Orissa High Court
Rasmi Ranjan Mohapatra vs State Of Odisha & Ors on 18 July, 2025
Author: S.K. Panigrahi
Bench: S.K. Panigrahi
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Location: ORISSA HIGH COURT, CUTTACK
Date: 21-Jul-2025 16:59:40
IN THE HIGH COURT OF ORISSA AT CUTTACK
ARBA No.21 of 2022
(From the judgment dated 22.3.2022 passed by the learned District
Judge, Puri in Arbitration Misc. Case No.134 of 2016, arising out of
award dated 8.3.2016 passed by the Ld. Sole Arbitrator in Arbitration
Proceeding No.5 of 2012)
Rasmi Ranjan Mohapatra .... Appellant(s)
-versus-
State of Odisha & Ors. .... Respondent(s)
Advocates appeared in the case through Hybrid Mode:
For Appellant (s) : Mr. Jatindra Kumar Mohapatra, Adv.
For Respondent (s) : Mr. Debasish Nayak, AGA
CORAM:
DR. JUSTICE S.K. PANIGRAHI
DATE OF HEARING:-08.05.2025
DATE OF JUDGMENT:-18.07.2025
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 22.3.2022 passed by the learned District Judge, Puri in
Arbitration Misc. Case No.134 of 2016, arising out of award dated
8.3.2016 passed by the Ld. Sole Arbitrator in Arbitration Proceeding
No.5 of 2012.
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I. FACTUAL MATRIX OF THE CASE:
2. For the sake of brevity, the facts involved in the appeals are pithily
discussed herein:
a. In pursuance to the tender call notice invited by the
Respondents for the work “Construction of Multi-Purpose
School-Cum-Cyclone Building at Ramachandi Sahi Girls Nodal
U.P. School and at Rebana Nuagaon Nodal U.P. School”, the
Appellant submitted its bid.
b. The bid submitted by the Appellant was the lowest valid bid
for contract value of Rs. 33,45,799/- and therefore, the tender
was awarded in his favour.
c. Accordingly, agreement for work was executed on 16.11.2004
and the work order was subsequently issued on 18.11.2004. As
per the terms of the agreement, the work was to be completed
by 17.4.2005.
d. However, work did not commence in its true spirit due to
certain exigent circumstances which led to the Respondents
terminating the agreement on 13.10.2006.
e. The order of termination intimated to the Appellant that it
could make any claims, it had qua the work, which the
Appellant did. However, disputes arose pertaining to the
quantum of the claims raised by the Appellant.
f. Thereafter, the Appellant approached this Court u/s 11(6) of the
A&C Act in ARBP No. 9 of 2010 for appointment of an
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9 of 2010, this Court appointed Sri. S.F. Ahmed, Retired District
Judge as the Sole Arbitrator for adjudication of the disputes
between the Parties.
g. Accordingly, the Ld. Sole Arbitrator after hearing both sides
and considering the documents as well as the oral evidences of
the Parties was pleased to pass award dated 8.3.2016. In the
said award, the Ld. Sole Arbitrator has been pleased to allow 6
of the 12 claims resulting in an amount of Rs. 5,97,084/- along
with pre-reference and pendente lite interest @ 10% and future
interest till the date of actual payment.
h. Aggrieved, the present Respondents preferred an application
u/s 34 of the A&C Act before the Court of the Ld. District Judge,
Puri. The Ld. District Judge vide the impugned order dated
22.3.2022 was pleased to uphold the findings of the Ld. Sole
Arbitrator but has modified the amount of the award, resulting
in the present Petition.
1. Now, the facts leading to the instant Appeals have 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.
II. APPELLANT’S SUBMISSIONS:
3. The counsel for the Claimant assails the judgment of the Ld. District
Judge mainly on the ground that though the Ld. District Judge has
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of the Respondents and has acknowledged that the Court while
exercising power u/s 34 cannot act as an appellate authority, the Ld.
District Judge has still proceeded to modify the award amount on the
sole ground that the same seem to be on the higher side.
4. Further, it is submitted that barring the few limited exceptions carved
out by the Apex Court, Courts in exercise of their powers u/s 34 and 37
of the A&C Act cannot modify the award. Therefore, the impugned
order is bad in law and liable to be set aside.
III. RESPONDENT’S SUBMISSIONS:
5. Per contra, learned counsel for the Respondent’s main thrust of the
argument is that the Appellant has violated the terms and conditions
of the agreement which he had entered into and thereby he is not
entitled to get any damage/compensation for his own wrong.
6. It is further argued that the Ld. Sole Arbitrator failed to appreciate the
averments made in the claim application which were not tallying with
the evidence affidavit but awarded compensation in an arbitrary
manner and the same ought to have been interfered with.
7. It is also submitted that there is no error evident on the face of the
record, nor any patent illegality in the Ld. District Judge’s order and
therefore, the present Petition is liable to be dismissed.
IV. ISSUE FOR CONSIDERATION
8. Having heard the parties and perused the materials available on
record, this Court has identified the following solitary issue to be
determined:
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Date: 21-Jul-2025 16:59:40A. 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?
9. First things first, it would be apposite to refer to the provisions
of Section 34 & 37 of the Act, which provisions read as under:
“34. Application for setting aside arbitral award. -(1)
Recourse to a Court against an arbitral award may be made
only by an application for setting aside such award in
accordance with subsection (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if-
(a) the party making the application establishes on the basis
of the record of the arbitral tribunal that-
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law
to which the parties have subjected it or, failing any
indication thereon, under the law for the time being in
force; or
(iii) the party making the application was not given
proper notice of the appointment of an arbitrator or of
the arbitral proceedings or was otherwise unable to
present his case; or
(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
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matters beyond the scope of the submission
to arbitration:
Provided that, if the decisions on matters submitted
to arbitration can be separated from those not so submitted,
only that part of the arbitral award which contains decisions
on matters not submitted to arbitration may be set aside; or
(v.) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the
parties, unless such agreement was in conflict with a
provision of this Part from which the parties cannot
derogate, or, failing such agreement, was not in accordance
with this Part; or
(b) the Court finds that–
(i) the subject-matter of the dispute is not capable of
settlement by arbitration under the law for the time
being in force, or
(ii) the arbitral award is in conflict with the public policy
of India.
Explanation 1.–For the avoidance of any doubt, it is
clarified that an award is in conflict with the public policy of
India, only if,-
(i) the making of the award was induced or affected by
fraud or corruption or was in violation of Section 75
or Section 81; or
(ii) it is in contravention with the fundamental policy of
Indian law; or
(iii) it is in conflict with the most basic notions of morality
or justice.
Explanation 2.–For the avoidance of doubt, the test as
to whether there is a contravention with the fundamental
policy of Indian law shall not entail a review on the merits
of the dispute.
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(2-A) An arbitral award arising out of arbitrations other
than international commercial arbitrations, may also be set
aside by the court, if the court finds that the award is
vitiated by patent illegality appearing on the face of the
award:
Provided that an award shall not be set aside merely on
the ground of an erroneous application of the law or by
reappreciation of evidence.
(3) An application for setting aside may not be made
after three months have elaaed from the date on which the
party making that application had received the arbitral
award or, if a request had been made under Section 33, from
the date on which that request had been disposed of by the
arbitral tribunal:
Provided that if the Court is satisfied that the applicant
was prevented by sufficient cause from making the
application within the said period of three months it may
entertain the application within a further period of thirty
days, but not thereafter.
(4) On receipt of an application under sub-section (1), the
Court may, where it is appropriate and it is so requested by
a party, adjourn the proceedings for a period of time
determined by it in order to give the arbitral tribunal an
opportunity to resume the arbitral proceedings or to take
such other action as in the opinion of arbitral tribunal will
eliminate the grounds for setting aside the arbitral award.
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:–
((a) refusing to refer the parties to arbitration under Section 8;
(b) granting or refusing to grant any measure
under Section 9;
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(c) setting aside or refusing to set aside an arbitral award
under Section 34.)
(2) An 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 Section17.
(3) No second appeal shall lie from an order passed in
appeal under this section, but nothing in this section shall
affect or take away any right to appeal to the Supreme
Court.”
10. On a careful perusal of Section 34 of the Act, it is clear that an arbitral
award can only be set aside by moving an application on grounds
mentioned under sub-section (2) and sub-section (3) of Section 34 of
the Act. An award can be interfered with where it 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 of the fundamental policy of
Indian law, or if it is in conflict with basic notions of morality and
justice.
11. 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 to travel beyond the aforesaid scope to
determine whether the award is good or bad. Even an award that may
not be reasonable or is non-speaking to some extent cannot ordinarily
be interfered with by the Courts.
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12. It is also a well settled proposition in law that the jurisdiction of the
Court under Section 34 of the Act is neither in the nature of an
appellate remedy or akin to the power of revision. It is also well
ordained in law that an award cannot be challenged on merits except
on the limited grounds that have been spelt out in sub-sections (2), (2-
A) and (3) of Section 34 of the Act, by way of filing an appropriate
application.
13. Having regard to the contentions urged and the issues raised, it shall
also be apposite to take note of the principles enunciated by the
Supreme Court in some of the relevant decisions cited by the parties
on the scope of challenge to an arbitral award under Section 34 and the
scope of appeal under Section 37 of the 1996 Act.
14. In MMTC Ltd. v. Vedanta Ltd.1, the Supreme Court took note of
various decisions including that in Associate Builders2 and exposited
on the limited scope of interference under Section 34 and further
narrower scope of appeal under Section 37 of the 1996 Act. The
Supreme Court, inter alia, held as under :
“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 the Hon’ble Supreme Court
prior to the amendments to the 1996 Act in 2015, a
violation of Indian public policy, in turn, includes a1
(2019) 4 SCC 163
2
(2015) 3 SCC 49
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Date: 21-Jul-2025 16:59:40violation of the fundamental policy of Indian law, a
violation of the interest of India, conflict with justice or
morality, and the existence of patent illegality in the arbitral
award. Additionally, the concept of the “fundamental policy
of Indian law” would cover compliance with statutes and
judicial precedents, adopting a judicial approach,
compliance with the principles of natural justice,
and Wednesbury [Associated Provincial Picture
Houses v. Wednesbury Corpn., (1948) 1 KB 223 (CA)]
reasonableness. Furthermore, “patent illegality” itself has
been held to mean contravention of the substantive law of
India, contravention of the 1996 Act, and contravention of
the terms of the contract.
12. It is only if one of these conditions is met that the Court
may interfere with an arbitral award in terms of Section
34(2)(b)(ii), but such interference does not entail a review of
the merits of the dispute, and is limited to situations where
the findings of the arbitrator are arbitrary, capricious or
perverse, or when the conscience of the Court is shocked, or
when the illegality is not trivial but goes to the root of the
matter. An arbitral award may not be interfered with if the
view taken by the arbitrator is a possible view based on facts
13. It is relevant to note that after the 2015 Amendment to
Section 34, the above position stands somewhat modified.
Pursuant to the insertion of Explanation 1 to Section 34(2),
the scope of contravention of Indian public policy has been
modified to the extent that it now means fraud or corruption
in the making of the award, violation of Section 75 or
Section 81 of the Act, contravention of the fundamental
policy of Indian law, and conflict with the most basic
notions of justice or morality. Additionally, sub-section (2-
A) has been inserted in Section 34, which provides that in
case of domestic arbitrations, violation of Indian public
policy also includes patent illegality appearing on the face of
the award. The proviso to the same states that an award
shall not be set aside merely on the ground of an erroneous
application of the law or by reappreciation of evidence.
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14. As far as interference with an order made under Section
34, as per Section 37, is concerned, it cannot be disputed
that such interference under Section 37 cannot travel
beyond the restrictions laid down under Section 34. In other
words, the Court cannot undertake an independent
assessment of the merits of the award, and must only
ascertain that the exercise of power by the Court under
Section 34 has not exceeded the scope of the provision. Thus,
it is evident that in case an arbitral award has been
confirmed by the Court under Section 34 and by the Court
in an appeal under Section 37, this Court must be extremely
cautious and slow to disturb such concurrent findings.”
15. The limited scope of challenge under Section 34 of the Act was once
again highlighted by the Supreme Court in PSA Sical Terminals (P)
Ltd. v. V.O. Chidambranar Port Trust3 and the Supreme Court
particularly explained the relevant tests as under :
“40. It will thus appear to be a more than settled legal
position, that in an application under Section 34, the Court
is not expected to act as an appellate court and reappreciate
the evidence. The scope of interference would be limited to
grounds provided under Section 34 of the Arbitration Act.
The interference would be so warranted when the award is
in violation of “public policy of India”, which has been held
to mean “the fundamental policy of Indian law”. A judicial
intervention on account of interfering on the merits of the
award would not be permissible. However, the principles of
natural justice as contained in Sections 18 and 34(2)(a)(iii)
of the Arbitration Act would continue to be the grounds of
challenge of an award. The ground for interference on the
basis that the award is in conflict with justice or morality is
now to be understood as a conflict with the “most basic
notions of morality or justice”. It is only such arbitral
awards that shock the conscience of the Court, that can be2021 SCC OnLine SC 508
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Date: 21-Jul-2025 16:59:40set aside on the said ground. An award would be set aside
on the ground of patent illegality appearing on the face of
the award and as such, which goes to the roots of the matter.
However, an illegality with regard to a mere erroneous
application of law would not be a ground for interference.
Equally, reappreciation of evidence would not be permissible
on the ground of patent illegality appearing on the face of
the award.
41. A decision which is perverse, though would not be a
ground for challenge under “public policy of India”, would
certainly amount to a patent illegality appearing on the face
of the award. However, a finding based on no evidence at all
or an award which ignores vital evidence in arriving at its
decision would be perverse and liable to be set aside on the
ground of patent illegality.
42. To understand the test of perversity, it will also be
appropriate to refer to paras 31 and 32 from the judgment of
this Court in Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ)
204] , which read thus : (SCC pp. 75-76)
’31. The third juristic principle is that a decision which
is perverse or so irrational that no reasonable person would
have arrived at the same is important and requires some
degree of explanation. It is settled law that where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account something
irrelevant to the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision,
such decision would necessarily be perverse.”
16. In Delhi Airport Metro Express (P) Ltd. v. DMRC4 , the Supreme Court
again surveyed the case law and explained the contours of the Courts’
power to review the arbitral awards. Therein, the Supreme Court not
(2022) 1 SCC 131
4
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only reaffirmed the principles aforesaid but also highlighted an area of
serious concern while pointing out “a disturbing tendency” of the
Courts in setting aside arbitral awards after dissecting and reassessing
factual aspects. The Supreme Court also underscored the pertinent
features and scope of the expression “patent illegality” while
reiterating that the Courts do not sit in appeal over the arbitral award.
17. The position in Associate Builders (supra) was recently summarised as
hereinbelow recorded by Indian Oil Corpn. Ltd. v. Shree Ganesh
Petroleum5:
“42. In Associate Builders [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204 (two-Judge
Bench)] , this Court held that an award could be said to be
against the public policy of India in, inter alia, the following
circumstances:
42.1. When an award is, on its face, in patent violation of a
statutory provision.
42.2. When the arbitrator/Arbitral Tribunal has failed to
adopt a judicial approach in deciding the dispute.
42.3. When an award is in violation of the principles of
natural justice.
42.4. When an award is unreasonable or perverse.
42.5. When an award is patently illegal, which would
include an award in patent contravention of any
substantive law of India or in patent breach of the 1996 Act.
42.6. When an award is contrary to the interest of India, or
against justice or morality, in the sense that it shocks the
conscience of the Court.”
(2022) 4 SCC 463
5
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18. In Haryana Tourism Ltd. v. Kandhari Beverages Ltd.6, the Supreme
Court yet again pointed out the limited scope of interference under
Sections 34 and 37 of the Act; and disapproved interference by the
High Court under Section 37 of the Act while entering into merits of
the claim in the following words :
“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 and order
[Kandhari Beverages Ltd. v. Haryana Tourism Ltd., 2018(2022) 3 SCC 237
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not sustainable.”
19. As regards the limited scope of interference under Sections 34/37 of the
Act, this Court also considers it apposite to refer to the following
observations of a three-Judge Bench of the Supreme Court in UHL
Power Co. Ltd. v. State of H.P.7:
“15. This Court also accepts as correct, the view expressed
by the appellate court that the learned Single Judge
committed a gross error in reappreciating the findings
returned by the Arbitral Tribunal and taking an entirely
different view in respect of the interpretation of the relevant
clauses of the implementation agreement governing the
parties inasmuch as it was not open to the said court to do
so in proceedings under Section 34 of the Arbitration Act,
by virtually acting as a court of appeal.
16. As it is, the jurisdiction conferred on courts under
Section 34 of the Arbitration Act is fairly narrow, when it
comes to the scope of an appeal under Section 37 of the
Arbitration Act, the jurisdiction of an appellate court in
examining an order, setting aside or refusing to set aside an
award, is all the more circumscribed.”
20. Section 34 of the Arbitration and Conciliation Act, 1996, governs the
setting aside of awards arising from arbitrations seated in India. This
provision was held to not provide any powers for the setting aside
court to vary or modify portions of the award. This was the legal
position in vogue under Indian law, until the Supreme Court’s
reinterpretation of Section 34, by its judgment in Gayatri
(2022) 4 SCC 116
7
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Balasamy v. ISG Novasoft Technologies Ltd. (Balasamy)8.In the
decision by 5-Judge Bench (by a majority of 4:1) Section 34 has been
“reinterpreted to include a limited power to modify awards”. The
Supreme Court has also explained the limitations on such power,
while also touching upon several allied issues, such as the severability
of awards and the specific power to modify the interest awarded by a
tribunal.
21. In a previous decision by a two-Judge Bench of the Supreme Court
in NHAI v. M. Hakeem (Hakeem)9 the Apex Court declared that no
power to modify an award could be derived from Section 34, holding
as follows:
“48. Quite obviously if one were to include the power to
modify an award in Section 34, one would be crossing the
Lakshman Rekha and doing what, according to the justice of
a case, ought to be done. In interpreting a statutory
provision, a Judge must put himself in the shoes of
Parliament and then ask whether Parliament intended this
result. Parliament very clearly intended that no power of
modification of an award exists in Section 34 of
the Arbitration and Conciliation Act, 1996. It is only for
Parliament to amend the aforesaid provision in the light of
the experience of the courts in the working of
the Arbitration and Conciliation Act, 1996 and bring it in
line with other legislations the world over.”
22. The Supreme Court in Hakeem (supra) also reconciled earlier decisions
wherein awards were modified with the above statement of law —
8
2025 SCC OnLine SC 986
9
(2021) 9 SCC 1
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holding that those decisions were rendered under the extraordinary
jurisdiction of the Supreme Court under Article 142of the Constitution
of India.
23. Subsequently, several judgments further clarified that even despite the
lack of power to modify an award, a setting aside court could
“partially set aside” severable portions of an award. This would not
amount to modification but merely setting aside a divisible part of an
award (to the extent such division is possible). As explained by the
Delhi High Court in NHAI v. Trichy Thanjavur Expressway Ltd.10:
“43. … The expression “modify” would clearly mean a
variation or modulation of the ultimate relief that may be
accorded by an Arbitral Tribunal (AT). However, when a
Section 34 Court were to consider exercising a power to
partially set aside, it would clearly not amount to a
modification or variation of the award. It would be confined
to an offending part of the award coming to be annulled and
set aside. It is this distinction between a modification of an
award and its partial setting aside that must be borne in
mind.”
24. The Supreme Court in Balasamy (supra) while recognising that the
Act “does not expressly empower courts to modify or vary an arbitral
award” has clarified that such power exists, albeit in a limited context,
as an inherent power of courts.
25. Interestingly, although not a dispositive part of the decision, the
approach adopted by the majority of Judges is reflected in the question
posed by them as: “to what extent can we weave the principles of
2023 SCC OnLine Del 583
10
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equity and justice while not offending the jurisdictional fabric of
Section 34?” The majority in Balasamy (supra) thereafter came to the
following conclusions in relation to the question of modification.
a. Partial setting aside of severable portions of an award
The majority held that an award may be partially set aside (to the
extent that the invalid portion of the award is severable from the
remainder of the award). The Court reasoned that:
“33. … The authority to sever the “invalid” portion of an
arbitral award from the “valid” portion, while remaining
within the narrow confines of Section 34, is inherent in the
court’s jurisdiction when setting aside an award.”
This ruling reaffirms several decisions of High Courts wherein awards
have been partially set aside, despite the absence of powers to modify
an award.
b. Modification in principle
Squarely departing from the view in Hakeem (supra), the majority also
found that a limited power of modification is inherent within Section
34. The majority in Balasamy (supra) arrived at this conclusion on two
bases:
First, that Section 34 is merely silent on and does not expressly
prohibit modification. This is evident from the majority ruling
that:
“43. … Section 34 does not restrict the range of reliefs that
the court can grant, while remaining within the contours of
the statute. A different relief can be fashioned as long as itPage 18 of 29
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Section 34….
44. … It will be wrong to argue that silence in
the Arbitration and Conciliation Act, 1996, as projected,
should be read as a complete prohibition.”
Second, that the policy of arbitration being an expeditious
mechanism would be undermined if the setting aside court was
forced to only set aside the award, requiring a fresh arbitration to
be commenced, followed by consequential litigation. As explained
by the majority:
“42. Given this background, if we were to decide that courts
can only set aside and not modify awards, then the parties
would be compelled to undergo an extra round of
arbitration, … In effect, this interpretation would force the
parties into a new arbitration process merely to affirm a
decision that could easily be arrived at by the Court. This
would render the arbitration process more cumbersome than
even traditional litigation.”
c. Extent of modification permissible
Interestingly, the majority, when elaborating on the extent of
modification which is permissible under Section 34, appears to have
restricted such powers to issues of procedural errors of the kind
contemplated under Section 33 (i.e. those involving computational or
typographical errors).
In its analysis, the majority decision affirmed that:
“49. … a court reviewing an award under Section 34
possesses the authority to rectify computational, clerical, or
typographical errors, as well as other manifest errors,Page 19 of 29
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merits-based evaluation. There are certain powers inherent
to the Court, even when not explicitly granted by the
legislature.”
The words “as well as other manifest errors” could have opened a
debate on the extent of modification powers recognised by the
Supreme Court. However, perhaps intentionally, these words do not
find a mention in the dispositive part of the decision in Balasamy
(supra), wherein, in its ultimate conclusions, the Court limits the
powers of modification to “correcting any clerical, computational or
typographical errors which appear erroneous on the face of the
record”.
Furthermore, the intent to limit the use of such modification powers to
patent errors (not involving reappreciation of merits) is evident from :
(a) the Court’s ruling that the limited modification power recognised
by it does not entail a review on merits; and (b) the Court setting out at
an extremely high threshold for applying such powers, holding that
the appropriateness of the modification should not be “debatable” or
in “doubt”. Differentiating between a “procedural review” and a
“review on merits”, the majority holds that:
“54. … inadvertent errors, including typographical and
clerical errors can be modified by the Court in an
application under Section 34. However, such a power must
not be conflated with the appellate jurisdiction of a higher
court or the power to review a judgment of a lower court.
The key distinction between Sections 33 and 34 lies in the
fact that, under Section 34, the Court must have no
uncertainty or doubt when modifying an award. If thePage 20 of 29
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Date: 21-Jul-2025 16:59:40modification is debatable or a doubt arises regarding its
appropriateness i.e. if the error is not apparent on the face of
the record, the court will be left unable to proceed, its hands
bound by the uncertainty.”
By reducing the power of modification to typographical or similar
errors and increasing the threshold for its application to one of “no
uncertainty or doubt”, “non-debatable”, the majority has, while
granting recognition to such power, also leashed it considerably.
d. Interest
The power of modification in relation to interest (both forming part
of an award, and interest on the awarded sums) has also been
clarified by the Supreme Court. First, in relation to pendente lite
interest (i.e. interest for the period spent during the arbitration) the
majority appears to have held that there can be no power of
modification exercised by the setting aside court. Since the
correctness of the rate of pendente lite interest would entail a review
on merits, this would therefore not be strictly subject to a
“modification” in the limited extent recognised by the Court.
Therefore, the majority reasoned that in cases where the pendente lite
interest has been awarded in violation of Section 31(7)(a) (for
example, where the rate of interest awarded is contrary to a
contractual provision) — this could only entail either a setting aside
or a remand, by asking the Tribunal to redetermine the rate of
interest under Section 34(4) of the Arbitration and Conciliation Act,
1996.
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However, in relation to “post-award interest” in terms of
Section 31(7)(b)of the Arbitration and Conciliation Act, 1996, the
Court reaffirmed that it would have the power to modify the interest
“where the facts justify such modification”.
While at first glance, this appears to depart from the limitations set
by the majority on the power of modification — such power in
relation to post-award interest appears to have been recognised on
the reasoning that:
“76. … Arbitral Tribunals, when determining post-award
interest, cannot foresee future issues that may arise. Post-
award interest is inherently future-oriented and depends on
facts and circumstances that unfold after the award is
issued. … Therefore, it is appropriate for Section 34 Court
to have the authority to intervene and modify the post-
award interest if the facts and circumstances justify such a
change.”
In this context, therefore, there is no “reappreciation” of facts
considered by the Tribunal, but rather a power of modification of the
post-award based on new facts that may emerge.
26. To summarise, the majority in Balasamy (supra)asserting that “the
setting aside of an award, should be read as inherently including a
limited power to modify the award” held that Court has power to
modify arbitral award under Sections 34 and 37 in the following
manner : (i) when the award is severable, allowing the “invalid”
portion to be separated from the “valid” portion; (ii) for correcting any
clerical, computational or typographical errors; (iii) to declare or
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modify post-award interest; and (iv) to apply Article 14220 of the
Constitution where it is required and necessary to bring the litigation
or dispute to an end.
27. Keeping in view the aforementioned principles enunciated by the
Supreme Court with regard to the limited scope of interference in an
arbitral award by a Court in the exercise of its jurisdiction under
Section 34 of the Act, which is all the more circumscribed in an appeal
under Section 37, this Court may examine the rival submissions of the
parties in relation to the matters dealt with by the High Court.
28. Prima facie, a perusal of the Award unequivocally demonstrates that
the Arbitrator relied upon written submissions, documentary
evidence, and the statements of the parties involved in the transaction
to determine and quantify the claims.
29. However, the Ld. District Judge after adverting to the settled position
of law as enumerated by the Apex Court in PSA Sical Terminals (P)
Ltd. v. V.O. Chidambranar Port Trust (supra) has gone on to conclude
the matter in the following manner:
“7. With the touchstone of the above established principle, if
the case in hand is to be looked into, it can be safely
concluded that there is no scope for this Court to re-
appreciate the evidence on record for the purpose of deciding
the appeal in terms of Sec.34 of Arbitration and Conciliation
Act, 1996. The work in question has not been completed
within the stipulated date i.e. 17.04.2005admits no doubt.
There are enormous amount of evidence available on the
record that due to the failure of the appellants to give lay out
at the site of construction, drawing and designing to start
execution of work which resulted in non-completion of thePage 23 of 29
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has discussed the evidence i.e. oral as well as documentary
in great detail, attributing the fault to the petitioners-
appellants for failure of completing the project work. The
stand of the petitioners-appellants is that after lapse of the
agreed period i.e. 17.04.2005, there exists no contractual
obligation between the parties and hence the question of
determining the compensation or damages does not arise at
all.
The evidence on record is crystal clear even after expiry of
the stipulated period i.e. 17.4.2005, there have been a lot of
correspondences relating to the existence of contractual
obligation in between the parties. Therefore, it cannot be
said that after the date i.e. 17.04.2005, the contractual
relationship had come to an end. Only the question of
compensation awarded to the claimant is to be reassessed in
this appeal. The learned Arbitrator has awarded the
claimant a sum of Rs.2,67,584/- as a loss of profit on the
basis of the anticipation that the claimant would have
earned 8% of the contract value if he was allowed to
complete the work. In my opinion such a huge amount in
favour of the claimant appears to be unjust, unreasonable
and unwarranted. The same should be confined within
Rs.1,00,000/- (Rupees one lakh) as a lump sum amount and
not more than that. Therefore, this Appellate Court modified
the order on heading “Loss of Profit” fromRs.2,67,584/- to
Rs.1,00,000/-. Similarly on the ground of “loss of
construction materials” a compensation to the tune of Rs.
37,500/- has been awarded to the O.P.-claimant by giving
observation that the claimant has stacked the construction
materials for construction purpose but the same could not be
utilized for this project due to termination of the contract. It
is the stand of the appellants that the S.T.C had visited the
site during which he could not find any construction
materials nor temporary tent and office proposed site. In
view of the aforesaid evidence on record, there is no
justification to award Rs.37,500/- to the O.P.- claimant onPage 24 of 29
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Date: 21-Jul-2025 16:59:40heading “loss of construction materials”. The award of
Rs.54,000/- on heading “ward and watch” is unwarranted
in as much as the S.T.C found the absence of construction
materials and office over the proposed site for which
granting of compensation on the heading “ward and watch”
is unjustified. So far as award to the tune of Rs.6,000/- on
the heading “tender papers” is concerned, this being a
purchased stamp paper on record which form part of the
contract, granting of such amount does not require any sort
of interference. The learned Arbitrator has awarded
Rs.92,000/- on heading “hire charges for concrete mixture
machine” by relying on the documentary evidence available
on the record. On conjoint reading of the evidence on record
and the observation made above in allowing/disallowing the
other heads, this Court is not inclined to grant such
expenditure to the O.P.-claimant. When the construction
materials and site office were not in existence, the question
of keeping the mixture machine over the site does not arise a
tall. Therefore, there is no justification in granting such
damage in favour of the O.P-claimant. With regard
granting of damage of Rs.1,40,000/- on the heading “cost of
test piling”, this Appellate Court is in conformity with the
observation of the learned Arbitrator but the amount of such
compensation has become high and disproportionate to the
quantum of construction. After assessing the evidence
available on record and other facts and circumstances of the
case, this Court is in a considered opinion to reduce the
same to the tune of Rs.1,00,000/- (rupees one lakh). …”
(emphasis is ours)
30. The learned District Judge, under the guise of deciding an appeal
under Section 34, has impermissibly re-appreciated the entire evidence
and substituted his own assessment of quantum for that of the
Arbitrator. Section 34 allows the Court to set aside an arbitral award
only on limited grounds such as patent illegality, fraud, or breach of
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natural justice; it does not empower the Court to reassess evidence or
re-calculate the amount awarded merely because it appears excessive
or unreasonable in its subjective view. By reducing amounts awarded
under heads like “loss of profit”, “cost of test piling”, and “loss of
construction materials” based solely on perceived proportionality, the
District Judge has exceeded the statutory limits. This approach
undermines the finality and binding nature of arbitral awards
envisaged under the Act and effectively converts a supervisory
jurisdiction into an appellate re-examination, which the law explicitly
prohibits.
31. It is well settled that Section 34 does not confer appellate powers to
modify an award by reassessing the adequacy of evidence or
substituting the Court’s own determination for that of the Arbitrator.
The learned District Judge’s detailed recalculation and modification of
amounts awarded under multiple heads clearly reflect a merit-based
review that is beyond the limited scope of interference under the Act.
The role of the Court under Section 34 is not to sit in appeal or second-
guess the Arbitrator’s factual conclusions, but only to test the award
against specific procedural and jurisdictional grounds. By assuming
the role of an appellate body and conducting a head-to-head
reassessment of quantum, the District Judge has overstepped the
jurisdiction conferred and violated the principle of minimal judicial
intervention that underpins the Arbitration and Conciliation Act, 1996.
32. The learned District Judge’s order effectively rewrites the arbitral
award by selectively reducing compensation under various heads,
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purely because he considered the amounts excessive or not supported
by his own evaluation of the evidence. Such intervention directly
contravenes the statutory scheme under Section 34, which bars Courts
from re-evaluating the merits or quantum of an award unless it is
shown that the award is patently illegal, wholly unsupported by
evidence, or contrary to the terms of the contract. The District Judge
did not record any finding of perversity or patent illegality but
proceeded as though exercising full appellate jurisdiction. This
revaluation transforms the narrow supervisory power into a broad
merits review, negating party autonomy and the finality of arbitral
decisions, and cannot be legally sustained.
33. The reasoning employed by the learned District Judge — that certain
awarded amounts “appear to be unjust, unreasonable and
unwarranted” or “high and disproportionate” — highlights a classic
case of subjective reassessment, not judicial review. Under Section 34,
mere disagreement with the Arbitrator’s quantification or
methodology is not a ground to modify the award; the Court must
find a clear violation of law or procedure. Here, the Arbitrator had
based the award on oral and documentary evidence and provided
detailed reasons. The District Judge’s interference, based on what he
felt would have been a fairer sum, shows a substitution of opinion
rather than scrutiny for illegality. This approach usurps the function of
the Arbitrator and conflicts with the legislative intent to insulate
arbitral awards from full merits-based review by Courts.
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34. The Supreme Court in Balasamy (supra), clarified that while courts
have a limited inherent power to correct clerical, computational, or
typographical errors, this does not extend to reassessing quantum or
substituting findings on merits. Modification must be confined to non-
debatable, patent errors apparent on the face of the record. The District
Judge’s order, which recasts quantum under each head on a subjective
view of what is “just,” goes far beyond this narrow power.
35. By dissecting the award head by head and reducing compensation
solely because he/she believed lower sums were more appropriate, the
learned District Judge has acted outside the jurisdiction contemplated
by Section 34. The Arbitrator, as the sole judge of facts and evidence,
had already exercised discretion in assessing damages based on the
record. The District Judge did not identify perversity, fraud, or breach
of natural justice — the only grounds that could justify intervention.
Instead, he merely replaced the Arbitrator’s factual conclusions with
his own assessment of what would be “reasonable.” Such modification
of quantum, absent statutory grounds, amounts to re-adjudication of
the dispute itself and defeats the very object of arbitration as a speedy
and final alternative dispute resolution mechanism. Consequently, the
order of modification is unsustainable in law.
36. A perusal of the arbitral award would elucidate that the sole
Arbitrator has considered the facts of the case, the contentions of both
the parties and other documentary and oral evidence on record to take
a decision. Now, even if one might feel that the evidence could be
clearer and its quality could be higher to buttress the award, however,
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the same does not by itself warrant interference by this Court given
the restrictive scope of this Court’s powers u/s 37 of the A&C Act.
37. What the Arbitral Tribunal has held in the Award has exclusively been
its view on the evidence on record and the relevant surrounding
facts/factors. The view so taken by the Arbitral Tribunal cannot be said
to be wholly perverse or suffering from patent illegality so as to be
interfered with. Needless to observe that even if two views are
possible, the Court cannot substitute its own view with that of the
Arbitral Tribunal.
VI. CONCLUSION:
38. In light of the discussion above, keeping the settled principles of law
in mind and for the reasons given above, this Court is of the
considered view that judgment dated 22.3.2022 passed by the learned
District Judge, Puri in Arbitration Misc. Case No. 134 of 2016 arising
out of award dated 8.3.2016 passed by the Ld. Sole Arbitrator in
Arbitration Proceeding No. 5 of 2012 is legally untenable and is
therefore, set aside.
39. The award dated 8.3.2016 passed by the Ld. Sole Arbitrator in
Arbitration Proceeding No. 5 of 2012 is reinstated in its entirety.
40. ARBA No. 21 of 2022 is disposed on the abovementioned terms. No
order as to costs.
41. Interim order, if any, passed earlier stands vacated.
(Dr.S.K. Panigrahi)
Judge
Orissa High Court, Cuttack,
Dated the 18th July, 2025/
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