Otsuka Chemical (India) Private Limited vs Trans Engineers India Private Limited
- Court
- Delhi High Court
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 10.07.2026
Pronounced on: 01.09.2026
# CNR No. DLHC010703412024
+ FAO (OS) (COMM) 234/2024
OTSUKA CHEMICAL (INDIA) PVT. LTD ....Appellant
Through: Mr.Jayant Mehta, Sr. Adv. with
Mr.Amit Dhingra, Mr.Rohit
Mahajan, Mr.Siddharth
Agrawal, Ms.Kesang Tenzin
Doma and Mr.Om Shelat,
Advs.
versus
TRANS ENGINEERS INDIA PVT. LTD. .....Respondent
Through: Mr.Arvind Nigam, Sr. Adv.
with Ms.Binsy Susan, Ms.Palak
Kaushal and Ms.Ananya
Dewan, Advs.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
HON'BLE MS. JUSTICE MADHU JAIN
J U D G M E N T
NAVIN CHAWLA, J.
1. This appeal has been filed challenging the Judgment and Order
dated 22.07.2024 (hereinafter referred to as the ‘Impugned Order’)
passed by the learned Single Judge of this Court in O.M.P. (COMM)
310/2022, titled Trans Engineers India Private Limited v. Otsuka
Chemicals (India) Private Limited , whereby the learned Single Judge
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Digitally Signed
By:REYMON VASHIST
Signing Date:01.09.2026
17:23:22
was pleased to allow the application under the Section 34 of the
Arbitration and Conciliation Act, 1996 (in short, ‘A&C Act’) filed by
the respondent herein, and set aside the Arbitral Award dated
07.03.2022 (in short, ‘Impugned Award’) passed by the learned Sole
Arbitrator.
BRIEF FACTS
2. Briefly stated, it is the case of the appellant that it established a
fully automatic plant at Kotputli, Rajasthan to manufacture the
chemical compound “GCLE” with an annual capacity of 1000 MT,
operational from May 2008. To expand the manufacturing capacity of
the said facility from 1000 MT to 1500 MT tonnes per annum, the
appellant initiated the ‘Lion Project’ comprising of a consultancy
stage followed by a construction stage.
3. The appellant claims that the respondent was engaged for
providing its services for the consultancy stage of the Lion Project
vide a Purchase Order dated 27.05.2016 for Rs. 3,00,00,000/- (Rupees
Three Crores). These services included preparation of detailed
engineering of Piping and Instrumentation Diagrams (in short,
‘P&IDs’) up to the “Good for Construction” (GFC) stage, that is, the
stage where the final and revised drawings were ready to be used by
contractors. In pursuance of the same, the respondent shared P&IDs
on 26.07.2016 and revised versions thereof on 20.08.2016.
4. On 30.08.2016, the respondent submitted its Offer for providing
its services for the construction stage of the Lion Project. Below
mentioned are the relevant stipulations of the said Offer:
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Digitally Signed
By:REYMON VASHIST
Signing Date:01.09.2026
17:23:22
“ ANNEXURE -A: PRICE SCHEDULE
xxx
ANNEXURE -I: EQUIPMENTS
xxx
MANUFACTURING, SUPPLY AND
INSTALLATION OF EQUIPMENTS FOR ALL
PROCESSES AS PER YOUR P&D DATED
20.08.2016 EXCEPT ITEMS DIRECTLY
PROCURED BY OTSUKA AS PER MAIL
DATED 25.08.2016
xxx
ANNEXURE -II: PIPING SYSTEM
xxx
MANUFACTURING, SUPPLY AND
INSTALLATION OF PIPING SYSTEM
(PROCESS & UTILITY) AS PER YOUR
P&ID DATED 20.08.2016 FOR ALL
PROCESS
xxx
ANNEXURE -III: ELECTRICAL
xxx
MANUFACTURING, SUPPLY AND
INSTALLATION OF ELECTRICAL ITEMS
FOR ALL PROCESSES AS PER YOUR P&ID
DATED 20.08.2016 EXCEPT ITEMS
DIRECTLY PROCURED BY OTSUKA AS
PER MAIL DATED 25.08.2016
xxx
ANNEXURE- IV: INSTRUMENTATION
xxx
MANUFACTURING, SUPPLY AND
INSTALLATION OF INSTRUMENTATION
ITEMS FOR ALL PROCESSES AS PER
YOUR P&ID DATED 20.08.2016 EXCEPT
ITEMS DIRECTLY PROCURED BY
OTSUKA AS PER MAIL DATED
25.08.2016.
”
5. Thereafter, a meeting was held between the parties on
15.09.2016, and a signed Minutes of Meeting (‘MOM’) was prepared,
wherein it was stated as under:
“1. The turnkey has been awarded to Trans
Engineers India Pvt ltd in lumpsum for 710
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By:REYMON VASHIST
Signing Date:01.09.2026
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th
Million INR based on P&IDs finalised by 25
July 2016, for ongoing Lion Project as per the
scope of work defined based on which offer
was submitted by Trans Engineers. No extra
amount will be charged by Trans for smaller
modifications. However, for any major
modifications incorporated in P&IDs after
th
26 July 2016, Trans will charge extra
amount on mutually agreed rates.”
6. On the same date, the appellant issued a Letter of Intent (‘LOI’)
in favour of the respondent in “Ref: Your offer No. TEIPL/OCIL/Q-
080 dated 30.08.2016” to carry out the construction stage of the Lion
Project for an amount of Rs. 71,00,00,00/- (Rupees Seventy One
Crores Only).
7. On 16.09.2016, Purchase Orders bearing no.LPJ-54/16-17 and
LPJ-WO-12/16-17 were issued by the appellant to the respondent for
“ manufacture and supply” ; and for “ erection and commissioning” of
the Equipments, Piping System, Instrumentation Material and
Electrical Material, respectively. Both Purchase Orders were issued as
per the “offer No. TEIPL/OCIL/Q-080 dated 30.08.2016 and P&ID
dated 26.07.2016” .
8. The parties then executed an Agreement dated 20.01.2017 (in
short, ‘the Agreement’) for supply, erection and commissioning of
Equipment, Piping system, Instrumentation and Electrical material.
The relevant clauses of the Agreement are reproduced hereunder:
“1. …
(d) Work: Work Supply, Erection and
Commissioning of Equipments, Piping System,
Instrumentation Material, Electrical Material,
the description of which has been provided in
Schedule I .
xxx
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Digitally Signed
By:REYMON VASHIST
Signing Date:01.09.2026
17:23:22
4 Interpretation
The Agreement conveys the final
agreement between the Owner and the
Contractor on the terms and conditions and is
a complete and exclusive statement of the
terms of their agreement and supersedes any
purchase order, letter of intent executed
earlier between the Parties. In the event of
conflicts between this Agreement and the
specifications, drawings and documents
furnished to the Contractor for supply and
installation of equipment, the latter shall
govern. If any of the provisions of the
Contractor's proposal or other
correspondence is in conflict with the terms
and conditions of the Agreement, the latter
shall govern.
xxx
7. Owner’s Comments and Suggestions.
The Contractor shall not be relieved of his
obligations under the Agreement, including
but not limited to, his warranty obligations
stated herein, by incorporating the Owner’s
design and fabrication comments into the
goods ordered under the contract, unless the
Contractor has expressed his reservations, in
writing, to such comments of the Owner. The
specifications set out in this Agreement and
the accompanying drawings are intended to
describe and provide for a finished piece of
work. Work executed shall be complete in all
respects/details even though every item
involved is not particularly mentioned. The
Contractor is required to provide all labour,
materials and equipments necessary for the
completion of entire Work. The Contractor
shall execute the Work in every respect in
accordance with the Agreement and in
accordance with the directions and to the
satisfaction of the Owner’s representatives.
xxx
11. Owner’s Instructions
The Owner may, in his absolute
discretion, from time to time, issue further
drawings/sketches and/or written instructions,
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Signing Date:01.09.2026
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details, directions and explanations, in regard
to:
11.1 Any additional drawings and
explanations to exhibit or illustrate details
11.2 The variation or modification of the
design, quality or quantity of work or the
additions or omission or substitution of any
work.
11.3 Any discrepancy in the drawing, or
between the Bill of Quantities and/or
Specifications as set out in Schedule I hereof.
11.4 Removal from the site of any material
brought thereon by the Contractor and the
substitution of any other material thereof
11.5 Removal and/or re-execution of any
work executed by the Contractor, which in the
opinion of the Owner is not in conformity with
the specifications.
11.6 Dismissal from the work of any persons
employed thereupon with justifiable reasons.
11.7 Opening up of any covered work for
inspection.
11.8 Amending and making good of any
defects.
12. Compliance with Owner’s instructions
12.1 The Contractor shall comply with and
duly execute any work covered in such
Owner’s instructions, which are given in
writing:
12.2 If compliance with the Owner’s
instructions involves change in scope of work,
variations and modifications beyond the
contractual terms, the Owner will pay to the
Contractor the price of the said extra work at
a mutually agreed price
12.3 The Contractor shall be entitled to an
extension in delivery/completion period due to
the work outside the scope of Works including
the variations and modifications and the
additional cost involved.
12.4 If the Contractor after receipt of written
notice from the Owner requiring compliance,
with such further drawings and/or Owner’s
instructions and after consideration, analysis
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Signing Date:01.09.2026
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and inspection of the same fails to comply to
start with the same within seven days, the
Owner may employ and pay other agencies to
execute any such work whatsoever, as may be
necessary, and all costs incurred in
connections therewith will be recoverable
from the Contractor by the Owner. The
Contractor, however, will not be held
responsible for the quality or warranty of such
work executed under the Owner’s agency.
13. Rights of Owner
13.1 The Owner has the right to give
Owner’s instructions as seated in Clause 11
above for the Contractor to comply with as
outlined in Clause 12 above.
13.2 Owner has a right to interpret, explain
and illustrate drawings, specifications and
correcting of any errors or omissions or issue
any additional drawings and explanation. The
Owner’s instructions will be final and binding
on the Contractor.
13.3 Owner has a right to direct/modify the
manner in which all work under the
Agreement is to be conducted, in so far as it
may be necessary to secure the safe and
proper progress and the specified quality of
the work to the satisfaction and approval of
the Owner.
13.4 Owner has a right to direct the
Contractor to accelerate particular work and
if necessary cease work at other places of this
Contract. The Contractor shall comply with
such directions. The Contractor shall not be
held responsible for delay in completion
caused due to such directions of the Owner.
13.5 The Owner will provide at site, free of
cost a reasonable space for the Contractor’s
Site office and store, water and electrical
power at a convenient point near to work
place. However, it will be the Contractor’s
responsibility to extend the same.
xxx
16. Contract Time
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By:REYMON VASHIST
Signing Date:01.09.2026
17:23:22
The Completion Schedule/ Milestones
are set out in Schedule 2 hereof. The same are
subject to reasonable extension which shall be
granted by the Owner as agreed herein with or
without imposing liquidated damages as
stipulated in Clause 18 below. The Contractor
shall work with utmost diligence with intention
to complete the Works on or before the 'Date
of Completion' set out there in. If in the
opinion of the Owner the work be delayed
during the progress of work for reasons not
attributable to the Contractor, the time of
completion will be extended by a reasonable
period upon application from the Contractor.
The ‘Guarantee/Defects Liability Period' shall
be 12 calendar months from the date of virtual
or substantial completion as certified by the
Owner or 18 months from the date of supply of
the equipment, whichever is earlier.
xxx
21. Resolution of Disputes and Arbitration
In the event of any dispute or difference
at any time arising between the parties
relating to the Agreement, meaning or effect of
any para or any content of the rights and
liabilities of the parties or other matters
specified therein or with reference to anything
arising out of or incidental to the Agreement
or otherwise in relation to the terms, whether
during the continuance of the Agreement or
thereafter, such disputes or differences shall
be endeavoured to be solved by mutual
negotiations. If however such negotiations are
infructuous, the disputes shall be resolved by
arbitration of a sole Arbitrator appointed
mutually by the parties. This shall be deemed
to be a submission to arbitration under The
Indian Arbitration and Conciliation Act, 1996
and any modification or re-enactment thereof,
and the award made in pursuance thereof
shall be binding on the parties. The venue of
arbitration shall be mutually agreed. Any
reference lo arbitration shall not relieve either
party from the due performance of its
obligations under the Agreement. However, if
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By:REYMON VASHIST
Signing Date:01.09.2026
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the nature of disputed matter under arbitration
so necessitates, either party may suspend
further performance till the arbitration award
is available. The period of non-performance
under these circumstances shall be added to
the contracted period of completion, without
payment of compensation for such delay.”
9. The respondent claimed that the P&IDs dated 26.07.2016 were
based on the Process Flow Diagrams (‘PFDs’), which indicate the
general flow of plant process and equipment, and display the
relationship between major equipment of a plant facility, without
minor details such as piping details and designations. The respondent
claimed that the P&IDs are more detailed and include both major and
minor details of the chemical process. The respondent claimed that the
appellant provided the PFDs, which were translated into P&IDs,
however, later the appellant substantially modified the PFDs on
certain occasions, which materially altered the P&IDs, resulting in
substantial increase in the scope of work. The respondent claimed that
the final drawings reflecting such revision/modifications were
presented to and approved by the appellant only on 07.07.2017.
10. The respondent claimed that despite such
variations/modifications having been made, it carried out all such
variations and/or modifications and was able to successfully hand over
the site to the appellant on 25.07.2017, before the Schedule
Completion Date of 31.07.2017. The appellant issued Completion
Certificate to the respondent for successful completion of work within
time, and on 15.02.2018, released the payment of Rs. 71 crores to the
respondent.
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Digitally Signed
By:REYMON VASHIST
Signing Date:01.09.2026
17:23:22
11. The respondent later claimed that due to change in the scope of
work, the price of Rs. 71 crores agreed in the Agreement was liable to
be increased. Accordingly, the respondent issued 26 (twenty-six)
Proforma Invoices dated 22.02.2018-27.02.2018 for a total amount of
Rs. 28,37,09,384/- ( Rupees Twenty-Eight Crores Thirty-Seven Lakh
Nine Thousand Three Hundred and Eighty-Four Only) to the
appellant.
12. The respondent further claimed that on 29.03.2018, a meeting
was held between the parties at Gurgaon, when the appellant, without
disputing the additional work having been done at the site by the
respondent, offered to pay a sum of Rs. 3,00,00,000/- (Rupees Three
Crores Only) towards full and final settlement of all outstanding dues
of the respondent.
13. The respondent claimed that on further persistence, the
appellant , vide email dated 05.07.2018, informed the respondent that it
was in the process of ascertaining the additional work carried out in
the Project and the said process shall be completed in next 10 days,
whereafter the parties can have a meeting to discuss the terms further.
14. The respondent, claiming that as the appellant did not come
back as promised, on 03.08.2018, the respondent invoked arbitration
in terms of Clause 21 of the Agreement.
15. As the disputes between the parties could not be settled, the
same was referred to the learned Sole Arbitrator. The respondent filed
its Statement of Claim, claiming the following reliefs:
“ I . directing the Respondent to pay to the
Claimant Company a sum of Rs.
28,37,09,384/- (Rupees Twenty Eight Crores
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Signing Date:01.09.2026
17:23:22
Thirty Seven Lakhs Nine Thousand Three
Hundred and Eighty Four) towards the
outstanding invoices raised by the Claimant
Company, along with interest at 18% per
annum from the due date till realization;
II. directing the Respondent to pay to the
Claimant Company a sum of Rs. 5,76,30,239/-
(Rupees Five Crores Seventy Six Thirty
Thousand Two Hundred and Thirty Nine)
towards the applicable statutory dues and
taxes on the total outstanding amount;
III . directing the Respondent to pay to the
Claimant Company a sum of Rs. 1,50,00,000/-
(Rupees One Crore and Fifty Lakhs) on
account of legal costs incurred qua the present
proceeding;
IV . directing the Respondent to pay pendente
lite and future interest @ 18% per annum to
the Claimant Company.”
16. The appellant, in response, filed its Statement of Defence,
contending that the contract was based on the Agreement dated
20.01.2017 and that no additional work had been established. It
further filed counter-claims praying for Rs. 3,55,00,000/- (Rupees
Three Crores Fifty Five Lakhs Only) as liquidated damages for
delayed completion of work; Rs. 43,81,278/- (Rupees Forty-Three
Lakhs Eighty-One Thousand Two Hundred and Seventy-Eight Only )
for pending and remedial work; Rs. 21,67,000/- (Rupees Twenty One
Lakhs Sixty Seven Thousand Only) for price differences; and simple
interest at 18% per annum and costs.
THE IMPUGNED AWARD
17. The learned Sole Arbitrator, vide the Impugned Arbitral Award,
dismissed the claims of the respondent as also the counter-claims of
the appellant and passed a ‘NIL’ Award.
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Digitally Signed
By:REYMON VASHIST
Signing Date:01.09.2026
17:23:22
18. Regarding the respondent’s claims, the learned Sole Arbitrator
held that the contract between the parties was a turnkey project not
limited to the P&IDs dated 26.07.2016, and that the Offer dated
30.08.2016 and the P&IDs dated 20.08.2016 had not been given a
“go-by” by the parties. It was held that the respondent had failed to
prove that the alleged additional work carried out by it was ‘major’ or
substantial work entitling “extra” payment in accordance with the
Conditions of Clauses 12.1 and 12.2 read with Schedule 5 of the
Agreement. Reliance was also placed on witness testimonies to hold
that a majority of the alleged “extra” items were duly reflected in the
P&IDs of 26.07.2016 or in the offer dated 30.08.2016 and the P&IDs
dated 20.08.2016. Accordingly, it was held that the respondent was
not able to establish its claims for payment for additional work and
statutory dues thereon.
19. The appellant’s counter-claims were also rejected. The
liquidated damages claim failed as the delay was due to continuous
P&ID revisions known to the appellant, who had paid the entire
contract value without making any deductions. The appellant also
failed to prove any loss caused by the alleged delay. The claim for
remedial works was also rejected as no notice had been served on the
respondent in terms of Clause 12.4 of the Agreement asking it to
rectify defective work. The claim for price difference was rejected as
no deduction had been made by the appellant in accordance with
Schedule 5 of the Agreement for the alleged price differences.
Therefore, a “NIL” Award was passed and the parties were directed to
bear their own costs.
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Digitally Signed
By:REYMON VASHIST
Signing Date:01.09.2026
17:23:22
20. We quote the relevant findings of the learned Sole Arbitrator, as
regards the claim of the respondent for additional work, which is the
only subject matter of this appeal, as under:
“56. After considering the submissions made
by Ld. Counsel for the parties and examining
the evidence on record I find that the plea of
the Claimant that the Project was to be
executed on the basis of the P&ID's of
26.07.2016 only and the offer made by the
Claimant on 30.08.2016 and the P&ID's of
20.08.2016 attached to the said offer had no
relevance cannot be accepted. It is clearly
shown on record that the P&ID's of
26.07.2016 were base drawings only on the
basis of which the work was to start and these
were subject to revisions from time to time as
per the requirements of the Project. Actually
there were several revisions to the P&ID's of
26.07.2016 and upon every revision the earlier
P&ID became redundant. The P&ID's were
being revised up to the end of 2017. It is seen
that the offer dt.30.08.2016 was never rejected
by the Respondent nor the P&ID's of
20.08.2016 were discarded. The contention of
the Claimant that by reducing the price
mentioned in the offer of 30.08.2016 the
Respondent had made a Counter offer and as
such the offer of 30.08.2016 and the P&ID's
dt.20.08.2016 became irrelevant cannot be
accepted. It is clear that P&ID's of 20.08.2016
were final and the offer dt.30.08.2016 was the
foundation of Agreement dt.20.01.2017. The
reduction in the price of the Contract was on
account of the negotiations between the parties
based on the P&ID's of 26.07.2016 and the
Purchase Orders of 16.09.2016 in which Offer
dt.30.08.2016 was mentioned. The Claimant
was demanding a total price of Rs.89.79
Crores which after negotiations was reduced
to Rs.71 Crores. It was agreed to by the
Claimant also. Ld. Counsel for the Respondent
has shown that the actual reduction in the
price was not to the tune of Rs.18 Crores but it
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By:REYMON VASHIST
Signing Date:01.09.2026
17:23:22
was actually about Rs.7 Crores only in as
much as in the amount of Rs.89 Crores
demanded by the Claimant all taxes were
included. However, while reducing the total
price to Rs.71 Crores the Respondent took
upon itself the burden of the taxes payable on
the total amount of the price and as such the
reduction after negotiations was of Rs.7
Crores only. It is therefore clear that the
parties had not given a ‘go-by’ to the offer of
the Claimant dt.30.08.2016 and the P&ID's of
20.08.2016.
57. Ld. Counsel for the Respondent has relied
upon a Book titled "Piping and
Instrumentation" written by Moe Toghral in
which it was clearly explained that the P&ID's
are a basic document which can be reviewed
as and when required and these keep on
developing and changing during the execution
of the work. It is done to ensure that a Project
is completed and made operational to the
satisfaction of the parties. Therefore, the
contention of the Claimant that the P&ID's of
26.07.2016 were final and the only P&ID's on
the basis of which the price of the Project was
fixed and if any work was executed beyond
these P&ID's the same was liable to be paid
separately by the Respondent cannot be
accepted.
58. In the Cross-Examination of CW-1 as well
as RW-1 it has come out that various
equipments for which the Invoices were raised
by the Claimant to Claim the amount under
Claim-A were either reflected in the P&ID's of
26.07.2016 or in the Offer dt.30.08.2016
which was based on the P&ID's of 20.08.2016.
Even the Purchase Orders dt.16.09.2016
define the scope of work based on the Offer
dt.30.08.2016 and the P&ID's of 26.07.2016
and as such it cannot be said that the Offer
dt.30.08.2016 and the P&ID's of 20.08.2016
were not part of the Contract between the
parties. In the Purchase Order dt.15.11.2017
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Signing Date:01.09.2026
17:23:22
even the PO's of 16.09.2016 were referred to.
The Respondent has proved on record a Chart
Exh.Rw-1/186 which shows that the
Equipments shown by the Claimant as "extra"
were either reflected in the P&ID's of
26.07.2016 or the Offer dt.30.08.2016 based
on the P&ID's of 20.08.2016. This Chart
clearly shows that the Claimant was executing
the work in the Project not only on the basis of
the P&ID's of 26.07.2016 but the P&ID's of
20.08.2016 also which were part of the Offer
dt.30.08.2016. Testimony of RW-1 proves on
record that almost 90% of the Equipments
claimed as "extra" by the Claimant were
reflected in the P&ID's of 26.07.2016 or the
Offer dt.30.08.2016 and the P&ID's of
20.08.2016. In his Cross-Examination even
CW-1 admitted that various items shown as
"extra" and included in Proforma Invoice No.9
were there in the P&ID's of 26.07.2016 also. I
am therefore of the considered view that the
P&ID's of 26.07.2016 were only basic P&ID's
which were open to revisions from time to time
and the Offer dt.30.08.2016 and the P&ID's of
20.08.2016 were also part of Contract. In
Answer to Question No.78 CW-1 admitted that
the Purchase Orders issued by the Respondent
were based on the P&ID's of 26.07.2016 and
the Offer dt.30.08.2016 which had updated
P&ID's of 20.08.2016. The Lol issued by the
Respondent on 15.09.2016 which was followed
by Purchase Orders of 16.09.2016 had a
Schedule which was made part of Agreement
dt.20.01.2017. Clause 7 of this Agreement
shows that the Agreement dt.20.01.2017 was
the concluded Contract between the parties
and was based on P&ID's prepared earlier
and revised from time to time. The work had
started on 16.09.2016 prior to the execution of
Agreement dt.20.01.2017. This Agreement had
formalized the understanding between the
parties and had mentioned GFC Drawings for
execution of work which indicates that the
GFC Drawings were the final understanding
of the work between the parties. This
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By:REYMON VASHIST
Signing Date:01.09.2026
17:23:22
Agreement contained full details of the work to
be executed by the Claimant and was for the
fixed price of Rs.71 Crores. Had any
additional work been included in this
Agreement or the revision in P&ID's had
resulted in Major additional work the
Claimant would have insisted for revision of
the Price in this Agreement which was settled
in August 2016 only.
59. This Claim, which is based on Proforma
Invoices issued by the Claimant on the ground
that on the instructions of the Respondent the
Claimant had executed additional work for the
Project which was major in nature, cannot be
sustained further on the ground that the
Claimant has not pleaded or proved on record
that the alleged additional work was major or
substantial work entitling the Claimant to
"extra" payment as the conditions of Clause
12.1 and 12.2 read with Schedule 5 of the
Agreement dt.20.01.2017 were not complied
with. The Claimant has not shown written
instructions from Respondent or any
Authorized Representative of the Respondent
for execution of the alleged additional major
work. Before executing the so called major
additional work no price was settled between
the parties. It is also not understandable as to
why the Claimant did not raise any Invoice for
the alleged additional work during the
execution of the work or soon after the
conclusion of such work. Strangely the alleged
additional work was not reflected in any of the
RA Bills presented by the Claimant to the
Respondent for payments. Had the alleged
work been additional or major in nature it
would have been the anxiety of the Claimant to
comply with Clause 12.1 and 12.2 read with
Clause 5 of Schedule 5 of the Contract and
also demand the price thereof from the
Respondent without any delay by raising a Bill
or demand in RA Bills. The Claimant started
demanding the amount under this Claim in
2018 only. Same is the position regarding
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piping work shown in Invoices No.21 to 28.
Length of piping was not shown in P&ID's.
The reason is that Project was clear to the
Claimant and it could easily assess the
expected length of pipes. Proforma Invoices
No. 29 and 30 are regarding electrical items.
These were also not shown in P&ID's but were
essential for the Project. It is found that BSR
and utility also were not shown in the P&ID's.
These were prepared on 05.10.2016 and such
were not reflected in P&ID's which had been
prepared earlier.
60. Not only that the Claimant had not acted
upon requirements of Clauses 12.1 and 12.2 of
the Contract in regard to the alleged
additional work, it has also miserably failed to
prove on record the nature of the alleged
additional work and the fact that it was major
in nature. The Claimant has also not proved
on record as to what was the Market Price of
the said additional work nor it has proved by
producing its Books of Accounts or the Bills
obtained from the Suppliers in regard to the
additional equipments or payment to the
labour for alleged additional work. Rather
most of the Equipment reflected in the
Proforma Invoices issued by the Claimant was
reflected either in the P&ID's of 26.07.2016 or
P&ID's of 20.08.2016 which shows that the
Bills being raised by the Claimant in respect of
the "extra" items and additional work are not
genuine and as such cannot be relied upon.
Whatever was added or additionally executed
was included in the price settled between the
parties as it was a Turnkey Project for a fixed
price. The measurement Sheets were denied by
the Respondent. The Claimant has not
properly proved the same on record. It is true
that in answer to Qns.123 RW1 admitted that
additional work was there but he did not say
that it was major in nature or the Respondent
had agreed to pay extra for the same. With the
revisions in P&ID's some extra work might
have been executed by the Claimant but it is
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not proved that it was major in nature. The
Claimant did not follow the agreed procedure
for claiming extra amount for execution of
major additional work.
61. The contention of the Ld. Counsel for the
Claimant that 26 Invoices on which Claim-A
raised by the Claimant is based are in regard
to the P&ID's of 26.07.2016, revised P&ID's
and the instructions issued by the Respondent
from time to time cannot be sustained. As
mentioned in the foregoing paras the Claimant
has not proved on record that the alleged
additional work was executed after complying
with the conditions of Clause 12.1 and Clause
12.2 of the Agreement dt.20.01.2017. No
written instructions from the Respondent or its
Authorised Representatives regarding any
additional work are proved on record.
Moreover, the nature of the additional work
nor the cost thereof as incurred by the
Claimant have been proved. The statement of
CW1 that the price in these Invoices was less
than the price changed from Respondent in
earlier Contract is of no help to it as earlier
Contract or prices have not been proved. It is
also shown on record that the Claimant had
engaged a Sub-Contractor for developing the
P&ID's who not only delayed the Preparation
thereof but also did not prepare proper or
accurate P&ID's which had to be revised
repeatedly. The Emails dt.24.06.2017 and
26.06.2017 between the Claimant and its Sub-
Contractor clearly show that work of Sub-
Contractor was not satisfactory. The
Respondent cannot be blamed for the
situation. Even the Equipment List was being
modified from time to time which shows that
the P&ID's of 26.07.2016 were neither perfect
nor meeting the Project requirements. It is
also shown on record that the Schedule-l
dt.11.09.2016 was part of the Agreement
dt.20.01.2017.
62. The Claimant had started demanding cost
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of additional work in 2018 only. Why not
earlier? The plea of the Claimant that the
Respondent had not denied the execution of
the additional work till the Claimant's Notice
Invoking Arbitration does not prove the
Claimant's case that it had executed major
additional work in the Project nor the
Claimant has proved the value thereof nor it
has explained as to why Clause 12.2 was not
complied with nor the Claimant has explained
as to why it did not Claim the Price for the
alleged additional work in its RA Bills.
Therefore, it does not stand proved on record
that the Claimant had executed additional
work which was major in nature and as such it
is entitled to Claim the amount of the
Proforma Bills on which its Claim-A is based.
Mere revision of P&ID's does not establish
that additional work was major or substantial
as the Contract had permitted revision thereof
from time to time so as to complete the work
satisfactorily. Email dt.02.04.2018 from
Respondent is not an admission that additional
work was major or that the Respondent was
liable to pay for it.
63. It is also noteworthy that in terms of the
Contract dt.20.01.2017 between the parties the
Project was to be executed on the basis of
"Good for Construction" Drawings. The
additional work, if any, was to be executed on
the written instructions of the Respondent in
terms of Clauses 12.1 and 12.2 of the
Agreement dt.20.01.2017 read with Schedule-
V thereof. If the additional work executed by
the Claimant was minor in nature it was
covered by the price fixed for the work as it
was a Turnkey Project. If the additional work
was major or substantial and beyond the GFC
Drawings, it must have got reflected in "as
built" Drawings. A comparison of GFC
Drawings and "as built" Drawings could have
easily shown the nature of additional or
"extra" work executed by the Claimant. The
burden of proving additional work as well as
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the fact that it was major was upon the
Claimant only but the Claimant has not placed
on record "as built" Drawings to show
additional work or the nature thereof. The fact
that in the Agreement dt.20.01.2017 also the
price as quoted in the Purchase Orders was
recorded shows that up to 20.01.2017 there
was no major additional work entitling the
Claimant to "extra" amount. The Agreement
dt.20.01.2017 was a complete and self-
contained Agreement between the parties and
the work executed by the Claimant under
P&ID's of 26.07.2016, 20.08.2016, Offer
dt.30.08.2016 was fully covered by the price
settled between the parties. Non-production of
"as built" Drawings by the Claimant calls for
an adverse inference against the Claimant and
it can be said that had these Drawings been
placed on record the hollowness of the
Claimant's Case would have been fully
exposed. Moreover, even if some equipment
used in the Project was additional or different
the Claimant could not ask for its price as it
was a Turnkey Project and everything was to
be done by the Claimant for the price already
settled.
XXX
65. With the help of Compilations I, II and III,
filed in the course of arguments, Ld. Counsel
for the Claimant has tried to show that
Proforma Invoices raised by the Claimant
were for work and equipments beyond the
Contract between the parties and additional
equipments of different sizes and material
were used in the Project which were beyond
the list dt.07.06.2016. It is found that the
equipments shown as "hold added" were
already there in P&ID's. If MOC of certain
items or their size was not there in the P&ID's
it was for the Claimant to get clarifications
from Respondent while preparing P&ID's. If
the directions given subsequently involved
higher cost the Claimant should have followed
Clauses 12.1 and 12.2 of Contract for
additional price. Qns. 63, 66, 78, 80 and 91
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put to CW1 and his answers thereto are
important. Qns. 92 and 93 to 99 are also quite
important in this regard. However, since this
work was not beyond P&ID's/revised
P&ID's/Agreement dt.20.01.2017 and was
required in the Project for which a lump sum
price had been settled the Claimant cannot ask
for additional payments. Even the PO's of
16.09.2016 had mentioned the offer
dt.30.08.2016 as well as P&ID's of
26.07.2016. It was a Turnkey Project for a
lump sum price and no breakup of the price of
different items was given. The Claimant has
not proved on record that the offer of
30.08.2016 or the P&ID's of 20.08.2016 were
not accepted by the Respondent or any
Counter Offer was given by the Respondent
which was not accepted by the Claimant for
the execution of the work. It is also seen that
Annexures-I, II, III and IV of the Agreement
between the parties did not record the
capacities or material of various equipments.
Annexure-II which was regarding piping
system was as per P&ID's of 20.08.2016 and
did not give any break up of price for piping.
Annexures-III and IV also referred to the
P&ID's of 20.08.2016 and did not mention
prices of various items to be used in the
Project. Therefore, it is not shown on record
that the work executed by the Claimant was
beyond the scope of the aforesaid Annexures I
to IV. The Claimant has not even placed on
record the P&ID's of 20.08.2016 as it knew
that the work was being executed on Turnkey
basis as per the offer dt.30.08.2016, P&ID's of
20.08.2016 and the Agreement dt.20.01.2017.
CW-1 in his Cross- Examination admitted that
the offer dt.30.08.2016 did not mention
P&ID's of 26.07.2016 and rather mentioned
P&ID's of 20.08.2016. It is also found that the
P&ID's of 26.07.2016 did not mention the
capacity, material or the price of various
equipments as it was clear to the Claimant that
the entire Project was to be completed on
Turnkey basis for a fixed price and whatever
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was required for completion of the Project had
to be done by the Claimant only. Since the
items mentioned in Proforma Invoices were
essential for completion of the Project these
cannot be called additional items. It is not the
case of the Claimant that the Respondent had
increased its production capacity or had
added some other products in the scope of
Project so as to increase the work of the
Claimant for which additional work or
additional equipment was required. If the
Project entrusted to the Claimant continued to
be for the same quantity of the chemical to be
manufactured and nothing more was included
in the production capacity the Claimant
remained bound to the terms of the Contract
and whatever was required to be installed,
added or executed remained covered by the
agreed price as it was a Turnkey Project. The
Chart Ext. RW1/186 prepared by RW1
establishes that many items shown in
Proforma Invoices were required in the
Project and were as per P&ID's of
20.08.2016/ 30.08.2016 and the Agreement
dt.20.01.2017. Cross- Examination of CW1
and answer to Question. 49 shows that
equipments shown in P&ID's of 26.07.2016
were reflected in Invoice No.9 also. It takes the
cat out of bag. Qns.64 to 73 are also quite
revealing and show that the work shown in
Invoices was not over and above the Contract
between the parties. As such the Respondent is
not liable to pay the amount as claimed in the
Invoices included in Claim-A.
66. The contention raised by Ld. Counsel for
the Claimant that since in a meeting held on
29.03.2018 between the Representatives of
both the parties, the Respondent had agreed to
pay a sum of Rs.3 Crores to the Claimant, it
should be taken as an admission on the part of
the Respondent that major additional work
was executed by the Claimant. I am unable to
agree with this submission of Ld. Counsel for
the Claimant for the reason that in the course
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of negotiations for an amicable settlement of
the disputes various offers and counter offers
are made which cannot be treated as
admissions. Many a times such offers are
made only to bring an end to acrimony and
litigation. An offer or counter offer made
during such negotiations can be taken as an
admission of a fact or liability only, if there is
clear evidence to show that it was an
admission of liability to pay. Mere offer to pay
some amount does not amount to admission of
liability.”
CHALLENGE BEFORE THE LEARNED SINGLE JUDGE
21. Aggrieved of the Impugned Award passed by the learned Sole
Arbitrator, the respondent challenged the same by way of an
application under Section 34 of the A&C Act before the learned
Single Judge.
THE IMPUGNED JUDGMENT
22. The learned Single Judge, by the Impugned Judgment, held that
the learned Sole Arbitrator had erroneously re-written the contractual
framework between the parties. It was held that the P&IDs dated
26.07.2016 formed the basis of the contract and any additional
work/variation/modification therefrom was to entail additional
payment. The learned Single Judge held that the P&IDs dated
20.08.2016 were of no relevance and were not even on record before
the learned Sole Arbitrator. It was held that the claim of the
respondent could not be nullified on account of belated demands for
payment. It was further held that the appellant had failed to respond to
the email dated 03.05.2018 whereby the respondent had claimed that it
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had executed additional work. The learned Single Judge also drew an
adverse inference against the appellant for its offer to pay Rs. 3 crores
to the respondent for the additional work.
23. The learned Single Judge, on the basis of the above findings,
held that the learned Arbitrator did not take note of the correct
contractual framework and therefore, the Impugned Award is vitiated
in its entirety, and accordingly set aside the Impugned Award. We
quote the relevant excerpts from the Impugned Judgment as under:
“76. It is evident from the above that the
impugned award concludes that:
(i) The offer dated 30.08.2016 was the
foundation of the agreement dated 20.01.2017.
(ii) The parties had not given a "go-by"
to the offer dated 30.08.2016 and the P&ID
dated 20.08.2016.
(iii) The claimant was executing the
work in project not only on the basis of P&IDs
dated 26.07.2016, but also on P&IDs dated
20.08.2016.
77. The above conclusion of the arbitral
tribunal is irreconcilable with the position
emanating from a bare perusal of the Minutes
of Meeting dated 15.09.2016; the POS dated
16.09.2016 and the Agreement dated
20.01.2017 (which itself was pursuant to the
POS dated 16.09.2016). It is evident that the
impugned award completely misdirects itself
in posing the question whether "P&IDs" of
20.08.2016 had any "relevance" or whether
they had been given a "go-by". The question
that was required to be answered was whether
performance of any additional work is
required to be assessed based on the P&IDs of
26.07.2016 or the P&IDs of 20.08.2016. The
relevancy of P&IDs dated 20.08.2016, or any
subsequent version of the P&IDs for that
matter, was not an issue inasmuch as it is the
common case of the parties that the P&IDs
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were revised from time to time to incorporate
the requirement of the respondent in respect of
work to be executed.
xxx
79. The award also notices that the revision to
the P&IDs is occasioned on account of
additional/change/requirement for equipment
etc., that have to be incorporated in
connection with the work. The obvious
intention behind omitting to make a reference
to the P&IDs dated 20.08.2016 in the Pos
dated 16.09.2016 that came to be eventually
issued, was to give effect to the
understanding/agreement that the P&IDs of
26.07.2016 would serve as the base drawings
and that any variation therefrom/additional
work would entail extra payment. This was
also categorically mentioned m the minutes of
meeting dated 15.09.2016.
80. The impugned award completely fails to
take into account the aforesaid fundamental
framework and background of the agreement
between the parties, and instead proceeds to
virtually re-write the contractual framework
by holding that the P&IDs dated 20.08.2016
were the "foundation of the agreement
between the parties".
81. This Court is conscious of the limited
scope of interference with an arbitral award
under Section 34 of the A&C Act, and the
settled position that while scrutinising an
arbitral award on the touchstone of Section 34
of A&C Act, it is impermissible to embark
upon re-appreciation of factual findings
rendered by an arbitral tribunal. However, the
law is equally well-settled that where the
findings/conclusions rendered in the arbitral
award are based on no evidence and/or are
perverse on the face of it, the same renders the
award vulnerable to challenge.
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82. In the present case, the
misreading/misunderstanding of the basic
contractual framework vitiates the award at its
root, and renders it vulnerable to challenge
under Section 34(2)(b )(ii) and 34(2A) of the
A&C Act.
xxx
88. The misreading of the basic contractual
framework of the contract between the parties
also vitiates the subsequent
examination/evaluation done in the impugned
award so as to the additional work claimed to
have been carried out by the petitioner Thus,
for instance, the arbitral tribunal renders
a finding in para 58 of the impugned award to
the effect that the "equipment shown by the
claimant as "extra" were either reflected
P&IDs dated 26.07.2016 or the offer dated
30.08.2016 based on P&IDs dated
20.08.2016". Apart from the fact that the
inclusion of some items in the P&IDs dated
20.08.2016, would not by itself disentitle the
petitioner to raise a claim for additional
work/s given that the petitioner's baseline
obligation was in terms of the P&IDs of
26.07.2016, it is also inexplicable how this
finding was reached without the P&IDs dated
20.08.2016 even being on record before the
Arbitral Tribunal.
89. Similarly, a finding has been rendered in
para 45 of the impugned award that the
"Testimony of RW1 proves on record that
almost 90% of the equipments claimed as
extra by the claimant were reflected in P&!Ds
of 26.07.2016 or the offer dated 30.08.2016
based on the P&IDs 20.08.2016''.Once the
Arbitral Tribunal reached the conclusion
(erroneously) that the P&IDs of 20.08.2016
were relevant for the purpose of assessing
extra/additional work, at the very least, the
said P&IDs (dated 20.08.2016) should have
been directed to be placed on record.
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90. The impugned award loses sight of the fact
that the P&IDs dated 20.08.2016, though a
basis of the offer dated 30.08.2016, was
consciously not made the basis for issuance of
PO dated 16.09.2016 which was finally issued
upon the petitioner/claimant. The parties
consciously chose to make the P&ID drawings
of 26.07.2016, as the basis of the purchase
orders issued to petitioner/claimant.
xxx
92. Thus, the award takes cognizance of the
fact that there were
continuous revisions in the P&IDs which the
petitioner/claimant was bound to abide with.
Necessarily, any increase of scope of work on
account of these revisions, entailed entitlement
for additional payment, which was required to
be assessed based on the comparison with the
P &ID drawings on 26.07.2016 viz-a-viz the
final P&ID drawings.
93. It is also seen that the award itself
acknowledges execution of "additional work".
Para 62 of the impugned award notes that the
petitioner/claimant had failed to prove that the
alleged additional work performed by the
petitioner was "major" in nature. Further, it is
mentioned that the petitioner had failed to
establish the price of the additional work and
also finds that there was no justification for
belatedly demanding additional amount for
work additionally performed. Para 38 of the
award records the contention of the petitioner/
claimant to the effect that the measurement of
the work was signed by both the parties.
Further, in an email dated 03.05.2018 sent by
the petitioner/claimant to the respondent, the
claimant had stated that additional work had
been done as per the requirement of the
project and with the approval of the
respondent, but there was no reply to the
said email. In fact, the execution of the
additional work was not denied by the
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respondent till the claimant invoked
arbitration vide notice dated
07.09.2018.
94. Attention has also been drawn during the
course of arguments to
various emails exchanged between the parties
in March 2018, whereby the respondent
sought detailed information to verify the
claims sought to be
raised by the petitioner. It also transpires that
a "without prejudice offer" for payment of
Rs.3,00,00,000/-, also came to be made by the
respondent to the petitioner.
95. In this background, it cannot be said, that
the claim is vitiated on account of the fact that
the payment towards alleged additional work
was demanded belatedly by the petitioner. In
any event, whether or not any additional work
was performed and/or whether the amount
claimed has been proved or not has to be
assessed by taking note of the correct
contractual framework, which the arbitral
award omits to do. This vitiates the arbitral
award in its entirety.”
24. Aggrieved of the Impugned Judgment, the appellant has filed
the present appeal.
SUBMISSIONS ON BEHALF OF THE APPELLANT
25. Mr. Jayant Mehta, the learned Senior Counsel, submits that the
Impugned Judgment is liable to be set aside as, (i) the learned Single
Judge exceeded the limited scope of interference under Section 34 of
the A&C Act; (ii) the Arbitral Tribunal's interpretation of the contract
was a plausible and correct view; (iii) the respondent had failed to
prove its claim for additional work; (iv) the respondent’s reliance on
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the equipment list contained in the email dated 07.06.2016 was a new
case; and, (v) Exhibit RW-1/186, an important evidence, remaining
unchallenged in cross-examination.
26. He submits that the Impugned Judgment suffers from a patent
jurisdictional error inasmuch as the learned Single Judge, while
adjudicating an application under Section 34 of the A&C Act,
exceeded its jurisdiction, re-read the contractual terms, the Purchase
Orders, and the Minutes of Meeting and the other documents, to arrive
at an independent conclusion on the terms of the Agreement different
from the one taken by the learned Tribunal. The learned Single Judge
re-assessed the factual findings on the sufficiency of the respondent’s
evidence and drew an inference that there was evidence before the
Arbitral Tribunal to quantify additional work, a function that is only
assigned to the learned Arbitral Tribunal. By placing reliance on OPG
Power Generation Private Limited v. Enexio Power Cooling
Solutions India Private Limited and Anr ., (2024) SCC OnLine SC
2600, he submits that the Court exercising jurisdiction under Section
34 of the A&C Act, does not sit in appeal over an Award and cannot
substitute the reasoning in the Award with its own.
27. He submits that when two views are possible, the Court, in
exercise of its power under Section 34 of the A&C Act, cannot
interfere with the possible and plausible view taken by the learned
Arbitrator. He relies upon Reliance Infrastructure Ltd. v. State of
Goa , (2024) 1 SCC 479, Parsa Kente Collieries Ltd. v. Rajasthan
Rajya Vidyut Utpadan Nigam Ltd ., (2019) 7 SCC 236 and Dyna
Technologies Pvt. Ltd., v. Crompton Greaves Ltd ., 2019 SCC OnLine
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SC 1656. The learned Senior Counsel further submits that on a
harmonised reading of the contract, the scope of work was defined by
the P&IDs dated 26.07.2016, the Offer dated 30.08.2016
incorporating the P&IDs of 20.08.2016, and the GFC drawings. This
view of the learned Arbitrator was not only a plausible view but also
the only view consistent with the record.
28. He submits that the Offer dated 30.08.2016 was expressly
accepted by the Letter of Intent dated 15.09.2016, and stood
incorporated by reference in the Purchase Orders dated 16.09.2016
under the head "Scope of Supply/Scope of Work", which was itself
based on P&IDs dated 20.08.2016.
29. He further submits that the CW-1, the respondent's own
Managing Director, admitted in his cross-examination in (Q.78) that
the Purchase Orders were based on the P&IDs of 26.07.2016 and the
Offer dated 30.08.2016, and that CW-1 also confirmed in answer to
(Q.39) that the Offer dated 30.08.2016 was the very offer referred to
in the Purchase Orders.
30. The learned Senior Counsel submits that the Agreement dated
20.01.2017 formalized the concluded contract at the lumpsum price of
Rs. 71 Crores and made no provisions for additional payment arising
from P&IDs revisions. He submits that the Arbitral Tribunal was
correct in arriving to a conclusion that the price settled in August 2016
remained unchanged because the alleged revisions did not constitute
any major additional work.
31. He submits that the P&IDs of 26.07.2016 are merely base
drawings "open to revisions from time to time", and that it would be
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technically and commercially absurd to treat them as freezing the
scope of a turnkey lump-sum contract. To this submission, he adds
that BSR and Utility were a part of the scope of work and that no
P&IDs for BSR and Utility existed even in 26.07.2016, which,
according to him, demolishes the respondent’s argument of the same
being the foundation.
32. The learned Senior Counsel submits that the rejection of the
respondent’s claim by the learned Arbitral Tribunal was on the basis
of the failure of the respondent to prove the additional amount of work
done by it. He submits that in absence of any Change Order as
mandated by Clauses 12.1 and 12.2 read with Schedule 5 of the
Agreement dated 20.01.2017, and non-production of the ‘as-built’
drawings, which alone could have demonstrated a departure from the
GFC drawings, there was no basis of the claim of the respondent nor
for its quantification. He submits that the learned Arbitrator, therefore,
rightly drew an adverse inference against the respondent for the non-
production of the above documents and held that the Agreement dated
20.01.2017 was a complete and self-contained contract fully covering
the work executed under the P&IDs of 26.07.2016, 20.08.2016 and
the Offer dated 30.08.2016.
33. He further submits that no contemporaneous invoices were
raised by the respondent despite the alleged additional work allegedly
being major in nature. The entire contract value of Rs. 71 crores stood
paid by January 2018, and it was only thereafter, in March 2018, that
the respondent raised 26 pro-forma invoices, which was found by the
learned Sole Arbitrator to be inconsistent with a genuine claim. He
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contends that the 26 pro-forma invoices raised for the amount of INR
28,37,09,384/- for the alleged additional work, were not raised at the
rates of the subject contract, as no agreed rate was available for the
same, and the respondent had derived the rates from a previous and
separate contract with the appellant, which were also not produced on
record before the learned Arbitrator. The same was therefore, rightly
rejected by the learned Arbitrator.
34. The learned Senior Counsel further submits that the Arbitral
Tribunal rightly rejected the respondent’s allegation of additional
pipeline work in the absence of some critical documents, namely
isometric and as-built drawings. He submits that relying upon the
authoritative technical treatise- Piping and Instrumentation Diagram
Development by Moe Toghraei, the Arbitral Tribunal correctly held
that the P&IDs are merely schematic representations and do not depict
actual length of pipelines, routing, fittings and other details and that
such particulars can only be established through isometric drawings.
35. The learned Senior Counsel submits that the respondent's
pleaded case before the learned Tribunal in its Statement of Claim was
confined to a comparison between the P&IDs of 26.07.2016 and the
final P&IDs. He submits that the respondent, for the first time before
the learned Single Judge, introduced an entirely new case of
comparing an equipment list contained in an email dated 07.06.2016
with the final equipment list, a case that finds no mention in any
contractual document, neither in the Purchase Orders of 16.09.2016
nor in the Minutes of Meetings, Statement of Claim, or even in CW-
1's Affidavit of Evidence. He submits that the comparative annexure
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relying on the 07.06.2016 was not tendered in evidence, marked, or
subjected to cross-examination, and was raised for the first time only
in Section 34 proceedings. He submits that a Section 34 Court,
exercising a narrow supervisory jurisdiction, cannot permit a party to
set up an entirely new factual foundation that was never canvassed
before the Arbitral Tribunal, and the learned Single Judge fell in a
jurisdictional error in relying upon this belatedly constructed case as a
ground for interference with the Award.
36. He submits that Exhibit RW-1/186, a detailed item-wise
tabulation produced by RW-1, cross-referencing each item of
equipment claimed as "extra" against the P&IDs of 26.07.2016 and
the equipment list in Annexure I to the Offer dated 30.08.2016,
remained unchallenged and uncontroverted in cross-examination, with
no question put to RW-1 thereon and no rival tabulation filed by the
respondent. He submits that the said tabulation demonstrated
that approximately 90% of the equipment claimed by the respondent
as additional work, was already reflected in the contractual
documents, namely the P&IDs dated 26.07.2016 or the Offer dated
30.08.2016 which incorporated the updated P&IDs dated 20.08.2016.
The learned Arbitrator, therefore, rightly accepted the chart and
recorded a finding in the Award that the respondent was executing the
project not merely on the basis of the P&IDs dated 26.07.2016 but
also on the basis of the P&IDs dated 20.08.2016 forming part of the
Offer dated 30.08.2016. He submits that this finding was further
corroborated by the admissions of CW-1, who, in cross-examination,
acknowledged that several items included in Proforma Invoice No. 9,
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including T-1251R, RT-1077A, P-1077A, P-1078 and RT-1077B,
were already reflected in the P&IDs dated 26.07.2016. He submits that
the learned Single Judge, by discarding the Arbitrator's finding, on the
erroneous premise that the P&IDs dated 20.08.2016 were not on
record, fundamentally misconstrued the evidentiary basis of Exhibit
RW-1/186, which was prepared with reference to the equipment list
contained in Annexure I to the Offer dated 30.08.2016 and did not
require the physical production of the P&IDs dated 20.08.2016.
37. The learned Senior Counsel for the appellant contends that the
learned Single Judge undertook a fresh appraisal of the evidence and
substituted his own view for that of the Tribunal. Such an exercise is
plainly outside the narrow confines of Section 34. The Arbitral
Tribunal is the final judge of the quality, credibility and sufficiency of
evidence, and a Court, under Section 34 of the A&C Act, cannot
interfere with the Arbitral Award merely because another view may
also be possible. To support his submission, he places reliance on
judgments in Navodaya Mass Entertainment Ltd. v. J.M. Combines,
(2015) 5 SCC 698 , Rail Vikas Nigam Ltd. v. Simplex Infrastructure
Ltd., 2021 SCC Del 4556 , Punjab State Civil Supplies Corporation
Limited and Another v. Sanman Rice Mills and Others (2024) SCC
OnLine SC 2632 and National Highways Authority of India v.
Hindustan Construction Company Limited (2024) 6 SCC 809.
SUBMISSIONS ON BEHALF OF THE RESPONDENT
38. Per contra , Mr. Arvind Nigam, the learned Senior Counsel
appearing on behalf of the respondent, submits that the impugned
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judgment by which the learned Single Judge has set aside the Arbitral
Award rendered by the Sole Arbitrator, does not warrant interference.
He submits that the learned Single Judge acted strictly within the
scope of powers under Section 34 of the A&C Act and did not in any
way transgress the jurisdictional limits.
39. He submits that the appellant has failed to demonstrate any
ground warranting interference by this Court within the scope of
Section 37 of the A&C Act, as the scope under Section 37 of the A&C
Act is quite narrow. He submits that, while exercising power under
Section 37 of the A&C Act, the Court is barred from undertaking an
independent assessment of the merits of the Award, re-appreciating
evidence, substituting own interpretation, or reopening questions of
fact and law. He submits that in the present case, the appellant has
failed to establish any such ground which requires intervention of this
Court in the limited framework of Section 37 of the A&C Act. To
buttress his contention, he places reliance on MMTC Ltd v. Vedanta
Ltd , 2019 4 SCC 163, Haryana Tourism Ltd. v. Kandhari Beverages
Ltd. , 2022 3 SCC 237, Konkan Railway Corporation Ltd. v. Chenab
Bridge Project , 2023 9 SCC 85 and UHL Power Co. Ltd v State of
H.P. , (2022) 4 SCC 116.
40. The learned Senior Counsel further submits that the learned
Single Judge, in his observation, records the three conclusions on
which the Award rested, namely, that the Offer dated 30.08.2016 was
the foundation of the Agreement dated 20.01.2017; that the parties had
not given a "go-by" to the said Offer and the P&IDs dated 20.08.2016;
and that the respondent was executing the work not merely on the
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P&IDs of 26.07.2016 but also on the P&IDs of 20.08.2016. He
submits that the learned Single Judge, upon a close examination of the
record, correctly found these conclusions to be perverse and irrational,
being conclusions that no reasonable person could have arrived at. He
submits that this is not a case of one possible view being displaced by
another, but one where the view taken by the Arbitrator has been
shown to be unsustainable, falling within the limited scope of
jurisdiction of the learned Single Judge under Section 34 of the A&C
Act. In support of his submission, he relies on Associate Builders v.
DDA, (2015) 3 SCC 49; Ssangyong Engg. & Construction Co. Ltd. v.
NHAI, (2019) 15 SCC 131; and Patel Engg. Ltd. v. North Eastern
Electric Power Corp. Ltd., (2020) 7 SCC 167.
41. The learned Senior Counsel further draws the attention of this
Court to the Minutes of Meeting dated 15.09.2016, which specifically
record that the turnkey job was awarded on the basis of the P&IDs
dated 26.07.2016, and which stipulates that the respondent would be
entitled to charge extra for "major modifications" incorporated in the
P&IDs subsequent thereto, reflecting the contemporaneous and shared
understanding of the parties that the P&IDs of 26.07.2016 constituted
the contractual baseline. He submits that the Letter of Intent and the
Purchase Orders dated 16.09.2016 were issued on this very basis. He
submits that the Purchase Orders make a specific and deliberate
reference to the Offer dated 30.08.2016 read with the P&IDs of
26.07.2016, while consciously omitting any reference to the P&IDs of
20.08.2016, an omission that, he submits, cannot be treated as
inadvertent, particularly since the amounts specified under the heads
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of Equipment, Piping, Electrical and Instrumentation in the Purchase
Orders are themselves at variance with the corresponding amounts in
the Offer.
42. He further submits that Schedule 5 of the Agreement dated
20.01.2017, incorporates the very same payment table that forms part
of the Purchase Orders and makes express reference to the P&IDs
dated 26.07.2016, and that Clause 12.2 read with Schedule 5, obliges
the appellant to pay at a mutually agreed price for additional work
carried out pursuant to its written instructions, without drawing any
distinction between "major" and "minor" work. He also relies upon the
Revised Purchase Order dated 15.11.2017 issued upon the transition
from Service Tax to GST, which also refers back to the original
Purchase Orders predicated on the P&IDs of 26.07.2016, to submit
that the contract remained, at all material times, anchored to those
very P&IDs and not to any subsequent revision.
43. The learned Senior Counsel for the respondent contends that
from the above, it is clear that the respondent had agreed to execute
the contract for a lump sum consideration of INR 71,00,00,000/-,
(Rupees Seventy One Crores) strictly limited to the scope of work
defined under the P&IDs dated 26.07.2016, and confirmed to such
equipments for which specifications had been provided by the
appellant. He submits that the contrary interpretation to such clear
contractual terms placed by the learned Sole Arbitrator, has been
rightly set aside by the learned Single Judge.
44. He submits that while the Award itself acknowledged that
P&IDs were liable to revision from time to time, it ignored that the
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parties' consistent reference to the P&IDs of 26.07.2016 and not those
of 20.08.2016, across every contractual document, was a deliberate
choice fixing the baseline against which the additional work was to be
measured. He submits that the Award failed to give effect to the clear
understanding of the parties that any variation from that baseline
would attract additional payment; the Arbitrator, rather redefined the
baseline itself. He further submits that the Tribunal also ignored the
fact that the last revised P&IDs were approved by the appellant only
on 07.07.2017.
45. The learned Senior Counsel submits that the learned Single
Judge rightly noticed a further inconsistency in the Award, where the
Tribunal held that the respondent had failed to prove that the
additional work was "major" in nature, while overlooking that Clause
12.2 read with Schedule 5 of the Agreement obliged the appellant to
pay for additional work at a mutually agreed rate irrespective of any
such characterisation, a distinction the Tribunal itself imported into
the contract without foundation.
46. He submits that the learned Single Judge correctly held the
Award to be vitiated by patent illegality under Section 34(2A) of the
A&C Act, and to be contrary to the fundamental policy of Indian law
under Section 34(2)(b)(ii) of the A&C Act as the Tribunal had failed
to take into account the agreed contractual framework and had
proceeded, in substance, to re-write the contract between the parties.
He places reliance on Union of India, Ministry of Railways, Railway
Board v. M/s Jindal Rail Infrastructure Limited , 2022 SCC OnLine
Del 1540; Ssangyong Engineering & Construction Co. Ltd. (supra);
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Satyanarayana Construction Company v. Union of India and Ors. ,
(2011) 15 SCC 101; Indian Oil Corp. Ltd. v. Shree Ganesh
Petroleum, (2022) 4 SCC 463; and PSA SICAL Terminals Pvt. Ltd.
v. Board of Trustees of V.O. Chidambranar Port Trust, AIR 2021
SC 4661.
47. The learned Senior Counsel submits that the submissions of the
appellant on the merits of the contractual arrangement and the parties'
contemporaneous conduct, are beyond the scope of enquiry under
Section 37 of the A&C Act.
48. On the contention of appellant that no variation order was ever
issued, he submits that the same is factually incorrect, since the
respondent performed additional work pursuant to written instructions
issued by the appellant through emails communicating revised
equipment lists and P&IDs, which squarely qualify as written
instructions under Clauses 12.1 and 12.4 of the Agreement.
49. He further submits that the appellant's contention that the
respondent failed to raise monthly running invoices in respect of the
additional works, is misconceived. He submits that the requirement
under Schedule 5 of the Agreement to raise monthly running bills was
confined to payment of the lump sum contract price and did not
extend to additional works. He further submits that, consistent with
the established course of dealing between the parties, consolidated
invoices for additional works were raised only upon completion of the
project, a practice that had been followed in earlier contracts between
the parties without objection, with such invoices having been duly
honoured and paid by the appellant.
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50. He submits that the appellant's contention that the additional
works in fact formed part of the originally agreed scope, is contrary to
its own conduct. He submits that in a jointly convened meeting held
on 01.02.2018, the appellant itself called upon the respondent to
quantify the additional works on the basis of the equipment list dated
07.06.2016. Pursuant thereto, the respondent, by email dated
09.02.2018, furnished the details of the additional works, to which the
appellant did not respond. He submits that the respondent thereafter,
by email dated 14.03.2018, forwarded 26 proforma invoices together
with the corresponding measurement sheets, and that the appellant, by
email dated 02.04.2018, merely informed the respondent that the
claim for the additional works was under consideration by its Japan
office, without disputing either the execution of the additional works
or the respondent's entitlement to payment . He submits that the
appellant's conduct thereafter contradicts its present stand even more
starkly, since at a meeting held on 29.03.2018, the appellant offered a
sum of Rs. 3 crores towards the cost of the additional works, thereby
unequivocally acknowledging that such works had in fact been
executed. The respondent had rejected this offer by its emails dated
03.05.2018 and 04.07.2018. He submits that the learned Single Judge
therefore rightly concluded that until the respondent invoked
arbitration, the appellant had never disputed the execution of the
additional works and had sought only to negotiate the amount payable.
51. He further submits that the appellant's reliance on a technical
treatise on Piping and Instrumentation for the proposition that the
price could not have been fixed by reference to the P&IDs of
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26.07.2016, runs contrary to the contractual arrangement recorded in
the Minutes of Meeting and the Purchase Orders, both of which
specifically delineate the P&IDs of 26.07.2016 as the basis of the
turnkey job.
52. The learned Senior Counsel submits that the learned Single
Judge found that the Arbitral Tribunal predicated its conclusions,
including the very finding that the contractual arrangement between
the parties rested on the P&IDs of 20.08.2016, on drawings that were
never placed on the record by either party, and that this constitutes a
patent illegality striking at the root of the validity of the Award. He
submits that the appellant's attempt to overcome this defect by relying
on Exhibit RW-1/186, and contending that the P&IDs of 20.08.2016
were thereby "effectively" on record, does not pass scrutiny, since a
bare perusal of RW-1/186 shows it to be no more than a chart
prepared by the appellant's own witness comparing certain equipment
lists between June and November 2016, neither reflecting nor
annexing the P&IDs of 20.08.2016, and being wholly irrelevant to the
question of the contractual framework agreed between the parties.
53. He further submits that the appellant's attempt to shift the
burden of producing the P&IDs of 20.08.2016 onto the respondent, is
equally misconceived; the appellant having consistently maintained
throughout the arbitral proceedings that these P&IDs bore no
contractual relevance.
54. He submits that Arbitrator’s finding that 90% of the equipment
claimed as "extra" was reflected in the Offer dated 30.08.2016 or the
P&IDs of 26.07.2016, could not possibly have been arrived at without
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an actual examination of the P&IDs of 20.08.2016, an examination
that never took place. He places reliance on PSA SICAL Terminals
Pvt. Ltd. (supra); Associate Builders (supra); and BSNL v. Vihaan
Networks Ltd. , (2023) 5 HCC (Del) 634.
55. The learned Senior Counsel submits that the Arbitral Tribunal
failed to properly appreciate the extensive documentary evidence
placed on record by the respondent concerning both, the scope of the
additional works executed and the cost incurred in relation thereto,
thereby rendering findings of the Arbitral Tribunal as perverse and
contrary to the evidence on record within the meaning of Section
34(2A) of the A&C Act.
56. In response to the appellant’s contention of failure of the
respondent to prove additional work, he submits that the Arbitral
Tribunal failed to consider the respondent's email dated 14.03.2018,
forwarding 26 proforma invoices together with detailed measurement
sheets for the additional works performed by the respondent. He
submits that the underlying equipment had been manufactured in-
house by the respondent in accordance with the appellant's
specifications, and that the appellant neither disputed the execution of
the additional works nor the amounts claimed, until the invocation of
arbitration proceedings.
57. He further submits that the Tribunal failed to consider the
respondent's Statement of Claim and Written Submissions, which set
out the factual background, the contractual understanding between the
parties, and the basis for quantifying the additional works. He submits
that the Written Submissions also explained the categorization of the
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26 proforma invoices under the heads "Property Change Added",
"Property Change Deleted", "Direct Added" and "Hold Added", so as
to avoid any overlap with the equipment list dated 07.06.2016.
58. He also relies upon Annexure A-3 to the respondent's Written
Submissions, stating that it contains a process-wise break-up of the
additional equipment and the corresponding cost analysis based on a
comparison between the base P&IDs dated 26.07.2016 and the final
P&IDs dated 07.07.2017. He submits that the Annexure further
clarifies that although the respondent could have claimed
approximately INR 5 crores more on that basis, the invoices were
instead raised on the appellant's insistence during the meeting held on
01.02.2018 by comparing the equipment list dated 07.06.2016 with
the final P&IDs.
59. He submits that the Arbitral Tribunal failed to consider
Annexure A-4 to the respondent's Written Submissions, which sets out
the additional equipment on the basis of the comparison specifically
requested by the appellant. He submits that the Arbitral Tribunal also
failed to examine the detailed measurement sheets annexed as
Annexure C-7 to the Statement of Claim, which were signed by both
parties and remained undisputed until the invocation of arbitration. He
points out that the appellant's own witness admitted, in cross-
examination, to having received the said documents by email dated
14.03.2018.
60. He further submits that the Arbitral Tribunal disregarded the
extensive cross-examination of the respondent's witness (CW-1), who
explained that the P&IDs dated 26.07.2016 and the equipment list
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dated 07.06.2016 did not specify the material, capacity or technical
parameters of certain equipment, making it impossible to account for
such equipment within the agreed lump sum price. He submits that
CW-1 also explained the basis for the categorisation of the proforma
invoices raised in respect of the additional works.
61. The learned Senior Counsel accordingly submits that the
learned Single Judge correctly found that the Arbitral Tribunal arrived
at perverse findings by disregarding vital evidence placed on record
by the respondent, which independently constitutes patent illegality
under Section 34(2A) of the A&C Act and vitiates the Award in its
entirety. He places reliance on Associate Builders (supra); State of
Chhattisgarh v. SAL Udyog (P) Ltd., (2022) 2 SCC 275; Patel
Engineering Ltd. v. North Eastern Electric Power Corporation
Limited, (2020) SCC OnLine SC 466; and BSNL (supra).
ANALYSIS/ REASONING
62. We have considered the submissions made by the learned
Senior Counsels of the respective parties.
63. At the outset, we would like to highlight that we have recorded
in detail in our judgment the submissions made by the parties, only to
bring home our eventual conclusion that the parties, firstly before the
learned Single Judge and now before us, were treating the learned
Single Judge as also us as Courts of Appeal rather than confining
themselves to the limited scope of jurisdiction that the learned Single
Judge and us have been vested with under Sections 34 and 37 of the
A&C Act. We would therefore, first take note of the limits of the
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jurisdiction exercised by the learned Single Judge under Section 34 of
the A&C Act.
64. The contours of such jurisdiction have been a subject matter of
a dispute over a long period of time, however, there is never a doubt
on the fact that the learned Arbitral Tribunal is the final authority on
the construction to be placed on the contractual terms between the
parties, as also on the findings of the facts. Unless the construction of
contractual terms arrived at by the Arbitral Tribunal, is found to be
perverse and as one which is totally not plausible or one which no
reasonable person could have reached at, and even though the Court
may feel that a contrary interpretation may be better reflective of the
intent of the parties, the Arbitral Award cannot be interfered with in
exercise of jurisdiction under Section 34 of the A&C Act.
65. Similarly, unless the finding of facts reached by the Arbitral
Tribunal on evidence led by the parties is found to be perverse, it
C ,
cannot be interfered with by a Court under Section 34 of the A& Act
by re-appreciating the evidence.
66. Section 34 of the A&C Act, as far as relevant to the present
appeal, is reproduced herein under:
“ 3 4. Application for setting aside arbitral
award .
— (1) Recourse to a Court against an arbitral
award may be made only by an application for
setting aside such award in accordance with
sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the
Court only if —
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2(b) the Court finds that--
(i) the subject-matter of the dispute is not
capable of settlement by arbitration under the
law for the time being in force, or
(ii) the arbitral award is in conflict with the
public policy of India.
Explanation 1.--For the avoidance of any
doubt, it is clarified that an award is in
conflict with the public policy of India, only
if,-
(i) the making of the award was induced or
affected by fraud or corruption or was in
violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental
policy of Indian law; or
(iii) it is in conflict with the most basic notions
of morality or justice.
Explanation 2.--For the avoidance of doubt,
the test as to whether there is a contravention
with the fundamental policy of Indian law
shall not entail a review on the merits of the
dispute.
(2A) An arbitral award arising out of
arbitrations other than international
commercial arbitrations, may also be set aside
by the Court, if the Court finds that the award
is vitiated by patent illegality appearing on the
face of the award:
Provided that an award shall not be set aside
merely on the ground of an erroneous
application of the law or by reappreciation of
evidence.”
67. The challenge of the respondent to the Award of the learned
Sole Arbitrator was claimed to fall under Section 34(2)(b)(ii) and
Section 34(2A) of the A&C Act.
68. As far as Section 34(2)(b)(ii) of the A&C Act is concerned,
Explanation 1 of the 34(2) of the A&C Act clarifies that the Award
can be said to be in conflict with the public policy of India only if the
making of the Award was induced or affected by fraud or corruption
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or was in violation of Section 75 or Section 81 of the A&C Act, or it
is in contravention with the fundamental policy of Indian law or in
conflict with the most basic notions of morality or justice.The
Explanation 2 of Section 34 (2) of the A&C Act further specifically
clarifies that the test as to whether there is a contravention with the
fundamental policy of Indian law shall not entail a review on the
merits of the dispute.
69. In OPG Power Generation Pvt. Ltd. (supra), the Supreme Court
clarified that to challenge an Award on the ground of it contravening
the fundamental policy of Indian Law, it must be shown that it
contravenes all or any of such fundamental principles that provide a
basis for administration of justice and enforcement of law in the
country. As an illustration, it was held that cases of violation of the
principles of natural justice, disregarding orders of superior Courts in
India or the binding effect of the judgment of a superior Court, and
violating law of India linked to public good or public interest, would
be considered as contravention of the fundamental policy of Indian
law. At the same time, Court emphasised that while assessing whether
there has been a contravention of the fundamental policy of Indian
law, the extent of judicial scrutiny must not exceed the limit as set out
in Explanation 2 to Section 34(2)(b)(ii) of the A&C Act, that is, it
would not allow a review on the merits of the dispute.
70. As far as the basic notions of morality and justice is concerned,
the Supreme Court clarified that to give it a broad dimension, would
be to deviate from the legislative intent. “The most basic notions of
justice”, therefore, ought to be such elementary principles of justice
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that their violation could be figured out by a prudent member of the
public who may, or may not, be judicially trained, and would be such
violation thereof which would shock the conscience of a legally
trained mind and that of the Court.
71. Coming to Section 34(2A) of the A&C Act, the Supreme Court
clarified that it refers to such illegality which goes to the root of the
matter, but which does not amount to mere erroneous application of
law or a challenge on re-appreciation of evidence. It was re-
emphasized that it is only when an Award is categorized as perverse,
that an error of fact can warrant setting aside of the Award. However,
mere erroneous application of law or wrong appreciation of evidence
by itself is not a ground to set aside an Award. Equally, while the
Award against the terms of the contract would be patently illegal,
however, the learned Arbitral Tribunal has jurisdiction to interpret a
contract having regard to the terms and conditions of the contract,
conduct of the parties, circumstances of the case, etc. If the conclusion
of the learned Arbitral Tribunal is based on a possible view of the
matter, the Court should not interfere with the same. It is only when
the interpretation placed by the learned Arbitral Tribunal is not even a
possible view, the Award would be considered perverse and as such
amenable to interference.
72. We quote from the judgment as under:
“ 52. The legal position which emerges from
the aforesaid discussion is that after the '2015
amendments' in Section 34 (2) (b) (ii) and
Section 48(2) (b) of the 1996 Act, the phrase
"in conflict with the public policy of India"
must be accorded a restricted meaning in
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terms of Explanation 1. The expression "in
contravention with the fundamental policy of
Indian law" by use of the word 'fundamental'
before the phrase 'policy of Indian law' makes
the expression narrower in its application than
the phrase "in contravention with the policy of
Indian law", which means mere contravention
of law is not enough to make an award
vulnerable. To bring the contravention within
the fold of fundamental policy of Indian law,
the award must contravene all or any of such
fundamental principles that provide a basis for
administration of justice and enforcement of
law in this country. Without intending to
exhaustively enumerate instances of such
contravention, by way of illustration, it could
be said that (a) violation of the principles of
natural justice; (b) disregarding orders of
superior courts in India or the binding effect of
the judgment of a superior court; and (c)
violating law of India linked to public good or
public interest, are considered contravention
of the fundamental policy of Indian law.
However, while assessing whether there has
been a contravention of the fundamental policy
of Indian law, the extent of judicial scrutiny
must not exceed the limit as set out in
Explanation 2 to Section 34(2) (b) (ii).
xxx
58. In the light of the discussion above, in our
view, when we talk about justice being done, it
is about rendering, in accord with law, what is
right and equitable to one who has suffered a
wrong. Justice is the virtue by which the
society/court/tribunal gives a man his due,
opposed to injury or wrong. Dispensation of
justice in its quality may vary, dependent on
person who dispenses it. A trained judicial
mind may dispense justice in a manner
different from what a person of ordinary
prudence would do. This is so, because a
trained judicial mind is likely to figure out
even minor infractions of law/norms which
may escape the attention of a person with
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ordinary prudence. Therefore, the placement
of words "most basic notions" before "of
justice" in Explanation 1 has its significance.
Notably, at the time when the 2015
Amendment was brought, the existing law with
regard to grounds for setting aside an arbitral
award, as interpreted by this Court, was that
an arbitral award would be in conflict with
public policy of India, if it is contrary to : (a)
the fundamental policy of Indian law; (b) the
interest of India; (c)justice or morality; and/or
is (d) patently illegal. As we have already
noticed, the object of inserting Explanations 1
and 2 in place of earlier explanation to Section
34(2) (b) (ii) was to limit the scope of
interference with an arbitral award, therefore
the amendment consciously qualified the term
justice' with 'most basic notions' of it. In such
circumstances, giving a broad dimension to
this category would be deviating from the
legislative intent. In our view, therefore,
considering that the concept of justice is open-
textured, and notions of justice could evolve
with changing needs of the society, it would
not be prudent to cull out "the most basic
notions of justice". Suffice it to observe, they
ought to be such elementary principles of
justice that their violation could be figured out
by a prudent member of the public who may,
or may not, be judicially trained, which means,
that their violation would shock the conscience
of a legally trained mind. In other words, this
ground would be available to set aside an
arbitral award, if the award conflicts with
such elementary/fundamental principles of
justice that it shocks the conscience of the
Court.
xxx
68. The aforesaid judicial precedents make it
clear that while exercising power under
Section 34 of the 1996 Act the Court does not
sit in appeal over the arbitral award.
Interference with an arbitral award is only on
limited grounds as set out in Section 34 of the
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1996 Act. A possible view by the arbitrator on
facts is to be respected as the arbitrator is the
ultimate master of the quantity and quality of
evidence to be relied upon. It is only when an
arbitral award could be categorized as
perverse, that on an error of fact an arbitral
award may be set aside.Further, a mere
erroneous application of the law or wrong
appreciation of evidence by itself is not a
ground to set aside an award as is clear from
the provisions of subsection (2-A) of Section
34 of the 1996 Act.
Xxx
72. An arbitral tribunal must decide in
accordance with the terms of the contract. In
a case where an arbitral tribunal passes an
award against the terms of the contract, the
award would be patently illegal. However, an
arbitral tribunal has jurisdiction to interpret a
contract having regard to terms and
conditions of the contract, conduct of the
parties including correspondences exchanged,
circumstances of the case and pleadings of the
parties. If the conclusion of the arbitrator is
based on a possible view of the matter, the
Court should not interfere..But where, on a full
reading of the contract, the view of the arbitral
tribunal on the terms of a contract is not a
possible view, the award would be considered
perverse and as such amenable to
interference.”
73. As far as the powers of the Court under Section 37 of the A&C
Act is concerned, where the challenge to the Award has been upheld
by the Court in Section 34 of the A&C Act and the Arbitral Award is
set aside on an application filed under Section 34 of the A&C Act, the
Appellate Court is to consider whether the exercise of power by the
Court under Section 34 of the A&C Act was proper and justified, that
is, whether the Court remained within the contours of the limited
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jurisdiction which is vested with Section 34 of the A&C Act and did
not exceed such jurisdiction. Equally, where the Award has been
upheld by the Court by dismissing the challenge under Section 34 of
the A&C Act, the appellate Court in exercise of its jurisdiction under
Section 37 of the A&C Act, exercises a co-extensive jurisdiction
which is again limited to consider the challenge to the Arbitral Award
within the limited contours of Section 34 of the A&C Act. To some
extent, in such circumstances, the power of the Court is even more
circumscribed and restricted as there is a concurrent finding of the
Arbitrator and then of the Court. Either way, the appellate Court
cannot undertake an independent assessment of the merits of the
Award, but should only ascertain and ensure that the exercise of the
power by the Court under Section 34 of the A&C Act has not
exceeded the scope of the provision. In this regard, we may usefully
refer to the judgment of the Supreme Court in Reliance Infrastructure
Ltd. (supra).
74. Recently, in Jan De Nul Dredging India Private Limited v.
Tuticorin Port Trust , 2026 INSC 34, the Supreme Court while
discussing the interplay between Sections 34 and 37 of the A&C Act,
reiterated that the jurisdiction under Section 37 of the A&C Act is
akin to that under Section 34 of the A&C Act and that the appellate
Court cannot travel beyond the limited scope of interference
exercisable under Section 34 of the Act. We quote from the judgment
as under:
“36. The gist of the aforesaid decisions is that
the jurisdiction of the court under Section 37
of the Act is akin to the jurisdiction of the
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court under Section 34 of the Act, and,
therefore, the scope of interference by the
court in appeal under Section 37 cannot go
beyond the grounds on which challenge can be
made to the award under Section 34 of the Act.
Moreover, the courts exercising powers under
Sections34 and 37, do not act as a normal
court, and therefore, ought not to interfere
with the arbitral award on a mere possibility
of an alternative view.
37. In other words, the scope of interference of
the court with the arbitral matters is virtually
prohibited, if not absolutely barred. The
powers of the Appellate Court are even more
restricted than the powers conferred by
Section 34 of the Act. The appellate power
under Section 37 of the Act is exercisable only
to find out if the court exercising power under
Section 34 of the Act, has acted within its
limits as prescribed thereunder or has
exceeded or failed to exercise the power so
conferred. The Appellate Court exercising
powers under Section 37 of the Act has no
authority of law to consider the matter in
dispute before the Arbitral Tribunal on merits
so as to hold as to whether the award of the
Arbitral Tribunal is right or wrong. The
Appellate Court in exercise of such power
cannot sit as an ordinary court of appeal and
reappraise the evidence to record a contrary
finding. The award of the Arbitral Tribunal
cannot be touched by the court unless it is
contrary to the substantive provision of law or
any provision of the Act or the terms of the
agreement.”
75. The above law is based on a public policy. Arbitration, as an
alternate dispute redressal mechanism, entails the confidence of the
parties to make the Arbitrator as the final adjudicator of the terms of
the Agreement and the disputed questions of fact. The parties,
knowing fully well that unlike in a Court of Law, where remedies of
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appeal are provided, the challenge to an Arbitral Award is limited,
agree to refer their disputes to arbitration. Once having done so and
having agreed to the above procedure, they cannot be allowed to
challenge the Award as an appeal there-against. By allowing them to
do so, would undermine the very object and purpose of the parties
agreeing to go for Arbitration rather than have their dispute settled
through the normal procedures of the Court of Law.
76. Having considered the above contours of Section 34 and also
Section 37 of the A&C Act, we now proceed to consider whether the
learned Single Judge has in any manner exceeded his jurisdiction in
setting aside the Arbitral Award.
77. As would be evident from the above summary of facts and the
submissions of the learned senior counsels for the parties, the basic
dispute between the parties was whether the Agreement in question
was a turnkey agreement; whether it was based only on P&IDs dated
26.07.2016; whether any variation therefrom was payable by the
appellant to the respondent; whether there was, in fact, any additional
work performed by the respondent under the Agreement; and if so,
whether the respondent had been able to prove such work and its
quantification for its entitlement.
78. We have reproduced hereinabove in detail the findings of the
learned Arbitrator on the above issue. In a summary, the learned
Arbitrator has held that it cannot be accepted that the P&IDs dated
26.07.2016 were the only basis of the Agreement and that the P&IDs
dated 20.08.2016 had no relevance at all. The learned Arbitrator
further held that the respondent had failed to plead or prove that the
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alleged additional work was major or substantial, entitling the
respondent to claim additional payments in terms of the Clauses 12.1
and 12.2 read with Schedule 5 of the Agreement. The learned
Arbitrator held that the respondent had failed to show any written
instruction from the appellant for the execution of the alleged
additional major work, nor any price was settled between the parties
for the same. The learned Arbitrator, in fact, placed much reliance on
the fact that the proforma invoices for the alleged additional work had
been raised by the respondent post the completion of the work. The
learned Single Judge, however, found fault in the above findings of
the learned Arbitrator as, in his opinion, the Minutes of Meeting dated
15.09.2016 clearly showed that the Agreement was based on the
P&IDs dated 26.07.2016, and in spite of the fact that the offer dated
30.08.2016 referred to P&IDs dated 20.08.2016, as the Minutes of
Meeting dated 15.09.2016 still made reference only to P&IDs dated
26.07.2016, the same would form the base and any major
modifications thereafter will entail a claim of extra charges by the
respondent on mutually agreed rates.
79. Clearly, the learned Single Judge felt that the interpretation to
the terms of the Agreement placed by the learned Arbitrator was
incorrect. But the question before the learned Single Judge was limited
to the aspect as to whether such interpretation was completely
perverse; not possible; and patently illegal. In our view, the learned
Single Judge did not confine his scrutiny of the Award to this limited
aspect alone. The learned Single Judge, in fact, seems to have
proceeded on what would have been a more appropriate interpretation
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of contractual terms, which, in our respectful opinion, is to travel
beyond the scope of scrutiny of an Award under Section 34 of the
A&C Act.
80. As noted hereinabove, the learned Arbitrator in reaching his
conclusion on the interpretation to be placed to the terms of the
contract, placed reliance on the Offer of the respondent dated
30.08.2016; evidence of the witnesses of the parties; conduct of the
parties during the execution of the work, wherein the respondent had
not claimed for the extra work till the completion of the work; and the
Purchase Orders dated 16.09.2016 and 15.11.2017, which defined the
scope of the work. Though the learned Single Judge may have had a
view that the above interpretation of the Agreement between the
parties by the learned Arbitrator was not correct, this is not the test to
be applied under Section 34 of the A&C Act. Interference with the
Award is warranted only where such interpretation is perverse and not
possible at all. This limited test was not applied by the learned Single
Judge in its Impugned Judgment.
81. The learned Arbitral Tribunal had also, on appreciation of the
evidence led before it, concluded that the respondent had neither
pleaded nor proved on record that the alleged additional work was
major or substantial work entitling it to extra payment in terms of
Clauses 12.1 and 12.2 read with Schedule 5 of the Agreement. The
learned Arbitrator had held that in terms of the Clauses 12.1 and 12.2
of the Agreement read with Schedule 5, not all additional work
performed by the respondent was to be paid over and above lump sum
price agreed between the parties; it was only where the “owner’s
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instructions involves change in the scope of the work, variations and
modifications beyond the contractual terms” that the appellant was to
pay to the respondent the price of such extra work “at a mutually
agreed price”. The Schedule 5 of the Agreement further stated that the
cost of all changes or variations, as instructed by the owner, will be
added or deducted from the contract price “by variation order”. It
further provided that such extra or reduced cost will be arrived “on the
basis of mutually agreed procedures/rates, for which purpose, the
contractor shall assist the owner by providing all documentary
evidence”. In the Minutes of Meeting dated 15.09.2016, it had also
specifically been agreed that “no extra amount will be charged by
Trans for smaller modifications. However, for any major
modifications incorporated in P&IDs after 26.07.2016, Trans will
charge extra amount on mutually agreed rates.” The learned Arbitral
Tribunal found that admittedly, there was no “variation order” as also
there were no “mutually agreed rates”. It was also admitted that the
respondent had not raised the claim for additional work. In fact, there
was no evidence led for the extra work, if any, performed by the
respondent, and the only reliance placed by the respondent was on
some charts which were produced with its written submissions. As far
as the rates are concerned, the respondent based its claim on some
earlier contract between the parties without placing the same on
record. It was based on the above findings that the learned Arbitrator
reached a conclusion that the respondent had failed to prove its claim
for additional work.
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82. The learned Single Judge, however, found fault with the above
findings, by placing reliance on the email dated 03.05.2018 sent by the
respondent to the appellant making a claim of the additional work
being done on the project with the approval of the appellant to which
there was no reply from the appellant, and concluded that the
execution of the additional work had not been denied by the appellant
till the respondent invoked arbitration vide notice dated 07.09.2018.
The learned Single Judge also placed reliance on the “without
prejudice” offer of the claimant to pay a sum of Rs.3 Crores to the
respondent for the additional work. In our view, the above interference
of the learned Single Judge with the impugned Award was also
unwarranted.
83. We are of the opinion that the learned Single Judge has
exceeded its jurisdiction under Section 34 of the A&C Act in setting
aside the Arbitral Award by re-appreciating the evidence and acting as
a Court of Appeal.
84. Merely because the appellant had not specifically disputed the
performance of extra work by the respondent or had made a “without
prejudice” offer to settle this dispute with the respondent, it cannot be
said that the burden of proving its claim on the respondent stood
discharged. In any case, this is a matter of appreciation of evidence,
which, as we have observed hereinabove, is in the exclusive domain of
the learned Arbitrator and with which the learned Single Judge could
have interfered with only and only if it found such conclusion to be
perverse and one which no reasonable person could have reached. In
our view, the learned Single Judge has acted more as a Court of
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Appeal rather than limiting itself to the jurisdiction under Section 34
of the A&C Act.
85. In our view, therefore, the learned Single Judge has exceeded
its jurisdiction vested in it under Section 34 of the A&C Act in
interfering with the Impugned Award. The Impugned Judgment
therefore cannot be sustained and is accordingly set aside. The appeal
is allowed in the above terms.
86. The parties shall bear their own costs.
NAVIN CHAWLA, J.
MADHU JAIN, J.
SEPTEMBER 1, 2026/Arya/pb
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