M/s RS Development and Constructions India Private vs M/s Indian Port Rail AND Ropeway Corporation Ltd.,

Arb O.P(COM.DIV.) No. 491 of 2022 &
A.No.769 of 2026
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON
PRONOUNCED ON
01.09.2026
04.11.2026
CORAM
THE HON'BLE MR.JUSTICE K.KUMARESH BABU
Arb O.P(COM.DIV.) No. 491 of 2022
AND
A NO. 769 of 2026
M/s RS Development and Constructions
India Private Limited,
Rep.by its Director,
Mr.S.Sankar,
No.131/1, A.P.T.Road,
Erode-638003, Tamil Nadu.
..Petitioner(s) in both
Arb.O.P.(COM.DIV.) &
Appln.
Vs
M/s Indian Port Rail & Ropeway Corporation Ltd.,
Acting through the Managing Director,
4th Floor, Nirman Bhavan, MP Road,
Mazgaon, Mumbai- 400 010.
..Respondent(s) in both
Arb.O.P.(COM.DIV.) &
Appln.
PRAYER in Arb O.P(COM.DIV.) No. 491 of 2022:- Arbitration Original
Petition filed under Section 34(2) of the Arbitration and Conciliation Act, 1996;
a) To set aside the Award passed by the Learned Tribunal
dated 14.04.2022 and received on 25.04.2022 and thus render
justice.
b) To direct the Respondent to pay the cost and
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Arb O.P(COM.DIV.) No. 491 of 2022 &
A.No.769 of 2026
c) To grant such further reliefs as this Court may deem fit and
proper in the circumstances of the case.
PRAYER in A No. 769 of 2026:- Application filed to permit applicant/
petitioner to raise the Additional Grounds filed by the Petitioner in Arb.O.P.
(Com.Div) No.491 of 2022.
In both Arb.O.P.(COM.DIV.) & Application:-
For Petitioner(s): Mr.R.Murali
for Ms. A.Madhumathi
For Respondent(s): Mr. P.T.Ramkumar
Standing Counsel for Railways
COMMON ORDER
The Arbitration Original petition has been filed seeking set aside the
Award passed by the Learned Tribunal dated 14.04.2022 and received on
25.04.2022 along with a direction to the respondent to pay the costs.
2. The present application has been filed seeking to permit applicant/
petitioner to raise the Additional Grounds filed by the Petitioner in Arb.O.P.
(Com.Div) No.491 of 2022.
3. Heard Mr.R.Murali the learned counsel for Ms. A.Madhumathi the
learned counsel appearing on behalf of the petitioner and Mr. P.T.Ramkumar
the learned Standing Counsel for Railways appearing on behalf of the
respondent, in both the Arb.O.P.(COM.DIV.) & Appln.
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Arb O.P(COM.DIV.) No. 491 of 2022 &
A.No.769 of 2026
4. The primordial issue with regard to the validity of the arbitral
proceedings had been raised by the petitioner in challenging the Award passed
by making a reliance upon a constitutional Bench judgment of the Hon’ble
Apex Court reported in ( 2025) 4 SCC 641 in the case of Central Organisation
for Railway Electrification v. ECI SPIC SMO MCML (JV) A Joint Venture
Company . The same was contested by the respondent by contending that one of
the Arbitrator so appointed was a nominee of the petitioner and also that the
very same issue which was also taken on an application filed under Section 14
for termination of the mandate, which also stood rejected with liberty to the
petitioner to raise those grounds before the arbitral proceedings interalia
holding that the Arbitrators were not under the control of the respondents and
further the judgment of the Hon’ble Apex Court indicated supra was sought not
to be applied as it is only prospective and not retrospective and reliance upon
three Judges Bench judgment which was over-turned by the Constitution Bench
reported in ( 2020) 14 SCC 712 was sought to be driven home.
5. An application seeking for raising additional grounds was also filed in
that regard, which this Court finds no impediment in ordering as even without
the said additional grounds sought to be raised, the grounds that are raised being
the questions of law could also be raised during the course of the final hearing
in the Section 34 Petition.
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Arb O.P(COM.DIV.) No. 491 of 2022 &
A.No.769 of 2026
6. The core issue that is now to be considered is what could be the impact
of the arbitration proceedings presided over by the Arbitrator drawn from the
panel of one of the parties which in the present case is the respondent herein.
The Constitution Bench judgment reported in ( 2025) 4 SCC 641 had held when
there is an unbridled power with the Government company in postulating the
manner in which the Arbitrators are to be appointed that too from a curated
panel maintained by them, it would lead to a possibility of bias. In the present
facts and circumstances of the case, even though grounds were raised before the
arbitral proceedings on the liberty granted by this Court in a Section 14 petition,
the Arbitrator had failed to answer the said issue. This itself would substantiate
the bias in the minds of the Arbitrators. The reasons attributed by the
Constitution Bench was mainly on the necessity of maintaining the principle of
minimum judicial interference in the arbitral proceedings. Even though, the
Hon’ble Apex court had held that the said ruling was only construed as a
prospective over-ruling, it should be noted that Section 34 of the Arbitration Act
provides that an arbitral Award could be set aside if it is found that the said
Award conflicts with the public policy of India which also includes a conflict
with the most basic notions of morality of justice. In this regard, it would also
be useful to refer to the deliberations of the Constitution Bench in the following
paragraphs:-
“….
157. Section 34 of the Arbitration Act specifies the grounds for setting
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Arb O.P(COM.DIV.) No. 491 of 2022 &
A.No.769 of 2026
aside an arbitral award. The grounds are separated into two categories :
(i) Section 34(2)(a) contains those grounds that have to be proved by the
parties; and (ii) Section 34(2)(b) contains grounds that a court has to
examine ex officio. The challenge of arbitral awards on ex officio grounds
is “of fundamental importance to the institution of arbitration as a
whole”. [ Peter Binder, International Commercial Arbitration and
NCITRAL
Conciliations in U Model Law Jurisdictions, (2nd Edn., Sweet and
Maxwell, 2005) p. 274.]
158. Section 34(2)(b) specifically provides that an arbitral award may be
set aside if the court finds that the arbitral award conflicts with the public
policy of India. The provision further clarifies “public policy of India” to
only mean that : (i) the making of the award was induced or affected by
fraud or corruption or was in violation of Section 75 or Section 81; (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.
159. This Court has construed the expression “public policy of India”
appearing under Section 34 to mean the “fundamental policy of Indian
law”. [Ssangyong Engg. & Construction Co. Ltd.v.NHAI, (2019) 15 SCC
131, para 34 : (2020) 2 SCC (Civ) 213; NHAI v. P. Nagaraju, (2022) 15
SCC 1 : (2024) 2 SCC (Civ) 414, para 39] The concept of “fundamental
policy of Indian law” has been held to cover compliance with statutes and
judicial precedents, adopting a judicial approach, and compliance with
the principles of natural justice. [MMTC Ltd. v. Vedanta Ltd., (2019) 4
SCC 163, para 11 : (2019) 2 SCC (Civ) 293] In OPG Power Generation
(India) (P) Ltd. v. Enexio Power Cooling Solutions (India) (P) Ltd. [OPG
Power Generation (India) (P) Ltd. v. Enexio Power Cooling Solutions
(India) (P) Ltd., (2025) 2 SCC 417 : (2025) 1 SCC (Civ) 54] , this Court
explained the concept of “fundamental policy of Indian law” thus : (SCC
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Arb O.P(COM.DIV.) No. 491 of 2022 &
A.No.769 of 2026
pp. 467-68, paras 55-56)
“55. … 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.
56. 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.”
160. In Avitel Post Studioz Ltd. v. HSBC PI Holdings (Mauritius) Ltd.
[Avitel Post Studioz Ltd. v. HSBC PI Holdings (Mauritius) Ltd., (2024) 7
SCC 197, para 34 : (2024) 3 SCC (Civ) 780] , this Court held that the
most basic notions of morality and justice under the concept of “public
policy” will include bias.
161. The provisions of the statute, including Section 34, highlight the
important role played by the Indian legal system in recognising and
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Arb O.P(COM.DIV.) No. 491 of 2022 &
A.No.769 of 2026
enforcing arbitral awards. It is one such instance where the Indian courts
exercise a measure of control over the private arbitral process. [Redfern
and Hunter on International Arbitration, (7th Edn., 2022) p. 58.] This
control over the arbitral process ensures that the arbitral awards are
made by following certain minimum standards of due process and justice.
[Redfern and Hunter on International Arbitration, (7th Edn., 2022) p. 58.]
Thus, the courts must ensure that the arbitral awards are consistent with
the fundamental policy of Indian law such as compliance with the
principles of natural justice. As a corollary, Section 34 places a
responsibility on the Arbitral Tribunals to ensure that the arbitral
proceedings are consistent with the fundamental policy of Indian law.
[Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1, pp. 69-70, para
70:“70. Arbitrators, like the courts, are equally bound to resolve and
decide disputes in accordance with the public policy of the law. Possibility
of failure to abide by public policy consideration in a legislation, which
otherwise does not expressly or by necessary implication exclude
arbitration, cannot form the basis to overwrite and nullify the arbitration
agreement. This would be contrary to and defeat the legislative intent
reflected in the public policy objective behind the Arbitration Act.
Arbitration has considerable advantages as it gives freedom to the parties
to choose an arbitrator of their choice, and it is informal,flexible and
quick. Simplicity, informality and expedition are hallmarks of arbitration.
Arbitrators are required to be impartial and independent, adhere to
natural justice, and follow a fair and just procedure. Arbitrators are
normally experts in the subject and perform their tasks by referring to
facts, evidence, and relevant case law.”]
162. By agreeing to arbitrate in a public-private contract, the Government
or its companies agree to settle their disputes with private contractors
through arbitration. Since the activities of the Government have a public
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Arb O.P(COM.DIV.) No. 491 of 2022 &
A.No.769 of 2026
element, it is incumbent upon the Government to ensure that it enters into
a contract with the public without adopting any unfair or unreasonable
procedure. [Erusian Equipment & Chemicals Ltd. v. State of W.B., (1975)
1 SCC 70, para 17; Ramana Dayaram Shetty v. International Airport
Authority of India, (1979) 3 SCC 489, p. 506, para 12:“12. … It must,
therefore, be taken to be the law that where the Government is dealing
with the public, whether by way of giving jobs or entering into contracts
or issuing quotas or licences or granting other forms of largesse, the
Government cannot act arbitrarily at its sweet will and, like a private
individual, deal with any person it pleases, but its action must be in
conformity with standard or norms which is not arbitrary, irrational or
irrelevant. The power or discretion of the Government in the matter of
grant of largesse including award of jobs, contracts, quotas, licences, etc.
must be confined and structured by rational, relevant and non-
discriminatory standard or norm and if the Government departs from such
standard or norm in any particular case or cases, the action of the
Government would be liable to be struck down, unless it can be shown by
the Government that the departure was not arbitrary, but was based on
some valid principle which in itself was not irrational, unreasonable or
discriminatory.”] Every action of a public authority or a person acting in
the public interest or any act that gives rise to a public element must be
based on principles of fairness and non-arbitrariness. [LIC v. Consumer
Education & Research Centre, (1995) 5 SCC 482 : (1995) 84 Comp Cas
168, para 23] Therefore, the government agencies have to consider the
principles of equality and non-arbitrariness when crafting arbitration
procedures, including the procedure for the appointment of arbitrators.
The terms of the arbitration agreement must meet the minimum standards
of equality and fairness. In a public-private contract, the Government and
its instrumentalities must ensure that the arbitral process contemplated by
the contract is also fair to the other party to avoid arbitrariness.
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Arb O.P(COM.DIV.) No. 491 of 2022 &
A.No.769 of 2026
163. The possibility of bias is real in situations where an arbitration
clause allows a government company to unilaterally appoint a sole
arbitrator or control the majority of the arbitrators. Since the Government
has control over the Arbitral Tribunal, it can chart the course of the
arbitration proceedings to the prejudice of the other party. Resultantly,
unilateral appointment clauses fail to provide an effective substitute for
judicial proceedings in India. Further, a unilateral appointment clause is
inherently exclusionary and violates the principle of equal treatment of
parties and procedural equality.
164. Unilateral appointment clauses in a public-private contract fail to
provide the minimum level of integrity required in authorities performing
quasi-judicial functions such as Arbitral Tribunals. Therefore, a unilateral
appointment clause is against the principle of arbitration, that is,
impartial resolution of disputes between parties. It also violates the nemo
judex rule which constitutes the public policy of India in the context of
arbitration. Therefore, unilateral appointment clauses in public-private
contracts are violative of Article 14 of the Constitution for being arbitrary
in addition to being violative of the equality principle under the
Arbitration Act.
….”
7. Even though, the respondent had claimed that the aforesaid judgment
could only be applied to prospective cases and not to already initiated or
concluded arbitral proceedings, in view of the grounds available under Section
34 to interfere with such an Award and also having given a finding that there
has been a bias in the minds of the Arbitrator in view that they have not
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A.No.769 of 2026
specifically addressed the issue raised by the petitioner on the liberty granted by
this Court as noted above, this Court has no hesitation in interfering with the
Award which has been impugned herein.
8. Accordingly, the impugned Award stands set aside. However, the
parties are at liberty to workout their remedies in the manner known to law
including initiation of a fresh arbitral proceedings.
9. In fine, Arb.O.P.(COM.DIV.)No.491 of 2022 & A.No.769 of 2026 are
allowed. However, there shall be no order as to costs.
04.11.2026
Index: Yes/No
Speaking/Non-speaking order
Neutral Citation: Yes/No
GBA
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Arb O.P(COM.DIV.) No. 491 of 2022 &
A.No.769 of 2026
K.KUMARESH BABU J.
GBA
A Pre-delivery order made in
Arb O.P(COM.DIV.) No. 491 of 2022
AND
A NO. 769 of 2026
04.11.2026
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