THE HIGH COURT OF SIKKIM: GANGTOK

(Civil Appellate Jurisdiction)

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DIVISION BENCH: THE HON’BLE MR. JUSTICE BISWANATH SOMADDER, CHIEF JUSTICE

THE HON’BLE MR. JUSTICE BHASKAR RAJ PRADHAN, JUDGE

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ARB. A. No. 8 of 2024

1. State of Sikkim,

Represented by and through the PCE-cum-Secretary,

Energy and Power Department,

Government of Sikkim,

Gangtok – 737101.

2. Power Department,

Represented by the Chief Engineer (North),

Government of Sikkim,

Gangtok – 737101.

3. Power Department,

Represented by the Superintending Engineer (North),

Government of Sikkim,

Gangtok – 737101. ..... Appellants

versus

Chhabil Dass Agarwal,

S/o Late Deepchand Agarwal,

Resident of 5/1 Sirwani Road,

Singtam,

P.O. and P.S. Singtam – 737134. ….. Respondent

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Appeal under Section 37 of the Arbitration & Conciliation

Act, 1996.

[ against the impugned judgment dated 30.05.2024 passed by the learned Judge,

Commercial Court at Gangtok in Commercial (Arbitration) Case No. 02 of 2022 in State

of Sikkim & Ors. vs. Chhabil Dass Agarwal]

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Appearance:

Mr. Zangpo Sherpa, Additional Advocate General with Mr. Mohan

Sharma, Advocate and Mr. Sujan Sunwar, Assistant Government

Advocate for the Appellants.

Mr. Rohan Batra, Mr. Dhruv Sethi and Mr. Hemlal Manger, Advocates

for the Respondent.

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Arb. A. No. 8 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

J U D G M E N T

Date of Hearing : 13.08.2025, 22.08.2025, 24.09.2025,

16.10.2025 & 06.11.2025

Judgment reserved : 13.11.2025

Judgment pronounced & uploaded: 10.12.2025

Bhaskar Raj Pradhan, J.

This is an appeal under section 37 of the Arbitration

and Conciliation Act, 1996 (the Arbitration Act).

2. The facts pertinent for disposal of the present

appeal can be briefly summarised as under:

(i) The appellants and the respondent had entered into a

contract agreement dated 12.10.2004 for (i) installation of

additional 66KV bay at 66/11KV Phodong sub station

required for connection of Khamdong-Phodong 66KV line; (ii)

drawing of associated new 11KV three phase heavy duty line

on ACSR dog conductor from new 2x5MVA, 66/11KV sub-

station at Mangan; and (iii) renovation/refurbishing of

66/11KV substation at Phodong. The wo rk had to be

completed within seven months but due to several factors, it

could be completed only on 18.02.2008. The cost of work

was Rs.1,60,26,000/- and the respondent was paid a sum of

Rs.1,58,75,669/- by the appellants on 31.03.2017.

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Arb. A. No. 8 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

(ii) Dissatisfied with the amount of payment received for the

contract work, the respondent invoked the arbitration

clause, claimed escalation cost and interest on delayed

payment. Consequently, the sole Arbitrator was appointed

by this Court vide order dated 08.10.2020 in Arb. P. No. 1 of

2020. After completing the proceedings, the impugned

award was passed on 08.11.2021 holding that the

respondent is entitled to both escalation cost of

Rs.25,00,418/- along with interest @10% per annum from

2008 to 2021, which amounted to Rs.2,38,88,914/-. The

total amount payable by the appellants to the respondent

was calculated at Rs.2,63,89,332/-. Aggrieved with the

impugned award, the appellants filed an application under

section 34 of the Arbitration Act, which was rejected by the

learned Commercial Court.

(iii) The respondent, in their claim before the learned

Arbitrator, asserted certain facts which were admitted by the

appellants in their statement of defence. The respondent

asserted that he had completed the work on 18.02.2008 by

raising loans from borrowers, his family business and also

by divesting savings. That, the appellants did not make any

payment to the respondent before completion of the work on

18.02.2008 because of which there was immense delay.

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Arb. A. No. 8 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

That, the respondent had completed the work to the value of

Rs.1,58,75,670/- and payment made to the respondent for

the first time on 31.03.2017 was Rs.1,58,75,670/-, although

the work was already completed on 18.02.2008. That,

during 2004, the respondent had executed two contract

works, one at Mangan and the other at Phodong under two

different contract agreements and both the works got

completed in 2008, however, the appellant failed to make

payment to the respondent. That, for both the works the

respondent had written several common letters for release of

payment but without any result . That, although,

mobilization advance of 25% value of the work was payable,

it was never paid to the respondent. Although, work was

completed in all respects by 18.02.2008, payment was

released after nine years only on 31.03.2017.

(iv) The appellants in their statement of defence replied to

the aforesaid assertions of the respondent stated in

paragraphs 1(vii) to 1(xiii) of the claim petition by admitting

thus, “11. That the contents of paragraph 1(vii) to 1(xii) of the

statement of claim are matters of record and are admitted to

the extent borne by records and anything contrary thereof the

petitioner be put to strict proof thereof.”

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Arb. A. No. 8 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

3. The learned Commercial Court on the basis of identical

reasoning in Commercial (Arbitration) Case No. 3 of 2022 did

not interfere with the arbitral award rendered by the learned

Arbitrator and rejected the petition under section 34 of the

Arbitration Act.

4. The present appeal under section 37 of the Arbitration

Act, preferred by the appellants raises identical grounds of

appeal before this Court as in Arbitration Appeal No. 9 of

2024. The learned Additional Advocate General once again

relies upon purported ‘clause 4h' of the contract agreement

and the judgment of the Hon’ble Supreme Court in Pam

Developments Private Limited vs. State of West Bengal & Another

1

,

which have both been dealt with in our judgment rendered in

Arbitration Appeal No. 9 of 2024.

5. In addition, we also notice that the contract agreement

dated 12.10.2004 does not have ‘clause 4h’ or a similar clause

as in the contract agreement dated 24.02.2004 involved in

Arbitration Appeal No. 9 of 2024. The learned Additional

Advocate General was also not able to point out ‘clause 4h’ or

a similar clause in the contract agreement dated 12.10.2004.

1

(2024) 10 SCC 715

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Arb. A. No. 8 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

6. We, therefore, dismiss the present appeal in terms of

the judgment rendered by us in Arbitration Appeal No. 9 of

2024.

(Bhaskar Raj Pradhan) (Biswanath Somadder)

Judge Chief Justice

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