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2026:CGHC:21871-DB

AFR

HIGH COURT OF CHHATTISGARH AT BILASPUR

ARBA No.67 of 2025

The date when

the judgment is

reserved

The date when the

judgment is

pronounced

The date when the judgment

is uploaded on the website

Operative Full

17.04.2026 11.05.2026 -- 11.05.2026

1 R. K. Transport Company A Sole Proprietary Firm Having Its Principal

Place of Business At Navkar Parisar, Pulgaon Naka, District Durg, CG,

Acting in Premises Through its Sole Proprietor Shri R.K. Jain, S/O Late

Harilal Jain, Resident Of Pulgaon Naka, Navkar Parisar, Durg,

Chhattisgarh

Appellant (s)

versus

1 - M/s Bharat Aluminum Company Limited (BALCO) A Company

Incorporated Under The Provisions Of Companies Act, 1956 Having Its

Registered Office At Core No.6, Scope Complex, Lodhi Road, New

Delhi and a Plant Factory At Korba Town, Tehsil And Dist Korba In The

State Of Chhatisgarh.

Respondent(s)

For Appellant (s) :Mr. Prafull N. Bharat, Senior Advocate along with

Mr. B. L. Parakh, Mr. Nikhil Parakh, Ms. Mitisha

Kotecha and Mr. Sanjeevi Sheshadri, Advocates

For Respondent(s) :Mr. Ratan Singh, Senior Advocate along with Mr.

Rishabh Garg, Akshay Gandotra and Ms. Arya

Mittal, Advocates

2

Hon’ble Smt. Justice Rajani Dubey

Hon’ble Shri Justice Radhakishan Agrawal

CAV Judgment

Per Rajani Dubey. J.

1.The present appeal has been preferred by the appellant against

the judgment dated 08.09.2025 passed by the learned

Commercial Court, District Judge Level, Raipur (C.G.) in ARB

MJC No.17/2022, whereby the learned Commercial Court set

aside the arbitral award dated 09.04.2022 passed by the learned

Sole Arbitrator, whereby the claim of the claimant/appellant was

allowed.

2.Brief facts of the case are that Bharat Aluminum Company

Limited ( BALCO) and R. K. Transport Company (RKTC) entered

into a contract dated 01.04.2002 for a period of one year in terms

whereof, RKTC had to mine and transport 2,00,000 Metric

Tonnes of Alumina Bauxite from Manpat, Sarguja to BALCO's

plant in Korba. During the course of performance of the contract,

the parties by mutual agreement had amended some of the

terms of the contract. The BALCO, from time to time, had offered

monetary incentive and bonus scheme for the benefit of the

RKTC, which were duly accepted and received by RKTC.

BALCO vide its letter dated 25/03/2003 set out the bauxite

mining and transportation monthly schedule for the year 2003-04,

clarifying that any additional quantity more than the monthly

schedule should be supplied only if BALCO gives written

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clearance, and bonus for supply of additional quantity above

monthly schedule will be paid only upon making of written

request. In the course of performance of contract, the RKTC

requested for a reduction/change in quality norms of the bauxite

supply The BALCO agreed to modify specification of bauxite to

47% alumina and 2.90 of silica as the limit. Further, bauxite

specification and penalty clause were amended. On 31/03/2005,

after discussions between the parties the period of contract was

extended by a further period of three months up to 30/06/2005 on

original contract's terms and conditions. In the course of time,

dispute arose between the parties and the contract was not

extended by BALCO. RKTC claimed an amount of Rs 2774.57

lacs allegedly due to it as balance payment under the subject

contract as against its legitimate claim of Rs.149.47 lacs only.

Since the dispute could not be resolved amicably, in exercise of

its power under clause 33, same was referred by BALCO for

arbitration. However, RKTC objected to the same and filed an

application under Section 11 of the Arbitration and Conciliation

Act before this Court for appointment of an Arbitrator. In the

meantime, Ld. Sole Arbitrator was appointed by BALCO, who

was agreeable to RKTC. RKTC filed its statement of claim on

08/12/2012 whereafter, the BALCO filed its statement of defense

and counter-claim on 10/04/2013 claiming Rs.5,15,26,866/- on

account of delay on the part of RKTC in carrying out its

obligations under the contract, resulting in loss to BALCO. On

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20/06/2015, before commencement of trial, the BALCO filed an

application before the Ld. Arbitrator under Section 16 of the A&C

Act contending that the claim nos.2, 8, 12, 13, 15, 19. 21 & 29 of

RKTC were beyond the scope of the contract and therefore,

beyond the jurisdiction of the Ld. Arbitrator. The Ld. Arbitrator

vide order dated 19/09/2015 held that the said application would

be decided at the time of final argument. However, same

remained undecided. In the arbitral proceedings, the

documents/vouchers relied upon by the RKTC with respect to its

claim for reimbursement of additional expenses incurred for

transportation of Bauxite were never produced before the Ld.

Arbitrator on the pretext of the documents/vouchers being very

bulky, and only certain ledger entries from April 2002 to March

2004 were filed along with the statement of claim by the RKTC.

The said ledger entries were denied by BALCO before the Ld.

Arbitrator in its statement of admission and denial. In the course

of arbitral proceedings, the BALCO had noted certain

discrepancy in the documents/vouchers produced by RKTC for

inspection Thereupon, the BALCO raised an objection with

respect to the admissibility of those ledgers and sought to

examine those documents/vouchers. The RKTC's counsel

objected to produce the vouchers for inspection of BALCO. The

Ld. AT directed the claimant/RKTC to inform the AT as well as the

BALCO as to when the documents will be available, within 3

weeks. Thereafter, the RKTC sought time on a couple of

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occasions on the premise that the documents were voluminous

and pertain to period long back The Ld. Arbitrator vide its order

dated 07/06/2018 dismissed BALCO's objection and directed the

parties to carry out the inspection at a mutually fixed date and

venue. During eventual inspection of the documents by the

BALCO on 05/08/2018, BALCO had noted certain discrepancies

in the documents/vouchers produced by RKTC for Inspection. In

order to effectively point out those discrepancies, BALCO chose

to cross-examine the RKTC's witness Mr. Kapoor Chand Jain.

The BALCO moved an application dated 21/08/2018 before Ld.

Arbitrator to this effect. The Ld. Arbitrator vide order dated

01/11/2018 allowed BALCO's request. Subsequent to Mr. Kapoor

Chand Jain's evidence, BALCO filed an application under

Section 26 of the A&C Act seeking appointment of a Forensic

Expert for examination of documents/vouchers produced by the

RKTC, alleging that the pristine nature of documents validates

the apprehension of the BALCO that the documents did not exist

and were created only after examination was sought. No written

order was passed by the Ld. AT on the application. After RKTC's

evidence was closed, on record. BALCO sought to amend its

statement of defense and bring certain additional documents

Accordingly, it filed an application dated 12/06/2019 for

amendment of counter statement and counter claim. Along with

the said application, BALCO filed an application for bringing

additional documents on record. However, the Ld. Arbitrator vide

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its order dated 15/03/2020 dismissed the applications filed by the

BALCO on the ground that the same would tantamount to having

a de novo trial. The Ld. Arbitrator also ordered that the evidence-

in-chief of BALCO's witness, so far as it relates to pleadings

which were not a part of the statement of defense, would also not

be considered. After conclusion of evidence, written arguments

were filed by the parties and subsequently rejoinder was also

filed by the claimant. The learned Sole Arbitrator vide award

dated 09.04.2022 allowed the claims of the appellant/claimant

partially, against which the respondent filed appeal before the

learned Commercial Court and the learned Commercial Court

vide judgment dated 08.09.2025 set aside the award passed by

the learned Sole Arbitrator. Hence the present appeal has been

filed by the appellant.

3.Learned Senior counsel for the appellant submits that the Ld.

Commercial Court has exceeded its jurisdiction by re-

appreciating evidence and re-interpreting the contract. It is not

permissible to re-appreciate evidence and re-interpret the

contract. Interpretation of the contract is a matter for the

Arbitrator to determine based on evidence and communications

and an error in interpretation is not a basis for interference under

Section 34 of the Arbitration Act. A plausible view of the arbitrator

cannot be interfered with merely because an alternate view is

possible and the Court cannot convert itself into an Appellate

Court. The Arbitral Tribunal is the master of evidence and the

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findings of fact which are arrived at by the arbitrators based on

evidence on record are not to be scrutinized, as if the Court was

sitting in appeal. As long as there is material available with the

arbitrator that damages have been suffered, but it does not give

him an insight into the granular details, he is permitted the

leeway to employ honest guesswork and/or a rough and ready

method for quantifying damages. The Respondent cannot

approbate and reprobate on the validity of Ex. C/6 and by not

challenging these claims, it was estopped from raising a

challenge to Ex. C/6. The Ld. Commercial Court has not dealt

with the argument of the appellant that no claim of Ex. C/6 having

been 'without prejudice' could be entertained, as the respondent

had not examined the attendees of the meeting. In the meeting

conducted on 27 February 2006, the minutes of which were

recorded in the Ex. C/6 took place after disputes had arisen

between the parties. On 22 August 2005, RKTC issued a notice

under Section 21 of the Arbitration Act to BALCO and detailed 29

claims and sought an amount of Rs. 27,74,57,000. The claims

detailed both the quantification as also the factual basis of these

claims. The Minutes of Meeting dated 27 February 2006 were

signed on 04 March 2006 where BALCO admitted 19 of these

claims in principle. Factual admissions as to the efforts made and

difficulties faced by RKTC were made. The offer made on 23

June 2006 by BALCO for an amount of Rs.1,49,47,000 as a full

and final settlement was unacceptable to RKTC. It is to be noted

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that while this document claims to be without prejudice, a similar

mention is absent in Ex. C/6. It is settled law that merely because

a document contains a reference to negotiations or claims to be

without prejudice, it does not mean that the same cannot be

looked into or alternatively not be treated as an admission. The

document has to be seen as a whole and in the context in which

it was executed. The assertion and reliance of BALCO on Ex. C/6

was precluded by virtue of Section 81 of the Arbitration Act, which

is wholly misplaced. Section 81 is in the context of a formal

conciliation process, where parties are appearing before a third-

party conciliator in a bid to resolve disputes. In the case at hand,

Ex. C/6 was not produced in any such circumstance but is in fact

a mere minutes of meeting executed between the parties where

admissions of fact were made. Learned Senior counsel further

submits that the Ld. Commercial Court has interpreted the

contract afresh in an approach that is positively unheard of and

certainly beyond the narrow contours of the jurisdiction under

Section 34 of the Arbitration Act. The Impugned Judgment suffers

from complete non-application of mind as is evident from the fact

that it has set aside Claim No.19 having laid any challenge to the

same in the petition under Section 34 of the Arbitration Act. The

petition under Section 34 of the Arbitration Act was filed on 11

July 2022 where no challenge was made to Claim No.19 of the

Award. This aspect was conceded by BALCO in its written

arguments before the Ld. Commercial Court, however reliance

9

was placed on the challenge made in the rejoinder to Claim

No.19. The Rejoinder was filed in October 2024, well beyond the

statutory period of limitation. It is settled law that the Rejoinder

does not constitute a pleading and cannot expand a case.

Therefore, the judgment of the Ld. Commercial Court be set

aside and the award of the Arbitrator dated 09.04.2022 deserves

to be restored in its entirety and the amounts awarded therein i.e.

INR 51,33,40,100 along with interest be awarded in favour of the

appellant. Reliance has been placed on the judgments rendered

by the Hon’ble Supreme Court in the matters of UHL Power

Company Ltd vs State of Himachal Pradesh, reported in AIR

2022 SC (Supp) 1227, Associate Builders vs Delhi

Development Authority, reported in (2015) 3 SCC 49, MMTC

Limited vs Vedanta Limited, reported in (2019) 4 SCC 163,

Ramesh Kumar Jain vs Bharat Aluminum Company Limited

(BALCO), reported in 2025 INSC 1457, Chairman and MD,

NTPC Ltd vs Reshmi Constructions, Builders and

Contractors, reported in (2004) 2 SCC 663, Peacock Plywood

(P) Ltd. Vs Oriental Insurance Co. Ltd, reported in (2006) 12

SCC 673, Parsa Kente Collieries Ltd vs Rajasthan Rajya

Vidyut Utpadan Nigam Limited, reported in (2019) 7 SCC 236,

Construction and Design Services vs Delhi Development

Authority, reported in (2015) 14 SCC 263.

4.Learned Senior counsel appearing for the respondent strongly

opposes the submission made by the petitioner’s counsel and

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submits that the learned Commercial Court after appreciating the

oral and documentary evidence available on record has rightly

passed the judgment and has rightly set aside the award passed

by the learned Arbitrator. He further submits that the judgment of

the Hon’ble Apex Court in the matter of R. K. Jain (supra) does

not support the case of the appellant. The claims raised before

the learned Arbitrator in the said judgment were for extra

contractual works with no express terms governing the same but

in the present case it was not the case. In R. K. Jain (supra),

claims were primarily awarded on two basis firstly, extra works

claims were awarded as no rates were contractually agreed

between parties and secondly, idling claims for strike period were

awarded as no force majeure clause existed in contract. On both

these counts, the present case differs as rates were fixed for

each work executed and contract contained express ‘force

majeure Clause (C1.26) and prohibition clause for claims on

account of strikes (C1.26). Claim Nos.1, 2, 5, 7, 22, 23, 24 raised

before the Ld. Arbitrator are barred by express contractual

provisions. Claim No.21 admitting alleged bribery raised before

the Ld. Arbitrator are barred by law, more particularly, Section 23

of Indian Contract Act being against the public policy of India.

Claim Nos.3, 4, 6, 8, 21, 22, 23 are based on no evidence at all

and are based on self-serving tabulated charts. There is not a

single claim with respect to which evidence could not be

adduced, hence any claim decided on no evidence would be

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perverse. Learned Senior counsel further submits that the

learned Commercial Court minutely appreciated the terms and

conditions of the agreement and also rightly rejected the claims

of the appellant. The learned Arbitrator has exercised its

discretion of awarding interest as compensation to the claimant

for a claim which he never claimed. The learned Arbitrator failed

to consider the delay in proceedings at every stage. The award is

directly contrary to the law laid down in UNIBROS vs All India

Radio, reported in 2023 SCC Online SC 1366, which mandates

strict proof for claiming loss of profit and hence the grant is

patently illegal, perverse and in conflict of public policy. The

learned Arbitrator allowed the claim without any evidence

adduced by the respondent to prove its claim which is not

permissible rendering the award perverse and patently illegal.

The learned Arbitrator allowed the claim for unfinished work

without any supporting evidence. The finding that the claimant

was the agent of the respondent contractor and contractual

relationship was between them is not a reasonable interpretation

and thus the learned Arbitrator wrongly allowed the claims of the

appellant without there being any effective evidence. The learned

Commercial Court considered the evidence available on record in

its true perspective and rightly set aside the award passed by the

learned Arbitrator based on the evidence available on record,

hence no interference is required by this Court. Therefore, the

appeal is liable to be dismissed.

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Learned Senior counsel further submits that the minutes

of meeting dated 27.02.2006 were with respect to consideration

of claim subject to submission and verification of details and no

such details were ever submitted by the claimant and the

claimant relied solely on a Ex-C/6, which was not verified and

supported by any documentary evidence. The learned Arbitrator

has not considered the cross-examination of claimant witnesses

from question Nos.134 to 136 and even no proper details

regarding expenses incurred were submitted by the appellant yet

the learned Arbitrator passed the award in favour of the

appellant. Learned Senior counsel lastly submits that the rate of

interest awarded by the learned Arbitrator in favour of the

appellant is on higher side and it can be modified by the

Appellate Court and claimant did not claim the rate of interest

from the date of cause of action to the date of filing of the

statement of claim and the learned Arbitrator awarded not

claimed relief. Apart from it, the learned Arbitration Tribunal also

considered the COVID-19 crisis in favour of the appellant which it

should not have been done. Therefore, the same may kindly be

modified. Reliance has been placed on the judgment rendered by

the Hon’ble Apex Court in the matters of Ramesh Kumar Jain

vs Bharat Aluminum Company Limited (BALCO), reported in

2025 INSC 1457, ONGC Ltd vs Off-Shore Enterprises,

reported in (2011) 14 SCC 147, Pure Helium India (P) Ltd vs

Oil and Natural Gas Commission, reported in (2003) 8 SCC

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593, Executive Engineer (R& B) vs Gokul Chandra Kanungo,

reported in 2022 SCC Online SC 1336 and State of

Chhattisgarh vs Sal Udyog Pvt Ltd, reported in (2022) 2 SCC

275.

5.Heard learned counsel for the parties and perused the material

available on record.

6.It is not disputed that Bharat Aluminum Company Limited

( BALCO) and R. K. Transport Company (RKTC) entered into a

contract on 01.04.2002 for a period of one year in terms whereof,

RKTC had to mine and transport 2,00,000 Metric Tonnes of

Alumina Bauxite from Manpat, Sarguja to BALCO's plant in

Korba. The contract was extended from time to time and the

contract in question came to an end on 30.06.2005.

Subsequently, dispute arose between the parties regarding the

payment of extra work performed by the appellant and the

Arbitrator was appointed and the learned Arbitrator passed award

on 09.04.2022, against this award, the respondent BALCO filed

application under Section 34 of the Act before the learned

Commercial Court and the learned Commercial Court by

impugned judgment dated 08.09.2025 partly allowed the

application of BALCO and set aside most of the claims allowed

by the learned Arbitrator. Hence this appeal has been filed by the

appellant RKTC.

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7.It is also not disputed between the parties that pursuant to

discussion between the parties, minutes of meeting dated

27.02.2006 were signed on 04.03.2006 and on 23.06.2006 offer

was made by BALCO to appellant RKTC for an amount of

Rs.1,49,47,000/- as a full and final settlement, which was not

accepted by RKTC.

8.Before the learned Arbitration Tribunal, the appellant RKTC

examined himself as witness. It is also clear that in the present

case, meeting dated 27.02.2006 was admitted by both the parties

and all such claims of RKTC got precluded in the form of Ex-C/5.

The learned Commercial Court observed in para 77 as under:-

“77. Now, this Court shall deal with various

claims as granted by Ld. AT. Before doing so,

it would be imperative for this Court to make

it clear that discussion infra shall only be with

a view to adjudicate the challenges mounted

by BALCO under the present objection

application within the restricted domain of

Sec. 34 A&C Act. This Court does not intend

to act as an appellate court or a fact finding

court so as to delve deep into the factual

matrix of the dispute. The grant of various

claims by the Ld. AT would only be tested by

this Court in terms of the yardsticks as laid

down by Hon'ble Supreme Court in the

matter OPG Power Generation (P) Ltd.

(supra), wherein It has been enunciated as

under:-

"80. We find ourselves in agreement with

the view taken in Dyna Technologies [Dyna

Technologies (P) Ltd. v. Crompton Greaves

Ltd., reported in (2019) 20 SCC 1, paras

27-43], as extracted above. Therefore, in

our view, for the purposes of addressing

an application to set aside an arbitral

award on the ground of improper

15

or inadequate reasons, or lack of reasons, awards can

broadly be placed in three categories:

(1) where no reasons are recorded, or the reasons

recorded are unintelligible;

(2) where reasons are improper, that is, they reveal a

flaw in the decision-making process; and

(3) where reasons appear inadequate.

81. Awards falling in Category (1) are vulnerable as

they would be in conflict with the provisions of Section

31(3) of the 1996 Act. Therefore, such awards are

liable to be set aside under Section 34, unless:

(a) the parties have agreed that no reasons are to be

given, or

(b) the award is an arbitral award on agreed terms

under Section 30.

82. Awards falling in Category (2) are amenable to a

challenge on ground of impropriety or perversity,

strictly in accordance with the grounds set out in

Section 34 of the 1996 Act.

83. Awards falling in Category (3) require to be dealt

with care. In a challenge to such award, before taking

a decision the Court must take into consideration the

nature of the issues arising between the parties in the

arbitral proceedings and the degree of reasoning

required to address them. The Court must thereafter

carefully peruse the award, and the documents

referred to therein. If reasons are Intelligible and

adequate on a fair reading of the award and, in

appropriate cases, implicit in the documents referred

to therein, the award is not to be set aside for

Inadequacy of reasons. However, if gaps are such that

they render the reasoning in support of the award

unintelligible, or lacking, the Court exercising power

under Section 34 may set aside the award.

Scope of Interference with the

Interpretation/construction of a contract accorded in

an arbitral award.

84. An Arbitral Tribunal must decide in accordance

with the terms of the contract. In a case where an

Arbitral Tribunal passes an award against the terms of

16

the contract, the award would be patently illegal.

However, an Arbitral Tribunal has jurisdiction to

interpret a contract having regard to terms and

conditions of the contract, conduct of the parties

including correspondences exchanged, circumstances

of the case and pleadings of the parties. If the

conclusion of the arbitrator is based on a possible

view of the matter, the Court should not Intefere [ See:

SAIL v. Gupta Brother Steel Tubes Ltd., (2009) 10

SCC 63 (2009) 4 SCC (Civ) 16; Pure Helium India (P)

Ltd. v. ONGC, (2003) 8 SCC 593; McDermott

International Inc. v. Burn Standard Co. Ltd., (2006) 11

SCC 181; MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC

163: (2019) 2 SCC (Clv) 293]. But where, on a full

reading of the contract, the view of the Arbitral

Tribunal on the terms of a contract is not a possible

view, the award would be considered perverse and as

such amenable to Interference [South East Asla

Marine Engg. & Constructions Ltd. v. Oil India Ltd.,

(2020) 5 SCC 164: (2020) 3 SCC (Clv) 1]."

Thus, it is clear that while observing the Hon’ble Apex

Court’s guidelines, the learned Commercial Court re-appreciated

the evidence of parties in terms of contract and also overturned

the finding of learned Arbitration Tribunal.

9.The Hon’ble Apex Court in Ramesh Kumar Jain (supra) held in

paras 27 to 37 as under:-

“27. The Arbitration and Conciliation Act, 1996 avows

to provide a speedy, cost-effective & efficacious mode

of alternative dispute resolution with a policy of

minimal judicial intervention. The same is apparent

from the legislative intent explicitly mandated under

section 5 of A&C Act which envisages an embargo

upon the judiciary to interfere in arbitral proceedings

save in circumstance expressly stipulated under Part I

of the Act. Hence, it is clear that judicial interference is

circumscribed with only exception being the statutorily

mandated remedies which we find under section(s) 34

and 37 of the A&C Act.

28. The bare perusal of section 34 mandates a narrow

lens of supervisory jurisdiction to set aside the arbitral

17

award strictly on the grounds and parameters

enumerated in sub-section (2) & (3) thereof. The

interference is permitted where the award is found to

be in contravention to public policy of India: is contrary

to the fundamental policy of Indian Law, or offends the

most basic notions of morality or justice. Hence, a

plain and purposive reading of the section 34 makes it

abundantly clear that the scope of interference by a

judicial body is extremely narrow. It is a settled

proposition of law as has been constantly observed by

this court and we reiterate, the courts exercising

jurisdiction under section 34 do not sit in appeal over

the arbitral award hence they are not expected to

examine the legality, reasonableness or correctness of

findings on facts or law unless they come under any of

grounds mandated in the said provision. In ONGC

Limited. v. Saw Pipes Limited14, this court held that

an award can be set aside under Section 34 on the

following grounds: "(a) contravention of fundamental

policy of Indian law; or (b) the interest of India; or (c)

justice or morality, or (d) in addition, if it is patently

illegal."

29. When it comes to section 37 of the A&C Act it

provides for a limited appellate remedy against an

order either setting aside or refusing to set aside an

arbitral award passed by civil court in exercise of its

power under section 34. This court in MMTC Ltd. v.

Vedanta Ltd.15, at Paragraph 14 observed that

interference with an order made under section 37

cannot travel beyond the restrictions laid down in

section 34. Further in Konkan Railway Corporation

Limited v. Chenab Bridge Project Undertaking16 this

court at Paragraph 18 observed that the scope of

appellate scrutiny under section 37 is necessarily co-

extensive with the parameters mandated under

section 34 of the Act and hence the said provision

does not enlarge the jurisdiction of the appellate court.

Even this court has observed in M/s. Hindustan

Construction Company Limited v. M/s. National

Highways Authority of India17, wherein one of us

(Justice Aravind Kumar) was part of the bench at

Paragraph 26 that the standard of scrutiny of an

arbitral award is very narrow and it is not the judicial

review of an award. Further in Paragraph 27 it was

observed that awards which contains reasons,

especially when they interpret contractual terms,

ought not to be interfered with lightly. This court has

also observed in Larsen Air Conditioning and

Refrigeration Company v. Union of India and Ors.18 at

18

Paragraph 15 that the scope of interference in

exercise of appellate power under section 37 is even

narrower to review the findings of the awards, if it has

been upheld or substantially upheld under section 34.

Hence, it is very well settled that arbitral awards are

not liable to be set aside merely on the ground of

erroneous in law or alleged misappreciation of

evidence and there is a threshold that the party

seeking for the award to be set aside has to satisfy,

before the judicial body could enter into the realm of

exercising its power under section(s) 34 & 37. It is

also apt and appropriate to note that re-assessment or

re-appreciation of evidence lies outside the contours

of judicial review under section(s) 34 and 37. This

court in Punjab State Civil Supplies Corporation

Limited & Anr. v. M/s. Sanman Rice Mills & Ors.19 at

Paragraph 12 observed that even when the arbitral

awards may appear to be unreasonable and non-

speaking that by itself would not warrant the courts to

interfere with the award unless that unreasonableness

has harmed the public policy or fundamental policy of

Indian law. It might be a possibility that on re-

appreciation of evidence, the courts may take another

view which may be even more plausible but that also

does not leave scope for the courts to reappraise the

evidence and arrive at a different view. This court in

Batliboi Environmental Engineers Limited v. Hindustan

Petroleum Corporation Limited & Anr.20 held that the

arbitrator is generally considered as ultimate master of

quality and quantity of evidence. Even an award which

is based on little or no evidence would not be held to

be invalid on this score. At times, the decisions are

taken by the arbitrator acting on equity and such

decisions can be just and fair therefore award should

not be overridden under section 34 and 37 of the A&C

Act on the ground that the approach of the arbitrator

was arbitrary or capricious.

30. Hence, in the light of the aforesaid discussion, we

would deal with the submissions made by the learned

senior counsels on behalf of the parties. But there is

yet another aspect that warrants our attention before

delving into the analysis of submission and that is the

setting aside of the impugned order by the High Court

by placing reliance on the ground of "patent illegality"

therefore, it becomes imperative to understand the

true import of the said term before we move further.

31. Prior to 2015 amendment, the ground of "patent

illegality" emerged as result of judicial interpretation in

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ONGC Ltd. (supra) while interpreting "public policy"

mandated under section 34(2)(b)(ii) of A&C Act

wherein this court for the first time read patent

illegality as a sub-ground to set aside the award on

the broader purport of "public policy". In Paragraph 22

of the decision this court observed: Therefore, in a

case where the validity of award is challenged, there

is no necessity of giving a narrower meaning to the

term "public policy of India" On the contrary, wider

meaning is required to be given so that the "patently

illegal award" passed by the arbitral tribunal could be

set aside. This court went on to illustrate what would

constitute patent illegality at Paragraph 22 and we

extract the same for easy reference:

"Take for illustration a case wherein there is a specific

provision in the contract that for delayed payment of

the amount due and payable, no interest would be

payable, still however, if the arbitrator has passed an

award granting interest, it would be against the terms

of the contract and thereby against the provision of

Section 28(3) of the Act which specifically provides

that "Arbitral Tribunal shall decide in accordance with

the terms of the contract". Further, where there is a

specific usage of the trade that if the payment is made

beyond a period of one month, then the party would

be required to pay the said amount with interest at the

rate of 15 per cent. Despite the evidence being

produced on record for such usage. if the arbitrator

refuses to grant such interest on the ground of equity,

such award would also be in violation of sub-sections

(2) and (3) of Section 28, Section 28/2) specifically

provides that the arbitrator shall decide ex aequo et

bono (according to what is just and good) only if the

parties have expressly authorised him to do so.

Similarly, if the award is patently against the statutory

provisions of substantive law which is in force in India

or is passed without giving an opportunity of hearing

to the parties as provided under Section 24 or without

giving any reason in a case where parties have not

agreed that no reasons are to be recorded, it would be

against the statutory provisions. In all such cases, the

award is required to he set aside on the ground of

"patent illegality"."

32. In Associate Builders v. Delhi Development

Authority21, this court attempted to filter out what

contemplated patent illegality in paras 42.1 to 42.3

under the following three subheads: firstly,

contravention of the substantive law of India: secondly,

20

contravention of the Arbitration Act itself and thirdly,

contravention of Section 28(3) of the Arbitration Act

which mandates the Arbitral Tribunal to decide the

case in accordance with the terms of the contract,

taking into account the usages of the trade applicable

to the transaction. With regard to the third sub-head

Justice R.F. Nariman, observed by stating that: if an

arbitrator construes a term of the contract in a

reasonable manner, it will not mean that the award

can be set aside on this ground. Construction of term

of a contract is primarily for an arbitrator to decide

unless the arbitrator construes the contract in such a

way that it could be said to be something that no fair

minded or reasonable person could do.

33. In 2015, by way of the Arbitration and Conciliation

(Amendment) Act a new sub-section (2A) to section

34 of A&C Act was inserted which in addition to

statutorily recognizing the 'patent illegality ground for

setting aside a domestic arbitral award made it an

independent and distinct ground from public policy

under section 34. The proviso to the newly inserted

clause further provided that an award "shall not be set

aside merely on the ground of an erroneous

application of the law or by reappreciation of

evidence". The legislative intent behind insertion of

this proviso was to avoid excessive intervention to

arbitral award by the courts under the ground of patent

illegality. However, the Amendment clarified that "an

erroneous application of the law" or "re-appreciation of

evidence" does not fall under patent illegality. Hence,

the courts are not to treat every factual error or every

divergent interpretation as an illegality. The illegality

must be of a kind that strikes at the heart of the

award's validity. For instance, if an arbitrator ignores a

binding precedent or a clear prohibition in the contract,

that may be patent illegality. Likewise, a finding based

on no evidence at all can be said to be perverse and

thus patently illegal. But where there is some evidence

and a reasonably plausible inference has been drawn

by the arbitrators, the courts should ordinarily refrain

themselves from supplanting the views arrived by the

arbitrator as that would be the true import of the

legislative intent inherent in the Amendment Act.

34. Thereafter, this court elucidated the meaning of

the expression patent illegality in Ssangyong Engg. &

Construction Co. Ltd. v. NHAP22 while taking into

consideration the amendment act of 2015 and held it

as a glaring. evident illegality that goes to the root of

21

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 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

22

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 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."

23

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

a 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.”

10.In light of the above, it is evident that in the present case the

learned Arbitrator has meticulously examined and appreciated

the claims and counterclaims of both parties on the basis of the

oral as well as documentary evidence available on record. The

learned Arbitrator has also placed reliance upon document Ex-

C/6. Significantly, the respondent, BALCO, has not disputed the

authenticity or existence of Ex-C/6. The principal objection raised

by the respondent is merely that the document reflects

negotiations or claims made “without prejudice.” It has further

been contended that, unlike the earlier case where no formal

agreement existed between the parties, the present dispute is

governed by a written agreement dated 01.04.2002, and

therefore the learned Arbitrator could not travel beyond the terms

of the contract.

11.It is, however, a settled principle of law that the mere use of the

expression “without prejudice” in a document relating to

negotiations or claims does not automatically render such

document inadmissible, nor does it prevent the Court or the

24

learned Arbitrator from examining the same or treating it as an

admission, if the facts and circumstances so warrant.

12.The Hon’ble Apex Court in Chairman and MD, NTPC Ltd (supra)

held in paras 32, 33, 34 & 35 as under:-

“32 Even correspondences marked as without

prejudice may have to be interpreted differently in

different situations.

33. What would be the effect of without prejudice offer

has been considered in Cutts Vs. Head and Another

[(1984) 2 WLR 349] wherein Oliver L.J. speaking for

the Court of Appeals held:

"In the end, I think that the question of what meaning

is given to the words "without prejudice" is a matter of

interpretation which is capable of variation according

to usage in the profession. It seems to be that, no

issue of public policy being involved, it would be

wrong to say that the words were given a meaning in

1889 which isimmutable ever after, bearing in mind

that the precise question with which we are

concerned in this case did not arise in Walker v.

Wilsher, 23 Q.B.D. 335, and the court did not deal

with it. I think that the wide body of practice which

undoubtedly exists must be treated as indicating that

the meaning to be given to the words is altered if the

offer contains the reservation relating to the use of the

offer in relation to costs."

34. Yet again in Rush & Tompkins Ltd. Vs. Greater

London Council and Another [(1988) 1 All ER 549]:

"The rule which gives the protection of privilege to

'without prejudice' correspondence 'depends partly on

public policy, namely the need to facilitate

compromise, and partly on 'implied agreement' as

Parker LJ stated in South Shropshire DC v Amos

[1987] 1 All ER 340 at 343, [1986] 1 WLR 1271 at

1277. The nature of the implied agreement must

depend on the meaning which is conventionally

attached to the phrase 'without prejudice'. The classic

definition of the phrase is contained in the judgment of

Lindley LJ in Walker v. Wilsher (1889) 23 QBD 335 at

337:

'What is the meaning of the words "without

prejudice"? I think they mean without prejudice to the

25

position of the writer of the letter if the terms he

proposes are not accepted. If the terms proposed in

the letter are accepted a complete contract is

established, and the letter, although written without

prejudice, operates to alter the old state of things and

to establish a new one.'

Although this definition was not necessary for the

facts of that particular case and was therefore strictly

obiter, it was expressly approved by this court in

Tomlin v Standard Telephones and Cables Ltd. [1969]

3 All ER 201 at 204, 205, [1969] 1 WLR 1378 at 1383,

1385 per Danckwerts LJ and Ormrod J. (Although he

dissented in the result, on this point Ormrod J agreed

with the majority.) The definition was further cited with

approval by both Oliver and Fox LJJ in this court in

Cutts v. Head [1984] 1 All ER 597 at 603, 610, [1984]

Ch. 290 at 303, 313. In our judgment, it may be taken

as an accurate statement of the meaning of 'without

prejudice', if that phrase be used without more. It is

open to the parties to the correspondence to give the

phrase a somewhat different meaning, e.g. where

they reserve the right to bring an offer made 'without

prejudice' to the attention of the court on the question

of costs if the offer be not accepted (See Cutts v.

Head) but subject to any such modification as may be

agreed between the parties, that is the meaning of the

phrase. In particular, subject to any such modification,

the parties must be taken to have intended and

agreed that the privilege will cease if and when the

negotiations 'without prejudice' come to fruition in a

concluded agreement."

35. Meaning the words "without prejudice" come up

for consideration before this Court in Superintendent

(Tech. I) Central Excise, I.D.D. Jabalpur and Others

Vs. Pratap Rai [(1978) 3 SCC 113] wherein it has

been held:

"The Appellate Collector has clearly used the words

"without prejudice" which also indicate that the order

of the Collector was not final and irrevocable. The

term "without prejduce" has been defined in Black's

Law Dictionary as follows:

Where an offer or admission is made 'without

prejduce', or a motion is defined or a bill in equity

dismissed 'without prejudice', it is meant as a

declaration that no rights or privileges of the party

concerned are to be considered as thereby waived or

lost, except in so far as may be expressly conceded

or decided. See, also Dismissal Without Prejudice.

26

Similarly, in Wharton's Law Lexicon the author while

interpreting the term 'without prejudice' observed as

follows:

The words import an understanding that if the

negotiation fails, nothing that has passed shall be

taken advantage of thereafter; so, if a defendant

offers, 'without prejudice', to pay half the claim, the

plaintiff must not only rely on the offer as an

admission of his having a right to some payment.

The rule is that nothing written or said 'without

prejudice' can be considered at the trial without the

consent of both parties not even by a Judge in

determining whether or not there is good cause for

depriving a successful litigant of costs . The word is

also frequently used without the foregoing

implications in statutes and inter partes to exclude or

save transactions, acts and rights from the

consequences of a stated proposition and so as to

mean 'not affecting', 'saving' or 'excepting'.

In short, therefore, the implication of the term 'without

prejudice' means (1) that the cause or the matter has

not been decided on merits, (2) that fresh

proceedings according to law were not barred."

13.The Hon’ble Apex Court in Peacock Plywood (P) Ltd. (supra)

held in paras 42 & 43 as under:-

“42. Only because the expression "without prejudice"

was mentioned, the same, in our opinion, by itself was

not sufficient and would not curtail the right of the

insured to which it was otherwise entitled to. The

expression "without prejudice" may have to be

construed in the context in which it is used. If the

purpose for which it is used is accomplished, no

legitimate claim can be allowed to be defeated

thereby. [See Cutts v. Head and Another, (1984) 2

WLR 349 and Rush & Tompkins Ltd v. Greater

London Council and another, (1988) 1 All ER 549].

43. In Phipson on Evidence, Sixteenth Edition, pages

655-657, it is stated:

"Without prejudice privilege is seen as a form of

privilege and usually treated as such. It does not,

however, have the same attributes as the law of

privilege. Privilege can be waived at the behest of the

party entitled to the privilege. Without prejudice

27

privilege can only normally be waived with the

consent of both parties to the correspondence. Whilst

the rule in privilege is "once privileged, always

privileged", the rule for without prejudice is less

straightforward, and at least in three party cases, this

will not always be the position. A third distinction is

that in the three party situation, which is not governed

by contract, without prejudice documents are only

protected in circumstances where a public policy

justification can be provided, namely where the issue

is whether admissions were made. That is not a

principle applicable in the law of privilege. Fourthly,

whereas legal professional privilege is a substantive

right, without prejudice privilege is generally a rule of

admissibility, either based on a contractual, or implied

contractual right, or on public policy. This may have

consequences relevant to proper law issues. Finally, if

a party comes into possession of a privileged

document, subject to equitable relief for breach of

confidence, there is no reason why he should not use

it and it will be admissible in evidence. But, the mere

fact that a party has a without prejudice document

does not entitle him to use it without the consent of

the other party.

(c) When is correspondence treated as within the

rule?

The first question is to determine what

communications attract without prejudice privilege.

The second stage is to consider when the court will,

nevertheless, admit such communications.

Correspondence will only be protected by without

prejudice privilege if it is written for the purpose of a

genuine attempt to compromise a dispute between

the parties. It is not a precondition that the

correspondence bears the heading without prejudice.

If it is clear from the surrounding circumstances that

the parties were seeking to compromise the action,

evidence of the content of those negotiations will, as a

general rule, not be admissible. The converse is that

there are some circumstances in which the words are

used but where the documents do not attract without

prejudice privilege. This may be because although the

words without prejudice were used, the negotiations

were not for the purpose of a genuine attempt to

settle the dispute. The most obvious cases are first,

where the party writing was not involved in genuine

settlement negotiations, and secondly, where

although the words were used, they were used in

28

circumstances which had nothing to do with

negotiations. Surveyors reports, for example, are

sometimes headed without prejudice, although they

have nothing to do with negotiations. The third case

is, where the words are used in a completely different

sense. Thus, in Council of Peterborough v. Mancetter

Developments, the documentation was admissible

because in context the words meant "without

prejudice to an alternative right and without

concession to the other application" and had nothing

to do with settlement.

There are circumstances in which the

correspondence is initiated with a view to settlement

but the parties do not intend that the correspondence

should be without prejudice. It may be that the parties

positively want any subsequent court to see the

correspondence and always had in mind that it should

be open correspondence. It may be a nice point

whether negotiations at which no one mentioned the

words "without prejudice" should be admitted in

evidence: for example at an early meeting between

the parties when the dispute first developed. There is

no easy rule here. On the other hand, even when a

letter is sent as the "opening shot" in negotiations,

and is not preceded by any previous correspondence,

it may be without prejudice. There are authorities in

both directions on this and it will depend on the facts.

It has been said that if one is seeking to change the

basis of the correspondence from without prejudice to

open it is incumbent on that person to make the

change clear, although that may be more a pointer

than a rule. There is no reason why every letter for

which without prejudice is claimed should contain an

offer or consideration of an offer, so long as the

without prejudice correspondence is part of a body of

negotiation correspondence."

14.A perusal of Ex-C/6 clearly demonstrates that the document

pertains to Agreement No.200035 dated 29.04.2002 relating to

bauxite mining and transportation for the period from 01.04.2002

to 30.06.2005, wherein as many as 29 claims were deliberated

upon by both parties. The document itself reflects admissions on

the part of the respondent, BALCO, acknowledging that the

29

appellant RKTC had taken significant initiative during the period

of crisis and had rendered extraordinary efforts, for which

suitable incentives were recommended. The document further

reveals that, with respect to certain claims, BALCO expressly

admitted that it was facing a financial crisis following the 67-day

strike and that the appellant RKTC was the only contractor that

had deployed its own machinery and resources for restarting the

mining operations. In recognition of such efforts and contribution,

a lump-sum compensation was also recommended. The learned

Arbitrator, after meticulously appreciating the oral as well as

documentary evidence and considering the submissions

advanced by both parties, proceeded to pass the impugned

award.

15.The Hon’ble Apex Court in similar case in Ramesh Kumar Jain

(supra) held in para 37 as under:-

“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

a 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.”

16.The Hon’ble Apex Court in Parsa Kente Collieries Limited

(supra) held in para 9.1 as under:-

“9.1 In the case of Associate Builders (supra), this

Court had an occasion to consider in detail the

jurisdiction of the Court to interfere with the award

30

passed by the Arbitrator in exercise of powers under

Section 34 of the Arbitration Act. In the aforesaid

decision, this Court has considered the limits of power

of the Court to interfere with the arbitral award. It is

observed and held that only when the award is in

conflict with the public policy in India, the Court would

be justified in interfering with the arbitral award. In the

aforesaid decision, this Court considered different

heads of “public policy in India” which, inter alia,

includes patent illegality. After referring Section 28(3)

of the Arbitration Act and after considering the

decisions of this Court in the cases of McDermott

International Inc. v. Burn Standard Co. Ltd., reported in

(2006) 11 SCC 181 (paras 112 113) and Rashtriya Ispat

Nigam Limited v. Dewan Chand Ram Saran, reported

in (2012) 5 SCC 306 (paras 4345), it is observed and

held that an arbitral tribunal must decide in accordance

with the terms of the contract, but if an arbitrator

construes a term of the contract in a reasonable

manner, it will not mean that the award can be set

aside on this ground. It is further observed and held

that construction of the terms of a contract is primarily

for an arbitrator to decide unless the arbitrator

construes the contract in such a way that it could be

said to be something that no fair minded or reasonable

person could do. It is further observed by this Court in

the aforesaid decision in paragraph 33 that when a

court is applying the “public policy” test to an

arbitration award, it does not act as a court of appeal

and consequently errors of fact cannot be corrected. 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 evidence to be relied

upon when he delivers his arbitral award. It is further

observed that thus 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 this score.

17.The Hon’ble Apex Court held in Construction and Design

Services (supra) held in para 17 as under:-

“17. Applying the above principle to the present case,

it could certainly be presumed that delay in executing

the work resulted in loss for which the respondent

was entitled to reasonable compensation. Evidence of

precise amount of loss may not be possible but in

31

absence of any evidence by the party committing

breach that no loss was suffered by the party

complaining of breach, the Court has to proceed on

guess work as to the quantum of compensation to be

allowed in the given circumstances. Since the

respondent also could have led evidence to show the

extent of higher amount paid for the work got done or

produce any other specific material but it did not do

so, we are of the view that it will be fair to award half

of the amount claimed as reasonable compensation.”

18.In light of above, in the present case also, the learned

Commercial Court reappreciated the evidence and came to a

different view which is impermissible. The learned Commercial

Court scrutinized the award from a stricter standard of proof than

arbitration law demands, as Hon’ble Apex Court held in Ramesh

Kumar Jain (supra) that the errors pointed out in the impugned

judgment, i.e., lack of evidence, percentage-based guess

allowances, etc. do not, singly or cumulatively, amount to patent

illegality warranting annulment. There were at least some

evidence and logical rationale for each award element. The

arbitrator’s approach was certainly a possible view a reasonable

man might take. The High Court, unfortunately, re-appreciated

the evidence and came to a different view, which is

impermissible. The High Court’s scrutinized the award from a

stricter standard of proof than arbitration law demands.

Arbitrators are not bound by the strict rules of evidence as per

Section 19 of the A&C Act and may draw on their knowledge and

experience. It is settled that a court should not interfere simply

because the arbitrator’s reasoning is brief or because the

32

arbitrator did not cite chapter and verse of the contract as long as

the path can be discerned by which the arbitrator arrived at his

conclusions. Here, the path is discernible and not absurd.

19.As regards objection of the respondent regarding rate of interest

awarded to the appellant by the learned Arbitrator, it is clear from

arbitral award that the learned Arbitrator after observing

provisions of Arbitration Act awarded interest @ 18% per annum

in favour of the appellant.

20.Section 31 (7a & 7b) of the Arbitration Act provides as under:-

“(7) (a) Unless otherwise agreed by the parties,

where and in so far as 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 award is made.

1[(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. higher than the

current rate of interest prevalent on the date of

award, from the date of award to the date of

payment.

Explanation.—The expression “current rate of

interest” shall have the same meaning as assigned to

it under clause (b) of section 2 of the Interest Act,

1978 (14 of 1978).]

Prior to amendment dated 23.10.2015, Clause (b)

reads as under:-

“A sum directed to be paid by an arbitral award shall,

unless the award otherwise directs, carry interest at

the rate of eighteen per centum per annum from the

date of the award to the date of payment.”

21.It is also clear that arbitral proceedings started prior to this

amendment and the learned Tribunal also considered pandemic

33

period as prolonged delivery of award and awarded interest also.

The learned Arbitration Tribunal duly considered the provisions of

Arbitration Act and passed award including statutory interest.

Thus, looking to the facts and circumstances of the case, we are

not inclined to interfere in the rate of interest awarded by the

learned Arbitrator to the appellant.

22.Thus, in light of guidelines of the Hon’ble Apex Court, the

impugned judgment dated 08.09.2025 passed by the learned

Commercial Court cannot be sustained and the appeal deserves

to be allowed.

23.Accordingly, the appeal is allowed and the judgment passed by

the learned Commercial Court dated 08.09.2025 is hereby set

aside and the award passed by the learned Arbitrator dated

09.04.2022 is restored.

Sd/- Sd/-

Rajani Dubey Radhakishan Agrawal

Judge Judge

Nirala