Himachal Pradesh High Court
Decided On: 06.05.2025 vs M/S B.S. Ranbir And Co on 6 May, 2025
Author: Jyotsna Rewal Dua
Bench: Jyotsna Rewal Dua
2025:HHC:12713
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Arbitration Appeal No.114 of 2024
Decided on: 06.05.2025
————————————————————————————-
Union of India & Anr. .....Appellants
Versus
M/s B.S. Ranbir and Co. .....Respondent
————————————————————————————-
Coram
Ms. Justice Jyotsna Rewal Dua
Whether approved for reporting?1
For the Appellants: Mr. Balram Sharma, Deputy Solicitor
General of India with Mr. Rajiv Sharma,
Advocate.
For the Respondent: Mr. Shubham Sood, Advocate.
————————————————————————————
Jyotsna Rewal Dua, Judge
Arbitral award passed in favour of respondent No.
1 on 15.10.2015 was upheld by the learned District Judge,
Kangra at Dharamshala on 08.12.2023. Objections preferred
against the award under Section of 34 of the Arbitration and
Conciliation Act, 1996 (in short ‘the Act’) were dismissed.
Feeling aggrieved, the appellants have now taken recourse to
Section 37 of the Act and have assailed the order passed by
the learned District Judge Kangra at Dharamshala dated
1
Whether reporters of print and electronic media may be allowed to see the order? Yes.
-2- 2025:HHC:12713 08.12.2023 and Arbitral Award dated 15.10.2015,
whereunder, claim preferred by respondent No.1 was allowed
to the extent indicated therein.
2. The case
2(i) A Contract agreement was executed between the
appellants and respondent No.1 for ‘Provision of OTM
accommodation for Postal Unit at Palampur, District Kangra’
for an amount of Rs.3,94,96,923.36/-. Stipulated period of
completion of work was 18 months with given date of
completion as 16.07.2015. The work extended beyond the
period of 18 months. Clause No.48 of the Contract
Agreement provided mechanism of reimbursement/refund on
variation in prices. Respondent No.1 claimed escalation
amounting to Rs. 2,25,498.00/- in Running Account Receipt
(RAR) dated 03.03.2014. Officials of the appellants submitted
it to the Audit Branch. The concerned authority disallowed
payment of escalation on the ground that stipulated period of
completion of the contract was 18 months and as per the
Government policy, provision for escalation is not to be
included in the tenders having completion period of 24
months or less. The escalation was denied to respondent
-3- 2025:HHC:12713
No.1. The dispute, ultimately reached the learned Arbitrator.
Respondent No.1 submitted that both the parties were bound
by the contract provisions and not by the departmental
instructions; That it was obligatory on part of the appellants
to make payment of escalation as per the provisions of the
contract; That he had quoted rates considering contract
provisions including provisions for escalation.
2(ii) Respondent No.1 also submitted that he had
continued to claim escalation payment in subsequent
RARs also. His legitimate payment of escalation was denied
in the subsequent RARs as well. The Physical Date of
Completion of the project was 36 months and hence,
inclusion of escalation clause was in order. Despite
respondent No.1’s representation, escalation was not paid to
him. The claim filed by respondent No.1 gave details of
different RARs for different amounts claimed by him, which
were not paid to him on due dates on account of alleged
departmental instructions.
2(iii) From the award, it appears that during hearing of
the claim before the learned Arbitrator, appellants agreed to
the contention of respondent No.1 that it was incumbent
-4- 2025:HHC:12713
upon both the parties to abide by the contractual obligations
and not the departmental instructions; That the departmental
instructions would not override the contractual provisions
agreed to between the parties. The appellants also furnished
calculations in terms of Clause 48 for the escalation
admissible to respondent No.1.
2(iv) Learned Arbitrator held that the contract had
stipulated completion period of 18 months from the date of
commencement. As per the contract, variations in price was
to be reimbursed/refunded on quarterly bases, based on
formula commencing from the date of receipt of quoted
tenders and the claim preferred on account of work done by
respondent No.1 at an interval of not less than 30 days.
Condition No.64, pertaining to advances on account, was also
considered, which stipulated that RARs payment so made
shall be regarded as payments by way of advance for work
done and material delivered at site. The advances were to be
adjusted against the final bills submitted by respondent No.1
on completion of work.
2(v) Learned Arbitrator further held that contract is a
legal document within the ambit of Indian Contract Act. It
-5- 2025:HHC:12713
was obligatory on both the parties to follow it holistically
without any deviation. Disallowance and delay in payment by
the appellants, which were admittedly due to respondent
No.1, citing their internal procedure was not justified and
contrary to contract. The internal procedure of the appellants
did not form part of the contract agreement. Appellants’
denial of payment, due to respondent No.1, was in breach of
the contract. Interpretation/ clarification/ departmental
procedure cannot override express terms and conditions of
the contract agreement. Accordingly, learned Arbitrator
awarded a sum of Rs. 4,299,00.85/- including simple interest
@ 12 % per annum up to 08.09.2015. Learned Arbitrator also
awarded simple interest @12% per annum on escalation
amount of Rs. 4,04,531.32/- w.e.f. 09.09.2015 till the date of
actual payment.
2(vi) In similar manner, interest on delayed payment
for 4th and 5th RARs was also allowed under Claim No.2 in
the sum of Rs.78,543.95/-, computed as simple interest
@12% per annum for the delay for a period of 54 days and 24
days respectively. As Claim No.3, learned Arbitrator also held
that in case the payment of awarded amount was not made
-6- 2025:HHC:12713
within two months, interest @12% per annum on Claim No.2
will be payable to respondent No.1. For Claim No.4, costs of
Arbitration were also awarded at Rs.70,000/- in favour of
respondent No.1 payable by the appellants.
2(vii) Counter claim preferred by the appellants was not
allowed.
Objections preferred the appellants under Section
34 of the Act against the aforesaid award were also dismissed
by the learned District Judge.
3. I have heard learned counsel on both sides and
considered the case file.
4. Consideration
4(i)(a). It is by now well-settled that the scope of Appellate
Court exercising jurisdiction under Section 37 of the Act to
review the findings in an award, is narrow/limited, if the
award has been upheld or substantially upheld under Section
34. [Ref. Larsen Air Conditioning and Refrigeration
Company vs. Union of India2]
In Konkan Railway Corporation Ltd. Vs.
Chenab Bridge Project Undertaking 3, it was held that
2
Civil Appeal No.3798 of 2023, decided on 11.08.2023
3
2023(9) SCC 85
-7- 2025:HHC:12713
jurisdiction of the Court under Section 37 of the Act is akin to
that under Section 34 of the Act. The Courts ought not to
interfere with arbitral award in a casual and cavalier manner.
Mere possibility of an alternative view on facts or
interpretation of contract does not entitle Courts to reverse
findings of the Arbitral Tribunal. Relevant paragraphs from
the decision are as follows:-
“19. Therefore, the scope of jurisdiction under Section 34 and
Section 37 of the Act is not akin to normal appellate
jurisdiction.4 It is well-settled that courts ought not to
interfere with the arbitral award in a casual and cavalier
manner. The mere possibility of an alternative view on
facts or interpretation of the contract does not entitle
courts to reverse the findings of the Arbitral Tribunal.5 In
Dyna Technologies Private Limited v. Crompton Greaves
Limited6, this Court held:
“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 which4
UHL Power Company Ltd. v. State of Himachal Pradesh (2022) 2 SCC (Civ) 401, para 15. See
also: Dyna Technologies Pvt Ltd v. Crompton Greaves Limited (2019) 20 SCC 1, para 24, 25.
5
ibid; Ssangyong Engineering. & Construction Company Ltd. v. National Highways Authority of
India (NHAI) (2019) 15 SCC 131; Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut
Utpadan Nigam Ltd., (2019) 7 SCC 236, para 11.1.
6
(2019) 20 SCC 1
-8- 2025:HHC:12713
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.
25. Moreover, umpteen number of judgments of this
Court have categorically held that the courts 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.”
XX XX XX
25. The principle of interpretation of contracts adopted
by the Division Bench of the High Court that when
two constructions are possible, then courts must
prefer the one which gives effect and voice to all
clauses, does not have absolute application. The
said interpretation is subject to the jurisdiction
which a court is called upon to exercise. While
exercising jurisdiction under Section 37 of the Act,
the Court is concerned about the jurisdiction that the
Section 34 Court exercised while considering the
challenge to the Arbitral Award. The jurisdiction
under Section 34 of the Act is exercised only to see if
-9- 2025:HHC:12713
the Arbitral Tribunal’s view is perverse or manifestly
arbitrary. Accordingly, the question of reinterpreting
the contract on an alternative view does not arise. If
this is the principle applicable to exercise of
jurisdiction under Section 34 of the Act, a Division
Bench exercising jurisdiction under Section 37 of the
Act cannot reverse an Award, much less the
decision of a Single Judge, on the ground that they
have not given effect and voice to all clauses of the
contract. This is where the Division Bench of the
High Court committed an error, in re-interpreting a
contractual clause while exercising jurisdiction
under Section 37 of the Act. In any event, the
decision in Radha Sundar Dutta (supra), relied on by
the High Court was decided in 1959, and it pertains
to proceedings arising under the Village Chaukidari
Act, 1870 and Bengal Patni Taluks Regulation of
1819. Reliance on this judgment particularly for
interfering with the concurrent interpretations of the
contractual clause by the Arbitral Tribunal and
Single Judge under Section 34 of the Act is not
justified.”
Corporation Pvt. Ltd. Vs. Samir Barain Bhojwani 7, the
Hon’ble Apex Court emphasized that supervisory role of
Courts is very restricted in dealing with appeals under
Section 37 of the Act. Scope of interference in a petition under
Section 34 of the Act is very narrow. Jurisdiction under
7
(2024) 7 SCC 218
– 10 – 2025:HHC:12713
Section 37 of the Act is narrower. By their own volition, the
parties choose to go before the Arbitral Tribunal instead of
availing remedy before the traditional Civil Courts. Therefore,
Courts must be very conservative while dealing with arbitral
awards and confine themselves to the grounds strictly
available under Section 34 of the Act.
4(i)(b). In Reliance Infrastructure Ltd. vs. State of
Goa8, Hon’le Apex Court held that ‘patent illegality’ in the
award calls for interference but a mere illegality is not patent
illegality. It ought to be apparent on the face of the award and
not the one which is culled out by way of a long drawn
analysis of pleadings and evidence. Relevant paragraphs of
the decision relevant to the context are under:-
“57. As noticed, arbitral award is not an ordinary adjudicatory
order so as to be lightly interfered with by the Courts
under Sections 34 or 37 of the Act of 1996 as if dealing
with an appeal or revision against a decision of any
subordinate Court. The expression “patent illegality” has
been exposited by this Court in the cases referred
hereinbefore. The significant aspect to be reiterated is that
it is not a mere illegality which would call for interference,
but it has to be “a patent illegality”, which obviously
signifies that it ought to be apparent on the face of the
award and not the one which is culled out by way of a
long-drawn analysis of the pleadings and evidence.
8
(2024) 1 SCC 479
- 11 - 2025:HHC:12713
58. Of course, when the terms and conditions of the
agreement governing the parties are completely ignored,
the matter would be different and an award carrying such
a shortcoming shall be directly hit by Section 28(3) of the
Act, which enjoins upon an Arbitral Tribunal to decide in
accordance with the terms of contract while taking into
account the usage of trade applicable to the transaction.
As said by this Court in Associate Builders vs. DDA9, if an
Arbitrator construes the term of contract in a reasonable
manner, the award cannot be set aside with reference to
the deduction drawn from construction. The possibility of
interference would arise only if the construction of the
Arbitrator is such which could not be made by any fair-
minded and reasonable person.
95. The narrow scope of “patent illegality” cannot be breached
by mere use of different expressions which nevertheless
refer only to “error” and not to “patent illegality”. We are
impelled to reiterate what has been stated and
underscored by this Court in Delhi Airport Metro Express
(P) Ltd. Vs. DMRC10 that restraint is required to be shown
while examining the validity of arbitral award by the
Courts, else interference with the award after reassessing
the factual aspects would be defeating the object of the
Act of 1996. This is apart from the fact that such an
approach would render several judicial pronouncements of
this Court redundant if the arbitral awards are set aside
by categorizing them as “perverse” or “patently illegal”
without appreciating the contours of these expressions.”
In Larsen Air Conditioning and Refrigeration
Company’s2 case, Hon’ble Apex Court held that Section 34 of
9
(2015) 3 SCC 49
10
(2022) 1 SCC 131
– 12 – 2025:HHC:12713
the Act, permits the Court to interfere with an award, sans
the grounds of patent illegality, i.e., that illegality must go to
the root of the matter and cannot be of a trivial nature.
Relevant paragraphs from the decision reads as under:-
“15. The limited and extremely circumscribed jurisdiction of the
court under Section 34 of the Act, permits the court to
interfere with an award, sans the grounds of patent
illegality, i.e., that “illegality must go to the root of the
matter and cannot be of a trivial nature”; and that the
tribunal “must decide in accordance with the terms of the
contract, but if an arbitrator construes a term of the
contract in a reasonable manner, it will not mean that the
award can be set aside on this ground” [ref: Associate
Builders (supra)]. The other ground would be denial of
natural justice. In appeal, Section 37 of the Act grants
narrower scope to the appellate court to review the
findings in an award, if it has been upheld, or
substantially upheld under Section 34. It is important to
notice that the old Act contained a provision 11 which
enabled the court to modify an award. However, that
power has been consciously omitted by Parliament, while
enacting the Act of 1996. This means that the
Parliamentary intent was to exclude power to modify an
award, in any manner, to the court. This position has been
iterated decisively by this Court in Project Director,
National Highways No. 45E and 220 National Highways11
“15. Power of court to modify award.–The court may by order modify or correct an award–
(a) where it appears that a part of the award is upon a matter not referred to arbitration and such part can be
separated from the other part and does not affect the decision on the matter referred; or
(b) where the award is imperfect in form, or contains any obvious error which can be amended without
affecting such decision; or
(c) where the award contains a clerical mistake or an error arising from an accidental slip or omission.”
– 13 – 2025:HHC:12713
Authority of India v M. Hakeem12:
“42. It can therefore be said that this question has now
been settled finally by at least 3 decisions [McDermott
International Inc. v. Burn Standard Co. Ltd.13], [Kinnari
Mullick v. Ghanshyam Das Damani14], [Dakshin
Haryana Bijli Vitran Nigam Ltd. v. Navigant
Technologies (P) Ltd.15] of this Court. Even otherwise, to
state that the judicial trend appears to favour an
interpretation that would read into Section 34 a power
to modify, revise or vary the award would be to ignore
the previous law contained in the 1940 Act; as also to
ignore the fact that the 1996 Act was enacted based on
the Uncitral Model Law on International Commercial
Arbitration, 1985 which, as has been pointed out in
Redfern and Hunter on International Arbitration,
makes it clear that, given the limited judicial
interference on extremely limited grounds not dealing
with the merits of an award, the “limited remedy”
under Section 34 is coterminous with the “limited
right”, namely, either to set aside an award or remand
the matter under the circumstances mentioned in
Section 34 of the Arbitration Act, 1996.”
In S.V. Samudram vs. State of Karnataka16,
the Hon’ble Apex Court held that jurisdiction of Court under
Section 34 is fairly narrow and moreover, when it comes to
jurisdiction under Section 37 it is all the more circumscribed.
The relevant paragraphs from the decision reads as under:-
“46. It has been observed by this Court in MMTC Ltd. v.
Vedanta Ltd.17
“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 court12
(2021) 5 SCR 368
13
(2006) 11 SCC 181
14
(2018) 11 SCC 328 : (2018) 5 SCC (Civ) 106
15
(2021) 7 SCC 657
16
(2024) 3 SCC 623
17
(2019) 4 SCC 163
– 14 – 2025:HHC:12713
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 disturb such concurrent findings.”
(Emphasis Supplied)
47. This view has been referred to with approval by a bench of
three learned Judges in UHL Power Company Ltd v. State
of Himachal Pradesh18. In respect of Section 37, this court
observed:-
“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.”
xx xx xx
49. We may also notice that the circumscribed nature of the
exercise of power under Sections 34 and 37 i.e.,
interference with an arbitral award, is clearly
demonstrated by legislative intent. The Arbitration Act of
1940 had a provision (Section 15) which allowed for a
court to interfere in awards, however, under the current
legislation, that provision has been omitted.19
50. The learned Single Judge, similar to the learned Civil
Judge under Section 34, appears to have not concerned
themselves with the contours of Section 37 of the A&C Act.
The impugned judgment20 reads like a judgment rendered
by an appellate court, for whom re-examination of merits is
open to be taken as the course of action.”
4(ii) In the instant case, it has not been disputed by
18
(2022) 4 SCC 116
19
Larsen Air Conditioning and Refrigeration Company v. Union of India and Others 2023 SCC
OnLine 982 (2-Judge Bench)
20
S.V. Samudram v. State of Karnataka, 2017 SCC OnLine Kar 6559
– 15 – 2025:HHC:12713
learned Deputy Solicitor General of India that contract
agreement executed between the parties provided for
escalation. It is also not in dispute that respondent No.1 was
denied the benefits of escalation only on the ground of some
departmental instructions on the subject. The view taken by
the learned Arbitrator that departmental instructions will not
override the contractual provisions is sound and legal view
requiring no interference. Since the appellants had denied
due payment to respondent No.1 and kept his payments on
hold, the award of interest by learned Arbitrator for the delay
in payment is also justified.
In this regard, reference can also be made to
Section 31(7) of the Act, which reads as under:-
“31(7) (a) Unless otherwise agreed by the parties, where and in
so far as an arbitral award is for the payment of
money, the arbitral tribunal may include in the sum for
which the award is made interest, at such rate as it
deems reasonable, on the whole or any part of the
money, for the whole or any part of the period between
the date on which the cause of action arose and the
date on which 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.
– 16 – 2025:HHC:12713
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).]”
It is not in dispute that the agreement executed
between the parties was silent on award of interest. Award of
interest in the given facts is justified. While awarding costs of
Rs.70,000/-, learned Arbitrator had exercised the discretion
in a judicious manner. The appellants had themselves
conceded before the learned Arbitrator that contract
agreement executed by them with respondent No.1 provided
for an escalation clause, which entitled respondent No.1 to
claim variation in prices. Despite this, the appellants did not
adhere to the contractual provisions and took shelter behind
departmental instructions for denying the payments
legitimately due to respondent No.1.
It has not been demonstrated by the appellant
as how the judgment passed by the learned Court below is
in contravention to Section 28(1)(a) of the Act. The judgment
is in conformity with substantive law in force.
“An arbitral award is not liable to be interfered
with only on the ground that the award is illegal or is
– 17 – 2025:HHC:12713
erroneous in law that too upon reappraisal of the evidence
adduced before the arbitral trial. Even an award which may
not be reasonable or is non-speaking to some extent cannot
ordinarily be interfered with by the courts. It is also well
settled that even if two views are possible there is no scope for
the court to reappraise the evidence and to take the different
view other than that has been taken by the arbitrator. The
view taken by the arbitrator is normally acceptable and ought
to be allowed to prevail”. (Reference: Punjab State Civil
Supplies Corporation Limited and another Versus
Sanman Rice Mills and others21)
The award does not suffer from any patent
illegality. The view taken by the learned Arbitrator is
reasoned, justified and plausible. Learned counsel for the
appellants has not been able to dispute and disprove the
findings of the learned Arbitrator, as affirmed by the learned
District Judge. Learned District Judge has examined the
award in accordance with law vis-à-vis the contentions urged
by the appellants and did not find any ground in exercise of
jurisdiction under Section 34 of the Act for interfering with it.
Having considered the impugned judgment, the award and
21
SLP(C) No.27699 of 2018, decided on 27.09.2024
– 18 – 2025:HHC:12713
the contentions now urged, I do not find it a case to interfere
in exercise of limited jurisdiction under Section 37 of the Act.
5. In view of above discussion, no case is made out
for interference with the impugned judgment dated
08.12.2023, whereby application moved by the appellant
under Section 34 of the Act was dismissed and the award
passed by the learned Arbitrator was affirmed. Accordingly,
the present appeal under Section 37 of the Act is dismissed.
Pending miscellaneous application(s), if any, also stand
disposed of.
Jyotsna Rewal Dua
May 06, 2025 Judge
(R.Atal)
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