ALS

π€πšππ«π’π€πšπš π‹πžπ πšπ₯ π’πžπ«π―π’πœπžπ¬ (𝐀𝐋𝐒)

Tag: #Shippinglaw

  • Himachal Pradesh High Court: Pending CBI or Vigilance Inquiry Cannot Justify Interference with Arbitral Award Under Section 37

    Himachal Pradesh High Court: Pending CBI or Vigilance Inquiry Cannot Justify Interference with Arbitral Award Under Section 37

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 02.11.2026

    Himachal Pradesh High Court: Pending CBI or Vigilance Inquiry Cannot Justify Interference with Arbitral Award Under Section 37

    This Short Article has been prepared & written by Arbitrator Shobhit Malik. The views expressed are based on his interpretation of the law. He can be reached at his mob no- +91 9712924188 and email id shobhit.Ica23@gmail.com.

    The Himachal Pradesh High Court has dismissed the Union of India’s appeal against an arbitral award in favour of contractor Pramod Sood, reaffirming that courts have only a narrowly limited role in reviewing arbitration decisions under the Arbitration and Conciliation Act, 1996.

    Background of the dispute

    The dispute arose from work relating to the trenching and laying of optical fibre cable (OFC). Pramod Sood, the claimant, pursued arbitration following directions of the High Court. The sole arbitrator, V.K. Khurana, issued an award on 21 July 2006.

    The Union of India and another party challenged that award before the District Judge, Shimla, under Section 34 of the Arbitration and Conciliation Act, 1996. Their objections were dismissed on 1 September 2011. They then appealed to the High Court under Section 37(1)(b) of the Act.

    Grounds raised by the Union of India

    The appellants argued that the award was founded on surmises and conjectures. They also relied on the fact that records connected with the work had been seized by the Central Bureau of Investigation in 1997 and that a vigilance inquiry had earlier been underway.

    According to the Union of India, requiring payment while those inquiries remained pending could undermine the purpose of examining alleged irregularities. It further challenged the award of interest at 14% per annum from 1 November 1996, contending that Clause 16.2 of the contract barred interest on earnest money, security deposits, or sums payable to the contractor.

    High Court’s reasoning: Section 37 review is highly restricted

    Justice Virender Singh held that an appeal under Section 37 is not a routine appeal on facts or contractual interpretation. Where an arbitral award has already survived a challenge under Section 34, the appellate court’s scope is even narrower.

    The Court relied on Supreme Court guidance in Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking and Bombay Slum Redevelopment Corporation Pvt. Ltd. v. Samir Barain Bhojwani. These decisions establish that courts should not set aside an award merely because another interpretation of the evidence or contract is possible.

    Interference is justified only where the award is perverse, manifestly arbitrary, or otherwise falls within the limited statutory grounds under Section 34. Under Section 37, the court primarily examines whether the Section 34 court exercised that limited jurisdiction correctly.

    CBI seizure and vigilance inquiry did not invalidate the award

    The High Court found that the CBI seizure of records and the vigilance inquiry did not affect the merits of the arbitral determination. The arbitrator had decided the dispute after providing both sides an opportunity to present their case.

    The District Judge had also considered this issue. The High Court noted that the appropriate stage to raise such objections was when the application under Section 18 of the Act was being considered. Crucially, the appellants did not show how the award violated public policy.

    Decision

    The High Court found no basis to interfere with the District Judge’s well-reasoned order dismissing the Section 34 objections. The appeal under Section 37 was therefore dismissed, along with any pending applications.

    Key legal takeaway

    The decision reinforces the finality of arbitration in India. A party challenging an arbitral award cannot succeed under Section 37 simply by offering a different reading of the facts or contract. It must demonstrate a serious legal defect, such as perversity or manifest arbitrariness, within the narrow limits set by the Arbitration and Conciliation Act, 1996.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Himachal Pradesh High Court

    Disclaimer

    Handy Download:

    “Handy Order for Download”Download

    Write to us at office@aadrikaalaw.com

    Tel: +91-11-4999 2707

    www.aadrikaalaw.com

  • Delhi HC: Invalid Arbitrator Appointment Clause Does Not Invalidate Arbitration Agreement

    Delhi HC: Invalid Arbitrator Appointment Clause Does Not Invalidate Arbitration Agreement

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 26.10.2026

    Delhi HC: Invalid Arbitrator Appointment Clause Does Not Invalidate Arbitration Agreement

    This Short Article has been prepared & written by Arbitrator Shobhit Mallik. The views expressed are based on his interpretation of the law. He can be reached at his email id shobhit.Ica23@gmail.com .

    The Delhi High Court has referred a payment and performance dispute between Greentree Building Energy Private Limited and the Bureau of Energy Efficiency (BEE) to arbitration, holding that BEE could not unilaterally appoint the sole arbitrator under the contract.

    Background of the dispute

    The dispute arose from a government engagement for conducting refresher courses for Energy Auditors and Energy Managers across India. BEE issued a request for proposal in December 2023, and Greentree’s bid was accepted through a Letter of Award dated 15 February 2024. The parties then entered into a Memorandum of Agreement/Service Agreement on 29 February 2024.

    Under the arrangement, Greentree was to provide refresher training to about 2,000 candidates through workshops held nationwide. The agreement included an arbitration clause providing that unresolved disputes would be referred to a sole arbitrator appointed by BEE, with New Delhi as the seat and venue of arbitration.

    Greentree’s claims

    Greentree contended that its work was hampered because BEE did not provide a functioning portal, candidate database, and necessary instructions or approvals concerning registration, payment verification and certification. According to Greentree, it had to deploy its own staff and technical resources to establish an alternative portal.

    The contract period was extended twice: first until 14 May 2025 and then until 1 October 2025. Greentree stated that it trained 636 candidates, exceeding the first milestone requirement of 600 candidates.

    For that milestone, Greentree issued an invoice of Rs. 46,11,204, inclusive of IGST, representing 30% of the total contract value of Rs. 1,53,70,680. It said that only Rs. 15,53,350 was released.

    BEE’s payment calculation treated Rs. 44,19,071 as payable but deducted:

    • Rs. 11,52,801 for alleged shortfalls in the minimum number of participants at six workshops; and
    • Rs. 15,37,068 as an alleged maximum 10% penalty on the total contract value.

    Greentree challenged these deductions as unilateral, arbitrary and inconsistent with the agreement. It also claimed a further Rs. 5,14,918 relating to 67 additional candidates trained under the same work order.

    BEE’s position

    BEE disputed Greentree’s claims. It maintained that Greentree had repeatedly failed to perform according to the agreed milestones and timelines, despite earlier communications. BEE also asserted that the deductions from the invoice were justified under the contractual framework.

    The Court did not decide these factual and contractual disputes. It held that questions relating to delay, performance, deductions and payment entitlement must be determined by the arbitral tribunal.

    Why the Court intervened

    Greentree invoked arbitration in April 2026 and asked BEE to agree to an independent and impartial sole arbitrator. While BEE responded to the notice, it did not concur with such an appointment.

    The Court found that the contractual provision allowing BEE to appoint the sole arbitrator could not be enforced. Relying on Supreme Court precedent, the Court reaffirmed that a party interested in the outcome of a dispute cannot unilaterally appoint the sole arbitrator. Such a process creates justified concerns regarding the arbitrator’s independence and impartiality and conflicts with the requirement of equal treatment of parties.

    Importantly, the Court clarified that an invalid appointment procedure does not invalidate the arbitration agreement itself. The parties’ clear intention to resolve disputes through arbitration remained effective; only the agreed method of appointment had failed.

    The Court’s decision

    The Delhi High Court appointed Ms. Manini Brar, Advocate, as the sole arbitrator to decide the disputes arising from the work order and service agreement.

    The arbitration will proceed under the aegis and rules of the Delhi International Arbitration Centre (DIAC). The parties must make the disclosures required under Section 12 of the Arbitration and Conciliation Act, 1996. BEE may raise any preliminary objections concerning jurisdiction or arbitrability before the arbitrator.

    All claims, counterclaims and substantive defences remain open for decision on their merits. The Court expressly stated that its order should not be treated as a view on the correctness of either party’s case.

    Legal significance

    The ruling reinforces a central principle of Indian arbitration law: a party to a dispute cannot retain exclusive control over the appointment of a sole arbitrator. Where such a clause exists, courts can preserve the arbitration agreement while replacing the defective appointment mechanism with an independent judicial appointment.

    For government bodies, contractors and commercial parties, the decision highlights the need to draft arbitration clauses that provide a neutral, balanced and legally sustainable appointment process.

    Listen to this on our #YouTube Channel

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Delhi High Court

    Disclaimer

    Handy Download:

    “Handy Order for Download”Download

    Write to us at office@aadrikaalaw.com

    Tel: +91-11-4999 2707

    www.aadrikaalaw.com

  • Bombay High Court Upholds Rs. 2.675 Crore Arbitration Award in Goregaon Redevelopment Dispute

    Bombay High Court Upholds Rs. 2.675 Crore Arbitration Award in Goregaon Redevelopment Dispute

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 24.10.2026

    Bombay High Court Upholds Rs. 2.675 Crore Arbitration Award in Goregaon Redevelopment Dispute

    This Short Article has been prepared & written by Arbitrator Shobhit Mallik. The views expressed are based on his interpretation of the law. He can be reached at his email id shobhit.Ica23@gmail.com .

    The Bombay High Court has dismissed Kumar Urban Development Private Limited’s challenge to an arbitral award requiring it to pay the Jal Ratn Deep Co-operative Housing Society Rs. 2.675 crore, reaffirming that a genuine liquidated-damages clause can be enforced when delay is established and actual loss is difficult to quantify.

    The dispute at a glance

    The case arose from the proposed redevelopment of Jal Ratn Deep Co-operative Housing Society’s property at Bangur Nagar, Goregaon (West), Mumbai. The society owns land containing five buildings and 97 occupied flats. After its members approved redevelopment in 2010, Kumar Builders Mumbai Realty Private Limited was appointed as developer; its rights and obligations later vested in Kumar Urban Development Private Limited through a merger.

    The parties executed their original Development Agreement on 12 January 2011. It included a time-bound construction schedule and a liquidated-damages provision. Under Clause 26, if the developer failed to complete the work and hand over the completed new building within the prescribed period, and the default continued beyond 60 days, it had to pay Rs. 10 lakh per week of delay or part thereof. The clause expressly described the amount as liquidated damages and β€œnot as penalty.”

    How the redevelopment stalled

    The redevelopment was affected by delays in approvals, revised plans, negotiations with members, and changes in development-control rules. The developer had initially paid the society Rs. 1.10 crore as security deposit and stated that it had also paid Rs. 2.425 crore towards hardship compensation and corpus.

    Following the introduction of fungible FSI in 2012, the developer offered larger rehabilitation flats and submitted revised proposals. The parties eventually entered into a fresh development agreement in August 2013, under which the developer was to load sufficient TDR for rehabilitation premises first and load the remaining TDR later.

    However, disagreements emerged over the sequence of obligations, including members’ vacation of flats, loading of TDR, payment of corpus and provision of a bank guarantee. The situation was further complicated by regulatory developments, including changes following the Supreme Court’s decision in the Kohinoor Mills matter. The society ultimately invoked Clause 26 and claimed liquidated damages for the developer’s alleged delay.

    Arbitration award and court challenge

    A sole arbitrator found that the developer had committed delays and awarded liquidated damages for 62 weeks at Rs. 10 lakh per week, totaling Rs. 6.20 crore. After adjusting the security deposit and hardship compensation/corpus amounts, the arbitrator directed payment of Rs. 2.675 crore, together with interest and quantified costs.

    The developer challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. Its central argument was that the society had not proved any real loss or legal injury. The developer stressed that members had continued to live in their existing flats and had not been displaced or required to obtain alternative accommodation. It also argued that the stipulated weekly amount had no demonstrated commercial basis and was, in substance, a penalty rather than a genuine pre-estimate of loss.

    The society responded that Clause 26 was a negotiated commercial term, expressly excluded a penalty character, and operated as a genuine pre-estimate of loss. It argued that the arbitrator had already found delay and breach, and that the nature of a delayed construction and redevelopment project made precise quantification of the loss difficult.

    Why the High Court refused to interfere

    Justice Aarti Sathe held that the court’s role under Section 34 is narrow. It cannot reassess evidence or substitute its own view merely because another interpretation may be possible. Interference is reserved for exceptional cases, such as awards affected by patent illegality, perversity, lack of reasons or findings based on no evidence.

    The Court found that Clause 26 clearly fixed Rs. 10 lakh per week as the agreed consequence of continuing delay and expressly stated that the payment was not a penalty. It accepted the arbitrator’s conclusion that the clause represented a genuine pre-estimate of loss in a construction-related redevelopment arrangement, where exact loss may be difficult to prove.

    The Court also noted the arbitrator’s findings of significant inaction and delay by the developer, including periods of approximately five months and eleven months in processing approvals. The arbitrator had also considered correspondence showing the society’s frustration with the prolonged delays and its loss of confidence in the developer.

    On this basis, the Court held that proof of actual loss or legal injury was not required in the circumstances. It distinguished authorities relied on by the developer by emphasizing that Section 74 of the Indian Contract Act permits reasonable compensation up to the stipulated amount, and that genuine pre-estimated damages may be awarded where actual loss is difficult to establish.

    Key legal principles from the ruling

    • Contractual wording matters: A carefully drafted liquidated-damages clause can be enforceable where it identifies the trigger for payment, specifies the agreed rate and indicates that the sum is not penal.
    • Delay can support liquidated damages: Once breach and delay are established, precise proof of financial loss may not be necessary if the stipulated sum is a genuine pre-estimate and the loss is difficult to quantify.
    • Section 34 review is limited: A court will not re-evaluate evidence or replace an arbitrator’s plausible interpretation of a contract with its own view.
    • Reasoned arbitral findings are protected: Findings based on the contract, correspondence and evidence will generally withstand challenge unless they are perverse, unsupported by evidence or fundamentally unlawful.
    • Adjustments may be permitted: The arbitrator’s adjustment of sums already paid by the developer against the liquidated-damages award was upheld because the relevant amounts arose under the parties’ contractual arrangement.

    Outcome

    The Bombay High Court dismissed the developer’s petition and left the arbitral award intact. The developer remains liable for the adjusted award of Rs. 2.675 crore, along with interest and costs as determined in arbitration.

    The Court also directed that any money deposited in court be released after one month from the judgment’s upload date, and it made no separate order as to costs.

    This decision highlights the importance of precise delay-damages clauses in redevelopment agreements and confirms the high threshold for setting aside a reasoned arbitral award in India.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Bombay High Court

    Disclaimer

    Handy Download:

    “Handy Order for Download”Download

    Write to us at office@aadrikaalaw.com

    Tel: +91-11-4999 2707

    www.aadrikaalaw.com

  • Bombay HC: Arbitrators Cannot Travel Beyond Contractual Warranty Clauses While Awarding Compensation

    Bombay HC: Arbitrators Cannot Travel Beyond Contractual Warranty Clauses While Awarding Compensation

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 23.10.2026

    Bombay HC: Arbitrators Cannot Travel Beyond Contractual Warranty Clauses While Awarding Compensation

    This Short Article has been prepared & written by Arbitrator Shobhit Mallik. The views expressed are based on his interpretation of the law. He can be reached at his email id shobhit.Ica23@gmail.com .

    The Bombay High Court has set aside an arbitral award requiring Forech India Limited to refund JSW Jaigarh Port Limited for conveyor belts, holding that the award disregarded material evidence, applied unequal standards to the parties’ witnesses, and went beyond the contractual warranty remedy.

    The dispute at a glance

    The dispute arose from two 2011 purchase orders under which Forech India Limited supplied EP conveyor belts for JSW Jaigarh Port Limited’s coal-handling system. The combined supply covered 3,490 metres of belting: 690 metres rated 800/4 and 2,800 metres rated 1250/4.

    Before dispatch, the parties carried out a joint inspection. After installation, JSW reported waviness, visible three-ply material at one belt edge, and later air pockets in portions of the belts. JSW contended that the defects were inherent manufacturing defects and invoked two performance bank guarantees. It subsequently commenced arbitration.

    In August 2015, the arbitral tribunal ordered Forech to pay Rs. 2,16,44,423, after accounting for the encashed bank guarantees, with 12% annual interest. The tribunal also rejected Forech’s counterclaim concerning the bank guarantees and damages.

    Why the award was challenged

    Forech challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. Its principal arguments were that:

    • the tribunal ignored joint-inspection records and test certificates said to show compliance with the agreed technical specifications;
    • the tribunal rejected Forech’s technical witnesses as in-house and non-expert, while relying on JSW’s own in-house witnesses;
    • there was no evidence that JSW replaced the entire supply or purchased replacement belts from other suppliers; and
    • the contractual warranty provided for free repair or replacement of defective parts, not a refund of the full contract price.

    JSW maintained that the belts were defective within the warranty period, that Forech had failed to replace them, and that the tribunal’s factual findings should not be re-examined in a Section 34 challenge.

    Court finds unequal treatment of evidence

    The High Court emphasized that courts do not sit in appeal over arbitral awards. However, an award may be set aside where patent illegality is apparent, including where vital evidence is ignored, the decision is perverse, or the tribunal acts contrary to the contract or substantive law.

    On the facts, the Court found that the tribunal had rejected Forech’s evidence about conveyor-system speed and operating parameters because its witnesses were in-house personnel and not specialist conveyor-system experts. Yet the tribunal accepted evidence from JSW’s similarly situated in-house witnesses.

    The Court held that Forech’s witnesses were technical personnel involved in conveyor-belt manufacture and supply and were competent to address the applicable standards. It also noted that the technical material indicated the conveyor system’s operating speed of 4.5 m/s could have been a contributing factor, while the applicable parameters were said to indicate a maximum speed of 3 m/s for the material and conditions involved.

    This one-sided treatment, the Court held, amounted to a failure to engage properly with Forech’s evidence and violated the equal-treatment requirement under Section 18 of the Arbitration and Conciliation Act.

    Warranty remedy did not support a full refund

    A key issue was the extent of belt replacement. Of the 3,490 metres supplied, the record showed that 860 metres had been replaced:

    • 150 metres of the 800/4 belting; and
    • 710 metres of the 1250/4 belting.

    That left 2,630 metres that had not been shown to be replaced because of defects. The Court also found no evidence that JSW had purchased new belts from other suppliers to replace the entire supply, despite the tribunal’s finding to that effect.

    The purchase orders contained a warranty for free repair or replacement of β€œany part(s)” found defective or unserviceable within the stipulated period. JSW had accepted and continued to use the belts, replacing certain portions rather than rejecting the goods outright.

    The Court therefore held that the matter was one of breach of warranty, not a basis for treating the entire contract as repudiated. Under the Sale of Goods Act, 1930, acceptance and use of goods generally confine the buyer to a damages remedy for breach of warranty rather than a right to reject the goods and recover the entire purchase price.

    Outcome and legal significance

    The High Court concluded that the award suffered from patent illegality because it:

    • selectively discounted Forech’s evidence while accepting comparable evidence from JSW;
    • awarded relief inconsistent with the warranty clause; and
    • lacked evidence that the whole supply had been replaced or that replacement belts had been bought from third parties.

    The Court set aside both the arbitral award and the determination on Forech’s counterclaim. It left the parties to pursue remedies available in law and stated that, if a new arbitrator is appointed, the existing evidence may be used along with any additional evidence permitted.

    Key takeaway for commercial contracts

    The ruling underscores that an arbitral tribunal has wide latitude on facts, but it must evaluate comparable evidence even-handedly and remain within the parties’ contractual framework. Where a warranty is limited to repair or replacement of defective parts, a full-price refund requires clear contractual support and evidence of loss or replacement of the entire supply.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Bombay High Court

    Disclaimer

    Handy Download:

    “Handy Order for Download”Download

    Write to us at office@aadrikaalaw.com

    Tel: +91-11-4999 2707

    www.aadrikaalaw.com

  • Delhi High Court Dismisses MIAL Appeal in Mumbai Airport Sahara Lease Arbitration Dispute

    Delhi High Court Dismisses MIAL Appeal in Mumbai Airport Sahara Lease Arbitration Dispute

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 21.10.2026

    Delhi High Court Dismisses MIAL Appeal in Mumbai Airport Sahara Lease Arbitration Dispute

    This Short Article has been prepared & written by Arbitrator Shobhit Mallik. The views expressed are based on his interpretation of the law. He can be reached at his email id shobhit.Ica23@gmail.com .

    The Delhi High Court has dismissed Mumbai International Airport Limited’s appeal against an arbitral award that rejected its claim that the Airports Authority of India was obliged to transfer the lessor’s interest in a long-term lease at Mumbai Airport.

    The dispute at a glance

    The case arose from the privatisation and redevelopment framework for Chhatrapati Shivaji Maharaj International Airport in Mumbai. Airports Authority of India (AAI) had granted Sahara (Batra) Hospitality Private Limited a 29-year lease in 2002 for approximately 30,047 square metres of airport land, running until 4 June 2031.

    In 2006, AAI and Mumbai International Airport Limited (MIAL), a joint-venture company established to operate and develop the airport, entered into the Operation, Management and Development Agreement (OMDA) and a separate lease deed. The Sahara lease was listed as an β€œExisting Lease.”

    MIAL argued that AAI was required to transfer or novate the Sahara lease, including AAI’s rights as lessor, to MIAL during the transition phase. AAI disputed that obligation. An arbitral tribunal unanimously rejected MIAL’s claims in March 2023, and a Single Judge of the Delhi High Court later refused to set aside the award. MIAL then appealed under Section 37 of the Arbitration and Conciliation Act, 1996.

    MIAL’s principal arguments

    MIAL relied on the OMDA provision requiring it to use best efforts, with AAI’s reasonable assistance, to transfer or novate existing contracts and agreements connected with the airport. It contended that this provision covered the Sahara lease and required the transfer of AAI’s lessor interest.

    MIAL also pointed to several supporting circumstances:

    • AAI’s 9 June 2006 letter stating that existing commercial and land licence or lease agreements were to be assigned or novated to the joint-venture company during the transition phase.
    • AAI’s transfer of lease-related amounts to MIAL for roughly ten years before stopping the payments in April 2019.
    • Inter-Ministerial Group minutes from 2004 recommending that the Sahara lease be assigned to the joint venture.
    • Communications from the Ministry of Civil Aviation that MIAL said supported its interpretation of the privatisation arrangement.

    MIAL further argued that the Single Judge had not independently evaluated its challenge because parts of the arbitral award were reproduced in the judgment.

    AAI’s response

    AAI maintained that the contractual documents expressly excluded land subject to Existing Leases from the premises leased to MIAL. Under the arrangements, that land would become part of MIAL’s demised premises only after the relevant third-party lease expired or ended early.

    AAI submitted that the payments made to MIAL were merely an interim arrangement and did not amount to assignment, novation, waiver, or recognition that the lessor’s interest had been transferred. It also argued that ministry communications and legal opinions could not amend the bilateral OMDA.

    Court’s reasoning: arbitration review is deliberately narrow

    The Division Bench emphasised that a court reviewing an arbitral award under Section 34 cannot reassess evidence or replace the tribunal’s contractual interpretation with its own preferred view. A challenge succeeds only where a statutory ground, such as patent illegality going to the root of the matter, is established.

    The Court held that review under Section 37 is narrower still. At that stage, the appellate court examines whether the Section 34 court stayed within its jurisdiction; it does not conduct a fresh merits appeal.

    This approach reflects a central principle of Indian arbitration law: parties who choose arbitration ordinarily receive finality, subject only to limited judicial supervision to address serious defects such as perversity, disregard of vital evidence, fraud, bias, or denial of natural justice.

    Reproducing an award does not automatically make a judgment defective

    The Court rejected MIAL’s argument that the Single Judge’s decision was invalid merely because it reproduced substantial passages from the arbitral award.

    According to the Court, the decisive issue is not the amount of copied text but whether the judgment demonstrates meaningful consideration of the objections raised. A court may adopt an arbitral tribunal’s reasoning if it finds that reasoning legally sustainable. The judgment would be vulnerable only if it mechanically reproduced the award without addressing material challenges or applying the statutory test.

    On an overall reading, the Court found that the Single Judge had considered the relevant contractual framework, MIAL’s submissions, and the applicable Section 34 standard.

    Existing leases and the transfer question

    The Court recognised that MIAL’s interpretation was arguable. The OMDA provisions on the demised premises dealt with the transfer of land to MIAL, while the transition provision dealt with transfer or novation of existing contracts. Therefore, excluding the Sahara-leased land from MIAL’s premises did not automatically answer whether AAI’s separate contractual rights as lessor could be transferred.

    However, the Court held that the arbitral tribunal’s contrary reading was not so unreasonable or perverse that judicial intervention was justified. The tribunal had read the transition provision together with the specific provisions governing Existing Leases and the demised premises. That was a permissible method of contractual interpretation within the tribunal’s authority.

    The Court also clarified that Section 109 of the Transfer of Property Act, 1882, addresses the consequences after a lessor’s interest is transferred. It does not itself establish that AAI had a contractual duty under the OMDA to make that transfer.

    Significance of the letter, payments and ministry communications

    The Court accepted that AAI’s 9 June 2006 letter was relevant because it referred to assignment or novation of existing commercial and land lease arrangements. But it found that the letter, as a post-contractual communication, could not independently amend the OMDA. Its meaning had to be assessed alongside the executed agreements.

    Similarly, AAI’s transfer of lease-related payments to MIAL for approximately a decade could be relevant evidence of how the parties implemented the arrangement. Yet those payments did not conclusively prove that AAI’s lessor interest had been assigned or that the OMDA compelled such an assignment.

    The Ministry of Civil Aviation communications were also insufficient to overturn the award. The Court agreed that ministry involvement in airport privatisation did not mean every later communication constituted a binding statutory policy direction under Section 40 of the Airports Authority of India Act, 1994.

    Finally, the 2004 Inter-Ministerial Group recommendation to assign the Sahara lease to the joint venture formed part of the background, but it did not by itself create an enforceable contractual obligation. The parties’ legal rights had to be determined primarily from the OMDA and related executed agreements.

    Outcome and wider importance

    The appeal was dismissed, leaving the arbitral award and the Single Judge’s decision intact. MIAL did not establish a ground for interference under Section 34, and therefore could not succeed under the even more limited appellate review available under Section 37. The judgment reinforces that Indian courts will not reopen arbitration disputes simply because a different contractual interpretation is plausible. To set aside an award, the challenging party must show a serious statutory defect, not merely an arguable disagreement over the contract or the weight of evidence.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Delhi High Court

    Disclaimer

    Handy Download:

    “Handy Order for Download”Download

    Write to us at office@aadrikaalaw.com

    Tel: +91-11-4999 2707

    www.aadrikaalaw.com

  • Himachal Pradesh High Court Sets Aside Arbitration Order Over Commercial Court Jurisdiction

    Himachal Pradesh High Court Sets Aside Arbitration Order Over Commercial Court Jurisdiction

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 19.10.2026

    Himachal Pradesh High Court Sets Aside Arbitration Order Over Commercial Court Jurisdiction

    This Short Article has been prepared & written by Arbitrator Shobhit Mallik. The views expressed are based on his interpretation of the law. He can be reached at his email id shobhit.Ica23@gmail.com .

    The Himachal Pradesh High Court has set aside a district court order in an arbitration dispute involving M/s Ech Ess Builders and the State of Himachal Pradesh, holding that the court lacked jurisdiction to decide the matter because it had not been constituted as a Commercial Court at the relevant time.

    Background of the construction dispute

    The dispute arose from a public works contract awarded in December 2005 to M/s Ech Ess Builders for a project valued at β‚Ή1.60 crore. The stipulated completion period was two years.

    According to the contractor, the work was disrupted when the site began sliding during the 2010 monsoon season. It said that the work was stopped, cracks developed in the area, and no further execution instructions were provided despite repeated communications. The contractor also alleged that designs and drawings were not made available in time, contributing to the delay.

    M/s Ech Ess Builders sought compensation for idle infrastructure and staff, additional overheads, unpaid work, price escalation, withheld security deposit, and earnest money. It also claimed costs and interest at 18% per annum.

    Arbitration award and court proceedings

    The arbitrator issued an award on 5 December 2019. Among other directions, the award granted simple interest at 8% per annum on:

    • β‚Ή4,46,039 from 27 November 2013 to 22 August 2019; and
    • β‚Ή2,52,492 from 27 November 2013 to 4 August 2017.

    Both the State authorities and the contractor challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. On 9 August 2024, the District Judge, Kinnaur dismissed both sets of objections and upheld the arbitral award.

    The State then appealed under Section 37 of the Arbitration and Conciliation Act. The High Court also condoned the delay in filing that appeal, accepting that it resulted from administrative processes rather than deliberate inaction.

    Why the High Court intervened

    Justice Sandeep Sharma held that this was a commercial dispute because it arose from a construction and infrastructure contract, which falls within the scope of the Commercial Courts Act, 2015.

    The decisive issue was jurisdiction. When the Section 34 objections were filed in July 2020, the District Judge was not notified or constituted as a Commercial Court under Section 3 of the Commercial Courts Act. Commercial Courts at the district level in Himachal Pradesh were notified only in May 2026.

    Relying on earlier High Court decisions, the Court concluded that a court not constituted as a Commercial Court cannot exercise jurisdiction over such commercial arbitration objections. As a result, the 2024 judgment was treated as having been passed without jurisdiction.

    Court’s order

    The High Court did not examine the merits of the contractor’s claims or the State’s objections to the arbitration award. Instead, it:

    • set aside the District Judge’s order dated 9 August 2024;
    • directed the District Judge to return the parties’ Section 34 objections for presentation before the appropriate forum under the Commercial Courts Act; and
    • ordered that the period from filing the appeal until the parties receive a certified copy of the High Court’s order will be excluded when calculating limitation.

    Legal significance

    The ruling reinforces that jurisdictional requirements under the Commercial Courts Act are mandatory in commercial arbitration matters. Even where a district court has considered an arbitral award in detail, its decision cannot stand if the court was not legally designated to hear commercial disputes when the case was instituted and decided.

    For parties to government construction contracts, the decision highlights the importance of filing arbitration challenges before the correctly constituted commercial forum. Procedural defects in forum selection can invalidate years of litigation without resolving the underlying contractual dispute.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Himachal Pradesh High Court

    Disclaimer

    Handy Download:

    “Handy Order for Download”Download

    Write to us at office@aadrikaalaw.com

    Tel: +91-11-4999 2707

    www.aadrikaalaw.com

  • Supreme Court: Contractual Bar on Interest Cannot Be Invoked Belatedly After Consenting to Arbitration

    Supreme Court: Contractual Bar on Interest Cannot Be Invoked Belatedly After Consenting to Arbitration

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 26.09.2026

    Supreme Court: Contractual Bar on Interest Cannot Be Invoked Belatedly After Consenting to Arbitration

    This Short Article has been prepared & written by Arbitrator Shobhit Mallik. The views expressed are based on his interpretation of the law. He can be reached at his email id shobhit.Ica23@gmail.com .

    The Supreme Court has held that a party cannot ordinarily raise a contractual or legal plea at a later stage of arbitration proceedings when it had the opportunity to raise the plea before the Arbitral Tribunal but failed to do so. Such conduct can amount to waiver or abandonment of the plea, particularly where allowing it later would prejudice the opposite party.

    In Union of India v. M/s Susaka Pvt. Ltd. & Ors., the Supreme Court dismissed the Union of India/Railways’ appeal challenging an arbitral award of interest, holding that the Railways could not rely for the first time before the Supreme Court upon a contractual clause prohibiting interest when it had failed to properly raise and pursue that objection before the Arbitral Tribunal and the courts below.

    Dispute Arose From Railway Works Contract

    • The dispute arose from a works contract awarded by the Union of India (Railways) to M/s Susaka Pvt. Ltd. on 19 December 1994 for repair work relating to 25 stators of TAO-659 Traction Motors of Electric Locomotives, Type WCAMI, at Electric Loco Shed, Valsad.
    • Disputes subsequently arose during execution of the contract. Since Clause 56(1) of the General Conditions of Contract (GCC) contained an arbitration mechanism, Susaka invoked arbitration and approached the Bombay High Court under Section 11(5) of the Arbitration and Conciliation Act, 1996 for constitution of an Arbitral Tribunal.
    • By an order dated 27 July 2001, the High Court, with the consent of the parties, referred the claims to a three-member Arbitral Tribunal consisting of Railway officials. Significantly, the reference expressly stated that the arbitrators would also be free to decide pre-reference interest, pendente lite interest, further interest and costs, considering the agreement.

    Arbitral Tribunal Awards β‚Ή27.62 Lakh

    • The Arbitral Tribunal delivered a unanimous reasoned award dated 11 September 2002, partly allowing Susaka’s claims.
    • The award covered, among other things, loss due to under-utilisation of equipment, material purchased but not utilised, loss of profit, overheads, payment under the price-variation clause and interest.
    • The table reproduced on pages 5 and 6 of the Supreme Court judgment records a total award of β‚Ή27,62,214, including β‚Ή12,89,033 towards interest.
    • The central issue that eventually reached the Supreme Court concerned the Tribunal’s power to award interest for different periods. The award provided for pre-reference interest at 15% per annum, pendente lite interest at 12% per annum and post-award interest at 18% per annum.

    Railways Challenges Award Under Section 34

    • Aggrieved by the award, the Union of India filed proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 before a Single Judge of the Bombay High Court.
    • The Single Judge partly interfered with the award by modifying the date from which interest would be payable in relation to two claims. However, the Railways’ objections concerning the remaining claims were rejected and the award was otherwise upheld.
    • Susaka challenged the limited interference before the Division Bench. The Railways, however, did not file an appeal against the part of the Single Judge’s order rejecting its other objections. Consequently, that part of the award attained finality.
    • The Division Bench subsequently allowed Susaka’s appeal, holding that no ground under Section 34 had been established for modifying the award in relation to interest. This effectively restored the arbitral award in its entirety.
    • The Union of India then approached the Supreme Court.

    Railways Relies on Clause 13(3) to Challenge Interest

    • Before the Supreme Court, the Railways relied heavily upon Clause 13(3) of the GCC.
    • According to the Railways, Clause 13(3) stipulated that no interest would be payable on earnest money, security deposit or amounts payable to the contractor under the contract, except Government securities.
    • It therefore argued that the Arbitral Tribunal had acted contrary to the contract in awarding interest and that the award was liable to be set aside under Section 34.
    • Susaka opposed the argument on a fundamental procedural ground: the Railways had not raised and pursued the Clause 13(3) objection before the Arbitral Tribunal or the courts below and therefore could not introduce it for the first time before the Supreme Court under Article 136 of the Constitution.

    Supreme Court: Railways Had Consented to Arbitration of Interest Claim

    • The Supreme Court accepted Susaka’s objection.
    • The Court found that the Railways had not raised the plea based on Clause 13(3) in its reply before the Arbitral Tribunal. More importantly, during the Section 11(5) proceedings, the Railways had expressly consented to referring the question of interest to arbitration.
    • The Court observed that if the Railways intended to rely on Clause 13(3), it could have raised the objection when the dispute was referred to arbitration or expressly reserved its right to raise the objection before the Tribunal.
    • It did neither.
    • The Railways thereafter participated in the arbitration and allowed the Tribunal to adjudicate the interest issue on merits without specifically pleading Clause 13(3).

    Raising a Ground in Section 34 Petition Is Not Enough If It Is Not Pressed

    • The Supreme Court also noticed an important procedural aspect.
    • Although the Railways included the Clause 13(3) objection as a ground in its Section 34 proceedings before the Single Judge, the ground was not pressed during arguments. It was also not subsequently raised before the Division Bench.

    The Supreme Court therefore described the case as one of:

    β€œwaiver or/and abandonment of a plea at the initial stage itself.”

    Pleas Must Be Raised at the Appropriate Stage

    • The judgment lays down an important litigation and arbitration principle: where a pleaβ€”whether based on fact or lawβ€”is available to a party, it must be raised at the appropriate stage in accordance with law.
    • If a party fails to raise the plea, or gives it up by consent, it may subsequently be precluded from resurrecting it on the principle of waiver, particularly where doing so would prejudice the opposite party.
    • The Court referred to the maxim β€œCuilibet licet renuntiare juri pro se introducto”, explaining that a person may waive the advantage of a law made solely for his or her individual benefit and protection, provided no public right or public policy is infringed. Susaka Pvt. Ltd. & Ors.

    Failure to Appeal Against Rejection of Other Claims Also Proved Fatal

    • There was another reason why the Railways’ challenge failed.
    • The Single Judge had substantially rejected the Railways’ Section 34 challenge except in relation to two interest claims. Yet the Railways did not appeal against the portion of the order rejecting its objections.
    • The Supreme Court held that this part of the Single Judge’s decision had therefore attained finality.
    • Had the Railways wished to keep those issues alive, it was required to challenge that portion before the Division Bench. Only thereafter could an adverse determination potentially have been pursued before the Supreme Court under Article 136.

    Arbitral Tribunal Has Power to Award Interest

    • The Supreme Court also made important observations concerning an arbitrator’s power to award interest.
    • It held that an award of interest on arbitrable claims is not inherently illegal, contrary to public policy, per se bad in law or beyond the powers of an Arbitral Tribunal.
    • The Court specifically referred to Section 31(7)(a) and (b) of the Arbitration and Conciliation Act, 1996, observing that these provisions empower an Arbitral Tribunal to award interest on the awarded sum, although that power remains subject to the agreement between the parties.
    • This qualification is important: the Supreme Court did not hold that an arbitrator can disregard an express contractual prohibition on interest. Rather, the decision turned substantially on the Railways’ failure to timely raise and preserve its contractual objection.

    Courts Should Not Lightly Interfere With Arbitral Awards

    • The Supreme Court further reiterated the limited nature of judicial interference with arbitral awards.
    • Once parties have chosen their arbitrators and authorised them to adjudicate specified disputes, their decision should ordinarily be respected. Courts should interfere only where the award falls within one of the grounds prescribed under Section 34 of the Arbitration and Conciliation Act, 1996.
    • This part of the judgment reinforces the principle that Section 34 proceedings are not intended to provide parties with an unrestricted opportunity to reargue matters already submitted to arbitration.

    Supreme Court Refers to Firm Kaluram Sitaram v. Dominion of India

    The judgment expressly refers to the Bombay High Court decision in:

    Firm Kaluram Sitaram v. The Dominion of India, AIR 1954 Bombay 50.

    • The Supreme Court recalled former Chief Justice M.C. Chagla’s observations concerning the State’s reliance on technical defences against citizens.
    • Applying that principle, the Supreme Court criticised the Railways for pursuing a technical legal argument up to the Supreme Court even though the plea had not been properly raised at the relevant stages of the proceedings.

    Final Decision: Union of India’s Appeal Dismissed

    • The Supreme Court ultimately found no merit in the Union of India’s appeal and dismissed it.
    • Accordingly, M/s Susaka Pvt. Ltd. succeeded before the Supreme Court, and the Railways’ attempt to challenge the award of interest by relying upon Clause 13(3) of the GCC failed.
    • The judgment is particularly significant for arbitration proceedings because it demonstrates that a potentially available contractual defence can be lost if it is not specifically pleaded, pressed and preserved at the appropriate stage.
    • It also makes an important distinction between the substantive contractual limitation on an arbitrator’s power to award interest and the procedural question of whether a party has preserved its right to invoke that limitation.

    Key Takeaway

    A party cannot participate in arbitration without raising an available contractual objection, allow the Tribunal to decide the issue on merits, fail to press the objection in Section 34 proceedings, and then seek to revive it for the first time before the Supreme Court.

    The decision in Susaka therefore stands as an important authority on waiver and abandonment of pleas in arbitration proceedings, while also recognising that Section 31(7) empowers arbitrators to award interest subject to the parties’ agreement.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Supreme Court

    Disclaimer

    Handy Download:

    “Handy Order for Download”Download

    Write to us at office@aadrikaalaw.com

    Tel: +91-11-4999 2707

    www.aadrikaalaw.com

  • Supreme Court: Arbitrator Cannot Award Pre-Reference Interest When Contract Expressly Bars It

    Supreme Court: Arbitrator Cannot Award Pre-Reference Interest When Contract Expressly Bars It

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 25.09.2026

    Supreme Court: Arbitrator Cannot Award Pre-Reference Interest When Contract Expressly Bars It

    This Short Article has been prepared & written by Arbitrator Shobhit Mallik. The views expressed are based on his interpretation of the law. He can be reached at his email id shobhit.Ica23@gmail.com .

    In an important ruling concerning interest in arbitration arising from public works contracts, the Supreme Court has held that where the parties have expressly agreed to a contractual clause barring interest on delayed payments, an Arbitral Tribunal cannot award pre-reference interest contrary to that bargain.

    Allowing the appeal filed by North Eastern Electric Power Corporation Limited (NEEPCO) against Astra Construction Private Limited, the Supreme Court set aside the Meghalaya High Court judgment to the extent that it had restored pre-reference interest awarded by the Arbitral Tribunal.

    The Court held that Clause 54 of the General Conditions of Contract (GCC) constituted an express contractual prohibition against such interest and therefore restricted the Tribunal’s power under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996.

    Background of the Dispute

    • NEEPCO had invited tenders on 12 June 1995 for civil works relating to the main plant and auxiliary building of a Gas Turbine Power Project at Ram Chandra Nagar, Tripura. Astra Construction’s tender was accepted and the parties executed a formal agreement on 23 May 1996.
    • The estimated contract value was approximately β‚Ή17.09 crore, and the work was stipulated to be completed by 26 March 1997.
    • Disputes subsequently arose and were referred to arbitration. By an award dated 5 June 2015, the Arbitral Tribunal found that the delay in execution of the project was attributable to NEEPCO.

    Four claims raised by Astra Construction were allowed and a principal amount of β‚Ή3.30 crore was awarded. In addition, the Tribunal granted:

    ComponentInterest awarded
    Pre-reference interest12% per annum
    Pendente lite interest9% per annum
    Future interest9% per annum

    The pre-reference interest at 12% was awarded on each of the claims allowed by the Tribunal.

    Commercial Court Interferes with Interest Component

    • NEEPCO challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996.
    • The Commercial Court, by its judgment dated 15 February 2024, relied upon the Supreme Court’s decision in Sayeed Ahmed & Company v. State of U.P. and concluded that Clause 54 barred the grant of interest.
    • Accordingly, the Commercial Court set aside the grant of pre-suit and pendente lite interest on Claim Nos. 2, 3, 4 and 5, while otherwise upholding the award.

    Meghalaya High Court Restores Arbitral Award

    • Astra Construction challenged the Commercial Court’s decision under Section 37 of the 1996 Act.
    • The Meghalaya High Court relied upon the Supreme Court’s earlier judgment in State of U.P. v. Harish Chandra & Co., (1999) 1 SCC 63.
    • It held that the contractual bar under Clause 54 was confined to interest claimed on money or balances withheld because of a dispute and did not extend to every other head of claim.
    • On that reasoning, the High Court restored the Arbitral Tribunal’s award in its entirety.
    • NEEPCO consequently approached the Supreme Court.

    NEEPCO Confines Supreme Court Challenge to Pre-Reference Interest

    • Before the Supreme Court, NEEPCO confined its challenge to the High Court’s restoration of pre-reference interest.
    • NEEPCO argued that the High Court had wrongly relied upon Harish Chandra, which arose under the Arbitration Act, 1940, without properly appreciating the later jurisprudence under the Arbitration and Conciliation Act, 1996.
    • NEEPCO relied particularly upon Sayeed Ahmed, Jai Prakash Associates Ltd. v. Tehri Hydro Development Corporation Ltd., Ferro Concrete Construction (India) Pvt. Ltd. v. State of Rajasthan and ONGC v. G & T Beckfield Drilling Services Pvt. Ltd.
    • Astra Construction, on the other hand, argued that NEEPCO had not raised the Clause 54 objection before the Arbitral Tribunal and had therefore waived its right to raise the issue. It relied upon Union of India v. Susaka Pvt. Ltd. & Ors., (2018) 2 SCC 182.

    Supreme Court Explains Major Difference Between 1940 and 1996 Arbitration Laws

    • A significant part of the judgment explains the evolution of the law governing an arbitrator’s power to award interest.
    • Under the Arbitration Act, 1940, there was no express statutory provision empowering an arbitrator to award interest. The Supreme Court’s Constitution Bench in Secretary, Irrigation Department, Government of Orissa v. G.C. Roy, (1992) 1 SCC 508 developed the principle that where an agreement did not prohibit interest and the claim was referred to arbitration, interest could be treated as an implied term of the agreement.
    • The position changed materially under the 1996 Act.
    • Section 31(7)(a) expressly begins with the words β€œUnless otherwise agreed by the parties”. The Supreme Court held that these words give primacy to party autonomy: the statutory power of an arbitrator to award interest is subject to what the contracting parties have agreed.

    Contract Can Restrict Arbitrator’s Power to Award Interest

    • Referring to Pam Developments Private Limited v. State of West Bengal, (2024) 10 SCC 715, the Court explained that under the 1996 Act an express contractual bar can restrict the arbitrator’s power to award pre-reference and pendente lite interest.
    • Unlike the position under the 1940 Act, it is not necessary that the contractual provision specifically state that the β€œarbitrator” has no power to award interest. If the agreement itself bars payment of interest, Section 31(7)(a) respects that contractual arrangement.
    • The Court reiterated that Section 31(7)(a) reflects a deliberate legislative shift toward party autonomy.

    Pre-Reference and Pendente Lite Interest Are Legally Distinct

    The judgment also draws an important distinction between pre-reference interest and pendente lite interest.

    The Court reaffirmed that pendente lite interest is a matter of procedural law governed by Section 31(7)(a), whereas pre-reference interest is governed by substantive law.

    Consequently, entitlement to pre-reference interest cannot be derived solely from Section 31(7)(a). It must have a basis in:

    • an express or implied agreement between the parties;
    • a statutory provision such as Section 3 of the Interest Act, 1978; or
    • established mercantile usage.

    Clause 54 Was the Decisive Contractual Provision

    • Clause 54 of the NEEPCO contract was titled β€œNo Claim for Delayed Payment due to Dispute Etc.”
    • It provided that no claim for interest or damages would be entertained in respect of money or balances lying with NEEPCO because of a dispute, difference or misunderstanding, or in respect of delay by the Engineer-in-Charge in making periodical or final payments, or in any other respect whatsoever.
    • The central question was whether this clause resembled the provision interpreted in Harish Chandra or the broader contractual bars considered in Sayeed Ahmed and the later THDC decisions.

    Supreme Court’s Important Comparison of Contract Clauses

    • The Supreme Court itself provided a comparative table on page 13 of the judgment, placing Clause 54 alongside the clauses considered in Harish Chandra, Sayeed Ahmed and THDC-II.
    • The Court found an important drafting difference.
    • In Harish Chandra, the contractual restriction essentially dealt with money withheld because of a dispute. It did not create a separate and independent prohibition concerning money simply paid late where no underlying dispute existed.
    • That was why the Harish Chandra Bench had concluded that the provision did not generally prevent an arbitrator from awarding interest for delayed payment.

    Clause 54 Goes Further Than Harish Chandra Clause

    Clause 54 in the NEEPCO contract was materially different.

    The Supreme Court found that it covered two independent situations:

    1. money or balances lying with the Corporation because of a dispute, difference or misunderstanding; and
    2. delay by the Engineer-in-Charge in making periodical or final payments.

    The second limb was decisive.

    • By separately and expressly covering delayed payment, Clause 54 prohibited an interest claim arising from delay even where there was no dispute about the underlying payment.
    • The Court therefore concluded that the High Court had erred in treating Clause 54 as equivalent to the clause considered in Harish Chandra.

    Sayeed Ahmed and THDC Line of Cases Applies

    • The Supreme Court instead found Clause 54 materially similar to the clauses considered in Sayeed Ahmed and THDC-II.
    • In those cases, separate language dealing with delayed payment was treated as a complete contractual restriction on the arbitrator’s authority to grant interest for the relevant periods.
    • The Supreme Court expressly agreed with that reasoning and held that the Sayeed Ahmed line of decisionsβ€”not Harish Chandraβ€”governed the NEEPCO dispute.

    NEEPCO Had Not Waived the Contractual Objection

    • The Supreme Court also rejected Astra Construction’s contention that NEEPCO had waived its right to rely upon Clause 54 because the objection had allegedly not been taken before the Arbitral Tribunal.
    • The record showed that NEEPCO had specifically raised the plea in its Statement of Defence dated 23 August 2012 before the Tribunal. The waiver argument therefore failed on facts.

    Supreme Court’s Final Decision

    • The Supreme Court ultimately held that Clause 54 barred the grant of pre-reference interest.
    • It further held that the Arbitral Tribunal, by granting such interest despite the contractual prohibition, exceeded the bounds of its jurisdiction under Section 31(7)(a).
    • Accordingly, the Meghalaya High Court judgment was set aside to the extent it had restored pre-reference interest, and NEEPCO’s appeal was allowed without any order as to costs.
    • Importantly, NEEPCO had confined its Supreme Court challenge to the restoration of pre-reference interest. The judgment should therefore not be read as the Supreme Court setting aside the entire arbitral award or the β‚Ή3.30 crore principal amount.

    Why This Judgment Is Important for Government and Infrastructure Contracts

    • The judgment has considerable significance for EPC contracts, construction contracts, power projects, infrastructure agreements and government/public-sector works contracts containing β€œno-interest” clauses.
    • Its central message is that Section 31(7)(a) does not give an arbitrator an unrestricted power to award interest. The statutory power operates subject to the parties’ agreement.
    • The precise drafting of the contractual clause becomes critical. A clause limited merely to amounts withheld because of a dispute may have a different legal effect from a clause that independently and expressly prohibits interest for delayed periodical or final payments.
    • The decision therefore reinforces both party autonomy and the importance of carefully construing the actual words of the contract before determining whether pre-reference interest is legally recoverable.

    Key Takeaway

    Where a contract governed by the Arbitration and Conciliation Act, 1996 expressly bars interest on delayed payments, an Arbitral Tribunal cannot override that bargain and award pre-reference interest under Section 31(7)(a). The wording of the contractual bar is decisive.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Supreme Court

    Disclaimer

    Handy Download:

    “Handy Order for Download”Download

    Write to us at office@aadrikaalaw.com

    Tel: +91-11-4999 2707

    www.aadrikaalaw.com

  • Supreme Court: State Cannot Raise New Defence at Award-Challenge Stage When It Was Never Taken Before Arbitrator

    Supreme Court: State Cannot Raise New Defence at Award-Challenge Stage When It Was Never Taken Before Arbitrator

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 24.09.2026

    Supreme Court: State Cannot Raise New Defence at Award-Challenge Stage When It Was Never Taken Before Arbitrator

    This Short Article has been prepared & written by Arbitrator Shobhit Mallik. The views expressed are based on his interpretation of the law. He can be reached at his email id shobhit.Ica23@gmail.com .

    The Supreme Court of India, while deciding a dispute arising from the construction and operation of the Bharatpur bypass in Rajasthan, held that an arbitral tribunal cannot travel beyond its terms of reference and that a contractor cannot recover toll-based compensation for expenditure it never incurred.

    The Court recognised the contractor’s contractual right to collect tolls on the Bharatpur–Deeg section of the project. However, it also found that the contractor had failed to execute the second phase of the project and that this failure was material to determining its financial entitlement.

    Accordingly, the Supreme Court referred two issues back to the arbitral tribunal for reconsideration. It limited the contractor’s immediate entitlement to β‚Ή26.34 lakh, with 10% interest, for the delay in issuing the traffic-restriction notification, subject to adjustment or prior payment.

    Background: The Bharatpur Bypass BOT Project

    • The dispute originated in September 1997, when the Public Works Department of Rajasthan decided to construct a bypass connecting Bharatpur and Mathura to divert traffic away from the congested market area of Bharatpur.
    • The project was awarded on a Build, Operate and Transfer (BOT) basis. It covered approximately 10.85 kilometres, comprising 9.6 kilometres of new construction and 1.25 kilometres of widening and strengthening of the existing Bharatpur–Deeg Road.
    • MSK Projects submitted a bid of β‚Ή13.25 crore, which the State accepted in February 1998. The parties subsequently entered into a concession agreement on 19 August 1998, granting the contractor the right to collect tolls during a concession period of 111 months, including construction.
    • The contractor completed the bypass on 10 April 2000 and began collecting tolls on 28 April 2000. However, agitation by local residents and difficulties in diverting commercial vehicles through the bypass affected toll collection.
    • The State issued a notification dated 1 September 2000 restricting the entry of vehicles into Bharatpur city, with effect from 1 October 2000. The contractor subsequently invoked arbitration, alleging delay in issuing and implementing the notification and disputing its entitlement to collect tolls from vehicles using the Bharatpur–Deeg section.

    Arbitral Tribunal Awarded β‚Ή9.90 Crore With 18% Interest

    • On 1 December 2003, the arbitral tribunal ruled in favour of MSK Projects.
    • It held that the State had delayed issuing and implementing the traffic-restriction notification and that the contractor was entitled to collect tolls from vehicles using the Bharatpur–Deeg portion of the road.
    • The tribunal directed the State to pay approximately β‚Ή9.90 crore for losses assessed up to 31 December 2003, together with interest at 18% from that date.
    • The State challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. The District Judge set it aside, holding, among other things, that the concession agreement did not expressly require the State to issue a notification prohibiting vehicles from entering Bharatpur city. The District Judge also reduced the interest rate from 18% to 10%.
    • On appeal, the Rajasthan High Court recognised the contractor’s right to collect tolls on the Bharatpur–Deeg section but rejected compensation based on an alleged obligation to issue the traffic-diversion notification. It maintained the reduced interest rate. Both parties subsequently approached the Supreme Court.

    Arbitrator Cannot Decide Matters Beyond the Reference

    • One of the principal questions before the Supreme Court concerned the limits of an arbitral tribunal’s jurisdiction.
    • The Court explained that an arbitral tribunal derives its authority from the reference made to it. It cannot materially enlarge that reference or decide matters outside its jurisdiction.
    • At the same time, the Court distinguished between an error in interpreting a contract, which may fall within an arbitrator’s jurisdiction, and deciding a matter that the parties never referred to arbitration, which constitutes a jurisdictional error.
    • Applying those principles, the Supreme Court noted that Rajasthan had not raised, during arbitration, the defence that it had never agreed to issue the traffic-restriction notification. The dispute framed before the tribunal concerned the delay in issuing and implementing that notification.
    • The District Judge and the High Court had therefore erred in deciding the case on a defence that the State had not taken before the arbitral tribunal.

    Contractor Entitled to Collect Toll on Bharatpur–Deeg Section

    • The State separately argued that the 1.25-kilometre Bharatpur–Deeg stretch was not part of the tollable project because it was an existing road rather than a newly constructed bypass.
    • The Supreme Court rejected that argument.
    • It examined the bid documents, traffic-survey data, pre-bid clarifications and concession agreement. These established that the Bharatpur–Deeg stretch formed an integral part of the composite project.
    • The Court also noted that the contractor had widened and strengthened the existing road. It was not a temporary service road intended to provide free passage during construction.
    • Consequently, the contractor’s right to collect tolls from vehicles using this section was upheld.

    Toll Collection Must Remain Compensatory

    • The judgment also examined the legal character of toll collection.
    • Referring to the Indian Tolls Act, 1851 and the applicable statutory notification dated 10 February 1997, the Supreme Court explained that tolls are compensatory in nature. They are intended to recover the costs of constructing and maintaining infrastructure, together with permissible interest and collection expenses.
    • The Court emphasised that toll collection cannot become an unrestricted source of revenue unrelated to the costs of the project.
    • This distinction was particularly important because MSK Projects had undertaken to execute the project in two phases, but the second phase had never been completed.

    Failure to Execute Second Phase Was Material to Compensation

    • The project documents contemplated an investment of approximately β‚Ή10.45 crore in Phase I and β‚Ή3.55 crore in Phase II.
    • The second phase involved repairs, maintenance and laying an additional bitumen layer over the road. The Supreme Court noted that MSK Projects had admittedly not executed this phase.
    • The Court further observed that the contractor had recovered its first-phase investment, together with some profit, although the precise amount of toll revenue collected had not been disclosed.
    • In these circumstances, the contractor could not claim compensation calculated on the entire projected investment of β‚Ή13.25 crore when it had not actually incurred the expenditure contemplated for Phase II.
    • The State had raised the non-execution of Phase II in its counter-affidavit before the Supreme Court. The contractor responded that the issue had not formed part of the original arbitration proceedings. The Court noted that there was no specific denial of the underlying allegation that the second phase remained unexecuted.
    • Although the issue arose after the original arbitral award and could not have been determined within that reference, the Supreme Court considered it necessary to examine its financial consequences to avoid awarding compensation disconnected from the contractor’s actual investment.

    Interest Reduced From 18% to 10%

    • The contractor also challenged the reduction of interest from 18% to 10%, arguing that the contractual arrangements contemplated a higher interest rate.
    • The Supreme Court declined to interfere with the reduced rate.
    • Referring to the Interest Act, 1978 and its earlier decisions, the Court explained that interest must be determined with regard to the circumstances of the case and the prevailing economic environment. It noted that interest rates had changed substantially following economic reforms.
    • The Court therefore maintained the 10% interest rate fixed by the courts below.

    Supreme Court’s Final Decision

    The Supreme Court did not restore the original arbitral award of β‚Ή9.90 crore. Instead, it directed the arbitral tribunal to reconsider two specific questions:

    1. What amount could the contractor legitimately have recovered from vehicles using the Bharatpur–Deeg section?
    2. What was the effect on the concession agreement as a whole of the contractor’s failure to execute Phase II?

    The Court requested the tribunal to decide these questions expeditiously after giving both parties an opportunity to be heard.

    It further held that MSK Projects was entitled to β‚Ή26.34 lakh for the delay in issuing the traffic-restriction notification, together with 10% interest, unless already paid. The amount could also be adjusted in the final accounts.

    Both appeals were disposed of without costs.

    Legal Significance

    The judgment addresses two distinct principles relevant to infrastructure contracts and commercial arbitration.

    First, an arbitral tribunal must remain within the scope of the dispute referred to it. Equally, a party cannot ordinarily introduce an entirely new defence at the judicial challenge stage and seek to overturn an award on that basis.

    Second, compensation under a BOT concession must be examined in light of the governing contract, statutory framework and expenditure actually incurred. A contractor’s entitlement to collect tolls does not, by itself, establish entitlement to recover the cost of contractual works that were never executed.

    The decision also illustrates the distinction between recognising a contractor’s contractual right and determining the amount ultimately payable under that right. In this case, the Supreme Court upheld the right to collect tolls on the disputed road section while leaving the financial consequences of the unexecuted second phase for further adjudication.

    Connected Matter

    Karnataka HC: Courts Cannot Re-Appreciate Evidence to Find Patent Illegality in Arbitral Award

    Listen to this on our #YouTube Channel

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Supreme Court

    Disclaimer

    Handy Download:

    “Handy Order for Download”Download

    Write to us at office@aadrikaalaw.com

    Tel: +91-11-4999 2707

    www.aadrikaalaw.com

  • Karnataka HC: Courts Cannot Re-Appreciate Evidence to Find Patent Illegality in Arbitral Award

    Karnataka HC: Courts Cannot Re-Appreciate Evidence to Find Patent Illegality in Arbitral Award

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 23.09.2026

    Karnataka HC: Courts Cannot Re-Appreciate Evidence to Find Patent Illegality in Arbitral Award

    This Short Article has been prepared & written by Arbitrator Shobhit Mallik. The views expressed are based on his interpretation of the law. He can be reached at his email id shobhit.Ica23@gmail.com .

    The Karnataka High Court has reaffirmed the limited scope of judicial interference with arbitral awards, holding that courts exercising jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996 cannot re-appreciate evidence or interfere merely because another interpretation of the contract may be possible.

    A Division Bench comprising Chief Justice Vibhu Bakhru and Justice C.M. Joshi dismissed an appeal filed by the State Project Director, Rashtriya Madhyamika Shikshana Abhiyana, thereby leaving undisturbed an arbitral award of β‚Ή60,24,774 towards price escalation, along with interest, in favour of Mycon Construction Ltd.

    Dispute Over Price Adjustment Clause in Government Construction Contract

    • The dispute arose from a tender floated for the construction of model schools and the upgrading and strengthening of existing Government High Schools across 30 districts of Karnataka.
    • Mycon Construction Ltd. emerged as the successful bidder for construction work under Package A-B. The parties consequently executed a construction agreement dated 15 May 2013, consisting of General Conditions of Contract and Special Conditions of Contract. Additional work was subsequently entrusted to Mycon, leading to a supplementary agreement dated 14 March 2017.
    • The controversy centred on Clause 39 β€” the Price Adjustment Clause.
    • Although the original tender material available on the e-procurement portal contained a note stating that the β€œprice adjustment clause may be treated as deleted,” the agreements actually executed by the parties in 2013 and 2017 continued to contain Clause 39.

    Arbitrator Awards β‚Ή60.24 Lakh Against Claim of β‚Ή1.22 Crore

    • During execution of the project, Mycon raised bills claiming amounts under the price adjustment mechanism. The State objected, eventually resulting in arbitration.
    • The Arbitral Tribunal adopted the fast-track procedure and delivered its award on 8 September 2023.
    • Against Mycon’s claim of β‚Ή1,22,81,956, the Tribunal partly allowed the claim and awarded β‚Ή60,24,774 along with interest, holding that the Price Adjustment Clause was valid.
    • The State challenged the award under Section 34, but the Commercial Court dismissed its petition on 2 December 2024. This led to the Section 37 appeal before the Karnataka High Court.

    State: Price Adjustment Clause Was Intended to Be Deleted

    • The State’s principal argument was that the tender/RFP had indicated that the Price Adjustment Clause was to be treated as deleted.
    • It contended that Clause 39 had found its way into the final agreement only because the agreement was erroneously signed by the State Project Engineer. According to the State, Mycon could therefore not claim any amount under that provision.
    • The State further argued that when the tender note expressly contemplated deletion of the Price Adjustment Clause, the authority signing the contract on behalf of the Government could not subsequently incorporate that clause into the agreement.
    • The State also invoked Article 299 of the Constitution, contending in effect that Clause 39 should be treated as non-existent because it had allegedly been incorporated without authority.

    Signed Contract Expressly Contained Clause 39

    • The High Court considered it significant that there was no dispute that the final agreement signed by the parties expressly contained Clause 39.
    • While the e-procurement portal carried the note that Clause 39 β€œmay be treated as deleted,” the agreement ultimately executed by the parties neither contained such a note nor had Clause 39 scored out.
    • The State did not dispute that the signed agreement contained the provision.
    • Clause 39 itself provided for adjustment of the contract price for increases or decreases in rates and prices of labour, materials, fuels and lubricants, subject to the contractual formula and conditions.
    • The High Court further recorded that there was no controversy regarding the calculation of the β‚Ή60,24,774 escalation amount in accordance with Clause 39. The dispute was essentially whether Clause 39 formed part of the parties’ agreement at all.

    Mycon: Bid Was Reduced Because Price Adjustment Protection Was Available

    • Mycon’s original bid was β‚Ή7,22,96,246.41, which was subsequently reduced during negotiations to β‚Ή6,70,56,696.
    • The contractor contended that it had agreed to the reduction because the contract contained a Price Adjustment Clause. It also claimed that during a meeting held on 13 February 2013, the concerned authorities had indicated that higher premiums were unnecessary because price adjustment protection was available.
    • Mycon additionally relied upon a Government Order dated 26 November 2004, under which a price adjustment clause was to be included in works contracts where the estimated cost put to tender was β‚Ή100 lakh or more and the completion period was 12 months or more.

    Tribunal Was Entitled to Interpret the Contract: High Court

    • The Arbitral Tribunal had rejected the State’s contention that the words β€œmay be treated as deleted” automatically meant that Clause 39 had ceased to form part of the contract.
    • The Tribunal instead relied upon the final signed agreement, which retained Clause 39 without any note stating that it should be deleted.
    • It therefore held that the executed agreement could not be read as excluding Clause 39 merely because of the note appearing in the RFP on the e-procurement portal.
    • The Tribunal had also rejected the State’s argument concerning lack of authority of the State Project Engineer. The State had neither rescinded nor rectified the contract and the contractor had executed the works between 2013 and 2018 without the Government taking steps to modify or rescind the agreement.
    • The High Court found that the real dispute was therefore not about the existence of the contract, but about the terms of that contract. Such a dispute fell squarely within the jurisdiction of the Arbitral Tribunal.

    Error in Contract Interpretation Is Ordinarily Within Arbitrator’s Jurisdiction

    • The Division Bench referred to the Supreme Court’s ruling in MSK Projects India (JV) Ltd. v. State of Rajasthan, (2011) 10 SCC 573.
    • The principle highlighted by the Court was that an error committed by an arbitrator while construing a contract is an error within the arbitrator’s jurisdiction. A jurisdictional error arises when the arbitrator travels outside the contract and deals with matters not entrusted to arbitration.
    • The High Court also relied upon SAIL v. Gupta Brother Steel Tubes Ltd., (2009) 10 SCC 63, where the Supreme Court distinguished between an arbitrator travelling beyond the contract and an arbitrator merely interpreting the contractual provisions.
    • Where the arbitrator’s conclusion represents a possible view, courts should not interfere merely because another view may also be possible. Courts cannot examine the correctness of arbitral findings as though exercising appellate jurisdiction.

    Courts Cannot Substitute Their Own Interpretation of Contract

    • The Karnataka High Court further relied upon State of Rajasthan v. Puri Construction Co. Ltd., (1994) 6 SCC 485.
    • The Supreme Court had distinguished between an error within jurisdiction and an error in excess of jurisdiction, holding that courts cannot substitute their own evaluation of the facts or contractual interpretation merely because they might have reached a different conclusion.
    • Where the arbitrator’s interpretation of a contract represents a possible view, the award cannot be reopened simply to reassess the contractual materials and evidence.

    Construction of Contract Lies Within Province of Arbitral Tribunal

    • The Bench also referred to Assam SEB v. Buildworth (P) Ltd., (2017) 8 SCC 146, reiterating that questions concerning construction of contractual provisions ordinarily fall within the province of the Arbitral Tribunal.
    • Where the arbitrator’s interpretation is supported by relevant evidentiary material, courts cannot interfere merely because they might prefer another construction.

    Section 34 Courts Cannot Re-Appreciate Evidence

    • The High Court agreed with the Commercial Court that the Tribunal’s conclusions were based upon evidence and could not be characterised as patently illegal or contrary to the public policy of India.
    • It reiterated that courts cannot re-appreciate evidence while examining an arbitral award, and that interference must remain confined to the grounds expressly provided under Section 34.
    • The Bench relied upon Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd., AIR Online 2021 SC 78, where the Supreme Court emphasised that Section 34 courts must act strictly within the confines of the statutory provision and refrain from appreciation or re-appreciation of facts and evidence.

    Every Error of Law Is Not β€œPatent Illegality”

    • The High Court also reiterated the restrictive meaning of patent illegality under Section 34(2A).
    • An illegality must go to the root of the matter. Every legal error or erroneous application of law does not amount to patent illegality.
    • Interference may be justified where, among other circumstances, the arbitrator adopts a view that is not even a possible one, interprets a contractual clause in a manner no fair-minded or reasonable person could adopt, travels outside the contract, bases conclusions on no evidence, or ignores vital evidence.
    • Courts, however, cannot re-appreciate evidence merely to reach the conclusion that an award is patently illegal.

    Article 299 Argument Rejected

    • The State had relied on K.P. Chowdhry v. State of Madhya Pradesh, AIR 1967 SC 203 to challenge the contractual provision.
    • The Karnataka High Court found that decision inapplicable because it concerned a situation where no written agreement had been entered into after the auction.
    • In Mycon’s case, there was an undisputed signed agreement between the parties, and there was no dispute that the Government had awarded the works contract and that an agreement for execution of those works was authorised.
    • The controversy was therefore confined to whether Clause 39 formed part of the contractual terms, a question that the Arbitral Tribunal had already considered and decided in Mycon’s favour.
    • The Tribunal had also taken note of the State’s failure to rescind or rectify the executed agreement.

    Karnataka HC Dismisses State’s Appeal; Mycon’s Award Stands

    • The Division Bench ultimately held that the State’s challenge could not be sustained under either Section 34(2) or Section 34(2A) of the Arbitration and Conciliation Act.
    • Finding no ground to interfere with the arbitral award and no infirmity in the Commercial Court’s refusal to set it aside, the High Court dismissed the State’s appeal.
    • Accordingly, Mycon Construction Ltd. succeeded in defending the arbitral award of β‚Ή60,24,774 towards price escalation, along with interest, against the State’s Section 34 and Section 37 challenges.

    Key Takeaway

    The ruling reinforces a fundamental principle of Indian arbitration law: interpretation of contractual terms is primarily the domain of the arbitrator. A court exercising jurisdiction under Sections 34 or 37 cannot substitute its preferred contractual interpretation merely because another view is possible.

    Where an executed government contract expressly contains a price adjustment clause, and the arbitrator adopts a possible interpretation of that agreement based on the contractual documents and evidence, judicial interference cannot be justified simply by pointing to a conflicting note in the earlier tender material.

    Connected Matter

    Supreme Court: State Cannot Raise New Defence at Award-Challenge Stage When It Was Never Taken Before Arbitrator

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Karnataka High Court

    Disclaimer

    Handy Download:

    “Handy Order for Download”Download

    Write to us at office@aadrikaalaw.com

    Tel: +91-11-4999 2707

    www.aadrikaalaw.com