2026:MHC:9381

IN THE HIGH COURT OF JUDICATURE AT MADRAS

Reserved on : 17.02.2026

Pronounced on : 06.03.2026

CORAM:

THE HONOURABLE MR. JUSTICE C.V.KARTHIKEYAN

AND

THE HONOURABLE MR. JUSTICE K.KUMARESH BABU

OSA.No. 301 of 2020

OPG Power Generation Pvt. Ltd.,

No.6, Sardar Patel Road

Guindy, Chennai – 600 032. ... Appellant

Vs.

Shree Karthik Papers Ltd.,

25, 50 Feet Road

Krishnaswamy Nagar,

Ramanathapuram,

Coimbatore – 641 045. ... Respondent

PRAYER: Appeal filed under Order 36 Rule 1 of O.S. Rules read with

Clause 15 of Letters Patent Appeal and Section 37 of the Arbitration and

Conciliation Act, 1996, against the order dated 19.08.2020 in O.P.No. 353 of

2020 passed by his Lordship Hon'ble Mr.Justice M.Sundar.

***

For Appellant: Mr. P.Vinod Kumar

for M/s. J.Sagar Associates

https://www.mhc.tn.gov.in/judis

2

For Respondent : Mr. M.Krishnappan

Senior Counsel

for Ms. R.Swarnalatha

JUDGMENT

(Order of the Court was made by C.V.KARTHIKEYAN, J.)

The petitioner in O.P.No. 353 of 2020 which had been filed under

Section 34 of the Arbitration and Conciliation Act, 1996, aggrieved by the

order dated 19.08.2020 of the learned Single Judge of this Court, is the

appellant herein.

2. O.P.No. 353 of 2020 had been filed to set aside an arbitral award

dated 31.01.2020 passed by the sole arbitrator. The respondent herein, Shree

Karthik Papers Ltd., at Coimbatore, had filed a claim petition under Section

8(1) of the Arbitration and Conciliation Act, 1996 seeking to refer to

arbitration the disputes which had arisen with regard to an agreement dated

18.04.2018 entered into by them with the appellant herein, OPG Power

Generation Pvt. Ltd. The agreement dated 18.04.2018 was a power supply

agreement for a period of three years. The appellant, OPG Power Generation

Pvt. Ltd., was the supplier of the electricity and the respondent herein Shree

Karthik Papers Ltd., was the consumer.

3. In the agreement, the tariff had been set out for one year. Monthly https://www.mhc.tn.gov.in/judis

3

bills had been raised computing the month from 28

th

to 27

th

of the

succeeding month. The respondent had to effect payment within a period of

7 days from the date of the bill raised.

4. It had been contended that the bill for the month 28.08.2018 till

27.09.2018 was raised on 01.10.2018. It was further contended that the

appellant had stopped supply of power on and from 28.09.2018. The

respondent had to procure power from TANGEDCO at a higher rate

resulting in loss. Contending that this abrupt stoppage of power was a

breach of the contract and in view of the fact that there was a clause in the

agreement to refer the disputes to arbitration, the respondent had filed a

claim petition before the arbitrator under Section 8(1) of the Act. The

respondent had laid a claim for a sum of Rs.51,55,488/- towards excess

power charges from 28.09.2018 till 23.03.2019 and also for interest on the

increased amount deposited before TANGEDCO as on 08.10.2018 as

damages and also sought interest at 12% p.a., on the said amounts from

09.10.2018 till date of realisation. The sole arbitrator passed an award on

31.01.2020 granting a sum of Rs.40,82,400/- as the amount incurred by the

respondent towards excess power charges for the period from 28.09.2018 to https://www.mhc.tn.gov.in/judis

4

23.03.2019 and also for interest on the increased amount of deposit to

TANGEDCO as damages. It was also held that the appellant was liable to

pay interest at 12% p.a., from the respective dates for payment and not from

09.10.2018 and from 29.03.2019 which was the last date for payment. It

was also held that the respondent was entitled for interest at 12% p.a., on the

sum of Rs.9,68,490/- from 23.05.2019 which was the additional security

deposit paid by the respondent to TANGEDCO.

5. Challenging this award, the appellant had filed O.P.No. 353 of

2020 under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996

to set aside the arbitral award. By order dated 19.08.2020, the learned

Single Judge of this Court had dismissed the said Original Petition,

necessitating filing of the present Appeal.

6. It is the contention of the learned counsel for the appellant that the

appellant had the right to revise the price under certain circumstances.

Accordingly, after due information, it was communicated that there would https://www.mhc.tn.gov.in/judis

5

be increase in the price from the next billing cycle which was from the 28

th

of that particular month till the 27

th

of the succeeding month. It had been

further contended that the appellant was to supply and the respondent was to

purchase 0.216 lakhs unit of electricity per day. The agreement also provided

that if the respondent failed to pay the bill within 7 days from the issuance of

the bill, the appellant was entitled to terminate the agreement or reduce or

even stop the allotment and supply of electricity. If payments were made

with delay, then interest at the rate of 3% per month should be paid. It was

contended that the cost of imported coal which was the fuel used for

generation of electricity increased owing to various factors. After intimating

the respondent, the appellant increased the price in accordance with Clause

11.8 of the agreement. However, the respondent had raised a protest. With

respect to the billing period 28.08.2018 to 27.09.2018, the appellant had

raised the invoice dated 01.10.2018 at the existing tariff for a sum of

Rs.35,26,360/-. It was contended that the respondent did not effect payment

within the stipulated period. By a communication dated 25.10.2018, the

appellant had called upon the respondent to remit the payment. Since the

payment was not received, the appellant did not supply any power to the

respondent for the subsequent billing period, 28.09.2018 to 27.10.2018. The https://www.mhc.tn.gov.in/judis

6

appellant also raised a debit note on 31.10.2018 for a sum of Rs.73,039/- for

the delayed payment for the months of July to September 2018. There were

exchange of correspondences between the parties. The appellant then issued

a notice under the Insolvency and Bankruptcy Code 2016, on 07.12.2018. It

was contended that the arbitration proceedings were initiated in response to

the issuance of such notice.

7. The allegation that the appellant had increased the price of the

supply of power was denied. It had been further contended that the appellant

had put the respondent on notice that if the amount raised in the bill were

paid, then there would not be stoppage of supply of power. The appellant

claimed that they acted in accordance with the rights granted under the

agreement.

8. The learned arbitrator after examining the rival contentions had

held that it was a fact that the respondent had purchased power at higher rate

from TANGEDCO. It was also held that the appellant had stopped supply of

power even before the expiry of the 7 days time granted to effect payment of https://www.mhc.tn.gov.in/judis

7

the bill amount raised. The learned arbitrator therefore, on consideration of

all the facts and circumstances granted an award as stated above.

9. The learned Single Judge held that the cessation of supply of

power by the appellant on 28.09.2018 was not justified and that this itself

was a breach of the agreement. It was also found that there was no

explanation for the subsequent period wherein there had been enhancement

of the tariff. It was held that the appellant did not have a vested right to

increase the tariff. It was finally held that no ground had been made to

interfere with the award and the petition was therefore dismissed.

10. Heard Mr.P.Vinod Kumar, learned counsel for M/s. J.Sagar

Associates for the appellant and Mr.M.Krishnappan, learned Senior Counsel

for Ms. R.Swarnalatha, learned counsel for the respondent.

11. The point which arises for consideration are:

(i) whether grant of damages on account of

non supply of electricity was justified when it was

held by the arbitrator that the appellant was

entitled to stop supply of electricity on the ground

of non payment of the invoices by the respondent. https://www.mhc.tn.gov.in/judis

8

12. The Appellant, OPG Power Generation Pvt. Ltd., and the

respondent Shree Karthik Papers Ltd., had entered into a power sharing

agreement by which the appellant agreed to supply power to the respondent

on the terms as provided in the said agreement. In the agreement, it had been

provided that the appellant, who was termed as the 'generator' had offered to

the respondent,who was termed as 'member consumer' a portion of power

generated from the power plant of the appellant from the delivery point and

from the date of enhancement of supply. In the said agreement, the Billing

Period had been defined as follows:-

“”Billing period” means the period for

which commercial invoice will be raised by the

GENERATOR for allotment of the contracted

capacity and is the period between any two

successive Meter Reading Dates. The first Billing

Period shall commence with the date of

commencement of supply of power and end with

the immediately following Meter Reading Date.”

13. Due date had been defined as follows:- https://www.mhc.tn.gov.in/judis

9

“”due date” means within Seven days from the Billing

Date including the Billing Date, in the case of a

commercial invoice, and seven days from the date

specified in a Supplementary invoice, as the case may

be.”

14. It had been covenanted that after the date of commencement of

supply, the contracted capacity would be 0.216 lakh units per day. It was

further provided that during any billing period, the appellant shall allot

power to the respondent which may be equal to or less than the contracted

supply. It had been further provided as follows:-

“Further, any failure by the Generator to not

supply / allot power to the Member Consumer due

to any fault or negligence of the Member

Consumer or this representatives and Officials

(including the provision of incorrect or late

documentation) will not constitute as a default of

any provisions of this Agreement by the Generator

and will not entitle the member Consumer for any

compensation/damages nor entitle the Member

Consumer to terminate this Agreement.” https://www.mhc.tn.gov.in/judis

10

15. It had been further provided as follows:-

“3.8. If the member consumer defaults in making

payments by the Due Date of any of the invoice(s) raised

by the Generator and/or falls to consume the Contracted

Capacity in any Billing Period, whether in part or in full,

then the GENERATOR may at its sole option and

discretion, without any intimation to the Member

Consumer, with immediate effect:

(a) Transfer or cause the Escrow Agent to transfer

the Equiry Shares (in part of in full, as determined by the

Generator in accordance with the Electricity Rules,

2005) held by the Member Consumer to any person,

and /or

(b) Terminate this Agreement, and/or

(c) Reduce the allotment and supply of the

Contracted capacity, or cease the allotment and supply of

the contracted capacity to the Member Consumer, and /

or

(d) Invoke the Letter of Credit and the Additional

Letter of credit.”

16. There were separate covenants referring to billing and payment.

It was agreed as follows:- https://www.mhc.tn.gov.in/judis

11

“a. In the last day of every Billing Period,

the Commercial Invoice for that Billing Period for

the entire Contracted Capacity.”

17. With respect to the delay in effecting payment, the parties had

agreed as follows:-

“The Member Consumer shall make payments on

or before the Due Date of any invoice(s) issued by

the GENERATOR either by Demand Draft payable

at Chennai or by RTGS. All charges associated

with any payment are to be borne by the Member

Consumer. The account details for the payment

shall be specified to the Member Consumer by the

GENERATOR (“Designated Account”). The

Member Consumer shall notify the Generator of

its payment of any invoice(s) into the Designated

Account on the same day of payment. In the event

of delay in payment of any invoice by the Member

Consumer beyond its Due Date, the Member

Consumer shall be liable to pay to the

GENERATOR interest at the rate of 3% p er month

on the amount of outstanding payment on a day to

day basis from the Due Date to the day of https://www.mhc.tn.gov.in/judis

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payment.”

18. If there were any disputes, the following conditions had been

agreed upon:-

“4.6.1 If the Member Consumer does not

dispute in writing a invoice raised by the

GENERATOR within (seven) days of receiving it,

such invoice, issue a notice (“Bill Dispute

Notice”) to the GENERATOR setting out:

(i) the details of the disputed amount with

calculation and basis for the dispute

(ii) its estimate of what the correct amount

should be; and

(iii) all written material in support of its

claim.”

19. The respondent had also undertaken as follows:-

“To make payments against all invoices, to

the GENERATOR on or before the Due date.”

20. It was further agreed that the agreement shall be in force till https://www.mhc.tn.gov.in/judis

13

31.03.2021. It had been finally covenanted by the parties as follows:-

“No variation, waiver or modification of any of the

terms of this Agreement shall be valid unless reduced to

writing and signed by both the parties.”

21. On 19.09.2018, just about 5 months from the date of entering into

the aforementioned agreement, the appellant had forwarded an E-mail to the

respondent giving the revised tariff dated 28.09.2018. This was replied to by

the respondent by E-mail dated 24.09.2019. They had a raised protest that

this increase in the price was not acceptable to them. It was further pointed

out that in the agreement, it had been stated that for any statutory charge, the

fuel surcharge must be borne by TANGEDCO, and would be shared in equal

proportion by both of them. A request was made not to increase the power

charges and maintain the power tariff at Rs.5.75/ per unit.

22. A further mail was forwarded by the appellant to the respondent

on 24.09.2018 which is extracted in entirety.

“Dear Sir, https://www.mhc.tn.gov.in/judis

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In line with our discussion, we once again repeat

that the schedule provided by you for the period

beginning 28

th

September, will be allotted only at the

price mentioned in our email dated 19

th

September 2018.

We request that you provide a confirmation mail

on or before 4.30 p.m on 25

th

September 2018. Please

note that if no response is received by this time, it will be

treated as irrevocable acceptance of our email dated 19

th

September, 2018.

The supply and allotment of power from your

captive power plant from 28

th

September 2018 will only

be done on the above basis.

We look forward to your long term support and

cooperation.

GPG Sales Team.”

23. An electronic communication was then sent by the respondent to

the appellant wherein they had again protested the increase in the power

tariff. https://www.mhc.tn.gov.in/judis

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24. A careful perusal of the correspondences above would show that

the appellant sought to increase the price. It had been provided in the

agreement that such increase could be resorted to only with prior notice

issued to the respondent. It is the case of the respondent that the appellant

had however escalated the tariff without any reason and without granting

opportunity to the respondent to raise a protest. The agreement also

necessitated reasons to be given for stoppage of supply of power. It had also

been agreed between the parties that the billing cycle would be from the 28

th

of a month to the 27

th

of the succeeding month. The respondent was also

given 7 days to effect payment.

25. The appellant then issued a communication on 19.09.2018

increasing the tariff with effect from 28.09.2018 from Rs.5.75 per unit to

Rs.6.15 per unit. The respondent replied that in the agreement, it had been

provided that if there was any increase in tariff by TANGEDCO or by any

statutory authority the same could be shared equally by both the respondent

and the appellant. They also pointed out that there was no increase in the

tariff by TANGEDCO and therefore, requested the appellant to maintain the https://www.mhc.tn.gov.in/judis

16

tariff at Rs.5.75 per unit. The appellant in their reply to this communication

practically threatened the respondent by stating that they would supply

power only at the increased price. The respondent were also directed to

issue a reply confirmation. It was also stated that the supply and allotment

from 28.09.2018 would only be done on the escalated price. A further

communication was issued by the respondent specifically stating that there

was no provision in the contract for the increase in the price. The respondent

then issued a further letter on 08.10.2018 stating that they would be forced to

pay additional interest to the bank and would financially suffer owing to the

refusal to supply power during the contract period. Further the deposit

maintained with TANGEDCO would be increased which would cause

substantial loss to them. The respondent enclosed a debit note quantifying

the loss and requested settlement of the same.

26. It is thus seen that on and from that date, a dispute had arisen

between the parties. The appellant had escalated the tariff rate and the

respondent had protested and had raised a demand for the damages incurred

owing to procuring power from TANGEDCO and in suffering increase in the

security deposit demanded by the TANGEDCO. https://www.mhc.tn.gov.in/judis

17

27. It was under those circumstances that the respondent had filed a

claim before the arbitrator complaining that the appellant had abruptly

stopped supplying electricity with effect from 28.09.2018, consequent to

which the respondent herein had to procure power from TANGEDCO at a

higher rate. The respondent claimed a sum of Rs.51,55,488/-. In the

statement of defence, the appellant had claimed that they had intimated their

proposal to increase the price per unit in exercise of their right under Clause

11.8 of the power supply agreement.

28. Clause 11.8 provided as follows:-

“11.8 In the event of change in Law and/or

change in price of fuel for the power plant or

change in transmission or wheeling losses and

charges, the GENERATOR shall have right to

revise terms of this Agreement especially relating

to Price, mode, method, billing and Contribution

towards energy.”

29. It is seen from the above that when there was a change in law or

change in price of fuel or change in transmission, the appellant shall have

the right to revise the terms of the agreement relating to price and on other https://www.mhc.tn.gov.in/judis

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aspects.

30. The learned Arbitrator in his award had specifically noted that

there was no communication about increase in the landed cost of coal

warranting upward reversion of tariff. The Arbitrator had also noted that the

contract permits stoppage of supply due to non payment. But however, he

observed that the dispute had arisen only because the appellant had

unilaterally raised the tariff on 19.09.2018. It had been further observed that

the claim for increase in the landed cost of coal was only an after thought. It

was further observed that the appellant had not produced any document to

show that there was an increase in the cost of generation of coal. The

arbitrator finally held that the appellant had committed breach of the Power

Supply Agreement and that the respondent would therefore be entitled to

claim damages / compensation. It was also held that the appellant had not

produced any material justifying increase in tariff. It was further held that

the appellant cannot unilaterally increase the tariff from Rs.5.75 to Rs.6.15

per unit. The Arbitrator then examined the quantity of the power purchased

from TANGEDCO which was to a sum of Rs.6,53,529/- and further included

the power purchased in the months from September 2018 till March 2019. https://www.mhc.tn.gov.in/judis

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31. The learned counsel for the appellant argued that the Tribunal had

stated that there was justification in increase in the tariff. However, this

observation must be viewed from a wider context. It was only an

observation as the Arbitrator had examined Clause 11.8 and stated that there

could be increase in the power tariff only when there was consequential

increase in the fuel price. It was also observed that there were no material

produced to justify increase in the tariff. It was observed that the appellant

gave, alternate reasons for the increase in the power tariff.

32. The learned Single Judge in the order now under appeal had held

that cessation of supply of power was a breach committed by the appellant.

It was also found that even if there could be a right to enhance the tariff, the

same could be done only after due communication to the respondent.

33. The learned counsel for the appellant had placed reliance on the

following Judgments:-

(1) Timbola Irmaos Ltd., Vs. Jorge Anibal Matos, (1977) 3 SCC

474, wherein paragraph Nos. 19 and 20 are as follows:- https://www.mhc.tn.gov.in/judis

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“19. Coming now to the second question,

we find that the findings of fact recorded by the

Judicial Commissioner are unexceptionable.

Firstly, it was found that, although, under the

contract, the defendants-respondents could load

iron ore, at any time during 24 hours, which

included the night, yet, the defendants were

prevented from doing so owing to the failure of the

plaintiff to provide either sufficient lighting or

enough winches to enable due performance of the

contract. Secondly, it was admitted that the

appellant never opened a Letter of Credit with the

named bank by 27th January, 1954, as promised by

it. Thirdly, the delay in loading was held to be due

to the fault of the company. The Judicial

Commissioner rightly concluded that the company

had not discharged its own part of the contract so

that it could not claim demurrage or damages.

Indeed, it was found that the company did not have

to pay any demurrage at all to the shippers for

delayed departure.

20. learned Counsel for the appellant relied

strongly on the following terms in the contract of

23rd January, 1954: https://www.mhc.tn.gov.in/judis

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Demurrage (if any) in loading payable by Seller at

the rate of US $ 800.00 per running day fraction of

day pro rata. Buyers to pay despatch money at half

the demurrage rate for all time saved in loading.

Payment either way in Portuguese Indian rupee

currency at the rate of exchange of Rs. 476/- for

US $100.00" The contention was that this created

an absolute liability to pay for delay in loading

irrespective of whether the company had to pay the

shippers any demurrage. It was urged that the

liability was upon the seller irrespective of whether

such payment had to be made to the shipping

company or not. We think that the demurrage could

not be claimed when the delay in loading was due

to the default of the respondents themselves. It is

apparent that the basis upon which the agreement

to pay demurrage rested was that the appellant will

afford proper facilities for loading. When the

appellant itself had committed breaches of its

obligations, it is difficult to see how the

respondents could be made responsible for the

delay in loading. We think that the Judicial

Commissioner had rightly disallowed this part of

the claim.”

34. The facts in the instant case are distinguishable on the ground that https://www.mhc.tn.gov.in/judis

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the defendants therein were prevented from loading iron ore owing to the

failure of the plaintiff to provide sufficient lighting or enough winches to

enable due performance of the contract.

35. In the instant case, the breach first commenced with the cessation

of supply of power, placing reliance on clause 11.8 of the agreement which

clause was not directly attracted as an alternate reason was given that the

respondent had not paid the bills within the time.

36. The observation in the Judgment that “when the appellant itself

had committed breaches of its obligations, it is difficult to see how the

respondents could be made responsible” would be applicable to the

appellants in this case owing to their initial breach of cessation of supply of

power.

(2) Pulavarti Sitaramamurthy Vs. Bangaru Sobhanadri, (1950) 63

LW 947 (Mad) with reference to the following passage:

“Unfortunately, the learned Sub-Judge

considered the surrounding circumstances and https://www.mhc.tn.gov.in/judis

23

decided the case against the defendants largely

because the price of gunnies had risen and the

defendants would have profited by not delivering

the bales. On this conclusion, he held the

defendants liable for breach, as they had a motive

to commit a breach, and awarded damages of Rs.

631-4-0 against them on the difference in price

between the market rate on the delivery dates and

the agreed contract rates. It is obvious that he

erred in doing so. Motive, by itself, will not do in

law, Civil or Criminal. Many a man who has a

strong motive to commit a murder may not commit

it, and cannot be convicted of murder merely

because he had a motive to commit it. So too, a

man having merely a motive to commit a breach of

contract cannot be mulcted in damages if he is not

proved to have committed a breach. The Court has

first to concentrate on the law, and then only on

the results of its findings on law .”

37. In the instant case, as consistently stated, the initial breach was on

the part of the appellant, who could have deferred the increase in the tariff

and could have increased the same after discussions with the respondent.

38. In the instant case, as repeatedly pointed out, the initial breach https://www.mhc.tn.gov.in/judis

24

was only by the appellant and not by the respondent.

(3) Sikkim Subba Associates Vs. State of Sikkim, (2001) 5 SCC 629

wherein paragraph No. 14, it had been held as follows:

“14. It is also, by now, well settled that an

Arbitrator is not a conciliator and his duty is to

decide the disputes submitted to him according to

the legal rights of the parties and not according to

what he may consider it to be fair and reasonable.

Arbitrator was held not entitled to ignore the law

or misapply it and cannot also act arbitrarily,

irrationally, capriciously or independently of the

contract (See 1999(9) SCC 283 : Rajasthan State

Mines and Minerals Ltd. v. Eastern Engineering

Enterpresies & Anr.). If there are two equally

possible or plausible views or interpretations, it

was considred to be legitimate for the Arbitrator to

accept one or the other of the available

interpretations. It would be difficult for the Courts

to either exhaustively define the ward `misconduct'

or likewise enumerate the line of caes in which

alone interference either could or could not be https://www.mhc.tn.gov.in/judis

25

made. Courts of Law have a duty and obligation in

order to maintain purity of standards and preserve

full faith and credit as well as to inspire confidence

in alternate dispute redressal method of

Arbitration, when on the face of the Award it is

shown to be based upon a proposition of law

which is unsound or findings recorded which are

absurd or so unreasonable and irrational that no

reasonable or right thinking person or authority

could have reasonably come to such a conclusion

on the basis of the materials on record or the

governing position of law to interfere. So far as the

case before us is concerned, the reference to the

Arbitrator is found to be a general reference to

adjudicate upon the dispute relating to the alleged

termination of the agreement by the State and not a

specific reference on any particular question and

consequently, if it is shown or substantiated to be

erroneous on the face of it, the award must be set

aside.”

39. In the instant case, the arbitrator and also the learned Judge

examining the petition under Section 34 of the Act had only proceeded on

the interpretation of Clause 11(8) and 11(4) of the agreement between the

parties and both had held that there was no justification for the increase in https://www.mhc.tn.gov.in/judis

26

the price and that there was no justification for the cessation of supply of

power. It is also to be noted that in the claim petition, the appellant had very

specifically stated the reasons for the amounts claimed by them. The award

of the Tribunal does not suffer for non consideration of relevant points.

(4) Kanchan Udyog Ltd., Vs. United Spirits Ltd., (2017) 8 SCC 237

wherein paragraph No. 17 is as follows:

“17. Considering the principle of causation

to award loss of anticipated profits by breach of

agreement, it was held in the facts of the case, that

it was not the result of the breach, but was a

composition of various factors like lack of brand

acceptance, financial crunch of the appellant and

lack of adequate infrastructure by it. The claim for

damages was therefore, remote as there was not

even a speculated chance for making profit by the

appellant. ”

40. In the instant case, the claim for damages was based on the

increased tariff paid to TANGEDCO and the increased interest paid owing to

the increase in the security deposit to TANGEDCO. The respondent had

given the details of the loss incurred every month and therefore, it cannot be https://www.mhc.tn.gov.in/judis

27

stated that the claim for damages was remote. It was proximate and directly

related to the cessation of supply of power by the appellant.

(5) PSA Sical Terminals Pvt. Ltd., Vs. Board of Trustees, V.O.C.

Port Trust, (2023) 15 SCC 781 wherein paragraph Nos. 41 and 42 are as

follows:

“41. A decision which is perverse, though would

not be a ground for challenge under “public policy of

India”, would certainly amount to a patent illegality

appearing on the face of the award. However, a finding

based on no evidence at all or an award which ignores

vital evidence in arriving at its decision would be

perverse and liable to be set aside on the ground of

patent illegality.

42. To understand the test of perversity, it will

also be appropriate to refer to paragraph 31 and 32

from the judgment of this Court in Associate Builders

Vs. DDA (2015) 2 SCC (Civ) 204, which read thus:

“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: https://www.mhc.tn.gov.in/judis

28

(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.

32. A good working test of perversity is

contained in two judgments. In Excise and Taxation

Officer-cum-Assessing Authority v. Gopi Nath & Sons

[1992 Supp (2) SCC 312], it was held: (SCC p. 317,

para 7)

“7. … It is, no doubt, true that if a finding of fact

is arrived at by ignoring or excluding relevant material

or by taking into consideration irrelevant material or if

the finding so outrageously defies logic as to suffer

from the vice of irrationality incurring the blame of

being perverse, then, the finding is rendered infirm in

law.”

In Kuldeep Singh v. Commr. of Police [(1999)

2 SCC 10: 1999 SCC (L&S) 429], it was held: (SCC p.

14, para 10) https://www.mhc.tn.gov.in/judis

29

“10. A broad distinction has, therefore, to be

maintained between the decisions which are perverse

and those which are not. If a decision is arrived at on

no evidence or evidence which is thoroughly unreliable

and no reasonable person would act upon it, the order

would be perverse. But if there is some evidence on

record which is acceptable and which could be relied

upon, howsoever compendious it may be, the

conclusions would not be treated as perverse and the

findings would not be interfered with.”

'

41. We are of the opinion that neither the award of the arbitrator nor

the order of the learned Single Judge can be termed as perverse. The

respondent had laid a claim for the additional loss incurred by them for

having procured power from TANGEDCO since the appellant had cased to

supply power.

42. Both the arbitrator and the learned Single Judge had examined

who was first in breach of the agreement and had come to an uniform

conclusion that it was the appellant, who had initially raised the tariff and

later exercising right under Clause 11.8 had stopped supply. The appellant

claimed later that they had stopped supply only because the respondent

failed to pay the bill within the time period stipulated. But again, even if the https://www.mhc.tn.gov.in/judis

30

bill had not been paid within the time, the appellant could not and should not

have stopped supply of power without following the guidelines under clause

11.4 of the agreement. These issues have been discussed by both the

Arbitrator and by the learned Single Judge and we hold that both the award

and the order can never be termed as perverse.

43. The learned Senior Counsel for the respondent had placed

reliance on the Judgment of the Hon'ble Supreme Court reported in Civil

Appeal No. 2153 of 2010 [M/s. Dyna Technologies Pvt. Ltd., Vs. M/s.

Crompton Greaves Ltd.,] with specific reference to paragraph No. 26 which

is as follows:-

“26. There is no dispute that Section 34 of

the Arbitration Act limits a challenge to an award

only on the grounds provided therein or as

interpreted by various Courts. We need to be

cognizant of the fact that arbitral awards should

not be interfered with in a casual and cavalier

manner, unless the Court comes to a conclusion

that the perversity of the award goes to the root of

the matter without there being a possibility of

alternative interpretation which may sustain the https://www.mhc.tn.gov.in/judis

31

arbitral award. Section 34 is different in its

approach and cannot be equated with a normal

appellate jurisdiction. The mandate under Section

34 is to respect the finality of the arbitral award

and the party autonomy to get their dispute

adjudicated by an alternative forum as provided

under the law. If the Courts were to interfere with

the arbitral award in the usual course on factual

aspects, then the commercial wisdom behind

opting for alternate dispute resolution would

stand frustrated. ”

44. The scope of interference with an award is extremely narrow. If

any error has been committed by the arbitrator unless they are found to be

perverse, the award cannot be set aside. The award must be held to be

contrary to the basic principles under which the agreement had been entered

into and should suffer from patent illegality or perversity.

45. A careful perusal of the award and also the order of the learned

Single Judge in the instant case does not give rise to any such ground to lead https://www.mhc.tn.gov.in/judis

32

us to such a conclusion.

46. We hold that the order of the learned Single Judge and the award

of the arbitrator require no interference. We therefore dismiss the Appeal

with costs.

47. Accordingly, this Appeal stands dismissed with costs.

[C.V.K., J.] [K.B., J.]

06.03.2026

Index: Yes/No

Internet:Yes/No

Neutral Citation: Yes/No

vsg

Note: The respondent is at liberty to seek permission to withdraw the amount deposited

by the appellant consequent to interim directions given by this Court at the time when the

appeal came up for admission by filing a memo. On filing of such memo, the Registrar

General may recall the deposit and pay the amount together with accrued interest directly

to the respondent. In the memo, the Bank details of the respondent may also be given by

the respondent.

C.V.KARTHIKEYAN, J.

AND

K.KUMARESH BABU, J.

vsg

Pre-Delivery Judgment made in https://www.mhc.tn.gov.in/judis

33

OSA.No. 301 of 2020

06.03.2026 https://www.mhc.tn.gov.in/judis