Mmtc Limited vs M/S Knowledge Infrastructure & Anr.

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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 14.05.2026
Judgment pronounced on: 20.05.2026
Judgment uploaded on: 20.05.2026
+ FAO(OS)(COMM) 109/2026
MMTC LIMITED .....Appellant
Through: Ms. Nandita Rao, Sr. Adv.
along with Mr. Akhil Sachar,
Ms. Sunanda Tulsyan, Ms.
Shweta Pattnaik, Ms. Babita
Rawat, Ms. Kashish
Maheshwari and Mr. Ujjwal
Sharma, Advs.

versus

M/S KNOWLEDGE INFRASTRUCTURE & ANR.
.....Respondents
Through: Mr. Rajshekhar Rao, Sr. Adv.
along with Ms. Manali Singhal,
Mr. Santosh Sachin, Mr.
Deepak Singh Rawat and Ms.
Tarini Khurana, Advs.

CORAM:
HON'BLE MR. JUSTICE ANIL KSHETARPAL
HON'BLE MR. JUSTICE AMIT MAHAJAN
J U D G M E N T
ANIL KSHETARPAL, J.
1. The present Appeal under Section 37 of the Arbitration and
Conciliation Act, 1996 [hereinafter referred to as ‘Act of 1996’] seeks
to set-aside the Impugned Judgment dated 19.03.2026 passed by the
Single Bench (SB), whereby the view of the Arbitral Tribunal (AT) to
refuse to set off the payments to be payable by the Appellant to East
Signature Not Verified
Signed By:SAVITA
PASRICHA
Signing Date:20.05.2026
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FAO(OS)(COMM) 109/2026 Page 1 of 8

Coast Railways (ECR), came to be upheld.
2. Pursuant to an agreement between the Appellant and Damodar
Valley Corporation (DVC) for supply of non-coking steam coal at
three Thermal Power Stations (TPS) of DVC, the parties herein vide
Tripartite Agreement dated 01.08.2012, agreed to supply 1.119 MMT
of non-coking steam coal in bulk to the aforementioned TPSs. While
Respondent No.1, under the Agreement, was to arrange stevedoring,
handling, storage, port clearances, railways rakes, loading,
transportation and delivery to the TPS, the Respondent No.2, being an
overseas supplier of coal, was bestowed the duty of supplying coal to
the Appellant at Paradip, Haldia, Dharma and other eastern ports of
India.
3. Upon dispute arising between the parties pertaining to
outstanding payments, the Respondents invoked the Arbitration
Clause, raising claims, inter alia , against the amounts retained by the
Appellant, totalling to sum of Rs.1,64,38,456/- towards Railway
Surcharge (Claim No.3) and Rs.56,93,579/- towards detention charges
of adjustment of overloaded wagons (Claim No.4).
4. The aforestated claims came to be allowed by the AT in favour
of the Respondents. It was held that the amount payable towards
Railway surcharge is time barred since Eastern Central Railways
(ECR) did not claim the same for over five years since 2014 and,
therefore, the same could not have been retained by the Appellant.
Aggrieved thereby the Appellant approached the SB under Section 34
of the Act of 1996.
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Signed By:SAVITA
PASRICHA
Signing Date:20.05.2026
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5. The opinion formed by the AT was upheld by the SB, with a
further observation that in case, ECR was to deduct amount from other
ongoing projects of the Appellant, it would be at liberty to invoke the
indemnity bonds signed by the Respondents. Aggrieved by the same,
the Appellant has filed the present Appeal seeking our indulgence.
6. In order to appreciate the controversy, it would be apposite to
note the clause contained in the Tripartite Agreement, on which the
Appeal is to be premised, which reads as follows:
“ 5.2 HANDLING CHARGES AND OTHER REIMBURSABLE
EXPENSES PAYABLE TO KISPL
(ii) KISPL has to ensure that there is no under loading of
wagons. However, in case of under loading the charges of
proportionate basis shall be recovered from KISPL’s dues. All other
charges like Demurrage/Dispatch, Wharfare, Overloading/Under
loading charges etc. as applicable for Ports and Railways shall be to
the account of KISPL. Any delay/detention charges of Rakes at DVC’s
Power plants shall be to the account of MMTC/DVC . ”
(Emphasis Supplied)
7. On 23.04.2026, while issuing notice to the Respondents, this
Court identified the issue requiring adjudication, which was to
determine whether the AT was justified in refusing to set off the
payments claimed by the ECR from the Appellant on account of
demurrage and overloading charges which were payable by
Respondent No.1.
8. Learned senior counsel representing the Appellant urged that
the AT has acted beyond its jurisdiction by travelling outside the four
walls of contract, in particular, Clause 5.2 of the Tripartite Agreement.
9. It has also been urged that the view taken by the SB, is not
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Signed By:SAVITA
PASRICHA
Signing Date:20.05.2026
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correct since the Award dated 07.11.2019 is against the public policy
inasmuch as it is contrary to the law of limitation, which only bars the
remedy and not the right.
10. Accordingly, the view of the SB that the challenge did not fall
within the scope of Section 34 of the Act of 1996 was erroneous.
11. In support of her submissions, learned senior counsel has placed
reliance on Indian Oil Corporation Limited Through its Senior
Manager v. M/s Shree Ganesh Petroleum Rajgurunagar, through its
1
Proprietor , Food Corporation of India v. Chanu Construction and
2
Another , PSA Sical Terminals Pvt. Ltd. v. The Board of Trustees of
3
V.O. Chidambranar Port Trust Tuticorin and Others , Sepco
Electric Power Construction Corporation v. GMR Kamalanga
4 5
Energy Ltd. and Associate Builders v. DDA .
12. Per contra, learned senior counsel representing the
Respondents, while supporting the findings rendered by the AT and
SB, has opposed the present Appeal, in as much as the same does not
call for any interference.
13. Additionally, it was also contended that the Respondents are
willing to give unconditional undertaking, in addition to indemnity,
for any dues that may be payable by the Petitioner to the ECR.
14. At the outset, we may highlight that the jurisdiction exercised
by a Court under Section 37 of the Act of 1996, is limited to the

1
(2022) 4 SCC 463
2
(2007) 4 SCC 697
3
2023 (15) SCC 781
4
2026 (2) SCC 542
5
(2015) 3 SCC 49
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Signed By:SAVITA
PASRICHA
Signing Date:20.05.2026
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grounds stipulated under Section 34 thereof, and the Courts are not
expected to reassess the merits of the dispute. However, such restraint
under Section 34 does not divest the Court of its power to interfere
where an award suffers from patent illegality, particularly in
contravention of Section 28(3) of the Act of 1996, which mandates
that the AT shall decide the disputes in accordance with the terms of
the contract. [ See: Associate Builders (Supra) ].
15. In the instant case, the question highlighted in Paragraph No.6
( Supra ), hinges on the relevance of Clause 5.2 of the Tripartite
Agreement, which has been relied upon by the Appellant. Needless to
state that, arbitration proceedings are founded upon party autonomy,
and the AT, being a creature of the contract, remains bound by the
allocation of rights and liabilities consciously agreed upon between
the parties.
16. Clause 5.2 herein is ex-facie unambiguous and particularly
imposes the liability for payment of any additional charges in relation
to Railways upon the Respondent No.1. The second limb of the clause
states, ‘… All other charges like Demurrage/Dispatch, Wharfare,
Overloading/Under loading charges etc. as applicable for Ports and
Railways shall be to the account of KISPL…’, thereby making it
evident that the particulars under Claim Nos.3 and 4 fall within the
ambit of the said stipulation, rendering the Respondent No.1
contractually liable to bear such charges.
17. In such circumstances, once a demand had already been raised
by ECR against the Appellant on 23.01.2014 towards ‘to-pay
surcharge’ for delayed payment of freight for the time period of April,
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Signed By:SAVITA
PASRICHA
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2013 to August, 2013, the Appellant was justified in withholding and
adjusting the corresponding amounts from the dues payable to the
Respondent No.1.
18. In this regard, it is apposite to note that upon a consolidated
demand of Rs. 4,78,17,458/- raised by the ECR, the Respondent No.1
disputed such levy on the ground that timely payments had been made
and requested the Appellant to seek withdrawal of the said demand by
the ECR. However, ECR vide its communication dated 01.09.2014,
declined to withdraw the same, thereby requesting to clear said dues at
the earliest.
19. Thus, the liability stood crystallised and enforceable against the
Appellant. Despite the aforestated, the AT as well as the SB failed to
give effect to the express stipulation in Clause 5.2, thereby proceeding
in a manner that effectively diluted the contractual burden, which lies
on the Respondent No.1.
20. Similarly, we do not agree with the view of SB that the
Appellant could invoke the indemnity bonds in the event of future
deductions by ECR. The Tripartite Agreement does not stipulate that
the Appellant must first discharge liabilities attributable to Respondent
No.1 and thereafter seek reimbursement through a separate
indemnificatory mechanism. Thus, such an interpretation by the SB
travels beyond the four corners of the Agreement.
21. Moreover, the Respondents have failed to challenge the dues
sought by ECR. In such circumstances, if in future, the Respondents
get a declaration, exempting it from the aforesaid liability they shall
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Signed By:SAVITA
PASRICHA
Signing Date:20.05.2026
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be at liberty to approach the appropriate Court in accordance with law
for recovery of the concerned amount.
22. The view taken by the AT that the bar of limitation in respect of
claim of ECR would absolve the right of the Appellant to effect the
set-off against the Respondent No.1 is equally untenable. It is well
settled that limitation merely bars the remedy and not the underlying
right, unless the statute expressly provides otherwise.
23. The expiry of limitation may preclude ECR from independently
enforcing its claim by way of legal proceedings, but it does not
extinguish the contractual liability undertaken by the Respondent No.1
under Clause 5.2, nor does it divest the Appellant of its right to effect
contractual set-off.
24. The view that lapse of time rendered the liability itself
incapable of adjustment proceeds on a fundamental misconception of
law of limitation. The Appellant herein, is not seeking an independent
recovery against the Respondent No.1 but merely adjusting amounts
contractually attributable to them pursuant to a crystallised demand
already raised by ECR. Such adjustment, being in the nature of set-off
arising from mutual obligations, cannot be defeated merely on the
ground that the original claim of ECR may have become time barred.
25. In view of the foregoing discussion and findings, this Court is
of the opinion that findings rendered by the Arbitral Tribunal, as
affirmed by the Single Bench, are contrary to the express terms of the
Tripartite Agreement and suffers from patent illegality.
26. Accordingly, the present Appeal is allowed and the Impugned
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Signed By:SAVITA
PASRICHA
Signing Date:20.05.2026
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Judgment dated 19.03.2026 along with the Award dated 07.11.2019 to
the extent it allowed Claim Nos.3 and 4 of the Respondents for sums
of Rs.1,64,38,456/- towards Railway Surcharge and Rs.56,93,579/-
towards detention charges arising out of adjustment of overloaded
wagons, respectively, which had been withheld by the Appellant for
the purpose of set-off against the claims raised by the ECR towards
‘to-pay surcharge’ for delayed payment of freight from the Appellant,
is hereby set-aside.
27. The pending applications also stand closed.
28. At the cost of repetition, it is clarified that in case of exemption
from the liability of the aforesaid amounts, the Respondents shall be at
liberty to claim the same from the Appellant, in accordance with law.

ANIL KSHETARPAL, J.

AMIT MAHAJAN, J.
MAY 20, 2026
s.godara/hr
Signature Not Verified
Signed By:SAVITA
PASRICHA
Signing Date:20.05.2026
16:43:27
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