of

second and third instalments. The arbitrator framed following issues:-

(i) Whether the respondent is guilty of violating the

express terms and conditions of the MoU dated

03.08.2017 (SOC)? OPC

(ii) Whether the respondent is liable to refund the 1

st

instalment of commission paid to him on 03.08.2017

along-with the interest from the date of default till the

date of realization? If so, at what rate (SOC)? OPC.

(iii) Whether the payment of Rs. 60 lakhs along with

O.M.P. (COMM) 149/2023 Page 3 of 17

GST was made by the claimant to the respondent as

advance or towards DSS Fee? OPR.

(iv) Whether the respondent is entitled to pro rata

commission amount of progress of project? OPR.

(v) Whether the respondent is entitled to 2

nd

and 3

rd

instalment of commission under MoU dated

03.08.2017? OPR.

(vi) Whether the claimant can seek refund of GST

after having taken the benefit of the input credit in

pursuance thereto? OPR.

(vii) Whether the respondent is entitled to interest on

the counter claim? If so at what rate and for what

period? OPR.

(viii) Whether the claimant is liable to pay Arbitration

cost & other legal expenses to the respondent?

(ix) Relief.

4. The issue nos. 1 & 2 were considered together and the claim of

the petitioner for refund of sixty lakhs plus GST was rejected holding

that the payment of first instalment was an advance of commission

payable to the respondent. Issue nos. 4 & 5 pertaining to the counter

claims of the respondent were allowed. It was concluded that the

respondent had provided services including negotiating price of plant

and machinery for the project and there was no failure on part of the

respondent in rendering services as agreed under the MOU. The issue

with regard to refund of GST was decided against the petitioner. The

respondent was held entitled to interest at the rate of nine per cent per

annum and litigation cost of two lakhs was awarded.

5. Learned senior counsel for the petitioner relying on clauses

O.M.P. (COMM) 149/2023 Page 4 of 17

3.1(e) and 3.1(g) contends that the payment of the first instalment

made upon signing of the MOU was an advance refundable upon

termination of the MOJP or in the eventuality of non-signing of the

JVA. It is submitted that while deciding issue no. 3 in favour of the

respondent the arbitrator held that the amount paid was an advance

towards commission yet rejected the claim of the petitioner for refund

and thereby recorded contradictory findings.

5.1 Vis-a-viz the allowance of counter claim of the respondent,

contention is that the award is contrary to the express terms of the

MOU and no reasons for allowing the counter claim have been

recorded. The submission is that the counter claims were allowed in

the absence of evidence establishing entitlement of the respondent to

receive commission and the basis for quantification thereof.

6. Per contra the award is defended and it is argued that the scope

of interference under Section 34 of the Act is limited, there cannot be

re-appreciation of evidence and in case of two possible views the

award is not to be interfered with. Reliance is on the decisions of the

Supreme Court in “South East Asia Marine Engineering and

Constructions Limited v. Oil India Limited” (2020) 5 SCC 164 and

“Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd.”(2019) 20

SCC 1.

6.1 The Supreme Court in “State of Rajasthan v. Ferro Concrete

Construction (P) Ltd.” (2009) 12 SCC 1 is relied upon to fortify the

argument that the quantum of evidence is within the exclusive domain

of the arbitrator and cannot be gone into under Section 34 of the Act.

O.M.P. (COMM) 149/2023 Page 5 of 17

The contention is that as per clauses 3.1(c), 3.1(e) & 3.1(g) of the

MOU the respondent was entitled to commission for the services

rendered and there was no occasion to refund the commission

received. It is argued that the pleadings before the arbitrator vis-a-viz

the services provided by the respondent remained uncontroverted. The

cross examination of CW-1 Mr. Sushil Kumar Pareek is relied upon

wherein the witness stated that it was not for the petitioner to judge

the failure of the respondent to render services and the witness had no

knowledge regarding the signing of the JVA.

6.2 It is submitted that the JVA was finalised but the petitioner

without any justifiable reason refused to sign it. Moreover, unilateral

termination of the MOJP by the petitioner was in violation of clause

5.2 thereof.

7. Heard learned counsel for the parties at length. No submission

other than those noted above was pressed.

8. Before proceeding further it would be relevant to quote the

clause 1 of the MOU dealing with the scope of the agreement and

clause 3 relating to payment of commission.

“1. SCOPE OF AGREEMENT

1.1 The Company hereby appoints the Consultant to be

its Exclusive Consultant/Advisor for providing advice/

Consultancy relating to the joint venture required to be

executed with the collaborator and arrangement of

Private Equity from the Fund saving the interest of the

party of the first part. The appointment of the second

party shall be subject to providing the consultancy on

all the issue put forth to him and safeguard the interest

of the part of first part in every manner whatsoever.

O.M.P. (COMM) 149/2023 Page 6 of 17

1.2 The Second Party to work and offer Service to the

First Party to finalize mutually beneficial terms of the

commercial and business arrangement for the aforesaid

project for successful implementation of project and

start commercial production of product which includes

but not limited to initiate, facilitate and ensure

meetings between parties, getting the mutually required

secretarial services such as recording of the discussion,

getting the arrangement's vetted, identifying and

introducing competent professionals to the First Party

and Collaborator (if such requirement is felt

necessary), to be available physically and on phone / e-

mail / fax to offer advisory and consultancy services if

and when the party of the First Part need or demand

such services. The Second party will provide all

documents / records / draft minutes exchanged with

Collaborators from time to time in English language.

3. COMMISSIONS/PAYMENTS

3.1 The Company agrees to pay Commission to the

Consultant for performing his duties subject to the

following conditions:

a. The First party has agreed to pay in phases the

commission as mutually agreed based on the project

cost to be determined upon signing of JV between

Company and Collaborator.

b. That the work assigned to the Consultant has been

completed in every manner and payment of

consultancy shall be paid strictly in terms of the

schedule of payment as agreed between the parties. It is

made clear by the party of first part that no interim

payment in the middle of work shall be paid to the

consultant.

b. The First Party has agreed to treat the Second Part as

an 'Advisor /Consultant' throughout the project from

inception till successful implementation of project and

start commercial production of Product; and to provide

O.M.P. (COMM) 149/2023 Page 7 of 17

every signed document / record / draft minutes

exchanged between the Company, Collaborator and

Fund and decision making meetings between/among

them if and when The Second Part's presence and

participation is solicited by the First Party. Also the

party of Second Part shall share investment proposals/

share calling communication, capital structure of the

JVC and likes with the Company from time to time till

commencement of production of product by the JVC.

c. That party of first part shall not be liable to pay any

commission or any payment if the consultant failed to

complete any of the duties assigned to the consultant. It

has been agreed by the consultant that all payments

received by the consultant shall be refunded to the

party of the first part, in case consultant failed to meet

any of the duties assigned to the consultant to meet the

requirement of the Joint Venture and to set up the

manufacturing of product.

d. The First Party shall pay the mutual agreed

Commission to the Second Party and Second Party will

raise Invoices for the same as per the following

payment schedule:

S.No. Particulars

1. 1

st

instalment of INR 60 Lacs

(INR Sixty Lacs) after signing

of this Memorandum of

Understanding.

2. 2

nd

instalment of 10% of

commission after signing of

Joint Venture Agreement with

collaborators.

3. 3

rd

instalment of 20% of

commission after

commissioning of plant and

machinery.

O.M.P. (COMM) 149/2023 Page 8 of 17

4. Balance upon commencement

of Commercial Production.

e. Any payment received by the consultant prior to

receiving the first capital instalment shall be treated as

Deposit and the same shall be payable by the party of

second part in the event of not concluding the joint

venture agreement with the foreign collaborator. If

there is delay or any non-performance by the first

party, the pro-rata commission amount based on the

progress of project will be payable to the second party.

f. The total commission due would be remitted by the

Company to the account of Consultant or any of its

Nominee intimated in writing on letterhead. The total

commission due would be remitted by the Company to

the account of Consultant in the Indian currency.

g. In case of termination of this agreement and/or not

successful commencement of commercial production

pursuant to joint venture agreement with the foreign

collaborator, the party of the second part shall not be

entitled for any commission and the party of the second

part shall be bound to return all payments received on

any account to the party of the first part. If first party

fails to comply by all the duties as per the JV

agreement, first party will be liable to pay pro-rata

commission based on progress of the project due to

second party.”

9. The undisputed facts are that the first instalment of commission

was paid. No JVA was signed between the petitioner and the foreign

collaborator, consequently neither any plant was set up in India nor

the commercial production started.

10. The MOU obligated the respondent to play an instrumental role

in execution of the JVA with the foreign collaborator and to make

arrangements for private equity. The respondent offered services to

O.M.P. (COMM) 149/2023 Page 9 of 17

finalise mutually beneficial terms and business arrangements for the

project; to assist in successful implementation of the project and

commencement of commercial production. The commission of the

respondent was to be paid in phases and was based on the project cost

to be determined upon signing of the JVA between the petitioner and

the foreign collaborator.

11. Clause 3.1(c), 3.1(e) and 3.1(g) are relevant with regard to the

commission payable and the manner in which the payment made was

to be treated.

11.1 Clause 3.1(c) provided that the petitioner was not liable to pay

commission in the event of failure of the consultant to complete the

duties assigned. The commission received by the respondent was to be

refunded upon failure to meet the duties assigned including meeting

the requirements of the JVA and setting up of the manufacturing

facility.

11.2 As per clause 3.1(e) the payment made to the consultant prior to

receipt of the first capital instalment was to be treated as a deposit and

was to be returned to the petitioner in the eventuality of non-

conclusion of the JVA with the foreign collaborator. In case of delay

or non-performance on part of the petitioner, the respondent was

entitled to pro-rata commission based upon the progress of the project.

11.3 Clause 3.1(g) comes into operation upon termination of the

agreement or unsuccessful commencement of commercial production

pursuant to the JVA. In these eventualities the respondent was not

entitled to the commission and had to return the payments received.

On failure of the petitioner to comply with the obligations under the

O.M.P. (COMM) 149/2023 Page 10 of 17

JVA, pro-rata commission based upon progress of the project was

payable to the respondent.

12. Clauses 3.1(c), 3.1(e), 3.1(g) covered three different

eventualities. Firstly failure of the respondent to complete the duties

assigned or failing to meet the requirements of the JVA and to set up

manufacturing facilities. Secondly in case no JVA was concluded

between the petitioner and the foreign collaborator and lastly on

termination of the agreement or unsuccessful commencement of

commercial production pursuant to the JVA. While deciding issue

nos. 1 & 2 the arbitrator considered clause 3.1(c) of the MOU but

failed to take into consideration clauses 3.1(e) and 3.1(g). Sub-Clause

(e) specifically dealt with a situation where the JVA was not

concluded between the petitioner and the foreign collaborator. In such

a scenario the payment received by the respondent was to be treated as

an advance and was to be refunded to the petitioner. At the cost of

repetition no JVA was concluded between the petitioner and the

foreign collaborator.

13. Under sub-clause (g) upon unsuccessful commencement of

commercial production pursuant to the JVA the respondent was not

entitled to commission and was bound to return all payments received.

It is an admitted fact that neither the JVA was concluded nor there was

successful commencement of commercial production.

14. The arbitrator while deciding issue nos. 1 & 2 against the

petitioner ignored the relevant clauses of the MOU and was swayed by

unilateral termination of the MOJP by the petitioner which was not the

subject matter of dispute in arbitration. The respondent was not a party

O.M.P. (COMM) 149/2023 Page 11 of 17

to the MOJP and cannot raise grievance with regard to its termination

more so, when the foreign collaborator accepted the termination and

had not challenged it. The arbitrator sat in appeal over the business

prudence of the petitioner in not signing the JVA whereas non-

conclusion of the JVA was an issue to be considered.

15. It was not considered as to whether under MOU the respondent

was entitled to retain the payment received rather the arbitrator

proceeded on the basis that service charges should be paid to the

respondent for the duties performed. Further that the commission

could not be denied on account of the failure of the petitioner to sign

the JVA. The arbitrator decided the matter contrary to the express

terms and conditions of the MOU.

16. The essence of the MOU was the conclusion of JVA between

the parties irrespective of which party was instrumental in non-signing

of the JVA. The condition was of „conclusion‟ of the JVA which

never happened in this case. The award passed ignoring the clauses of

the MOU and contrary to its terms is vitiated by patent illegality.

17. Issue no. 3 as to whether the payment of first instalment of

commission along with GST could be treated as an advance was

decided taking into consideration part of clause 3.1(e) and ignoring

clauses 3.1(c) and clause 3.1(g). Clause 3.1(e) was partially

considered to the extent that the payment received by the respondent

was to be treated as a deposit whereas the latter part providing that the

amount so received was refundable in the eventuality of non-

conclusion of the JVA was ignored.

18. No reasons are recorded for deciding issue no. 3 against the

O.M.P. (COMM) 149/2023 Page 12 of 17

petitioner. The conclusion on issue no. 3 is reproduced:

“38. Considering all facts and circumstances, this

Tribunal is of the view that the payment of Rs. 60 lacs

+ GST made by the Claimant is as advance on account

of fee/commission to be paid to the Respondent. This

issue thus is decided in favour of the Respondent and

against the Claimant.”

19. The counter claims filed by the respondent under issue nos. 4 &

5 were decided by recording:

“43. This Tribunal, upon perusal of the record and

consideration of arguments put forth by both the sides

finds weight in the submissions made by the

Respondent. If the journey is not complete and some

portion of it is left then the efforts and expenses made

till actual completion cannot be ignored.

44. These issues are thus decided in favour of the

Respondent and against the Claimant.”

20. The conclusion is bald of reasons. The claim for pro-rata

commission could have been made under clauses 3.1(e) and 3.1(g).

Neither evidence was adduced by the respondent in support of the

counter claim to establish delay or failure on the part of the petitioner

as stipulated clause 3.1(e) nor the arbitrator recorded reasons as to

under which clause the counter claim is allowed. For claiming pro-rata

commission under sub-clause (g) there should have been failure of the

petitioner to comply with duties under the JVA whereas in the case in

hand no JVA was executed between the parties.

21. From reading of clauses 3.1(a) and 3.1 (d) it emerges that the

second and third instalments were payable on a percentage based on

the project cost determined under the JVA. There was no basis for

O.M.P. (COMM) 149/2023 Page 13 of 17

quantifying the instalments in the absence of an agreed project cost

due to failure of the parties to enter into the JVA. The claim of the

respondent for payment of second & third instalments was allowed

against the clauses of MOU.

22. The issues of refund of GST and entitlement to interest are

consequent upon the decisions of issue nos. 1 to 4 and need not be

gone into.

23. The law is well-settled that an arbitral tribunal is obligated

under Section 31(3) of the Act to pass a speaking award. Reference in

this regard be made to decision of Supreme Court in Dyna

Technologies Private Limited v. Crompton Greaves Limited

(2019) 20 SCC 1:

“34. The mandate under Section 31(3) of the

Arbitration Act is to have reasoning which is

intelligible and adequate and, which can in appropriate

cases be even implied by the courts from a fair reading

of the award and documents referred to thereunder, if

the need be. The aforesaid provision does not require

an elaborate judgment to be passed by the arbitrators

having regard to the speedy resolution of dispute.

35. When we consider the requirement of a reasoned

order, three characteristics of a reasoned order can be

fathomed. They are: proper, intelligible and adequate.

If the reasonings in the order are improper, they reveal

a flaw in the decision-making process. If the challenge

to an award is based on impropriety or perversity in the

reasoning, then it can be challenged strictly on the

grounds provided under Section 34 of the Arbitration

Act. If the challenge to an award is based on the

ground that the same is unintelligible, the same would

be equivalent of providing no reasons at all. Coming to

the last aspect concerning the challenge on adequacy of

O.M.P. (COMM) 149/2023 Page 14 of 17

reasons, the Court while exercising jurisdiction under

Section 34 has to adjudicate the validity of such an

award based on the degree of particularity of reasoning

required having regard to the nature of issues falling

for consideration. The degree of particularity cannot be

stated in a precise manner as the same would depend

on the complexity of the issue. Even if the Court comes

to a conclusion that there were gaps in the reasoning

for the conclusions reached by the Tribunal, the Court

needs to have regard to the documents submitted by the

parties and the contentions raised before the Tribunal

so that awards with inadequate reasons are not set aside

in casual and cavalier manner. On the other hand,

ordinarily unintelligible awards are to be set aside,

subject to party autonomy to do away with the

reasoned award. Therefore, the courts are required to

be careful while distinguishing between inadequacy of

reasons in an award and unintelligible awards.”

24. In case of an award suffering from patent illegality, perversity

or being in conflict with the Public Policy of India the power under

Section 34 of the Act is to be exercised. The non-consideration of the

clauses of the MOU or rewriting of the contractual terms vitiates the

award on the ground of perversity. Reference in this regard be made to

following decisions of the Supreme Court:

24.1 In Delhi Metro Rail Corporation Ltd. V. Delhi Airport

Metro Express Pvt. Ltd. 2024 INSC 292 held as under:

“38. In Associate Builders vs. Delhi Development

Authority

22

, a two-judge Bench of this Court held that

although the interpretation of a contract is exclusively

within the domain of the arbitrator, construction of a

contract in a manner that no fair-minded or reasonable

person would take, is impermissible. A patent illegality

arises where the arbitrator adopts a view which is not a

O.M.P. (COMM) 149/2023 Page 15 of 17

possible view. A view can be regarded as not even a

possible view where no reasonable body of persons

could possibly have taken it. This Court held with

reference to Sections 28(1)(a) and 28(3), that the

arbitrator must take into account the terms of the

contract and the usages of trade applicable to the

transaction. The decision or award should not be

perverse or irrational. An award is rendered perverse or

irrational where the findings are (i) based on no

evidence; (ii) based on irrelevant material; or (iii)

ignores vital evidence. Patent illegality may also arise

where the award is in breach of the provisions of the

arbitration statute, as when for instance the award

contains no reasons at all, so as to be described as

unreasoned. A fundamental breach of the principles of

natural justice will result in a patent illegality, where

for instance the arbitrator has let in evidence behind the

back of a party. In the above decision, this Court

observed:

“31. The third juristic principle is that a

decision which is perverse or so irrational

that no reasonable person would have arrived

at the same is important and requires some

degree of explanation. It is settled law that

where:

(i) a finding is based on no evidence, or

(ii) an Arbitral Tribunal takes into account

something irrelevant to the decision which it

arrives at; or

(iii) ignores vital evidence in arriving at its

decision,

such decision would necessarily be perverse.

…

42.2. (b) A contravention of the Arbitration

Act itself would be regarded as a patent

illegality — for example if an arbitrator

gives no reasons for an award in

contravention of Section 31(3) of the Act,

O.M.P. (COMM) 149/2023 Page 16 of 17

such award will be liable to be set aside.”

40. 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.

24

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 his

jurisdiction or violating a fundamental principle of

natural justice.”

25.2 In Indian Oil Corpn. Ltd. v. Shree Ganesh Petroleum,

(2022) 4 SCC 463 held as under:

“43. An Arbitral Tribunal being a creature of contract,

is bound to act in terms of the contract under which it

is constituted. An award can be said to be patently

illegal where the Arbitral Tribunal has failed to act in

terms of the contract or has ignored the specific terms

of a contract.”

25.3 In State of Chhattisgarh v. SAL Udyog (P) Ltd., (2022) 2

SCC 275 held as under:

“26. ………. We are, therefore, of the view that failure

on the part of the learned sole arbitrator to decide in

accordance with the terms of the contract governing the

parties, would certainly attract the “patent illegality

ground”, as the said oversight amounts to gross

contravention of Section 28(3) of the 1996 Act, that

enjoins the Arbitral Tribunal to take into account the

terms of the contract while making an award. The said

“patent illegality” is not only apparent on the face of

O.M.P. (COMM) 149/2023 Page 17 of 17

the award, it goes to the very root of the matter and

deserves interference……….”

25.4 In Bharat Coking Coal Ltd. v. Annapurna Construction,

(2003) 8 SCC 154 held as under:

“22. There lies a clear distinction between an error

within the jurisdiction and error in excess of

jurisdiction. Thus, the role of the arbitrator is to

arbitrate within the terms of the contract. He has no

power apart from what the parties have given him

under the contract. If he has travelled beyond the

contract, he would be acting without jurisdiction,

whereas if he has remained inside the parameters of the

contract, his award cannot be questioned on the ground

that it contains an error apparent on the face of the

record.”

(emphasis supplied)

25. For the reasons mentioned above, the impugned arbitral award

is set aside. Pending application is also disposed of.

AVNEESH JHINGAN , J.

FEBRUARY 02, 2026

‘JK’

Reportable:- Yes