IN THE HIGH COURT OF JUDICATURE AT PATNA

COMMERCIAL APPEAL No.10 of 2025

======================================================

1.The Bihar State Food and Civil Supplies Corporation Ltd. Sone Bhawan,

Daroga Prasad Rai Path, R. Block, Road No.2, Patna-800001, through its

Managing Director.

2.The Managing Director, The Bihar State Food and Civil Supplies

Corporation Ltd., Khadya Bhawan, R.Block, Rd. No.2, Patna-800001.

3.The District Manager, The Bihar State Food and Civil Supplies Corporation

Ltd., Khagariya.

... ... Appellant/s

Versus

Dinkar Choudhary Son of Sri Raj Ram Choudhary, Resident of Bgwara, P.O.

Suhird Nagar, P.S. Muffasil, District- Begusarai.

... ... Respondent/s

======================================================

with

COMMERCIAL APPEAL No. 13 of 2025

======================================================

1.The Bihar State Food and Civil Supplies Corporation Ltd. Khadya Bhawan,

Daroga Prasad Rai Path, R. Block, Road No.- 2, Patna- 800001, through its

Managing Director.

2.The Managing Director, The Bihar State Food and Civil Supplies

Corporation Ltd., Khadya Bhawan, Daroga Prasad Path, R. Block, Rd. No.-

2, Patna- 800001.

3.The District Manager, The Bihar State Food and Civil Supplies Corporation

Ltd., Khagariya.

... ... Appellant/s

Versus

Dinkar Choudhary Son of Sri Raj Ram Choudhary Resident of Bgwara, P.O.-

Suhird Nagar, P.S.- Muffasil, District- Begusarai.

... ... Respondent/s

======================================================

Appearance :

(In COMMERCIAL APPEAL No. 10 of 2025)

For the Appellant/s: Mr.Shailendra Kumar Singh, Adv.

For the Respondent/s: Mr. Prashant Kumar, Adv.

Mr. Manish Prakash, Adv.

Mr. Kumar Anjaneya Shanu, Adv.

Mr. Rohit Raj, Adv.

Mr. Ranvir Pratap Singh, Adv.

(In COMMERCIAL APPEAL No. 13 of 2025)

For the Appellant/s: Mr.Shailendra Kumar Singh, Adv.

For the Respondent/s: Mr. Prashant Kumar, Adv.

Mr. Manish Prakash, Adv.

Mr. Kumar Anjaneya Shanu, Adv.

Mr. Rohit Raj, Adv.

Mr. Ranvir Pratap Singh, Adv.

======================================================

Patna High Court COMMERCIAL APP No.10 of 2025 dt.23-05-2026

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CORAM: HONOURABLE MR. JUSTICE MOHIT KUMAR SHAH

and

HONOURABLE MR. JUSTICE ARUN KUMAR JHA

CAV JUDGMENT

(Per: HONOURABLE MR. JUSTICE MOHIT KUMAR SHAH)

Date : 23-05-2026

COMMERCIAL APPEAL No. 10 of 2025

1.The present appeal has been filed under Section 13 (1A)

of the Commercial Courts Act, 2015 (herein after referred to as

the “Act, 2015”) read with Section 37 of the Arbitration and

Conciliation Act, 1996 (herein after referred to as the “Act,

1996”) against the Judgment dated 25.07.2025, passed by the

Ld. Court of Principal District Judge, Patna (herein after

referred to as the “learned PDJ, Patna”) in Miscellaneous

(Arbitration) Case No. 01 of 2021.

Facts of the Case:

2.The genesis of the present appeal lies in an agreement

executed in between the appellants and the claimant-Respondent

herein dated 28.1.2014, pursuant to issuance of notice inviting

tender from eligible candidates, for being appointed as

transporting-cum-handling agent for a period of three years for

the revenue District-Khagaria and acceptance of the tender

submitted by the claimant-Respondent. The claimant-

Respondent was entrusted with the work of transportation of

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food-grains and other commodities including edible oil to the

destinated godown, as directed by or on behalf of the appellants

and according to the route chart fixed for the said purpose. The

period of contract was for three years pertaining to the District-

Khagaria. The claimant-Respondent is stated to have executed

the work of transporting-cum-handling agent under the

agreement and had submitted several bills in between the years

2015 to 2019. It is the claim of the claimant-Respondent that the

payments of bills were delayed. It appears that disputes had

erupted in between the parties, leading to claims and counter

claims being asserted.

3.The claimant-Respondent had then sent a notice to the

appellants on 02.04.2019 for appointing an arbitrator suggesting

three names, however the appellants did not respond to the said

notice as also failed to appoint any arbitrator within a reasonable

time, leading to filing of a request case bearing Request Case

No. 63 of 2019 under Section 11(6) of the Act, 1996 by the

claimant-Respondent, inter alia praying therein for appointment

of an independent and impartial arbitrator, in view of Clause 17

of the agreement dated 28.01.2014. The Hon’ble Chief Justice

of this Court by an order dated 06.09.2019, passed in Request

Case No. 63 of 2019 and other analogous cases, in exercise of

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the powers U/s. 11(6) of the Act, 1996 had appointed Hon’ble

Mr. Justice Sadananad Mukherjee, a retired Judge of the Patna

High Court as the sole Arbitrator to enter upon the disputes and

render his award in terms of the provisions of the Act, 1996.

4.The claimant-Respondent had then approached the Ld.

Sole Arbitrator on 13.09.2019 with a copy of the aforesaid order

dated 06.09.2019, passed in Request Case No. 63 of 2019 and

other analogous cases, leading to registration of Arbitration

Case No. 05 of 2019, whereafter the claimant-Respondent had

filed a detailed statement of claim on 25.10.2019, raising a

claim of a sum of Rs. 4,44,79,872.58. The total amount of the

balance payment due (Column No.8) of the summary of claim

annexed as Annexure-7 to the statement of claim would show

that the same totals up to a sum of Rs. 2,11,08,521.56/-,

however the said amount also includes detention charges.

5.The appellants had then filed statement of defence on

13.1.2020, inter alia stating therein stating therein that the

claimant-Respondent has submitted calculation chart with the

claim petition without any supporting documents and the

admitted amount has already been paid long back. It has also

been stated that as per Clause 18 of the agreement, the claimant-

Respondent is not entitled to claim any compensation for

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detention of trucks at the godown gates or by law enforcing

agencies during transit or at any other place. The appellants

have also stated that the claim raised by the claimant-

Respondent is time barred under Section 43 of the Act, 1996. It

was also averred that the claimant-Respondent has engaged in

breach of the terms and conditions of the contract and he has

already received all the admissible outstanding amount against

the bills submitted by him, hence the claims raised by him is not

admissible in the eyes of law.

6.The Respondent-claimant had then filed a rejoinder to the

statement of defence on 11.2.2020, stating therein that in

support of the statement of claim annexed as Annexure -7, photo

copies of several bills have been annexed as Annexure- 6/1 to

6/52, to the statement of claim wherein each and every fact as

well as supporting documents have been furnished in detail. The

claimant-Respondent had also filed a supplementary statement

of claim on 14.06.2020, wherein it has been stated that a sum of

Rs. 7,94,500/- has already been claimed on the head of truck

idling charges, apart from claiming a sum of Rs. 1,50,000/- as

travelling expenses for attending arbitral proceedings at Patna

and a sum of Rs. 1,60,000/- on the head of fees of the Ld.

Advocate.

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7.The learned Sole Arbitrator had then framed the following

issues for consideration:-

“(i) Whether there is any cause of action for the present

proceeding.

(ii) Whether the reference is barred by limitation.

(iii) Whether the petitioner/claimant is entitled to the

claims as per statement of claims.

(iv) What relief or reliefs the petitioner is entitled?”

8.The Ld. Sole Arbitrator had thereafter, passed an arbitral

award dated 17.10.2020, holding that the claimant shall be

entitled to the following award:-

“1. The claimant petitioner shall be paid Rs.

2,06,13,021/- (Two Crores six lakhs thirteen thousand

and twenty-one rupees) only towards claim amount.

2. The claimant petitioner shall be entitled to

compensation amount of Rs. 25,00,000/- (Twenty-five

lakhs) only under Section 54 of the Indian Contract Act.

3. The claimant petitioner shall be entitled to simple

interest @10% p.a. from 13.09.2019 till the date of

award and further 18% interest over awarded sum from

the date of award till realization over the awarded

amount.

4. The claimant petitioner shall be entitled to cost

towards fees and expenses of the Arbitrator and Courts

and other legal expenses.

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5. Since the Arbitrator's fees has not been paid by the

respondent, the same shall be treated as 'unpaid cost' of

the Award, under Section 39 of the Arbitration and

Conciliation Act, 1996, and accordingly Arbitrator shall

have lien over the award, the respondent shall be liable

for making payment of the fees of the Arbitrator before

pursuing the matter before the Court.”

9.The Ld. Sole Arbitrator by the aforesaid award dated

17.10.2020 has though held (at internal Pg. No. 11 of the said

award) that Clause 18 of the agreement clearly provides that the

second party would not be entitled to claim any compensation

for detention of the trucks at the godown gates or detention by

law enforcing agency during transit, hence no compensation is

payable to the claimant on the said head, however only a sum of

Rs. 1,95,500/- (should be Rs. 1,90,500/-) has been taken to be

the amount of detention bill (at internal Pg. No. 12 of the said

award). The bill containing the said detention charge can be

found at running page no. 156 of the brief, which is a bill for the

month of February, 2017, however we find from the bills

annexed as Annexure- 6/1 to 6/52, to the statement of claim that

a sum of Rs. 22,94,000/- has been raised by the claimant-

Respondent on the head of detention charges, but the same

appears to have escaped the attention of the Ld. Sole Arbitrator.

Moreover, without there being any specific claim for

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compensation, the Ld. Sole Arbitrator by the aforesaid award

dated 17.10.2020 has awarded compensation to the tune of Rs.

25,00,000/- under Section 54 of the Indian Contract Act.

10.The aforesaid award dated 17.10.2020 passed by the Ld.

Sole Arbitrator was challenged before the Ld. Court of Principal

District Judge, Patna by the appellants 34 (2) & (2A) of the Act,

1996, which was numbered as Miscellaneous (Arbitration) Case

No. 01 of 2021 (arising out of award dated 17.10.2020 passed in

Arbitration Case No. 5 of 2019). The grounds which can be

culled out from the petition of the said Miscellaneous Case No.

25 of 2021 are enumerated herein below:-

(i) The Sole Arbitrator has passed the award only on the

basis of calculation chart produced by the claimant-

respondent without any supporting documents.

(ii) The appellants had filed statement of defence before

the learned Sole Arbitrator and prayed for directing the

claimant-respondent to produce supporting documents

against his claims as also examine witnesses but the

learned Sole Arbitrator neither followed the provisions

contained in the Act, 1996 nor examined the records/

witnesses.

(iii) The learned Sole Arbitrator failed to consider that

several claims raised by the claimants are de hors the

agreement.

(iv) The learned Sole Arbitrator has awarded two

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penalties against the appellants i.e. compensation amount

and interest on belated payment of the outstanding

amount although the admitted claims of the claimant-

respondent have already been paid by the appellants well

within time.

(v) The learned Sole Arbitrator failed to consider that the

claimant-respondent had failed to adhere to the terms of

the agreement regarding installing truck with GPS Load-

Cells at the time of lifting food grains, hence appropriate

deductions were made from the bills. The learned Sole

Arbitrator failed to consider that the appellants had

passed the admitted amount of bills of the claimant-

Respondent, which he had received without any

objection.

(vi) The impugned award is against the provisions of the

Act, 1996.

(vii) The learned Sole Arbitrator was though appointed to

consider the disputes arising out of the agreement in

question, however he has considered several claims based

on different contracts and agreements.

11.The claimant-respondent had filed reply on 23.12.2021 to

the aforesaid Misc. Case No.01 of 2021 inter alia stating therein

that the said petition filed by the appellants is not maintainable

in view of the observations of the learned Sole Arbitrator to the

effect that since the arbitration fees has not been paid by the

appellants, same shall be treated as unpaid cost of the award

under Section 39 of the Act, 1996 and accordingly, Arbitrator

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shall have lien over the award and the appellants shall be liable

to make payment of the fees of the Arbitrator before pursuing

the matter before the Court. The claimant-respondent had also

raised an objection regarding the aforesaid petition filed by the

appellants being in violation of the mandatory provisions

contained under Section 34 (5) of the Act, 1996, as no prior

notice was issued to the claimant-Respondent before filing of

the said petition. The claimant-respondent had also raised the

issue of jurisdiction inasmuch as the award under challenge

being in respect of commercial dispute as defined under Section

2(1)(c)(xviii) of the Commercial Courts, Commercial Division

and Commercial Appellate Division of the High Courts Act,

2015, the appellants were required to invoke the provisions of

the Act, 2015, which has not been invoked, thus the learned

Court is not vested with the jurisdiction to decide the case in

hand. The claimant-respondent had refuted the contentions

made by the appellants in the aforesaid Misc. (Arbitration) Case

No. 01 of 2021 and had stated that in pursuance to the

agreement dated 28.01.2014 executed in between the claimant-

respondent and the appellants, the claimant-respondent had

diligently completed the assignment as a Transporting-cum-

Handling Agent within the framework of the said agreements

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and in fact the calculation chart produced by the claimant-

respondent with his claim petition is supported by month-wise

bills of transport and handling charges as well as other relevant

documents which were brought on record before the learned

Sole Arbitrator along with the statement of claim filed by the

claimant-respondent.

12.It has also been stated by the claimant-respondent in his

reply that as per Clause 12 A of the agreement, the appellants

were under contractual obligation to make payments of the bills

of the claimant-respondent herein within a period of 15 days of

submission of bills (Note:-There is no such stipulation in the

agreement), however none of the bills were paid within time by

the appellants. It has also been stated that the appellants never

received the bills with any objection, nonetheless huge

deductions were made by the appellants from the bills without

assigning any reason. It has also been stated that the appellants

did not file any affidavit of admission/denial of documents of

the claimant-respondent before the learned Sole Arbitrator,

hence all the documents filed by the claimant-respondent would

be deemed to have been accepted. It has also been stated that the

claims have only been raised with regard to the district-

Khagaria for which the claimant-respondent was appointed as

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Transporter-cum-Handing Agent vide agreement dt. 28.01.2014.

Thus, the allegations regarding award of such amount which

were not pertaining to the contract in question and were in

connection with other districts is baseless. Lastly, it was stated

in the reply filed by the claimant-respondent that it is a well

settled law, as propounded by the Hon’ble Supreme Court in a

catena of cases that any error on the face of the award or in case

there is any patent illegality then the same should be examined

by the learned Court U/s. 34 of the Act, 1996, however the facts

cannot be re-appreciated by the learned Court at the appellate

stage.

13.The claimant-respondent had also filed a supplementary

reply on 14.02.2022 to the said Misc.(Arbitration) Case No. 01

of 2021, inter alia stating therein that the statement of claim

filed by the claimant-respondent before the learned Sole

Arbitrator was duly supported by relevant documents which

have already been submitted to the concerned officials of the

appellants from time to time in accordance with the terms and

conditions of the agreement. It has also been stated that interest

was claimed on the ground of delay and for the same notice

under Section 3 of the Interest Act was sent to the appellants

with regard to each and every outstanding amount of bills and

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the same were also produced before the learned Sole Arbitrator.

It has also been stated that the calculation chart produced by the

claimant-respondent was duly supported by month-wise bill of

transport and handling charges as well as other documents

which were brough on record of the arbitral proceedings along

with the statement of claim filed by the claimant-respondent

herein by way of monthly bills as contained in Annexures 6/1 to

6/52 to the statement of claims. Thus, the contention of the

appellants that no proof/documents were produced is denied.

14.The learned court of PDJ, Patna by a judgment dated

25.07.2025 passed in Miscellaneous (Arbitration) Case No.01 of

2021 has been pleased to dismiss the said case holding that no

valid ground has been made out under Section (2) or (2A) of

Section 34 of the Arbitration and Conciliation Act, 1996 so as to

warrant interference with the impugned arbitral award or the

findings of the learned Sole Arbitrator. At this juncture, it would

be relevant to enumerate in brief, the findings recorded by the

learned PDJ, Patna in the aforesaid judgement dated 25.07.2025,

herein below:-

(i) The learned PDJ, Patna has held that the learned Sole

Arbitrator has adjudicated the disputes strictly within the

confines of the agreement executed between the parties as

also the findings are clear and the rational adopted by the

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Ld. Sole Arbitrator in arriving at the conclusion is sound,

coherent and well-reasoned, hence the award cannot be

regarded as patently illegal, perverse or contrary to the

public policy of India.

(ii) As regards compensation amount of Rs.25 lakhs

awarded by the learned Sole Arbitrator taking into

account the provisions contained in Section 54 of the

Indian Contract Act, the learned PDJ, Patna has come to a

finding that since the claimant-respondent ought not to

have been subjected to loss arising from the default

committed by the appellants and on account of delayed

payments causing wrongful loss, as is reflected from the

arbitral award, the appellants failed to perform their part

of the agreement, hence they cannot claim the

performance of reciprocal promise from the claimant-

respondent, thus in view of the undue hardship and

financial loss suffered due to delayed payment and

defaults on the part of the appellants, the learned Sole

Arbitrator has rightly & justifiably awarded compensation

of Rs. 25 lakhs in favor of the claimant-respondent.

(iii) The learned PDJ, Patna has further held that it is well

settled established legal principal that a Court, while

adjudicating a petition under Section 34 of the Act, 1996

is empowered to set aside an arbitral award where it is

found to be devoid of reasoning, or where its outcome is

so unjust and irrational as to shock the judicial conscience

and similarly an award may be invalidated if it is based

on evidence and resulting conclusions which no prudent

or reasonable person could reasonably reach. The learned

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PDJ, Patna has also held that the Arbitrator remains the

ultimate master of the quality and quantity of evidence

and unless the Arbitrator’s approach is demonstrably

arbitrary or capricious, the Court shall refrain from

revisiting or re-evaluating factual determinations already

placed on record.

(iv) The learned PDJ has come to a finding that none of

the grounds enumerated under sub-Sections (2) or (2A) of

Section 34 of the Act, 1996 have been substantiated in the

challenge to the arbitral award. It has also been held that

it is a settled law that the proceedings instituted under

Section 34 of the Act, 1996 do not partake the nature of

an appeal or revision and the jurisdiction conferred upon

the Court is inherently limited as also the Court is neither

empowered to re-evaluate the findings and conclusions

recorded in the award nor substitute its own views or

effect any modification thereof and furthermore, the

Court is also not required to delve into or adjudicate the

merits of the award in a petition filed U/s. 34 of the Act,

1996.

(v) The learned PDJ, Patna has thus held that the learned

Sole Arbitrator has justifiably rendered the arbitral award

dated 17.10.2020, having duly considered and evaluated

the evidentiary material placed on record and delivered a

well-reasoned and a legally sound award.

(vi) In conclusion, the learned PDJ, Patna has held that

considering the materials on record, it is manifest that the

appellants have failed to establish any of the ground

enumerated under sub-Sections (2) or (2A) of Section 34

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of the Act, 1996, hence the circumscribed jurisdiction

conferred under Section 34 of the Act, 1996 has not been

satisfied in the present case so as to warrant setting aside

of the impugned arbitral award. The learned PDJ, Patna

has also held that the Ld. Sole Arbitrator has adjudicated

the disputes strictly within the confines of the agreement

executed between the parties and the documents placed

on record in that regard as also the findings are clear and

the rationale adopted by the learned Sole Arbitrator in

arriving at the conclusion is sound, coherent and well-

reasoned, hence the award cannot be regarded as patently

illegal, perverse or contrary to the public policy of India.

15.The aforesaid judgment dated 25.07.2025 passed by the

learned PDJ, Patna has been challenged in the present appeal.

Submissions of the Ld. Counsel for the Appellants:

16.The learned counsel for the appellants has submitted that

the Ld. Sole Arbitrator has passed the award dated 17.10.2020

only on the basis of the calculation chart produced by the

claimant-Respondent without any supporting documents and the

Ld. PDJ, Patna has similarly erred by not considering the said

aspect of the matter. It has been stated that the claimant-

Respondent has failed to produce any supporting documents

against his claims like truck challan, store issue order etc., apart

from the fact that the claimant-Respondent did not examine any

witness in support of his claim. It is also submitted that the

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learned Ld. PDJ, Patna had neither called for the arbitral records

nor had examined the records and in an arbitrary manner has

upheld the arbitral award dated 17.10.2020 by the impugned

judgment dt. 25.7.2025. In fact, the Ld. PDJ, Patna failed to

consider that all the admitted outstanding amount of bills/claims

have been paid to the claimant-Respondent. It is next submitted

that it has been wrongly stated on behalf of the claimant-

respondent that as per Clause 12 A of the agreement, the

appellants were under contractual obligations to make payments

of the bills of the claimant-respondent within a period of 15

days of submission of bills, inasmuch as Clause 12 A of the

agreement reads as follows:-

“The second party will immediately submits his

transporting bills within a maximum period of three

months from the date of completion of particular work to

the concerned district manager with entire connected

documents and the district manager will process the said

bill and after checking and verifying the same, will send

the bills to head office for further steps for passing and

payment of the same without any delay. In case, the

second party fails to submit his bills with required

documents within the aforesaid maximum period, his

working will be treated unsatisfactory and he will be

deemed to be disqualified for any extension or

participating in any tender thereafter.”

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17.The learned counsel for the appellants has submitted that

though the Ld. Sole Arbitrator has at internal page no. 11 of the

impugned arbitral award dated 17.10.2020 held that Clause 18

of the agreement clearly provides that the second party would

not be entitled to claim any compensation for detention of the

trucks at the godown gates or detention by law enforcing agency

during transit to any other authorized persons of the corporation

while the delivery of the consignment is to be obtained or the

delivery is to be given, hence no compensation is payable to the

claimant on this head and in fact, the Ld. Sole Arbitrator has

also directed to deduct a sum of Rs. 1,95,500/- (should be Rs.

1,90,500/-) on the head of detention charges, pertaining to the

bill of the month of February, 2017, which can be found at

running page no. 156 of the brief, however the detention charges

claimed by the claimant-respondent in other bills have not been

directed to be deducted from the claim of the claimant-

Respondent.

18.The learned counsel for the appellants has further

submitted that the Ld. Sole Arbitrator as also the Ld. PDJ Judge,

Patna in the impugned arbitral award and judgment dated

17.10.2020 and 25.7.2025 respectively, have failed to consider

that several claims raised by the claimant-Respondent are de

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hors the agreement, apart from the fact that though there is no

provision for payment of interest and grant of compensation in

the agreement entered into between the parties, however both

the Ld. Sole Arbitrator as also the Ld. PDJ, Patna have, in utter

disregard to the provisions of the agreement allowed the claim

of the claimant-Respondent pertaining to interest and

compensation. Thus, in nutshell, it is the contention of the

learned counsel for the appellants that the impugned judgment

dated 25.7.2025, passed by the Ld. Court of PDJ, Patna is in

teeth of the provisions contained under Section 34(2)(a), (b) and

(2)(A) of the Act, 1996.

19.The learned counsel for the appellants has referred to a

judgment rendered by the Hon’ble Apex Court in the case of

Gayatri Balasamy vs. ISG Novasoft Technologies Limited,

reported in (2025) 7 SCC 1 to submit that Section 34 Court can

apply the doctrine of severability and modify a portion of the

award while retaining the rest, however the same is subject to

parts of the award being separable, legally and practically. In

fact, the Courts are empowered to modify the arbitral award

under Section 34 and 37 of the Act, 1996, nonetheless the same

is limited and can be exercised when the award is severable, by

severing the “invalid” portion from the “valid” portion of the

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award by correcting any clerical, computational or

typographical errors, which appear erroneous on the face of the

record and post-award interest can also be modified in some

circumstances as mentioned in the said judgment. Reference has

also been made to a judgment rendered by the Hon’ble Apex

Court in the case of North Delhi Municipal Corporation vs.

S.A. Builders Limited, reported in (2025) 7 SCC 132 to submit

that the arbitral tribunal does not have the power to award

interest upon interest or compound interest either for the pre-

award period or the post-award period.

20.The learned counsel for the appellants has also referred to

a judgment rendered by the Hon’ble Apex Court in the case of

Union of India vs. Ambica Construction, reported in (2016) 6

SCC 36 to submit that reference has been made in the said

judgment to a Constitution Bench judgment of the Hon’ble

Apex Court, rendered in the case of Secretary, Irrigation

Department, Government of Orissa & Ors. vs. GC Roy,

reported in (1992) 1 SCC 508, wherein it has been held that if

the arbitration agreement or the contract itself provides for

interest, the arbitrator would have the jurisdiction to award

interest, however where the agreement expressly provides that

no interest pendente lite shall be payable on the amount due, the

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arbitrator has no power to award pendente lite interest. It would

be apt to reproduce para nos. 12, 14 & 34 of the said judgment,

rendered in the case of Ambica Construction (supra), herein

below:-

“12. A Constitution Bench of this Court in G.C. Roy

[Irrigation Deptt., State of Orissa v. G.C. Roy, (1992) 1

SCC 508] has considered the question of power of the

arbitrator to award pendente lite interest and it has been

laid down that if the arbitration agreement or the

contract itself provides for interest, the arbitrator would

have the jurisdiction to award the interest. Similarly,

where the agreement expressly provides that no interest

pendente lite shall be payable on the amount due, the

arbitrator has no power to award pendente lite interest.

In G.C. Roy [Irrigation Deptt., State of Orissa v. G.C.

Roy, (1992) 1 SCC 508] this Court has held thus : (SCC

p. 514, para 7)

“7. … If the arbitration agreement or the contract itself

provides for award of interest on the amount found due

from one party to the other, no question regarding the

absence of arbitrator's jurisdiction to award the

interest could arise as in that case the arbitrator has

power to award interest pendente lite as well. Similarly,

where the agreement expressly provides that no interest

pendente lite shall be payable on the amount due, the

arbitrator has no power to award pendente lite interest.

But where the agreement does not provide either for

grant or denial of interest on the amount found due, the

question arises whether in such an event the arbitrator

has power and authority to grant pendente lite interest.

14. Ultimately, in G.C. Roy [Irrigation Deptt., State of

Orissa v. G.C. Roy, (1992) 1 SCC 508] , this Court has

answered the question whether the arbitrator has the

power to award interest pendente lite. Their Lordships

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have reiterated that they have dealt with the situation

where the agreement does not provide for grant of such

interest nor does it prohibit such grant when the

agreement is silent as to award of interest. This Court

has laid down various principles in paras 43-44 of the

Report thus : (SCC pp. 532-34)

“43. The question still remains whether arbitrator has

the power to award interest pendente lite, and if so, on

what principle. We must reiterate that we are dealing

with the situation where the agreement does not

provide for grant of such interest nor does it prohibit

such grant. In other words, we are dealing with a case

where the agreement is silent as to award of interest.

On a conspectus of the aforementioned decisions, the

following principles emerge:

(i) A person deprived of the use of money to which he

is legitimately entitled has a right to be compensated

for the deprivation, call it by any name. It may be

called interest, compensation or damages. This basic

consideration is as valid for the period the dispute is

pending before the arbitrator as it is for the period

prior to the arbitrator entering upon the reference.

This is the principle of Section 34 of the Civil

Procedure Code and there is no reason or principle to

hold otherwise in the case of arbitrator.

(ii) An arbitrator is an alternative form (sic forum) for

resolution of disputes arising between the parties. If

so, he must have the power to decide all the disputes

or differences arising between the parties. If the

arbitrator has no power to award interest pendente

lite, the party claiming it would have to approach the

court for that purpose, even though he may have

obtained satisfaction in respect of other claims from

the arbitrator. This would lead to multiplicity of

proceedings.

(iii) An arbitrator is the creature of an agreement. It is

open to the parties to confer upon him such powers

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and prescribe such procedure for him to follow, as

they think fit, so long as they are not opposed to law.

(The proviso to Section 41 and Section 3 of the

Arbitration Act illustrate this point). All the same, the

agreement must be in conformity with law. The

arbitrator must also act and make his award in

accordance with the general law of the land and the

agreement.

(iv) Over the years, the English and Indian courts

have acted on the assumption that where the

agreement does not prohibit and a party to the

reference makes a claim for interest, the arbitrator

must have the power to award interest pendente lite.

Thawardas Pherumal v. Union of India [Thawardas

Pherumal v. Union of India, AIR 1955 SC 468] has not

been followed in the later decisions of this Court. It

has been explained and distinguished on the basis that

in that case there was no claim for interest but only a

claim for unliquidated damages. It has been said

repeatedly that observations in the said judgment were

not intended to lay down any such absolute or

universal rule as they appear to, on first impression.

Until Deptt. of Irrigation v. Abhaduta Jena [Deptt. of

Irrigation v. Abhaduta Jena, (1988) 1 SCC 418]

almost all the courts in the country had upheld the

power of the arbitrator to award interest pendente lite.

Continuity and certainty is a highly desirable feature

of law.

(v) Interest pendente lite is not a matter of substantive

law, like interest for the period anterior to reference

(pre-reference period). For doing complete justice

between the parties, such power has always been

inferred.

44. Having regard to the above consideration, we

think that the following is the correct principle which

should be followed in this behalf:

Where the agreement between the parties does not

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prohibit grant of interest and where a party claims

interest and that dispute (along with the claim for

principal amount or independently) is referred to the

arbitrator, he shall have the power to award interest

pendente lite. This is for the reason that in such a case

it must be presumed that interest was an implied term

of the agreement between the parties and therefore

when the parties refer all their disputes—or refer the

dispute as to interest as such—to the arbitrator, he

shall have the power to award interest. This does not

mean that in every case the arbitrator should

necessarily award interest pendente lite. It is a matter

within his discretion to be exercised in the light of all

the facts and circumstances of the case, keeping the

ends of justice in view.”

(emphasis in original)

The Constitution Bench of this Court has laid down that

where the agreement between the parties does not

prohibit grant of interest and where the party claims

interest and that dispute is referred to the arbitrator, he

shall have the power to award interest pendente lite. The

law declared has been held applicable prospectively.

34. Thus, our answer to the reference is that if the

contract expressly bars the award of interest pendente

lite, the same cannot be awarded by the arbitrator. We

also make it clear that the bar to award interest on

delayed payment by itself will not be readily inferred as

express bar to award interest pendente lite by the

Arbitral Tribunal, as ouster of power of the arbitrator

has to be considered on various relevant aspects referred

to in the decisions of this Court, it would be for the

Division Bench to consider the case on merits.”

21.The learned counsel for the appellants has next referred to

a judgment rendered by the Hon’ble Apex Court in the case of

Oil & Natural Gas Corporation Ltd. vs. Saw Pipes Ltd.,

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reported in (2003) 5 SCC 705, paragraphs no. 13, 15 to 22 and

31 whereof are reproduced herein below:-

“13. The question, therefore, which requires

consideration is — whether the award could be set aside,

if the Arbitral Tribunal has not followed the mandatory

procedure prescribed under Sections 24, 28 or 31(3),

which affects the rights of the parties. Under sub-section

(1)(a) of Section 28 there is a mandate to the Arbitral

Tribunal to decide the dispute in accordance with the

substantive law for the time being in force in India.

Admittedly, substantive law would include the Indian

Contract Act, the Transfer of Property Act and other such

laws in force. Suppose, if the award is passed in violation

of the provisions of the Transfer of Property Act or in

violation of the Indian Contract Act, the question would

be — whether such award could be set aside. Similarly,

under sub-section (3), the Arbitral Tribunal is directed to

decide the dispute in accordance with the terms of the

contract and also after taking into account the usage of

the trade applicable to the transaction. If the Arbitral

Tribunal ignores the terms of the contract or usage of the

trade applicable to the transaction, whether the said

award could be interfered. Similarly, if the award is a

non-speaking one and is in violation of Section 31(3), can

such award be set aside? In our view, reading Section 34

conjointly with other provisions of the Act, it appears that

the legislative intent could not be that if the award is in

contravention of the provisions of the Act, still however, it

couldn't be set aside by the court. If it is held that such

award could not be interfered, it would be contrary to the

basic concept of justice. If the Arbitral Tribunal has not

followed the mandatory procedure prescribed under the

Act, it would mean that it has acted beyond its jurisdiction

and thereby the award would be patently illegal which

could be set aside under Section 34.

15. The result is — if the award is contrary to the

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substantive provisions of law or the provisions of the Act

or against the terms of the contract, it would be patently

illegal, which could be interfered under Section 34.

However, such failure of procedure should be patent

affecting the rights of the parties.

16. The next clause which requires interpretation is clause

(ii) of sub-section (2)(b) of Section 34 which inter alia

provides that the court may set aside the arbitral award if

it is in conflict with the “public policy of India”. The

phrase “public policy of India” is not defined under the

Act. Hence, the said term is required to be given meaning

in context and also considering the purpose of the section

and scheme of the Act. It has been repeatedly stated by

various authorities that the expression “public policy”

does not admit of precise definition and may vary from

generation to generation and from time to time. Hence,

the concept “public policy” is considered to be vague,

susceptible to narrow or wider meaning depending upon

the context in which it is used. Lacking precedent, the

court has to give its meaning in the light and principles

underlying the Arbitration Act, Contract Act and

constitutional provisions.

17. For this purpose, we would refer to a few decisions

referred to by the learned counsel for the parties. While

dealing with the concept of public policy, this Court in

Central Inland Water Transport Corpn. Ltd. v. Brojo Nath

Ganguly [(1986) 3 SCC 156] has observed thus: (SCC

pp. 217-19, paras 92-93)

“92. The Indian Contract Act does not define the

expression ‘public policy’ or ‘opposed to public policy’.

From the very nature of things, the expressions ‘public

policy’, ‘opposed to public policy’, or ‘contrary to

public policy’ are incapable of precise definition.

Public policy, however, is not the policy of a particular

Government. It connotes some matter which concerns

the public good and the public interest. The concept of

what is for the public good or in the public interest or

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what would be injurious or harmful to the public good

or the public interest has varied from time to time. As

new concepts take the place of old, transactions which

were once considered against public policy are now

being upheld by the courts and similarly where there

has been a well-recognized head of public policy, the

courts have not shirked from extending it to new

transactions and changed circumstances and have at

times not even flinched from inventing a new head of

public policy. There are two schools of thought — ‘the

narrow view’ school and ‘the broad view’ school.

According to the former, courts cannot create new

heads of public policy whereas the latter countenances

judicial law-making in this area. The adherents of ‘the

narrow view’ school would not invalidate a contract on

the ground of public policy unless that particular

ground had been well established by authorities.

Hardly ever has the voice of the timorous spoken more

clearly and loudly than in these words of Lord Davey in

Janson v. Driefontein Consolidated Gold Mines Ltd.

[1902 AC 484, 500: (1900-03) All ER Rep 426 : 87 LT

372 (HL)]: ‘Public policy is always an unsafe and

treacherous ground for legal decision.’ That was in the

year 1902. Seventy-eight years earlier, Burrough, J., in

Richardson v. Mellish [(1824) 2 Bing 229, 252 : 130

ER 294] described public policy as ‘a very unruly

horse, and when once you get astride it you never know

where it will carry you’. The Master of the Rolls, Lord

Denning, however, was not a man to shy away from

unmanageable horses and in words which conjure up

before our eyes the picture of the young Alexander the

Great taming Bucephalus, he said in Enderby Town

Football Club Ltd. v. Football Assn. Ltd. [1971 Ch 591,

606] : ‘With a good man in the saddle, the unruly horse

can be kept in control. It can jump over obstacles’. Had

the timorous always held the field, not only the doctrine

of public policy but even the common law or the

principles of equity would never have evolved. Sir

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William Holdsworth in his ‘History of English Law’,

Vol. III, p. 55, has said:

‘In fact, a body of law like the common law, which has

grown up gradually with the growth of the nation,

necessarily acquires some fixed principles, and if it is

to maintain these principles it must be able, on the

ground of public policy or some other like ground, to

suppress practices which, under ever new disguises,

seek to weaken or negative them.’

It is thus clear that the principles governing public

policy must be and are capable, on proper occasion, of

expansion or modification. Practices which were

considered perfectly normal at one time have today

become obnoxious and oppressive to public conscience.

If there is no head of public policy which covers a case,

then the court must in consonance with public

conscience and in keeping with public good and public

interest declare such practice to be opposed to public

policy. Above all, in deciding any case which may not

be covered by authority our courts have before them

the beacon light of the preamble to the Constitution.

Lacking precedent, the court can always be guided by

that light and the principles underlying the

fundamental rights and the directive principles

enshrined in our Constitution.

93. The normal rule of common law has been that a

party who seeks to enforce an agreement which is

opposed to public policy will be non-suited. The case of

A. Schroeder Music Publishing Co. Ltd. v. Macaulay

[(1974) 1 WLR 1308 : (1974) 3 All ER 616 (HL)],

however, establishes that where a contract is vitiated as

being contrary to public policy, the party adversely

affected by it can sue to have it declared void. The case

may be different where the purpose of the contract is

illegal or immoral. In Kedar Nath Motani v. Prahlad

Rai [AIR 1960 SC 213 : (1960) 1 SCR 861], reversing

the High Court and restoring the decree passed by the

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trial court declaring the appellants' title to the lands in

suit and directing the respondents who were the

appellants' benamidars to restore possession, this

Court, after discussing the English and Indian law on

the subject, said (at p. 873):

‘The correct position in law, in our opinion, is that

what one has to see is whether the illegality goes so

much to the root of the matter that the plaintiff cannot

bring his action without relying upon the illegal

transaction into which he had entered. If the illegality

be trivial or venial, as stated by Williston and the

plaintiff is not required to rest his case upon that

illegality, then public policy demands that the

defendant should not be allowed to take advantage of

the position. A strict view, of course, must be taken of

the plaintiff's conduct, and he should not be allowed to

circumvent the illegality by resorting to some

subterfuge or by misstating the facts. If, however, the

matter is clear and the illegality is not required to be

pleaded or proved as part of the cause of action and

the plaintiff recanted before the illegal purpose was

achieved, then, unless it be of such a gross nature as to

outrage the conscience of the court, the plea of the

defendant should not prevail.’

The types of contracts to which the principle

formulated by us above applies are not contracts which

are tainted with illegality but are contracts which

contain terms which are so unfair and unreasonable

that they shock the conscience of the court. They are

opposed to public policy and require to be adjudged

void.”

(emphasis supplied)

18. Further, in Renusagar Power Co. Ltd. v. General

Electric Co. [1994 Supp (1) SCC 644] this Court

considered Section 7(1) of the Arbitration (Protocol and

Convention) Act, 1937 which inter alia provided that a

foreign award may not be enforced under the said Act, if

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the court dealing with the case is satisfied that the

enforcement of the award will be contrary to the public

policy. After elaborate discussion, the Court arrived at the

conclusion that public policy comprehended in Section

7(1)(b)(ii) of the Foreign Awards (Recognition and

Enforcement) Act, 1961 is the “public policy of India”

and does not cover the public policy of any other country.

For giving meaning to the term “public policy”, the

Court observed thus: (SCC p. 682, para 66)

“66. Article V(2)(b) of the New York Convention of

1958 and Section 7(1)(b)(ii) of the Foreign Awards Act

do not postulate refusal of recognition and enforcement

of a foreign award on the ground that it is contrary to

the law of the country of enforcement and the ground of

challenge is confined to the recognition and

enforcement being contrary to the public policy of the

country in which the award is set to be enforced. There

is nothing to indicate that the expression ‘public policy’

in Article V(2)(b) of the New York Convention and

Section 7(1)(b)(ii) of the Foreign Awards Act is not

used in the same sense in which it was used in Article

I(c) of the Geneva Convention of 1927 and Section 7(1)

of the Protocol and Convention Act of 1937. This would

mean that ‘public policy’ in Section 7(1)(b)(ii) has been

used in a narrower sense and in order to attract the bar

of public policy the enforcement of the award must

invoke something more than the violation of the law of

India. Since the Foreign Awards Act is concerned with

recognition and enforcement of foreign awards which

are governed by the principles of private international

law, the expression ‘public policy’ in Section 7(1)(b)(ii)

of the Foreign Awards Act must necessarily be

construed in the sense the doctrine of public policy is

applied in the field of private international law.

Applying the said criteria it must be held that the

enforcement of a foreign award would be refused on the

ground that it is contrary to public policy if such

enforcement would be contrary to (i) fundamental

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policy of Indian law; or (ii) the interests of India; or

(iii) justice or morality.”

(emphasis supplied)

The Court finally held that: (SCC p. 685, para 76)

“76. Keeping in view the aforesaid objects underlying

FERA and the principles governing enforcement of

exchange control laws followed in other countries, we

are of the view that the provisions contained in FERA

have been enacted to safeguard the economic interests

of India and any violation of the said provisions would

be contrary to the public policy of India as envisaged

in Section 7(1)(b)(ii) of the Act.”

19. This Court in Murlidhar Aggarwal v. State of U.P.

[(1974) 2 SCC 472] while dealing with the concept of

“public policy” observed thus: (SCC pp. 482-83, paras

31-32)

“31. Public policy does not remain static in any given

community. It may vary from generation to generation

and even in the same generation. Public policy would

be almost useless if it were to remain in fixed moulds

for all time.

32. … The difficulty of discovering what public policy

is at any given moment certainly does not absolve the

Judges from the duty of doing so. In conducting an

enquiry, as already stated, Judges are not hidebound by

precedent. The Judges must look beyond the narrow

field of past precedents, though this still leaves open

the question, in which direction they must cast their

gaze. The Judges are to base their decisions on the

opinions of men of the world, as distinguished from

opinions based on legal learning. In other words, the

Judges will have to look beyond the jurisprudence and

that in so doing, they must consult not their own

personal standards or predilections but those of the

dominant opinion at a given moment, or what has been

termed customary morality. The Judges must consider

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the social consequences of the rule propounded,

especially in the light of the factual evidence available

as to its probable results. … The point is rather that

this power must be lodged somewhere and under our

Constitution and laws, it has been lodged in the Judges

and if they have to fulfil their function as Judges, it

could hardly be lodged elsewhere.”

(emphasis supplied)

20. Mr Desai submitted that the narrow meaning given to

the term “public policy” in Renusagar case [1994 Supp

(1) SCC 644] is in context of the fact that the question

involved in the said matter was with regard to the

execution of the award which had attained finality. It was

not a case where validity of the award is challenged

before a forum prescribed under the Act. He submitted

that the scheme of Section 34 which deals with setting

aside the domestic arbitral award and Section 48 which

deals with enforcement of foreign award are not identical.

A foreign award by definition is subject to double

exequatur. This is recognized inter alia by Section 48(1)

and there is no parallel provision to this clause in Section

34. For this, he referred to Lord Mustill & Stewart C.

Boyd, Q.C.'s Commercial Arbitration 2001 wherein (at p.

90) it is stated as under:

“Mutual recognition of awards is the glue which holds

the international arbitrating community together, and

this will only be strong if the enforcing court is willing

to trust, as the convention assumes that they will trust

the supervising authorities of the chosen venue. It

follows that if, and to the extent that the award has

been struck down in the local court it should as a

matter of theory and practice be treated when

enforcement is sought as if to the extent it did not

exist.”

21. He further submitted that in foreign arbitration, the

award would be subject to being set aside or suspended

by the competent authority under the relevant law of that

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country whereas in the domestic arbitration the only

recourse is to Section 34.

22. The aforesaid submission of the learned Senior

Counsel requires to be accepted. From the judgments

discussed above, it can be held that the term “public

policy of India” is required to be interpreted in the

context of the jurisdiction of the court where the validity

of award is challenged before it becomes final and

executable. The concept of enforcement of the award after

it becomes final is different and the jurisdiction of the

court at that stage could be limited. Similar is the position

with regard to the execution of a decree. It is settled law

as well as it is provided under the Code of Civil

Procedure that once the decree has attained finality, in an

execution proceeding, it may be challenged only on

limited grounds such as the decree being without

jurisdiction or a nullity. But in a case where the judgment

and decree is challenged before the appellate court or the

court exercising revisional jurisdiction, the jurisdiction of

such court would be wider. 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. If narrow meaning

as contended by the learned Senior Counsel Mr Dave is

given, some of the provisions of the Arbitration Act would

become nugatory. 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

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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 be set aside on the

ground of “patent illegality”.

31. Therefore, in our view, the phrase “public policy of

India” used in Section 34 in context is required to be

given a wider meaning. It can be stated that the concept

of public policy connotes some matter which concerns

public good and the public interest. What is for public

good or in public interest or what would be injurious or

harmful to the public good or public interest has varied

from time to time. However, the award which is, on the

face of it, patently in violation of statutory provisions

cannot be said to be in public interest. Such

award/judgment/decision is likely to adversely affect the

administration of justice. Hence, in our view in addition

to narrower meaning given to the term “public policy” in

Renusagar case [1994 Supp (1) SCC 644] it is required to

be held that the award could be set aside if it is patently

illegal. The result would be — award could be set aside if

it is contrary to:

(a) fundamental policy of Indian law; or

(b) the interest of India; or

(c) justice or morality, or

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(d) in addition, if it is patently illegal.

Illegality must go to the root of the matter and if the

illegality is of trivial nature it cannot be held that award

is against the public policy. Award could also be set aside

if it is so unfair and unreasonable that it shocks the

conscience of the court. Such award is opposed to public

policy and is required to be adjudged void.”

22.Thus, it is submitted by the learned counsel for the

appellants by relying on the aforesaid judgment rendered by the

Hon’ble Apex Court in the case of Saw Pipes Ltd. (supra) that

the arbitral award dated 17.10.2020, passed by the Ld. Sole

Arbitrator is patently illegal, hence is fit to be set aside and this

Court is fully empowered to do so by virtue of the provisions

contained under Section 37 of the Act, 1996.

Submissions of the Ld. Counsel for the claimant-

Respondent:

23.Per contra, the Ld. counsel for the claimant-Respondent

has submitted that it is wrong to say that no supporting

documents were annexed by the claimant-Respondent in his

claim petition filed before the Ld. Sole Arbitrator in support of

his claims, inasmuch as the bills for various months have been

annexed, wherein each and every fact as well as supporting

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documents have been furnished in detail, duly supported by

month wise bills of transport and handling charges as well as

other relevant documents, however the appellants did not file

any affidavit/annexure/denial of documents of the claimant-

Respondent before the Ld. Sole Arbitrator, hence all the

documents filed by the claimant-Respondent would be deemed

to have been accepted.

24.The learned counsel for the claimant-Respondent has

further submitted that all the claims have been awarded within

the ambit of the agreement in question i.e. the one dated

28.01.2014, pertaining to the district-Khagaria. It is also

submitted that there is no bar under the agreement to award

interest and compensation, hence the arbitral award dated

17.10.2020 as upheld by the judgment dated 25.7.2025, passed

by the Ld. Court of PDJ, Patna under Section 34 of the Act,

1996 does not suffer from any infirmity.

25.The learned counsel for the claimant-Respondent has next

submitted that Section 34 of the Act, 1996 provides for certain

grounds on which the competent Court can interfere with the

arbitral award, however no interference is permissible if the

grounds urged for setting aside of arbitral award is not within

the contours of Section 34 of the Act, 1996. Reference has also

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been made to Section 5 of the Act, 1996 to submit that an

arbitration award, which is governed by Part-I of the Act, 1996

can only be set aside on the grounds mentioned under Section

34 (2) and (3) and not otherwise. The Ld. Counsel has referred

to a judgment rendered by the Hon’ble Apex Court in the case

of Associate Builders vs. Delhi Development Authority,

reported in (2015) 3 SCC 49, paragraphs no. 33, 34, 52 and 56

whereof are reproduced herein below:-

“33. It must clearly be understood 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. 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 [Very often an

arbitrator is a lay person not necessarily trained in law.

Lord Mansfield, a famous English Judge, once advised a

high military officer in Jamaica who needed to act as a

Judge as follows:

“General, you have a sound head, and a good heart;

take courage and you will do very well, in your

occupation, in a court of equity. My advice is, to make

your decrees as your head and your heart dictate, to

hear both sides patiently, to decide with firmness in the

best manner you can; but be careful not to assign your

reasons, since your determination may be substantially

right, although your reasons may be very bad, or

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essentially wrong”.

It is very important to bear this in mind when awards of

lay arbitrators are challenged.]. Once it is found that the

arbitrators approach is not arbitrary or capricious, then

he is the last word on facts. In P.R. Shah, Shares & Stock

Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd. [(2012) 1

SCC 594], this Court held : (SCC pp. 601-02, para 21)

“21. A court does not sit in appeal over the award of an

Arbitral Tribunal by reassessing or reappreciating the

evidence. An award can be challenged only under the

grounds mentioned in Section 34(2) of the Act. The

Arbitral Tribunal has examined the facts and held that

both the second respondent and the appellant are

liable. The case as put forward by the first respondent

has been accepted. Even the minority view was that the

second respondent was liable as claimed by the first

respondent, but the appellant was not liable only on the

ground that the arbitrators appointed by the Stock

Exchange under Bye-law 248, in a claim against a non-

member, had no jurisdiction to decide a claim against

another member. The finding of the majority is that the

appellant did the transaction in the name of the second

respondent and is therefore, liable along with the

second respondent. Therefore, in the absence of any

ground under Section 34(2) of the Act, it is not possible

to re-examine the facts to find out whether a different

decision can be arrived at.”

34. It is with this very important caveat that the two

fundamental principles which form part of the

fundamental policy of Indian law (that the arbitrator

must have a judicial approach and that he must not act

perversely) are to be understood.

52. It is most unfortunate that the Division Bench did not

advert to this crucial document at all. This document

shows not only that the Division Bench was wholly

incorrect in its conclusion that the contractor has tried

to pull the wool over the eyes over the DDA but it should

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also have realised that the DDA itself has stated that the

work has been carried out generally to its satisfaction

barring some extremely minor defects which are capable

of rectification. It is clear, therefore, that the Division

Bench obviously exceeded its jurisdiction in interfering

with a pure finding of fact forgetting that the arbitrator

is the sole Judge of the quantity and quality of evidence

before him and unnecessarily bringing in facts which

were neither pleaded nor proved and ignoring the vital

completion certificate granted by the DDA itself. The

Division Bench also went wrong in stating that as the

work completed was only to the extent of Rs 62,84,845,

Hudson's formula should have been applied taking this

figure into account and not the entire contract value of

Rs 87,66,678 into account.

56. Here again, the Division Bench has interfered

wrongly with the arbitral award on several counts. It had

no business to enter into a pure question of fact to set

aside the arbitrator for having applied a formula of 20

months instead of 25 months. Though this would inure in

favour of the appellant, it is clear that the appellant did

not file any cross-objection on this score. Also, it is

extremely curious that the Division Bench found that an

adjustment would have to be made with claims awarded

under Claims 2, 3 and 4 which are entirely separate and

independent claims and have nothing to do with Claims

12 and 13. The formula then applied by the Division

Bench was that it would itself do “rough and ready

justice”. We are at a complete loss to understand how

this can be done by any court under the jurisdiction

exercised under Section 34 of the Arbitration Act. As has

been held above, the expression “justice” when it comes

to setting aside an award under the public policy ground

can only mean that an award shocks the conscience of

the court. It cannot possibly include what the court

thinks is unjust on the facts of a case for which it then

seeks to substitute its view for the arbitrator's view and

does what it considers to be “justice”. With great respect

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to the Division Bench, the whole approach to setting

aside arbitral awards is incorrect. The Division Bench

has lost sight of the fact that it is not a first appellate

court and cannot interfere with errors of fact.”

26.The learned counsel for the claimant-Respondent has

further submitted that it is a settled position of law that the

grounds for interference with the arbitral award under Section

37 of the Act, 1996 is narrower than those under Section 34 of

the Act, 1996, hence if an arbitral award has been upheld in

challenge under Section 34 of the Act, 1996, then the same

should not be disturbed by the Appellate Court. In this regard,

reliance has been placed on a judgment, rendered by the

Hon’ble Apex Court in the case of UHL Power Company Ltd.

vs. State of Himachal Pradesh, reported in (2022) 4 SCC 116

as also upon the one rendered by the Hon’ble Apex Court in the

case of Reliance Infrastructure Ltd. vs. State of Goa, reported

in (2024) 1 SCC 479, paragraphs no. 25 to 33 whereof are

reproduced herein below:-

“25. Having regard to the contentions urged and the

issues raised, it shall also be apposite to take note of the

principles enunciated by this Court in some of the

relevant decisions cited by the parties on the scope of

challenge to an arbitral award under Section 34 and the

scope of appeal under Section 37 of the 1996 Act.

26. In MMTC [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC

163], this Court took note of various decisions including

that in Associate Builders [Associate Builders v. DDA,

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(2015) 3 SCC 49] and exposited on the limited scope of

interference under Section 34 and further narrower scope

of appeal under Section 37 of the 1996 Act, particularly

when dealing with the concurrent findings (of the

arbitrator and then of the Court). This Court, inter alia,

held as under: [MMTC Ltd. v. Vedanta Ltd., (2019) 4

SCC 163], SCC pp. 166-67, paras 11-14)

“11. As far as Section 34 is concerned, the position is

well-settled by now that the Court does not sit in

appeal over the arbitral award and may interfere on

merits on the limited ground provided under Section

34(2)(b)(ii) i.e. if the award is against the public policy

of India. As per the legal position clarified through

decisions of this Court prior to the amendments to the

1996 Act in 2015, a violation of Indian public policy, in

turn, includes a violation of the fundamental policy of

Indian law, a violation of the interest of India, conflict

with justice or morality, and the existence of patent

illegality in the arbitral award. Additionally, the

concept of the “fundamental policy of Indian law”

would cover compliance with statutes and judicial

precedents, adopting a judicial approach, compliance

with the principles of natural justice, and Wednesbury

[Associated Provincial Picture Houses v. Wednesbury

Corpn., (1948) 1 KB 223 (CA)] reasonableness.

Furthermore, “patent illegality” itself has been held to

mean contravention of the substantive law of India,

contravention of the 1996 Act, and contravention of the

terms of the contract.

12. It is only if one of these conditions is met that the

Court may interfere with an arbitral award in terms of

Section 34(2)(b)(ii), but such interference does not

entail a review of the merits of the dispute, and is

limited to situations where the findings of the arbitrator

are arbitrary, capricious or perverse, or when the

conscience of the Court is shocked, or when the

illegality is not trivial but goes to the root of the matter.

An arbitral award may not be interfered with if the

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view taken by the arbitrator is a possible view based on

facts. (See Associate Builders v. DDA [Associate

Builders v. DDA, (2015) 3 SCC 49] Also see ONGC

Ltd. v. Saw Pipes Ltd. [ONGC Ltd. v. Saw Pipes Ltd.,

(2003) 5 SCC 705]; Hindustan Zinc Ltd. v. Friends

Coal Carbonisation [(2006) 4 SCC 445]; and

McDermott International Inc. v. Burn Standard Co.

Ltd. [(2006) 11 SCC 181])

13. It is relevant to note that after the 2015 Amendment

to Section 34, the above position stands somewhat

modified. Pursuant to the insertion of Explanation 1 to

Section 34(2), the scope of contravention of Indian

public policy has been modified to the extent that it

now means fraud or corruption in the making of the

award, violation of Section 75 or Section 81 of the Act,

contravention of the fundamental policy of Indian law,

and conflict with the most basic notions of justice or

morality. Additionally, sub-section (2-A) has been

inserted in Section 34, which provides that in case of

domestic arbitrations, violation of Indian public policy

also includes patent illegality appearing on the face of

the award. The proviso to the same states that an award

shall not be set aside merely on the ground of an

erroneous application of the law or by reappreciation

of evidence.

14. As far as interference with an order made under

Section 34, as per Section 37, is concerned, it cannot

be disputed that such interference under Section 37

cannot travel beyond the restrictions laid down under

Section 34. In other words, the Court cannot undertake

an independent assessment of the merits of the award,

and must only ascertain that the exercise of power by

the Court under Section 34 has not exceeded the scope

of the provision. Thus, it is evident that in case an

arbitral award has been confirmed by the Court under

Section 34 and by the Court in an appeal under Section

37, this Court must be extremely cautious and slow to

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disturb such concurrent findings.”

27. In Ssangyong Engg. [Ssangyong Engg. &

Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131], this

Court has set out the scope of challenge under Section 34

of the 1996 Act in further details in the following words :

(SCC pp. 170-71, paras 37-41)

“37. Insofar as domestic awards made in India are

concerned, an additional 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

[Associate Builders v. DDA, (2015) 3 SCC 49], 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

[Associate Builders v. DDA, (2015) 3 SCC 49],

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 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 [Associate Builders v.

DDA, (2015) 3 SCC 49], namely, that the construction

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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 [(2015) 3 SCC 49], 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 based on

documents taken behind the back of the parties by the

arbitrator would also qualify as a decision based on no

evidence inasmuch as such decision is not based on

evidence led by the parties, and therefore, would also

have to be characterised as perverse.”

28. The limited scope of challenge under Section 34 of

the Act was once again highlighted by this Court in PSA

Sical Terminals [PSA Sical Terminals (P) Ltd. v. V.O.

Chidambranar Port Trust, (2023) 15 SCC 781] and this

Court particularly explained the relevant tests as under :

(SCC paras 40 to 42)

“40. It will thus appear to be a more than settled legal

position, that in an application under Section 34, the

Court is not expected to act as an appellate court and

reappreciate the evidence. The scope of interference

would be limited to grounds provided under Section 34

of the Arbitration Act. The interference would be so

warranted when the award is in violation of “public

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policy of India”, which has been held to mean “the

fundamental policy of Indian law”. A judicial

intervention on account of interfering on the merits of

the award would not be permissible. However, the

principles of natural justice as contained in Sections 18

and 34(2)(a)(iii) of the Arbitration Act would continue

to be the grounds of challenge of an award. 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”. It is only such arbitral awards that

shock the conscience of the Court, that can be set aside

on the said ground. An award would be set aside on the

ground of patent illegality appearing on the face of the

award and as such, which goes to the roots of the

matter. However, an illegality with regard to a mere

erroneous application of law would not be a ground for

interference. Equally, reappreciation of evidence would

not be permissible on the ground of patent illegality

appearing on the face of the award.

41. A decision which is perverse, though would not be

a ground for challenge under “public policy of India”,

would certainly amount to a patent illegality appearing

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

no evidence at all or an award which ignores vital

evidence in arriving at its decision would be perverse

and liable to be set aside on the ground of patent

illegality.

42. To understand the test of perversity, it will also be

appropriate to refer to paras 31 and 32 from the

judgment of this Court in Associate Builders [Associate

Builders v. DDA, (2015) 3 SCC 49], which read thus:

(SCC pp. 75-76)

‘31. The third juristic principle is that a decision

which is perverse or so irrational that no reasonable

person would have arrived at the same is important

and requires some degree of explanation. It is settled

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law that where:

(i) a finding is based on no evidence, or

(ii) an Arbitral Tribunal takes into account something

irrelevant to the decision which it arrives at; or

(iii) ignores vital evidence in arriving at its decision,

such decision would necessarily be perverse.

32. A good working test of perversity is contained in

two judgments. In CCE & Sales v. Gopi Nath & Sons

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

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

arrived at by ignoring or excluding relevant

material or by taking into consideration irrelevant

material or if the finding so outrageously defies

logic as to suffer from the vice of irrationality

incurring the blame of being perverse, then, the

finding is rendered infirm in law.”

29. In Delhi Airport Metro Express [Delhi Airport Metro

Express (P) Ltd. v. DMRC, (2022) 1 SCC 131], this Court

again surveyed the case law and explained the contours

of the Courts' power to review the arbitral awards.

Therein, this Court not only reaffirmed the principles

aforesaid but also highlighted an area of serious concern

while pointing out “a disturbing tendency” of the Courts

in setting aside arbitral awards after dissecting and

reassessing factual aspects. This Court also underscored

the pertinent features and scope of the expression “patent

illegality” while reiterating that the Courts do not sit in

appeal over the arbitral award. The relevant and

significant passages of this judgment could be usefully

extracted as under: [Delhi Airport Metro Express (P)

Ltd. v. DMRC, (2022) 1 SCC 131], SCC pp. 147-48, 150-

51 & 155-56, paras 26, 28-30 & 42)

“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

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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.

[(2020) 2 SCC 455], Bhaven Construction v. Sardar

Sarovar Narmada Nigam Ltd. [(2022) 1 SCC 75] &

Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram

Saran [(2012) 5 SCC 306].)

***

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

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.

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29. Patent illegality should be illegality which goes to

the root of the matter. In other words, every error of

law committed by the Arbitral Tribunal would not fall

within the expression “patent illegality”. Likewise,

erroneous application of law cannot be categorised as

patent illegality. In addition, contravention of law not

linked to public policy or public interest is beyond the

scope of the expression “patent illegality”. What is

prohibited is for Courts to reappreciate evidence to

conclude that the award suffers from patent illegality

appearing on the face of the award, as Courts do not sit

in appeal against the arbitral award. The permissible

grounds for interference with a domestic award under

Section 34(2-A) on the ground of patent illegality is

when the arbitrator takes a view which is not even a

possible one, or interprets a clause in the contract in

such a manner which no fair-minded or reasonable

person would, or if the arbitrator commits an error of

jurisdiction by wandering outside the contract and

dealing with matters not allotted to them. An arbitral

award stating no reasons for its findings would make

itself susceptible to challenge on this account. The

conclusions of the arbitrator which are based on no

evidence or have been arrived at by ignoring vital

evidence are perverse and can be set aside on the

ground of patent illegality. Also, consideration of

documents which are not supplied to the other party is

a facet of perversity falling within the expression

“patent illegality”.

30. Section 34(2)(b) refers to the other grounds on

which a court can set aside an arbitral award. If a

dispute which is not capable of settlement by

arbitration is the subject-matter of the award or if the

award is in conflict with public policy of India, the

award is liable to be set aside. Explanation (1),

amended by the 2015 Amendment Act, clarified the

expression “public policy of India” and its

connotations for the purposes of reviewing arbitral

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awards. It has been made clear that an award would be

in conflict with public policy of India only when it is

induced or affected by fraud or corruption or is in

violation of Section 75 or Section 81 of the 1996 Act, if

it is in contravention with the fundamental policy of

Indian law or if it is in conflict with the most basic

notions of morality or justice.

***

42. The Division Bench referred to various factors

leading to the termination notice, to conclude that the

award shocks the conscience of the Court. The

discussion in SCC OnLine Del para 103 of the

impugned judgment [DMRC v. Delhi Airport Metro

Express (P) Ltd., 2019 SCC OnLine Del 6562] amounts

to appreciation or reappreciation of the facts which is

not permissible under Section 34 of the 1996 Act. The

Division Bench further held that the fact of AMEL

being operated without any adverse event for a period

of more than four years since the date of issuance of

the CMRS certificate, was not given due importance by

the Arbitral Tribunal. As the arbitrator is the sole

Judge of the quality as well as the quantity of the

evidence, the task of being a Judge on the evidence

before the Tribunal does not fall upon the Court in

exercise of its jurisdiction U/s. 34. [State of Rajasthan

v. Puri Constr. Co. Ltd., (1994) 6 SCC 485] On the

basis of the issues submitted by the parties, the Arbitral

Tribunal framed issues for consideration and answered

the said issues. Subsequent events need not be taken

into account.”

(emphasis supplied)

30. In Haryana Tourism [Haryana Tourism Ltd. v.

Kandhari Beverages Ltd., (2022) 3 SCC 237 : (2022) 2

SCC (Civ) 87] , this Court yet again pointed out the

limited scope of interference under Sections 34 and 37 of

the Act; and disapproved interference by the High Court

under Section 37 of the Act while entering into merits of

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the claim in the following words : (SCC p. 240, paras 8-

9)

“8. So far as the impugned judgment and order

[Kandhari Beverages Ltd. v. Haryana Tourism Ltd.,

2018 SCC OnLine P&H 3233] passed by the High

Court quashing and setting aside the award and the

order passed by the Additional District Judge under

Section 34 of the Arbitration Act are concerned, it is

required to be noted that in an appeal under Section 37

of the Arbitration Act, the High Court has entered into

the merits of the claim, which is not permissible in

exercise of powers U/s. 37 of the Arbitration Act.

9. As per settled position of law laid down by this Court

in a catena of decisions, an award can be set aside only

if the award is against the public policy of India. The

award can be set aside under Sections 34/37 of the

Arbitration Act, if the award is found to be contrary 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. None of the aforesaid exceptions shall

be applicable to the facts of the case on hand. The High

Court has entered into the merits of the claim and has

decided the appeal under Section 37 of the Arbitration

Act as if the High Court was deciding the appeal

against the judgment and decree passed by the learned

trial court. Thus, the High Court has exercised the

jurisdiction not vested in it under Section 37 of the

Arbitration Act. The impugned judgment and order

[Kandhari Beverages Ltd. v. Haryana Tourism Ltd.,

2018 SCC OnLine P&H 3233] passed by the High

Court is hence not sustainable.”

31. As regards the limited scope of interference under

Sections 34/37 of the Act, we may also usefully refer to

the following observations of a three-Judge Bench of this

Court in UHL Power Co. Ltd. v. State of H.P. [(2022) 4

SCC 116]: (SCC p. 124, paras 15-16)

“15. This Court also accepts as correct, the view

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expressed by the appellate court that the learned Single

Judge committed a gross error in reappreciating the

findings returned by the Arbitral Tribunal and taking

an entirely different view in respect of the interpretation

of the relevant clauses of the implementation agreement

governing the parties inasmuch as it was not open to

the said court to do so in proceedings U/s. 34 of the

Arbitration Act, by virtually acting as a court of

appeal.

16. As it is, the jurisdiction conferred on courts under

Section 34 of the Arbitration Act is fairly narrow, when

it comes to the scope of an appeal under Section 37 of

the Arbitration Act, the jurisdiction of an appellate

court in examining an order, setting aside or refusing to

set aside an award, is all the more circumscribed.”

32. The learned Attorney General has referred to another

three-Judge Bench decision of this Court in SAL Udyog

[State of Chhattisgarh v. SAL Udyog (P) Ltd., (2022) 2

SCC 275], wherein this Court indeed interfered with the

award in question when the same was found suffering

from non-consideration of a relevant contractual clause.

In the said decision too, the principles aforesaid in Delhi

Airport Metro Express [(2022) 1 SCC 131], Ssangyong

Engg. [(2019) 15 SCC 131] and other cases were

referred to and thereafter, this Court applied the

principles to the facts of that case. We shall refer to the

said decision later at an appropriate juncture.

33. Keeping in view the aforementioned principles

enunciated by this Court with regard to the limited scope

of interference in an arbitral award by a Court in the

exercise of its jurisdiction U/s. 34 of the Act, which is all

the more circumscribed in an appeal under Section 37,

we may examine the rival submissions of the parties in

relation to the matters dealt with by the High Court.”

27.Thus, it is submitted by the learned counsel for the

claimant-Respondent that the law is now well-settled, inasmuch

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as an arbitral award can be set aside only on the ground of

patent illegality, i.e. where illegalities go to the root of the

matter but re-appreciation of facts and evidence cannot be

permitted under the ground of patent illegality and the

jurisdiction conferred on Courts under Section 34/37 of the Act

is fairly narrow. It is equally a well-settled law that power of

Court under Section 37 of the Act, 1996 is not same as the

power of the Appellate Court under Code of Civil Procedure,

inasmuch as the learned Appellate Court can re-appreciate both

factual and legal position whereas the jurisdiction of the Court

under Section 37 is confined only to see that the power under

Section 34 has been rightly exercised. In fact, neither the Court

exercising jurisdiction under Section 34 nor under Section 37 of

the Act, 1996 can go into finding of facts recorded by the

arbitral Tribunal. Reference has been made to a judgment

rendered by the Hon’ble Apex Court in the case Bombay Slum

Redevelopment Corporation Ltd. vs. Samir Narain Bhojwani,

reported in (2024) 7 SCC 218 as also to the one rendered in the

case of Somdat Builders-NCC-NEC(JV) vs. National

Highways Authority of India & Others, reported in (2025) 6

SCC 757 and the one rendered in the case of Jan De Nul

Dredging India Private Ltd. vs. Tuticorin Port Trust, reported

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in (2026) SCC Online SC 33.

Determination:

28.We have heard the learned counsel for the parties at

length and perused the voluminous records, including the

records of the arbitral proceedings, copies of Misc. (Arbitration)

Case No. 01 of 2021 and the reply filed therein as also the

arbitral award dated 17.10.2020 and the impugned judgement

passed by the learned PDJ, Patna dated 25.07.2025.

29.Shorn of the details, it would suffice to state that an

agreement dated 28.01.2014 was entered into between the

parties for three years whereby the claimant-respondent was

required to execute the work of Transporting-cum-Handling

Agent for the District Khagaria and he was entrusted with the

work of transportation of food-grains and other commodities

including edible oil to the destinated godown, as directed by or

on behalf of the appellants and according to the route chart fixed

for the said purpose. The period of agreement was from

28.01.2014 to 27.01.2017. A bare perusal of the statement of

claim filed by the claimant-respondent before the learned Sole

Arbitrator would show that the Deputy Chief, Transportation,

BSFC, Patna vide letter dated 30.01.2017 had granted approval

for extension of the time period of the work of the claimant-

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respondent as Transport-cum-Handling Agent with effect from

the date of end of the period of the previous agreement dated

28.01.2014, for two years and a copy of the said letter was

marked to the claimant-respondent vide memo dated 09.02.2017

to execute fresh agreement within 24 hours of receipt of the said

letter, whereafter an agreement dated 10.02.2017 was entered

into between the appellants and the claimant-respondent,

however not for two years but only for one year as is apparent

from Clause 14 of the said agreement dated 10.02.2017, hence

the period of agreement was from 10.02.2017 to 09.02.2018,

nonetheless it appears that the claimant had continued to work

for extra one year, inasmuch as the statement of claims

submitted before the learned Arbitrator would show that he has

submitted bills for the period starting from the month of

February 2015 up to the month of February 2019.

30.The claimant-respondent being aggrieved had filed a

detailed statement of claims before the learned Arbitrator on

25.10.2019, inter alia praying for the following reliefs:-

“(i) Respondents be directed to make payment of the claims

of the claimant amounting. to Rs. 4,44,79,872.58 (Rupees four

crore forty-four seventy none thousand eight hundred seventy-

two rupees and fifty-eight paisa) with interest thereon @ 18%

till 31.10.2019 as noted in Annexure - 7 to the statement of

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claims, with further interest thereon at the rate of 18% per

annum from 01.11.2019 up to date of actual receipt of the

awarded amount with interest thereon by the claimant.

(ii) The respondents joint and severally be directed to pay the

cost of arbitration to the claimant.

(iii) The Hon’ble Tribunal may grant any other relief or

relieves which is deemed fit and proper in the ends of justice

to the claimant.”

31.The appellants had then filed statement of defence on

13.01.2020, whereafter the claimant-respondent had filed a

rejoinder dated 11.02.2020 as also a supplementary statement of

claim on 14.06.2020. The learned Sole Arbitrator had then

framed issues for consideration.

32.The learned Sole Arbitrator vide arbitral award dated

17.10.2020 has passed the arbitral award allowing the claim on

the head of outstanding bill amounts, compensation to the tune

of Rs.25 lakhs, simple interest @ 10% for the pendente lite

period and further 18% interest over the awarded sum from the

date of award till realization of the awarded amount, cost

towards fees and expenses of the arbitrator and courts and other

legal expenses apart from considering the unpaid arbitrator’s

fees not paid by the appellants herein as unpaid cost of the

award under Section 39 of the Act. We have already reproduced

the amounts awarded by the learned Sole Arbitrator by the

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arbitral award dated 17.10.2020 hereinabove in paragraph No. 8.

The said award was challenged by the appellants before the

learned Court of PDJ, Patna by filing Misc. (Arbitration) Case

No.01 of 2021 under Section 34 (2) and (2A) of the Act, 1996 to

which the claimant-respondent herein had filed a reply as also

supplementary reply dt. 23.12.2021 & 14.01.2022, respectively.

33.The learned PDJ, Patna by the impugned judgment dated

25.07.2025 has been pleased to dismiss the said Misc.

(Arbitration) Case No. 01 of 2021 filed on 02.01.2021, holding

that no valid ground has been made out under Section (2) or

(2A) of Section 34 of the Act, 1996 so as to warrant interference

with the impugned arbitral award or findings of the learned Sole

Arbitrator. The findings recorded by the learned PDJ, Patna in

the aforesaid judgement dated 25.07.2025 has already been

detailed hereinabove in paragraph No. 14.

34.At the outset, it would be relevant to reproduce

hereinbelow Clauses of the Agreement dated 28.01.2014 entered

into between the parties for the District of Khagaria:-

“10. The First Party shall be liable to pay the second-Party

remuneration for the undertaking in this agreement at the

rates specified below against each item. No other charges

shall be admissible to the second Party for the due

performance to this agreement. These rates are also

subject to revision at any time at the discretion of the first

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Party. If the Second Party agreed to such revisions either

by express consent or by implied action such rates would

automatically by-binding to the second Party.

(Application of rate of Particular slab will be only up to

the maximum distance fixed for the beginning form Zero).

11. No separate handling and stacking charges is payable

in respect of handling work taking place at F.C.I. depot

or rail head/Godown. Schedule of approved rates for

transport and handling is indicated above in this

agreement.

12. The District Manager, Bihar State Food &Civil

Supplies Corporation Ltd shall on completion of each

month, calculate the amount of remuneration for which

the Second Party is entitled to as aforesaid and pay the

same by Account Payee cheque within a reasonable

period after such accounting. However, after the

submission of bills by the Second Party and subject to the

completion of such other formalities as required by the

First party, the payment against bill submitted by the

Second party will be made by the first party in the

manner specified in the Head office Circular No. Audit-

IX 13/96-799 dated 07.02.2001. The First Party reserves

the right to amend the procedure of payment, as and

when so required. No interest shall be payable to the

Second Party for unavoidable delay in the payment. In

special circumstances, the payment may be made even

within the quarter at discretion to the District Manager

with prior approval of the Managing Director while

making the payment the damage like shortage officially,

accident, theft etc. payable by the Second Party will be

deducted and if damage is claimed but not finally

determined payment that extent will be withheld till final

determination which is to be done at the shortest possible

time.

14. The agreement shall remain in operation for the

period of three years from the date of execution of the

agreement or allotment of work. This may be extended by

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mutual consent for a further period of two years or may

be terminated earlier than the period mentioned above on

behalf of the First Party in case if non-lifting of grains,

sugar, edible oil etc. During the specified period if there

is any breach of any of the terms of the agreement by the

second carry, the agreement may be terminated and

blacklisted as well as debarred for future transportation

work, security deposits will be forfeited and Bank

guarantee of 10 lacs (ten lac only) will be utilized and

encashed at once by the First Party. The responsibility of

the second party shall not cease with the termination of

the agreement unless he has redelivered the grains, sugar,

edible oils and etc. entrusted to him and rendered

complete accounts thereof to the satisfaction of the First

Party.

The terms of agreements and contract for transporting

and handling work can be extended for another period of

two years on the recommendations of District Transport

Committee, if the work of the Second Party is found

satisfactory and the recommendation of the District

Transport Committee, reaches Corporation Headquarter,

two months before expiry of agreement and as per

guidelines issued by the corporation from time to time in

this regard.

17. All disputes arising under or in pursuance of this

agreement between the parties, except matters decision of

which herein expressly is otherwise provided, shall be

referred to sole arbitration of the C.M.D./Managing

Director of the Bihar State Food & Civil Supplies

Corporation Ltd. Patna or a person nominated by the

C.M.D/ Managing Director decision of such arbitrator

shall be final and binding on both the parties. The

provisions of the arbitration and conciliation Act 1996

and rules framed there under and statuary modifications

there of shall apply to the proceedings of arbitration and

all such disputes shall be subject to the jurisdiction of

courts at Patna.

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18. The second party would not be entitled to claim any

compensation for detention of their trucks at the godown

gates or detention by law enforcing agencies during

transit any other authorized places of the corporation

from where the delivery of any consignment is to be

obtained or where any delivery is to be given.”

35.At this juncture, we would like to delve upon the scope of

Sections 34 and 37 of the Act, 1996 as has been considered and

settled in a catena of judgments by the Hon’ble Apex Court. In

this regard, we would first refer to the judgment rendered by the

Hon’ble Apex Court in the case of Sepco Electric Power

Construction Corporation vs. GMR Kamalanga Enery Limited

reported in (2026) 2 SCC 542, paragraph Nos. 68, 114 to 116

whereof are reproduced herein below:-

“68. Furthermore, in the process of discussing the jurisdiction

and powers of courts under Sections 34 and 37 of the 1996

Act, a 3-Judge Bench of this Court, in UHL Power Co. [UHL

Power Co. Ltd. v. State of H.P., (2022) 4 SCC 116 : (2022) 2

SCC (Civ) 401] while holding that the learned Single Judge

of the High Court concerned had exceeded his jurisdiction

through interference with the arbitral award, explicated the

reasons of such narrow scope of powers of a court under

Section 34 of the 1996 Act. Referencing extensively on other

decisions of this Court, namely, MMTC [MMTC Ltd. v.

Vedanta Ltd., (2019) 4 SCC 163 : (2019) 2 SCC (Civ) 293] ,

K. Sugumar v. Hindustan Petroleum Corpn. Ltd. [K. Sugumar

v. Hindustan Petroleum Corpn. Ltd., (2020) 12 SCC 539] ,

Dyna Technologies [Dyna Technologies (P) Ltd. v. Crompton

Greaves Ltd., (2019) 20 SCC 1] , and Parsa Kente Collieries

[Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut

Utpadan Nigam Ltd., (2019) 7 SCC 236 : (2019) 3 SCC (Civ)

552] , it laid down that the courts do not sit in appeal over

arbitral awards, therefore, the jurisdiction of the courts

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concerned is confined to specific grounds as laid down under

Section 34 of the 1996 Act, for instance, violation of public

policy, patent illegality, or misconduct. Furthermore, it is

based on the principle of party autonomy and the need to

uphold the finality of an arbitral award. Concluding, it

iterated that when the parties have, through conscious

decision-making, opted for arbitration as an alternative

means of dispute mechanism, the courts ought to refrain from

reappreciation of evidence or substitution of interpretation(s),

unless the award is perverse, unreasonable, or contrary to the

mandate of the statute or decisions of court.

114. Summarising the principles as aforesaid, it is undoubtful

that the interference under jurisprudence laid down under

Sections 34 and 37 of the 1996 Act is narrow, while

aforementioned decisions do acknowledge that, SEPCO has

vehemently pushed so in an attempt to persuade us to hold the

Division Bench in error. However, the jurisprudence, as also

identified in the aforesaid issues, clarifies that the principles

of natural justice, and the public policy of India are

paramount and cannot be ignored or sidelined in an attempt

not to frustrate the patent or latent commercial wisdom of the

parties to seek an alternative means of dispute resolution.

Such issues attack the root of the Indian legal system and the

courts cannot be made a mere spectator to such gross

violations.

115. The scope under Section 37, as rightly argued by

SEPCO, is slimmer than that under Section 34, but, in the

instant case, the Section 34 judgment had failed to

appreciate the gross violations of the basic principles of

adjudication of a dispute. While one may argue some of those

may be latent and not a prima facie violation, thereby not

mandating any interference, direct omission of the mandate of

Section 18 and Section 28 sub-section (3) of the 1996 Act are

clearly patent through a skimming of arbitral award. No

contentions appear on behalf of SEPCO vis-à-vis waiver

through the circumstances arising in March 2012, and despite

such a want, the Arbitral Tribunal exceeded the mandate to

deem a waiver on the part of GMRKE Limited for contractual

notices, without any explicit intent. Thereafter, it patently

discriminates against GMRKE Limited to deny their claims

for want of contractual notice(s).

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116. An attack on the fundamental policy of Indian law allows

for reappreciation and thereby, the impugned judgment

cannot be faulted with on the ground of having exceeded its

jurisdiction under Section 37 of the 1996 Act. The Division

Bench was correct in this regard, as to open up the necessary

floodgates of reappreciation of the arbitral award.”

36.Yet another judgment on the aforesaid judgment is the

one rendered by the Hon’ble Apex Court in the case of UHL

Power Company Limited vs. State of Himachal Pradesh

reported in (2022) 4 SCC 116, paragraph Nos. 16 to 19 and 21

whereof reproduced herein below:-

“16. As it is, the jurisdiction conferred on courts under

Section 34 of the Arbitration Act is fairly narrow, when it

comes to the scope of an appeal under Section 37 of the

Arbitration Act, the jurisdiction of an appellate court in

examining an order, setting aside or refusing to set aside an

award, is all the more circumscribed. In MMTC Ltd. v.

Vedanta Ltd. [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163 :

(2019) 2 SCC (Civ) 293] , the reasons for vesting such a

limited jurisdiction on the High Court in exercise of powers

under Section 34 of the Arbitration Act have been explained

in the following words : (SCC pp. 166-67, para 11)

“11. As far as Section 34 is concerned, the position is well-

settled by now that the Court does not sit in appeal over the

arbitral award and may interfere on merits on the limited

ground provided under Section 34(2)(b)(ii) i.e. if the award is

against the public policy of India. As per the legal position

clarified through decisions of this Court prior to the

amendments to the 1996 Act in 2015, a violation of Indian

public policy, in turn, includes a violation of the fundamental

policy of Indian law, a violation of the interest of India,

conflict with justice or morality, and the existence of patent

illegality in the arbitral award. Additionally, the concept of

the “fundamental policy of Indian law” would cover

compliance with statutes and judicial precedents, adopting a

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judicial approach, compliance with the principles of natural

justice, and Wednesbury [Associated Provincial Picture

Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)]

reasonableness. Furthermore, “patent illegality” itself has

been held to mean contravention of the substantive law of

India, contravention of the 1996 Act, and contravention of the

terms of the contract.”

17. A similar view, as stated above, has been taken by this

Court in K. Sugumar v. Hindustan Petroleum Corpn. Ltd. [K.

Sugumar v. Hindustan Petroleum Corpn. Ltd., (2020) 12 SCC

539] , wherein it has been observed as follows : (SCC p. 540,

para 2)

“2. The contours of the power of the Court under Section 34

of the Act are too well established to require any reiteration.

Even a bare reading of Section 34 of the Act indicates the

highly constricted power of the civil court to interfere with an

arbitral award. The reason for this is obvious. When parties

have chosen to avail an alternate mechanism for dispute

resolution, they must be left to reconcile themselves to the

wisdom of the decision of the arbitrator and the role of the

court should be restricted to the bare minimum. Interference

will be justified only in cases of commission of misconduct by

the arbitrator which can find manifestation in different forms

including exercise of legal perversity by the arbitrator.”

18. It has also been held time and again by this Court that if

there are two plausible interpretations of the terms and

conditions of the contract, then no fault can be found, if the

learned arbitrator proceeds to accept one interpretation as

against the other. In Dyna Technologies (P) Ltd. v. Crompton

Greaves Ltd. [Dyna Technologies (P) Ltd. v. Crompton

Greaves Ltd., (2019) 20 SCC 1] , the limitations on the Court

while exercising powers under Section 34 of the Arbitration

Act has been highlighted thus : (SCC p. 12, para 24)

“24. There is no dispute that Section 34 of the Arbitration Act

limits a challenge to an award only on the grounds provided

therein or as interpreted by various Courts. We need to be

cognizant of the fact that arbitral awards should not be

interfered with in a casual and cavalier manner, unless the

Court comes to a conclusion that the perversity of the award

goes to the root of the matter without there being a possibility

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of alternative interpretation which may sustain the arbitral

award. Section 34 is different in its approach and cannot be

equated with a normal appellate jurisdiction. The mandate

under Section 34 is to respect the finality of the arbitral

award and the party autonomy to get their dispute

adjudicated by an alternative forum as provided under the

law. If the Courts were to interfere with the arbitral award in

the usual course on factual aspects, then the commercial

wisdom behind opting for alternate dispute resolution would

stand frustrated.”

19. In Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut

Utpadan Nigam Ltd. [Parsa Kente Collieries Ltd. v.

Rajasthan Rajya Vidyut Utpadan Nigam Ltd., (2019) 7 SCC

236 : (2019) 3 SCC (Civ) 552] , adverting to the previous

decisions of this Court in McDermott International Inc. v.

Burn Standard Co. Ltd. [McDermott International Inc. v.

Burn Standard Co. Ltd., (2006) 11 SCC 181] and Rashtriya

Ispat Nigam Ltd. v. Dewan Chand Ram Saran [Rashtriya

Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5 SCC

306] , wherein it has been observed that an Arbitral Tribunal

must decide in accordance with the terms of the contract, but

if a term of the contract has been construed in a reasonable

manner, then the award ought not to be set aside on this

ground, it has been held thus : (Parsa Kente Collieries case

[Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut

Utpadan Nigam Ltd., (2019) 7 SCC 236 : (2019) 3 SCC (Civ)

552] , SCC pp. 244-45, para 9)

“9.1. … 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 para 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

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legal mind would not be held to be invalid on this score.

9.2. Similar is the view taken by this Court in NHAI v. ITD

Cementation India Ltd. [NHAI v. ITD Cementation India Ltd.,

(2015) 14 SCC 21 : (2016) 2 SCC (Civ) 716] , SCC para 25

and SAIL v. Gupta Brother Steel Tubes Ltd. [SAIL v. Gupta

Brother Steel Tubes Ltd., (2009) 10 SCC 63 : (2009) 4 SCC

(Civ) 16] , SCC para 29.”

21. An identical line of reasoning has been adopted in South

East Asia Marine Engg. & Constructions Ltd. (Seamec Ltd.)

v. Oil India Ltd. [South East Asia Marine Engg. &

Constructions Ltd. (Seamec Ltd.) v. Oil India Ltd., (2020) 5

SCC 164 : (2020) 3 SCC (Civ) 1] and it has been held as

follows : (SCC p. 172, paras 12-13)

“12. It is a settled position that a court can set aside the

award only on the grounds as provided in the Arbitration Act

as interpreted by the courts. Recently, this Court in Dyna

Technologies (P) Ltd. v. Crompton Greaves Ltd. [Dyna

Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20

SCC 1] laid down the scope of such interference. This Court

observed as follows : (SCC p. 12, para 24)

‘24. There is no dispute that Section 34 of the Arbitration Act

limits a challenge to an award only on the grounds provided

therein or as interpreted by various Courts. We need to be

cognizant of the fact that arbitral awards should not be

interfered with in a casual and cavalier manner, unless the

Court comes to a conclusion that the perversity of the award

goes to the root of the matter without there being a possibility

of alternative interpretation which may sustain the arbitral

award. Section 34 is different in its approach and cannot be

equated with a normal appellate jurisdiction. The mandate

under Section 34 is to respect the finality of the arbitral

award and the party autonomy to get their dispute

adjudicated by an alternative forum as provided under the

law. If the Courts were to interfere with the arbitral award in

the usual course on factual aspects, then the commercial

wisdom behind opting for alternate dispute resolution would

stand frustrated.’

13. It is also settled law that where two views are possible, the

Court cannot interfere in the plausible view taken by the

arbitrator supported by reasoning. This Court in Dyna

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Technologies [Dyna Technologies (P) Ltd. v. Crompton

Greaves Ltd., (2019) 20 SCC 1] observed as under : (SCC p.

12, para 25)

‘25. Moreover, umpteen number of judgments of this Court

have categorically held that the Court should not interfere

with an award merely because an alternative view on facts

and interpretation of contract exists. The Courts need to be

cautious and should defer to the view taken by the Arbitral

Tribunal even if the reasoning provided in the award is

implied unless such award portrays perversity unpardonable

under Section 34 of the Arbitration Act.”

37.We may also refer to the judgement rendered in the case

of Jan De Nul Dredging India Private Limited vs. Tuticorin

Port Trust reported in 2026 SCC OnLine SC 33, paragraph

Nos. 36, 37 whereof are reproduced herein below:-

“36. In other words, the scope of interference of the court

with the arbitral matters is virtually prohibited, if not

absolutely barred. The powers of the appellate court are even

more restricted than the powers conferred by Section 34 of the

Act. The appellate power under Section 37 of the Act is

exercisable only to find out if the court exercising power

under Section 34 of the Act, has acted within its limits as

prescribed thereunder or has exceeded or failed to exercise

the power so conferred. The appellate court exercising

powers under Section 37 of the Act has no authority of law to

consider the matter in dispute before the Arbitral Tribunal on

merits so as to hold as to whether the award of the Arbitral

Tribunal is right or wrong. The appellate court in exercise of

such power cannot sit as an ordinary court of appeal and

reappraise the evidence to record a contrary finding. The

award of the Arbitral Tribunal cannot be touched by the court

unless it is contrary to the substantive provision of law or any

provision of the Act or the terms of the agreement.

37. Undoubtedly, in the case at hand, the award of the

Arbitral Tribunal is not contrary to any substantive provision

of law or any provision of the Act. Yet, it has been disturbed

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by the appellate court, apparently by giving a different

interpretation of the clauses of the licence agreement which

jurisdiction was not vested in it. Ordinarily, the interpretation

given by the Arbitral Tribunal, as affirmed by the court in

exercise of powers under Section 34 of the Act ought to have

been accepted.”

38.We have already referred to the judgments rendered in the

case of Saw Pipes Limited (supra), Associate Business (supra),

Reliance Infrastructure Limited (supra), Bombay Slum Re-

development Corporation Limited (supra), Somdat Builders-

NCC-NEC (JB) (supra) and most of other judgments referred to

in the said judgement on the scope of interference under

Sections 34 and 37 of the Act of 1996. We find from the catena

of judgments referred to hereinabove that broadly as far as

Section 34 and 37 of the Act of 1996 is concerned, the Court is

not required to sit in appeal over the arbitral award and

reappreciate the evidence, however the scope of interference

would be permissible in the following situations:-

(i) When the award is in violation of Public Policy of

India i.e. the Fundamental Policy of Indian Law.

(ii) Violation of Principles of Natural Justice as

envisaged under Sections 18 and 34 (2)(a)(iii) of the Act

of 1996.

(iii) If the award is in conflict with justice or morality

i.e. in conflict with the most basic notions of morality

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and justice.

(iv) If the arbitral award shocks the conscience of the

Court.

(v) An arbitral award can also be set aside on the ground

of patent illegality appearing on the face of the award

which goes to the root of the matter.

39.Thus, in a nutshell we find that an award can be

challenged on the ground provided for under Section 34 (2) of

the Act, 1996. It is a well settled law that where a finding is

based on no evidence or an arbitral tribunal takes into account

something irrelevant to the decision which it arrives at or

ignores vital evidence or arrived at its decision, such decision

would necessarily be perverse. A conspectus of the aforesaid

judgement rendered by the Hon’ble Apex Court would

demonstrate that award can be set aside under Sections 34 and

37 of the Act, 1996, if the award is found to be contrary to:-

(a) Fundamental policy of Indian Law; or

(b) The Interest of India.

(c) Justice or morality.

(d) It is patently illegal.

40.Yet another issue which arises for consideration is

whether the powers of the Court under Sections 34 and 37 of the

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Act, 1996 will include the power to modify an arbitral award

and if the power to modify the award is available, whether such

power can be exercised only where the award is severable and a

part thereof can be modified. The said issues have been

answered in a constitution bench judgment rendered by the

Hon’ble Apex Court in the case of Gayatri Balasamy vs. ISG

Novasoft Technologies Limited reported in (2025) 7 SCC 1, to

the effect that the Court has a limited power under Sections 34

and 37 of the Act, 1996 to modify the arbitral award which may

be exercised under the following circumstances:-

(i) When the award is severable, by severing the

“invalid” portion from the “valid” portion of the award;

(ii) By correcting any clerical, computational or

typographical errors which appear erroneous on the basis

of records.

(iii) By modifying post-award interest in some

circumstances; and

41.It would be apt to reproduce paragraph Nos.32 to 34,

38, 39, 41 to 45, 49, 63, 65 and 87 of the judgment rendered

by the Hon’ble Apex in the case of Gayatri Balasamy (supra),

which reads as under:-

“II. Severability of awards

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32. In the present controversy, the proviso to Section 34(2)(a)

(iv) is particularly relevant. It states that if the decisions on

matters submitted to arbitration can be separated from those

not submitted, only that part of the arbitral award which

contains decisions on matters non-submitted may be set aside.

The proviso, therefore, permits courts to sever the non-

arbitrable portions of an award from arbitrable ones. This

serves a twofold purpose. First, it aligns with Section 16 of

the 1996 Act, which affirms the principle of kompetenz-

kompetenz, that is, the arbitrators' competence to determine

their own jurisdiction. Secondly, it enables the Court to sever

and preserve the “valid” part(s) of the award while setting

aside the “invalid” ones. [ The “validity” and “invalidity”,

as used here, does not refer to legal validity or merits

examination, but validity in terms of the proviso to Section

34(2)(a)(iv) of the 1996 Act.] Indeed, before us, none of the

parties have argued that the Court is not empowered to

undertake such a segregation.

33. We hold that the power conferred under the proviso to

Section 34(2)(a)(iv) is clarificatory in nature. The authority to

sever the “invalid” portion of an arbitral award from the

“valid” portion, while remaining within the narrow confines

of Section 34, is inherent in the Court's jurisdiction when

setting aside an award.

34. To this extent, the doctrine of omne majus continet in se

minus—the greater power includes the lesser—applies

squarely. The authority to set aside an arbitral award

necessarily encompasses the power to set it aside in part,

rather than in its entirety. This interpretation is practical and

pragmatic. It would be incongruous to hold that power to set

aside would only mean power to set aside the award in its

entirety and not in part. A contrary interpretation would not

only be inconsistent with the statutory framework but may

also result in valid determinations being unnecessarily

nullified.

III. Difference between setting aside and modification

38. This distinction lies at the heart of many arguments

canvassed before us. The parties opposing the recognition of

a power of modification of the courts have strenuously

contended that modification and setting aside are distinct and

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sui generis powers. While modification involves altering

specific parts of an award, setting aside does not alter the

award but results in its annulment. Their primary concern is

that recognising a power of modification may invite judicial

interference with the merits of the dispute—something

arguably inconsistent with the framework of the 1996 Act.

39. We agree with this argument, but only to a limited extent.

It is true that modification and setting aside have different

consequences: the former alters the award, while the latter

annuls it. [ The words used in the statute must be interpreted

contextually, taking into account the purpose, scope, and

background of the provision. Many words and expressions

have both narrow and broad meanings and thereby open to

multiple interpretations. Legal interpretation should align

with the object and purpose of the legislation. Therefore, we

may not strictly apply a semantic differentiation while

interpreting the words “modification” or “setting aside”.

Instead, a holistic and purposive interpretation of these words

will be consistent with the intent behind the provision and the

1996 Act. Linguistically and even jurisprudentially, a

distinction can be drawn between the expressions —

“modification”, “partial setting aside”, and “setting aside”

of an arbitral award in its entirety. However, we must note

that the practical effect of partially setting aside an award is

the modification of the award.] However, we do not concur

with the view that recognising any modification power will

inevitably lead to an examination of the merits of the dispute.

It will completely depend on the extent of the modification

powers recognised by us. In the following part of our

Analysis, we outline the contours of this limited power and

explain why, in our view, recognising it will ultimately yield

more just outcomes.

41. To deny courts the authority to modify an award—

particularly when such a denial would impose significant

hardships, escalate costs, and lead to unnecessary delays—

would defeat the raison d'être of arbitration. This concern is

particularly pronounced in India, where applications under

Section 34 and appeals under Section 37 often take years to

resolve.

42. Given this background, if we were to decide that courts

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can only set aside and not modify awards, then the parties

would be compelled to undergo an extra round of arbitration,

adding to the previous four stages: the initial arbitration,

Section 34 (setting aside proceedings), Section 37 (appeal

proceedings), and Article 136 (SLP proceedings). In effect,

this interpretation would force the parties into a new

arbitration process merely to affirm a decision that could

easily be arrived at by the Court. This would render the

arbitration process more cumbersome than even traditional

litigation.

43. Equally, Section 34 limits recourse to courts to an

application for setting aside the award. However, Section 34

does not restrict the range of reliefs that the Court can grant,

while remaining within the contours of the statute. A different

relief can be fashioned as long as it does not violate the

guardrails of the power provided under Section 34. In other

words, the power cannot contradict the essence or language

of Section 34. The Court would not exercise appellate power,

as envisaged by Order 41 of the Code of Civil Procedure,

1908 (hereinafter referred to as “the Code”).

44. We are of the opinion that modification represents a more

limited, nuanced power in comparison to the annulment of an

award, as the latter entails a more severe consequence of the

award being voided in toto. Read in this manner, the limited

and restricted power of severing an award implies a power of

the Court to vary or modify the award. It will be wrong to

argue that silence in the 1996 Act, as projected, should be

read as a complete prohibition.

45. We are thus of the opinion that the Section 34 Court can

apply the doctrine of severability and modify a portion of the

award while retaining the rest. This is subject to parts of the

award being separable, legally and practically, as stipulated

in Part II of our Analysis.

49. Notwithstanding Section 33, we affirm that a Court

reviewing an award under Section 34 possesses the authority

to rectify computational, clerical, or typographical errors, as

well as other manifest errors, provided that such modification

does not necessitate a merits-based evaluation. There are

certain powers inherent to the Court, even when not explicitly

granted by the legislature. The scope of these inherent powers

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depends on the nature of the provision, whether it pertains to

appellate, reference, or limited jurisdiction as in the case of

Section 34. The powers are intrinsically connected as they are

part and parcel of the jurisdiction exercised by the Court.

63. We are unable to accept the view taken in Kinnari Mullick

[Kinnari Mullick v. Ghanshyam Das Damani, (2018) 11 SCC

328 : (2018) 5 SCC (Civ) 106] , which insists that an

application or request under Section 34(4) must be made by a

party in writing. The request may be oral. Nevertheless, there

should be a request which is recorded by the Court. We are

also unable to agree that the request must be exercised before

the application under Section 34(1) is decided. Section 37

(Annexure A) permits an appeal against any order setting

aside or refusing to set aside an arbitral award under Section

34. To this extent, the appellate jurisdiction under Section 37

is coterminous with, and as broad as, the jurisdiction of the

Court deciding objections under Section 34. Hence, the

contention that the Tribunal becomes functus officio after the

award is set aside is misplaced. The Section 37 Court still

possesses the power of remand stipulated in Section 34(4). Of

course, the appellate court, while exercising power under

Section 37, should be mindful when the award has been

upheld by the Section 34 Court. But the Section 37 Court still

possesses the jurisdiction to remand the matter to the Arbitral

Tribunal.

65. In Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd.

[Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd.,

(2019) 20 SCC 1] , this Court emphasised that the issuance of

a reasoned award is not a mere formality under the 1996 Act.

For an award to be termed “reasoned”, it must meet three

essential yardsticks: it must be proper, intelligible, and

adequate. The purpose behind Section 34(4) is clear: it allows

for an award to become enforceable after granting the

Tribunal an opportunity to cure any defects. This power is

exercisable when the Arbitral Tribunal has failed to give any

reasoning or the award exhibits gaps in reasoning and these

defects can be cured, thereby preventing unnecessary

challenges. The underlying intent is to provide an effective,

expeditious forum for addressing curable defects, which

Section 34(4) facilitates.

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Conclusions

87. Accordingly, the questions of law referred to by Gayatri

Balasamy [Gayatri Balasamy v. ISG Novasoft Technologies

Ltd., 2024 SCC OnLine SC 1681] are answered by stating

that the Court has a limited power under Sections 34 and 37

of the 1996 Act to modify the arbitral award. This limited

power may be exercised under the following circumstances:

87.1. When the award is severable, by severing the “invalid”

portion from the “valid” portion of the award, as held in

Part II of our Analysis;

87.2. By correcting any clerical, computational or

typographical errors which appear erroneous on the face of

the record, as held in Parts IV and V of our Analysis;

87.3. Post-award interest may be modified in some

circumstances as held in Part IX of our Analysis; and/or

87.4. Article 142 of the Constitution applies, albeit, the power

must be exercised with great care and caution and within the

limits of the constitutional power as outlined in Part XII of

our Analysis.”

42.Now coming back to the facts of the present case, we find

that the Ld. sole Arbitrator has by his award dated 17.10.2020,

under serial no. 1, awarded a sum of Rs. 2,06,13,021/- towards

the claim raised by the claimant-Respondent with regard to

transport and handling charges. In this regard, we find from the

records of the arbitral proceedings that an agreement dated

28.01.2014 as also the one dated 10.02.2017 was entered into

between the parties for the district of Khagaria and accordingly,

the claimant-Respondent had submitted a claim of Rs.

2,11,08,521.56/- under the head of balance payment due, as is

apparent from the chart containing the summary of claim of the

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claimant-Respondent for the district-Munger, more particularly

column no. 8 thereof, however beyond the scope of the

agreement, the claimant-Respondent had submitted claim

pertaining to detention charges as well. We find from the arbitral

award dated 17.10.2020, passed by the Ld. Sole Arbitrator that

at internal page no. 11, it has been held that Clause 18 of the

agreement clearly provides that the second party would not be

entitled to claim any compensation for detention of trucks,

hence no compensation is payable to the claimant-Respondent

herein on this head and in fact, a sum of Rs. 1,95,500/- (should

be actually Rs. 1,90,500/-) on the head of detention charges,

pertaining to the bill of month of February, 2017, which can be

found at running page no. 156 of the brief has been held to be

not payable, however it appears that a computational error has

been committed by the Ld. Sole Arbitrator, inasmuch as the

detention charges claimed by the claimant-Respondent in other

bills have not been deducted from the claim of the claimant-

Respondent. A bare perusal of the bills annexed by the claimant-

Respondent in the statement of claim filed before the Ld. Sole

Arbitrator would show that though a sum of Rs. 1,90,500/-

(wrongly mentioned as Rs. 1,95,500/-) has been directed to be

deducted, which can be found at running page no. 156 of the

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brief, however the detention bills raised along with the bills at

running page nos. 156, 168 to 170, 172 to 176 of the brief would

show that the detention charges totals up to a sum of Rs.

24,84,500/-, hence upon deduction of the amount already

deducted by the Ld. Sole Arbitrator, i.e. a sum of Rs. 1,95,500/-,

the balance amount of detention charge to the tune of Rs.

22,89,000/- is required to be deducted from the claim awarded

at serial no. 1 of the award dated 17.10.2020 to the tune of Rs.

2,06,13,021/-. Thus, the award at serial no. 1 is required to be

corrected / modified. Hence, the Ld. Sole Arbitrator ought to

have awarded a sum of Rs. 1,83,24,021/- instead of sum of Rs.

2,06,13,021/-, which in any view of the matter is a

computational error, erroneous on the face of the record, hence

we direct that the amount awarded in favor of the claimant-

Respondent by the Ld. Sole Arbitrator vide award dated

17.10.2020, pertaining to item No.1 at internal page No.14 of

the said award would stand corrected as follows:-

“(i) The claimant-respondent shall be paid an amount of

Rs. 1,83,24,021/- only towards the claim amount.”

43.It is a well-settled law that an Appellate Court cannot re-

appreciate the evidence. In the present case the bills submitted

by the claimant before the Ld. Sole Arbitrator along with the

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statement of claim have been marked as Annexure-6/1 to 6/52,

however the same have not been refuted by the appellants,

inasmuch as they did not file any affidavit of admission / denial

of documents of the claimant-Respondent before the Ld. Sole

Arbitrator, hence all the bills filed by the claimant before the Ld.

Sole Arbitrator would be deemed to have been accepted by the

appellants to be correct except to the extent of deduction of

detention bill from various bills, as aforesaid.

44.Now coming to the issue of compensation, we find that

the Ld. Sole Arbitrator has in an ad hoc manner granted

compensation to the tune of Rs. 25,00,000/-, however without

any evidence or proof to substantiate the said claim having been

led by the claimant-Respondent. In this regard, we find from the

statement of claim filed by the claimant-Respondent before the

Ld. Sole Arbitrator that averments have been made in

paragraphs no. 20 and 21 with regard to loss to the claimant-

Respondent to the tune of Rs. 61,76,000/- on account of non-

extension of the agreement for a period of further two years.

The said paragraphs no. 20 and 21 are reproduced herein

below:-

“20. That the claimant vide his letter dated 04.08.2018

addressed to the Collector cum Chairman District

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Transport Committee, Khagaria with a copy to the

District Manger, Khagaria gave his consent for extension

of period of transportation contract under Clause 14 of

the agreement for further period of two (02) years as the

claimant has successfully discharged his contractual

obligations but for the reasons best known to the

respondent authority they allotted the transportation work

to another transporter namely Vikash Kumar at a higher

rate vide Memo No. 48 Dated 14.01.2019 issued under

the signature of District Manager, B.S.F.C, Khagaria

putting the respondent to wrongful loss. It is stated that

the claimant has a right to get the period of contract

extended for a further period of two years but the

respondents in spite of request by the claimant did not

extend the period of agreement for a further period of

two years which resulted in loss of Rs. 61,76,000/- which

the claimant is entitled to recover the above noted

amount as compensation for the losses suffered by the

claimant. It is further stated that the trucks of the

claimant are idle and the claimant has not been selected

as Transport cum Handling Agent by the B.S.F.C in any

of the district though the claimant has participated in the

tender for the District of Begusarai, Khagaria and

Purnea. The details of calculation of the losses suffered

by the claimant would be submitted subsequently during

the pendency of the arbitral proceeding.

21.That during the subsistence period of agreement of

the claimant i.e up to 09.02.2019, the respondents

appointed another Transport cum Handling Agent on

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15.01.2019 and due to which the scope of work of the

claimant was reduced, trucks hired by the claimant fitted

with GPS remained idle and the claimant has to pay

higher charges for the idle period of the trucks also. The

claimant has paid a sum of Rs. 7,94,500/- as hire charges

for the idle trucks, detail of which are noted in Annexure-

6 to this statement of claims. The claimant is entitled to

recover the aforesaid amount of Rs. 7,94,500/- from the

respondents on account of losses suffered by the claimant

due to breach and disregard of contractual obligations by

the respondents.”

45.In this regard, we may mention here that as per the

records of the arbitral proceedings, it is apparent that the first

agreement was signed in between the parties on 28.1.2014 for a

period of three years for the district-Khagaria and after expiry of

the period of the said contract, a fresh contract was entered into

between the parties for a period of one year on 10.2.2017, as

would be apparent from Clause 14 of the said agreement dated

10.2.2017 and it was stipulated in the said Clause 14 that the

agreement may be extended by mutual consent for a further

period of one year, however no extension was granted to the

claimant-Respondent and now shockingly the claimant-

Respondent is claiming compensation to the tune of Rs.

61,76,000/- on the ground of non-extension of the period of

agreement for a further period of two years although there is no

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material on record to show that any promise was made by the

appellants to mandatorily / compulsorily extend the period of

agreement. Therefore, what was required to be seen by the Ld.

Sole Arbitrator is the terms and conditions of the contract/

agreement and he cannot travel beyond the same while making

the award. We also find from the records that though the

agreement dated 28.1.2014 had come to an end on 27.1.2017

while the agreement dated 10.2.2017 had come to an end on

09.02.2018 but the statement of claim filed by the claimant-

Respondent would show that he had continued to work even

beyond the expiry of the period of the agreement, i.e. 09.2.2018

and has submitted bills every month up to the month of

February, 2019, which have also been allowed by the Ld. Sole

Arbitrator, hence in no view of the matter, it can be said that any

loss was caused to the claimant-Respondent on account of any

default on the part of the appellants. Hence, the award of

compensation to the tune of Rs. 25,00,000/- by the Ld. Sole

Arbitrator vide arbitral award dated 17.10.2020 is patently

illegal on the very face of it and this part of the award is not

only unfair but also unreasonable and shocks the conscience of

this Court, hence is liable to be set aside.

46.It is yet another aspect of the matter that the claimant-

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respondent has also failed to bring on record credible evidence

with regard to the aforesaid issue. There is no proof much less

any evidence whatsoever, on the records of the arbitral

proceedings regarding the claimant-respondent having suffered

any loss or injury, hence the award of compensation to the tune

of Rs.25 lakhs is based on no evidence, thus is outrightly

perverse on this score as well. This aspect of the matter stands

fully covered by the judgement rendered by the Hon’ble Apex

Court in the case of Unibros vs. All India Radio, reported in

2023 SCC Online SC 1366 as also in the case of Batliboi

Environmental Engineers Limited vs. Hindustan Petroleum

Corporation Limited and Another, reported in (2024) 2 SCC

375, wherein the judgement rendered by the Hon’ble High

Court of Bombay in the case of Hindustan Petroleum

Corporation Ltd., Mumbai vs. Batliboi Environmental

Engineers Ltd, Mumbai and Another, reported in (2007) SCC

OnLine BOM 1016, has been upheld.

47.The other issue, which arises for consideration is the

award of interest by the Ld. Sole Arbitrator vide arbitral award

dated 17.10.2020 in the following manner:-

“The claimant-petitioner shall be entitled to simple

interest at the rate of 10 % p.a. from 13.9.2019 till the

date of award and further 18 % interest over awarded

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sum from the date of award till realization over the

awarded amount.”

48.The findings of the Ld. Sole Arbitrator with regard to the

aforesaid aspect of the matter is as follows:-

“The Arbitrator shall simply go by section 31(7) of

Arbitration and Conciliation Act 1996 as amended in

granting the interest upon the Awarded amount.

The Arbitrator also finds that the claimant shall be

entitled to award interest at the rate of 10% per annum

aver the award during the pendency of the proceeding

from 13.09.2019 till the date of the award and shall be

granted 18% interest over the final Award from the date

of the award till realisation.”

49.Thus, we find that the Ld. Sole Arbitrator vide arbitral

award dated 17.10.2020 has awarded interest pendente lite as

also interest from the date of award till realization of the

awarded amount. The law in this regard is no longer res integra,

inasmuch as the Hon’ble Apex Court has repeatedly held that if

the arbitration agreement or the contract itself provides for

interest, the Arbitrator would have the jurisdiction to award

interest, however when the agreement expressly provides that

no interest pendente lite shall be payable on the amount due, the

Arbitrator has no power to award pendente lite interest.

Reference in this connection be had to the judgments rendered

by the Hon’ble Apex Court in the case of Ambica Construction

(supra) and the one rendered in the case of GC Roy (supra). In

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this regard, we would also refer to a judgment rendered by the

Hon’ble Apex Court in the case of Union of India & Ors. vs.

Larsen & Tubro Limited (L&T), reported in 2026 SCC Online

SC 327, para nos. 29, 31, 34, 36, 38, 40, 43, 45, 46, 47, 48, 52,

53, 55, 56, 59, 61 and 62 whereof are reproduced herein below:-

“29. We have heard learned counsel for the parties and

perused the material placed on record. The following

issues are raised for our consideration:—

A. Whether the AT is justified in awarding pre-

award/pendente lite interest, by way of compensation,

while passing the award in favour of the respondent-

claimant, and more particularly in view of Clause

16(3) and Clause 64(5) of GCC.

B. Whether the AT is justified in awarding post award

interest in favour of the respondent-claimant.

C. Whether the Courts below committed any error

while dealing with Issue (A) and Issue (B) referred

hereinabove while exercising the powers under Section

34 and Section 37 of the Act.

31. Clause 16(3) of the GCC reads as under:

“no interest will be payable upon the Earnest Money

and Security Deposit or amounts payable to the

Contractor under the Contract, but Government

Securities deposited in terms of Sub-Clause (1) of this

clause will be payable with interest accrued thereon”.

34. Section 31(7)(a) and 31(7)(b) further clarifies that

the power of the arbitral tribunal to award interest,

which reads as under:—

“31. Form and contents of arbitral award.—

………….

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

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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 the award is made.”

(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).”

36. In the present case, Clause 16(3) of the GCC, as

referred hereinabove, expressly stipulates that no interest

will be payable upon earnest money and security

deposits or amounts payable to the contractor under the

contract.

38. This Court in the decision rendered in the case of

Manraj Enterprises (supra) has considered a similar

submission canvassed on behalf of the party concerned

and thereafter observed and held in para 12.1 as under:

“12.1. It is required to be noted that Clause 16(1) is

with respect to earnest money/security deposit.

However, Clause 16(2) is specifically with respect to

interest payable upon the earnest money or the security

deposit or amounts payable to the contractor under the

contract. The words used in Clause 16(2) is “or”.

Therefore, the expression “amounts payable to the

contractor under the contract” cannot be read in

conjunction with “earnest money deposit” or “security

deposit” by applying the principle of ejusdem generis.

The expression “amounts payable to the contractor

under the contract” has to be read independently and

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disjunctively to earnest money deposit and security

deposit as the word used is “or” and not “and”

between “earnest money deposit”, “security deposit”

and “amounts payable to the contractor under the

contract”. Therefore, the principle of ejusdem generis

is not applicable in the present case.”

40. At this stage, we would also like to refer to the

decision rendered by a three-judge bench of this Court in

Bright Power Projects (India) (P) Ltd. (supra), wherein

in para 10, 11 and 13, it was held as under:

“10. Thus, it had been specifically understood between

the parties that no interest was to be paid on the

earnest money, security deposit and the amount

payable to the contractor under the contract. So far as

payment of interest on government securities, which

had been deposited by the respondent contractor with

the appellant is concerned, it was specifically stated

that the said amount was to be returned to the

contractor along with interest accrued thereon, but so

far as payment of interest on the amount payable to the

contractor under the contract was concerned, there

was a specific term that no interest was to be paid

thereon.

11. When parties to the contract had agreed to the fact

that interest would not be awarded on the amount

payable to the contractor under the contract, in our

opinion, they were bound by their understanding.

Having once agreed that the contractor would not

claim any interest on the amount to be paid under the

contract, he could not have claimed interest either

before a civil court or before an Arbitral Tribunal.

………….

13. Section 31(7) of the Act, by using the words “unless

otherwise agreed by the parties”, categorically

specifies that the arbitrator is bound by the terms of the

contract so far as award of interest from the date of

cause of action to date of the award is concerned.

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Therefore, where the parties had agreed that no interest

shall be payable, the Arbitral Tribunal cannot award

interest.”

43. Now, at this stage, it is pertinent to observe that this

Court, thereafter, in the case of Manraj Enterprises

(supra) had an occasion to consider similar issues

involved in the present matter and had considered all the

aforementioned decisions, including the decisions

rendered in the cases of Bright Power Projects (India)

(P) Ltd. (supra), Raveechee and Company (supra) and

Ambica Construction v. Union of India, (2017) 14 SCC

323 (a three-judge bench judgment of this Court). After

considering the aforesaid decisions as well as several

other decisions referred on the issue, this Court has

observed in para 8 and 11 as under:

“8. After considering various decisions on award of

interest pendente lite and the future interest by the

arbitrator and after discussing the decisions of this

Court in Ambica Construction v. Union of India

[Ambica Construction v. Union of India, (2017) 14

SCC 323 : (2018) 1 SCC (Civ) 257] and Raveechee &

Co. [Raveechee & Co. v. Union of India, (2018) 7 SCC

664 : (2018) 3 SCC (Civ) 711] and other decisions on

the point, this Court has observed in paras 9 to 18 as

under: (Garg Builders [Garg Builders v. BHEL, (2022)

11 SCC 697], SCC paras 9-19)

“9. On the other hand, Mr. Pallav Kumar, learned

counsel for the respondent, submitted that Section

31(7)(a) of the 1996 Act gives paramount importance

to the contract entered into between the parties and

categorically restricts the power of an arbitrator to

award pre-reference and pendente lite interest when the

parties themselves have agreed to the contrary. He

argued that if the contract itself contains a specific

clause which expressly bars the payment of interest,

then it is not open for the arbitrator to grant pendente

lite interest. It was further argued that Ambica

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Construction [Ambica Construction v. Union of India,

(2017) 14 SCC 323 : (2018) 1 SCC (Civ) 257] is not

applicable to the instant case because it was decided

under the Arbitration Act, 1940 whereas the instant

case falls under the 1996 Act. It was further argued

that Section 3 of the Interest Act confers power on the

court to allow interest in the proceedings for recovery

of any debt or damages or in proceedings in which a

claim for interest in respect of any debt or damages

already paid. However, Section 3(3) of the Interest Act

carves out an exception and recognises the right of the

parties to contract out of the payment of interest

arising out of any debt or damages and sanctifies

contracts which bars the payment of interest arising out

of debt or damages. Therefore, Clause 17 of the

contract is not violative of any the provisions of the

Contract Act, 1872. In light of the arguments advanced,

the learned counsel prays for dismissal of the appeal.

10. We have carefully considered the submissions of the

learned counsel for both the parties made at the Bar.

The law relating to award of pendente lite interest by

arbitrator under the 1996 Act is no longer res integra.

The provisions of the 1996 Act give paramount

importance to the contract entered into between the

parties and categorically restricts the power of an

arbitrator to award pre-reference and pendente lite

interest when the parties themselves have agreed to the

contrary.

11. Section 31(7)(a) of the 1996 Act which deals with

the payment of interest is as under:

‘31.(7)(a) Unless otherwise agreed by the parties,

where and insofar 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

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and the date on which the award is made.’

12. It is clear from the above provision that if the

contract prohibits pre-reference and pendente lite

interest, the arbitrator cannot award interest for the

said period. In the present case, clause barring interest

is very clear and categorical. It uses the expression

“any moneys due to the contractor” by the employer

which includes the amount awarded by the arbitrator.

13. In Sayeed Ahmed & Co. v. State of U.P. [Sayeed

Ahmed & Co. v. State of U.P., (2009) 12 SCC 26 :

(2009) 4 SCC (Civ) 629], this Court has held that a

provision has been made under Section 31(7)(a) of the

1996 Act in relation to the power of the arbitrator to

award interest. As per this section, if the contract bars

payment of interest, the arbitrator cannot award

interest from the date of cause of action till the date of

award.

14. In Sree Kamatchi Amman Constructions v.

Railways [Sree Kamatchi Amman Constructions v.

Railways, (2010) 8 SCC 767 : (2010) 3 SCC (Civ)

575], it was held by this Court that where the parties

had agreed that the interest shall not be payable, the

Arbitral Tribunal cannot award interest between the

date on which the cause of action arose to the date of

the award.

15. BHEL v. Globe Hi-Fabs Ltd. [(2015) 5 SCC 718],

is an identical case where this Court has held as

under : (SCC p. 723, para 16)

‘16. In the present case we noticed that the clause

barring interest is very widely worded. It uses the

words “any amount due to the contractor by the

employer”. In our opinion, these words cannot be read

as ejusdem generis along with the earlier words

“earnest money” or “security deposit”.’

16. In Chittaranjan Maity v. Union of India [ (2017) 9

SCC 611], it was categorically held that if a contract

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prohibits award of interest for pre-award period, the

arbitrator cannot award interest for the said period.

17. Therefore, if the contract contains a specific clause

which expressly bars payment of interest, then it is not

open for the arbitrator to grant pendente lite interest.

The judgment on which reliance was placed by the

learned counsel for the appellant in Ambica

Construction [Ambica Construction v. Union of India,

(2017) 14 SCC 323 : (2018) 1 SCC (Civ) 257] has no

application to the instant case because Ambica

Construction [Ambica Construction v. Union of India,

(2017) 14 SCC 323 : (2018) 1 SCC (Civ) 257] was

decided under the Arbitration Act, 1940 whereas the

instant case falls under the 1996 Act. This has been

clarified in Chittaranjan Maity [Chittaranjan Maity v.

Union of India, (2017) 9 SCC 611 : (2017) 4 SCC (Civ)

693] as under: (SCC p. 616, para 16)

‘16. Relying on a decision of this Court in Ambica

Construction v. Union of India [Ambica Construction v.

Union of India, (2017) 14 SCC 323 : (2018) 1 SCC

(Civ) 257], the learned Senior Counsel for the

appellant submits that mere bar to award interest on

the amounts payable under the contract would not be

sufficient to deny payment on pendente lite interest.

Therefore, the arbitrator was justified in awarding the

pendente lite interest. However, it is not clear from

Ambica Construction [(2017) 14 SCC 323] as to

whether it was decided under the Arbitration Act, 1940

(for short “the 1940 Act”) or under the 1996 Act. It has

relied on a judgment of Constitution Bench in

Irrigation Deptt., State of Orissa v. G. C. Roy [(1992) 1

SCC 508]. This judgment was with reference to the

1940 Act. In the 1940 Act, there was no provision

which prohibited the arbitrator from awarding interest

for the pre-reference, pendente lite or post-award

period, whereas the 1996 Act contains a specific

provision which says that if the agreement prohibits

award of interest for the pre-award period, the

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arbitrator cannot award interest for the said period.

Therefore, the decision in Ambica Construction cannot

be made applicable to the instant case.’

18. The decision in Raveechee & Co. [Raveechee &

Co. v. Union of India, (2018) 7 SCC 664] relied on by

the learned counsel for the appellant is again under the

Arbitration Act, 1940 which has no application to the

facts of the present case.

19. Having regard to the above, we are of the view that

the High Court [Garg Builders v. BHEL, 2017 SCC

OnLine Del 12871] was justified in rejecting the claim

of the appellant seeking pendente lite interest on the

award amount.”

……………

11. In the said decision in Bright Power Projects

[Union of India v. Bright Power Projects (India) (P)

Ltd., (2015) 9 SCC 695 : (2015) 4 SCC (Civ) 702], this

Court also considered Section 31(7)(a) of the 1996 Act.

It is specifically observed and held that Section 31(7) of

the 1996 Act, by using the words “unless otherwise

agreed by the parties” categorically specifies that the

arbitrator is bound by the terms of the contract insofar

as award of interest from the date of cause of action to

date of the award is concerned. It is further observed

and held that where the parties had agreed that no

interest shall be payable, the Arbitral Tribunal cannot

award interest. Thus, the aforesaid decision of a three-

Judge Bench of this Court is the answer to the

submission made on behalf of the respondent that

despite the bar under Clause 16(2) which is applicable

to the parties, the Arbitral Tribunal is not bound by the

same. Therefore, the contention raised on behalf of the

respondent that dehors the bar under Clause 16(2), the

Arbitral Tribunal independently and on equitable

ground and/or to do justice can award interest

pendente lite or future interest has no substance and

cannot be accepted. Once the contractor agrees that he

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shall not be entitled to interest on the amounts payable

under the contract, including the interest upon the

earnest money and the security deposit as mentioned in

Clause 16(2) of the agreement/contract between the

parties herein, the arbitrator in the arbitration

proceedings being the creature of the contract has no

power to award interest, contrary to the terms of the

agreement/contract between the parties and contrary to

Clause 16(2) of the agreement/contract in question in

this case.”

45. The provisions of the Act of 1996, including

provisions contained in Section 31(7)(a) give paramount

importance to the contract entered into between the

parties and categorically restrict the power of an

arbitrator to award pre-award/pendente lite interest

when the parties have themselves agreed to the contrary.

Thus, the AT cannot award pre-award/pendente lite

interest, even in the form of compensation, in view of

specific Cl. 16(3) of GCC read with Cl. 64(5) of GCC.

46. At this stage, it is also relevant to observe that the AT

itself acknowledged this prohibition by rejecting Claim

No. 7 seeking pendente lite interest. The relevant

paragraph of the Arbitral Award reads as under:—

“The Interest so claimed is therefore not admissible as

per Section 31(7)(a) of the Act read with Clause 64(5)

of the GCC & Clause 7.35 of SCC of the contract

agreement signed between the two parties. Tribunal did

not therefore consider to award any interest on the

award sum as claimed by the Claimant. Therefore,

Arbitral Tribunal declare Nil Award against this

claim.”

47. With regard to the post-award interest, Section 31(7)

(b) of the Act provides that unless the award otherwise

directs, the sum awarded shall carry interest from the

date of the award till payment. The legislative intent

underlying this provision is twofold: first, to compensate

the successful party for delayed realization of the award,

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and second, to ensure prompt compliance with the award

by the judgment-debtor.

48. Recently, this Court in the case of R.P. Garg (supra),

has observed and held in para 9, 11 and 12 as under:

“9. We are of the opinion that the judgment of High

Court is clearly erroneous. Firstly, the interest granted

by the First Appellate Court only related to post award

period, and therefore, for this period, the agreement

between the parties has no bearing. Section 31(7)(b)

deals with grant of interest for post award period i.e.,

from the date of the award till its realization. The

statutory scheme relating to grant of interest provided

in Section 31(7) creates a distinction between interest

payable before and after the award. So far as the

interest before the passing of the award is concerned, it

is regulated by Section 31(7)(a) of the Act which

provides that the grant of interest shall be subject to the

agreement between the parties. This is evident from the

specific expression at the commencement of the sub-

section which says “unless otherwise agreed by the

parties”.

…………..

11. So far as the entitlement of the post-award interest

is concerned, sub-Section (b) of Section 31(7) provides

that the sum directed to be paid by the Arbitral

Tribunal shall carry interest. The rate of interest can be

provided by the Arbitrator and in default the statutory

prescription will apply. Clause (b) of Section 31(7) is

therefore in contrast with clause (a) and is not subject

to party autonomy. In other words, clause (b) does not

give the parties the right to “contract out” interest for

the post-award period. The expression ‘unless the

award otherwise directs’ in Section 31(7)(b) relates to

rate of interest and not entitlement of interest. The only

distinction made by Section 31(7)(b) is that the rate of

interest granted under the Award is to be given

precedence over the statutorily prescribed rate. The

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assumption of the High Court that payment of the

interest for the post award period is subject to the

contract is a clear error.

12. The clear position of law that granting post-award

interest is not subject to the contract between the parties

was recently affirmed in the decision of this Court in

Morgan Securities & Credits (P) Ltd. v. Videocon

Industries Ltd.,6 wherein the court observed as follows:

“24. The issue before us is whether the phrase “unless

the award otherwise directs” in Section 31(7)(b) of the

Act only provides the arbitrator the discretion to

determine the rate of interest or both the rate of interest

and the “sum” it must be paid against. At this juncture,

it is crucial to note that both clauses (a) and (b) are

qualified. While, clause (a) is qualified by the

arbitration agreement, clause (b) is qualified by the

arbitration award. However, the placement of the

phrases is crucial to their interpretation. The words,

“unless otherwise agreed by the parties” occur at the

beginning of clause (a) qualifying the entire provision.

However, in clause (b), the words, “unless the award

otherwise directs” occur after the words “a sum

directed to be paid by an arbitral award shall” and

before the words “carry interest at the rate of eighteen

per cent”. Thereby, those words only qualify the rate of

post-award interest.

25. Section 31(7)(a) confers a wide discretion upon the

arbitrator in regard to the grant of pre-award interest.

The arbitrator has the discretion to determine the rate

of reasonable interest, the sum on which the interest is

to be paid, that is whether on the whole or any part of

the principal amount, and the period for which

payment of interest is to be made — whether it should

be for the whole or any part of the period between the

date on which the cause of action arose and the date of

the award. When a discretion has been conferred on the

arbitrator in regard to the grant of pre-award interest,

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it would be against the grain of statutory interpretation

to presuppose that the legislative intent was to reduce

the discretionary power of the arbitrator for the grant

of post-award interest under clause (b). Clause (b) only

contemplates a situation where the arbitration award is

silent on post-award interest, in which event the award-

holder is entitled to a post-award interest of eighteen

per cent.”

52. We are of the view that the AT has committed serious

error by awarding pre-award/pendente lite interest qua

Claim Nos. 1, 3 & 6, though AT has observed that the

said amount are awarded by way of compensation,

however, in view of the peculiar clause of GCC as well

as provisions contained in Section 31(7)(a) of the Act of

1996 and the decisions rendered by this Court, the AT

could not have awarded the pre-award/pendente lite

interest.

53. For the above stated reasons, the Commercial Court

and the High Court failed to appreciate that the AT had

awarded pendente lite interest in violation of an express

contractual bar and such failure attracts interference

even within the limited scope of Sections 34 and 37 of the

Act. 55. There is no provision in the GCC which

expressly bars the grant of post-award interest. In the

absence of such an express exclusion, the statutory

mandate under Section 31(7)(b) of the Act must prevail.

56. In RP Garg (supra), in paragraph 11, this Court

reiterated that post-award interest flows as a matter of

law under Section 31(7)(b), unless the parties have

unequivocally agreed to exclude it.

59. In this context, the decision of this Court in Gayatri

Balasamy v. ISG Novasoft Technologies Limited, (2025)

7 SCC 1, is significant. In paragraphs 74 to 78, this

Court has categorically held that courts retain the power

to modify post-award interest under Section 31(7)(b) of

the Act where the facts justify such modification. It has

been clarified that Section 31(7)(b) is a distinct

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legislative creation which prescribes a statutory

standard to guide the determination of post-award

interest and since such interest is inherently future-

oriented, the courts may increase or decrease the rate of

post-award interest where compelling reasons exist. The

Court further observed that when the statute itself

benchmarks a standard, such benchmark must weigh in

the consideration of the rate awarded and that the power

of modification is necessary to avoid unnecessary setting

aside of the entire award merely on the question of

interest.

61. Accordingly, the answer to the issues framed in the

present matter is that:

A. The AT is not justified in awarding pre-

award/pendente lite interest, by way of compensation,

while passing the award in favour of the respondent-

claimant, and more particularly in view of Clause

16(3) and Clause 64(5) of the GCC. The award of such

interest is not in accordance with the agreement, and

liable to be set aside.

B. The AT is justified in awarding post award interest

in favour of the respondent-claimant, however, the rate

of post-award interest is modified from 12% per annum

to 8% per annum from the date of award till

realization.

C. The Courts below committed a serious error while

dealing with Issue (A) and Issue (B) referred

hereinabove while exercising the powers under Section

34 and Section 37 of the Act.

62. In view of the aforesaid discussion, the impugned

judgment dated 25.05.2023 passed by the High Court of

Judicature at Allahabad, the order dated 15.09.2022

passed by the Commercial Court, Jhansi, and the

Arbitral Award dated 25.12.2018, are set aside, to the

extent of the grant of pre-award/pendente lite interest or

amounts in the nature of interest, qua Claim No. 1, 3 and

6. The Arbitral Award dated 25.12.2018 is further

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modified to the extent of the rate of the post-award

interest from 12% per annum to 8% per annum from the

date of award till realization.”

50.It would be apposite to reproduce paragraphs no. 73 and

74 of the Constitution Bench judgment rendered by the Hon’ble

Apex Court in the case of Gayatri Balasamy vs. ISG Novasoft

Technologies Ltd., reported in (2025) 7 SCC 1 herein below:-

“73. The next question that arises is: Do courts possess

the power to declare or modify interest, especially post-

award interest? In respect of pendente lite interest,

Section 31(7)(a)(Annexure A), states that unless

otherwise agreed by the parties, the Arbitral Tribunal

may include in its sum for the award, interest, at such

rate it deems reasonable on whole or part of the money

for whole or part of the period on which the cause of

action arose and the date on which the award is made. In

respect of post-award interest, Section 31(7)(b)

(Annexure A) states that unless an award provides for

interest on a sum directed to be paid by it, the sum will

carry an interest at a 2% higher rate than the current

rate of interest prevalent on the date of the award, from

the date of the award till the date of payment. The

Explanation defines the expression “current rate of

interest”.

74. There can be instances of violation of Section 31(7)

(a), and the pendente lite interest awarded may be

contrary to the contractual provision. We are of the

opinion that, in such cases, the Court while examining

objections under Section 34 of the 1996 Act will have

two options. First is to set aside the rate of interest or

second, recourse may be had to the powers of remand

under Section 34(4).”

51.It would also be gainful to refer to a judgment rendered

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by the Hon’ble Apex Court in the case of PAM Developments

Private Ltd. vs. State of West Bengal & Anr., reported in (2024)

10 SCC 715, paragraphs no. 23, 23.1 to 23.6 whereof are

reproduced herein below:-

“23. The power of the arbitrator to grant pre-reference

interest, pendente lite interest, and post-award interest

under Section 31(7) of the Act is fairly well-settled. The

judicial determinations also highlight the difference in

the position of law under the Arbitration Act, 1940. The

following propositions can be summarised from a survey

of these cases:

23.1. Under the Arbitration Act, 1940, there was no

specific provision that empowered an arbitrator to

grant interest. However, through judicial

pronouncements, this Court has affirmed the power of

the arbitrator to grant pre-reference, pendente lite, and

post-award interest on the rationale that a person who

has been deprived of the use of money to which he is

legitimately entitled has a right to be compensated for

the same. [State of Orissa v. G.C. Roy, (1992) 1 SCC

508, para 43(i). Also see State of Orissa v. N.C.

Budharaj, (2001) 2 SCC 721; Union of India v.

Krafters Engg. & Leasing (P) Ltd., (2011) 7 SCC 279 :

(2011) 3 SCC (Civ) 533] When the agreement does not

prohibit the grant of interest and a party claims

interest, it is presumed that interest is an implied term

of the agreement, and therefore, the arbitrator has the

power to decide the same. [State of Orissa v. G.C. Roy,

(1992) 1 SCC 508, paras 43 (iv) & 44]

23.2. Under the 1940 Act, this Court has adopted a

strict construction of contractual clauses that prohibit

the grant of interest and has held that the arbitrator

has the power to award interest unless there is an

express, specific provision that excludes the jurisdiction

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of the arbitrator [Port of Calcutta v. Engineers-De-

Space-Age, (1996) 1 SCC 516, paras 4 and 5; Madnani

Construction Corpn. (P) Ltd. v. Union of India, (2010)

1 SCC 549 : (2010) 1 SCC (Civ) 168; Tehri Hydro

Development Corpn. Ltd. v. Jai Prakash Associates

Ltd., (2012) 12 SCC 10 : (2013) 2 SCC (Civ) 122,

paras 18-20; Union of India v. Ambica Construction,

(2016) 6 SCC 36 : (2016) 3 SCC (Civ) 36 (First

Ambica Construction Case); Ambica Construction v.

Union of India, (2017) 14 SCC 323 : (2018) 1 SCC

(Civ) 257 (Second Ambica Construction Case);

Raveechee & Co. v. Union of India, (2018) 7 SCC 664 :

(2018) 3 SCC (Civ) 711; Reliance Cellulose Products

Ltd. v. ONGC Ltd., (2018) 9 SCC 266 : (2018) 4 SCC

(Civ) 351] from awarding interest for the dispute in

question [State of U.P. v. Harish Chandra, (1999) 1

SCC 63].

23.3. Under the 1996 Act, the power of the arbitrator to

grant interest is governed by the statutory provision in

Section 31(7). This provision has two parts. Under

clause (a), the arbitrator can award interest for the

period between the date of cause of action to the date

of the award, unless otherwise agreed by the parties.

Clause (b) provides that unless the award directs

otherwise, the sum directed to be paid by an arbitral

award shall carry interest @ 2% higher than the

current rate of interest, from the date of the award to

the date of payment.

23.4. The wording of Section 31(7)(a) marks a

departure from the Arbitration Act, 1940 in two ways :

first, it does not make an explicit distinction between

pre-reference and pendente lite interest as both of them

are provided for under this sub-section; second, it

sanctifies party autonomy and restricts the power to

grant pre-reference and pendente lite interest the

moment the agreement bars payment of interest, even if

it is not a specific bar against the arbitrator. [Sayeed

Ahmed & Co. v. State of U.P., (2009) 12 SCC 26, paras

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14, 23, 24 : (2009) 4 SCC (Civ) 629; Union of India v.

Saraswat Trading Agency, (2009) 16 SCC 504 : (2011)

3 SCC (Civ) 499; Sree Kamatchi Amman Constructions

v. Railways, (2010) 8 SCC 767, para 19 : (2010) 3 SCC

(Civ) 575; Union of India v. Bright Power Projects

(India) (P) Ltd., (2015) 9 SCC 695, para 13 : (2015) 4

SCC (Civ) 702; Reliance Cellulose Products Ltd. v.

ONGC Ltd., (2018) 9 SCC 266, para 24 : (2018) 4 SCC

(Civ) 351; Jaiprakash Associates Ltd. v. Tehri Hydro

Development Corpn. (India) Ltd., (2019) 17 SCC 786,

paras 13-15 : (2020) 3 SCC (Civ) 605; Delhi Airport

Metro Express (P) Ltd. v. DMRC, (2022) 9 SCC 286,

paras 16-20, 24 : (2022) 4 SCC (Civ) 623]

23.5. The power of the arbitrator to award pre-

reference and pendente lite interest is not restricted

when the agreement is silent on whether interest can be

awarded [Jaiprakash Associates Ltd. v. Tehri Hydro

Development Corpn. (India) Ltd., (2019) 17 SCC 786,

para 13.2] or does not contain a specific term that

prohibits the same [Oriental Structural Engineers (P)

Ltd. v. State of Kerala, (2021) 6 SCC 150, paras 15-18:

23.6. While pendente lite interest is a matter of

procedural law, pre-reference interest is governed by

substantive law. [Central Bank of India v. Ravindra,

(2002) 1 SCC 367, para 39 following State of Orissa v.

G.C. Roy, (1992) 1 SCC 508, para 43(v)] Therefore, the

grant of pre-reference interest cannot be sourced solely

in Section 31(7)(a) (which is a procedural law), but

must be based on an agreement between the parties

(express or implied), statutory provision (such as

Section 3 of the Interest Act, 1978), or proof of

mercantile usage [Central Bank of India v. Ravindra,

(2002) 1 SCC 367, para 39; Central Coop. Bank Ltd. v.

S. Kamalaveni Sundaram, (2011) 1 SCC 790, para 13 :

(2011) 1 SCC (Civ) 331] .

52.Thus, we find from the law laid down by the Hon’ble

Apex Court in the aforesaid judgments that the provisions of the

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Act, 1996 including the provisions contained in Section 31(7)(a)

of the Act, 1996 gives paramount importance to the contract

entered into between the parties and categorically restricts the

power of an Arbitrator to pre-award / pendente lite interest when

the parties have themselves agreed to the contrary, hence an

Arbitral Tribunal cannot award pre-award or pendente lite

interest, even under the guise of compensation, where contract

expressly prohibits payment of interest on amounts payable

under the contract, however post-award interest is governed by

Section 31(7)(b) of the Act, 1996 and can be granted unless

expressly barred.

53.Now coming back to the present case, we find that Clause

12 of the agreements dated 28.01.2014 and 10.02.2017

stipulate- “no interest shall be payable to the second party for

unavoidable delay in the payment”. Therefore, it is amply clear

that the agreements entered into between the parties expressly

prohibits payment of interest on amounts payable under the

contract / agreement, hence applying the principles laid down by

the Hon’ble Apex Court in the aforesaid cases, we hold that the

Ld. Sole Arbitrator was not justified in awarding interest

pendente lite @ 10 % per annum from the date of start of the

arbitral proceedings i.e. 13.09.2019 till the date of award, hence

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is liable to be set aside. Moreover, neither any pleading has been

made by the claimant-Respondent nor any evidence has been

brought on record to demonstrate the factum regarding

unavoidable/ avoidable delay in the payments. However, award

of interest @ 18 % over the awarded sum from the date of

award till realization of the awarded amount being covered by

the provision contained in Section 31(7)(b) of the Act, 1996

does not require any interference.

54.Having regard to the facts and circumstances of the case

discussed hereinabove in the preceding paragraphs and for the

foregoing reasons, the arbitral award dated 17.10.2020, passed

by the Ld. Sole Arbitrator as also the impugned judgment dated

25.7.2025, passed by the Ld. Principal District Judge, Patna is

corrected/modified/set aside in terms of this judgment as

follows:-

“(i) The amount of Rs. 2,06,13,021/-, awarded in favor of

the claimant-Respondent by the Ld. Sole Arbitrator,

pertaining to item No.1 at internal page No.14 of the

award dated 17.10.2020 shall stand corrected / modified

to a sum of Rs. 1,83,24,021/- towards the claimed

amount. Accordingly, the finding of the Ld. Principal

District Judge, Patna in the impugned judgment dated

25.7.2025 to the said effect shall also stands corrected /

modified.

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(ii). The award of the Ld. Sole Arbitrator at serial no. 2 at

internal page No.15 of the award dated 17.10.2020,

holding the claimant-Respondent entitled to

compensation of Rs. 25,00,000/- is set aside. Accordingly,

the impugned judgment dated 25.7.2025, passed by the

Ld. Principal District Judge, Patna, upholding this portion

of the award is also set aside.

(iii). The award of the Ld. Sole Arbitrator at serial no. 3 at

internal page No.15 of the award dated 17.10.2020

regarding grant of simple interest @ 10 % per annum

from 13.9.2019 till the date of award is set aside, however

award of interest @ 18 % over the awarded amount from

the date of award till realization of the awarded amount is

upheld. Accordingly, the impugned judgment dated

25.7.2025, passed by the Ld. Principal District Judge,

Patna, upholding this part of the award to the extent of

grant of simple interest @ 10 % per annum from

13.9.2019 till the date of award is also set aside.

55.In view of the aforesaid discussion, the award dated

17.10.2020, passed by the Ld. Sole Arbitrator and the impugned

judgment dated 25.7.2025, passed by the Ld. Court of Principal

District Judge, Patna are corrected/modified/set aside to the

above extent.

56.Accordingly, the present appeal is partly allowed to the

aforesaid extent.

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COMMERCIAL APPEAL No. 13 of 2025

57.The present appeal has been filed by the appellants under

Section 13 (1A) of the Act, 2015 read with Section 37 of the

Act, 1996 against the order dated 31.07.2025, passed by the

learned Principal District Judge, Patna (hereinafter referred to as

the “learned PDJ, Patna”) in Execution Case No. 111 of 2021.

58.Shorn of the unnecessary details, it would suffice to state

here that the claimant-respondent had instituted execution

proceedings by filing the aforesaid Execution Case No. 111 of

2021 under Section 36 of the Act, 1996 for execution of Arbitral

award dated 17.10.2020, passed by the learned Sole Arbitrator,

Patna in Arbitration Case No.5 of 2019. The appellants had filed

rejoinder to the said execution petition raising various

objections and stating therein that the aforesaid award passed by

the learned Sole Arbitrator has been challenged under Section

34 of the Act, 1996 by filing Miscellaneous (Arbitration) Case

No.01 of 2021, hence the Execution Case be listed after disposal

of the said miscellaneous case filed by the appellants.

59.It appears that the learned PDJ, Patna by the impugned

order dated 31.07.2025, passed in Execution Case No. 111 of

2021, had on a petition filed by the claimant-respondent

supported by an affidavit dated 06.05.2025, attached the bank

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accounts of the appellants and had directed the Office to issue

warrant of attachment in respect of the bank accounts mentioned

in the said order dated 31.07.2025, in accordance with due

process of law.

60.The Ld. Counsel for the claimant-respondent has further

pointed out that subsequently, the learned PDJ, Patna has passed

an order dated 26.11.2025 in Execution Case No. 111 of 2021

whereby and whereunder the petition filed by the claimant-

respondent herein on 26.11.2025 has been allowed and the

authorities of the Corporation Bank, Boring Canal Road Branch,

Patna have been directed to effect transfer of a sum of Rs.

4,93,16,819/- from the bank account standing in the name of the

award debtor, maintained at the said branch to the bank account

of the claimant-respondent maintained at Indian Bank, Bagwara

Branch, Bihar, whereafter the matter had been directed to be

listed on 11.12.2025.

61.Thus, it is submitted by the Ld. Counsel for the claimant-

respondent that the present petition has been rendered

infructuous on account of passing of the subsequent order dated

26.11.2025 by the learned PDJ, Patna in Execution Case No.

111 of 2021, which has not yet been challenged by the

appellants.

Patna High Court COMMERCIAL APP No.10 of 2025 dt.23-05-2026

104/104

62.Having regard to the facts and circumstances of the case

and without going into the merits of the present appeal, we find

that since the award dated 17.10.2020 passed by the learned

Arbitrator, in Arbitration Case No.5 of 2019 as also the

judgment dated 25.07.2025 passed by the learned PDJ, Patna in

Misc. (Arbitration) Case No.01 of 2021, under Section 34 of the

Act, 1996, dismissing the appeal filed by the appellants have

now been corrected/modified/set aside by the aforesaid

judgment being passed today in the connected Commercial

Appeal No.10 of 2025, we are of the view that the present

appeal has been rendered infructuous, as such the parties would

be well advised to approach the Execution Court, especially in

view of the fact that the execution proceedings are still pending.

63.Accordingly, the present appeal stands disposed of.

I agree.

Arun Kumar Jha, J:

Ajay/Gaurav

(Mohit Kumar Shah, J)

( Arun Kumar Jha, J)

AFR/NAFR AFR

CAV DATE 15.05.2026

Uploading Date 23.05.2026

Transmission Date NA