Bharat Heavy Electricals Ltd. (Trichy) vs Sarr Freight Corporation & Anr.

$~12
* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Date of decision: 05.11.2026

# CNR No. DLHC010647572025
+ FAO (COMM) 249/2025 & CM APPL. 55794/2025
BHARAT HEAVY ELECTRICALS LTD. (TRICHY)
.....Appellant
Through: Mr. Suraj Kumar Singh, Mr.
Bharat Singh, Ms. Julie Singh,
Advs.

versus

SARR FREIGHT CORPORATION & ANR. .....Respondents

Through: Mr. Rohan Chandra, Mr.
Divyam Agarwal, Advs.

CORAM:
HON'BLE MR. JUSTICE AVNEESH JHINGAN
HON'BLE MS. JUSTICE SHAIL JAIN

AVNEESH JHINGAN, J. (ORAL)
1. The present appeal is filed under Section 37 of the Arbitration
and Conciliation Act, 1996 (for short ‘the Act’) assailing the judgment
dated 17.05.2025 (for short ‘the impugned judgment’) passed by the
District Judge (Commercial Court-03), Patiala House Courts, New
Delhi (hereinafter ‘the Commercial Court’).

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BRIEF FACTS
2. The appellant, Bharat Heavy Electricals Limited (hereinafter
‘BHEL’) is a public sector undertaking engaged in the manufacture of
power boilers and their components. BHEL floated tender
(LOG/CCC/14-15/4017E) dated 26.07.2014 for handling and
transportation of boiler components from Sone Nagar Railway Siding,
Bihar to the Nabinagar, site of M/s Nabinagar Power Generation
Company Limited (for short ‘NPGC’), the project owner. Sarr Freight
Corporation (hereinafter ‘the respondent’) was the successful bidder
and was awarded the work vide Letter of Intent dated 11.09.2014 (for
short ‘LOI’).
2.1 During execution of the work a dispute arose between the
parties to the lis with regard to non-payment of the outstanding
transportation charges by BHEL to the respondent.
2.2 The arbitration invoked by the respondent culminated in the
award dated 28.10.2022. The pleaded case of BHEL was that the
respondent had subcontracted the work to Anuj Kumar in
contravention of Clause 7 of the General Terms and Conditions of
Contract (for short ‘GCC’). BHEL further pleaded that it had paid
Rs.18,30,220/- to the respondent towards the work executed.
Subsequently, Anuj Kumar approached NPGC alleging non-payment
of dues by the respondent. On 31.03.2016, NPGC paid Rs.19,80,849/-
to Anuj Kumar and adjusted the amount against the running bills of
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BHEL. The arbitrator held that BHEL had failed to establish that the
work was subcontracted to Anuj Kumar. It was observed that Anuj
Kumar was engaged in limited capacity. The respondent was awarded
Rs.13,73,260/- as outstanding transportation charges, Rs.1,83,022/-
for security deposit, Rs.1,50,000/- towards earnest money deposit and
Rs.41,000/- for bank guarantee along with interest @8% per annum
till actual payment. The counter claims of BHEL were rejected.
2.3 The Commercial Court vide the impugned judgment dismissed
the objections filed by BHEL under Section 34 of the Act. Hence, the
present appeal.
SUBMISSIONS OF THE PARTIES
3. Learned counsel for BHEL contends that the Commercial Court
failed to consider the relevant documents on record and erroneously
dismissed the objections observing that the arbitrator had examined
the evidence adduced by the parties. Reliance is on M/s. Divyam Real
Estate Pvt. Ltd. v. M/s. M2K Entertainment Pvt. Ltd. , O.M.P.
(COMM) 162/2020 decided on 22.05.2024 and I-Pay Clearing
Services (P) Ltd. v. ICICI Bank Ltd., (2022) 3 SCC 121 to contend
that an award is liable to be set aside where material evidence is
ignored.
3.1 The submission is that Clause 7 of the GCC prohibited the
respondent from subcontracting the work without prior written
approval of BHEL yet the respondent subcontracted the entire work to
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Anuj Kumar. Reliance is placed on the letter dated 15.12.2014 written
by Anuj Kumar to BHEL, emails dated 23.09.2014, 10.10.2014 and
23.11.2014 sent by the respondent to Anuj Kumar, the letter dated
15.01.2016 issued by NPGC and the work order dated 22.09.2014
issued by the respondent in favour of Anuj Kumar, to buttress the
submission.
4. Per contra , the impugned judgment is defended. The contention
is that the scope of interference under Section 37 of the Act is limited.
The Court cannot sit in appeal over the award or the impugned
judgment. The well-reasoned award taking a plausible view was
upheld by the Commercial Court under Section 34 of the Act and calls
for no interference.
5. Heard learned counsel for the parties at length. Though written
submissions are on record, no contentions other than those noted
above were pressed.
ANALYSIS
6. It is settled law that in an appeal under Section 37 of the Act,
the Court is only required to examine whether the exercise of
jurisdiction under Section 34 of the Act was within the four corners of
the provision. Reference in this regard be made to the following
decisions of the Supreme Court:
6.1 In AC Chokshi Share Broker (P) Ltd. v. Jatin Pratap Desai ,
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(2025) 5 SCC 321 it was held:
“29. The limited supervisory role of courts while reviewing
an arbitral award is stipulated in Section 34 of the Act, be-
yond whose grounds courts cannot intervene and cannot
correct errors in the arbitral award. [McDermott Internation-
al Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181, para
52] The appellate jurisdiction under Section 37 is also lim-
ited, as it is constrained by the grounds specified in Section
34 and the court cannot undertake an independent assess-
ment of the merits of the award by reappreciating evidence
or interfering with a reasonable interpretation of contractual
terms by the Arbitral Tribunal. [MMTC Ltd. v. Vedanta
Ltd., (2019) 4 SCC 163, para 14 : (2019) 2 SCC (Civ) 293;
Konkan Railway Corpn. Ltd. v. Chenab Bridge Project,
(2023) 9 SCC 85, para 25 : (2023) 4 SCC (Civ) 458.] The
court under Section 37 must only determine whether the
Section 34 court has exercised its jurisdiction properly and
rightly, without exceeding its scope. [MMTC Ltd. v. Vedan-
ta Ltd., (2019) 4 SCC 163, para 14 : (2019) 2 SCC (Civ)
293; Bombay Slum Redevelopment Corpn. (P) Ltd. v.
Samir Narain Bhojwani, (2024) 7 SCC 218, para 26.]”
6.2 In SEPCO Electric Power Construction Corpn. v. GMR Ka-
malanga Energy Ltd., (2026) 2 SCC 542 it was held:
“72. The decision in MMTC [MMTC Ltd. v. Vedanta Ltd.,
(2019) 4 SCC 163 : (2019) 2 SCC (Civ) 293] , as referenced
recently by a coordinate Bench of this Court in Reliance In-
frastructure Ltd. [Reliance Infrastructure Ltd. v. State of
Goa, (2024) 1 SCC 479 : (2024) 1 SCC (Civ) 412] , unfolds
in an involute manner that a court under Section 37 of the
1996 Act can only determine as to whether the court con-
cerned under Section 34 has not travelled beyond the pa-
rameters of the scope therein. No independent evaluation is
permitted on the merits of the award.”
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(Emphasis supplied)
7. The contention of learned counsel for BHEL that the
Commercial Court ignored material evidence on record while
upholding the finding that there was no subcontracting between the
respondent and Anuj Kumar, lacks merit. The Commercial Court held
that the finding returned by the arbitrator was supported by cogent
reasons. The arbitrator upon consideration and appreciation of the
evidence recorded a factual finding that the arrangement between the
respondent and Anuj Kumar was not of subcontracting. The
engagement of Anuj Kumar by the respondent in a limited capacity to
provide transportation vehicles was permissible under the terms and
conditions agreed between the parties.
8. The letters, emails and work order relied upon by learned
counsel for BHEL to establish that the entire work awarded to the
respondent was subcontracted to Anuj Kumar are not substantiating
the contention.
8.1 The letter dated 15.12.2014 issued by Anuj Kumar to BHEL
sought release of payment to the respondent for the work awarded and
contains nothing to prove that the work was subcontracted to Anuj
Kumar.
8.2 Learned counsel for BHEL pressed into service the email dated
23.09.2014, sent by the respondent to Anuj Kumar wherein it was
stated that the work order for the subject work was attached. However,
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no details of the work order were mentioned nor the attachment was
produced.
8.3 The e-mail dated 10.10.2014, addressed by the respondent to
Anuj Kumar pertained to the loading of trucks and is not evidence of
the awarded work having been sub-contracted.
8.4 The email dated 23.11.2014 sent by the respondent to Anuj
Kumar was for taking up the issue of pending payments with the
Accounts Department.
8.5 The letter dated 15.01.2016 issued by NPGC to BHEL pertains
to the issue of non-payment to Anuj Kumar and requests BHEL to
resolve the same.
8.6 Learned counsel for BHEL relied upon the work order dated
22.09.2014 issued by the respondent in favour of Anuj Kumar. The
subject of the work order refers to the handling and transportation of
panels, headers and boiler components etc., by road from Sone Nagar
(Bihar) Railway Siding to NTPC. It is pertinent to note that the entire
work order was not produced. Only the first page of the work order
was placed on record which does not advance the case of BHEL.
9. The law is well-settled that the scope of interference under
Section 34 of the Act is limited and the Court cannot reappreciate the
evidence or substitute its own view for the plausible view taken by the
arbitrator. In the present case, no ground is made out to interfere with
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the plausible view taken by the arbitrator. Reference in this regard be
made to the following decisions of the Supreme Court:
9.1 In Prakash Atlanta JV v. National Highways Authority of
India, 2026 INSC 76 it was held:
“59. (vi) If an arbitral tribunal’s view is found to be a
possible and plausible one, it cannot be substituted
merely because an alternate view is possible.
Construction and interpretation of a contract and its
terms is a matter for the arbitral tribunal to determine.
Unless the same is found to be one that no fair-minded
or reasonable person would arrive at, it cannot be
interfered with. If there are two plausible
interpretations of the terms of a contract, then no fault
can be found if the arbitrator accepts one such
interpretation as against the other. To be in conflict
with the public policy of India, the award must
contravene the fundamental policy of Indian law,
which makes it narrower in its application.”
9.2 In Punjab State Civil Supplies Corporation Limited & Anr.
V. M/s Sanman Rice Mills & Ors ., 2024 INSC 742 is was held:
“In paragraph 11 of Bharat Coking Coal Ltd. v.
L.K. Ahuja, it has been observed as under:

“11. There are limitations upon the scope of
interference in awards passed by an arbitrator.
When the arbitrator has applied his mind to the
pleadings, the evidence adduced before him and
the terms of the contract, there is no scope for the
court to reappraise the matter as if this were an
appeal and even if two views are possible, the
view taken by the arbitrator would prevail. So
long as an award made by an arbitrator can be
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said to be one by a reasonable person no
interference is called for. However, in cases where
an arbitrator exceeds the terms of the agreement
or passes an award in the absence of any
evidence, which is apparent on the face of the
award, the same could be set aside.”

(Emphasis supplied)

10. In the impugned judgment the plausible view taken by the
arbitrator after considering the evidence adduced was rightly upheld.
The evidence even now relied upon by learned counsel for BHEL to
contend that there was a violation of the contractual terms by
subcontracting the awarded work to Anuj Kumar does not substantiate
the case set-up by BHEL. There is no factual or legal error much less
perversity in the impugned judgment.
11. It is a trite law that the quality of evidence to be considered falls
within the exclusive domain of the arbitrator. Reference in this regard
be made to the following decisions of the Supreme Court:
11.1 In Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut
Utpadan Nigam Ltd ., (2019) 7 SCC 236 it was held:
“9.1. In Associate Builders [Associate Builders v.
DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], this
Court had an occasion to consider in detail the
jurisdiction of the Court to interfere with the award
passed by the Arbitrator in exercise of powers under
Section 34 of the Arbitration Act. In the aforesaid
decision, this Court has considered the limits of power
of the Court to interfere with the arbitral award. It is
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observed and held that only when the award is in
conflict with the public policy in India, the Court
would be justified in interfering with the arbitral
award. In the aforesaid decision, this Court considered
different heads of “public policy in India” which, inter
alia, includes patent illegality. After referring Section
28(3) of the Arbitration Act and after considering the
decisions of this Court in McDermott International Inc.
v. Burn Standard Co. Ltd. [McDermott International
Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181] ,
SCC paras 112-113 and Rashtriya Ispat Nigam Ltd. v.
Dewan Chand Ram Saran [Rashtriya Ispat Nigam Ltd.
v. Dewan Chand Ram Saran, (2012) 5 SCC 306] , SCC
paras 43-45, it is observed and held that an Arbitral
Tribunal must decide in accordance with the terms of
the contract, but if an Arbitrator construes a term of the
contract in a reasonable manner, it will not mean that
the award can be set aside on this ground. It is further
observed and held that construction of the terms of a
contract is primarily for an Arbitrator to decide unless
the Arbitrator construes the contract in such a way that
it could be said to be something that no fair-minded or
reasonable person could do. It is further observed by
this Court in the aforesaid decision in para 33 that
when a court is applying the “public policy” test to an
arbitration award, it does not act as a court of appeal
and consequently errors of fact cannot be corrected. 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 when he delivers his arbitral award. It is further
observed that thus 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
this score.”
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11.2 In Maharashtra State Electricity Distribution Co. Ltd. v. Datar
Switchgear Ltd. , (2018) 3 SCC 133 it was held:
“51. Categorical findings are arrived at by the Arbitral
Tribunal to the effect that insofar as Respondent 2 is
concerned, it was always ready and willing to perform
its contractual obligations, but was prevented by the
appellant from such performance. Another specific
finding which is returned by the Arbitral Tribunal is
that the appellant had not given the list of locations
and, therefore, its submission that Respondent 2 had
adequate lists of locations available but still failed to
install the contract objects was not acceptable. In fact,
on this count, the Arbitral Tribunal has commented
upon the working of the appellant itself and expressed
its dismay about lack of control by the Head Office of
the appellant over the field offices which led to the
failure of the contract. These are findings of facts
which are arrived at by the Arbitral Tribunal after
appreciating the evidence and documents on record.
From these findings it stands established that there is a
fundamental breach on the part of the appellant in
carrying out its obligations, with no fault of
Respondent 2 which had invested whopping amount of
Rs 163 crores in the project. A perusal of the award
reveals that the Tribunal investigated the conduct of the
entire transaction between the parties pertaining to the
work order, including withholding of DTC locations,
allegations and counter-allegations by the parties
concerning installed objects. The arbitrators did not
focus on a particular breach qua particular number of
objects/class of objects. Respondent 2 is right in its
submission that the fundamental breach, by its very
nature, pervades the entire contract and once
committed, the contract as a wholestands abrogated. It
is on the aforesaid basis that the Arbitral Tribunal has
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come to the conclusion that the termination of contract
by Respondent 2 was in order and valid. The
proposition of law that the Arbitral Tribunal is the
master of evidence and the findings of fact which are
arrived at by the arbitrators on the basis of evidence on
record are not to be scrutinised as if the Court was
sitting in appeal now stands settled by a catena of
judgments pronounced by this Court without any
exception thereto.”
(Emphasis supplied)
12. In view of the above, the appeal is dismissed. The award dated
28.10.2022 and the impugned judgment are upheld.
13. Pending application also stands dismissed.

AVNEESH JHINGAN, J

SHAIL JAIN, J
NOVEMBER 5, 2026
‘JK’
Reportable: Yes
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