# OPG Power Generation Private Limited v. Enexio Power Cooling Solutions India Private Limited & Anr

- **Citation:** 2024 INSC 711
- **Court:** Supreme Court of India
- **Decided:** 2024-09-20
- **Case number:** Civil Appeal Nos. 3981-3982 of 2024
- **Bench:** Dr. Dhananjaya Y. Chandrachud
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/opg-power-generation-private-limited-v-enexio-power-cooling-solutions-india-37995
- **Pages:** 119

## Headnote

Issue arose as to whether the arbitral award is in conflict with the
public policy of India, or/and is vitiated by patent illegality appearing
on the face of the award; whether the holding company could
have been subjected to arbitration and made jointly and severally
liable along with the project beneficiary-appellant for the award;
whether respondent's claim for the outstanding principal amount
barred by limitation; whether the counter claim, in respect of cost
of repair/replacement of gear boxes and fan modules, could be
treated as barred by time when the other side's claim, arising out of
same contractual relationship, was found within limitation; whether
arbitral award for payment of the outstanding principal amount with
interest is perverse; whether the reasoning of the arbitral tribunal
is flawed and vitiated by adopting different yardstick for adjudging
the counterclaim than what was adopted for adjudging the claim;
if so, whether it vitiated the award and rendered it vulnerable to
a challenge u/s. 34 of the Arbitration and Conciliation Act, 1996.
Headnotes†
Arbitration and Conciliation Act, 1996 - s. 34(2)(b)(ii) - Arbitral
Award - Challenge to - Arbitral award, if in conflict with
the public policy of India, or/and vitiated by patent illegality
appearing on the face of the award - Appellant company floated
composite tender for design, manufacture and commissioning
of an air-cooled condenser unit, however, supply and
erection orders issued by its holding company - Appellant
later confirmed those orders - Respondent had bid for the
project - Dispute between parties as regards declaration qua
invalidity of debit notes, outstanding principal amount and
* Author
[2024] 9 S.C.R.
491
OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.
interest - Respondent invoked arbitration - Arbitral award
passed an award in favour of the respondent, holding that
the holding company and appellant jointly and severally
liable; that declaratory relief sought by respondent qua debit
notes-towards liquidated damages and customs duty beyond
the period of limitation, however, claim for unpaid dues payable
under the contract within the period of limitation - Single
Judge of the High Court set aside the award, however the
Division Bench restored the same - Justification:
Held: Division Bench of the High Court justified in setting aside
the judgment and order of the Single Judge and restoring the
arbitral award - No palpable error in the arbitral award as to be
termed 'patently illegal'/'perverse', or in conflict with public policy
of India - Though the ACC Unit /project was of the appellant,
the holding company of the appellant actively participated in the
formation of the contract for the project - They not only acted as
a single economic entity but as agents of each other - Hence,
the arbitral tribunal justified in holding that holding company was
bound by the arbitration agreement and jointly and severally liable
along with appellant to pay the awarded amount - Claim of the
respondent was an indivisible claim for compensation in lieu of
goods supplied, and work done, based on breach of the contract,
thus limitation for the claim governed by Art. 55, and not by Arts.
14, 18 and 113, of the Schedule to the 1963 Act - Claimant's claim
for the outstanding principal amount matured on 19 March 2016,
thus, limitation started to run from that date - However, even if
limitation is counted from 21 September 2015, deemed date of
completion of the supply/work (as found by the tribunal) it would
have no material bearing on the award - Limitation for the claim
as well as counterclaim, other than those relating to cost of repair/
replacement of gear boxes and fan modules, stood extended,
u/s. 18 of the 1963 Act, on the basis of acknowledgement made
in the minutes of meeting, and, thus, those were within limitation
and rightly considered on merit - Counterclaims qua cost of
repair /replacement of gear boxes an

## Text

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[2024] 9 S.C.R. 490 : 2024 INSC 711
OPG Power Generation Private Limited
v.
Enexio Power Cooling Solutions India Private
Limited & Anr.
(Civil Appeal Nos. 3981-3982 of 2024)
20 September 2024
[Dr. Dhananjaya Y. Chandrachud, CJI,
J.B. Pardiwala and Manoj Misra,* JJ.]
Issue for Consideration
Issue arose as to whether the arbitral award is in conflict with the
public policy of India, or/and is vitiated by patent illegality appearing
on the face of the award; whether the holding company could
have been subjected to arbitration and made jointly and severally
liable along with the project beneficiary-appellant for the award;
whether respondent's claim for the outstanding principal amount
barred by limitation; whether the counter claim, in respect of cost
of repair/replacement of gear boxes and fan modules, could be
treated as barred by time when the other side's claim, arising out of
same contractual relationship, was found within limitation; whether
arbitral award for payment of the outstanding principal amount with
interest is perverse; whether the reasoning of the arbitral tribunal
is flawed and vitiated by adopting different yardstick for adjudging
the counterclaim than what was adopted for adjudging the claim;
if so, whether it vitiated the award and rendered it vulnerable to
a challenge u/s. 34 of the Arbitration and Conciliation Act, 1996.
Headnotes†
Arbitration and Conciliation Act, 1996 - s. 34(2)(b)(ii) - Arbitral
Award - Challenge to - Arbitral award, if in conflict with
the public policy of India, or/and vitiated by patent illegality
appearing on the face of the award - Appellant company floated
composite tender for design, manufacture and commissioning
of an air-cooled condenser unit, however, supply and
erection orders issued by its holding company - Appellant
later confirmed those orders - Respondent had bid for the
project - Dispute between parties as regards declaration qua
invalidity of debit notes, outstanding principal amount and
* Author
[2024] 9 S.C.R.
491
OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.
interest - Respondent invoked arbitration - Arbitral award
passed an award in favour of the respondent, holding that
the holding company and appellant jointly and severally
liable; that declaratory relief sought by respondent qua debit
notes-towards liquidated damages and customs duty beyond
the period of limitation, however, claim for unpaid dues payable
under the contract within the period of limitation - Single
Judge of the High Court set aside the award, however the
Division Bench restored the same - Justification:
Held: Division Bench of the High Court justified in setting aside
the judgment and order of the Single Judge and restoring the
arbitral award - No palpable error in the arbitral award as to be
termed 'patently illegal'/'perverse', or in conflict with public policy
of India - Though the ACC Unit /project was of the appellant,
the holding company of the appellant actively participated in the
formation of the contract for the project - They not only acted as
a single economic entity but as agents of each other - Hence,
the arbitral tribunal justified in holding that holding company was
bound by the arbitration agreement and jointly and severally liable
along with appellant to pay the awarded amount - Claim of the
respondent was an indivisible claim for compensation in lieu of
goods supplied, and work done, based on breach of the contract,
thus limitation for the claim governed by Art. 55, and not by Arts.
14, 18 and 113, of the Schedule to the 1963 Act - Claimant's claim
for the outstanding principal amount matured on 19 March 2016,
thus, limitation started to run from that date - However, even if
limitation is counted from 21 September 2015, deemed date of
completion of the supply/work (as found by the tribunal) it would
have no material bearing on the award - Limitation for the claim
as well as counterclaim, other than those relating to cost of repair/
replacement of gear boxes and fan modules, stood extended,
u/s. 18 of the 1963 Act, on the basis of acknowledgement made
in the minutes of meeting, and, thus, those were within limitation
and rightly considered on merit - Counterclaims qua cost of
repair /replacement of gear boxes and fan modules rightly held
barred by time as in respect thereof there was no recital in the
minutes of meeting - Rejection of prayer to declare debit notes
invalid, on ground of limitation, had no adverse impact on the
claimant's claim for compensation, which was well within the
extended period of limitation - Also, the arbitral tribunal did not
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adopt different yardstick, the reasoning of the arbitral tribunal not
flawed or perverse - Limitation Act, 1963 - Arts. 14, 18 and 55
of the Schedule. [Paras 150, 151]
Arbitration and Conciliation Act, 1996 - Holding company of
appellant, if could be subjected to arbitral proceedings and
made jointly and severally liable along with appellant for the
dues of claimant:
Held: Holding company bound by the arbitration agreement and
thus, jointly and severally liable along with the appellant for the
dues payable to the claimant - Arbitral tribunal found that the
holding company of the appellant had issued the Purchase Orders
and had actively participated in the formation of the contract
even though the ACC unit was of the appellant; initial 10% of the
purchase price was provided by the holding company; subsequent
Purchase Orders issued by the appellant were on similar terms
and were issued by way of affirmation to obviate technical |
issues - Said circumstances had a material bearing for invocation
of Group of Companies doctrine to bind holding company with the
arbitration agreement and fasten it with liability, jointly and severally
with the appellant, in respect of the Purchase Orders relating to
ACC Unit - Thus, no reason to interfere with the findings of the
arbitral tribunal more so when it is based on a possible view of
the matter. [Para 81]
Limitation Act, 1963 - Art. 14, 18, 55 of the Schedule - Claim in
respect of declaration qua invalidity of debit notes; outstanding
principal amount; and interest - Applicability of Art. 14, 18,
55 to the claim - Limitation for the claim:
Held: On facts, there is an indivisible claim in respect of the
outstanding principal amount for the goods supplied and the work
done - Moreover, the payments under the supply purchase order
were to be on pro rata basis, and full payment for the supplies
was dependent on supporting documents, including certificates,
to be provided by the purchaser, which were not provided - Thus,
when full payments under the supply/erection purchase orders were
dependent on certificates relating to completion/commissioning/
guaranteed performance etc., the claimant waited till successful
completion/commissioning/guaranteed performance of the project
to file a composite claim for the balance amount payable under
both the purchase orders - Thus, Art. 14 not applicable to the
[2024] 9 S.C.R.
493
OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.
claim as framed - As regards applicability of Art. 18, since the
payments under the contract were to be made on pro rata basis,
dependent on work done and certificates issued, which were not
issued, hence, the claimant was entitled to make a composite
claim for the goods supplied and the work done after the project
was successfully complete-when the Unit was commissioned
followed by guaranteed performance because it is only then, when
the outstanding amount, as per the Bills/Invoices raised, became
due and payable to the claimant in terms of the contract, thus,
Art. 18 would also not apply - Art. 55 was applicable since the
claim was for compensation which includes a specified amount
payable under a contract, in respect of the goods supplied and
the work done under a contract - Claim was based on a breach
of the contractual obligation as, according to the findings returned
by the tribunal, the appellants failed to fulfil their obligations of
making payment of the outstanding principal amount payable
under the contract despite raising of bills/invoices by the claimant -
Thus, the claim for the outstanding principal amount not barred
by limitation. [Paras 105-107]
Limitation Act, 1963 - Starting point of limitation for the claim -
Date from which the limitation period is to be counted:
Held: Under Art. 55, the limitation period begins to run when the
contract is broken or where there are successive breaches, when
the breach in respect of which the suit is instituted occurs, or
where the breach is continuing, when it ceases - Claim is for the
outstanding principal amount due to the claimant on discharge of
his obligations under the contract - Thus, the cause of action for
the claim is appellants' failure to make payment of the outstanding
principal amount to the claimant despite discharge of contractual
obligations by it - Nothing brought to the notice that there was
any fixed date, or period of credit, for payment of the balance
amount - Starting point of limitation should be the date when the
claimant had fulfilled all its obligations under the contract and
was entitled for release of the outstanding amount payable under
the contract - Tribunal concluded that commissioning took place
in the month of May 2015; technical issues were resolved by 21
September 2015; and performance guarantee period expired
on 19 March 2016 - Final payment of the principal outstanding
amount was dependent on meeting the requirement of performance
guarantee, the cause of action for the claim, as made, matured on
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expiry of that stipulated period of 180 days within which, despite
request, the appellants failed to undertake the performance
guarantee test - Thus, even though there might be several bills/
invoices raised/issued by the claimant during execution of the
contract, the claim of the claimant for the outstanding principal
amount matured on expiry of 180 days from the date of the notice
given by the claimant to the appellants to undertake the performance
guarantee test - Thus, limitation for the claim started to run from
19 March 2016. [Paras 109-113]
Limitation Act, 1963 - s. 18 - Limitation extended by
acknowledgement - By virtue of acknowledgment, if any, the
claimant, if entitled to extension of the period of limitation:
Held: s. 18 deals with the effect of acknowledgement in writing -
Sub-section (1) thereof provides that where, before the expiration
of the prescribed period for a suit or application in respect of any
right, an acknowledgement of liability in respect of such right has
been made in writing signed by the party against whom such right
is claimed, a fresh period of limitation to be computed from the
time when the acknowledgment was so signed - Explanation to
s. 18 provides that an acknowledgment may be sufficient though
it omits to specify the exact nature of the right or avers that the
time for payment has not yet come or is accompanied by a refusal
to pay, or is coupled with a claim to set off, or is addressed to a
person other than a person entitled to the right - On facts, the
limitation period started to run from 19 March 2016 - Within three
years therefrom, in the minutes of meeting dated 19 April 2018
there was a clear acknowledgement that the amount claimed by the
claimant is the balance amount payable, though subject to debit,
by way of set off, against various claims made by the appellant
upon the claimant - Such an acknowledgment was sufficient to
extend the limitation period as it admitted the existing liability of
the appellants qua the balance amount payable to the claimant
under the contract - Benefit of such an acknowledgement would
not be lost merely because a set off is claimed - Thus, minutes
of meeting dated 19 April 2018, though claims a set off, is a valid
acknowledgement of the existing liability within the ambit of s. 18
and it extends the period of limitation for a period of 3 years from
the date it was made - Thus, the claim made on 2 May 2019,
within the period of limitation. [Paras 116, 119]
[2024] 9 S.C.R.
495
OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.
Arbitration and Conciliation Act, 1996 - s. 23 (2A) - Counter
claim - Nature of - Counterclaim in respect of cost of repair/
replacement of gear box and fan modules, if barred by time:
Held: Counterclaim is a claim made by a defendant in a suit
against the plaintiff - It is a claim, independent of and separable
from the plaintiff's claim, which can be enforced by a cross
action - Counterclaim preferred by the defendant in a suit is a
cross suit and even if the suit is dismissed, counterclaim shall
remain alive for adjudication - Purpose of the scheme relating to
counterclaim is to avoid multiplicity of proceedings - s. 23 (2A) gives
respondent to a claim a right to submit a counterclaim or plead a
set off, which shall be adjudicated upon by the arbitral tribunal, if
such counterclaim or set off falls within the scope of the arbitration
agreement - Counterclaim is like a cross suit, or a separate suit,
and the limitation of a counterclaim is to be counted from the date
of accrual of the cause of action which it seeks to espouse - As a
logical corollary thereof, it is quite possible that even though a suit
or a claim is within the period of limitation, the counterclaim may
well be barred by limitation, if the cause of action espoused therein
accrued beyond the prescribed period of limitation - On facts, the
counterclaim in respect of cost of repair/replacement of gear box
and fan modules, barred by time - Tribunal took 21 September 2015
as the start point of limitation for the counterclaim on the premise
that it would be the date when the Takeover Certificate is deemed
to have been issued, the supplier had fulfilled its obligations - On
basis thereof, the tribunal found counterclaims as regards cost of
repair/replacement of gear boxes and of fan modules barred by
time as the counterclaim was filed on 15 July 2019 i.e., more than
three years later, and there existed no acknowledgement in respect
thereof - However, for other issue, 19 March 2016 is found as the
start point of limitation for the claim because that is the date when
180 days period of guaranteed performance, part of supplier's
liability, expired - Whether the limitation period is counted from
21 September 2015 or 19 March 2016, the counterclaim filed on
15 July 2019 was beyond the prescribed period of three years
inasmuch as its cause of action could not have arisen after 19
March 2016. [Paras 120, 122, 124, 125, 128, 129]
Limitation Act, 1963 - s. 18 - Effect of acknowledgment in
writing - Extension of the period of limitation - Minutes of
meeting, if extended the limitation of counterclaims:
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Held: To extend the period of limitation with the aid of s. 18, the
acknowledgment must involve an admission of a subsisting jural
relationship between the parties and a conscious affirmation of
an intention of continuing such relationship regarding an existing
liability - Such intention can be gathered from the nature of the
admission - Admission need not be express, or regarding a precise
amount, but must be made in circumstances and in words from
which the court can reasonably infer that the person making the
admission intended to refer to a subsisting liability as on the date of
the statement - However, where an acknowledgement is in respect
of a specified sum of money or a specific right only, and not in
general terms, it would extend the period of limitation only in respect
thereof, and not of other claims which, though may have arisen
out of same jural relationship, are not specified therein - On facts,
minutes of meeting did not extend the limitation of counterclaims -
Minutes of meeting made no reference to the items referable to
counterclaims-cost of repair/replacement of Gear Box and Fan
Modules - Also no acknowledgment in general terms in regard
to liabilities subsisting under the contract - Said minutes could
not be treated as acknowledgment for the purpose of extending
limitation of the counterclaims not specified therein - Thus, when
the counterclaims were otherwise barred by limitation on the date
of filing of counterclaim, the tribunal justified in rejecting them as
barred by limitation. [Paras 137, 138]
Limitation Act, 1963 - Rejection of claimant's prayer to declare
debit notes invalid, if had adversely affected the claim for the
outstanding principal amount in respect of the goods supplied/
work done under the contract :
Held: Rejection of prayer to declare debit notes invalid did not
affect respondent's claim for the outstanding principal amount -
Relief for declaratory relief was rightly held barred by limitation
by the tribunal - Rejection of declaratory relief did not impact
relief for compensation, since relief for compensation was not a
consequential relief, dependent on debit notes being declared
invalid because issuance of debit notes was a unilateral act of
the employer which on its own did not extinguish the right of the
contractor - No doubt, where the relief sought is consequential to
the declaration, and declaratory relief is found barred by time, the
prayer for consequential relief will also fail - But where declaration
is just an optional relief-on which the main relief is not dependent,
[2024] 9 S.C.R.
497
OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.
rejection of it as barred by limitation would not extinguish the
claim in respect of which substantive relief is sought - In such
circumstances, it was open for the contractor to sue for its dues
without seeking a declaration qua the debit notes - Thus, rejection
of the declaratory relief as barred by limitation, did not have a
material bearing on respondent's claim against the appellants' for the
outstanding principal amount payable under the contract - Amount,
as shown debited in the debit notes, was not to be automatically
adjusted against the principal outstanding amount payable to
respondent - While deciding the claim of respondent, the tribunal
was well within its remit to adjudicate upon the issue whether such
amount should be adjusted or not against the outstanding principal
amount payable to respondent - No perversity in the award on
this count. [Paras 139, 141]
Arbitration and Conciliation Act, 1996 - ss. 34, 37 - Arbitral
award - Setting aside of - Plea that the arbitral tribunal adopted
different yardstick for adjudicating the claim than what was
adopted for the counterclaim; and the reasoning is completely
flawed and perverse :
Held: Distinction would have to be drawn between an arbitral award
where reasons are either lacking/unintelligible or perverse and an
arbitral award where reasons are there but appear inadequate
or insufficient - In a case where reasons appear insufficient or
inadequate, if, on a careful reading of the entire award, coupled
with documents recited/relied therein, the underlying reason, factual
or legal, that forms the basis of the award, is discernible/intelligible,
and the same exhibits no perversity, the court need not set aside
the award while exercising powers u/s. 34 or s. 37, rather it may
explain the existence of that underlying reason while dealing with
a challenge laid to the award - In doing so, the court does not
supplant the reasons of the arbitral tribunal but only explains it for
a better and clearer understanding of the award - On facts, the
arbitral tribunal did not adopt different yardstick for adjudicating
the claim than what was adopted for the counterclaim and the
reasoning of the arbitral tribunal is not flawed or perverse - Though
reasons recorded in the award at first blush appear insufficient,
or a bit confusing, but, when those reasons are examined in the
context of the documents placed and the arguments advanced,
the underlying reasons, which form basis of the conclusion, are
not only intelligible but sound - Mistake, if any, committed by
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the arbitral tribunal in using the words 'ongoing negotiations' in
place of acknowledgement is trivial does not go to the root of the
matter as to have a material bearing on the conclusion - Thus,
for this mistake alone, the award is not liable to be set aside -
Furthermore, it cannot be said that the arbitral tribunal was obliged
to accept the admission contained in the minutes of meeting qua
liquidated damages and customs duties, because it relied on it for
extending the limitation - Tribunal was well within its jurisdiction
in drawing a conclusion that the claimant was not liable in respect
of those items which formed part of the counterclaim, based on
consideration of the entire evidence, at variance with the recitals
in the acknowledgement - Such conclusion is a plausible view
and cannot be termed perverse - Single Judge of the High Court
erred in law while interfering with the arbitral award - Furthermore,
as regards the plea that the appellate court-Division Bench of the
High Court exceeded its jurisdiction while providing its own reasons
to support the conclusion in the award, the appellate court took
pains, and rightly so, to understand and explain the underlying
reason on which the claim of the respondent was found within
limitation - Appellate court was well within its jurisdiction to explain
the underlying legal principle which the arbitral tribunal had applied;
and in doing so, it did not supplant the reasons provided in the
award - Impugned order of the Division Bench does not suffer
from any legal infirmity. [Paras 144-149]
Arbitration and Conciliation Act, 1996 - s. 34(2)(b)(ii) - Arbitral
Award - Challenge to - Award may be set aside when in conflict
with the public policy of India - Scope of public policy:
Held: For an award to be against public policy of India a mere
infraction of the municipal laws of India not enough - There must
be, inter alia, infraction of fundamental policy of Indian law including
a law meant to serve public interest or public good. [Para 36]
Arbitration and Conciliation Act, 1996 - ss. 34 and 48 (as
amended by the Amendment, 2015) - Amendment, 2015
adding Explanations to s. 34(2)(b)(ii) and s. 48(2)(b), in place
of the earlier Explanation, wherein Explanation 1 clause (ii) to
s. 34(2)(b)(ii) and s. 48(2)(b), specifies that an arbitral award
is in conflict with the public policy of India, only if, it is in
contravention with the fundamental policy of Indian law -
Expression "in contravention with the fundamental policy of
Indian law" - Meaning of:
[2024] 9 S.C.R.
499
OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.
Held: After the '2015 amendments' in s. 34 (2)(b)(ii) and s. 48(2)
(b), the phrase "in conflict with the public policy of India" must
be accorded a restricted meaning in terms of Explanation -
Expression "in contravention with the fundamental policy of Indian
law" by use of the word 'fundamental' before the phrase 'policy
of Indian law' makes the expression narrower in its application
than the phrase "in contravention with the policy of Indian law",
which means mere contravention of law is not enough to make
an award vulnerable - To bring the contravention within the fold
of fundamental policy of Indian law, the award must contravene
all or any of such fundamental principles that provide a basis for
administration of justice and enforcement of law in this country -
Violation of the principles of natural justice; disregarding orders of
superior courts in India or the binding effect of the judgment of a
superior court; and violating law of India linked to public good or
public interest, are considered contravention of the fundamental
policy of Indian law - However, while assessing whether there has
been a contravention of the fundamental policy of Indian law, the
extent of judicial scrutiny must not exceed the limit as set out in
Explanation 2 to s. 34(2)(b)(ii). [Para 52]
Arbitration and Conciliation Act, 1996 - ss. 34 and 48 (as
amended by the Amendment, 2015) - Explanation 1 clause (iii)
to s. 34(2)(b)(ii) and s. 48(2)(b) inserted by 2015 Amendment,
that an award is in conflict with the public policy of India, inter
alia, if it conflicts with the 'most basic notions of morality or
justice' - Most basic notions of 'morality' - Explanation:
Held: It would cover such agreements as are not illegal but would
not be enforced given the prevailing mores of the day - Interference
on this ground would be only if something shocks the court's
conscience. [Para 59]
Arbitration and Conciliation Act, 1996 - ss. 34 and 48 (as
amended by the Amendment, 2015) - Explanation 1 clause (iii)
to s. 34(2)(b)(ii) and s. 48(2)(b) inserted by 2015 Amendment,
that an award is in conflict with the public policy of India, inter
alia, if it conflicts with the 'most basic notions of morality or
justice' - Most basic notions of 'justice' - Explanation:
Held: Term 'legal justice' is not used in Explanation 1, thus, simple
conformity or non-conformity with the law is not the test to determine
whether an award is in conflict with the public policy of India in
terms of Explanation 1 - Test is that it must conflict with the most
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basic notions of justice - For lack of any objective criteria, it is
difficult to enumerate the 'most basic notions of justice' - More
so, justice to one may be injustice to another - As regards justice
being done, it is about rendering, in accord with law, what is right
and equitable to one who has suffered a wrong - Dispensation of
justice in its quality may vary, dependent on person who dispenses
it - Thus, the placement of words "most basic notions" before "of
justice" in Explanation 1 has its significance - Object of inserting
Explanations 1 and 2 in place of earlier explanation to s. 34(2)(b)(ii)
was to limit the scope of interference with an arbitral award, thus
the amendment consciously qualified the term 'justice' with 'most
basic notions' of it - Giving a broad dimension to this category
would be deviating from the legislative intent - Thus, considering
that the concept of justice is open-textured, and notions of justice
could evolve with changing needs of the society, it would not be
prudent to cull out "the most basic notions of justice" - They ought
to be such elementary principles of justice that their violation could
be figured out by a prudent member of the public who may, or may
not, be judicially trained, which means, that their violation would
shock the conscience of a legally trained mind - This ground would
be available to set aside an award, if the award conflicts with such
elementary/fundamental principles of justice that it shocks the
conscience of the Court. [Paras 55, 58]
Arbitration and Conciliation Act, 1996 - s. 34 (2-A) (as inserted
by the Amendment, 2015) -Sub-section (2-A) of s. 34 providing
that the Court may also set aside an arbitral award if it is vitiated
by patent illegality appearing on the face of the award - Patent
illegality appearing on the face of the award - Meaning of:
Held: Proviso to sub-section (2-A) 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 - Thus, an award could
be set aside if it is patently illegal - However, illegality must go
to the root of the matter and if the illegality is of trivial nature, it
cannot be held that award is against public policy. [Para 60]
Arbitration and Conciliation Act, 1996 - s. 34 -Arbitral Award -
Scope of interference - Perversity as a ground for setting
aside an arbitral award:
Held: Interference with an arbitral award is only on limited grounds
as set out in s. 34 - Possible view by the arbitrator on facts is to
be respected as the arbitrator is the ultimate master of the quantity
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Enexio Power Cooling Solutions India Private Limited & Anr.
and quality of evidence to be relied upon - Arbitral decision must
not be perverse or so irrational that no reasonable person would
have arrived at the same - If an award is perverse, it would be
against the public policy of India - It is only when an arbitral award
could be categorized as perverse, that on an error of fact an arbitral
award may be set aside - Mere erroneous application of the law
or wrong appreciation of evidence by itself is not a ground to set
aside an award as is clear from the provisions of sub-section (2-A)
of s. 34. [Paras 63, 68]
Arbitration and Conciliation Act, 1996 - s. 31 - Forms and
contents of arbitral award - Scope of interference - Ground
of insufficient, or improper/erroneous or lack of reasons:
Held: Arbitral award on the ground of improper or inadequate
reasons, or lack of reasons, can be placed in three categories,
(1) where no reasons are recorded, or the reasons recorded are
unintelligible; (2) where reasons are improper, that is, they reveal
a flaw in the decision-making process; and (3) where reasons
appear inadequate - Awards falling in category (1) are vulnerable
as they would be in conflict with the provisions of s. 31(3), thus,
liable to be set aside u/s. 34, unless the parties have agreed that
no reasons are to be given, or the award is an arbitral award on
agreed terms u/s. 30 - Awards falling in category (2) are amenable
to a challenge on ground of impropriety or perversity, strictly in
accordance with the grounds set out in s. 34 - In a challenge to
award falling in category (3), before taking a decision the Court
must take into consideration the nature of the issues arising
between the parties in the arbitral proceedings and the degree of
reasoning required to address them - If reasons are intelligible
and adequate on a fair-reading of the award and, in appropriate
cases, implicit in the documents referred to therein, the award is
not to be set aside for inadequacy of reasons - However, if gaps
are such that they render the reasoning in support of the award
unintelligible, or lacking, the Court exercising power u/s. 34 may
set aside the award. [Paras 71.3, 71.6]
Arbitration and Conciliation Act, 1996 - Arbitral award -
Scope of interference with the interpretation/construction of
a contract accorded in the award :
Held: Arbitral tribunal must decide in accordance with the terms of
the contract - In a case where an arbitral tribunal passes an award
against the terms of the contract, the award would be patently
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illegal - However, an arbitral tribunal has jurisdiction to interpret
a contract having regard to terms and conditions of the contract,
conduct of the parties including correspondences exchanged,
circumstances of the case and pleadings of the parties - If the
conclusion of the arbitrator is based on a possible view of the
matter, the Court should not interfere - But where, on a full reading
of the contract, the view of the arbitral tribunal on the terms of a
contract is not a possible view, the award would be considered
perverse and as such amenable to interference. [Para 72]
Arbitration - Arbitration agreement/contract - Unexpressed
term, if can be read into a contract as an implied condition:
Held : Ordinarily, terms of the contract are to be understood in the
way the parties wanted and intended them to be - In agreements
of arbitration, where party autonomy is the grund norm, how the
parties worked out the agreement, is one of the indicators to
decipher the intention, apart from the plain or grammatical meaning
of the expressions used - However, reading an unexpressed
term in an agreement would be justified on the basis that such a
term was always and obviously intended by the parties thereto -
Unexpressed term can be implied if, and only if, the court finds
that the parties must have intended that term to form part of their
contract - It is not enough for the court to find that such a term
would have been adopted by the parties as reasonable men if
it had been suggested to them - Rather, it must have been a
term that went without saying, a term necessary to give business
efficacy to the contract, a term which, although tacit, forms part of
the contract - But before an implied condition, not expressly found
in the contract, is read into a contract, by invoking the business
efficacy doctrine, it must be reasonable and equitable; it must be
necessary to give business efficacy to the contract, that is, a term
will not be implied if the contract is effective without it; it must be
obvious, it must be capable of clear expression; and it must not
contradict any terms of the contract. [Paras 73, 75]
Limitation Act, 1963 - Arts. 14, 18 and 55 of the Schedule -
Applicability to the claim, when:
Held: Art. 14 applies where the suit/ claim is for the price of goods
sold and delivered; and no fixed period of credit is agreed upon
whereas Art.18 applies where the suit/claim is for the price of work
done by the plaintiff/claimant for the defendant at his request; and
no time has been fixed for payment - Thus, where a suit is for
[2024] 9 S.C.R.
503
OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.
goods supplied and work done by the plaintiff (a contractor) and the
price of materials and the price of work is separately mentioned,
and the time for payment is not fixed by the contract, Art. 14 will
apply to the former claim, and Art. 18 to the latter - But where a
claim is made for a specific sum of money as one indivisible claim
on the contract, without mentioning any specific sum as being the
price of goods or price of the work done, neither Art. 14 nor Art. 18
would apply, but only Art. 55, which provides for all actions based
on a contract, not otherwise provided for, would apply - Art. 55
is a residuary Article in respect of all actions based on a contract
not otherwise specially provided for - For the applicability of Art.
55, the suit should be based on a contract, there must be breach
of the contract, the suit should be for compensation and the suit
should not be covered by any other Article specially providing for
it - Phrase 'compensation for breach of contract', as occurring in
Art. 55 would comprehend also a claim for money due under a
contract - Thus, even a suit for recovery of a specified amount,
based on a contract, is a suit for compensation, and if the suit is
a consequence of defendant breaching the contract or not fulfilling
its obligation(s) thereunder, the limitation for institution of such a
suit would be covered by Art. 55, provided the suit is not covered
by any other Art. specially providing for it. [Paras 91, 92, 95, 98]
Words and phrases - Expression 'public policy' - Meaning
and scope of. [Paras 30-40]
Words and phrases - Term 'justice' - Meaning of:
Held: Justice is the virtue by which the society/court/tribunal gives
a man his due, opposed to injury or wrong - Justice is an act of
rendering what is right and equitable towards one who has suffered
a wrong - Thus, while tempering justice with mercy, the court must
be very conscious, that it has to do justice in exact conformity
with some obligatory law, for the reason that human actions are
found to be just or unjust on the basis of whether the same are
in conformity with, or in opposition to, the law - Thus, in 'judicial
sense', justice is nothing more nor less than exact conformity to
some obligatory law; and all human actions are either just or unjust
as they are in conformity with, or in opposition to, the law. [Para 54]
Case Law Cited
Dyna Technologies Pvt. Ltd. v. Crompton Greaves Lt. [2019] 15
SCR 295 : (2019) 20 SCC 1 - relied on.
504
[2024] 9 S.C.R.
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Bharat Sanchar Nigam Limited v. Nortel Networks Pvt. Ltd. [2021]
2 SCR 644 : (2021) 5 SCC 738; B & T AG v. Ministry of Defence
[2023] 7 SCR 599 : (2024) 5 SCC 358; Ssangyong Engg. &
Construction Co. Ltd. v. NHAI [2019] 7 SCR 522 : (2019) 15 SCC
131; Associate Builders v. Delhi Development Authority [2014]
13 SCR 895 : (2015) 3 SCC 49; UHL Power Company limited
v. State of Himachal Pradesh [2022] 1 SCR 1 : (2022) 4 SCC
116; Heidelbergh Cement India Ltd. v. The Indure Pvt. Ltd. 2022/
DHC/003952; MMTC Ltd. v. Vedanta Ltd. [2019] 3 SCR 1023 :
(2019) 4 SCC 163; Haryana Tourism Ltd. v. Kandhari Beverages
Ltd. [2022] 2 SCR 316 : (2022) 3 SCC 237; Geo Miller & Co. (P)
Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd [2019] 11 SCR 1108 :
(2020) 14 SCC 643; Steel Authority of India Ltd. v. Gupta Brothers
Steel Tubes Ltd. [2009] 14 SCR 253 : (2009) 10 SCC 63; Delhi
Airport Metro Express Pvt. Ltd. v. DMRC Ltd. [2022] 3 SCR 716 :
(2022) 1 SCC 131; Oil and Natural Gas Corporation Ltd. v. Afcons
Gunanusa JV [2022] 10 SCR 660 : (2024) 4 SCC 481; Gherulal
Parakh v. Mahadeodas Maiya and others [1959] Supp. 2 SCR 406:
AIR (1959) SC 781; Central Inland Water Transport Corporation
v. Brojo Nath Ganguly [1986] 2 SCR 278 : (1986) 3 SCC 156;
Renusagar Power Co. Ltd. v. General Electric Co. [1993] Supp. 3
SCR 22 : (1994) Supp (1) SCC 644; Oil and Natural Gas Corporation
(ONGC) v. Saw Pipes Ltd. [2003] 3 SCR 691 : (2003) 5 SCC 705;
D.D.A v. M/s. R.S. Sharma & Co. [2008] 12 SCR 785 : (2008) 13
SCC 80; Oil and Natural Gas Corporation Limited v. Western Geco
International Limited [2014] 12 SCR 1 : (2014) 9 SCC 263; Delhi
Administration v. Gurdip Singh Uban [1999] Supp. 1 SCR 650 :
(2000) 7 SCC 296; Patel Engineering Limited v. North Eastern
Electric Power Corporation Limited [2020] 4 SCR 156 : (2020) 7
SCC 167; Delhi Metro Rail Corporation Ltd. v. Delhi Airport Metro
Express Pvt. Ltd. [2024] 4 SCR 473 : 2024 INSC 292; Pure Helium
India (P) Ltd v. ONGC [2003] Supp. 4 SCR 561 : (2003) 8 SCC
593; McDermott International Inc. v. Burn Standard Co. Ltd. [2006]
Supp. 2 SCR 409 : (2006) 11 SCC 181; South East Asia Marine
Engg. & Construction Ltd. (SEAMEC Ltd.) v. Oil India Ltd. [2020]
4 SCR 254 : (2020) 5 SCC 164; Bharat Aluminium Co. V. Kaiser
Aluminium Technical Services Inc. [2016] 1 SCR 364 : (2016) 4
SCC 126; Adani Power (Mundra) Ltd. v. Gujarat ERC [2019] 8 SCR
1017 : (2019) 19 SCC 9; Nabha Power Limited (NPL) v. Punjab
State Power Corporation Limited (PSPCL) and Another [2017] 14
SCR 301 : (2018) 11 SCC 508; Cox & Kings Ltd. v. SAP India (P)
[2024] 9 S.C.R.
505
OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.
Ltd. [2023] 15 SCR 621 : (2024) 4 SCC 1; State of Goa v. Praveen
Enterprises [2011] 10 SCR 1026 : (2012) 12 SCC 581; Mahomed
Ghasita v. Siraj-ud-Din and others AIR (1922) Lah 198 (FB) : ILR
(1921) 2 Lah 376 (FB) : (1921) SCC OnLine Lah 303; Dhapia v.
Dalla (1969) All LJ 718 : AIR (1970) All 206 : (1969) SCC OnLine All
79; Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority
[1988] 3 SCR 351 : (1988) 2 SCC 338; Khan Bahadur Shapoor
Fredom Mazda v. Durga Prasad Chamaria and others [1962] 1
SCR 140 : AIR (1961) SC 1236; J.C. Budhraja v. Chairman Orissa
Mining Corporation Ltd. and Others [2008] 1 SCR 821 : (2008) 2
SCC 444; Rajni Rani v. Khairati Lal [2014] 10 SCR 971 : (2015) 2
SCC 682; Thomas Mathew v. KLDC Ltd. (2018) 12 SCC 560; Bans
Gopal v. Mewa Ram AIR (1930) All 461 : (1929) SCC OnLine All
152; Kali Das Chaudhuri v. Drapaudi Sundari Dassi AIR (1918) Cal
294: (1917) SCC OnLIne Cal 23; Prem Singh & Ors v. Birbal & Ors.
[2006] Supp. 1 SCR 692 : (2006) 5 SCC 353; Padhiyar Prahladji
Chenaji v. Maniben Jagmalbhai & Ors. [2022] 2 SCR 455 : (2022)
12 SCC 128 - referred to.
Books and Periodicals Cited
Chitty on Contracts Volume 1, 35th Edition, paragraph 19-112;
P. Ramanatha Aiyar's Advanced Law Lexicon, 6th Edition,
Volume III, page 2621; U.N.