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2026:CGHC:15708-DB

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23.02.2026 07.04.2026 -- 07.04.2026

NAFR

HIGH COURT OF CHHATTISGARH, BILASPUR

ARBA No. 27 of 2018

1 - South Eastern Coalfields Limited, A Company Duly

Incorporated Under The Indian Companies Act, 1956, Having Its

Office At Seepath Road Bilaspur, District Bilaspur (C.G.)

2 - The Chairman Cum Managing Director , SECL, Seepath Road

Bilaspur, District : Bilaspur, Chhattisgarh.

3 - The General Manager, SECL, Chirmiri Area, G. M. Complex

Post Office West Chirmiri, District Korea, Chhattisgarh.

... Appellants

versus

1 - M/s M. K. Chaterjee, A Partnership Firm Duly Registered

Under The Indian Partnership Act, 1932 Having Its Office At

Rajendrapath Post Office Ramgarh Cantt, District Hazaribagh

(Bihar) Having Its Camp Office At Chirmiri, District Korea

Chhattisgarh.

... Respondent

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For Appellants :Mr. H.B. Agrawal, Sr. Advocate with Mr.

Vinod Deshmukh, Advocate.

For Respondent :Mr. Sharmila Singhai, Sr. Advocate with

Mr. Kanchan Kalwani, Advocate.

D.B. : Hon'ble Smt. Justice Rajani Dubey &

Hon’ble Shri Justice Radhakishan Agrawal

(CAV Order)

Per Rajani Dubey, J

1.The Appellants – S.E.C.L. authority filed this arbitration

appeal under Section 37 of the Arbitration and Conciliation

Act, 1966 (for short ‘the Arbitration Act’) read with Section

13 of the Commercial Courts, Commercial Court Act, 2015

(for short ‘the Commercial Act’) against order dated

06.02.2018 passed by the learned Commercial Court

(District Level), Naya Raipur (C.G.) in M.J.C. No.09/2017,

whereby the application preferred by the appellants herein

under Section 34 against the arbitral award dated

05.02.2017 passed by the learned Sole Arbitrator, was

dismissed holding it to be not against the public policy of

India.

2.Brief facts of the case are that the Appellants and the

respondent-company entered into a contract on 09.11.1990

for construction of 250 units of miners’ quarters (D/S),

including development work at Khurasia Colliery in the

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Chirmiri Area of SECL (Chhattisgarh), vide Agreement No.

CE(C)/BSP/AGT/2/153.

3.Prior to execution of the agreement, the Chief Engineer of

the appellants (SECL) issued a provisional letter of

acceptance dated 28.02.1990. Subsequently, the Additional

Chief Engineer issued a work order dated 31.03.1990,

requiring the contractor to deposit an additional sum of Rs.

66,227/- (Rs. Sixty Six Thousand Two Hundred Twenty-

Seven only) towards 1% security deposit, making a total

initial security deposit of Rs. 1,66,227/-. It was further

stipulated that 5% of the gross value of running account bills

would be deducted towards security deposit, aggregating to

Rs. 8,31,137/- (Rs. Eight Lakh Thirty One Thousand One

Hundred Thirty-Seven only).

4.The stipulated period for completion of the work was 18

months, to be reckoned from the 10th day of issuance of the

letter of intent or from the actual date of handing over of the

site, whichever was later. The arrangement of cement was

primarily the responsibility of the contractor; however, the

appellants could supply cement subject to availability, with

the cost to be recovered as per the rates specified in the

schedule. Electricity was to be supplied at a single point,

and the cost of consumption was to be recovered at the

rates prescribed by SECL from time to time.

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5.The respondent sought extension of time on multiple

occasions. Initially, by letter dated 11.06.1992, the

appellants granted extension up to 28.06.1992. Thereafter,

the respondent applied for further extension up to

31.12.1992 vide letter dated 30.08.1992. Subsequently, the

respondent further sought for extension of time upto

30.09.1993 and 30.09.1994, which was further granted by

the appellants.

6.During the subsistence of the contract, the disputes arose

between the parties in relation to the said contract. The

respondent invoked the arbitration clause as stipulated in

the Contract; however, the appellants failed to appoint an

Arbitrator. Consequently, the respondent filed an application

under Section 11(6) of the Act, 1996 before this Court,

pursuant to which a Sole Arbitrator was appointed.

Thereafter, the learned Sole Arbitrator after having

considered the material facts, documentary as well as oral

evidence of the parties, passed the arbitral award on

05.02.2017 holding that the respondent is entitled for

retention amount and also for refund of security deposit &

bank guarantee. The order dated 05.02.2017 passed by the

Sole Arbitrator was subjected to challenge before the

Commercial Court, Naya Raipur (C.G.) being M.J.C.

No.09/2017 and the learned Commercial Court, vide

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impugned order dated 16.02.2018 dismissed the application

of the appellants on the ground that the order passed by the

learned Sole Arbitrator is not against the public policy of

India. Hence, this arbitration appeal.

7.Mr. H.B. Agrawal, learned Sr. counsel for the appellants

referring to the decision of Hon’ble Apex Court in the matter

of Steel Authority of India Ltd. Vs. J.C. Budharaja,

Government and Mining Contractor (1998 (8) SCC 122),

wherein the Hon’ble Apex Court held that reference of

dispute to arbitration must be sought within 03 years from

the date when the cause of action arose, submits that the

respondent’s claim is barred by limitation as the same has

been referred after 03 years from the date of cause of action

arose. Learned Sr. counsel further submits that the learned

Commercial Court did not consider clause 5.0 of the

agreement, which provides for retention of amount by the

applicants till the defects are made good by the contractor

and under this provision the amounts have been retained

which are justified from various communications made by

the appellants herein with regard to the delay in execution of

the work as also the defects in the work executed including

the communication dated 16.10.1991, 19.09.1991,

13.06.1991 and 01.02.1991 etc, thus, the learned Arbitrator

went beyond the four corners of the agreement as well as

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the documents brought on record and therefore, the award

is against the public policy of India. Learned Sr. counsel

also submits that the learned Commercial Court did not

consider clause 17, which specifically provides that unless

the entire work under the contract is completed and certified

by the Engineer In-charge subject to the conditions

mentioned therein. The first condition being if any defects in

the work is detected after issue of completion certificate or

the same is rectified to the satisfaction of the Engineer In-

charge within a period of six months and it is proved by the

contractor to the complete satisfaction of the Engineer-in-

Charge that the site is completely watertight and only after

such defects are cured the security deposit could be

refunded. However, in the instant case, no such completion

certificate has been produced by the respondent herein so

as to entitle him for refund of security deposit. Learned

counsel also submits that admittedly the entire work has not

been completed by the contractor and therefore, the learned

Sole Arbitrator has travelled beyond the scope of contract

rendering the award with regard to the instant claim as

against the public policy of India.

8.Learned Sr. counsel also contended that the Arbitrator

himself has categorically come to a finding that from the

contentions mentioned under the contract it was the

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claimant’s responsibility for procurement of cement and

steel and also come to a conclusion that the special terms

and conditions does not provide for any clause for payment

of escalation for price increase of cement, further, although

has come to a conclusion that escalation in respect of steel

is to be allowed only to the extent of statutory increase and

without there been any documents in support thereof has

come to a perverse finding that the claimant is entitled for

escalation. Learned Sr. counsel further submits that a

specific clause which bars payments of any loss of profit

has been inserted under the contract, the learned sole

arbitrator ignoring the same has passed the award which

renders the same against the public policy of India and also

the contract, therefore, the same deserves to be set aside.

Learned Sr. counsel also submits that it is well settled that

for claiming loss of profit, the claimant has to specifically

assert the loss occasioned to them with proof of the same

and also has to prove the breach of contract by other party

but in the present case, the Contractor could not complete

the entire work stipulated under the contract in time and

therefore, he was himself liable for breach of the contract

and no claim whatsoever for loss of profit should have been

entertained by the Arbitrator. On various occasions the

appellants had directed the respondent contractor to

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accelerate the progress of work and also categorically

stated that the entire side had been handed over to them

since 18.03.1990. However, all these communications made

by the Government servants which forms part of the arbitral

proceedings has been completely ignored by the learned

Sole Arbitrator and therefore, the award of the Arbitrator is

liable to be set-aside on this short score alone. It has been

further contended that the learned Trial Court miserably

failed to appreciate the relevant provisions incorporated

under the contract in its right perspective and thus have

come to an erroneous finding that the award passed by the

learned Arbitrator is in accordance with law. So, the

impugned order and the award are liable to be set aside.

9.Alternate submission of learned Sr. counsel is that payment

of interest @ 9 % from 08.03.1996 to 04.02.2017 on

Rs.14,54,692/- as directed in clause (v) of para 118 of the

arbitral award may be modified to the extent of 6% from

08.03.1996 to 04.02.2017 on Rs.14,54,692/-, in the interest

of justice.

In support of his submission, learned Sr. counsel

placed reliance on the decisions of Hon’ble Apex Court in

the matter of J.G. Engineers Private Limited Vs. Union of

India and Another reported in (2011) 5 SCC 758,

Associate Builders Vs. Delhi Development Authority

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reported in (2015) 3 SCC 49 and Sri Chittaranjan Maity

Vs. Union of India reported in (2017) 9 SCC 611.

10.Ms. Sharmila Singhai, learned Sr. counsel appearing for

respondent submits that genesis of this dispute traces back

to the year 1996, and the appellant despite having

acknowledged their liability, failed to discharge their

contractual obligation. Learned Sr. counsel submits that a

notice dated 27.07.1996 was issued by the respondent

which gave rise to proceedings under Section 11(6) of the

Arbitration Act, and this High Court referred the matter to

arbitration and the arbitral proceedings too were delayed

solely because of the appellants’ repeated adjournments

and non co-operation & finally the learned Sole Arbitrator

passed a reasoned award dated 05.02.2017 in favour of the

respondent directing payment of the legitimate amount due

along with applicable interest but the appellants without any

ground filed the application under Section 34 of the

Arbitration and Conciliation Act on 03.07.2017 long after the

statutory period of limitation had expired, which was

registered as MJC No.09/2017 & the learned Commercial

Court vide order dated 06.02.2018 affirming the arbitral

award, and again after long delay, the present appeal was

filed on 09.09.2018 well beyond the statutory period which

shows the deliberate intention to frustrate the respondent’s

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right to enjoy the fruits of the award. Learned Sr. counsel

also submits that the partner of the respondent firm namely

B.N. Chatterjee has since expired during the pendency of

arbitral proceedings, and the old aged surviving partner

continues to suffer from serious ailment and age related

health issues. The respondent has been subjected to

mental agony and financial distress for nearly three decades

while the appellants have been unlawfully enjoying the

award amount. Learned Sr. counsel further contended that

the appellant No.1 being the Government of India

undertaking and therefore a ‘State’ under Article 12 of the

Constitution of India is expected to act as a model litigant

but the appellants have chosen to prolong litigation

unnecessarily contrary to settle principles of fair conduct

expected of public authority. It has been also contended that

under the settled proposition of law, a money decree cannot

be stayed. The consequential relief of the impugned award

is the affirmation of the award, which is already prevailing

partially in favour of the respondent. However, the benefits

of the award have been withheld voluntarily by preferring

the present appeal without paying the awarded amount to

the claimant, who is a senior citizen. The learned sole

Arbitrator considering terms of contract and after

appreciating oral and documentary evidence passed the

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award dated 05.02.2017 and the learned Commercial Court

also by the impugned order dated 06.02.2018 rightly

dismissed the application of appellants but without any valid

ground the appellants filed this appeal. The appellants have

failed to demonstrate any good ground under Section 34 of

the Arbitration and Conciliation Act. So, the appeal being

without any merit is liable to be dismissed.

In support of her submission, learned Sr. counsel

placed reliance on the decisions of Hon’ble Apex Court in

the matter of Swan Gold Mining Limited Vs. Hindustan

Copper Limited reported in (2015) 5 SCC 739, Ravindra

Kumar Gupta and Company Vs. Union of India reported

in (2010) 1 SCC 409, Delhi Airport Metro Express

Private Limited Vs. Delhi Metro Rail Corporation Limited

reported in (2022) 1 SCC 131, Associate Builders Vs.

Delhi Development Authority reported in (2015) 3 SCC

49, Ispat Engineering & Foundry Works Vs. Steel

Authority of India Limited reported in (2001) 6 SCC 347

and Union of India and Another Vs. L.K. Ahuja and Co.

reported in (1988) 3 SCC 76.

11.We have heard learned counsel for the parties and perused

the material available on record.

12.It is clear from the record of the learned Trial Court that

appellant/SECL authorities and respondent company had

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entered into an contract for construction of 250 units of

miner’s quarters (D/S) including development work at

Khurasia colliery, in Chirmiri area of SECL (Chhattisgarh) on

09.11.1990 vide agreement No.CE(C)/BSP/AGT/2/153. It is

not disputed that vide letter dated 28.02.1990, the Chief

Engineer of the appellants’ company issued provisional

letter of acceptance and on 31.03.1990 the work order was

issued by the Additional Chief Engineer stating that the

contract is required to deposit a further sum of Rs.66,227/-

being 1% as security deposit aggregating Rs.1,66,227/- and

5% of the gross amount would be recovered from the

running account bills to form total security deposit of

Rs.8,31,137/-. It is also not disputed that dispute arose

between the parties with regard to subject contract. The

respondent/contractor invoked the arbitration clause but the

appellants did not appoint an arbitrator and

respondent/company filed an application under Section

11(6) of the Arbitration Act before this Court and order had

been passed by this Court appointing the Sole Arbitration to

adjudicate the dispute and the learned Sole Arbitrator

passed the arbitral award dated 05.02.2017, against which

the appellant/SECL company filed an application under

Section 34 of the Arbitration Act before the learned

Commercial Court and the learned Commercial Court, vide

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order dated 06.02.2018 dismissed the application filed by

the Appellant/SECL Company.

13.The learned Commercial Court, in para 3, framed point for

consideration, which reads thus :-

“Whether the Arbitral Award in conflict with

the public policy of India ?”

14.At the outset, it is well settled that the scope of interference

under Section 34 and Section 37 of the Arbitration Act is

extremely limited. The Court does not sit in appeal over the

findings of the learned Arbitrator and cannot re-appreciate

evidence or substitute its own interpretation merely because

another view is possible. Interference is permissible only

when the award is vitiated by patent illegality, perversity, or

is in conflict with the fundamental policy of Indian law or the

most basic notions of justice or morality.

15.In the present case, it is clear from the record that the

learned Sole Arbitrator has minutely examined the entire

material available on record, including oral and

documentary evidence, and has rendered a reasoned

award. The learned Commercial Court rightly finds that the

cause of action arose on 30.06.1994 i.e. extended period of

contract and respondent invoked arbitration clause on

27.07.1996 within three years from the date when cause of

action arose. The learned Commercial Court also

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considered all the arguments advanced by both the parties

and finds that the learned Arbitrator did not ignore the

vital/substantial evidence led by the parties. The learned

Sole Arbitrator minutely appreciated the oral and

documentary evidence & decided the every claim as per the

evidence and entitlement of the respondent company. The

learned Arbitrator, in para 116 of the arbitral award dated

05.02.2017, out of 16 claims, has allowed 6 claims. There is

nothing on record to demonstrate that the learned Arbitrator

has ignored vital evidence, taken into account irrelevant

material, or rendered findings which are so arbitrary or

irrational that no reasonable person would arrive at such

conclusions. On the contrary, the award reflects a plausible

and reasoned view based on the material before the

Arbitrator.

16.It is also clear from the application of the appellants/SECL

authorities filed before the learned Commercial Court under

Section 34 and this appeal under Section 37 of the

Arbitration Act that no any valid ground raised by the

appellants which provides under Sections 34 and 37 of the

Arbitration Act.

17.The Hon’ble Apex Court in Associate Builders (supra)

held that when any of the heads/sub-heads of test of "public

policy" is applied to an arbitral award, court does not act as

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court of appeal. Interference is permissible only when

findings of arbitrator are arbitrary, capricious or perverse, or

when conscience of court is shocked, or when illegality is

not trivial but goes to root of the matter, not when merely

another view is possible. Furthermore, arbitrator being

ultimate master of quantity and quality of evidence while

drawing arbitral award, award based on little evidence or on

evidence which does not measure up in quality to a trained

legal mind cannot be held invalid. Once it is found that

arbitrator's approach is neither arbitrary nor capricious, no

interference is called for on facts.

18.In Swan (supra), Hon’ble Apex Court held in para 11 to 19

as under :-

“11.Section 34 of the Arbitration and

Conciliation Act, 1996 corresponds to Section 30

of the Arbitration Act, 1940 making a provision for

setting aside the arbitral award. In terms of sub-

section (2) of Section 34 of the Act, an arbitral

award may be set aside only if one of the

conditions specified therein is satisfied. The

arbitrator's decision is generally considered

binding between the parties and therefore, the

power of the court to set aside the award would

be exercised only in cases where the court finds

that the arbitral award is on the fact of it

erroneous or patently illegal or in contravention of

the provisions of the Act. It is a well-settled

proposition that the court shall not ordinarily

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substitute its interpretation for that of the

arbitrator. Similarly, when the parties have arrived

at a concluded contract and acted on the basis of

those terms and conditions of the contract then

substituting new terms in the contract by the

arbitrator or by the court would be erroneous or

illegal.

12.It is equally well settled that the arbitrator

appointed by the parties is the final judge of the

facts. The finding of facts recorded by him cannot

be interfered with on the ground that the terms of

the contract were not correctly interpreted by

him.

13.We have gone through the facts of the case

and perused the documents on the basis of

which the arbitrator gave the award on 24-7-

2009.

14. The respondent issued a notice inviting

tender (NIT) for the operation of its mine.

Clauses 4.9.1 to 4.9.5 of NIT are extracted

hereinbelow:

“4.9.1. The rates quoted by the successful

bidder shall be deemed to be (inclusive) of

the sales taxes, other taxes and service tax

that the successful bidder will have to pay

in India and abroad for the performance of

this contract. HCL will perform such duty

regarding the deduction of such taxes at

source as per applicable laws.

4.9.2. The successful bidder shall also be

responsible to bear and pay any taxes,

cess, fees and/or duties levied including but

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not limited to interest, penalty and/or fine

Imposed by any authorities including

revenue authorities in India and/or abroad

at any time even beyond the expiry of the

contract period with respect of the work to

be performed by the successful bidder in

accordance with the contract.

4.9.3. The successful bidder shall also be

responsible for filing income tax return

and/or complying with necessary procedure

and/or formalities as required or may be

required under the fiscal laws of India

and/or abroad in respect of the work to be

performed by the successful bidder in

accordance with the contract.

4.9.4. Corporate tax and/or income tax, if

any applicable/levied in India and/or abroad

on the successful bidder and/or its

personnel and/or on the sub-contractors

engaged by the successful bidder and/or

the personnel of such sub-contractors in

respect of this contract will be the

responsibility of the successful bidder. All

the necessary return and other formalities

will be the responsibility of successful

bidder.

4.9.5. All the other statutory levies including

but not limited to custom duties/excise

duties, sales taxes, works contract and

other levies of whatsoever nature payable

in accordance with the law of India,

levied/leviable on the successful bidder

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and/or its sub -contractors in respect of

performance of this contract shall be the

responsibility of the successful bidder or

any of its sub-contractors."

15.The appellant in response to NIT submitted

its technical and financial bids. Subsequent to the

submission of the technical bid and the price bid,

the parties entered into negotiation and thereafter

a letter of intent on the terms and conditions of

NIT and the other terms agreed during

subsequent negotiations was issued. In the said

letter of intent dated 3-3-2007, it was specifically

mentioned that the execution of work shall be on

the terms of notice inviting tender (NIT) and other

agreed discussions/negotiations subsequently

held between the parties. Finally the work order

was issued on 14-4-2007 in continuation with the

letter of intent dated 3-3-2007. The relevant

portion of the work order is extracted

hereinbelow:

"WORK ORDER

Sub: Reopening and operating of Surda Mine

and Mosabani Concentrator Plant at Indian

Copper Complex, Ghatsila

Dear Sir,

With reference to the above subject,

Hindustan Copper Limited is please to issue work

order in continuation with Lol dated 3-3-2007 to

re-commission, operate and maintain Surda Mine

and Mosabani Concentrator Plant to supply and

deliver copper concentrate at rates Rs

1,53,470.00 per tonne of metal in concentrate

(excluding royalty) to Maubhandar work of Indian

Copper Complex, produced from the operations

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of these units.

This work shall be governed by the terms

and conditions of the expressions of interest of

dated 21-9-2006, Notice Inviting Tender No.

HC/HO/GM (MBS)/SURDA dated 11-12-2006

and the other agreed during subsequent

discussions/negotiations, and the final offer."

(emphasis supplied)”

16. In the course of hearing, Mr P.P. Rao,

learned Senior Counsel appearing for the

respondent produced before us a xerox copy of

the work order dated 14-4-2007. Clause 4.9.1

quoted hereinabove specifically mentions therein

that the rate quoted by the appellant was

inclusive of sales tax, service tax and other

taxes. The representative of the appellant signed

the work order on each page (20 pages) and

acknowledged and admitted the terms and

conditions for the said work.

17. From the facts mentioned hereinabove, it is

evident that the appellant has accepted the

liability of payment of excise duty, sales tax,

service tax and other taxes and hence it cannot

be held that Clause 4.9.1 of the work order is

inconsistent with the terms and conditions of the

contract documents. The learned arbitrator has

gone in detail of the dispute raised by the

appellant and rightly came to the conclusion that

the responsibility on the appellant is to abide by

the terms and conditions of the work order. We

have also gone through the order passed by the

High Court. The Court rightly came to the

conclusion that there is no patent illegality in the

award passed by the arbitrator which needs

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interference under Section 34 of the Act.

18.Mr Sharan, learned Senior Counsel

appearing for the appellant, also challenged the

arbitral award on the ground that the same is in

conflict with the public policy of India. We do not

find any substance in the said submission. This

Court, in ONGC Ltd., observed that the term

"public policy of India" is required to be

interpreted in the context of jurisdiction of the

court where the validity of award is challenged

before it becomes final and executable. The

Court held that an award can be set aside if it is

contrary to the fundamental policy of Indian law

or the interest of India, or if there is patent

illegality. In our view, the sald decision will not in

any way come into rescue of the appellant. As

noticed above, the parties have entered into

concluded contract, agreeing terms and

conditions of the said contract, which was finally

acted upon. In such a case, the parties to the

said contract cannot back out and challenge the

award on the ground that the same is against the

public policy. Even assuming the ground

available to the appellant, the award cannot be

set aside because it is not contrary to the

fundamental policy of Indian law or against the

interest of India or on the ground of patent

illegality.

19.The words "public policy" or "opposed to

public policy", find reference in Section 23 of the

Contract Act and also Section 34(2)(b)(ii) of the

Arbitration and Conciliation Act, 1996. As stated

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above, the interpretation of the contract is matter

of the arbitrator, who is a Judge chosen by the

parties to determine and decide the dispute. The

Court is precluded from reappreciating the

evidence and to arrive at different conclusion by

holding that the arbitral award is against the

public policy.”

19.In Delhi Airport (supra), the Hon’ble Apex Court held in

para 22 to 28 as under :-

“Contours of the Court's power to review

arbitral awards.

22. The 1996 Act was enacted to consolidate and

amend the law felating to domestic arbitration,

international commercial arbitration and

enforcement of foreign arbitral awards and also

to define the law relating to conciliation and for

matters connected therewith, by taking into

account the United Nations Commission on

International Trade Law ("UNCITRAL") Model

Law on International Commercial Arbitration and

the UNCITRAL Conciliation Rules. One of the

principal objectives of the 1996 Act is to minimise

the supervisory role of Courts in the arbitral

process. With respect to Part I of the 1996 Act,

Section 5 imposes a bar on Intervention by a

judicial authority except where provided for,

notwithstanding anything contained in any other

law for the time being in force. An application for

setting aside an arbitral award can only be made

in accordance with provisions of Section 34 of

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the 1996 Act.

23. Relevant provisions of Section 34 [as they

were prior to the Arbitration and Conciliation

(Amendment) Act, 2015] read as under:

"34. Application for setting aside arbitral award.-

(1) Recourse to a Court against an arbitral award

may be made only by an application for setting

aside such award in accordance with sub-section

(2) and sub-section (3).

(2) An arbitral award may be set aside by the

Court only if-(a) the party making the application

furnishes proof that-

(i) a party was under some incapacity; or

(ii) the arbitration agreement is not valid under

the law to which the parties have subjected it or,

failing any indication thereon, under the law for

the time being in force; or

(iii) the party making the application was not

given proper notice of the appointment of an

arbitrator or of the arbitral proceedings or was

otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not

contemplated by or not falling within the terms of

the submission to arbitration, or it contains

decisions on matters beyond the scope of the

submission to arbitration:

Provided that, if the decisions on matters

submitted to arbitration can be separated from

those not so submitted, only that part of the

arbitral award which contains decisions on

matters not submitted to arbitration may be set

aside; or

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(v) the composition of the Arbitral Tribunal or the

arbitral procedure was not in accordance with the

agreement of the parties, unless such agreement

was in conflict with a provision of this Part from

which the parties cannot derogate, or, failing

such agreement, was not in accordance with this

Part; or

(b) the Court finds that-

(1) the subject-matter of the dispute is not

capable of settlement by arbitration under the law

for the time being in force, or

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

policy of India.

Explanation.-Without prejudice to the generality

of sub-clause (ii), it is hereby declared, for the

avoidance of any doubt, that an award is in

conflict with the public policy of India if the

making of the award was induced or affected by

fraud or corruption or was in violation of Section

75 or Section 81."

24. An amendment was made to Section 34 of

the 1996 Act by the Arbitration and

Concillation (Amendment) Act, 2015

(hereinafter "the 2015 Amendment Act"). A

perusal of the Statement of Objects and

Reasons of the 2015 Amendment Act would

disclose that the amendment to the 1996 Act

became necessary in view of the interpretation

of the provisions of the 1996 Act by Courts in

certain cases which had resulted in delav of

disposal of arbitration proceedings and

increase in interference by Courts in

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arbitration matters, which had the tendency to

defeat the object of the 1996 Act. Initially, the

matter was referred to the Law Commission of

India to review the shortcomings in the 1996

Act in detail. The Law Commission of India

submitted its 176th Report, recommending

various amendments to the 1996 Act.

However, the Justice Saraf Committee on

Arbitration constituted by the Government,

was of the view that the proposed

amendments gave room for substantial

intervention by the court and were also

contentious. Thereafter, on reference, the Law

Commission undertook a comprehensive

study of the amendments proposed by the

Government, keeping in mind the views of the

Justice Saraf Committee and other

stakeholders. The 246th Report of the Law

Commission was submitted on 5-8-2014.

Acting on the recommendations made by the

Law Commission in its 246th Report,

amendments by way of the 2015 Amendment

Act were made to several provisions of the

1996 Act, including Section 34.

25. The amended Section 34 reads as under:

"34. Application for setting aside arbitral

award.-(1) Recourse to a Court against an

arbitral award may be made only by an

application for setting aside such award in

accordance with sub-section (2) and sub-

section (3).

(2) An arbitral award may be set aside by the

25

Court only if-

(a) the party making the application furnishes

proof that-

(i) a party was under some incapacity, or

(ii) the arbitration agreement is not valid

under the law to which the parties have

subjected it or, failing any indication

thereon, under the law for the time being

in force; or

(iii) the party making the application was

not given proper notice of the

appointment of an arbitrator or of the

arbitral proceedings or was otherwise

unable to present his case; or

(iv) the arbitral award deals with a

dispute not contemplated by or not

falling within the terms of the submission

to arbitration, or it contains decisions on

matters beyond the scope of the

submission to arbitration:

Provided that, if the decisions on matters

submitted to arbitration can be

separated from those not so submitted,

only that part of the arbitral award which

contains decisions on matters not

submitted to arbitration may be set

aside; or

(v) the composition of the Arbitral

Tribunal or the arbitral procedure was

not in accordance with the agreement of

the parties, unless such agreement was

in conflict with a provision of this Part

26

from which the parties cannot derogate,

or, failing such agreement, was not in

accordance with this Part; or

(b) the Court finds that-

(i) the subject-matter of the dispute is

not capable of settlement by arbitration

under the law for the time being in force,

or

(ii) the arbitral award is in conflict with

the public policy of India.

Explanation 1. For the avoidance of any

doubt, it is clarified that an award is in

conflict with the public policy of India,

only if-

(i) the making of the award was induced

or affected by fraud or corruption or was

in violation of Section 75 or Section 81;

or

(ii) it is in contravention with the

fundamental policy of Indian law; or

(iii) it is in conflict with the most basic

notions of morality or justice.

Explanation 2.-For the avoidance of

doubt, the test as to whether there is a

contravention with the fundamental

policy of Indian law shall not entail a

review on the merits of the dispute.

(2-A) An arbitral award arising out of

arbitrations other than international

commercial arbitrations, may also be set

aside by the Court, if the Court finds that

the award is vitiated by patent illegality

27

appearing on the face of the award:

Provided that an award shall not be

set aside merely on the ground of an

erroneous application of the law or by

reappreciation of evidence."

26. A cumulative reading of the

UNCITRAL Model Law and Rules, the

legislative intent with which the 1996 Act

is made, Section 5 and Section 34 of the

1996 Act would make it clear that judicial

interference with the arbitral awards is

limited to the grounds in Section 34.

While deciding applications filed under

Section 34 of the Act, Courts are

mandated to strictly act in accordance

with and within the confines of Section

34, refraining from appreciation or

reappreciation of matters of fact as well

as law. (See Uttarakhand Purv Sainik

Kalyan Nigam Ltd. v. Northern Coal

Field Ltd

4

, Bhaven Construction v.

Sardar Sarovar Narmada Nigam Ltd.

5

and Rashtriya Ispat Nigam Ltd. v.

Dewan Chand Ram Saran

6

.)

27. For a better understanding of the

role ascribed to Courts in reviewing

arbitral awards while considering

applications filed under Section 34 of the

1996 Act, it would be relevant to refer to

a judgment of this Court in Ssangyong

Engg. & Construction Co. Ltd. v. NHAI

wherein R.F. Nariman, J. has in clear

28

terms delineated the limited area for

judicial interference, taking into account

the amendments brought about by the

2015 Amendment Act. The relevant

passages of the judgment in Ssangyong

are noted as under: (SCC pp. 169-71,

paras 34-41)

"34. What is clear, therefore, is that

the expression "public policy of India",

whether contained in Section 34 or in

Section 48, would now mean the

"fundamental policy of Indian law" as

explained in paras 18 and 27 of

Associate Builders i.e. the fundamental

policy of Indian law would be relegated

to "Renusagar" understanding of this

expression. This would necessarily

mean that Western Geco expansion has

been done away with. In short, Western

Geco, as explained in paras 28 and 29

of Associate Builders, would no longer

obtain, as under the guise of interfering

with an award on the ground that the

arbitrator has not adopted a judicial

approach, the Court's intervention would

be on the merits of the award, which

cannot be permitted post amendment.

However, insofar as principles of natural

justice are concerned, as contained in

Sections 18 and 34(2)(a)(iii) of the 1996

Act, these continue to be grounds of

challenge of an award, as is contained in

29

para 30 of Associate Builders.

35. It is important to notice that the

ground for interference insofar as it

concerns "interest of India" has since

been deleted, and therefore, no longer

obtains. Equally, the ground for

interference on the basis that the award

is in conflict with justice or morality is

now to be understood as a conflict with

the "most basic notions of morality or

justice". This again would be in line with

paras 36 to 39 of Associate Builders, as

it is only such arbitral awards that shock

the conscience of the court that can be

set aside on this ground.

36. Thus, it is clear that public policy

of India is now constricted to mean

firstly, that a domestic award is contrary

to the fundamental policy of Indian law,

as understood in paras 18 and 27 of

Associate Builders, or secondly, that

such award is against basic notions of

justice or morality as understood in

paras 36 to 39 of Associate Builders.

Explanation 2 to Section 34(2)(b)(ii) and

Explanation 2 to Section 48(2)(b)(ii) was

added by the Amendment Act only so

that Western Geco, as understood in

Associate Builders, and paras 28 and 29

in particular, is now done away with.

37. Insofar as domestic awards made

in India are concerned, an additional

30

ground is now available under sub-

section (2-A), added by the Amendment

Act, 2015, to Section 34. Here, there

must be patent illegality appearing on

the face of the award, which refers to

such illegality as goes to the root of the

matter but which does not amount to

mere erroneous application of the law. In

short, what is not subsumed within "the

fundamental policy of Indian law",

namely, the contravention of a statute

not linked to public policy or public

interest, cannot be brought in by the

backdoor when it comes to setting aside

an award on the ground of patent

illegality.

38. Secondly, it is also made clear

that reappreciation of evidence, which is

what an appellate court is permitted to

do, cannot be permitted under the

ground of patent illegality appearing on

the face of the award.

39. To elucidate, para 42.1 of

Associate Builders, namely, a mere

contravention of the substantive law of

India, by itself, is no longer a ground

available to set aside an arbitral award.

Para 42.2 of Associate Builders,

however, would remain, for if an

arbitrator gives no reasons for an award

and contravenes Section 31(3) of the

1996 Act, that would certainly amount to

31

a patent illegality on the face of the

award.

40. The change made in Section

28(3) by the Amendment Act really

follows what is stated in paras 42.3 to 45

in Associate Builders, namely, that the

construction of the terms of a contract is

primarily for an arbitrator to decide,

unless the arbitrator construes the

contract in a manner that no fair-minded

or reasonable person would; in short,

that the arbitrator's view is not even a

possible view to take. Also, if the

arbitrator wanders outside the contract

and deals with matters not allotted to

him, he commits an error of jurisdiction.

This ground of challenge will now fall

within the new ground added under

Section 34(2-A).

41. What is important to note is that a

decision which is perverse, as

understood in paras 31 and 32 of

Associate Builders, while no longer

being a ground for challenge under

“public policy of India”, would certainly

amount to a patent illegality appearing

on the face of the award. Thus, 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. Additionally, a finding

32

based on documents taken behind the

back of the parties by the arbitrator

would also qualify as a decision based

on no evidence in asmuch as such

decision is not based on evidence led by

the parties, and therefore, would also

have to be characterised as perverse.”

28. This Court has in several other

judgments interpreted Section 34 of the

1996 Act to stress on the restraint to be

shown by Courts while examining the

validity of the arbitral awards. The

limited grounds available to Courts for

annulment of arbitral awards are well

known to legally trained minds.

However, the difficulty arises in applying

the well -established principles for

interference to the facts of each case

that come up before the Courts. There is

a disturbing tendency of Courts setting

aside arbitral awards, after dissecting

and reassessing factual aspects of the

cases to come to a conclusion that the

award needs. intervention and

thereafter, dubbing the award to be

vitiated by either perversity or patent

illegality, apart from the other grounds

available for annulment of the award.

This approach would lead to corrosion of

the object of the 1996 Act and the

endeavours made to preserve this

object, which is minimal judicial

33

interference with arbitral awards. That

apart, several judicial pronouncements

of this Court would become a dead letter

if arbitral awards are set aside by

categorising them as perverse or

patently illegal without appreciating the

contours of the said expressions.”

20.In light of the principles laid down by the Hon’ble Supreme

Court in Associate Builders (supra), Swan (supra), and

Delhi Airport (supra), it is clear that the Court cannot

interfere with an arbitral award merely on the ground that

another interpretation is possible or that the evidence could

have been appreciated differently. The Arbitrator is the final

authority on facts as well as interpretation of contract,

unless the view taken is wholly unreasonable or beyond the

scope of the contract. We find that the learned Commercial

Court rightly recorded its finding that reasons mentioned by

the learned Sole Arbitrator were genuine and approach of

the learned Arbitrator is neither arbitrary nor capricious. The

award is well reasoned and is in great detail on the basis of

material facts and the finding rendered by it are those which

fall within the terms and conditions of the contract and the

learned Commercial Court rightly dismissed the application

filed by the appellants under Section 34 of the Act. The

findings of the learned Sole Arbitrator do not suffer from any

34

patent illegality. The award is neither arbitrary nor perverse,

and the appellants have failed to establish any ground

falling within the limited ambit of Sections 34 or 37 of the

Act.

21.The case laws relied upon by the learned Sr. counsel for the

appellants in Steel Authority (supra), J.G. Engineers

(supra), Associate Builders (supra) and Sri Chittaranjan

(supra) would be of no help being distinguishable on the

ground of facts.

22.In the result, looking to the limited scope of Section 37 of the

Arbitration Act, this appeal being without any merit liable to

be and is hereby dismissed. No order as to costs.

23.Pending applications, if any, stand disposed of.

Sd/- Sd/-

(Rajani Dubey) (Radhakishan Agrawal)

Judge Judge

pekde