Ircon International Ltd. vs Progressive Infotech Pvt. Ltd.
- Court
- Delhi High Court
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
# CNR No. DLHC010150882024
+ O.M.P. (COMM) 131/2024
IRCON INTERNATIONAL LTD. .....Petitioner
Through: Mr. Chandan Kumar and Mr.
Vikram Sharma, Advs.
versus
PROGRESSIVE INFOTECH PVT. LTD. .....Respondent
Through: Mr. Amit Goel, Adv.
CORAM:
HON'BLE MR. JUSTICE OM PRAKASH SHUKLA
JUDGMENT(ORAL)
% 14.10.2026
1. The present petition has been filed under Section 34 of the
1
Arbitration and Conciliation Act, 1996 , seeking to set aside the
2
Arbitral Award dated 11.12.2023 passed by the learned Sole
Arbitrator.
2. It emerges from the record that the Petitioner is engaged in the
business of executing engineering and infrastructure projects, whereas
the Respondent is a company engaged in the business of providing
Information Technology infrastructure services.
3. Pursuant to a Notice Inviting Tender dated 19.02.2007, the
Respondent was declared the successful bidder for the work involving
the supply, installation, testing, and maintenance of hardware and
1
“the Act” hereinafter
2
“impugned Award” hereinafter
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Signed By:ANUBHAV
TRIPATHI
Signing Date:22.10.2026
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system software for a 64-bit UNIX/64-bit LINUX based thin client
solution, together with its associated servers, storage and backup
solution, at the Petitioner’s Corporate Office at Saket, New Delhi.
4. Thereafter, a Purchase Order dated 11.04.2007 was issued in
favour of the Respondent, followed by the execution of an Agreement
3
dated 15.05.2007 . The total Contract value was Rs.1,11,34,350/-.
5. Under the terms of the Contract, the release of the payment was
linked to three milestone-based stages, i.e.: (i) Stage-I: 65% of the
Contract value upon delivery, installation, testing, commissioning of
the system and training of the Petitioner’s staff; (ii) Stage-II: 25% of
the Contract value upon successful completion of the work, including
integration of the system and issuance of the acceptance certificate;
and (iii) Stage-III: the balance 10% of the Contract value upon
successful operation of the entire system for a period of one year.
6. It is not in dispute that the Petitioner released the payments
payable under Stage-I and Stage-II of the Contract. The dispute relates
to the balance 10% payable under Stage-III. After completion of the
project, the Respondent sought release of the final milestone payment.
7. By its letter dated 27.04.2009, the Petitioner informed the
Respondent that the Stage-III payment was under process. The
payment, however, was not released and the dispute regarding the
Stage-III payment continued.
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TRIPATHI
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8. In the meantime, the Petitioner issued notices under Clause 38
of the General Conditions of Contract, alleging defaults in the
performance of the Contract. Ultimately, by letter dated 23.12.2009,
the Petitioner terminated the Agreement and the Performance Bank
Guarantee furnished by the Respondent was also invoked.
9. Aggrieved by the aforesaid actions of the Petitioner, the
Respondent invoked the arbitration agreement contained in Clause 40
of the Contract, pursuant to which the parties were referred to
arbitration.
10. Before the learned Arbitrator, the Respondent raised various
claims arising out of the Contract, while the Petitioner contested those
claims and also raised counter-claims. The claims and counter-claims,
along with the awarded amount by the learned Arbitrator, are
tabulated herein below for reference:
Claim Amount
Amount Awarded
Claimed
A. Balance Payment 12,16,150 12,16,150
B. Amount of Bank Guarantee 5,56,718 5,56,718
C. Earnest Money Deposit 50,000 50,000
D. Loss of Opportunity on Bank
20,59,957 Nil (Rejected)
Guarantee Margin Money
E. Loss of Opportunity on earnest
3,40,000 Nil (Rejected)
money deposit
F. Loss of Goodwill 25,00,000 Nil (Not pressed)
G. Mental Agony & Harassment 25,00,000 Nil (Not pressed)
3
“Agreement or Contract” hereinafter
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TRIPATHI
Signing Date:22.10.2026
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H. Interest @ 16%
Simple interest @ 12%
amounting
p.a. on Claims a, b & c
to 10,26,033
from 17.12.2009
I. Cost of Arbitration 5,00,000 2,00,000
Counter- Claims 13,88,13,027
Rejected
+ interest @
16%
Total Claims –
Rs. 18,22,868 + simple
1,07,48,758
interest @ 12% p.a. &
& Counter-
Rs. 2,00,000
Claims –
13,88,13,027
11. In challenging the impugned Award, Mr. Chandan Kumar,
learned Counsel for the Petitioner submits that the learned Arbitrator
travelled his jurisdiction by holding the termination of the Contract to
be illegal, even though the Respondent neither sought any declaratory
relief nor challenged the termination notices in its prayer. The
grievance is that, in doing so, the learned Arbitrator suo moto
adjudicated an issue which was never referred for determination and
thereby acted in contravention of Section 23 of the Act. Reliance was
4
placed on J.C. Budhraja v. Chairman, Orissa Mining Corpn. Ltd. ,
5
Bharat Amritlal Kothari v. Dosukhan , State of Orissa & anr. v.
6 7
Mamata Mohanty and State of Goa v. Praveen Enterprise .
12. It is next submitted that, in the absence of any finding on the
4
(2008) 2 SCC 444
5
(2010) 1 SCC 234
6
(2011) 3 SCC 436
7
(2012) 12 SCC 581
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TRIPATHI
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contentious issue of whether the system had successfully operated for
one year, as required for release of the Stage-III payment, the learned
Arbitrator could not have directed the release of the final payment.
Reliance was placed on I-Pay Clearing Services (P) Ltd. v. ICICI
8 9
Bank Ltd. and Canara Bank v. State Trading Corpn. of India Ltd. .
13. It is further submitted that, in the absence of any authorisation
under Section 28(2) of the Act, the learned Arbitrator erred in
awarding the claim on the basis of justice, fairness and equity.
14. Lastly, he submits that the learned Arbitrator erred in rejecting
the Petitioner’s counter-claims on the ground that they had been raised
for the first time in the Statement of Defence and that there is no
evidence to establish the loss suffered by the Petitioner. It is pointed
out that both findings are unsustainable, as the counter-claims are
maintainable in law even if they were not raised earlier, and the
Respondent had specifically admitted the relevant fact in paragraph
7(i) of its written statement to the Petitioner’s counter-claim.
15. I have considered the submissions advanced and perused the
material on record.
16. As the present petition is filed under Section 34, it would be
apposite to notice the limited scope of jurisdiction vested in this Court
under Section 34 of the Act. It is now too well settled by a catena of
decisions of the Hon’ble Supreme Court that this Court does not sit in
8
(2022) 3 SCC 121
9
2022 SCC OnLine Del 3060
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TRIPATHI
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appeal over an arbitral award and cannot re-appreciate the evidence or
substitute its own view merely because another view is possible.
Interference is confined strictly to the grounds specifically enumerated
under Section 34.
17. Insofar as the present petition is concerned, it is apparent that
through the aforesaid submissions, the Petitioner has essentially
invoked the ground of patent illegality under Section 34 of the Act and
contended that the findings recorded in the impugned Award are
unsupported by evidence. The Hon’ble Supreme Court has had the
occasion to consider the scope of interference under the head of
“patent illegality” in OPG Power Generation (P) Ltd. v. Enexio
10
Power Cooling Solutions (India) (P) Ltd. . The relevant observations
are read as follows-
“Patent illegality
*
67. In Associate Builders, this Court held that an award would
be patently illegal if it were contrary to:
(a) substantive provisions of the law of India;
(b) provisions of the 1996 Act; and
(c) terms of the contract.
The Court clarified that if an award is contrary to the substantive
provisions of the law of India, in effect, it is in contravention of
Section 28(1)(a) of the 1996 Act. Similarly, violating terms of the
contract, in effect, is in contravention of Section 28(3) of the 1996
Act.
68. In Ssangyong, this Court specifically dealt with the 2015
Amendment, which inserted Sub-section (2- A) in Section 34 of the
1996 Act. It was held that "patent illegality appearing on the face
of the award" refers to such illegality as goes to the root of the
matter, but which does not amount to mere erroneous application
of law. It was also clarified that what is not subsumed within "the
fundamental policy of Indian law", namely, the contravention of a
statute not linked to 'public policy' or 'public interest’, cannot be
brought in by the back door when it comes to setting aside an
10
(2025) 2 SCC 417
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TRIPATHI
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award on the ground of patent illegality. Further, it was observed
that reappreciation of evidence is not permissible under this
category of challenge to an arbitral award.
Perversity as a ground of challenge
69. Perversity as a ground for setting aside an arbitral award
was recognised in Western Geco. Therein, it was observed that an
arbitral decision must not be perverse or so irrational that no
reasonable person would have arrived at the same. It was observed
that if an award is perverse, it would be against the public policy
of India.
70. In Associate Builders, certain tests were laid down to
determine whether a decision of an arbitral tribunal could be
considered perverse. In this context, it was observed that:
(i) a finding is based on no evidence; or
(ii) an arbitral tribunal takes into account something irrelevant to
the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision; such a
decision would necessarily be perverse.
However, by way of a note of caution, it was observed that when a
court applies these tests, it does not act as a court of appeal and,
consequently, errors of fact cannot be corrected. Though a possible
view by the arbitrator on facts has necessarily to pass muster, as
the arbitrator is the ultimate master of the quantity and quality of
evidence to be relied upon. It was also observed that an award
based on little evidence or on evidence which does not measure up
in quality to a trained legal mind would not be held to be invalid
on that score.
71. In Ssangyong (supra), which dealt with the legal position
post 2015 amendment in Section 34 of the 1996 Act, it was
observed that a perverse decision, while no longer being a ground
for challenge under "public policy of India", would certainly
amount to a patent illegality appearing on the face of the award. It
was pointed out that an award based on no evidence, or which
ignores vital evidence, would be perverse and thus patently illegal.
It was also observed that a finding based on documents taken
behind the back of the parties by the arbitrator would also qualify
as a decision based on no evidence inasmuch as such a decision is
not based on evidence led by the parties, and therefore, would also
have to be characterised as perverse.
72. The tests laid down in Associate Builders to determine
perversity were followed in Ssyanyong and later approved by a
three-Judge Bench of this Court in Patel Engineering Limited v.
North Eastern Electric Power Corporation Limited.
73. In a recent three-Judge Bench decision of this Court in
DMRC Ltd. v. Delhi Airport Metro Express Pvt. Ltd., the ground of
patent illegality /perversity was delineated in the following terms:
(SCC p. 376, para 39)
“39. In essence, the ground of patent illegality is available for
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Signed By:ANUBHAV
TRIPATHI
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setting aside a domestic award, if the decision of the arbitrator is
found to be perverse, or so irrational that no reasonable person
would have arrived at it; or the construction of the contract is such
that no fair or reasonable person would take; Or, that the view of
the arbitrator is not even a possible view. A finding based on no
evidence at all or an award which ignores vital evidence in
arriving at its decision would be perverse and liable to be set aside
under the head of “patent illegality”. An award without reasons
would suffer from patent illegality. The arbitrator commits a patent
illegality by deciding a matter not within its jurisdiction or
violating a fundamental principle of natural justice.”
(emphasis supplied)
18. Keeping the aforesaid principles in mind, I shall now proceed to
examine the challenges raised by the Petitioner.
19. At the outset, I do not agree with the submission that the
learned Arbitrator travelled beyond his jurisdiction by recording
findings on the legality of the termination of the Contract. In this
context, paragraphs 29 and 30 of the Statement of Claim assume
importance and the same are delineated below for consideration:
“29. That it is submitted that on 23.12.2009, the Respondent
sent a letter to the Claimant illegally, un-authorizedly and
malafidely terminating contract with immediate effect and also
threatened that the balance work shall be got done through
alternative sources, a copy of the letter dated 23.12.2009 is
attached hereto and marked as ANNEXURE-XXXV. On
23.12.2009 itself, the Respondent sent a letter dated 23.12.2009
addressed to Citi Bank invoking the bank guarantee dated
24.05.2007 for a sum of Rs.5,56,718/-. It is submitted that the
Claimant in a most fare, honest and bona fide manner handed over
a demand draft for a sum of Rs. 5,56,718 vide DD NO.698753
dated 23.12.2009 drawn on Citi Bank, a copy of the DD is attached
hereto and marked as ANNEXURE-XXXVI. The DD was handed
over to the Respondent to keep their impeccable bank record with
their Bankers, as in the past, there had never been any single
instance where their bank guarantee had been en-cashed for
breach of contract. It is submitted that the invocation of the Bank
Guarantee by the Respondent is wholly illegal, unauthorized, ultra-
vires and blatant arbitrary exercise of powers and not permitted
under the provisions of law and contract. The claimant has
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TRIPATHI
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suffered due to illegal, dishonest, arbitrary exercise of powers and
for which the Claimant are entitled to claim damages and losses
from the Respondent.
30. That it is submitted that the alleged and purported
termination of the contract by the Respondent is wholly illegal,
un-authorized, mala fide and against the terms and conditions of
the contract. It is submitted that because of the illegal, un-
authorized and illegal termination of the contract, the Claimants
are entitled to claim damages and losses suffered and/or caused to
be suffered by the Claimant.”
20. These pleadings, in my view, clearly put the validity of the
termination in issue. The Respondent not only challenges the
termination as being illegal and contrary to the Contract, but also
bases its claim for damages on the alleged illegality of the termination.
Thus, although no formal declaratory relief is expressly sought in the
prayer clause, the legality of the termination was one of the
rudimentary issues put forth in the Respondent’s claims.
21. This conclusion is further borne out by the impugned Award
itself, wherein the learned Arbitrator records that the “ Claimant
vigorously contends that the termination of the contract pursuant to
Clause 38.0 of the General Conditions of Contract is devoid of
validity ”.
22. It is true that the prayer clause does not separately seek a
declaration that the termination was illegal. However, the Respondent
claimed an amount of Rs.1,07,48,758/- and specifically pleaded that
its claims arose, inter alia , from the alleged illegal termination of the
Contract. Thus, the challenge to the termination was not beyond the
pleadings but was an issue subsumed within the claim ultimately
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TRIPATHI
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raised by the Respondent.
23. In State of Orissa (supra) , the Hon’ble Supreme Court
observed that pleadings serve to narrow the controversy and identify
the matters in dispute, and that relief must ordinarily be founded on
the pleadings. In the present case, the illegality of the termination was
expressly pleaded in support of prayer. Therefore, the absence of a
separately worded prayer for declaration cannot defeat the substance
of the claim or prevent the learned Arbitrator from examining the
issue on which the claim was founded.
24. The reliance placed by the Petitioner on J.C. Budhraja
(supra), State of Goa (supra) and Bharat Amrit Lal Kothari (supra)
is misplaced. In J.C. Budhraja (supra) , the learned Arbitrator had
awarded amounts in excess of the amounts claimed, whereas no such
excess amount has been granted here. Further, State of
Goa(supra) deals with the adjudication of claims and counter-claims
within the scope of the arbitration agreement and does not suggest that
an Arbitrator is precluded from examining an issue expressly raised in
the pleadings on the basis of which substantive relief is claimed
merely because no separate declaratory relief is sought. In the same
manner, Bharat Amrit Lal Kothari (supra) concerned the grant of
relief not prayed for in writ proceedings. The distinction in the present
case is that the learned Arbitrator did not grant any independent
declaration invalidating the termination but considered its legality
while deciding the monetary claims before him. None of these
decisions, therefore, supports the contention that the learned Arbitrator
exceeded the limits of his jurisdiction.
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TRIPATHI
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25. Therefore, in the considered view of this Court, the learned
Arbitrator cannot be said to have overstepped its jurisdiction by
delving into an issue which did not arise for consideration. The
Petitioner was well within its rights to contest before the arbitrator on
validity of the termination in its Statement of Defense and if the
Petitioner failed to do so, no fault can be attributed to the Arbitrator.
26. The next submission of the Petitioner is that the learned
Arbitrator has awarded the Stage-III payment without recording any
specific finding that the system had “successfully run for one year”,
which was a precondition as per the Contract for release of the said
payment.
27. I am unable to accept the submission of the Petitioner in this
regard. According to this Court, merely because the impugned Award
does not record, in so many words, that the system had successfully
operated for one year does not render it patently illegal or perverse.
An arbitral award is required to be read as a whole.
28. If, on a fair reading of the Award and the material referred to
therein, the reasons which weighed with the Arbitral Tribunal while
granting the ultimate relief are discernible, the Court would not be
justified in interfering merely because those reasons are not articulated
in the manner suggested by one of the parties. This is precisely the
principle recognised by the Hon’ble Supreme Court in OPG (supra) in
the following words:
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TRIPATHI
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168. We have given due consideration to the above submission. In
our view, a distinction would have to be drawn between an arbitral
award where reasons are either lacking/unintelligible or perverse
and an arbitral award where reasons are there but appear
inadequate or insufficient. In a case where reasons appear
insufficient or inadequate, if, on a careful reading of the entire
award, coupled with documents recited/relied therein, the
underlying reason, factual or legal, that forms the basis of the
award, is discernible/intelligible, and the same exhibits no
perversity, the Court need not set aside the award while exercising
powers under Section 34 or Section 37 of the 1996 Act, rather it
may explain the existence of that underlying reason while dealing
with a challenge laid to the award. In doing so, the Court does not
supplant the reasons of the Arbitral Tribunal but only explains it
for a better and clearer understanding of the award.
29. Keeping the above principle in view, the following relevant
portion of the impugned Award may now be examined:
“ Findings
7. Milestone-III (31st March 2009): The contractual narrative
continued to unfold as Milestone-III approached on 31st March
2009. Milestone-III, defined as the successful operation of the
entire system for one year from the date of OSAT completion. In
response to the upcoming milestone. the Claimant proactively
addressed the matter in a formal letter dated 16th April 2009. This
letter underscored the importance of the pending payments related
to Milestone-III, which remained unresolved despite earlier
commitments.
8. It is critical to point out that in their communication dated
27th April 2009, the Respondent had confirmed that the "payment
is under process." However, in a subsequent turn of events, the
Respondent claimed, in their letter dated 22nd June 2009, that they
had already made a payment of Rs. 5,56,717/- on account of
Milestone-III. This abrupt shift in stance sought to create a
misleading narrative, which the Claimant vehemently contested.
9. As the contractual disputes escalated, both parties
embarked on a series of claims and counterclaims. The Claimant,
in its letter dated 16th October 2009 addressed to the Managing
Director of the Respondent Company, formally requested
intervention and, more critically, sought the release of the 10%
Milestone-III retention money, which had fallen due for payment
on 31st March 2009.
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TRIPATHI
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10. In response to the same, the Respondent issued letter dated
23rd November 2009, alleging that an Operational Service
Acceptance Test (OSAT) was never issued to the Claimant. This
assertion contradicted the admitted fact of the release of Rs.
27,70,323/- on 31st March 2008 by the Respondent to the
Claimant, a payment tied explicitly to the completion of the OSAT.
The Respondent's failure to issue written confirmation of this
acceptance became a point of contention.
11. Subsequently, the Claimant dispatched a letter dated 02nd
December 2009 to the Managing Director of the Respondent
Company, reiterating their request for the release of legitimate
dues. In response, the Respondent referred to Clause 38.0 of the
General Conditions of the Contract in their letter dated 09th
December 2009. giving the Claimant seven days to rectify alleged
shortcomings. The Respondent's claims of shortcomings were
contested by the Claimant, as no grievances regarding the
availability of the system had been raised in any of the letters
exchanged between the parties during the period from 1st April
2008 to 31st March 2009 i.e. the warranty period. The Claimant
maintained that minor operational issues were part of warranty
support and did not warrant the invocation of the bank guarantee,
which was furnished to ensure continued services during the
warranty period only.
Reasoning
V. Further complicating this arbitration are the contradictory
statements attributed to the Respondent concerning the retention
payment. Initially. the Respondent represented that the payment
was in process on 27th April 2009. Subsequently, this stance was
modified to assert that payment would only be processed upon the
resolution of the raised issues, i.e. vide letter dated 5th June 2009.
Finally, the Respondent claimed that the retention money had
already been disbursed as of 9th July 2008, a statement
incongruous to prior communications. The assessment of these
conflicting declarations assumes paramount importance in
ascertaining the Respondent's true intent and their adherence to
contractual obligations.
VI. A thought-provoking question raised by the Claimant
pertains to the severity of the purported system performance issues.
In the event that these issues were indeed as grave and if the
system was a unreliable as asserted by the Respondent, the
rationale behind the decision to place an additional order for 50
P's as confirmed vide letter dated 2nd July 2008 warrants a
judicious examination. I his inquiry invites an analysis of the
practical implications and motivations underlying this
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TRIPATHI
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supplementary procurement, thereby casting light upon the
credibility of the Respondent's claims as to the issues that were
allegedly being faced due to underperformance.”
The Award
Accordingly, this Arbitral Tribunal. considering all the facts,
evidence, and arguments presented by both parties, awards in
favour of the Claimant. There is fundamental breach on the part
of the Respondent which relates to the significant delay in
making payments and provision of milestone certificates as
stipulated in the contractual agreement. This delay has had a
substantial impact on the progress of the project. It is essential to
highlight that the contract explicitly outlined payment schedules
and due dates in three phases. which the Respondent failed io
adhere to. The delays in payments as initiated by the Respondent,
have contributed significantly to the disputes having been arisen
between the parties.
The Respondent's non-fulfilment of their payment obligations as
well as their failure to provide Claimant with milestone certificates
such as the OSAT which was already due to be issued as per
Respondent's own document goes to show that formal non-issuance
of same was an afterthought. Further, release of payment towards
Milestone II by the Respondent clearly establishes that the
Claimant had satisfied the requirement towards the project and the
timelines therein”.
30. A reading of the aforesaid paragraphs shows that the learned
Arbitrator was aware of the requirement for release of Stage III
payment. In fact, the impugned Award itself notes that the milestone
was linked to the successful operation of the entire system for one
year. After noticing the condition required in the Contract, the learned
Arbitrator proceeded to examine the material placed before him before
directing release of the Stage-III payment.
31. This Court further finds that the impugned Award discusses the
relevant correspondence exchanged between the parties, including the
Respondent’s request for release of the Stage-III amount, the
Petitioner’s letter dated 27.04.2009 stating that the payment was under
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TRIPATHI
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process, the Petitioner’s subsequent inconsistent stands regarding the
payment, the absence of any complaint by the Petitioner regarding the
functioning of the system during the warranty period from 01.04.2008
to 31.03.2009, and the Petitioner’s subsequent placement of an
additional order for 50 PCs despite its allegations of serious
deficiencies in the system, in this regard. These circumstances were
considered by the learned Arbitrator while assessing the Petitioner’s
defence.
32. The learned Arbitrator, also considered the technical sheets
relied by the Petitioner, however the same was labelled as an attempt
to show underperformance. The learned Arbitrator also expressed
serious reservations regarding the credibility of the Petitioner’s
allegations of persistent deficiencies in the system. Upon considering
the material as a whole, the learned Arbitrator found that the Petitioner
had committed a fundamental breach of the Contract, particularly by
delaying payments and failing to issue the requisite milestone
certificates which was also labelled as afterthought. Thus, this Court
find that the Arbitrator has taken a plausible view after considering the
material on record.
33. The reliance placed by the Petitioner on I-Pay Clearing
Services and Canara Bank (supra) is misplaced. In those cases, the
absence of a finding on a contentious issue was held to constitute a
ground for interference. In the present case, however, the learned
Arbitrator considered the Petitioner’s defence regarding the
unsuccessful operation of the system, examined the correspondence
and other material on record, and was not persuaded by the allegations
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TRIPATHI
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of deficiencies. It was in this context that the learned Arbitrator
rendered a specific finding that the Petitioner had committed a
fundamental breach of the Contract by delaying payments. The
grievance that no separate finding was recorded in the precise terms
suggested by the Petitioner does not render the impugned Award
vitiated for want of findings.
34. In view of the above, I find no merit in the Petitioner’s
submission that the learned Arbitrator failed to render finding on a
contentious issue. The learned Arbitrator has recorded findings that
the Petitioner committed a breach of the Contract, which formed the
basis for allowing the Stage-III payment, and the reasons supporting
that conclusion are discernible from a reading of the impugned Award
as a whole. As held in OPG (supra) , where the reasons underlying an
award can be gathered on a reading of the Award as a whole,
interference under Section 34 is not warranted merely because those
reasons are not recorded in any particular form.
35. The Petitioner’s endeavour of taking this Court through the
correspondence exchanged between the parties, the documentary
record and the evidence led before the learned Arbitrator to contend
that the system had not successfully operated for the stipulated period
is also of no avail.
36. Once the learned Arbitrator has considered the entire material
and returned a reasoned finding, this Court cannot substitute its own
view merely because the Petitioner seeks to place a different
interpretation on the same evidence, as these are matters squarely
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Signed By:ANUBHAV
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within the domain of the learned Arbitrator, who is the final Arbiter on
11
facts. Such an exercise would fall outside the limited jurisdiction
under Section 34 of the Act. Accordingly, no ground of interference is
made out on this count.
37. The Petitioner has next challenged the rejection of its
counterclaims, contending that the learned Arbitrator erred in holding
them to be barred merely because they were raised for the first time in
the Statement of Defence. In the view of this Court, the challenge to
the rejection of the counterclaim is also without merit.
38. A reading of the reasoning in the impugned Award indicates
that the learned Arbitrator did not reject the counterclaims solely on
the ground that they were raised for the first time in the Statement of
Defence. The learned Arbitrator also examined whether the Petitioner
had established the loss alleged to have been suffered. In this regard,
the learned Arbitrator specifically recorded that “ the Respondent could
not place on record any document to establish that they suffered any
substantial loss or damage thereof ”. The impugned Award further
notices that although technical data sheets were produced to allege
underperformance of the software, no material was placed on record to
establish any actual monetary or operational loss. It was on this basis
that the learned Arbitrator concluded that the counterclaims could not
be sustained. The relevant observations are reproduced below:
“In the present case the Respondent has brought on record
technical data sheets in an attempt to establish underperformance
of the software solution, however no concrete evidence was
11
Quadrant Televentures Ltd. v. ATC Telecom Infrastructure (P) Ltd., 2024 SCC OnLine
Del 9191
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brought on record that would show that the Respondent has
suffered actual monetary or operational loss.”
39. The nature of the counterclaims further supports the conclusion
reached by the learned Arbitrator. Of the total claim of approximately
Rs.13 crore, Rs.2,29,78,027.04 was claimed as a refund of amounts
already paid under the Contract, inclusive of interest at 16% for five
years, Rs.9,75,000 was claimed towards additional expenditure
allegedly incurred to improve hardware-software integration and
Rs.11,48,60,000 was claimed towards alleged losses relating to
business and user productivity, IT technical resources, stress and
harassment, allegations against the IT Department, loss to the careers
of IT personnel and PRP.
40. The learned Arbitrator found these counter-claims to be
unsupported by evidence of actual loss which is evident from a mere
reading of the counter-claims raised by the Petitioner and perusing the
documents placed in support of it. The Petitioner’s reliance on the
alleged admission in paragraph 7(i) of the Respondent’s written
submissions does not advance its case.
41. Even if the payment of Rs.1,09,40,138 stood admitted towards
Stage I and Stage II, such admission established only the fact of
payment, and not the Petitioner’s entitlement to recover or seek refund
of the said amount. That entitlement had to be independently
established by material evidence. Once the learned Arbitrator found
that the fundamental breach was attributable to the Petitioner, the
claim for refund of the amounts paid for the initial stages could not be
sustained. The same reasoning applies to the claim towards additional
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expenditure allegedly incurred to improve hardware-software
integration.
42. The only submission of the Petitioner which, in my view, merits
closer consideration is that the impugned Award is contrary to Section
28(2) of the Act as the learned Arbitrator has observed that the
impugned Award is “ grounded firmly in the principles of justice,
fairness and equity ”. The Petitioner is right in contending that, in the
absence of the consent of the parties, an arbitral tribunal cannot decide
a dispute ex aequo et bono or as an amiable compositeur .
43. While examining the above remark by the learned arbitrator, I
find it relevant to reproduce the following observations made by the
coordinate bench of this court in Oracle international vs CIS IT
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Solutions.
“81. Merely because certain observations may not have been
strictly necessary or may have been articulated in broader terms
would not render the Award patently illegal or contrary to public
policy.
82. An arbitral award cannot be dissected by isolating stray
observations divorced from the Award as a whole. The Impugned
Award is required to be read holistically and meaningfully . The
Hon’ble Supreme Court in a catena of judgments, has cautioned
Courts against approaching arbitral awards with a hyper-
technical or dissective approach while exercising jurisdiction
under Section 34 of the A&C Act. The Court is not required to
search for errors in isolated sentences nor reinterpret the
Impugned Award as though sitting in appeal over the reasoning
adopted by the tribunal . Minor inadequacies in reasoning,
imperfect articulation or stray observations cannot be transmuted
into grounds for annulment unless they strike at the very root of the
arbitral determination and render the Award wholly unsustainable
in law”.
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2026 SCC OnLine Del 4472
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44. In view of the above, the aforesaid submission is of no aid to
the Petitioner in the facts of the present case. A holistic reading of the
impugned Award reveals that the learned Arbitrator has not decided
the disputes on considerations of justice, fairness or equity. The
ultimate relief granted is neither ex facie contrary to, nor dehors , the
terms of the Contract, but is based on the evidences and pleadings on
record and is in line with the conditions stipulated in the Contract.
45. The reference to “justice, fairness and equity” appears only in
the concluding part of the impugned Award and cannot alter its true
character. To hold otherwise would amount to giving undue weight to
one isolated expression over the substance of the impugned Award. At
best, the expression used by the learned Arbitrator can be
characterised as an infelicitous choice of words and, by itself, does not
furnish a ground for interference under Section 34 of the Act on the
ground of contravention of Section 28(2).
46. In view of the above reasons, no ground for interference under
Section 34 of the Act is made out.
47. Accordingly, the present petition is dismissed.
OM PRAKASH SHUKLA, J
OCTOBER 14, 2026/ gunn/at
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