Delhi High Court
National Project Constructions … vs M/S S S Sharma And Company on 2 July, 2025
Author: Subramonium Prasad
Bench: Subramonium Prasad
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 02nd JULY, 2025
IN THE MATTER OF:
+ FAO (COMM) 89/2023
NATIONAL PROJECT CONSTRUCTIONS CORPORATION LTD
.....Appellants
Through: Mr. Rajat Arora & Ms. Mariya
Shahab, Advs.
versus
M/S S S SHARMA AND COMPANY .....Respondent
Through: Mr. S. C. Juneja, Ms. Hema Malik &
Mr. Sanjay Mishra, Advs.
CORAM:
HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
JUDGMENT
SUBRAMONIUM PRASAD, J.
1. The present Appeal filed under Section 37 of the Arbitration and
Conciliation Act, 1996 assails the Order dated 20.12.2022 passed by the
learned Additional District Judge, South-01, Saket (hereinafter referred to as
“ADJ”) in CS No. 146/2018 whereby the application filed by the Appellant,
under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter
referred to as “Act “) challenging the Arbitral Award dated 15.10.2003, was
dismissed.
2. The facts as stated in the petition are as follows
a. National Project Construction Corporation Limited (hereinafter
referred to as the Appellant) is a government company that was
Signature Not Verified
Digitally Signed FAO (COMM) 89/2023 Page 1 of 15
By:SHAZAAD ZAKIR
Signing Date:04.07.2025
12:37:56
awarded a contract by Sardar Sarovar Narmada Nigam Limited
(hereinafter referred to as SSNNL/ principal employer) for the
construction of four (4) aqueducts at rivers Deo, Karad, Mesari
and Kun.
b. The impugned judgment pertains to the dispute arising out of
the construction of aqueducts over river Kun which was also the
subject matter of the award dated 15.10.2003.
c. The construction of these aqueducts involved operations of civil
construction, and well sinking was an integral part of the said
construction process.
d. The Appellant issued a work order for sinking of circular wells
and other connected works vide work order no 32/0007, for an
amount of Rs. 23,34,000/- (Rupees Twenty-Three Lakh Thirty-
Four Thousand Only) in favor of M/s S.S. Sharma and
Company (hereinafter referred to as “Respondent”). The time
period for completion of the same was 18 months.
e. The Respondent could not complete the entire awarded work
within the stipulated time and could rather only complete work
worth Rs. 1,69,937/- (Rupees One Lakh Sixty-Nine Thousand
Nine Hundred Thirty-Seven Only) in about six and a half
months. Consequently, the Principal Employer terminated the
contract on 14.05.1992.
f. Even prior to termination of the Contract the Respondent had
stopped the work w.e.f. 28.02.1992 on account of its failure to
pay its workmen irrespective of having its bills cleared by the
Appellant.
Signature Not Verified
Digitally Signed FAO (COMM) 89/2023 Page 2 of 15
By:SHAZAAD ZAKIR
Signing Date:04.07.2025
12:37:56
g. On 05.05.1997, the Respondent submitted a claim before the
learned Sole Arbitrator for an amount of Rs. 18,00,000/-
(Rupees Eighteen Lakhs Only) along with interest payable at
the rate of 24 % (Twenty Four Percent) per annum from the
date of award till actual payment.
h. The parties were heard and upon conclusion of the proceedings
the learned Sole Arbitrator passed the impugned award on
15.10.2003.
i. Aggrieved by the impugned award, the Appellant herein filed a
petition under Section 34 of the Act before the learned
Additional District Judge, South-01, Saket.
j. The learned ADJ dismissed the Section 34 Petition vide
judgment dated 20.12.2022 (hereinafter referred to as the
“impugned judgement”). It is this impugned judgement which
has now been challenged in the instant appeal under Section 37
of the Act.
3. At the very outset, an objection has been raised by the learned
Counsel for the Appellant which goes to the very root of this matter. He
contends that although the learned ADJ has recorded the submissions
advanced by the Appellant, the impugned judgment neither addresses nor
engages with the submissions advanced by the Appellant on merits. Instead,
the impugned judgement merely quoted the principles and judgements
relating to Section 34 without demonstrating as to how they are applicable to
the facts of the present case. He states that the award does not indicate as to
how the Appellant’s contentions are not falling under the ambit of Section
34 of the Act.
Signature Not Verified
Digitally Signed FAO (COMM) 89/2023 Page 3 of 15
By:SHAZAAD ZAKIR
Signing Date:04.07.2025
12:37:56
4. The learned Counsel for the Appellant has also submitted that the
impugned award is based on mere conjectures and surmises. Further, the
impugned judgement gives no reasons for its conclusions and is therefore
bad in law. In particular, he challenges the grant of claim for idle labor and
loss of profits in favor of the Respondent, contending that the impugned
award does not disclose any discernable basis for such findings. The learned
Counsel for the Appellant further argues that his contentions have not been
dealt with, by the learned ADJ, in the impugned judgement.
5. Per contra, the learned Counsel for the Respondent has argued that
the present appeal is essentially a last-ditch attempt by the Appellant to
challenge the impugned award. He has contended that the impugned award
and the impugned judgement are well reasoned and do not warrant any
interference by this Court. He therefore prays that the impugned award dated
15.10.2003 and the impugned judgement dated 20.12.2022 should be upheld
by this Court.
6. Heard learned Counsel for the parties and perused the material on
record.
7. It is trite law that when a specific challenge against an Arbitral award
is made in terms of Section 34 of the Act, the Court does not function like an
appellate forum. It is not permissible for a Court under Section 34 to re-
appreciate evidence or re-examine the merits of a dispute, as would
ordinarily be done in a regular appeal. The Apex Court has time and again
held that the jurisdiction conferred on a Court under Section 34 is narrowly
tailored, and when it comes to the scope of an appeal under Section 37 of the
Act, the jurisdiction of the Appellate Court in examining an order setting
aside or refusing to set aside an Award is even more circumscribed. The
Signature Not Verified
Digitally Signed FAO (COMM) 89/2023 Page 4 of 15
By:SHAZAAD ZAKIR
Signing Date:04.07.2025
12:37:56
Apex Court in Larsen Air Conditioning & Refrigeration Co. v. Union of
India, (2023) 15 SCC 472, has observed 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 [Associate Builders v. DDA, (2015) 3 SCC 49
: (2015) 2 SCC (Civ) 204] , SCC p. 81, para 42]. 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.”
8. However, despite the limited scope and jurisdiction of a Court dealing
with a challenge under Section 34, when a party raises a valid challenge
against an Award under Section 34(2) of the Act, the Court must examine
those objections by applying its mind and engaging with the objections
raised. The narrowly tailored jurisdiction does not mean that a Court can
summarily note down the objections raised by the challenger in a cursory
manner without engaging with the objections on merits or assigning cogent
reasons for rejecting them.
9. While Section 19(1) of the Act provides procedural flexibility and
clarifies that the provisions of the Civil Procedure Code, 1908 and Indian
Evidence Act, 1872 do not apply ipsissima verba to arbitral proceedings, it
in no manner whatsoever dispenses with the requirement of adhering to the
Signature Not Verified
Digitally Signed FAO (COMM) 89/2023 Page 5 of 15
By:SHAZAAD ZAKIR
Signing Date:04.07.2025
12:37:56
principles of natural justice. These principles are not only relevant for
conducting arbitral proceedings but also for the exercise of jurisdiction by
Courts under Section 34 and the exercise of supervisory jurisdiction by the
appellate Courts under Section 37. The requirement for passing a reasoned
order and speaking order is one such fundamental principle which is central
to the scheme of the Act.
10. It is a settled principle of law that judicial and quasi-judicial
authorities must provide reasons in support of their conclusions. The Apex
Court in Woolcombers of India Ltd. v. Woolcombers Workers Union &
Anr., (1974) 3 SCC 318, has held as under:-
“5. It may be observed that the first passage quoted by
us states only the conclusions. It does not give the
supporting reasons. The second passage quoted by us
states merely one of the reasons. The other relevant
reasons are not disclosed. The giving of reasons in
support of their conclusions by judicial and quasi-
judicial authorities when exercising initial jurisdiction
is essential for various reasons. First, it is calculated
to prevent unconscious unfairness or arbitrariness in
reaching the conclusions. The very search for reasons
will put the authority on the alert and minimise the
chances of unconscious infiltration of personal bias or
unfairness in the conclusion. The authority will adduce
reasons which will be regarded as fair and legitimate
by a reasonable man and will discard irrelevant or
extraneous considerations. Second, it is a well-known
principle that justice should not only be done but
should also appear to be done. Unreasoned
conclusions may be just but they may not appear to be
just to those who read them. Reasoned conclusions, on
the other hand, will have also the appearance of
justice. Third, it should be remembered that an appeal
generally lies from the decisions of judicial and quasi-
judicial authorities to this Court by special leaveSignature Not Verified
Digitally Signed FAO (COMM) 89/2023 Page 6 of 15
By:SHAZAAD ZAKIR
Signing Date:04.07.2025
12:37:56
granted under Article 136. A judgment which does not
disclose the reasons, will be of little assistance to the
Court. The Court will have to wade through the entire
record and find for itself whether the decision in
appeal is right or wrong. In many cases this investment
of time and industry will be saved if reasons are given
in support of the conclusions. So it is necessary to
emphasise that judicial and quasi-judicial authorities
should always give the reasons in support of their
conclusions.”
11. Similarly, the Apex Court in Bombay Slum Redevelopment Corpn.
(P) Ltd. v. Samir Narain Bhojwani, (2024) 7 SCC 218, has reiterated that
the remedy of appeal would not be effective unless there is a power of
remand vested in the appellate authority. The relevant excerpts of the said
Judgment read as under:-
“28. The provisions of the CPC have not been made
applicable to the proceedings before the learned
arbitrator and the Court under Sections 34 and 37 of
the Arbitration Act. The legislature’s intention is
reflected in Section 19(1) of the Arbitration Act, which
provides that an Arbitral Tribunal is not bound by the
provision of the CPC. That is why the provisions of the
CPC have not been made applicable to the proceedings
under Sections 34 and 37(1)(c). We are not even
suggesting that because the provisions of the CPC are
not applicable, the appellate court dealing with an
appeal under Section 37(1)(c) is powerless to pass an
order of remand. The remedy of an appeal will not be
effective unless there is a power of remand vesting in
the appellate authority. In the Arbitration Act, there is
no statutory embargo on the power of the appellate
court under Section 37(1)(c) to pass an order of
remand. However, looking at the scheme of the
Arbitration Act, the appellate court can exercise the
power of remand only when exceptional circumstancesSignature Not Verified
Digitally Signed FAO (COMM) 89/2023 Page 7 of 15
By:SHAZAAD ZAKIR
Signing Date:04.07.2025
12:37:56
make an order of remand unavoidable.
29. There may be exceptional cases where remand in
an appeal under Section 37 of the Arbitration Act may
be warranted. Some of the exceptional cases can be
stated by way of illustration:
(a) Summary disposal of a petition under Section 34
of the Arbitration Act is made without consideration
of merits;
(b) Without service of notice to the respondent in a
petition under Section 34, interference is made with
the award; and
(c) Decision in proceedings under Section 34 is
rendered when one or more contesting parties are
dead, and their legal representatives have not been
brought on record.”
(emphasis supplied)
12. A perusal of the impugned judgement indicates that there is
considerable weight in the arguments raised by the Appellant. The impugned
judgment dated 20.12.2022 is indeed unreasoned, non-speaking and does not
deals with the merits of the issued raised by the Appellant. The Trial Court
has noted about 28 odd contentions raised by the Appellant and broadly
clubbed these grounds under three broad heads i.e. (i) to (x), (xi) to (xix) and
(xx) to (xxviii). However, upon perusal of the impugned judgement it is
abundantly clear that there has been no assessment of these grounds on
merits nor has it been examined whether any of these grounds cross the
threshold under Section 34(2) of the Act.
13. Even though a microscopic analysis of each individual ground may
not be mandatory, the impugned judgement does not demonstrate any
Signature Not Verified
Digitally Signed FAO (COMM) 89/2023 Page 8 of 15
By:SHAZAAD ZAKIR
Signing Date:04.07.2025
12:37:56
engagement with the allegations of perversity, irrational reasoning and
absence of proper evidence. For instance, the Appellant has argued that the
Arbitrator has not relied on evidence and rather acted on the basis of
assumptions by presuming that about fifty (50) workmen must have been at
the site while awarding idle labor charges in favor of the Respondent. While
dealing with this particular objection, the Trial Court has not examined
whether the learned Arbitrator actually relied on any evidence for
determining the number of workmen or not. Instead, the Trial Court engages
in a somewhat circular argument and simply states that this ground is not
covered under Section 34 and therefore the evidence as recorded by the
Arbitrator cannot be tested unless it is covered under Section 34. The
relevant excerpt from the impugned Judgment reads as under:-
“17. In so far as ground of calculating the number of
workman/labour are concerned, unless the award is
against the public policy or is covered by other
grounds as mentioned in Section 34 of the Act the
findings of the Ld. Arbitrator cannot be reversed. The
main focus of the parties is with respect to arbitrator
acted arbitrarily without collecting any evidence and
simply on assumption and presumption with respect to
number of workmen. However, this court is of the
opinion that as the evidence cannot be tested and the
present Court cannot interfere with the findings of the
arbitrator unless it is covered under clause of Section
34.”
14. Similarly, while dealing with the three broad heads of objections the
Trial Court has summarily noted them down and generically summarized the
law concerning applicability of Section 34 of the Act and has in no manner
whatsoever explained as to how the law is applicable to the facts of the
present case. The relevant portion of the impugned Judgment, which deal
Signature Not Verified
Digitally Signed FAO (COMM) 89/2023 Page 9 of 15
By:SHAZAAD ZAKIR
Signing Date:04.07.2025
12:37:56
with these three broad heads, are reproduced as under:-
“13.In so far as ground (i) to (x) are concerned, it has
been held in catena of judgments that Section 34
petition deserves to be allowed in case the grounds as
mentioned in the Section 34 are fulfilled. It has been
held in Associate Builders Vs. Delhi Development
Authority, AIR 2015 SC 620 that:
“It will be seen that none of the grounds
contained in sub- clause 2 (a) deal with the
merits of the decision rendered by an arbitral
award. It is only when we come to the award
being in conflict with the public policy of India
that the merits of an arbitral award are to be
looked into under certain specified
circumstances.
Reliance is being placed on Jitender
Rajpal vs. Ansal Properties & Infrastructure
Ltd. (OS) (COMM) 28/19 decided on
13.02.2019 wherein it has been held that “It is
apparent, therefore, that, while interference by
court, with arbitral awards, is limited and
circumscribed, an award which is patently
illegal, on account of it being injudicious,
contrary to the law settled by the Supreme
Court, or vitiated by an apparently untenable
interpretation of the terms of the contract,
requires to be eviscerated. In view thereof, the
decision of the ld. Single Judge that reasoning
of the arbitral award in this regard was based
on no material and was contrary to the
contract, cannot be said to be deserving of any
interference at our hands under Section 37 of
the Act. In a pronouncement reported at
MANU/DE/0459/2015, MTNL v. Fujitshu India
Pvt. Ltd. (FAO(OS) No.63/2015), the Division
Bench of this court has held that “an appealSignature Not Verified
Digitally Signed FAO (COMM) 89/2023 Page 10 of 15
By:SHAZAAD ZAKIR
Signing Date:04.07.2025
12:37:56
under Section 37 is like a second appeal, the
first appeal being to the court by way of
objections under Section 34“. Being in the
nature of a second appeal, this court would be
hesitant to interfere, with the decision of the
learned Single Judge, unless it is shown to be
palpably erroneous on facts or in law, or
manifestly perverse.”
14. In so far as ground (xi) to (xix) are concerned the
same are with respect to the appreciation of evidence
by the Ld. Arbitrator. It has been held in catena of
judgments that once the Arbitrator has returned a
finding after appreciation of evidence, the court
cannot sit in appeal against the said order and re-
appreciate the evidence or discern it afresh. Perusal
of Arbitral record would show that the Ld. Arbitrator
had discussed each claim of the claimant minutely
and after discerning the evidence led by both the
parties and has decided the claims. There is no error
apparent in the finding returned by the Arbitrator.
15. Reliance is being place on Sumitomo Heavy
Industries Ltd vs ONGC Ltd (2010) 11 SCC 296:
43……..The umpire has considered the fact
situation and placed a construction on the
clauses of the agreement which according to
him was the correct one. One may at the
highest say that one would have preferred
another construction of Clause 17.3 but that
cannot make the award in any way perverse.
Nor can one substitute one’s own view in such a
situation, in place of the one taken by the
umpire, which would amount to sitting in
appeal. As held by this Court in Kwality Mfg.
Corpn. v. Central Warehousing Corpn. (2009)
5 SCC 142 the Court while considering
challenge to arbitral award does not sit in
Signature Not Verified
Digitally Signed FAO (COMM) 89/2023 Page 11 of 15
By:SHAZAAD ZAKIR
Signing Date:04.07.2025
12:37:56
appeal over the findings and decision of the
arbitrator, which is what the High Court has
practically done in this matter. The umpire is
legitimately entitled to take the view which he
holds to be the correct one after considering
the material before him and after interpreting
the provisions of the agreement. If he does so,
the decision of the umpire has to be accepted as
final and binding.
16. In so far as ground (xx) to (xxviii) are concerned,
the same are with respect to the interpretation of the
terms of contract between the parties. In so far as
reconsideration of the terms of contract is concerned,
it has been decided by the Hon’ble Appex court in State
Trading Corporation of India Ltd. Vs. Toepfer
International Asia PTE Ltd. (2014) 7 High court
Cases (Del) 504 2014 SCC Online Del 3426 that
“5. The challenge in this appeal is on the
ground that the learned Single Judge ignored
that the interpretation of the contract between
the parties given by the Arbitral Tribunal is
contrary to the express terms and conditions
thereof and the Arbitral Tribunal has given a
meaning to the terms and conditions which is
not contemplated in the contract. The senior
counsel for the appellant thus wants us to read
the contract between the parties, particularly
the clauses relating to demurrage, and then to
judge whether the interpretation thereof by the
Arbitral Tribunal is correct or not.
6. In our view, the interpretation in Saw
Pipes Ltd. supra of the ground in Section 34 of
the Act for setting aside of the arbitral award,
for the reason of the same being in conflict with
the public policy of India, would not permit
setting aside, in the aforesaid facts. A Section
Signature Not Verified
Digitally Signed FAO (COMM) 89/2023 Page 12 of 15
By:SHAZAAD ZAKIR
Signing Date:04.07.2025
12:37:56
34 proceeding, which in essence is the remedy
of annulment, cannot be used by one party to
convert the same into a remedy of appeal. In
our view, mere erroneous/wrong finding of fact
by the Arbitral Tribunal or even an erroneous
interpretation of documents/evidence, is non-
interferable under Section 34 and if such
interference is done by the Court, the same will
set at naught the whole purpose of amendment
of the Arbitration Act.
7. Arbitration is intended to be a faster and
less expensive alternative to the courts. If this is
one’s motivation and expectation, then the
finality of the arbitral award is very important.
The remedy provided in Section 34 against an
arbitral award is in no sense an appeal. The
legislative intent in Section 34 was to make the
result of the annulment procedure prescribed
therein potentially different from that in an
appeal. In appeal, the decision under review
not only may be confirmed, but may also be
modified. In annulment, on the other hand, the
decision under review may either be
invalidated in whole or in part or be left to
stand if the plea for annulment is rejected.
Annulment operates to negate a decision, in
whole or in part, thereby depriving the portion
negated of legal force and returning the
parties, as to that portion, to their original
litigating positions. Annulment can void, while
appeal can modify. Section 34 is found to
provide for annulment only on the grounds
affecting legitimacy of the process of decision
as distinct from substantive correctness of the
contents of the decision. A remedy of appeal
focuses upon both legitimacy of the process of
decision and the substantive correctness of the
decision. Annulment, in the case of arbitration
Signature Not Verified
Digitally Signed FAO (COMM) 89/2023 Page 13 of 15
By:SHAZAAD ZAKIR
Signing Date:04.07.2025
12:37:56
focuses not on the correctness of decision but
rather more narrowly considers whether,
regardless of errors in application of law or
determination of facts, the decision resulted
from a legitimate process.”
(emphasis supplied)
15. A perusal of the foregoing paras makes it abundantly clear that there
has been a vague and incomplete application of Section 34 jurisdiction.
There is nothing to show as to how the judgements that have been cited in
the impugned judgement concur with the observations made in the
impugned judgement. Perusal of the impugned judgement also reveals that
besides it being cryptic to the extent that it does not find mention of a reply,
if any, filed by the Respondent, the issues flagged for consideration have
been left unanswered. With these gaps and consequently unanswered
issues/objections, the impugned order is rendered vague and ambiguous. In
view of the same, this Court finds it difficult to comprehend how the learned
Trial Court upheld the impugned award and arrived at the conclusion that
the objections raised by the Appellant were not sustainable.
16. The Trial Court has mechanically rejected the substantive challenge
raised by the Appellant without going into the merits of the case and this in
itself is sufficient to warrant that the present case be remanded back to the
Trial Court for fresh consideration on merits.
17. Therefore, this Court is of the considered opinion that the impugned
judgement is liable to be set aside on the grounds that it is non-speaking,
unreasoned and does not appropriately exercise jurisdiction under Section 34
of the Act. Further, this Court deems it appropriate to remand the matter
back to the Trial Court for fresh consideration of the Section 34 petition on
Signature Not Verified
Digitally Signed FAO (COMM) 89/2023 Page 14 of 15
By:SHAZAAD ZAKIR
Signing Date:04.07.2025
12:37:56
merits.
18. However, keeping in view that the impugned award had been passed
in the year 2003 and almost 22 years have since elapsed since, the Trial
Court is directed to ensure that the objection petition be positively disposed
of within 2 months of the date of pronouncement of this judgement. It is
clarified that the observations made in this judgement are confined solely to
the Trial Court’s jurisdiction under Section 34 of the Act. Nothing stated
herein shall be construed as an expression on the merits of this case and all
right and contentions of the parties are left open for adjudication by the Trial
Court.
19. In view of the above, the present appeal along with pending
application(s), if any, stands allowed.
SUBRAMONIUM PRASAD, J.
HARISH VAIDYANATHAN SHANKAR, J.
JULY 02, 2025
hsk/VR
Signature Not Verified
Digitally Signed FAO (COMM) 89/2023 Page 15 of 15
By:SHAZAAD ZAKIR
Signing Date:04.07.2025
12:37:56