FLOVEL ENERGY PVT LTD vs SLV POWER PRIVATE LIMITED

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

TH
DATED THIS THE 30 DAY OF OCTOBER, 2026

PRESENT


THE HON'BLE MRS. JUSTICE ANU SIVARAMAN

AND

THE HON'BLE MR. JUSTICE T.P.VIVEKANANDA


COMMERCIAL APPEAL NO.305 OF 2024

C/W

COMMERCIAL APPEAL NO.331 OF 2024



IN COMAP No.305/2024

BETWEEN:

FLOVEL ENERGY PVT. LTD.
A COMPANY REGISTERED UNDER THE COMPANIES
ACT, 1956
HAVING ITS CORPORATE OFFICE AT
VATIKA MINDSCAPES
SUITE NO.101-A
TOWER B, 12/3
MATHURA ROAD
FARIDABAD-121003
HARYANA
REPRESENTED HEREIN BY ITS
COMPANY SECERETARY
MR. KISHOR CHAUHAN


…APPELLANT





Digitally
signed by
PAVITHRA N
Location:
High Court of
Karnataka



(BY SRI. PROMOD NAIR, SR. COUNSEL A/W
SRI. K.S. PRADEEP SKANDAN, ADV.)

2

AND:

SLV POWER PRIVATE LIMITED
A COMPANY REGISTERED
UNDER THE COMPANIES ACT, 1956
HAVING ITS OFFICE AT:
YMK COMPOUND
ASHOK NAGAR
MANGALURU 575006
REPRESENTED THROUGH ITS DIRECTOR
MR. Y. ABDULLA JAVEED


…RESPONDENT
(BY SRI. DHYAN CHINNAPPA, SR. COUNSEL A/W
SRI. CYRIL PRASAD PAIS, ADV.)

THIS COMMERCIAL APPEAL IS FILED UNDER SECTION 13
(1A) OF THE COMMERCIAL COURTS ACT, 2015 READ WITH
SECTION 37 OF THE ARBITRATION AND CONCILIATION ACT,
1996, PRAYING TO I) CALL FOR RECORDS IN COMAP. NO.
201/2023 ON FILES OF LEARNED LXXXIII ADDITIONAL CITY
CIVIL AND SESSIONS JUDGE, BENGALURU (CCH-84)
(COMMERCIAL COURT), AS WELL AS THE ARBITRAL RECORDS
WHICH ARE PLACED BEFORE THE SAID COURT AND ETC.

3

IN COMAP NO. 331/2024

BETWEEN:

FLOVEL ENERGY PVT. LTD.
A COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956
HAVING ITS CORPORATE OFFICE AT
VATIKA MINDSCAPES
SUITE NO.101-A
TOWER B, 12/3
MATHURA ROAD
FARIDABAD-121003
HARYANA
REPRESENTED HEREIN BY ITS
COMPANY SECERETARY
MR. KISHOR CHAUHAN

...APPELLANT
(BY SRI. PROMOD NAIR, SR. COUNSEL A/W
SRI. K.S. PRADEEP SKANDAN, ADV.)

AND:

SLV POWER PRIVATE LIMITED
A COMPANY REGISTERED
UNDER THE COMPANIES ACT, 1956
HAVING ITS OFFICE AT:
YMK COMPOUND
ASHOK NAGAR
MANGALURU 575006

4

REPRESENTED THROUGH ITS DIRECTOR
MR. Y. ABDULLA JAVEED


…RESPONDENT
(BY SRI. DHYAN CHINNAPPA, SR. COUNSEL A/W
SRI. CYRIL PRASAD PAIS, ADV.)

THIS COMMERCIAL APPEAL IS FILED UNDER SECTION
13(1A) OF THE COMMERCIAL COURTS ACT, 2015 READ WITH
SECTION 37 OF THE ARBITRATION AND CONCILIATION ACT,
1996, PRAYING TO CALL FOR RECORDS IN COM.A.A.
NO.352/2023 ON FILES OF LEARNED LXXXIII ADDITIONAL CITY
CIVIL AND SESSIONS JUDGE, BENGALURU (CCH-
84)(COMMERCIAL COURT), AS WELL AS THE ARBITRAL RECORDS

WHICH ARE PLACED BEFORE THE SAID COURT AND ETC.

THESE COMMERCIAL APPEALS HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT ON 18.08.2026 AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, ANU SIVARAMAN
J., PRONOUNCED THE FOLLOWING:

CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN
and
HON'BLE MR. JUSTICE T.P.VIVEKANANDA

5

CAV JUDGMENT

(PER: HON'BLE MRS. JUSTICE ANU SIVARAMAN)

Commercial Appeals No.305/2024 and 331/2024 are
filed seeking to set aside the judgments and orders dated
29.06.2024 passed by the LXXXIII Additional City Civil and
Sessions Judge (CCH-84), Bengaluru ('Commercial Court' for
short) in Com.A.P.No.201/2023 and Com.A.A.No.352/2023,
respectively. In Com.A.P.No.201/2023, the Commercial
Court allowed the petition filed by the respondent herein
under Section 34 of the Arbitration and Conciliation Act,
1996 ('Arbitration Act' for short), and set aside the Arbitral
Award dated 14.09.2023. In the light of the same, the
Commercial Court also dismissed the petition filed under
Section 9 of the Arbitration Act in Com.A.A.No.352/2023.
2. We have heard Shri. Pramod Nair, learned Senior
Counsel as instructed by Shri. K. S. Pradeep Skandan,
learned Advocate appearing for the appellants in both the
appeals and Shri. Dhyan Chinnappa, learned Senior Counsel
as instructed by Shri. Cyril Prasad Pais, learned advocate
appearing for the caveator/respondents in both the appeals.

6

3. The respondent and the appellant entered into a
Supply Contract dated 20.05.2015, wherein the appellant
undertook to design and supply electromechanical

equipment for the respondent's project. It is contended that
the respondent did not fulfill the contractual obligations
which resulted in delays and also began defaulting on its
payment obligations. The parties thereafter, executed a
Memorandum of Understanding ("MoU" for short) dated
08.02.2018, which was in the nature of a one-time
settlement affording the respondent an opportunity to clear
its dues at a reduced sum. The MoU recorded the defaults
alleged against the respondent under the Supply Contract
and provided revised timelines for payment.
4. It is further contended that the respondent
violated Clause 3 of the MoU by failing to pay the amount
due, despite several reminders and opportunities to clear the
payments. Therefore, the appellant issued a Demand Notice
dated 20.07.2021 under Section 8 of the Insolvency and
Bankruptcy Code, 2016 demanding payment of
Rs.1,07,09,105/-, while expressly reserving its rights to

7

raise or revise its claims towards delays, damages,
overheads, and interest as per applicable law. The
respondent replied to the Demand Notice on 03.08.2021, by
placing reliance on the original Supply Contract and
disputing payment on the ground of the appellant’s alleged
failure to fulfil reciprocal obligations. The respondent did
admit to an outstanding liability of at least Rs.98,25,510/-,
without any corresponding payment being made. Thereafter,
the appellant issued a Rejoinder Notice dated 21.10.2021
under Section 21 of the Arbitration Act, contending that it
was no longer bound by Clause 3 of the MoU and was
entitled to rescind the MoU and recover the entire original
sum of Rs.2,48,30,815/- together with interest at 18% per
annum and proposed the appointment of an Adjudicator. As
on 21.10.2021, the appellant claimed that it was entitled to
at least Rs.4.20 crores, with interest continuing to accrue.
The respondent, in its reply dated 19.11.2021, disputed the
enforceability of the MoU dated 08.02.2018 contending that
it had been constrained to agree to its terms and that the
MoU had not been executed of its own free will.

8

5. Pursuant to the invocation of arbitration, a three-
member Arbitral Tribunal came to be constituted and held its
first sitting on 11.03.2022. The appellant filed its Statement
of Claim on 25.03.2022 quantified at over Rs.4,00,00,000/-,
while the respondent by its Statement of Defence and
Counter-Claim dated 15.09.2022, raised counter-claims
quantified at Rs.1,50,00,000/- for alleged loss of revenue.
The Arbitral Tribunal recorded the evidence adduced by the
parties and passed a unanimous Arbitral Award dated
14.09.2023 holding that the appellant was entitled to a sum
of Rs.3,75,44,030/- towards interest payable on delayed
payments under the Supply Contract, together with a further
sum of Rs.45,07,701/- towards the costs of the arbitration,
with interest at the rate of 8.54% per annum on all sums
awarded until the date of payment. The counter claim was
dismissed.
6. The appellant filed a petition under Section 9 of
the Arbitration Act along with an application under Order
XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908, as
Com.A.A.352/2023, seeking a temporary injunction

9

restraining the respondent from alienating, mortgaging,
dealing with, encumbering, transferring, creating third-party
rights in, or parting with possession of its assets, to the
extent of the awarded sum of Rs.4,20,51,731/- together
with interest. Aggrieved by the Arbitral Award, the
respondent filed a petition under Section 34 of the
Arbitration Act before the Commercial Court, seeking to set
aside the Award. On 29.06.2024, the Commercial Court, by
the Impugned Judgment, allowed the Section 34 petition
and set aside the Arbitral Award dated 14.09.2023, holding
that it suffered from patent illegality.
7. The Commercial Court dismissed the respondent’s
other grounds of challenge namely, as to constitution of the
Tribunal/jurisdiction, non-arbitrability and limitation but held
that the Arbitral Tribunal had erred in awarding the claims to
the appellant under the Supply Contract dated 20.05.2015
despite execution of the MoU dated 08.02.2018. The
Commercial Court held that the case was covered by Section
62 of the Indian Contract Act, 1872, in that the parties had
agreed to substitute a new contract (MoU) in place of the

10

original Contract, which accordingly stood novated and need
not have been performed. As a consequence of the setting
aside of the Award, the Commercial Court also dismissed the
appellant's Section 9 petition in Com.A.A.352/2023, on the
ground that no question of granting interim relief to secure
the awarded amount would arise once the Award itself had
been set aside. Aggrieved by the Impugned Judgments
dated 29.06.2024, the appellant has preferred the present
Commercial Appeals under Section 13(1A) of the
Commercial Courts Act, 2015, read with Section 37 of the
Arbitration Act.
8. The learned Senior counsel appearing for the
appellants contends that the Commercial Court sat in appeal
over the Arbitral Award rather than confining itself to the
grounds available under Section 34 of the Arbitration Act. It
is submitted that Section 34(2A) of the Arbitration Act
expressly bars setting aside an award merely for an
erroneous application of law or re-appreciation of evidence,
and that "patent illegality" does not extend to a mere error
of law by the tribunal. It is also contended that courts must

11

not interfere with an Arbitral Award in a "casual and cavalier
manner," and that where two interpretations of a contract
are plausible, the arbitrator's choice between them is not
open to correction under Section 34 or Section 37 of the
Arbitration Act.
9. It is further contended that a party alleging
novation under Section 62 of the Indian Contract Act, 1872
must specifically plead the facts on which novation is
founded, which was not done either before the Arbitral
Tribunal or before the Commercial Court. Therefore, the
Commercial Court erred in holding that there was novation
of contract.
10. It is further contended that the respondent had
throughout the arbitral proceedings and again in its Section
34 petition taken the specific stand that the MoU dated
08.02.2018 was unenforceable, being the product of undue
influence and fraud. It is contended that the Commercial
Court's finding of novation could not stand, since the very
instrument said to have effected the novation was on the
respondent's own contentions void. It is further contended

12

that the respondent could not be permitted to "approbate
and reprobate", by disowning the MoU as fraudulent while
simultaneously relying on it to contest the arbitrability and
quantification of the appellant's claims and that the
Commercial Court had disregarded this inconsistency.
11. It is further contended that even where a
subsequent agreement (MoU) is treated as a fresh contract,
the settled principle is twofold: (a) where a subsequent
agreement cannot be performed or enforced owing to the
default of the defaulting party, the claimant is not deprived
of the benefit of the original agreement merely because a
subsequent agreement was entered into; and (b) where
both parties, in substance, reject the subsequent agreement
and fall back on the earlier one, the earlier contract revives
and becomes binding. It is further contended that even
considering the respondent's case, findings on novation or
alteration of a contract are questions of fact falling squarely
within the Arbitral Tribunal's domain, and a court exercising
jurisdiction under Section 34 of the Arbitration Act cannot

13

substitute its own view for a plausible view taken by the
Tribunal.
12. It is further contended that the reasoning of the
Commercial Court was internally inconsistent, as on one
hand, it held that execution of the MoU resulted in novation
of the Supply Contract under Section 62 of the Indian
Contract Act, yet on the other, it agreed with the Arbitral
Tribunal's jurisdictional finding that any dispute arising out
of the MoU was traceable to the original Supply Contract. It
is therefore contended that these two findings could not co-
exist and that this contradiction demonstrates the absence
of any patent illegality in the Arbitral Award.
13. The learned senior counsel appearing for the

appellant places reliance on the following decisions:-
•
State of Maharashtra v. Hindustan
Construction Company Ltd., reported in (2010)
4 SCC 518;

•
Kanthamma Chandrashekhar & Anr. v. Rohan
Housing Private Limited & Ors., reported in
2019 SCC OnLine Kar 3522;

•
Union of India v. Mago Constructions Pvt. Ltd.,
reported in 2026 SCC OnLine Del 166;

14


•

Prakash Industries Ltd. v. Bengal Energy
Limited & Anr., reported in 2020 SCC OnLine
Cal 971;

•
Chhogalal v. Kanayalal, reported in 1958 SCC
OnLine Raj 16;

•
Mausumi Bhattacharjee v. Jumbo Chemicals &
Ors., reported in 2024 SCC OnLine NCLAT 2573;

•
Shrimoni Gurdwara Committee v. Jaswant
Singh, reported in (1996) 11 SCC 690;

•
UHL Power Company Limited v. State of
Himachal Pradesh, reported in (2022) 4 SCC
116;

•
Konkan Railway Corporation Limited v.
Chenab Bridge Project Undertaking, reported in
(2023) 9 SCC 85;

•
Dr. Sasidaran v. India Cements Capital Limited
& Ors., reported in 2010 SCC OnLine Mad 6038;

•
Reliance Industries Ltd. v. Gail (India) Ltd.,
reported in 2020 SCC OnLine Del 2041;

•

United Bank of India v. Ramdas Mahadeo
Prashad & Ors., reported in (2004) 1 SCC 252;

•
Chrisomar Corporation v. MJR Steels Private
Limited and Anr., reported in (2018) 16 SCC
117;

15

•
Manohur Koyal v. Thakur Das Naskar, reported
in MANU/WB/0010/1888;

•
Phani Bhusan Gupta v. Sm. Mira Roy, reported
in 1986 SCC OnLine Cal 73;

•
M. Farisa Begum & Ors., v. Smt. Syed M.
Fathima & Anr., reported in 1990 SCC OnLine
Ker 116; and

•
Steel Authority of India Ltd. v. Union of India
& Ors., reported in (2006) 12 SCC 233.


14. The learned senior counsel appearing for the
respondent contended that the appellant had itself failed to
supply, install, and commission the E&M equipment within
the stipulated time and that this delay, was not due to any
default of the respondent. It is contended that the MoU was
not executed of the respondent's free will but was itself the
product of undue influence and fraud. It is further
submitted that the MoU contained no arbitration clause, was
an agreement entirely independent of the Supply Contract,
and that any claim to enforce its terms lay before a civil
court of competent jurisdiction, and the Arbitral Tribunal had
no jurisdiction to grant relief founded on the MoU at all.

16


15. It is further contended that if the claim rested on
the Supply Contract, it ought to have been raised within
three years of 20.05.2015 and was therefore time-barred
and that even if founded on the MoU, the three-year period
expired on 07.02.2021, before the Section 21 notice of
21.10.2021. It is further contended that the Chairman,
Institution of Engineers (India) as opposed to the Chairman,
Institution of Engineers, Bengaluru, who alone was
empowered under Clauses 6.1 and 6.2 of the Supply
Contract. Further, the contractually mandated pre-arbitral
step of appointing an Adjudicator was never undertaken, as
the appellant had proceeded straight to nominating an
arbitrator without following this procedure, therefore the
Arbitral Tribunal was illegally constituted and without
jurisdiction to adjudicate the dispute at all.
16. It is further submitted that the transformers and
diesel generators supplied did not meet the specifications
needed to run all three turbine generators simultaneously,
causing the respondent an alleged revenue loss of
approximately Rs.1.5 crore from August 2021 onward. It is

17

contended that the Arbitral Tribunal wrongly declined to
appoint a court commissioner to assess the defects. It was
further contended that the Arbitral Tribunal erred in
dismissing the respondent's counter-claim solely for non-
payment of arbitration fees, thereby denying the respondent
an opportunity to lead evidence on its counter-claim.

17. The learned Senior counsel appearing for the
respondent has placed reliance on the following judgments:-
•
J.C. Budhraja v. Chairman, Orissa Mining
Corporation Ltd. and Another, reported in
(2008) 2 SCC 444;


•
Union of India v. Kishorilal Gupta &
Bros., reported in 1959 SCC OnLine SC 6;

•

State of Chhattisgarh & Anr., v. Sal
Udyog (P) Ltd ., reported in (2022) 2 SCC
275; and

•
Gimpex Private Limited v. Manoj Goel,
reported in (2022) 11 SCC 705.


18. Having considered the contentions advanced, we
notice that three questions had been raised for consideration
before the Commercial Court. The preliminary question was
with regard to the jurisdiction of the Arbitral Tribunal to

18

adjudicate the dispute between the parties. The question of
limitation applicable to the claims and thirdly the effect of
the MoU dated 08.02.2018 upon the Supply Contract dated
20.05.2015 and the legality of the arbitral proceedings were
also raised apart from the questions of fatcs. All the 3
questions were found in favour of the claimant by the
Arbitral Tribunal, and the first two questions were found
in favour of the claimant by the Commercial Court as
well. It was only on the third question that the award
has been set aside by the Commercial Court, on a
finding that the issue of Novation of contract had not
been considered by the Arbitral Tribunal.

19. We notice from the pleadings and materials on
record that the initial contract between the parties was the
Supply Contract entered into on 20.05.2015. The said
contract provided a mechanism for settlement of disputes as
well as for arbitration. Clause 6.1.1 provided that, if any
dispute arises between the employer and the contractor in
connection with or arising out of the contract, the parties

19

shall seek to resolve such dispute by mutual consultation
and on failure thereof, the dispute shall be referred in
writing by either party to the adjudicator with a copy to the
other party. It is clear that there is no named adjudicator as
provided in the contract. Thereafter, Clause 6.2 provides
that if either the employer or the contractor is dissatisfied
with the adjudicator's decision, or if the adjudicator fails to
give a decision within 28 days of the dispute being referred
to him, then either the employer or the contractor may
within 56 days of such reference, give notice to the other
party with a copy for information to the adjudicator of the
intention to commence arbitration.

Clause 6 of the Supply Contract, reads as under:-
6. Settlement of Disputes
"
6.1 Adjudicator
6.1.1 If any dispute of any kind whatsoever shall
arise between the Employer and the Contractor in
connection with or arising out of the Contract, including
without prejudice to the generality of the foregoing, any
question regarding its existence, validity or termination,
or the execution of the Facilities—whether during the
progress of the Facilities or after their completion and
whether before or after the termination, abandonment
or breach of the Contract—the parties shall seek to

20

resolve any such dispute or difference by mutual
consultation. If the parties fail to resolve such a dispute
or difference by mutual consultation, then the dispute
shall be referred in writing by either party to the
Adjudicator, with a copy to the other party.
6.1.2 The Adjudicator shall give his decision in
writing to both parties within twenty-eight (28) days of
a dispute being referred to him. If the Adjudicator has
done so, and no notice of intention to commence
arbitration has been given by either the Employer or the
Contractor within fifty-six (56) days of such reference,
the decision shall become final and binding upon the
Employer and the Contractor. Any decision that has
become final and binding shall be implemented by the
parties forthwith.
6.1.3 The Adjudicator shall be paid a daily fee at
the rate of Rs. 6000.00 plus reasonable expenditures
incurred in the execution of his duties as Adjudicator,
and these costs shall be divided equally between the
Employer and the Contractor.
6.1.4 Should the Adjudicator resign or die, or
should the Employer and the Contractor agree that the
Adjudicator is not fulfilling his functions in accordance
with the provisions of the Contract, a new Adjudicator
shall be jointly appointed by the Employer and the
Contractor. Failing agreement between the two within
twenty-eight (28) days, the new Adjudicator shall be
appointed at the request of either party by the
Appointing Authority, i.e., The Chairman, Institution of
Engineers, Bangalore.
6.2 Arbitration

21

6.2.1 If either the Employer or the Contractor is
dissatisfied with the Adjudicator’s decision, or if the
Adjudicator fails to give a decision within twenty-eight
(28) days of a dispute being referred to him, then either
the Employer or the Contractor may, within fifty-six
(56) days of such reference, give notice to the other
party, with a copy for information to the Adjudicator, of
his intention to commence arbitration, as hereinafter
provided, as to the matter in dispute, and no arbitration
in respect of this matter may be commenced unless
such notice is given.
6.2.2 Any dispute in respect of which a notice of
intention to commence arbitration has been given, in
accordance with GCC Sub-Clause 6.2.1, shall be finally
settled by arbitration. Arbitration may be commenced
prior to or after completion of the Facilities.
6.2.3 Any dispute, controversy or claim arising out
of, or relating to this contract or breach, termination or
invalidity there of which has not become final and
binding pursuant to G.C.C. Clause 6.1.2, shall be settled
by arbitration by arbitral tribunal as under.
The arbitral tribunal shall have full power to open-
up, review and revise any decision, opinion, instruction,
determination, certificate or valuation of the Project
Manager and any Recommendation(s) of the Adjudicator
relating to the dispute.
(i) A dispute with an Indian Contractor shall be
finally settled by arbitration in accordance with the
Arbitration & Conciliation Act, 1996, or any statutory
amendment thereof.
The arbitral tribunal shall consist of three
arbitrators, one each to be appointed by the Employer

22

and the Contractor and the third Arbitrator shall be
chosen by the two Arbitrators so appointed by the
parties and shall act as Presiding arbitrator. In case of
failure of the two arbitrators appointed by the parties to
reach upon a consensus within a period of 30 days from
the appointment of the arbitrator appointed
subsequently, the Presiding arbitrator shall be appointed
by the Chairman of the Institution of Engineers,
Bangalore. For the purpose of this sub-clause, the term
“Indian Contractor” means a Contractor who is
registered in India and is a juridic person created under
Indian law as well as a joint venture between such a
Contractor and a Foreign Contractor.
(ii) In the case of a dispute with a foreign
Contractor, the dispute shall be finally settled in
accordance with the provisions of UNCITRAL Arbitration
Rules. The arbitral tribunal shall consist of three
Arbitrators one each to be appointed by the Employer
and the Contractor. The third Arbitrator shall be chosen
by the two Arbitrators so appointed by the parties and
shall act as presiding arbitrator. In case of failure of the
two arbitrators appointed by the parties to reach upon a
consensus within a period of 30 days from the
appointment of the arbitrator appointed subsequently,
the Presiding Arbitrator shall be appointed by the
Chairman of the Institution of Engineers, Bangalore. For
the purposes of this Clause 6.2 the term “Foreign
Contractor” means a Contractor who is not registered in
India and is not a juridic person created under Indian
law.
(iii) Neither party shall be limited in the
proceedings before such tribunal to the evidence or

23

arguments before the Arbitrator for the purpose of
obtaining its Recommendation(s) pursuant to Sub-
Clause 6.2.2. No recommendation shall disqualify any
Adjudicator from being called as a witness and giving
evidence before the arbitrator(s) on any matter
whatsoever relevant to the dispute.
(iv) Arbitration may be commenced prior to or after
completion of the Works provided that the obligations of
the Employer, the Project Manager, the Contractor and
the Adjudicator shall not be altered by reason of the
arbitration being conducted during the progress of the
Works.
(v) If one of the parties fail to appoint its arbitrator
in pursuance of Sub-Clause (i) and (ii) above, within 30
days after receipt of the notice of the appointment of its
arbitrator by the other party, then the Chairman of the
Institution of Engineers, Bangalore, both in cases of
foreign Contractors as well as Indian Contractors shall
appoint the arbitrator. A certified copy of the order of
the Chairman of the Institution of Engineers (India)
making such an appointment shall be furnished to each
of the parties.
(vi) Arbitration proceedings shall be held at
Bangalore, India, and the language of the arbitration
proceedings and that of all documents and
communications between the parties shall be in English.
(vii) The decision of the majority of arbitrators shall
be final and binding upon both parties. The cost and
expenses of Arbitration proceedings will be paid as
determined by the arbitral tribunal. However, the
expenses incurred by each party in connection with the
preparation, presentation, etc., of its proceedings as

24

also the fees and expenses paid by the arbitrator
appointed by such party or on its behalf shall be borne
by each party itself.
(viii) The arbitrator(s) shall give reasoned award.

6.3 Notwithstanding any reference to the
Adjudicator or arbitration herein,
(a) the parties shall continue to perform their
respective obligations under the Contract unless they
otherwise agree
(b) the Employer shall pay the Contractor any
money, except for those in dispute, due to the
Contractor."

20. The MoU dated 08.02.2018, records that the
second party, that is, the claimant has raised certain
monetary claims against the respondent herein as per the
terms of the contract on account of balance money payable
and that the respondent wishes to settle the claims of the
second party and the parties therefore enter into the
Memorandum of Understanding. It is therefore abundantly
clear that the MOU is entered on a mutual understanding
between the parties to resolve the disputes which have
arisen between them arising out of the original Supply
Contract dated 20.05.2015. It is an effort between the

25

parties to the initial contract to settle their differences which
has given rise to the MOU dated 08.02.2018.

21. The respondent had taken up a contention with
regard to the jurisdiction of the Tribunal and had filed a
Section 16 application challenging the legality and validity of
the constitution of the Arbitral Tribunal. It was contended
that there is no arbitration clause in the MoU dated
08.02.2018. In the original contract, the parties had agreed
for the appointment of an adjudicator either on mutual
consent, failing which through the Chairman, Institution of
Engineers Bangalore. It was contended that the name of
Adjudicator was suggested by the claimant, it was not
accepted by the respondent and therefore the authority to
appoint the Adjudicator was vested in the Chairman
Institution of Engineers, Bangalore. No such procedure
having been followed, the claimant proceeded to initiate
arbitration proceedings which is contended to be a violation
of the contract. It is further contended that the Presiding
Arbitrator also ought to have been appointed by the
Institution of Engineers, Bangalore and his appointment is to

26

be certified by the Chairman Institution of Engineers, India.
It is contended that since no appointment was made by the
Institution of Engineers Bangalore, the appointment made
by the Institute of Engineers, India is incorrect. The Tribunal
considered the contentions and found that the respondent's
jurisdictional challenge on the ground that the MOU does not
contain an Arbitration Clause has to fail, in view of the fact
that the claims flow directly from the Supply Contract dated
20.05.2015.

22. Further, it was found that the arbitration clause in
the Supply Contract requires any dispute, controversy or
claim arising out of or relating to this contract to be resolved
for arbitration and the language being wide, the present
disputes would fall under the ambit of the said clause.
Further, it was found that the initial contract does not name
an adjudicator and the claimant could not be expected to
comply with a process that is inherently unworkable.

23. The further contention with regard to the
appointment was also found against on the ground that the

27

contract only provided for appointment of an adjudicator by
the Chairman, Institution of Engineers, Bangalore, if either
an existing adjudicator dies or resigns, or if the claimant and
respondent both felt that the adjudicator appointed had
failed to fulfil its functions. It was found that this clause did
not apply to a situation where no adjudicator was named in
the contract. It was found that the said clause did not stand
in the way of either party initiating arbitration. It was further
found that the Constitution of the Arbitral Tribunal was
perfectly legal and valid.

24. On the question of limitation also, the Tribunal
found that there were several communications between the
parties and part-payments had been made in pursuance to
the contractual terms as late as on 08.06.2021 and there
were acknowledgments in writing of the liability to make the
payments in terms of the original Supply Contract. The
Arbitral Tribunal found that the period of limitation was
extended until at least 07.06.2024 and the claimant had
initiated the arbitration on 21.10.2021, well within the
period of limitation.

28

25. We find that the Commercial Court has upheld the
findings of the Arbitral Tribunal on both these points, holding
that any dispute arising out of the MoU would be ultimately
traceable to the original supply contract which contains
arbitration clause. On limitation, the Commercial Court held
that the payment of Rs.50 lakh on 08.06.2021 extended the
period of limitation under Section 19 of the Limitation Act
and consequently rejected the contention that the claim was
barred by limitation.
26. It is only on the question of novation that the
Commercial Court has set aside the arbitral award. We
notice that the question of novation, which was considered
by the Commercial Court as a patent illegality to set aside
the Award was never taken up specifically as a defence by
the respondent before the Arbitrator. As regards novation,
the terms of the MoU specifically refer to the supply contract
and records as follows:-
“x x x x x
WHEREAS the First Party had awarded a contract
bearing no. SLV/AMHS/E&M-1/2015 dated 20.05.2015
to the Second Party for design, manufacture, test,

29

supply, transport & insurance of certain facilities, viz.
Electro-Mechanical Equipment for Aniyur Mini Hydel
Scheme (MHS) (3 x 8000 KW + 10% COL) near
Gandubagilu, Neriya Village, Belthangadi Taluk of
Mangalore District, Karnataka.
x x x x x
AND WHEREAS the First Party now wishes to settle
the claims of the Second Party and the Parties are,
therefore, entering into this MoU.”

27. It therefore contemplates the continuation of the
contractual relationship for completion of the project.
Though the expression “novation” was not expressly
employed in the original pleadings, the effect of MoU and the
appellant’s entitlement to pursue its original claims were
considered by the Tribunal under Issue No.3. The Arbitral
Tribunal considered the rival contentions and found that the
Supply Contract continued to govern the parties, subject to
the modifications introduced by the MoU. In the Section 34
petition filed before the Commercial Court, the respondent
herein had contended as follows:-
“49. The findings of the Tribunal that the MOU was
the instrument executed for the settlement of dues that
arose under the original contract. The key question that
arose is whether subsequent to the execution of the
instrument, the claim was the liberty to rescind the MOU

30

and revive its claims under the main contract, the said
view expressed by the learned Arbitrators is erroneous
suffers from non-application of mind and liable to be
interfered with.”

28. However, it is abundantly clear that there were no
specific pleadings or proof to support the plea of novation of
contract either before the Arbitral Tribunal or the
Commercial Court. In Lata Construction v. Dr.
Rameshchandra Ramniklal Shah reported in (2000) 1
SCC 586 , the Apex Court held that an essential requirement
of novation under Section 62 of the Indian Contract Act is
the complete substitution of a new contract in place of the
earlier contract by agreement between the parties. The
subsequent arrangement must have the effect of rescinding,
altering or extinguishing the earlier contractual obligations.

29. However, the Commercial Court came to the
conclusion that the Arbitral Tribunal has not appreciated the
decisions relied on by the parties correctly in concluding that
on breach of the MoU, the original claims would revive. It
was found that the claimant had continued to raise the
claims under the MoU alone and therefore, the parties had

31

agreed to a novation of contract. The finding of the Arbitral
Tribunal on the point was therefore found to a patent
illegality that vitiates the award.

30. In exercising jurisdiction under Section 37 of the
Arbitration Act, this Court is required to examine whether
the Commercial Court’s interference remained within the
limits prescribed by Section 34. The Commercial Court could
not have substituted its interpretation for a reasonably
possible view adopted by the Tribunal. In the present case,
the Tribunal’s conclusions on jurisdiction, the effect of the
MOU and limitation are supported by its consideration of the
contractual provisions and the material on record. The
Commercial Court has substantially agreed with the Tribunal
on the questions of jurisdiction, constitution of the Tribunal
as well as on the question of limitation. However, the
Commercial Court has set aside the award on the sole
ground of novation, which is not a ground specifically taken
by the opposite party in the arbitration proceedings.

32

32. The learned counsel for the appellant has placed
reliance on the decisions in the cases of Dr. Sasidaran v.
India Cements Capital Limited reported in 2010 SCC
OnLine Mad 6038 , Reliance Industries Ltd v. Gail
(India) Ltd reported in 2020 SCC OnLine Del 2041 and
Chrisomar Corporation v. MJR Steels Private Limited
and Another reported in (2018) 16 SCC 117, to show as
to how pleading of novation of contract is to be raised and
considered. It is clear from a reading of Section 62 of the
Indian Contract Act that consent of all parties to the earlier
contract is imperative for novation of the contract to be set
up as a defence. The contention of novation of a contract
has not only to be pleaded specifically, but also to be proved
for the same to be taken into account in a contractual
dispute.
33. In the instant case, novation as a ground was not
pleaded much less proved by the respondent before the
Arbitral Tribunal. It is also clear that a ground which is not
raised before the Arbitrator cannot be taken up in the first
instance before the Section 34 Court to challenge the award

33

of the Arbitrator which has been passed on the material and
the evidence placed before the Arbitrator.

34. The scope of interference under Section 37 of the
Arbitration Act, where the Court exercising jurisdiction under
Section 34 has exceeded its statutory limits, has been
considered by the Apex Court in the following decisions. In
UHL Power Company Ltd. v. State of Himachal Pradesh
reported in (2022) 4 SCC 116 , at paragraphs 14 and 21,
the Apex Court approved the Appellate Court’s conclusion
that the Court exercising jurisdiction under Section 34 had
exceeded its jurisdiction by reappreciating the Tribunal’s
findings and adopting a different interpretation of the
agreement. It was held that, where the arbitrator’s
interpretation was possible and plausible, the availability of
another interpretation could not justify interference with the
award.

35. Further, in AC Chokshi Share Broker Private
Ltd. v. Jatin Pratap Desai reported in 2025 INSC 174 ,
the Apex Court reiterated that an award cannot be interfered
with by reappreciating evidence or displacing a reasonable

34

interpretation of contractual terms adopted by the Arbitral
Tribunal. It was further held that the Court exercising
jurisdiction under Section 37 must determine whether the
Court under Section 34 exercised its jurisdiction properly
and without exceeding its permissible scope.

36. In Konkan Railway Corporation Ltd. v.
Chenab Bridge Project Undertaking reported in (2023)
9 SCC 85 , the Apex Court reiterated that the jurisdiction
exercised under Sections 34 and 37 of the Arbitration Act is
not akin to ordinary appellate jurisdiction. It held that the
mere possibility of an alternative view on the facts or
interpretation of the contract does not justify interference
with the findings of the Arbitral Tribunal. A plausible
interpretation adopted by the Tribunal cannot, therefore, be
displaced merely because the Court considers another
interpretation preferable.

37. In the instant case, the Arbitral Award has been
set aside on the sole ground of novation of contract which
was not specifically pleaded or proved before the Arbitral

35

Tribunal. We are therefore of the opinion that the setting
aside of the award by the Commercial Court was an
erroneous exercise of jurisdiction and is completely
unsustainable.
38. COMAP No.331/2024 challenges dismissal of the
Section 9 petition, wherein the Commercial Court held
that since the Arbitral Award had been set aside in
Com.A.P.No.201/2023, there was no question of granting
any interim relief for securing the awarded amount.
39. We notice that the Section 9 petition was
dismissed solely on the ground that the Arbitral Award
had been set aside. We have held that the Commercial
Court exceeded its jurisdiction in setting aside the Award,
and have set aside the judgment in
Com.A.P.No.201/2023 and restored the Award. Therefore,
the question that remains is the status of the Section 9
petition. Section 9(1) of the Arbitration Act enables a
party to seek interim measures after the making of the
Arbitral Award but before it is enforced in accordance with
section 36 of the Arbitration Act. The challenge to the

36

Award under Section 34 of the Arbitration Act having now
failed, the Award is liable to be enforced, and the interim
protection under Section 9 of the Arbitration Act shall be
granted only until enforcement proceedings are taken.
The respondent’s assets have remained subject to a
restraint to the extent of the awarded amount as
recorded in Order dated 23.09.2024.
40. In the above view of the matter, the judgment
dated 29.06.2024 passed by the Commercial Court in
Com.A.A.No.352/2023 is also liable to be set aside.
Therefore, the Section 9 petition is allowed in part , with
a direction to the respondent not to alienate or encumber
its assets to the extent of the awarded amount, pending
enforcement of the Arbitral Award.
41. In the result:-
(i) COMAP No.305/2024 i s accordingly allowed.

(ii) COMAP No.331/2024 is disposed of , retaining
the Interim Order dated 23.09.2024 passed in
these appeals.

37

(iii) The order dated 29.06.2024 passed by the
LXXXIII Additional City Civil and Sessions
Judge (CCH-84), Bengaluru in
Com.A.P.No.201/2023 is set aside.

(iv) The Arbitral award dated 14.09.2023
passed in Arbitration No.1/2022, is revived
and shall govern the parties.

There will be no order as to costs.

All pending interlocutory applications shall stand
disposed of in both the appeals.


Sd/-
(ANU SIVARAMAN)
JUDGE



Sd/-
(T.P.VIVEKANANDA)
JUDGE


PN/CP*