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. 9 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. 3 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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2

Arb. A. No. 9 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 Chhabil Dass Agarwal ( the

respondent) had entered into a contract agreement dated

24.02.2004 for construction of 2x5 MVA, 66/11KV

substation with LILO from Phodong 66KV S/S and Meyong-

C-Power House at Mangan. The work had to be completed

within four months but due to several factors, it could be

done only on 18.02.2008. The work value was initially for

Rs.7,79,33,000. Admittedly, on 28.04.2004 and 09.11.2004

mobilization advances for Rs.1,00,00,000/ - and Rs.

94,83,250/- respectively, were paid to the respondent.

Although, the work was completed on 18.02.2008, the

respondent did not receive full and final payment on the

said date. According to the respondent, on 16.02.2006, he

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Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

received Rs.2,76,44,048/- for civil works. Thereafter, for

electrical works, he received Rs.1,76,00,000/ - on

14.10.2011 and Rs.91,00,000/- on 02.11.2011. According

to the respondent, on 31.03.2017 he received final payment

of Rs.3,77,67,688/- after entering into a revised agreement

dated 30.03.2017. The total amount received therefore was

Rs.11,15,94,986/-.

(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. 2 of

2020. After completing the proceedings, the impugned

award was passed on 08.11.2021 hold ing that the

respondent is entitled to both escalation cost and interest

amounting to Rs.5,88,10,934/- along with 10% interest per

annum. Aggrieved with the impugned award, the appellant

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

appellant in their statement of defence. The respondent

asserted that during the process of execution of the work

there was change in specification. The change in alignment

4

Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

of approach road necessitated increase in protective works

and other allied works due to site conditions. There was also

increase in number of culverts. To protect private properties

during monsoon period and because of the instability of the

site, additional walls were also constructed. The respondent

had to execute all such works. For all such reasons, the

revised estimate for said works increased from original

approved cost of Rs.9,18,21,591.79p to Rs.11,19,55,284.10p

which fact finds support from office notings of the

appellants. Token work order dated 09.05.2007 was also

issued to complete the work as per the revised estimate.

Revised estimate was prepared in view of the excess work

done at site. Ultimately, revised agreement dated 30.03.2017

was also executed for additional civil and electrical works.

By the end of October 2005, more than 80% of the civil

works were completed which fact has been admitted by the

appellants in their office notings dated 26.10.2005. The

entire work was completed and the sub-station charged on

18.02.2008. All the additional works were executed which

fact the appellants also admitted. That, against the entire

works completed on 18.02.2008 , the respondent received

Rs.1,00,00,000/- and Rs.94,83,250/- as mobilisation

advances on 28.04.2004 and 19.11.2004 respectively. On

16.02.2006, an amount of Rs.2,76,44,048/- was received for

5

Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

civil works. On 14.10.2011 and 02.11.2011,

Rs.1,76,00,000/- and Rs.91,00,000/- was received for

electrical works. Thereafter, on 31.03.2017, final payment

was received of Rs.3,77,67,688/ - totalling to

Rs.11,15,94,986/-. Although the work was completed on

18.02.2008 that vastly improved the power distribution in

North Sikkim and the appellants had been earning revenue

in crores upon commissioning of the project completed by

the respondent, he was not paid the pending payments for

execution of the works. By various letters written from time

to time, the respondent had been requesting the appellants

to clear his payments but unfortunately after 2011 no

payments were released and the respondent had been

suffering losses. Several crores were still due and payable by

the appellants. Due to non-payment, the respondent‟s

financial and debt burden became precarious and daunting.

The respondent was constantly hounded by his lenders and

bankers. Instead of releasing payment s, the appellants

issued a letter dated 20.10.2011 to the Managing Director of

the State Bank of Sikkim, stating that the respondent had

completed the works and there was an unpaid liability to the

tune of 5 crores due to paucity of funds.

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

the aforesaid assertions of the respondent stated in

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Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

paragraphs 1(xii) to 1(xix) of the claim petition by admitting

thus, “12. That the contents of paragraph 1(xii), 1(xiii), 1(xiv),

1(xv), 1(xvi), 1(xvii), 1(xviii) and 1(xix) 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.”

3. The claim of the respondent before the learned

Arbitrator totalled to Rs.41,68,54,446.7p as outstanding on

31.10.2020 including escalation and interest on delayed

payment. The learn ed Arbitrator did not grant the

respondent the total amount of the claim and awarded only

an amount of Rs.5,88,10,934/- which included escalation

and interest on delayed payment.

4. The appellants invoked section 34 of the

Arbitration Act for setting aside the arbitral award dated

08.11.2021 (the award) on the following grounds:-

(i) that the claim of the respondent was barred by Limitation

Act, 1963 and as such, it contravenes the fundamental

policy of Indian law.

(ii) that the award is patently illegal as the respondent did

not produce any document to prove that:

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Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

a) he had borrowed loans for the purpose of

executing the contract;

b) as to at what cost the equipment/materials were

bought to claim escalation; and

c) he had raised the bills periodically as required

under the terms of the contract and that the

appellant had failed to pay or clear the said bills.

(iii) that the payment was made to the respondent on the

very next day after the revised agreement dated 30.03.2017,

and that the revised agreement does not have any provision

for escalation and interest.

(iv) that the respondent had received the final payment

without any protest or demur and in fact, the respondent, at

no point of time, before or on the date of final payment

raised any plea of escalation and interest.

5. The learned Commercial Court determined

whether the impugned award contravenes the fundamental

policy of Indian law or whether it is patently illegal.

6. The learned Commercial Court noted Explanation

1 to section 34(2)(b)(ii) of the Arbitration Act and held that it

clarifies 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

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Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

fundamental policy of Indian law; or (iii) it is in conflict with

the most basic notions of morality or justice.

7. The learned Commercial Court also took note of

Explanation 2 to section 34(2)(b)(ii) of the Arbitration Act

which provides that the test as to whether there is

contravention with the fundamental policy of Indian law

shall not entail a review on the merits of the dispute.

Further, section 2A empowers the Court to set aside an

award if it is vitiated by patent illegality appearing on the

face of the award. It mandates that an award shall however,

not be set aside merely on the ground of an erroneous

application of the law or by reappreciation of evidence.

8. The learned Commercial Court opined that the

standard of public policy laid down in Renusagar Power Co.

Ltd. vs. General Electric Co.

1 has now been incorporated in

Explanation 1 to section 34(2)(b)(ii) of the Arbitration Act

concerning contravention with the fundamental policy of

Indian law. It also held that the concept of patent illegality

was read into section 34 by the case of Oil & Natural Gas

1

1994 Supp (1) SCC 644

9

Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

Corporation Ltd.

2, according to which, a patently illegal award

cannot be enforced and must be set aside.

9. The learned Commercial Court was of the view

that in Associate Builders vs. Delhi Development Authority

3, the

principle of patent illegality was explained by the Hon‟ble

Supreme Court of India at paragraph 42 under three sub-

heads: (a) contravention of the substantive law of India

which would result in the death knell of an arbitral award.

Such illegality must go to the root of the matter and cannot

be of a trivial nature; (b) contravention of the Arbitration Act

itself would be regarded as a patent illegality, for example, if

an arbitrator gives no reason for an award; and

(c) contravention of section 28(3) of the Arbitration Act which

mandates that arbitral tribunal to decide in accordance to

the terms of the contract and to take into account trade

usages applicable to the transaction.

10. The learned Commercial Court also took note of

the judgment of the Hon‟ble Supreme Court in Delhi Airport

Metro Express Pvt. Ltd. vs. Delhi Metro Rail Corporation Ltd .

4 in

which patent illegality was explained.

2

(2003) 5 SCC 705

3

(2015) 3 SCC 49

4

(2022) 1 SCC 131

10

Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

11. After a clear understanding of the concepts of

contravention of the fundamental policy of Indian law and

patent illegality, the learned Commercial Court examined

the impugned award as to whether it was in violation

thereof. It was noticed that the learned Arbitrator had

framed three issues, viz., (i) Whether the respondent was

entitled to escalation and labour charges?; (ii) Whether the

respondent was entitled to interest?; and (iii) Whether the

claim of the respondent was barred by limitation?

12. The learned Commercial Court noted that the

learned Arbitrator had interpreted section 18 of the

Arbitration Act in a liberal manner by holding that the

provision does not require any particular form of

acknowledgement and it is sufficient if there is an admission

of one‟s liability. The number of official notings,

correspondence and certificates of the appellant‟s

department was taken into account to conclude that the

acknowledgment of the liability to pay due s of the

respondent began from 24.06.2008 and continued till 2017

when the petitioner actually made the payment to the

respondent. The learned Commercial Court noted that the

impugned award refers to several notings from 2014 to 2017

and letter dated 30.10.2011 issued to the Managing

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Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

Director, State Bank of Sikkim, by the Secretary of the

Power Department requesting for release of the funds in

favour of the respondent. The learned Commercial Court

perused the relevant notings recorded in the concerned files

that admit the liability of the Power Department to clear the

dues of the respondent for the contract work. The learned

Commercial Court noted that the learned Arbitrator had

examined the judgment of J.C. Budhraja vs. Chairman, Orissa

Mining Corporation Ltd. & Another

5 and distinguished it. The

learned Arbitrator had relied upon the judgment in Asset

Reconstruction Company (India) Ltd. vs. Bishal Jaiswal &

Another

6, in which it was held by the Hon‟ble Supreme Court

that even acknowledgement made in financial statements

and entries in books of accounts amount to

acknowledgement of liability. The learned Commercial Court

therefore opined that the respondent could definitely take it

as acknowledgment of the monies payable by the appellant.

Accordingly, the learned Arbitrator correctly decided issue

no.3 of limitation.

13. With reference to issues no.1 and 2 relating to

entitlement of escalation charges and accrual of interest, the

learned Commercial Court held that the learned Arbitrator

5

(2008) 2 SCC 444

6

(2021) SCC OnLine SC 321

12

Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

had analyzed the nature of work involved and arrived at a

conclusion that even in the absence of escalation clause in

the contract, such costs could be considered. It was held

that the learned Arbitrator had kept in mind increase in

rates of material required to be procured by the respondents

for performance of the contract. The learned Commercial

Court did not go into reappreciation of documentary

evidence relying upon the judgment of Ssangyong Engineering

and Construction Company Ltd. vs. National Highways Authority

of India (NHAI)

7, which held that reappreciation of evidence

cannot be permitted under the ground of patent illegality

appearing on the face of the order.

14. The learned Commercial Court opined that the

interpretation of terms of a contract is within the ambit of

the arbitration jurisdiction and if it is done so in a

reasonable manner, the findings of the arbitrator cannot be

termed as patently illegal. In the considered opinion of the

learned Commercial Court, the learned Arbitrator had

construed the contract document in a sensible way and it

would be an error to interfere under such circumstances. To

hold so, the learned Commercial Court relied upon NTPC Ltd.

7

(2019) 15 SCC 131

13

Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

vs. Deconar Services Pvt. Ltd.

8, wherein it was held that a

challenger to the arbitral award must show that the award

of the arbitrator suffered from perversity or an error of law

or that the arbitrator has otherwise misconducted himself.

Merely showing that there is another reasonable

interpretation or possible view based on material on record,

is insufficient to allow for interference by the Court. The

learned Commercial Court also referred to the judgment of

the Division Bench of this Court in Sikkim Power Development

Corporation Ltd. vs. M/s Amalgamated Transpower (India) Ltd .

9.

In that case, it was held that in an application under section

34, the Court is not expected to act as an appellate Court

and reappreciate the evidence and the scope of interference

will be limited to the grounds provided under section 34 of

the Arbitration Act. Resultantly, the learned Commercial

Court declined to interfere with the award on the grounds

canvassed before it.

15. Dissatisfied with the impugned judgment dated

30.05.2024, the appellants have now sought to invoke

section 37 of the Arbitration Act.

8

(2021) 19 SCC 694

9

2023:HCS:57-DB

14

Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

16. We notice that the judgment in Delhi Airport Metro

Express Private Limited (supra) referred to by the learned

Commercial Court was interfered with in a curative petition

in the matter of Delhi Metro Rail Corporation Limited vs. Delhi

Airport Metro Express Private Limited

10. In that case, it was

held that: in essence, the ground of patent illegality is

available for setting aside a domestic award, if the decision

of the arbitrator is found to be perverse or so irrational that

no reasonable person would have arrived at it; or the

construction of the contract is such that no fair or

reasonable person would take; or, that the view of the

arbitrator is not even a possible view. A finding based on no

evidence at all or an award which ignores vital evidence in

arriving at its decision would be perverse and liable to be set

aside under the head of patent illegality. An award without

reason would suffer from patent illegality. The arbitrator

commits a patent illegality by deciding a matter within his

jurisdiction or violating a fundamental principle of natural

justice.

17. In the said judgment, the Supreme Court al so

held that a judgment setting aside or refusing to set aside an

arbitral award under section 34 is appealable in the exercise

10

(2024) 6 SCC 357

15

Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

of jurisdiction of the Court under section 37 of the

Arbitration Act. That, the Supreme Court had clarified in a

line of precedents that the jurisdiction under section 37 of

the Arbitration Act is akin to the jurisdiction of the Court

under section 34 and restricted to the same grounds of

challenge as section 34.

18. In Sikkim Power Development Corporation Ltd.

(supra), this Court has examined the scope of section 37 and

held:

“Scope of section 37 of the Arbitration &

Conciliation Act, 1996

11.(i) We shall now examine the jurisdiction and scope of

section 37 of the Arbitration Act. In Punjab State Civil

Supplies Corporation Ltd . and Another vs. Ramesh

Kumar and Company and Others

11

, the Hon„ble Supreme

Court held that the jurisdiction in a first appeal arising

out of a decree in a civil suit is distinct from the

jurisdiction of the High Court under section 37 of the

Arbitration Act arising from the disposal of a petition

challenging an arbitral award under section 34. It was

held that the High Court was required to determine as to

whether the District Judge had acted contrary to the

provisions of section 34 of the Arbitration Act in rejecting

the challenge to the arbitral award.

11.(ii) In Haryana Tourism Ltd. vs. Kandhari Beverages

Ltd.

12, the Hon„ble Supreme Court held that the award

can be set aside under section 34/37 of the Arbitration

Act, if the award is found to be contrar y to (a)

fundamental policy of Indian law; or (b) the interest of

India; or (c) justice or morality; or (d) if it is patently

illegal. It also held that the High Court while deciding an

appeal under section 37 cannot enter into the merits of

the claim.

11

2021 SCC OnLine SC 1056

12

(2022) 3 SCC 237

16

Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

11.(iii) In Dr. A. Parthasarathy and Others vs. E. Springs

Avenues Pvt. Ltd. and others

13, the Hon„ble Supreme Court

reiterated that under section 37 of the Arbitration Act, the

C ourt cannot remand the matter to arbitrator for fresh

decision unless it is consented by both the parties

following the law laid down in Kinnari Mullick vs.

Ghanshyam Das Damani

14 and I-Pay Clearing Services

Pvt. Ltd. vs. ICICI Bank Ltd.

15

It held that only two

options are available to the Court considering the appeal

under section 37 of the Arbitration Act. The High Court

may either relegate the parties for fresh arbitration or to

consider the appeal on merits on the basis of the material

available on record within the scope and ambit of the

jurisdiction under section 37 of the Arbitration Act.”

19. The learned Additional Advocate General

representing the appellant relied upon paragraph 12 of Pam

Developments Private Limited vs. State of West Bengal &

Another

16, in which it was held:

“12. This submission is persuasive, but the contrac t

clauses speak for themselves. In fact, the High Court did what

the arbitrator should have done. Examine what the contract

provides. This is not even a matter of interpretation. It is the

duty of every Arbitral Tribunal and court alike and without

exception, for contract is the foundation of the legal

relationship. Having considered the above referred clauses in

the contract the High Court came to the conclusion that

awarding any amount towards idle, machinery, etc. is

prohibited under the “Special Terms and Conditions” of the

contract. The arbitrator did not even refer to the contractual

provisions and the District Court dismissed the objections

under Section 34 with a standard phrase as extracted

hereinabove. The High Court exercising jurisdiction under

Section 37 did its duty and we are of the opinion that the

conclusions of the High Court are correct and cannot be

interfered with.”

20. The learned Additional Advocate General referred

to „clause 4(h)‟ under the head “General Terms & Conditions

13

(2022) SCC Online SC 719

14

(2018) 11 SCC 328

15

(2022) SCC OnLine SC 4

16

(2024) 10 SCC 715

17

Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

of Erection, Testing & Commissioning” and sub -head

“General Terms & Conditions” which reads, “h. The contract

price as indicated in the Price Schedule shall remain firm

during the tenure of the entire execution period of the work.

No escalation on whatsoever ground shall be admissible.”

The contract ageement dated 24.02.2004 defines the word

“contract” to include the tender documents as well. The

learned Additional Advocate General therefore submitted

that „clause 4h‟ prohibited escalation cost.

21. The learned Counsel for the respondent submitted

that an award cannot be set aside based on contentions

which were not urged before the learned Arbitrator. That,

the Court under section 37 of the Arbitration Act cannot

reinterpret the terms of the contract on the ground that the

learned Arbitrator or the learned Commercial Court failed to

give effect to all its clauses. He relied upon the judgments of

the Supreme Court in State of Rajasthan & Another vs. Nav

Bharat Construction Co.

17, Konkan Railway Corporation vs.

Chenab Bridge Project Undertaking

18; MMTC Limited vs. Vedanta

Limited

19

, to buttress his submissions.

17

(2002) 1 SCC 659

18

(2023) 9 SCC 85

19

(2019) 4 SCC 163

18

Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

22. The new plea relying upon „clause 4h‟ above by

the learned Aditional Advocate General for the first time

before this Court is a plea contrary to their own stand before

the learned Arbitrator as well as the learned Commercial

Court. We are of the view that the award cannot be set aside

on such a plea.

23. Even otherwise, we notice that t he learned

Arbitrator has proceeded on the basis that there was no

escalation clause in the contract as admitted by both the

appellants as well as the respondent before him. The learned

Commercial Court has accepted the interpretation of the

learned Arbitrator. Therefore, there is no room for revisiting

the impugned judg ment on the ground of wrong

interpretation of the contract.

24. However, we are of the opinion that even if we

accept the plea of the learned Additional Advocate General,

it does not affect the inevitable outcome of the case. Clause

„h‟ quoted above would only mean that the contract price as

indicated in the price schedule shall remain firm during the

four months execution period of the work as time was the

essence of the contract. What was further agreed upon ,

therefore, was that no escalation on whatsoever ground shall

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Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

be admissible if the work was completed within four months

firmed up as the execution period. The facts, however,

reflected something else. The learned Arbitrator agreed with

the respondent that it was because of the appellants that

the work could not be completed within the four months

execution period. The learned Arbitrator came to a finding

that the delays caused by the appellant s led to the

completion of the work only on 18.02.2008. The learned

Arbitrator held that once it is found that there was delay in

the execution of the contract due to the conduct of the

appellants, they would be liable for the consequences of the

delay, namely increase in prices. It was further held that in

fact, the claim for escalation was not outside of the purview

of the contract and arose as an incidence of the contract.

The view taken by the learned Arbitartor is both legal and

logical. It is not faulted by perversity or patent illegality. It

would have been completely illogical to bind the respondent

to the prices agreed in the year 2004 as the work was

completed in the year 2008 due to the faults of the

appellants and even then, substantive payment was made

only in the year 2017.

25. On a query made by this Court to point out the

price schedule mentioned in „clause 4h‟, the learned

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Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

Additional Advocate General submitted that it does not exist.

The learned Counsel for the respondent confirmed this

statement.

26. The learned Arbitrator has awarded the escalation

charges on a reasoned award which has been tested before

the learned Commercial Court. The learned Commercial

Court has come to the conclusion that grant of the

escalation charges by the learned Arbitrator did not result in

patent illegality.

27. Therefore, the facts of the present case would be

completely distinguishable from the facts that were before

the Supreme Court in Pam Developments P rivate Limited

(supra) where there was a specific clause prohibiting any

amount towards idle machinery, etc.

28. The learned Additional Advocate General also took

another plea which was neither agitated before the learned

Arbitrator nor before the learned Commercial Court. It was

submitted that after entering into the agreement dated

24.02.2004, the work was completed on 18.02.2008 and

thereafter, the second agreement was entered into on

30.03.2017. This agreement quantified the total amount

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Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

payable to the respondent by the appellant as Rs.1129.94

lakhs only, and therefore, having agreed to the payment of

the said amount the respondent is precluded from seeking

any further amount either on account of interest on delayed

payment or for escalation cost.

29. It is noticed that the appellants had infact

admitted the facts stated by the respondent as to how the

cost increased and why the agreement dated 30.03.2017

was entered into. With these admitted facts, the parties

decided to resolve their disputes through the process of

arbitration. Before the learned Arbitrator, the respondent

made his claims and the appellants filed their statement of

defence. The learned Arbirator examined all these facts,

framed relevant issues and decided them. The agreement

dated 30.03.2017 does not even indicate that it was a full

and final settlement as argued by the learned Additional

Advocate General. A holistic reading of the agreement dated

30.03.2017 suggests that the parties thereto agreed to revise

the schedule of rates agreed upon in the year 2004 which

increased the total amount payable for works from

Rs.7,79,33,000/- to Rs.1129.94 lakhs. The agreement dated

30.03.2017 also does not prohibit interest on delayed

payment or escalation cost. Therefore, the appellants are

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Arb. A. No. 9 of 2024

State of Sikkim & Ors. vs. Chhabil Dass Agarwal

precluded from stating anything contrary at the stage of an

appeal under section 37 of the Arbitration Act.

30. We find that there is, in fact, no scope of

interference under section 37 of the Arbitration Act. The

impugned judgment is a reasoned one, which has correctly

appreciated the limited scope of interference under section

34 of the Arbitration Act. Accordingly, the appeal stands

dismissed. Parties to bear their respective costs.

(Bhaskar Raj Pradhan) (Biswanath Somadder)

Judge Chief Justice

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Internet : Yes

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