Cavera Systems (India) Pvt. Ltd. & Anr. vs Technology Development Board
- Court
- Delhi High Court
$~60
* IN THE HIGH COURT OF DELHI AT NEW DELHI
# CNR No. DLHC012223932016
+ O.M.P. (COMM) 415/2016
CAVERA SYSTEMS (INDIA) PVT. LTD. & ANR.
....Petitioners
Through: Mr. Alok Kumar, Sr. Adv. with
Mr. Varun Maheshwari, Mr.
Amit Kumar Singh, Mr. Manan
Soni, Ms. Kavita Bardia and Ms.
Suhani Jain, Advs.
versus
TECHNOLOGY DEVELOPMENT BOARD .....Respondent
Through: Mr. Rakesh Kumar Singh and
Ms. Sonali Singh, Advs.
CORAM:
HON'BLE MR. JUSTICE OM PRAKASH SHUKLA
JUDGMENT(ORAL)
% 18.08.2026
1. The present petition under Section 34 of the Arbitration and
1
Conciliation Act, 1996 has been filed by the Petitioners challenging
the Arbitral Award dated 25.05.2016 passed by the learned Sole
Arbitrator.
2
2. Technology Development Board is a Board constituted by the
Government of India under provisions of the Technology Development
Board Act, 1995 for assisting and disbursing loans to the
companies/organizations engaged in development and
1
“the Act”, hereinafter
2
“Respondent or TDB”, hereinafter
Signature Not Verified
O.M.P. (COMM) 415/2016 Page 1 of 12
Signed By:GUNN
Signing Date:01.09.2026
19:34:33
commercialization of indigenous technologies and adaptation of
imported technologies for wider domestic applications.
3. The Petitioner No.1 approached the Respondent for financial
assistance for its project titled “Development and Commercialization of
VERA PON System [Fibre to the Home (FTTH) optical access system].
4. A loan agreement dated 07.11.2007 was executed between the
parties and its terms were subsequently varied by a supplementary
agreement dated 16.07.2010.
5. The Respondent sanctioned loan assistance to the Petitioners. It
is alleged that the project was being developed in a technically sound
manner but, according to the Petitioners, could not be commercially
successful for reasons beyond their control.
6. Thus, the Petitioners’ sought rescheduling of the repayment of
the loan. In response, the Respondent agreed to rescheduling subject to
submission of post-dated cheques and execution of a second
supplementary agreement. The Petitioners did not accede to the said
condition.
7. The Respondent thereafter, issued a Show Cause Notice dated
19.12.2012 and subsequently recalled the financial facility by Notice
dated 01.02.2013. In reply to the recall notice, the Petitioners requested
the Respondent to declare the project as a failure and to waive the loan
with interest.
Signature Not Verified
O.M.P. (COMM) 415/2016 Page 2 of 12
Signed By:GUNN
Signing Date:01.09.2026
19:34:33
8. The disputes were thereafter referred to arbitration. Before the
learned Arbitral Tribunal, the Petitioners pleaded, inter alia , that the
project had failed and that they were entitled to waiver of the loan
amount and interest under Rule 19(13) of the Technology Development
3
Board Rules, 1996 . The learned Arbitral Tribunal framed, inter alia,
the following issues:
“6. Whether the Respondent is entitled to the waiver of the loan
amount and the interest thereon in terms of Rule 19(13) of the TDB
Rules, 1996?
7. Whether the Project undertaken by the Respondent was a
failure?”
9. The Arbitral Tribunal rejected the Petitioner’s objection that the
arbitral proceedings were premature, holding that the pendency of its
request for declaration of project failure and waiver of the loan under
Rule 19(13) of the TDB Rules did not constitute a condition precedent
to TDB’s invocation of arbitration or pursuit of its recovery claim.
10. The Tribunal further held that, under Article III of the Loan
Agreement, the determination of whether the project had succeeded or
failed was exclusively entrusted to the Monitoring
Committee/Technology Development Board, whose decision was final
and binding on Cavera.
11. Accordingly, the Tribunal treated the issues regarding project
failure and consequential waiver of loan as matters beyond its
jurisdiction and declined to adjudicate Issues No. 6 and 7.
3
“TDB Rules, 1996”, hereinafter
Signature Not Verified
O.M.P. (COMM) 415/2016 Page 3 of 12
Signed By:GUNN
Signing Date:01.09.2026
19:34:33
12. Since Petitioner had defaulted in repayment of the loan and had
not paid any instalment despite the supplementary agreement and recall
notice, the Tribunal allowed Respondent’s claim for recovery of the
outstanding loan amount along with interest and costs.
13. Issues No.6 and 7 were consequently decided in the negative and
against the Petitioners. The claim of the Respondent for recovery was
thereafter allowed. The learned Arbitral Tribunal held that a sum of
Rs.5,12,68,725/- was outstanding and awarded interest @ 10% p.a.
from 25.02.2013 till the date of the award and thereafter till full
realization besides cost of Rs.50,000/-.
14. Learned Counsel for the Petitioners submits that the impugned
award is in violation of Section 34(2)(b)(11) of the Act being against
the public policy of India. It is submitted that the Respondent did not
raise the plea of lack of jurisdiction at the appropriate stage and that the
objection was introduced only after the final arguments.
15. Learned Counsel appearing for the Petitioners has also
highlighted the statutory scheme governing jurisdictional challenge set
out in Sections 4 and 16 of the Act. Section 4 and 16 are reproduced
hereinbelow:
“4. Waiver of right to object.—A party who knows that—
(a) any provision of this Part from which the parties may
derogate, or
(b) any requirement under the arbitration agreement,
has not been complied with and yet proceeds with the arbitration
without stating his objection to such non-compliance without undue
delay or, if a time limit is provided for stating that objection, within
Signature Not Verified
O.M.P. (COMM) 415/2016 Page 4 of 12
Signed By:GUNN
Signing Date:01.09.2026
19:34:33
that period of time, shall be deemed to have waived his right to so
object.
16. Competence of arbitral tribunal to rule on its jurisdiction.-
16(2) A plea that the arbitral tribunal does not have jurisdiction
shall be raised not later than the submission of the statement of
defence; however, a party shall not be precluded from raising such
a plea merely because that he has appointed, or participated in the
appointment of, an arbitrator.
16(3) A plea that the arbitral tribunal is exceeding the scope of its
authority shall be raised as soon as the matter alleged to be beyond
the scope of its authority is raised during the arbitral proceedings.
16(4) The arbitral tribunal may, in either of the cases referred to
in sub-section (2) or sub-section (3), admit a later plea if it considers
the delay justified.”
16. It is also submitted that the Respondent actively participated in
trial on Issues No.6 and 7. It cross-examined the Petitioners’ witnesses
on these issues and led its own evidence without seeking to reserve any
right or demur to jurisdiction.
17. Per contra , learned Counsel for the Respondent submits that the
arbitration was validly invoked under Article X Clause 10.1 of the Loan
Agreement, which provided for arbitration of disputes but excluded
matters for which the Agreement specifically provided a separate
mechanism for determination.
18. According to learned Counsel for the Respondent, the issue of
whether the project was successful or had failed was expressly entrusted
to the Monitoring Committee/Board under Article III, and its decision
was final and binding on petitioner. Therefore, the arbitrator had no
jurisdiction to decide project failure or consequent waiver of the loan.
Signature Not Verified
O.M.P. (COMM) 415/2016 Page 5 of 12
Signed By:GUNN
Signing Date:01.09.2026
19:34:33
19. Learned Counsel for the Respondent argued that the request for
waiver under Rule 19(13) of the TDB Rules did not create any
enforceable right in favour of Petitioner and was only a matter for
consideration by the Board after a declaration of project failure, which
was not a condition precedent for initiating recovery proceedings.
20. Learned Counsel further relied on Article 9.1 of the Agreement
to contend that any delay or inaction by the Board in exercising its rights
would not amount to waiver of its remedies. It is also submitted that
Petitioner had already been granted extensions through the
Supplementary Agreement dated 16.07.2010 but failed to comply with
subsequent restructuring requirements, including execution of another
supplementary agreement and furnishing post-dated cheques.
21. Therefore, according to Respondent, Petitioner remained liable
to repay the loan amount, and its plea of project failure could not defeat
TDB’s recovery claim.
22. I have heard both the parties and perused the record .
23. The principal ground raised by Petitioner for non-payment of
loan amount was (i) project failure (ii) entitlement of loan waiver.
However, according to the Petitioner, the tribunal refused to decide the
defences of the Petitioner.
24. According to learned Counsel for the Petitioner, if the Tribunal
Signature Not Verified
O.M.P. (COMM) 415/2016 Page 6 of 12
Signed By:GUNN
Signing Date:01.09.2026
19:34:33
had no power to decide on the Petitioner's substantial defences, it could
not decide the dispute effectively. In such a case Arbitral Tribunal must
have recused itself from jurisdiction or at least held the arbitration to be
premature till the same is decided by the TDB.
25. I am of the view that before examining this issue raised by the
Petitioner, it would be relevant to go through the contractual scheme
between the parties for adjudication of disputes.
26. Article 3.5 and 10.1 assume significance in this regard, the same
read as follows:
“ “ 3.5 The decision of the Monitoring Committee/Board regarding
successful completion or failure of the project shall be final and
binding on the Borrower.
10.1 If any dispute or difference arises between the Parties hereto
as to the construction, interpretation, effect and implication of any
provision of this Agreement including the rights or liabilities or any
claim or demand of any Party against other or in regard to any
matter under these presents but excluding any matters, decisions or
determination of which is expressly provided for in this Agreement,
such disputes or differences shall be referred to the sole arbitration
of the Chairperson, Technology Development Board or that of his
nominee and the decision of such arbitrator shall be conclusive and
binding on the Parties hereto. → A reference to the arbitration
under this Clause shall be deemed to be submission within the
meaning of the Arbitration And Conciliation Act, 1996 and the rules
framed thereunder and any statutory modifications thereof for the
time being in force, which shall be deemed to apply to the arbitration
proceedings under this Clause.”
27. Upon a plain reading of the above, it can be made out that the
Loan Agreement itself created a mechanism whereby the Monitoring
Committee was empowered under Article 3.5 to determine whether the
Signature Not Verified
O.M.P. (COMM) 415/2016 Page 7 of 12
Signed By:GUNN
Signing Date:01.09.2026
19:34:33
project had succeeded or failed, and such decision was made final and
binding on the borrower.
28. Further, Article 10.1 expressly excluded matters “ the decisions
or determination of which is expressly provided in this Agreement ”
from the scope of arbitration.
29. Thus, according to this court, the Tribunal correctly held that
while it had jurisdiction to decide Respondent’s claim for recovery of
the loan amount, it could not assume the role of the Monitoring Board
and adjudicate whether the project had failed.
30. The waiver claim under Rule 19(13) was only consequential to a
prior declaration of failure and could not be invoked as a defence in the
absence of such declaration.
31. According to this Court, the Tribunal did not hold that it lacked
jurisdiction to decide the entire dispute or respondent’s recovery claim
as it held only that one particular determination i.e. whether the project
had succeeded or failed was contractually reserved to the Monitoring
board under Article 3.5 and excluded from arbitration by Article 10.1.
32. More importantly, the Tribunal did not merely leave Petitioner’s
waiver defence undecided as it held that under Rule 19(13), waiver
could arise for consideration only after the project had first been
declared a failure, and since there was no such declaration, the condition
precedent for Petitioner’s waiver defence had not arisen.
Signature Not Verified
O.M.P. (COMM) 415/2016 Page 8 of 12
Signed By:GUNN
Signing Date:01.09.2026
19:34:33
33. Thus, on the Tribunal’s reasoning, there was no necessity either
to recuse from the entire arbitration or to hold Respondent’s recovery
claim premature.
34. Moreover, the contention that the Tribunal ought to have recused
itself or treated the reference as premature does not, ipso facto , furnish
a ground for interference under Section 34.
35. Unless the Petitioner demonstrates that the Tribunal’s decision to
proceed with the recovery claim, while treating project failure as an
excepted matter, contravenes or ignored an express contractual
provision, or is an impossible interpretation of the Agreement, or
otherwise results in a patent illegality going to the root of the award.
This court cannot substitute its own view as to how the arbitral
proceedings ought to have been conducted.
36. Moving forward, the next ground which the Petitioner has raised
before this court, is that the plea of lack of jurisdiction was not raised at
the appropriate stage and that the objection was introduced only after
the final arguments, thus amounting to violation of principle of natural
justice.
37. At this juncture, it would be relevant to refer to under section 18
and 34(2) (a)(iii) of the Act.
“18. Equal treatment of parties. —The parties shall be treated with equality
and each party shall be given a full opportunity to present this case.
Signature Not Verified
O.M.P. (COMM) 415/2016 Page 9 of 12
Signed By:GUNN
Signing Date:01.09.2026
19:34:33
34(2)(a)(iii) the party making the application was not given proper notice
of the appointment of an arbitrator or of the arbitral proceedings or was
otherwise unable to present his case;”
38. It can be made out that Section 18 of the Act requires the arbitral
tribunal to treat both parties equally and give each party a full
opportunity to present its case, while Section 34(2)(a)(iii) provides a
ground to set aside an award where a party was not given proper notice
of the arbitral proceedings or was otherwise unable to present its case.
39. However, this court is of the view that these sections are not
attracted because the Tribunal did not ignore Petitioner’s defence of
project failure and loan waiver.
40. The Tribunal examined the contractual framework under Article
3.5, Article 10.1 and Rule 19(13) and held that the question whether the
project had failed was expressly reserved for determination by the
Monitoring board and consequently was therefore outside the
Tribunal’s jurisdiction.
41. The Tribunal further held that waiver under Rule 19(13) could
arise for consideration only after such a declaration of failure had been
made, and since no such declaration existed, Petitioner’s plea for waiver
had not crystallised into an enforceable defence before the Tribunal.
Thus, the defence was not left unadjudicated.
42. The contention that jurisdictional objection was raised only after
final arguments and that Cavera had no opportunity to respond cannot
also ipso facto lead to a ground of setting aside an award.
Signature Not Verified
O.M.P. (COMM) 415/2016 Page 10 of 12
Signed By:GUNN
Signing Date:01.09.2026
19:34:33
43. According to this Court, merely showing that the objection was
raised late is not enough to set aside the award. Petitioner must
additionally establish that the jurisdictional submission introduced a
case, and that it had no meaningful opportunity to answer it, and this
caused actual prejudice.
44. The law is settled that Section 34(2)(a)(iii) is attracted only when
a party was genuinely prevented from presenting its case, and not
merely because the Tribunal ultimately accepted a legal argument
against it.
45. In facts of this case, Petitioner’s own defence was based on
project failure, and Rule 19(13), and the Loan Agreement. The
contractual mechanism i.e. Articles 3.5 and 10.1 were therefore not
some new factual material or undisclosed evidence introduced later or
behind petitioner’s back.
46. This Court is of the view that the aforesaid provisions were of the
very agreement governing Petitioner’s defence and petitioner had
already placed before the Tribunal its entire case as to why the project
had failed and why it was entitled to waiver.
47. The Tribunal thereafter interpreted those contractual provisions
and held that the determination of project failure was reserved to the
Monitoring Committee and excluded from arbitration. Thus, in view of
this court, petitioner was not prevented from presenting the factual or
Signature Not Verified
O.M.P. (COMM) 415/2016 Page 11 of 12
Signed By:GUNN
Signing Date:01.09.2026
19:34:33
contractual basis of its defence.
48. Thus, it cannot be said that the Petitioner was unable to present
its case and suffered demonstrable prejudice.
49. According to this court, Section 34(2)(a)(iii) is not triggered here
and the impugned award does not warrant this court’s interference
under section 34 of the Act.
50. For all the aforesaid reasons, the present petition is dismissed.
OM PRAKASH SHUKLA, J
AUGUST 18, 2026/ gunn/ss
Signature Not Verified
O.M.P. (COMM) 415/2016 Page 12 of 12
Signed By:GUNN
Signing Date:01.09.2026
19:34:33