# State of U.P. & Ors v. M/S Virat Construction

- **Citation:** (2024) 10 ILRA 450
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2024-10-25
- **Case number:** Jhansi in Arbitration Case No. 31 of 2022
- **Bench:** Mahesh Chandra Tripathi, Prashant Kumar
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/state-of-u-p-ors-v-m-s-virat-construction-51187
- **Pages:** 22

## Headnote

A. Civil Law - Arbitrartion and Conciliation
Act,1996-Section
37-A
contract
was
awarded to M/s Virat Construction for
building a head regulator at the Margin
Bandh
to
protect
Banda
City
from
flooding-the
appellant
alleged
delays
caused by the State due to failure in
logistics,
stock
supply
and
other
obstructions leading to financial lossesThe
sole
arbitrator
awarded
Rs.
3,77,42,700 plus interest to the appellantthe State challenged the award u/s 34
before the Commercial Court Jhansi, the
10 All. State of U.P. & Ors. Vs. M/S Virat Construction
451
commercial
court
upheld
that
the
arbitrator acted within his authority -
Again the State filed an appeal u/s 37 of
the Act alleging therein delay in work was
caused by the contractor-Held the court
reiterated
the
limited
scope
of
interference u/s 34 and 37-fresh grounds
and evidence raised at the appellate stage
were rejected as barred by limitation-the
award was found consistent with law, as
the arbitrator considered all materials and
facts before deciding-Hence, the court
upheld the arbitral award.(Para 1 to 45)

The writ petition is dismissed. (E-6)

List of Cases cited:

## Text

_Characters 0–39,537 of 64,386. This is a partial read: ask again with offset=39537 for what follows._

450 INDIAN LAW REPORTS ALLAHABAD SERIES
from the date of completion of
pleadings and not as a requirement
of publication of an award within
eighteen months from service of
the
notice
upon
the
learned
Arbitrator. The statute provides the
circumstances
under
which
a
mandate
terminates.
Had
the
intention of the legislature been to
incorporate a mandatory provision
for completion of pleadings within
six months as per Section 23(4), the
consequence of non-compliance
would have been provided in the
statute itself, or the section would
have been couched in a different
language. The orders directing
filing of pleadings have not been
passed in wrongful exercise of
jurisdiction."

27. The aforesaid judgment came
to be challenged before the Apex Court in
Special Leave to Appeal (C) No. 5851 of
2024 Yashovardhan Sinha HUF & Anr.
Vs. Satyatej Vyapaar Pvt. Ltd. in which
on 18.03.2024 the following order was
passed.-

"1. We are not inclined to
entertain the Special Leave Petition
under
Article
136
of
the
Constitution of India.
2.
The
Special
Leave
Petition is accordingly dismissed.
3. Pending applications, if
any, stand disposed of."

28. Applying the above noted
judgment in the facts of the case, we are of
the firm opinion that the statement of claim
stood submitted by the claimant within the
time stipulated under Section 23(4) of the A
& C Act, 1996 and it was on account of
fault of the BSNL, the written statement
could not be filed and due to their absence
an ex parte award came to be filed.

29. Viewing the case from all
points of angle, we do not find any patent
illegality committed by the court below in
rejecting the applications under Section 34
of the A & C Act, 1996 while upholding the
awards.

30. Resultantly, the appeals are
dismissed.
----------
(2024) 10 ILRA 450
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 25.10.2024

BEFORE

THE HON'BLE MAHESH CHANDRA
TRIPATHI, J.
THE HON'BLE PRASHANT KUMAR, J.

Appeal u/s 37 of Arbitration & Conciliation Act
1996 No. 590 of 2023

State of U.P. & Ors. ...Appellants
Versus
M/S Virat Construction ...Respondent

Counsel for the Appellants:
Ankur Agarwal

Counsel for the Respondent:
Jagat Narayan Mishra

A. Civil Law - Arbitrartion and Conciliation
Act,1996-Section
37-A
contract
was
awarded to M/s Virat Construction for
building a head regulator at the Margin
Bandh
to
protect
Banda
City
from
flooding-the
appellant
alleged
delays
caused by the State due to failure in
logistics,
stock
supply
and
other
obstructions leading to financial lossesThe
sole
arbitrator
awarded
Rs.
3,77,42,700 plus interest to the appellantthe State challenged the award u/s 34
before the Commercial Court Jhansi, the
10 All. State of U.P. & Ors. Vs. M/S Virat Construction
451
commercial
court
upheld
that
the
arbitrator acted within his authority -
Again the State filed an appeal u/s 37 of
the Act alleging therein delay in work was
caused by the contractor-Held the court
reiterated
the
limited
scope
of
interference u/s 34 and 37-fresh grounds
and evidence raised at the appellate stage
were rejected as barred by limitation-the
award was found consistent with law, as
the arbitrator considered all materials and
facts before deciding-Hence, the court
upheld the arbitral award.(Para 1 to 45)

The writ petition is dismissed. (E-6)

List of Cases cited:

1. St. of chht. & ors.Vs Sal Udyog Pvt.
Ltd.(2002) 2 SCC 275

2. Associate Builders Vs DDA (2015) 3 SCC 49

3. Reliance Infra. Ltd. Vs St. of Goa(2023) 0
Supreme(SC) 495

4. MMTC Ltd. Vs Vedanta Ltd.(2019) 4 SCC 163

5. Dyna Tech.(P) Ltd. Vs Crompton Greaves
Ltd.(2019) SCC Online SC 1656

6. Vastu Invest & Holdings Pvt. Ltd. Vs Guj. Lease
Financing Ltd.(2000) SCC Online Bom. 729

7. The project Dir. National Highways No. 45E &
220, NHAI Vs M. Hakeem & anr.(2021) 9 SCC 1

8. PSA SICAL Terminals(P) Ltd. Vs Board of
Trustees of V.O. Chidambaranar Port Trust
Tuticorin & ors.(2021) SCC Online SC 508

9. Delhi Airport Metro Express Pvt. Ltd. Vs Delhi
Metro Rail Corp. Ltd.(2022) 1 SCC 131

10. Haryana Tourism Ltd. Vs Kandhari Beverages
Ltd.(2022) 3 SCC 237

11. St. of Mah. Vs Hindustan Construction Co.
Ltd.(2010) 4 SCC 518

(Delivered by Hon'ble Mahesh Chandra
Tripathi, J.)
1. Heard Sri Manish Goyal,
learned
Additional
Advocate
General
assisted by Sri Devansh Rathore, learned
Additional Chief Standing Counsel for the
State-appellants and Sri Jagat Narayan
Mishra, learned counsel for the opposite
party.

2. The instant appeal under Section
37 of 1996 Act1 has been filed seeking
quashing of the impugned judgment and
order dated 14-02-2023 passed by the
Presiding
Officer,
Commercial
Court,
Jhansi in Arbitration Case No. 31 of 2022
(State of U.P. Vs. M/S Virat Construction),
arising out of Arbitration Case decided
between the parties by the Sole Arbitrator
on 03-05-2022.

Relevant factual aspects and
background

3. A tender was invited on 01-082008 by the appellants for the construction
of Head Regulator at Km.0.410 of Margin
Bandh to protect the Banda City from the
flood of Cane River. In response to it, the
contractor/opposite
party
no.2/claimant
applied and his bid was found to be
responsive, when tender was opened on 1009-2008. Accordingly, the tender was
awarded to the claimant and letter of
acceptance was issued on 07-11-2008. In
accordance with the letter of acceptance
dated
07-11-2008,
the
claimant
was
required to submit the balance security
money plus stamp duty within ten days,
which
was
duly
complied
by
him.
Thereafter both the parties entered into a
contract agreement on 22-11-2008. As per
the contract agreement the cost of the work
was Rs.4,96,92,893.00 only. The date of
commencement of the work was given as
22-11-2008 and the period of completion of
the work was nine (09) months, hence the
452 INDIAN LAW REPORTS ALLAHABAD SERIES
stipulated date of completion was given as
21-08-2009.

4. It is claimed by the opposite
party no.2/claimant that since the time for
execution of the contract was only nine
months, so he immediately mobilised his
equipments, machines, labours, staffs and
other construction materials to the site with
sincere intention to complete the work
within stipulated time. However, he could
not start the work because the appellants
failed to finalise the logistics of the work
before execution of the contract. The
appellants also failed to issue the stock
materials namely cement and tor steel of
different dia within stipulated time. The
failure to finalise the logistics resulted in a
prolonged delay and also resulted in a
financial loss to the claimant.

5.

The
work
remained
suspended/closed at various times, due to
which the claimant's staff, labours and
machinery remained idle at work site
without doing any work, and this was duly
intimated to the appellants by the claimant.
The effect of this delay was that the project
started after lapse of six months and this
delay could not be attributed to the
contractor. Because of this inordinate delay
and various other issues, the claimant
claims that he had suffered a huge loss,
which resulted into a dispute between the
parties. As per the agreement, the matter
was referred to the Arbitrator.

6. As per agreement, the Chief
Engineer (Betwa) Irrigation and Water
Resources, Department of U.P., Jhansi, who
was actually the project proponent, appointed
a Sole Arbitrator vide order dated 05-02-2021
for adjudication of the dispute. After the
Arbitrator entered into the reference, the
claimant had filed the statement of claims and
the appellants filed the statement of defence.
Thereafter,
pleadings
were
complete,
evidences were adduced and the parties were
heard.

7. The Sole Arbitrator had considered
the pleadings of the parties and contractual
terms and conditions. He had also considered
the
oral/written
arguments
and
legal
submissions made by both the parties. He also
considered the agreement and the provisions
of I.D. Form No.111, which formed part of the
contract as well as general conditions of the
contract. He had also examined Clause 2 (A)
of I.D. Form No.111, which stipulated that the
time is the essence of contract. The Sole
Arbitrator also considered and examined
Clause-5 (Extension of time) of I.D. Form
No.111, which provided the extension of time
for completion of work on the ground of an
avoidable hindrance to its execution, whereas
G.C.C. Clause-5 (Construction Programme)
also provided for progress of the work in
different time period.

Arbitration proceedings and award

8. Finally, the Sole Arbitrator had
summarized 17 points of issues, which were to
be
finalised
in
terms
of
the
arguments/discussion.
After
long-drawn
proceedings of arbitration with filing of claim,
reply and counter claim, filing of various
applications and written submission, the Sole
Arbitrator passed the award on 03.05.2022.
For ready reference, relevant paragraph nos.53
to 61 of the award are reproduced herein
below:-

"53.00 Now therefore, the total
awarded amount in respect of all claims
comes as below:-

Cla
im
Particulars
Claimed
Amount
Awarded
Amount
10 All. State of U.P. & Ors. Vs. M/S Virat Construction
453
No
.
(In Rs.
(In Rs.)
1.
Claim
No.1
for payment
of
AsExecuted
work
which
uncontractual
ly
and
illegally
withheld/kept
pending XIth
alleged to be
final
1,13,22,
751.00
1,13,22,
751.00
2.
Claim
No.2
payment
regarding
payment
of
compensatio
n for idling
resources i.e.
Labour, Staff
and
Machinery
on account of
holdups and
stoppage
of
works.
1,02,84,
060.00
44,38,58
5.00
3.
Claim No. 3
for payment
of Overhead
charges
due
to Idling and
under
utilization of
resources on
account
of
prolongation
of
Contract
period
1,52,52,
937.00
70,00,00
0.00
4.
Claim No. 4
for payment
of
loss
of
productivity
& profit due
1,49,77,
644.00
NIL
to deduction
in turn over
as a result of
prolongation
of
contract
period
5.
Claim No. 5
for payment
of
Price
Adjustment
during
the
Extended/
Prolongated
period
of
Contract
70,02,13
5.00
35,01,06
7.00
6.
Claim No. 6
for payment
on
a/c
of
solatium/com
pensation for
mental
harassment
and loss of
business.
As
per
Decision
of
Ld,
Sole
Arbitrat
or
NIL
7.
Claim
No.7
for the cost
of Arbitration
as
per
section-31A
of Arbitration
&
Conciliation
Act-2015
10,00,00
0.00
8,54,990
.00
8.
Claim No. 8
payment
of
As-Executed
Extra Items
3,50,000
.00
3,50,000
.00
9.
Claim
No.9
for refund of
4%
VAT,
which
wrongfully
deducted
more
from
Claimant's
8,38,136
.00
7,00,192
.00
454 INDIAN LAW REPORTS ALLAHABAD SERIES
bills.

Total
amount Rs.
6,10,27,
633.00
2,81,67,
585.00
10.
Claim No. 10
regarding
payment
of
interest
as
per
Section
31(7)
of
Arbitration &
Conciliation
Act-2015
@18%
per
annum
Interest
@7%
per
annum
since
01.05.20
22
to
03.05.20
22 (Date
of
award)
on
amounti
ng
Rs.
2,73,12,
595.00
only (on
awarded
item
No.1 to
6, 8 &
9) which
comes
to
Rs.
95,75,12
2.00

Total
amount Rs.
Rs.
6,10,27,
633.00
Rs.
3,77,42,
707.00

Say
Rs.
6,10,27,
000.00
Rs.
3,77,42,
700.00

Thus, total awarded amount
comes to Rs.3,77,42,700.00 only
(Rupees
Three
Crore
Seventy
Seven Lac Forty Two Thousand
Seven Hundred only).

54.00
Accordingly,
the
Respondent/State of U.P. is directed
to
make
payment
of
Rs.3,77,42,700.00 only (Rupees
Three Crore Seventy Seven Lac
Forty
Two
Thousand
Seven
Hundred only) and plus (+) to
refund the security deposit's F.D.R.
amounting Rs.6,25,000.00 along
with Bank Interest of F.D.R. upto
date to the Claimant (M/s Virat
Construction) as per this award.
55.00 The Claimant shall
further be entitled to receive the
future interest @ 7% p.a. (simple)
from the Respondent on this
awarded amount Rs.3,77,42,700.00
only (Rupees Three Crore Seventy
Seven Lac Forty Two Thousand
Seven Hundred only) from the date
of award to the date of actual
payment.
56.00 The Sole Arbitrator
had directed the claimant to submit
stamp papers of appropriate value
for
declaring
the
award.
Accordingly, this award is being
made and published on the stamp
papers of the value of Rs.1000.00
supplied by the Claimant. Balance
stamp
papers
as
and
when
necessary shall have to be supplied
by the Claimant. The Claimant
shall, however, be entitled to
recover 50% cost of such stamp
papers from the Respondents.
57. The total awarded cost
Rs.3,77,42,700.00 only (Rupees
Three Crore Seventy Seven Lac
Forty
Two
Thousand
Seven
Hundred only) and plus (+) to
refund the security deposit F.D.R.
amounting Rs.6,25,000.00 along
with Bank interest upto date shall
be payable to the Claimant by the
Respondent within three months
from the date of award for which
no additional interest shall have to
10 All. State of U.P. & Ors. Vs. M/S Virat Construction
455
be paid. However, in case of failure
of payment within three (03)
months of the declaration of the
award, interest @ 7% p.a. (simple)
shall have to be paid w.e.f. date of
award to till release of payment on
amount of Rs.3,77,42,700.00 only
(Rupees
Three
Crore
Seventy
Seven Lac Forty Two Thousand
Seven Hundred only) in addition to
the awarded amount.
58.00 This Arbitral Award
has been made by the Sole
Arbitrator after considering all the
documents, contractual provisions,
pleadings of parties, documents,
letters/correspondence and other
documents
filed
on
record,
citations,
oral
and
written
arguments made and submitted by
both
the
parties/Claimant
and
Respondent.
59.00 The Sole Arbitrator
has deeply considered all aspects of
this referred case and has duly
applied his mind in making a fair
and reasonable award against the
Respondents as described above.
60.00 This arbitral award
has been made and declared by me,
Chob Singh Verma, Sole Arbitrator
at Ghaziabad on 3rd May, 2022.
61.00 The Sole Arbitrator
has set his hands to this award on
the 3rd day of May, 2022 as under
and have initiated each page having
verified the contents of each page."

Challenge to the award under
Section 34 of 1996 Act.

9. The award so made by the Sole
Arbitrator was challenged by the State
appellant under Section 34 of the 1996 Act
before the Commercial Court. A vast
variety of contentions urged on behalf of
the
parties
were
considered
by
the
Commercial Court and the relevant points
were answered in favour of the claimant
and thereby, the award was upheld while
rejecting the application under Section 34
of the 1996 Act. While questioning the
award the appellants had taken broadly two
grounds for setting aside the award in the
application. The grounds taken in the
application were:-

"1- Whether the opposite
party which is unregistered firm
can file his statement of claim
before the Arbitrator and the same
has not been considered by the
Arbitrator,
which
amounts
to
illegality.
2- Whether the award dated
03-05-2022 ought to be set aside on
the basis of grounds raised in the
application"

10. The learned Commercial
Court, Jhansi, after taking note of the
submissions of parties, framed the points
for determination and then, dealt with every
point on the anvil of Section 34 of the 1996
Act. The court had also examined the
award and found that the award was passed
after hearing the parties and considering the
conditions of the agreement, and thereafter
vide judgment and order dated 14-02-2023
rejected the application filed by the
appellants under Section 34 of the 1996
Act. The operative portion of the order
dated 14-02-2023 passed by the learned
Commercial
Court,
Jhansi
is
quoted
hereunder:-

"जहां तक आपनि में यह नबन्दु उठाया
जाना नक नबना साक्ष्यों का नवश्लेषण नकये या संनवदा से
परे जाकर अपने ननष्कषय ननकाले गये हैं। इस सम्बन्ध में
पूवय में नवश्लेषण नकया जा चुका है नक संनवदा के
456 INDIAN LAW REPORTS ALLAHABAD SERIES
नबन्दुओं का उल्लेख अवाडय में आया है। नकसी साक्ष्य
को गलत नवश्लेषण या गलत नववेचना मात्र ही नकसी
अवाडय को इस न्यायालय के वारा समाप्त करने का
अनधकार नहीं होगा, क्योंनक यह स्र्थानपत नसद्धान्त दोनों
ही पक्षों के वारा प्रस्तुत ननणय से स्पष्ट हो जाता है नक
साक्ष्यों व तथ्यों का नवश्लेषण होना चानहये तर्था यनद
नवश्लेषण के दो ननष्कषय हो सकते हैं नजन से एक ननष्कषय
आबीट्रेटर के वारा नदया गया है तर्था एक ननष्कषय उन्होंने
नहीं नलया है। मात्र इस आधार पर नक दूसरा ननष्कषय भी
सम्भव र्था। आबीट्रेटर का अवाडय अपास्त नहीं नकया
जायेगा। केवल उन तथ्यों में अवाडय अपास्त होगा जब
नकया गया नवश्लेषण प्रर्थमदृष्टया ही नकसी भी प्रकार से
नवश्वसनीय न हो अर्थायत् वह Patent illegality
on the face of record की श्रेणी में आता हो।
नबलों का जहां तक अनधक भुगतान का प्रश्न है इन
नबन्दुओं को भी पूवय में देखा जा चुका है। पक्षकारों के
वारा प्रस्तुत अनभलेख के वारा भी नटप्पणी की जा चुकी
है। सवयप्रमुख यह नबन्दु सामने आता है नक एक बार
ठेकेदार के नबलों का भुगतान करने के सन्दभय में नवभाग
व ठेकेदार की सहमनत बनी तर्था यह भी सहमनत बनी
नक वह आबीट्रेशन नहीं करेगा। जब ठेकेदार के वारा
आबीट्रेशन कर नदया गया। तब यह आपनि उठा दी
गयी। इस प्रकरण में आरम्भ में ही नवभाग का रुख
रक्षात्मक रहा है अर्थायत् उनके वारा नबलों को भी
स्वीकार नकया गया। नवलम्ब के कारणों को भी स्वीकार
नकया गया। जैसा नवपक्षी के वारा प्रस्तुत अनभलेखों से
नवनदत होता है तो उपरोक्त पररनस्र्थनतयों में अवाडय को
ननरस्त करने का कोई आधार नहीं बनता है।
उपरोक्त नवश्लेषण से स्पष्ट है नक अवाडय
नदनांनकत 03.05.2022में ऐसी कोई भी त्रुटी नहीं है
जो धारा-34माध्यस्र्थम् एवं सुलह अनधननयम 1996
के अन्तगयत उसे अपास्त करने योग्य बनाता हो।
प्रार्थीगण के वारा प्रस्तुत प्रार्थयना पत्र ननरस्त होने योग्य
है।"
(English version)

As far as the objection
raised that conclusions have been
drawn
without
analyzing
the
evidence or by going beyond the
contract, this has already been
analyzed earlier, where it has been
established that the terms of the
contract have been mentioned in
the award. Merely a wrong analysis
or wrong interpretation of evidence
is not a ground for this court to
annul an award, because it is a
well-established principle that both
the parties have clarified through
the decision presented that the
evidence and facts should be
analyzed, and if two conclusions
can be drawn, with one being given
by the arbitrator and the other not
considered, the award will not be
set aside merely on the ground that
another
conclusion
was
also
possible. The award will only be
nullified when the analysis is prima
facie unreliable or falls under the
category of "patent illegality on the
face of the record."
As far as the question of
overpayment of bills is concerned,
these
points
have
also
been
examined earlier. Comments have
also been made based on the
records presented by the parties.
The most important point that
emerges
is
that
once
the
department and the contractor
agreed on the payment of the
contractor's bills and also agreed
that there would be no arbitration,
the objection was raised when the
contractor went for arbitration. In
this case, from the beginning, the
stance of the department has been
defensive, meaning they accepted
the bills as well as the reasons for
the delay, as is evident from the
documents
presented
by
the
opposing party. Therefore, in the
above circumstances, there is no
basis to nullify the award."

Appeal under Section 37 of the
1996 Act
10 All. State of U.P. & Ors. Vs. M/S Virat Construction
457
11. Laying challenge to the order
dated
14.02.2023
as
passed
by
the
Commercial Court, the State preferred
Commercial Appeal under Section 37 of
the 1996 Act on the grounds that the
claimant had failed to fulfil the basic
obligations and responsibilities, whereas
the claimant had to complete the work
within nine months but he started the work
late, so the delay cannot be attributed to the
appellant; the availability of stock material
had been made in time by the appellant and
no
hindrance
was
created
by
the
farmers/any third party; the payment of the
firm was not released because of the
unavailability of fund; the sufficient staff
labours and machineries were not available
at the site due to which the progress of the
work got delayed and hence, penalty ought
to be imposed on the claimant for delayed
work. The claim nos.2 to 6 were not correct
and the claim no.7 was not in accordance
with the terms and conditions of the
contract.

12. The claimant had not done any
extra work or supplied any extra item; the
interest awarded by the Arbitrator and
approved by the Commercial Court was not
correct as the same should have been in
accordance with Section 31(1)(7)(b) of the
2016 Act; it was due to the revision of
Drawing by I.I.T. Roorkee, the cost of the
project has increased; the work of Erection
of Gates were to be done by the
Mechanical Division, Kanpur but due to
delay in erection of Gates, the construction
of Civil work was not to be affected; the
award was passed contrary to the material
available on record and evidence adduced
in support thereof. The Arbitrator has not
considered the measurement of work as per
the measurement book; the Arbitrator has
wrongly awarded the claim on account of
extension
of
period
of
construction;
towards infringement of the conditions of
contract; 20,000 sacks of soil were placed
in the river to avoid flood was not correct
as there was no flood in that year; the delay
cannot be attributed towards the appellant
and the interest @ 7 per cent awarded by
the Arbitrator was highly excessive.

13. During the pendency of the
present appeal, the appellants firstly moved
Civil
Misc.
Amendment
Application
No.06/2023 with a prayer to permit the
applicant/appellant to amend the grounds
preferred in the Arbitration Appeal and also
to permit the applicant to take additional
grounds for adjudication of the instant
appeal. Another application was also
moved under Order 41 Rule 27 Civil
Procedure Code to permit the applicant to
adduce
additional
evidence.
The
applications were moved with a plea to
bring
on
record
the
tender
document/agreement dated 22.11.2008 as
the said document contains the arbitration
clause, which was invoked by the claimant.
It was also claimed that the said document
was never placed before the Sole Arbitrator
and the Sole Arbitrator, without examining
the said document, proceeded to pass the
impugned
award
dated
03.05.2022.
Admittedly,
fresh
additional
grounds/issues, which were neither raised
before the Sole Arbitrator nor before the
Commercial
Court,
Jhansi,
in
an
application under Section 34 of the 1996
Act. For the first time, the appellants tried
to press the applications in the instant
appeal.

Rival Submissions.

14. Sri Manish Goyal, learned
Additional Advocate General assisted by
Sri Devansh Rathore, learned Additional
Chief Standing Counsel for the State-
458 INDIAN LAW REPORTS ALLAHABAD SERIES
appellants had vehemently submitted that
even though the scope of interference under
Section 37 of the 1996 Act is limited and
restricted to the grounds mentioned in
Section 34 thereof, and if the view of the
Arbitrator is a plausible view, the Court
will not interfere or substitute its own view
with that of the Arbitrator. He submitted
that re-appreciation of evidence or review
on merits is not permissible under the
provisions of the 1996 Act unless the award
is shown to be in conflict with the 'public
policy of India' or vitiated by 'patent
illegality appearing on the face of the
award'.

15. Sri Manish Goyal, learned
Senior Advocate submitted that the Sole
Arbitrator had proceeded to pass the
impugned award dated 03.05.2022 without
even perusing the document/agreement
dated 22.11.2008, which contained the
arbitration clause, which was invoked by
the opposite party. However, the said
documents were never placed before the
Sole Arbitrator and he, without examining
the said document, proceeded to pass the
award dated 03.05.2022. He submitted that
only in this backdrop, both the applications
were pressed to bring on record the
document/agreement dated 22.11.2008 and
therefore, the impugned award is vitiated
by patent illegality appearing on the face of
the award.

16. Even on merit, learned Senior
Advocate submitted that the Commercial
Court had erred in law in not considering
the factual aspect of the matter that the
claimant had not even started the concerned
work even after substantial time of six
months and indulged in malpractices by
resorting to various excuses in relation to
non-availability of cement, TNT bar and
sometimes weather condition specially
rains were also taken as excuses for noncommencement of the work and without
completing the work, the Sole Arbitrator
had passed an award in favour of the
claimant/opposite party and in arbitrary
manner, the same has been approved by the
Commercial Court in appeal. Even the Sole
Arbitrator had also erred in declaring an
imaginary and far-fetching award in favour
of the claimant ignoring the material
fact/evidences adduced by the appellants in
support of their case.

17. Sri Manish Goyal, learned
Senior Advocate had strenuously argued
that the Sole Arbitrator had passed an
award without having the glance of the
agreement
and
in
absence
of
any
consideration of the relevant clauses of the
contract, such award is patently illegal.
(Ref. State of Chhattisgarh and ors v. Sal
Udyog Pvt. Ltd.2 and Associate Builders
vs. Delhi Development Authority3. Hence,
it was contended that the award would also
be liable to be set aside on the ground of
patent illegality under Section 34 (2A) of
the 1996 Act as the Commercial Court had
failed to consider the said aspect of the
matter. The Sole Arbitrator and the
Commercial Court could not re-write the
contract between the parties in absence of
the material evidence, i.e. agreement
document and the award was made in
ignorance of vital evidence. He submitted
that therefore, the award as well as
impugned judgement and order dated
14.02.2023 passed by the Commercial
Court are liable to be set aside.

18. Per contra, Sri Jagat Narayan
Mishra, learned counsel for the opposite
party/claimant vehemently opposed the
instant appeal and submitted that the
applications filed by the appellants were
also moved with inordinate delay of more
10 All. State of U.P. & Ors. Vs. M/S Virat Construction
459
than two years just to delay the disposal of
the instant appeal. He further submits that
as per Section 34 and 37 of the 1996 Act,
the scope of interference by the Court is
very limited and the Court can only
interfere in a situation where the award is
found to be contrary to the fundamental
policy of Indian Law or is against the
interest of India or the award suffers from
justice or morality or if it is patently illegal.
To buttress his argument, learned counsel
for the opposite party had placed reliance
on a judgment passed by Hon'ble Supreme
Court
in
the
matter
of
Reliance
Infrastructure Ltd. Vs. State of Goa4.

19. We have given anxious
consideration to the rival submissions and
have examined the record with reference to
the law applicable.

Relevant Statutory provisions.

20. Since the present appeal relates
to an arbitral award, which was carried in
challenge under Section 34 of the 1996 Act
and in appeal under Section 37 of the 1996
Act; and looking to the variety of
submissions made, we may usefully take
note of the relevant statutory provisions
contained in Section 26, 28, 34, and 37 of
the 1996 Act as follows:

"26. Expert appointment
by arbitral tribunal.-(1) Unless
otherwise agreed by the parties, the
arbitral tribunal may-
(a) appoint one or more
experts to report to it on specific
issues to be determined by the
arbitral tribunal, and

(b) require a party to give
the expert any relevant information
or to produce, or to provide access
to, any relevant documents, goods
or other property for his inspection.
(2)
Unless
otherwise
agreed by the parties, if a party so
requests or if the arbitral tribunal
considers it necessary, the expert
shall, after delivery of his written
or oral report, participate in an oral
hearing where the parties have the
opportunity to put questions to him
and to present expert witnesses in
order to testify on the points at
issue.
(3)
Unless
otherwise
agreed by the parties, the expert
shall, on the request of a party,
make available to that party for
examination all documents, goods
or other property in the possession
of the expert with which he was
provided in order to prepare his
report.
**** **** ****
28. Rules applicable to
substance of dispute.-(1) Where
the place of arbitration is situate in
India,-
(a) in an arbitration other
than an international commercial
arbitration, the arbitral tribunal
shall decide the dispute submitted
to arbitration in accordance with
the substantive law for the time
being in force in India;
(b)
in
international
commercial arbitration,-
(i) the arbitral tribunal shall
decide the dispute in accordance
with the rules of law designated by
the parties as applicable to the
substance of the dispute;
(ii) any designation by the
parties of the law or legal system of
a given country shall be construed,
unless otherwise expressed, as
460 INDIAN LAW REPORTS ALLAHABAD SERIES
directly referring to the substantive
law of that country and not to its
conflict of laws rules;
(iii) failing any designation
of the law under clause (a) by the
parties, the arbitral tribunal shall
apply the rules of law it considers
to be appropriate given all the
circumstances
surrounding
the
dispute.
(2) The arbitral tribunal
shall decide ex-aequo et bono or as
amiable compositeur only if the
parties have expressly authorised it
to do so.
(3) While deciding and
making an award, the arbitral
tribunal shall, in all cases, take into
account the terms of the contract
and trade usages applicable to the
transaction.]
**** **** ****
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 sub-
section (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
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
10 All. State of U.P. & Ors. Vs. M/S Virat Construction
461
(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.
(2A) 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 re-appreciation of
evidence.]
(3) An
application
for
setting aside may not be made after
three months have elapsed 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.
(5) An application under this
section shall be filed by a party only
after issuing a prior notice to the
other party and such application shall
be accompanied by an affidavit by
the applicant endorsing compliance
with the said requirement.
(6) An application under this
section
shall
be
disposed
of
expeditiously, and in any event,
within a period of one year from the
date on which the notice referred to
in sub-section (5) is served upon the
other party.]
**** **** ****
37. Appealable orders.-(1)
15[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;
(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.-
462 INDIAN LAW REPORTS ALLAHABAD SERIES
(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.
(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."
12.1 Section 31 (7) of the
Act of 1996 as regards interest in
award may also be usefully noticed
which reads as under:-
"31. Form and contents of
arbitral award.-
xxx xxx xxx
(7) (a) Unless otherwise
agreed by the parties, where and in
so far as an arbitral award is for the
payment of money, the arbitral
tribunal may include in the sum for
which the award is made interest, at
such rate as it deems reasonable, on
the whole or any part of the money,
for the whole or any part of the
period between the date on which
the cause of action arose and the
date on which the award is made.
(b), A sum directed to be
paid by an arbitral award shall,
unless the award otherwise directs,
carry interest at the rate of two per
cent. higher than the current rate of
interest prevalent on the date of
award, from the date of award to
the date of payment.
Explanation.-The
expression "current rate of interest"
shall have the same meaning as
assigned to it under clause (b) of
section 2 of the Interest Act, 1978
(14 of 1978)]
xxx xxx xxx"

The scope of challenge to an
arbitral award under Section 34 and the
scope of appeal under Section 37 of the
Act

21.

Having
regard
to
the
contentions urged and the issues raised, it
shall also be apposite to take note of the
principles enunciated by the Apex Court in
some of the relevant decisions on the scope
of challenge to an arbitral award under
Section 34 of the 1996 Act and the scope of
appeal under Section 37 of the 1996 Act.

22. The Hon'ble Supreme Court in
the matter of MMTC Limited v. Vedanta
Limited5 has held as follows:-

"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
10 All. State of U.P. & Ors. Vs. M/S Virat Construction
463
natural justice, and Wednesbury
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."

23. The Hon'ble Supreme Court in
Dyna Technologies (P) Ltd. v. Crompton
Greaves Ltd6 held as follows:-

"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.
30. There is no dispute that
Section 34 of the Arbitration Act
limits a challenge to an award only
on the grounds provided therein or
as interpreted by various Courts.
We need to be cognizant of the fact
that arbitral awards should not be
interfered with in a casual and
cavalier manner, unless the Court
comes to a conclusion that the
perversity of the award goes to the
root of the matter without there
being a possibility of alternative
interpretation which may sustain
the arbitral award. Section 34 is
different in its approach and
cannot be equated with a normal
appellate
jurisdiction.
The
mandate under Section 34 is to
respect the finality of the arbitral
award and the party autonomy to
get their dispute adjudicated by
an alternative forum as provided
under the law.