Orissa High Court
M/S. National Aluminium Company vs Indo Power Projects Limited on 24 July, 2025
Author: S.K. Panigrahi
Bench: S.K. Panigrahi
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Location: ORISSA HIGH COURT, CUTTACK
Date: 28-Jul-2025 17:28:24
IN THE HIGH COURT OF ORISSA AT CUTTACK
ARBA No.16 of 2023
(From the judgment dated 18.05.2023 passed by the learned District
Judge, Koraput at Jeypore in Arbitration Proceeding No.1 of 2020)
M/s. National Aluminium Company .... Appellant (s)
Limited, Bhubaneswar, Odisha
-versus-
Indo Power Projects Limited, .... Respondent (s)
Kolkata
Advocates appeared in the case through Hybrid Mode:
For Appellant (s) : Ms. Pami Rath, Senior Advocate
Along with
Miss. Guman Singh, Adv.
For Respondent (s) : Mr. Dayananda Mohapatra,
Senior Advocate
Along with
Mr. Subhasis Sarkar, Advocate
CORAM:
DR. JUSTICE S.K. PANIGRAHI
DATE OF HEARING:-22.07.2025
DATE OF JUDGMENT: -24.07.2025
Dr. S.K. Panigrahi, J.
1. This Appeal under Section 37 of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as “A&C Act”) has been filed against the
judgment dated 18.05.2023 passed by the learned District Judge,
Koraput at Jeypore in Arbitration Proceeding No.1 of 2020 wherein the
learned District Judge has dismissed the petition filed under Section 34
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of the A&C Act thereby confirming the award dated 17.12.2019 passed
by the learned Sole Arbitrator in Arbitration Proceeding No.5 of 2017.
I. FACTUAL MATRIX OF THE CASE:
2. Pursuant to an invitation to tender floated by the present Appellant for
execution and completion of the work of Electrical works for Phase-2
Expansion Project of Alumina Refinery at Damonjodi (Orissa). The
present Respondent participated in the tender and was declared
successful. Formal agreement between the parties was executed on
10.10.2007 with the stipulation that the work in question would be
completed within a period of 12 months beginning from 15.9.2007.
3. However, the work could not be completed by the Respondent within
the time stipulated i.e. 12 months. As many as 12 extensions were
granted by the Appellant and the work was completed by the
Respondent on 31.7.2012. The Designated Engineer- in-Charge issued a
letter of completion on 1.7.2015 indicating that the work of the
Respondent amounted to a total of Rs. 9,53,61,442/- The Engineer-in-
Charge recommended payment of the 24th R.A. bill for an outstanding
amount of Rs. 1,59,40,585 subject to statutory deductions and other
legal recoveries to be decided by the present Appellant. Soon thereafter,
the Appellant replied vide letter dated 30.9.2015 that this
recommended amount was tentative and several deductions towards
liquidated damages, cost of unreturned free issue materials and scraps,
rebate items, cost of the items lost, etc. would be deducted from the
Respondent. Upon calculation, the Appellant determined that the
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Respondent was liable to pay an amount of Rs. 89,63,093/- to the
Respondent. And at this juncture, the dispute arose.
4. The Respondent questioned the proposed deductions terming them as
illegal and beyond the terms of the contract. The Respondent issued a
notice raising several claims and demanded reference of the matter for
arbitration. As the Appellant did not respond to the notice, the
Respondent approached the High Court of Orissa in ARBP No. 42 of
2016 u/s 11 of the Act. This Court was pleased to appoint former Judge
of Orissa High Court Justice A.K. Parichha as the Sole Arbitrator in the
matter.
5. Before the Sole Arbitrator both the parties, tendered oral and
documentary evidence. Upon analysis and consideration of the
evidence adduced by the parties, the Sole Arbitrator was pleased to
pass an award in favour of the present Respondent vide award dated
17.12.2019.
6. Aggrieved, the present Appellant preferred an application u/s 34 of the
A&C Act. Vide judgment dated 18.5.2023 in Arbitration Proceeding
No.1 of 2020, the Ld. District Judge, Koraput at Jeypore was pleased to
dismiss the said application on the ground that the Appellant has failed
to point out any illegality in the Award. Hence, the present petition.
7. Now that the facts leading up to the instant Appeal has been laid down,
this Court shall endeavour to summarise the contentions of the Parties
and the broad grounds that have been raised to seek the exercise of this
Court’s limited jurisdiction available under S. 37 of the A&C Act.
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II. APPELLANT’S SUBMISSIONS:
8. During course of hearing, learned counsel for the Appellants submitted
that the award dated 17.12.2019 suffers from patent illegality due to the
fact that the Ld. Tribunal had awarded the claim towards escalation of
price of materials and labour costs during the extended period of
execution of work, thereby completely ignoring that the works contract
is a firm/fixed contract.
9. Furthermore, it was submitted that the Ld. District Judge passed the
impugned order without applying its independent mind and has only
reiterated what the arbitrator has held and copy pasted the award
without application of its own judicial mind.
III. RESPONDENT’S SUBMISSIONS:
10.On the contrary, learned counsel for the Respondent contends that
while considering an application under Section 37 of the Act, the Court
is not to act as an Appellate Court. The Court is to see as to whether
challenge to the award comes within the grounds contained in sub-
Section (2) of Section 34 of the Act. According to the learned counsel,
the contentions advanced on behalf of the Appellants for challenging
the award are factual in nature and, more or less, are pure surmises.
None of such contentions come within the purview of Section 34(2) of
the Act. Therefore, the award may not be interfered with.
11.It was earnestly contended that there is absolutely no illegality in the
award for which the Court may feel inclined to interfere with the same.
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IV. ISSUE FOR CONSIDERATION:
12.Having heard the parties and perused the materials available on
record, this court here has identified the following solitary issue to
be determined:
A. Whether the order of the Ld. District Judge warrants
interference keeping in mind the limitations of this court’s
powers under Section 37 of the A&C Act?
V. ISSUE A: WHETHER THE ORDER OF THE LD. DISTRICT
JUDGE WARRANTS ANY INTERFERENCE KEEPING IN
MIND THE LIMITATIONS OF THIS COURT’S POWERS
UNDER SECTION 37 OF THE A&C ACT?
13. Before going into the merits of the contentions, it is necessary to outline
the ambit and scope of Section 37(2)(b) of the 1996 Act. The said section
is extracted below:
“37. Appealable orders.–(1)[Notwithstanding anything
contained in any other law for the time being in force, an
appeal] shall lie from the following orders (and from no
others) to the court authorised by law to hear appeals from
original decrees of the court passing the order, namely:
∗∗∗
(2) Appeal shall also lie to a court from an order of the
Arbitral Tribunal–
(a) accepting the plea referred to in sub-section (2) or sub-
section (3) of Section 16; or
(b) granting or refusing to grant an interim measure under
Section 17.”
14.The Supreme Court and this Court in catena of judgments have held
that the powers of appellate court while exercising jurisdiction under
Section 37(2)(b) of the 1996 Act against orders passed by the Arbitral
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Tribunal is very restricted and narrow and the same should be
exercised when the orders seems to be perverse, arbitrary and contrary
to law. The judgment of Wander Ltd. v. Antox India (P) Ltd.1 passed by
the Apex Court, elaborates the ambit and scope of the appeals.
Although the aforesaid judgment is not dealing with the arbitration
proceedings but the same deals with the power of appellate court in
the Civil Procedure Code, 1908 (CPC). Operative paragraphs of the
aforesaid judgment are extracted below:
“13. On a consideration of the matter, we are afraid, the
Appellate Bench fell into error on two important
propositions. The first is a misdirection in regard to the very
scope and nature of the appeals before it and the limitations
on the powers of the appellate court to substitute its own
discretion in an appeal preferred against a discretionary
order. The second pertains to the infirmities in the
ratiocination as to the quality of antox’s alleged user of the
trade mark on which the passing-off action is founded. We
shall deal with these two separately.
14. The appeals before the Division Bench were against the
exercise of discretion by the Single Judge. In such appeals, the
appellate court will not interfere with the exercise of
discretion of the court of first instance and substitute its own
discretion except where the discretion has been shown to have
been exercised arbitrarily, or capriciously or perversely or
where the court had ignored the settled principles of law
regulating grant or refusal of interlocutory injunctions. An
appeal against exercise of discretion is said to be an appeal on
principle. Appellate court will not reassess the material and
seek to reach a conclusion different from the one reached by
the court below if the one reached by that court was
reasonably possible on the material. The appellate court1
1990 Supp SCC 727Page 6 of 27
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Date: 28-Jul-2025 17:28:24would normally not be justified in interfering with the
exercise of discretion under appeal solely on the ground that
if it had considered the matter at the trial stage it would have
come to a contrary conclusion. If the discretion has been
exercised by the trial court reasonably and in a judicial
manner the fact that the appellate court would have taken a
different view may not justify interference with the trial
court’s exercise of discretion. After referring to these
principles Gajendragadkar, J. in Printers (Mysore) (P)
Ltd. v. Pothan Joseph (SCC OnLine SC para 9)
‘9. …These principles are well established, but as has been
observed by Viscount Simon in Charles Osenton &
Co. v. Johnston “the law as to the reversal by a court of
appeal of an order made by a Judge below in the exercise
of his discretion is well established and any difficulty that
arises is due only to the application of well-settled
principles in an individual case.”‘
The appellate judgment does not seem to defer to this
principle.”
15.The said judgment is consistently followed in adjudicating petitions
pertaining to the A&C Act by Courts across the Country in Green Infra
Wind Energy Ltd. v. Regen Powertech (P) Ltd.2; Sona Corpn. India (P)
Ltd. v. Ingram Micro India (P) Ltd.3; Manish Aggarwal v. RCI
Industries & Technologies Ltd.4; Tahal Consulting Engineers India (P)
Ltd. v. Promax Power Ltd.5 and Handicraft & Handlooms Exports Co.
of India v. SMC Comtrade Ltd.6.
2
2018 SCC OnLine Del 8273
3
2020 SCC OnLine Del 300
4
(2022) 3 HCC (Del) 289
5
2023 SCC OnLine Del 2069
6
2023 SCC OnLine Del 3981
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16.In Reliance Infrastructure Ltd. v. State of Goa7, the Apex Court
noticing its previous decision in MMTC Ltd. v. Vedanta Ltd.8 has noted
the limited scope of interference under Section 34 and further narrower
scope of appeal under Section 37 of the Act particularly when dealing
with the concurrent findings of the arbitrator and that of the Court.
Relevant paragraph ’14’ of MMTC Ltd.(supra) as noted in paragraph
’26’ in Reliance Infrastructure Ltd.(supra) is to be extracted
hereinunder:–
“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 Section34 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.”
17.The same view has been expressed in UHL Power Company
Ltd. v. State of Himachal Pradesh9 in paragraph ’16’ while noticing
paragraph ’11’ in MMTC Ltd.(supra):–
“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 in7
(2024) 1 SCC 479
8
(2019) 4 SCC 163
9
(2022) 4 SCC 116Page 8 of 27
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Date: 28-Jul-2025 17:28:24examining 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
judicial approach, compliance with the principles of natural
justice, and Wednesbury [Associated Provincial Picture
Houses Ltd. v. Wednesbury Corpn., [1948] 1 K.B. 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.”
18.In Haryana Tourism Ltd. v. Kandhari Beverages Ltd.10 as noted in
paragraph ’30’ in Reliance Infrastructure Ltd.(supra), it was held on the
scope of interference under Sections 34 and 37 of the Act’ 1996 as
under:–
10
2022) 3 SCC 237
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Date: 28-Jul-2025 17:28:24“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 and37 of
the Act; and disapproved interference by the High Court
under Section 37 of the Act while entering into merits of 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 under Section 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 andorder [Kandhari Beverages
Ltd. v. Haryana Tourism Ltd., 2018 SCC OnLine P&H
3233] passed by the High Court is hence not sustainable.”
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19.It was, thus, observed in paragraph ’33’ of Reliance Infrastructure
Ltd.(supra) as under:–
“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 under Section34 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.”
20.It is observed in Punjab State Civil Supplies Corpn. Ltd. v. Sanman
Rice Mills11 that:
“9. The object of the Act is to provide for a speedy and
inexpensive alternative mode of settlement of dispute with the
minimum of intervention of the courts. Section 5 of the Act
is implicit in this regard and prohibits interference by the
judicial authority with the arbitration proceedings except
where so provided in Part-I of the Act. The judicial
interference, if any, is provided inter-alia only by means of
Sections 34 and 37 of the Act respectively.
10. Section 34 of the Act provides for getting an arbitral
award set aside by moving an application in accordance with
sub-Section (2) andsub-Section (3) of Section 34 of the Act
which inter-alia provide for the grounds on which an arbitral
award is liable to be set aside. One of the main grounds for
interference or setting aside an award is where the arbitral
award is in conflict with the public policy of India i.e. if the
award is induced or affected by fraud or corruption or is in
contravention with the fundamental policy of Indian law or
it is in conflict with most basic notions of morality and
justice. A plain reading of Section 34 reveals that the scope of
interference by the court with the arbitral award under
Section 34 is very limited and the court is not supposed to11
2024 SCC OnLine SC 2632
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good or bad.
11. Section 37 of the Act provides for a forum of appeal inter-
alia against the order setting aside or refusing to set aside an
arbitral award under Section 34 of the Act. The scope of
appeal is naturally akin to andlimited to the grounds
enumerated under Section 34 of the Act.
12. It is pertinent to note that an arbitral award is not liable
to be interfered with only on the ground that the award is
illegal or is 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.
xxxxxx
14. It is equally settled law that the appellate power
under Section 37of the Act is not akin to the normal appellate
jurisdiction vested in the civil courts for the reason that the
scope of interference of the courts with arbitral proceedings
or award is very limited, confined to the ambit of Section 34
of the Act only and even that power cannot be exercised in a
casual and a cavalier manner.
xxxxxx
16. It is seen that the scope of interference in an appeal
under Section37 of the Act is restricted and subject to the
same grounds on which an award can be challenged
under Section 34 of the Act. In other words, the powers
under Section 37 vested in the court of appeal are not beyond
the scope of interference provided under Section 34 of
the Act.”
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Here, the Supreme Court has once again reiterated that even an award
which may not be reasonable or is nonspeaking 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.
21.In Konkan Railway Corpn. Ltd. v. Chenab Bridge Project12 referring
to MMTC Limited (supra) it has been held that:
“19….The scope of jurisdiction
under Section 34 and Section 37 of the Act is not akin to
normal appellate jurisdiction. 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…”
22.In Dyna Technology Private Limited v. Crompton Greaves Limited13,
the Apex Court observed as under:
“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 be12
(2023) 9 SCC 85
13
(2019) 20 SCC 1
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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.”
23.Judicial scrutiny of arbitral awards is quite limited in nature under
Indian law. Section 34 of the Arbitration and Conciliation Act, 1996,
prescribes the exclusive grounds upon which an arbitral award can be
challenged. Courts, therefore, are very conservative in interfering
merely because another interpretation or outcome may seem more
reasonable. The jurisdiction under Section 34 is confined to procedural
and legal infirmities such as lack of jurisdiction, violation of natural
justice, or patent illegality. Consequently, appellate jurisdiction under
Section 37 is even narrower in its scope. Its purpose is to evaluate
whether the court adjudicating under Section 34 has remained within
the permissible statutory boundaries. The appellate court cannot re-
evaluate evidence or reconsider the factual matrix afresh. The statutory
framework thus reflects an overarching legislative intent to insulate
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arbitral decisions from excessive judicial intervention. The entire
architecture of Sections 34 and 37 reinforces the finality and autonomy
of arbitral proceedings. Arbitration is designed to offer an efficient,
expert-led, and expedited alternative to litigation. Courts must
therefore resist the temptation to intervene unless the decision by the
court under Section 34 itself amounts to a significant transgression of
the well-defined legal boundaries.
24.It is now firmly established in law that appellate review under Section
37 of the Act does not permit the court to act as a second court of first
instance. The appellate Court’s task is not to reassess the arbitral
tribunal’s findings on merits or evidence, but only to determine
whether the court under Section 34 has exercised its discretion legally
and within its jurisdiction. This means the appellate court must limit
itself to checking if the Section 34 court has adhered to the narrow scope
prescribed by the Act. It is not sufficient for the appellate court to
identify an alternative or even preferable view–interference is justified
only if the lower court has committed a jurisdictional error, or it has
failed to apply the law correctly. The structure of the Act ensures that
arbitration remains an autonomous dispute resolution mechanism,
minimally impacted by judicial oversight. The Court under Section 37
is not an appellate authority like the conventional civil law sense; it
cannot substitute its own interpretation for that of the arbitrator unless
a clear and grave legal error is demonstrated. In essence, the appellate
court serves as a watchdog over the procedural fidelity of the Section
34 court–not the substantive reasoning of the arbitrator.
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25.When interpreting Section 37, it is imperative to contextualize it
alongside the Section 5 of the Act, which serves as a foundational
provision reinforcing the ethos of minimal interference. Section 5
makes it clear that courts shall not intervene in arbitral issue except as
expressly provided in the Act. This legislative mandate is not merely
procedural–it is a substantive limitation on judicial power. Appeals
under Section 37, especially those arising under Section 37(2)(b), are
therefore constrained by both the statutory scheme and overarching
judicial philosophy. Unlike appeals under other civil statutes, where
courts may dive deep into factual findings or discretionary decisions,
the Arbitration Act imposes a tight statutory leash. The objective is to
prevent the unraveling of arbitration outcomes through prolonged
court battles. Any order passed by an arbitral tribunal, particularly at
interlocutory stages, must be accorded due deference unless it reveals
clear arbitrariness, irrationality, or breach of the fundamental legal
principles. Courts must, therefore, resist the impulse to interfere merely
because a different view appears plausible or even more just in
hindsight. Arbitration focuses on party autonomy, and any judicial
incursion must align strictly with the boundaries demarcated by
Sections 5, 34, and 37.
26.The judiciary’s intervention in arbitral matters must be exercised with
utmost caution, especially where the arbitral tribunal’s decisions reflect
reasonable interpretations of contractual terms or factual matrices. The
1996 Act was introduced with the explicit objective of limiting the role
of courts, ensuring faster and more efficient resolution of disputes
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outside traditional litigation. Consequently, appellate courts under
Section 37 must act with deliberate restraint, only intervening when the
arbitral process has clearly deviated from established legal standards.
This includes instances of perversity, gross arbitrariness, or when
settled legal principles have been ignored or misapplied. Importantly,
arbitral decisions–even at interim stages–deserve judicial respect
unless a substantial illegality is apparent. The appellate court’s function
is supervisory, not substitutive. It is not tasked with forming a fresh
opinion but must ensure that the arbitral tribunal’s discretion has been
exercised within legal bounds. In other words, Section 37 does not
allow for wholesale re-litigation of disputes that have already been
adjudicated by an arbitral forum. The credibility of the arbitration
system hinges on this judicial discipline. Allowing appeals to turn into
de facto retrials would defeat the very purpose of choosing arbitration
over courtroom adjudication.
27.The foundational framework of the Arbitration Act reflects an express
intent to exclude ordinary civil appellate practices in arbitral matters.
The powers conferred under Section 37(2)(b) are not akin to those
under civil appellate jurisdiction, where factual reappraisal and
discretionary judgments are routine. Rather, the Act envisions a system
where arbitral orders are largely immune from judicial revisitation
unless a serious and demonstrable breach of procedure or law occurs.
This philosophy is rooted in the recognition that arbitration is a
consensual mechanism designed to bypass the complexities and delays
of civil litigation. Courts, therefore, must respect the principle of
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finality, stepping in only where an order of the arbitral tribunal is
tainted by evident perversity or gross misapplication of law.
28.In view of the above position in law on the subject, the scope of the
intervention of the court in arbitral matters is virtually prohibited, if not
absolutely barred and that the interference is confined only to the extent
envisaged under Section 34 of the Act. The appellate power
of Section 37 of the Act is limited within the domain of Section 34 of
the Act. It 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 has no authority of law to consider the
matter in dispute before the arbitral tribunal on merits so as to find out
as to whether the decision of the arbitral tribunal is right or wrong upon
reappraisal of evidence as if it is sitting in an ordinary court of appeal.
It is only where the court exercising power under Section 34 has failed
to exercise its jurisdiction vested in it by Section 34 or has travelled
beyond its jurisdiction that the appellate court can step in and set aside
the order passed under Section 34 of the Act. Its power is more akin to
that superintendence as is vested in civil courts while exercising
revisionary powers. The arbitral award is not liable to be interfered
unless a case for interference as set out in the earlier part of the decision,
is made out. It cannot be disturbed only for the reason that instead of
the view taken by the arbitral tribunal, the other view which is also a
possible view is a better view according to the appellate court.
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29.It must also be remembered that proceedings under Section 34 of
the Act are summary in nature and are not like a full-fledged regular
civil suit. Therefore, the scope of Section 37 of the Act is much more
summary in nature and not like an ordinary civil appeal. The award as
such cannot be touched unless it is contrary to the substantive provision
of law; any provision of the Act or the terms of the agreement.
30.It is within this statutory and jurisprudential framework that the
present appeal must be evaluated. The core issue for consideration here
is whether the Arbitral Award, as upheld by the Ld. District Court,
suffers from patent illegality warranting interference
under Section 37 of the Act.
31.At the outset, the contentions raised by the Appellants fail to establish
any of the statutory grounds for setting aside an arbitral award as
outlined in Section 34(2) of the Arbitration and Conciliation Act, 1996.
The objections do not invoke violation of the fundamental policy of
Indian law, public interest, or morality, nor is there any indication that
the award is in conflict with justice in a manner envisaged by the Act.
32.A careful examination of the impugned arbitral award demonstrates
that the Sole Arbitrator has undertaken a detailed evaluation of the
rival contentions advanced by both the Appellant and the Respondent.
The award appears to be the outcome of thorough consideration of the
oral and documentary evidence presented by the parties. It reflects
reasoned findings on the respective claims and counterclaims, without
any indication of oversight or arbitrariness. The Appellant, while
seeking to assail the award, has not been able to highlight any element
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that would place the award in conflict with the public policy of India, a
prerequisite under Section 34 of the Arbitration and Conciliation Act,
1996 for setting aside an arbitral award.
33.The Appellant, in an attempt to repudiate the claims allowed in favour
of the Respondent, had placed reliance on five principal grounds. The
first of these was that although the Respondent was contractually
obliged to complete the work within a period of 12 months, it allegedly
took 57 months and 12 extensions to conclude the same. Consequently,
the Appellant contended that the Respondent was liable to pay
liquidated damages amounting to Rs.19,07,228.80 (Counter Claim No.
1). This delay, in the Appellant’s view, was attributable solely to the
Respondent and not to any default on the Appellant’s part.
34.Secondly, the Appellant claimed that the Respondent failed to return
or properly account for free-issue materials and scrap provided during
the execution of the work. It was alleged that this resulted in a financial
loss, for which the Respondent was liable to compensate the Appellant
to the tune of Rs.74,13,396.00 (Counter Claim No.2). The third
counterclaim involved a rebate of Rs.21,202/- (Counter Claim No. 3),
which the Appellant asserted had not been accounted for. Each of these
counterclaims was presented with the assertion that they arose out of
breaches of contractual obligations by the Respondent.
35.The fourth counterclaim raised by the Appellant was a demand for
compensation amounting to Rs.1,39,48,190/- on account of loss of
materials allegedly stolen while in the custody of the Respondent
(Counter Claim No. 4). Lastly, under Counter Claim No. 5, the
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Appellant sought recovery of statutory dues, comprising Rs.3,32,179/-
towards income tax, Rs.6,64,357/- towards VAT on WCT, and
Rs.5,00,000/- towards RF dues. The aggregate of these counterclaims
formed the core of the Appellant’s challenge to the award, with the
Appellant asserting that these claims were either not addressed or
inadequately considered by the Sole Arbitrator.
36.In response to these allegations, the Respondent argued that the Sole
Arbitrator had comprehensively dealt with the issues raised, including
all claims and counterclaims. It was contended that the Arbitrator had
extensively deliberated upon the evidence, both oral and documentary,
and delivered a well-reasoned award. The argument put forth was that
the Court, in exercise of its jurisdiction under Section 34, cannot act as
an appellate forum and re-evaluate the evidence or second-guess the
reasoning of the Arbitrator merely because another view is possible on
the same set of facts.
37.This Court, upon reviewing the award, finds that the Arbitrator had
specifically considered the Appellant’s counterclaims in para 6 of the
award while dealing with Issue Nos.1 and 10 to 14. It is clearly recorded
that the Arbitrator took into account all relevant facts and
circumstances. Notably, Counter Claims No. 1, 4, and 6 (interest) were
rejected after a reasoned analysis. Conversely, Counter Claims No. 2, 3,
and 5 were allowed either wholly or in part. This balanced treatment of
claims, accompanied by justifications grounded in the record, shows
that the award is not arbitrary or perverse.
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38.Regarding Counter Claim No. 1 on liquidated damages, the Arbitrator
relied on Clause 24 of the General Conditions of Contract (GCC), which
stipulated liability for delay. However, after evaluating the factual
matrix, it was found that the delays were largely due to the Appellant’s
lapses. The Arbitrator noted that by 15.6.2010, only 77.03% of work
fronts had been made available to the Respondent, and it was only by
2012 that full access was granted. The Appellant had also agreed to pay
Rs. 2.4 lakhs per month as compensation for idle labour and equipment,
which indicated acknowledgment of its own responsibility in causing
the delay.
39.The Arbitrator’s rejection of Counter Claim No. 4 (loss due to theft) is
also based on cogent reasoning. It was held that the Appellant failed to
furnish specific evidence regarding the identity or value of the missing
materials. Reference was made to the 22nd R.A. Bill, where a sum of
Rs.3,23,265/- had already been recovered on this count. Further, it was
observed that Rs.5,03,706/- was to be recovered from the final bill,
indicating a total assessed loss of Rs.8,27,971/-. This was found to be
significantly lower than the claimed amount of Rs.1,39,48,190/-, and
thus, the Arbitrator rightly refused to allow the inflated claim.
40.The award also demonstrates that the Arbitrator did not
indiscriminately accept all claims of the Respondent. It is evident from
the record that Claim Nos.2, 3, 7, 8, and 10 of the Respondent were
disallowed after due consideration. This further dispels the Appellant’s
allegation of bias or one-sided adjudication. The detailed approach
adopted by the Arbitrator reflects a judicious application of mind. The
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reasoning, even if not aligned with the Appellant’s views, does not in
any way reflect perversity or patent illegality that would warrant
intervention by the Court under the limited grounds available for
setting aside an arbitral award.
41.Moreover, with regards to the cost escalation that was awarded in
favour of the present Respondent, the Respondent had raised a claim
amounting to Rs.76,56,856/-, which included Rs.31,87,740/- towards
escalation in labour cost and Rs.41,76,357/- for escalation in material
cost, asserting that the delay in project execution up to 31.07.2012 was
attributable to the Appellant’s failure to provide timely and adequate
work fronts. It is submitted that the Respondent had to retain its
workforce and establishment until the issuance of the completion
certificate on 9.10.2015 by the Engineer-In-Charge, thereby incurring
increased costs during the extended period. The claim was based on
compensation due to prolonged execution arising out of the
Appellant’s contractual defaults.
42.The Appellant resisted the claim on the ground that the contract was a
fixed-price agreement with an explicit clause disallowing price
escalation. It is further argued that the Respondent had provided a
written undertaking confirming that it had no claims beyond the final
bill, and thus the demand for escalation in costs was contractually
barred. The Appellant also alleged that delays occurred due to the
Respondent’s inability to mobilize sufficient labour, material, and
finances, suggesting that the Respondent bore responsibility for the
delay and therefore was not entitled to any such compensation.
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43.In rebuttal, the Respondent relied on Sections 55 and 73 of the Indian
Contract Act and submitted that a contractor may still claim
compensation if the delay was due to the employer’s fault and the
contractor incurred loss performing work during the extended period.
The Respondent also submitted that “no claim certificates” do not
automatically preclude genuine post-contractual claims if they can be
substantiated.
44.In the present matter, although the Respondent did submit a “no claim
certificate” along with the 24th R.A.-cum-final bill, the Ld. Arbitrator
found that this did not preclude the Respondent from seeking
legitimate compensation. The delay of approximately 46 months was
found to be primarily due to the Appellant’s failure to provide
necessary work fronts, which justified the Respondent’s continued
incurrence of labour and material costs. Although there was some
evidence of minor lapses by the Respondent–such as failure to
promptly pay subcontractors and insufficient resource deployment–
the Ld. Arbitrator held that the predominant cause of delay lay with
the Appellant. Consequently, the Arbitrator determined that the
Appellant bore major liability for the increased cost incurred during the
extended period despite the clause disallowing price escalation and
considering both parties’ contributions to the delay, the Arbitrator
judiciously awarded 50% of the revised escalation amounts to the
Respondent–Rs.15,93,870/- for labour cost escalation and
Rs.20,88,178/- for material cost escalation. This Court finds no error in
the Arbitrator’s interpretation of the contractual terms or in the
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application of relevant legal provisions. Clause 88(b) of the General
Conditions of Contract states that the contract shall be governed by the
relevant laws of India and therefore, the Ld. Arbitrator’s reliance on the
Indian Contract Act is tenable in law.
45.The fact that the underlying agreement was a fixed-price contract does
not, in any manner, imply that the Appellant was at liberty to delay the
execution of the contractual obligations without facing any financial or
legal consequences. A fixed-price contract merely stipulates that the
consideration for the work to be performed remains predetermined and
unaltered under normal circumstances; it does not operate as a blanket
protection against repercussions arising from breaches or defaults
committed by either party. If the delay in completion of the contract is
attributable, either wholly or substantially, to the Appellant’s own
lapses–such as failure to provide timely work fronts, inadequate
coordination, or delays in releasing payments–then the Appellant
cannot claim immunity merely on the ground of the fixed-price nature
of the contract. Parties to a contract are expected to act in good faith and
adhere to their respective obligations, and any deviation attracting loss
to the other side invites proportionate legal and contractual liability.
46.In view of the above analysis, it is clear that the award has been passed
after a careful and reasoned consideration of the evidence on record.
The Arbitrator has acted within his jurisdiction and has not committed
any illegality–much less a patent illegality–that would justify setting
aside the award. This Court cannot interfere merely because a different
conclusion could be drawn from the same evidence. The Arbitrator is
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the sole judge of the quality and sufficiency of the evidence presented
before him, and unless the findings are perverse or shock the
conscience of this Court, no interference is warranted. The appeal,
therefore, fails to make out any valid ground for intervention.
VI. CONCLUSION:
47.In light of the above discussion, it is evident that the Appellant has not
identified any infirmity in the arbitral award that would rise to the level
of patent illegality or jurisdictional error as contemplated under Section
34(2A) of the Act. The Arbitrator has provided reasoned findings,
grounded in documentary evidence and consistent with legal
principles applicable to contractual breaches and delay. These findings
were not only comprehensive but were also examined and upheld by
the District Court. It is now well settled that neither the re-evaluation
of facts nor the mere possibility of a more favourable interpretation can
form the basis for setting aside an award. The appellate court,
particularly while exercising powers under Section 37, must adhere
strictly to the limited scope of judicial review. It cannot act as a court of
first appeal, nor can it re-assess the arbitral process as if the award is
being tried afresh. Given that the Arbitrator acted within his
jurisdiction, followed due process, and arrived at a decision through a
reasoned and evidentiary process, there is no warrant for interference.
The appeal, therefore, lacks merit and must be dismissed in keeping
with the principles governing limited judicial oversight in arbitration.
48.In the circumstances, there is no justification to interfere with the
findings in the impugned award in respect of the aforesaid claims,
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having regard to the scope of jurisdiction under Section 34 and/or 37 of
the A&C Act.
49.ARBA No.16 of 2023 is disposed on the abovementioned terms. No
order as to costs.
50. Interim order, if any, passed earlier stands vacated.
(Dr.S.K. Panigrahi)
Judge
Orissa High Court, Cuttack,
Dated the 24th July, 2025/
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