Tbea Energy India Private Limited vs M/S Bharat Heavy Electricals Limited
- Court
- Delhi High Court
* IN THE HIGH COURT OF DELHI AT NEW DELHI
st
Date of decision: 01 JULY, 2026
IN THE MATTER OF:
+ O.M.P. (COMM) 307/2022
TBEA ENERGY INDIA PRIVATE LIMITED .....Petitioner
Through: Mr. Vinam Gupta, Ms Pragya
Narayan and Ms. Nabam Yama,
Advocates
versus
M/S BHARAT HEAVY ELECTRICALS LIMITED .....Respondent
Through: Ms. Priya Kumar, Sr. Adv. with Mr.
Atul Shaker Mathur, Ms. Priya Singh,
Mr. Umang Katariya, Ms. Sarvapreya
Makkar & Ms. Ghanishtha Mishra,
Advs.
+ O.M.P. (COMM) 294/2022 & I.A. 10912/2022
M/S BHARAT HEAVY ELECTRICALS LIMITED .....Petitioner
Through: Ms. Priya Kumar, Sr. Adv. with
Mr.Atul Shaker Mathur, Ms. Priya
Singh, Mr. Umang Katariya, Ms.
Sarvapreya Makkar & Ms.
Ghanishtha Mishra, Advs.
versus
TBEA ENERGY (INDIA) PRIVATE LIMITED .....Respondent
Through: Mr. Vinam Gupta, Ms Pragya
Narayan and Ms. Nabam Yama,
Advocates
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 1 of 39
CORAM:
HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
JUDGMENT
1. The present petitions are filed under Section 34 of the Arbitration and
Conciliation Act, 1996 ( hereinafter referred to as “ the Act ”) for setting
aside the Arbitral Award ( hereinafter referred to as “ the impugned award ”)
dated 06.01.2022, passed by the learned Sole Arbitrator, Justice (Retd)
Vinay Kumar Jain.
2. There are cross objections to the Impugned Award, and for the sake of
convenience, it is stated that TBEA Energy India Private Limited
( hereinafter referred to as “ the Petitioner ”) was the Claimant before the
Arbitrator and M/S Bharat Heavy Electricals Limited ( hereinafter referred to
as “ the Respondent ”) was the Respondent before the Arbitrator.
3. Shorn of unnecessary details, relevant facts leading to the present
petition are as follows:
a. The Petitioner, TBEA Energy India Private Limited, is a company
incorporated under the Companies Act, 1956, engaged in the
business of Manufacturing, Designing, Supply and Service of
Transformers and Reactors.
b. The Respondent, Bharat Heavy Electricals Limited is a Public
Sector Undertaking incorporated under the Companies Act, 1956.
The Respondent is engaged in the business of Design,
Engineering, Manufacturing, Construction, Testing,
Commissioning and Servicing of a wide range of power,
transmission, oil, gas and transportation products.
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 2 of 39
c. That Tamil Nadu Transmission Corporation Limited ( hereinafter
referring to as “ TANTRANSCO ”) issued an NIT to the
Respondent for the supply of six units of 765 KC, 500 MVA ICT
Transformers for 10 Transco Ariyalur Project. For the said
purpose, the Respondent issued a tender, as a result of which a
Purchase Order dated 18.12.2017 (herein referred to as the “PO”)
was issued to the Petitioner for an amount of Rs. 67,00,39,376 /-
d. It is stated that at the time of entering the bid, the Petitioner had
to meet the Prequalification Requirement ( hereinafter referred to
as “ PQR ”). It is stated that the Petitioner opted for B) (ii) of the
PQR and in furtherance of the same issued to the Respondent a
letter dated 19.08.2017 and furnished an undertaking dated
12.12.2017 stating that the Parent Company of the Petitioner will
furnish an Additional Performance Bank Guarantee (herein
referred to as APBG) equivalent to 10% of the Contract.
e. Under the PO, an Activity Schedule was prepared stating the
obligation of the respective parties during the terms of the PO.
The said schedule was prepared by the Respondent and was
agreed to by the Petitioner. The schedule as agreed to is
reproduced hereunder :
Cumulative
time in weeks
Activity
Sl.
Activity
No.
time in
Remarks if any
(from
LOI/PO date)
weeks
Submission of
1 Week from
1 Week
Max. within 1 week
1
master
document list
PO
by vendor
2 Submission of 5 Weeks 6 Weeks from
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 3 of 39
Cumulative
time in weeks
Activity
Sl.
Activity
No.
time in
Remarks if any
(from
LOI/PO date)
weeks
document
necessary for
PO
getting
manufacturing
clearance like
Drawings,
data sheet etc.
Design review
documents shall not
Review and
Approval of
documents and
be submitted.
3 Weeks
by BHEL
9 Weeks from
3
However,
calculation of No
issue of
manufacturing
PO
load & load loss
shall be submitted
clearance
After receipt of
drawing approval
supported with
manufacturing
clearance.
Manufacturing
Manufacturing
4
15-27
Weeks
24-36 Weeks
Time
from PO
shall be
commencing 1st
unit in 24 to 26
weeks & then after
2 to 3 units per 4
weeks/1 month
2 Weeks
5 Inspection
by BHEL
26-38 Weeks
from PO
Issue of
6
MICC/MDCC
1 Week
by BHEL
27-39 Weeks
from PO
28-40 Weeks
7 Dispatch 1 Week
from PO
Transit time
8
34-46 Weeks
6 Weeks
upto Site
from PO
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 4 of 39
Cumulative
time in weeks
Activity
Sl.
Activity
No.
time in
Remarks if any
(from
LOI/PO date)
weeks
Note : 1) Supplier must ensure the completeness and correctness
of the requisite documents before submission for approval.
2) Delay in approval on account of inspection call should be
given in the prescribed format only. Inspection calls not in the
prescribed format shall not be entertained
3) Qty to be offered for Inspection should be in accordance within
Delivery-schedule lot. BHEL reserves the right not to entertain
multiple inspection calls
f. Under the said Schedule, a total of six weeks were granted to the
Respondent, three weeks for review, approval of documents and
issuance of manufacturing clearance, two weeks for inspection
and one week for issue of MICC/MDCC.
g. The Petitioner was allotted 6 weeks from the date of the Purchase
order for submission of documents necessary for the clearance,
15-27 weeks for the manufacture, one week for the dispatch of
ICTs and 6 weeks for transit time up to the site where the ICTs
were to be delivered.
h. That Clause 7 of the arrangement laid down the time for delivery
of the proposed transformers along with the finalization of the
activity schedule. Clauses 8 and 8.1 laid down the requirement of
deposition of Security- Cum Performance BG by the Petitioner
and APBG by the Petitioner‟s Parent Company respectively.
Clause 9 provided for imposition of liquidated damages for
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 5 of 39
delayed delivery and services. Relevant clauses are reproduced
hereunder :
“Clause 7 - Delivery Period
"Delivery as per project requirement. Present
indication: 05-Nov-2018 within 40+6=46 weeks from
PO date considering 3 weeks for review and approval
of documents and issue of manufacturing clearance, 2
weeks for inspection and 1 week for issue MICC I
MDCC)
Early delivery acceptable. Date calculated as per
activity schedule. To be re-fixed as per actual time
taken by BHEL vendor. Date of receipt of material at
site, shall be considered as delivery date.”
Clause 8-Security-Cum Performance BG
"Supplier shall arrange to submit Performance BG I
Deposit on a non ...j udicial stamp paper of
appropriate value along with first invoice or within
120 days from placement of Purchase Order (PO)
whichever is earlier in line with follows:
PBG for 10% of the total PO value, (and any
subsequent amendments thereof) valid for 60 months
from the date of taking over by TANTRANSCO (date is
31.03.2019) or from the date of delivery at site
(whichever is later). With claim period of 3 months
over and above. Total PO value at the time of
placement of PO shall be considered for calculation of
the PBG amount. In case of extension of BG Period is
required, bidder to ensure extension of PBG
accordingly.”
Clause 8.1-Additional Performance BG
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 6 of 39
"Supplier shall arrange to submit Additional
Performance Bank Guarantee from Parent Company
(Mis TBEA Shenyang Transformer Group Co. Ltd,
China) for an amount of 10% of the ex-works cost of
the 500 MV A Auto Transformer. This Bank Guarantee
shall remain valid for 60 months from the date of
taking over by T ANTRANSCO ( date is 31. 03.2019)
or from the date of delivery at site ( whichever is later),
with claim period of 3 months over and above. In case
of extension of BG Period is required, bidder to ensure
extension of PBG accordingly.”
Clause 9-Liquidated Damages for delayed delivery and
for delayed services
"In case of delay in execution of Purchase Order
beyond the contractual delivery time, an amount of
0.5% of the total Purchase Order value for supply
(incl. taxes and duties, freight & Insurance as
applicable) per week of delay or part thereof subject to
a maximum of 10% of the total Purchase Order value
for supply (incl. taxes and duties, freight & insurance
as applicable) shall be deducted as Liquidated
Damages (LD) along with applicable GST (if any), on
LD
Note:
i) in case of any amendment/ revision in PO/ WO, the
LD shall be linked to the amended / revised Purchase
Order/ Contract value and delivery/completion time/
schedule. if applicable.
ii) Date of receipt of material at site, shall be
considered as delivery date and same shall be treated
for levying LD as above.
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 7 of 39
If, as per supplier, delay is not attributable to the
supplier delay analysis with documentary evidence
may be submitted by the supplier at the earliest but not
later than six months from the end of the financial year
in which the payment is withheld. Based on the above
details / documents submitted by the supplier. BHEL
shall take final decision and if considered appropriate
by BHEL withheld amount (full or part as the case may
be) shall be released otherwise, full or balance
withheld amount shall be treated as deduction of
Liquidated Damages (LD) towards delayed delivery". ”
i. The dispute between the parties arises of out the following
causes:
I. Imposition of liquidated damages by the Respondent on
the Petitioner amounting to INR 7,85,41,104 due to delay
in the delivery of the ICTs. (Raised by the Petitioner)
II. Non-payment of Additional BG by the Parent Company
of the Petitioner and withholding of an amount of Rs.
5,23,76,868 by the Respondent as a result of non-
payment. (Raised by the Respondent)
III. Award of Cost by the Arbitral Tribunal (Raised by the
Respondent)
IV. Refusal to grant future interest (Raised by the Petitioner)
j. The Agreement between the parties contained an Arbitration
Clause and the Petitioner, therefore, filed a Petition under Section
11 of the Arbitration and Conciliation Act, 1996 before the
Hon'ble High Court of Delhi. Vide order dated 08.02.2021, the
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 8 of 39
Hon'ble High Court appointed a Sole Arbitrator to adjudicate the
disputes that have arisen between the parties.
k. The issues framed by the Learned Arbitral Tribunal are
reproduced hereunder:
1. “Whether the time mentioned in the agreement,
for the supply of the transformers, was a firm
time, as is alleged by the respondent OPR
2. Whether the delay in supply of the
transformers is not attributable to the claimant
and if so to what effect OPC
3. Whether the respondent suffered losses /
damages due to delay in supply of the
transformers and if so to what extent OPR
4. Whether the respondent is not entitled to the
Liquidated damages, if Issue / Point -3 is not
proved OPC
5. Whether the Claimant altered its position on
issuance of the credit-notes by the respondent
OPC
6. If issue / Point no 4 is answered in affirmative,
whether the respondent is not entitled to the
Liquidated Damages and the 9 claimant is
entitled to the release / payment of INR
78541104, the amount withheld towards the said
Liquidated Damages OPC
7. Whether the claimant is entitled to reduction of
the PBG from 10% to 3% OPC
8. Whether the respondent was entitled to withhold
the amount of INR 52376868 due to non-
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 9 of 39
submission of the Additional PBG by the Parent
Company of the claimant OPR
9. Whether the claimant is entitled to release of
INR 52376868 against submission of its own
Additional PBG OPC
10. Whether the claimant is entitled to Pendete-lite
and future interest and if so at what rate and to
what amount OPC
11. Whether the claimant is entitled to the cost of the
arbitration proceedings OPC
12. Relief”
4. With respect to the imposition of liquidated damages by the
Respondent on the Petitioner amounting to INR 7,85,41,104 due to delay in
the delivery of the ICTs, the Arbitrator directed the Respondent to release a
sum of Rs.3,92,70,552/- to the Petitioner, which was 50 percent of the
amount withheld towards liquidated damages. Along with this, the
Arbitrator directed the Respondent to pay proportionate cost on the said
amount to be calculated in terms of the Affidavit of cost filed by the
Petitioner. On the aspect of non-payment of APBG by the Parent company
of the Petitioner, the Arbitrator granted liberty to deposit the APBG in terms
of the agreement subject to which the Respondent shall release the amount
of Rs. 5,23,76,868/- withheld by it. With regards to cost, the Arbitrator
allowed proportionate cost to be paid to the Petitioner by the Respondent.
Conclusively, the Arbitrator refused to grant any future Interest to the
Petitioner.
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 10 of 39
OBJECTIONS OF THE PETITIONER TO THE AWARD DATED
06.01.2022 IN OMP(COMM) 307/2022
5. The Petitioner herein has raised objections to the impugned award to
the extent that (i) the Respondent was directed to release only 50% of the
claim amount, i.e., INR 3,92,70,552 (Rupees Three Crores Ninety-Two
Lakhs Seventy Thousand Five Hundred Fifty-Two Only) towards liquidated
damages and (ii) the rejection of the Petitioner‟ claim for future interest.
6. It is submitted by the Petitioner that no loss was caused or proved by
the Respondent, as despite delivery of the ICTs in July 2019, not even a
single ICT has been commissioned on the date of the Impugned Award due
to non- readiness of the site. Despite this, the arbitrator had awarded
damages to the Respondent principally by way of penalty, in the absence of
any loss caused to the Respondent. Reliance is placed on Kailash Nath vs
Delhi Development Authority, (2015) 4 SCC 13 .
7. It is stated that the Arbitrator on mere assumption and conjectures
proceeded to impose damages on the Petitioner, by merely stating that cost
of ICTs formed major component of the work which the Petitioner was to
execute for the End Customer, TANTRANSCO, however no evidence or
document was placed on record by the Respondent which would establish
any link between TANTRANSCO Debit Note dated 26.12.2019 issued to the
Respondent due to delay in the delivery of ICTs and the Petitioner„s alleged
delays.
8. It is stated by the Petitioner that the Respondent imposed Liquidated
Damages despite a clear waiver and refund of LD amount to the Petitioner
vide the Credit Notes. It is the Petitioner‟s case that 05.11.2018 was a
tentative date of delivery and was to be refixed as per the project
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 11 of 39
requirement. Despite non-delivery on the said date, the Respondent made no
endeavours to inquire into the status of the ICTs. It is stated that the ICTs
were only delivered on 10.07.2019 but no objections were raised by the
Respondent with respect to the delivery at that time. It was only two months
after the delivery that the Respondent issued two debit notes imposing
liquidated damages on the Petitioner.
9. It is stated that time was not the essence of the contract, and in
addition to this, the date of delivery was never refixed by the Respondent.
Despite this, the Arbitrator had erroneously concluded that it was
inconsequential whether 5.11.2018 was revised or not and the Petitioner is in
any event liable to pay liquidated damages to the Respondent.
10. It is stated by the Petitioner that the Arbitrator took upon itself the
exercise to suo-moto re-fix the date by computing the number of days of
delay attributable to each Party, sans any pleading or evidence from the
Petitioner. Basis this assessment, the Arbitrator unjustly allowed partial
imposition of LD which was 50% of the claim amount on the Petitioner, by
stating that Petitioner is liable to pay LD for such period which can be
attributable to it. Such exercise is beyond the jurisdiction of the Arbitrator.
11. The second objection raised by the Petitioner relates to the rejection
of grant of Future Interest.
12. It is stated that the Arbitrator failed to appreciate that there is no
specific bar under Clause 4, which prohibits grant of future interest, in
accordance with the mandate of Section 31(7)(b) of the Act.
13. It is the case of the Petitioner that Arbitrator has incorrectly read the
observations rendered by the Apex Court in Union of India vs Manraj
Enterprises, (2022) 2 SCC 331, into the facts of the present case. It is
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 12 of 39
submitted that reliance on Manraj Enterprises ( supra ) is incorrect as the
parties therein were in dispute under Section 31(7)(a) of the Act, which
gives paramount importance to the contract entered between the parties and
categorically restricts the power of an arbitrator to award pre-reference and
pendente lite interest when the parties themselves have agreed against it.
14. It is stated by the Petitioner that the Arbitrator failed to appreciate the
difference in the language in 31(7)(a) and 31(7)(b) which indicates that
award of future/post-award interest is not discretionary but a mandate of the
statute. Reliance was placed on Hyder Consulting (UK) Limited vs State of
Orissa, (2015) 2 SCC 189 and Future Market Networks Limited vs Laxmi
Pat Surana and Another, (2022) SCC Online Cal 919 .
15. It is stated that the inconsistencies, illegalities and infirmities
highlighted above are not trivial and go to the root of the matter and
therefore impugned Award is hit by Section 34.
SUBMISSIONS OF THE PARTIES IN OMP(COMM) 294/2022
I. Withholding of an amount of INR 5,23,76,868/- due to non-
submission of APBG by the parent company and entitlement of the
Petitioner to the release of the said amount against submission of the
additional bank guarantee on behalf of the Petitioner.
16. It is submitted by the Respondent that the Petitioner is in clear breach
of Clause 8.1 of the PO despite accepting the terms of the same vide a letter
dated 26.12.2017. It is their case that the arbitrator has rewritten the terms of
the contract and has ignored the clear stipulation with respect to additional
bank guarantee in terms of clause 8.1 of the PO. By doing so, the arbitrator
has amended the terms of the PO as agreed between the parties
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 13 of 39
17. It is submitted by the Respondent that the furnishing of the said
APBG by the Parent Company of the Petitioner was a PQR which was
agreed upon by the Petitioner vide letter dated 19.08.2017 and a subsequent
undertaking dated 12.12.2017.
18. It is submitted that it was outside the scope of the Respondent to
accept the APBG from the Petitioner as the Respondent had agreed to accept
the same only from the Petitioner‟s parent Company so as to secure its
interest in case the Petitioner is unable to satisfy its obligations.
19. The Petitioner, on the other hand submits that the Petitioner and its
Parent Company, issued a Joint Deed of Undertaking in favour of the
Respondent. That vide this Joint Deed of Understanding, Petitioner and its
Parent Company have accepted joint and several liability towards the
faithful performance of the Agreement. It was in furtherance of the
discharge of this admitted joint and several responsibilities that the parent
company vide letter dated 08.11.2019 offered the said APBG through the
Petitioner, however, the Respondent rejected the said offer.
20. It is submitted that the Arbitrator took a plausible and reasonable
view, after duly appreciating that, in case of any default/breach under the
Agreement, the Respondent could enforce the Joint Deed of Undertaking
against the Parent Company if the amount of the Bank Guarantees was not
sufficient to cover the loss caused to it on account of such breach.
21. It is their case that the Respondent, by withholding Petitioner‟s sums
of INR 5,23,76,868/- against the APBG and not accepting the said APBG
from the Petitioner, is guilty of approbate and reprobate. It is further stated
that the Respondent proceeded with the Agreement despite non-compliance
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 14 of 39
of a pre-qualification requirement. In view thereof, the Respondent has
clearly waived the said requirement by its conduct.
II. Cost of Arbitration awarded partly to the Petitioner
22. It is submitted by the Respondent that on one hand the Arbitrator had
entitled the Respondent to deduct liquidated damages due to delay of 70
days on the part of the Petitioner, while on the other hand it has failed to
treat the Respondent as a successful party in terms of Section 31 of the Act,
according to which, cost must be awarded to a successful party.
23. It is submitted by the Respondent that the Ld. Sole Arbitrator has
awarded proportionate costs to Petitioner, but no calculation has been
provided in the impugned award in terms of Section 31(4) of the Act
rendering the impugned award vague.
24. It is further submitted that the costs were never quantified by the
Petitioner in its Statement of Claim but the same was done by way of
Affidavit of Costs when the award was reserved.
25. It is submitted that the impugned award as far as issue no 8, 9 and 11
are decided is patently illegal as the Arbitrator has, without any jurisdiction
passed the impugned award in such a manner which amounts to rewriting
the terms of the contract and the same is an error in exercise of jurisdiction
under the terms of the Contract.
26. On the aspect of award of cost by the Arbitrator, it is submitted by the
Petitioner that the Arbitrator, partially allowed the Petitioner‟s claim to the
extend the Petitioner was successful. Consequently, in terms of the Act more
particularly Section 31A, the Arbitrator awarded proportionate costs to the
Petitioner computed in terms of the Affidavit of Costs filed by the Petitioner.
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 15 of 39
27. It is submitted that as Petitioner‟s claims were partially allowed, the
Petitioner can be termed as the “partially successful party” and the
Respondent as the “unsuccessful party”. This is in consonance with Section
31A of the Act.
28. It is stated that no prayers were sought by the Respondent qua costs in
its SoD. The said untenable objection raised belatedly as an afterthought
warrants instant dismissal on this ground alone.
29. Heard the counsel for the parties and perused the material on record.
ANALYSIS
30. From the discussion above, it is apparent that the scope of objection in
the present petition is limited to the issues mentioned in paragraph (i) above.
This court will now proceed to analyse each issue individually.
Imposition of Liquidated Damages by the Respondent on the Petitioner
for an amount of INR 7,85,41,104 due to delay in the delivery of the
ICTs
31. The Arbitrator had perused RD-4 and has reached to a finding that
TANTRANSCO has levied maximum liquidated damages equivalent to 10%
of the value on the Respondent on the Respondent submitting the bills for
the supply of 765 / 400 KV, 500 MV single phase Inter-connection
Transformer OL TC with Nitrogen injection system, online bushing
monitoring system, line material required for formation of tertiary delta and
neutral bus. While noting this, it was observed by the arbitrator that except
for the supply of Nitrogen Oxygen, the whole of the said supply was to be
made by the Petitioner.
32. It is observed by the Arbitrator that it was unlikely that the ICT would
have been commissioned on the date as fixed i.e. 5.11.2018, due to non-
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 16 of 39
readiness of the site, hence TANTRANSCO would have still levied
liquidated damages on the Respondent.
33. However, a perusal of the award reflects that the imposition of
liquidated damages arise out of the delay of 70 days by the Petitioner to
supply the ICTs. Relevant paragraph of the award is reproduced hereunder:
“43. A perusal of RD-4 would show that Tamil Nadu
Electricity Board (Holding Company of T
ANTRANSCO) levied maximum Liquidated Damages,
equivalent to 10% of the value, when the Respondent
submitted bills for "supply of 765 / 400 KV, 500 MV A
single phase Inter-connection Transformer OL TC with
Nitrogen injection system, online bushing monitoring
system and line material required for formation of
tertiary delta and neutral bus". Admittedly, the whole
of the said supply except Nitrogen injection system was
to be made by the Claimant. Though the cost of
Nitrogen injection system is not available, it can be
hardly disputed that the cost of the said system would
be a small fraction of the cost of the system for which
the bill was raised by the Respondent on
TANTRANSCO. This is not the case of the Claimant in
its Rejoinder that RD-4 does not pertain to the ICTs
which were to be supplied by it to the Respondent. The
case set out in the Rejoinder rather is that the scope of
the supply for which Liquidated Damages were
imposed by T ANTRANSCO on the Respondent was
larger, the said supply having included Nitrogen
injection system which the Claimant was not to supply
to the Respondent. It is thus seen that though levy of
Liquidated Damages to the extent of Rs. 87687329/-
including GST by Tamil Nadu Electricity Board /
TANTRANSCO upon the Respondent cannot be
reasonably disputed, the work which the Respondent
had to execute for T ANTRANSCO included interalia a
system which the Respondent had not procured from
the Claimant. The facts and circumstances including
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 17 of 39
the pith and substance of the cross-examination of RW-
1 Prateek Kumar also show that the ICTs have not
been commissioned till 33 date, thereby proving the
case of the Claimant that the site where the ICTs were
to be erected / commissioned were not ready in time. It
is quite likely that even if ICTs were to be supplied by
5.11.2018, it would not have been possible to
commission them in time and, therefore, it is quite
possible that T ANTRANSCO I Tamil Nadu Electricity
Board would still have levied Liquidated Damages
upon the Respondent. But, the facts and circumstances
of the case, discussed while deciding Issues / Points
No. 1 & 2 also show that there was delay of 70 days on
the part of the Claimant in supply of the ICTs. Since the
cost of the ICTs constituted overwhelming part of the
cost of the work which the Respondent had to execute
for TANTRANSCO / Tamil Nadu Electricity Board, it
would be difficult to dispute that the delay in supply of
the ICTs had also contributed to the overall delay in
execution of the work at the site of TANTRANSCO and
the said delay resulted in TANTRANSCO / Tamil Nadu
Electricity Board levying Liquidated Damages upon
the Respondent. It would be highly unfair to place the
whole of the delay in completion of the work for
TANTRANSCO on the supplier of the Nitrogen
injection system or on the failure of the Respondent to
procure the said Nitrogen injection system well in time
and the delay in the preparation of the sites. In other
words, the Liquidated Damages upon the Respondent
were levied due to several delays such as delay in
procurement of Nitrogen injection system, delay in
preparation of the site and delay in the delivery of the
ICTs by the Claimant. ”
34. The contention of the Petitioner that the date originally fixed under
the contract i.e. 15.11.2018 was never refixed by the Respondent does not
hold any ground. The reasoning of the arbitrator that the date 15.11.2018 is
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 18 of 39
of no consequence does not warrant interference as each party was allotted a
specific period for completion of their respective obligation as per the
activity schedule. As the Petitioner was given a period of 40 weeks, this
period would be accounted for after excluding the excess time/delay
attributable to the Respondent. Relevant observation in the award is
reproduced hereunder:
“ 21 . It would in my opinion be inconsequential
whether the date of 5th November, 20 1 8 given in
Clause 7 of the Agreement was revised or not, since the
15 Claimant would be liable to pay Liquidated
Damages only for that much period beyond 5th
November, 2018, which can be reasonably attributed to
it. Though the Activity Schedule had bifurcated the 40
weeks available to the Claimant under different heads,
the time actually taken by the Claimant to complete
each of the activities under different heads would be
immaterial, since the excess time taken to complete one
activity could always be made up by taking lesser time
to complete the other activities. The material factor
would be the aggregate time taken by the Claimant to
perform all its obligations including the delivery of the
ICTs at the site and not the time taken by the Claimant
to complete individual activities. If the Claimant was to
take not more than 40 weeks to perform all its
obligations, no Liquidated Damages could be levied on
it. Of course, the time taken by the Claimant has to be
computed by excluding the excess time which can be
reasonably attributed to any delay / inaction on the
part of the Respondent.
*
40. It was an admitted position before me that all the
ICTs were supplied by 10th July, 2019. Had there been
no delay on the part of the Respondent in performing
its obligations in , terms of the Activity Schedule, the
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Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
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O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 19 of 39
Claimant would have been contractually bound to
deliver all the six ICTs by 5th November, 2018. The
time available to the Claimant under the Activity
Schedule was 280 days from the date of the Purchase
Order. The time available to the Respondent under the
said Activity Schedule was 42 days in aggregate. The
total time taken in the delivery of all the six ICTs at the
site was 569 days. The time taken by the Claimant for
the manufacture and delivery of all the six ICTs
therefore can be said to be 569-42-177=350 days. The
time available to the Claimant under the Activity
Schedule being 280 days, there was delay of 70 days
i.e. 10 weeks on its part in the supply of the ICTs. ”
35. Due to a delay of 70 days on account of the Petitioner in supplying the
ICTs, the Arbitrator has imposed an amount of INR 3,92,70,552/- on the
Petitioner, which is 50 percent of what was originally imposed by the
Respondent.
36. From a bare perusal of the above observation made by the Arbitrator,
it appears that the imposition of liquidated damages to the above extend is
reasonable as a clear case of delay has been made out as against the
Petitioner. The reasoning in the award is reproduced hereunder:
“ 51. The legal proposition which emerges from the
decisions referred hereinabove including the decision
of the Hon'ble Supreme Court in Kailash Nath &
Associates (supra) is that even where a sum is named
in a Contract as a liquidated amount payable by way
of damages, the party complaining of a breach can
receive as reasonable compensation, such liquidated
amount, only if it is a genuine pre-estimation of
damages and even in such a case only reasonable
compensation not exceeding the sum fixed in the
Agreement can be awarded against the party in default.
The reasonable compensation if made out is required
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Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
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O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 20 of 39
to be fixed in terms of the principles contained in
Section 73 of the Indian Contract Act. Thus, in order to
succeed, in its claim for Liquidated Damages, the party
seeking to recover such damages is required to prove
that (I) the sum fixed in the Agreement was a genuine
pre-estimate of damages and (II) Loss / damage / legal
injury has actually been suffered by it on account of the
delay / default on the part of the other party.
Additionally, the party seeking to recover Liquidated
Damages is also required to prove the actual damages
suffered by it, wherever it is possible to prove the
actual damages. If in a given case, it is not possible to
prove the actual damages suffered by the party seeking
to recover the Liquidated Damages, the said party
would be entitled to a reasonable compensation not
exceeding the sum mentioned in the Contract, without
proof of the actual damages suffered by it.
52. In the present case, the Respondent, in my opinion,
has been able to prove the actual monetary loss
suffered by it, the said monetary loss being the amount
of Rs. 87687329/- deducted from its bill, by Tamil Nadu
Electricity Board. Thus, this is not a case where no
monetary loss has been suffered by the Respondent on
account of the delay in supply of the ICTs. Moreover, in
this case, the quantum of the actual monetary loss
suffered by the Respondent also stands proved.
However, it has not been proved nor could it have been
proved in a transaction of this nature as to how much
of the monetary loss suffered by the Respondent is
attributable to the delay on the part of the Claimant in
the delivery of the ICTs at the site, how much monetary
loss is attributable to the delay on the part of the
Respondent and/or TANTRANSCO, how much loss is
attributable to the delay in procurement of the Nitrogen
injection system and how much is attributable to the
delay in preparation of the site where the ICTs were to
be commissioned. The Respondent having chosen not
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 21 of 39
to file the correspondence exchanged between it and
TANTRANSCO / Tamil Nadu Electricity Board in
respect of imposition of Liquidated Damages upon it, it
cannot be !mown, by this Tribunal, as to for what
period the Liquidated Damages were imposed. But it
cannot be disputed that the Claimant was partly
responsible for Tamil Nadu Electricity Board /
TANTRANSCO imposing Liquidated Damages
amounting to Rs. 8 7687329/- upon the Respondent. It
is not as if the Respondent could have proved but did
not prove the quantum of Liquidated Damages directly
attributable to the Claimant. In a Contract of this
nature, involving more than one agencies, it is per se
impossible to apportion specific amounts to each
agency contributing to the delay which resulted in
imposition of the Liquidated Damages. The ICTs being
the costliest component of the work which the
Respondent had to execute for TANTRANSCO, the
Claimant cannot be allowed to altogether escape the
levy of Liquidated Damages. In the facts and
circumstances of the case, the Claimant in my view, is
entitled to reasonable compensation from the Claimant
for the delay which is attributable directly to the
Claimant. ”
37. The Apex Court in Consolidated Construction Consortium Ltd. v.
Software Technology Parks of India, (2025) 7 SCC 757 , has held as under:
“ 42 . Sections 73 and 74 deal with consequences of
breach of contract. Heading of Section 73 is
“Compensation for Loss or Damage Caused by Breach
of Contract”. When a contract is broken, the party who
suffers by such breach is entitled to receive from the
party who has broken the contract compensation for
any loss or damage caused to him thereby which
naturally arose in the usual course of things from such
breach or which the parties knew when they made the
contract to be likely to result from the breach of it. On
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
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O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 22 of 39
the other hand, Section 74 deals with compensation for
breach of contract where penalty is stipulated for.
When a contract is broken, if a sum is mentioned in the
contract as the amount to be paid in case of such
breach or if the contract contains any other stipulation
by way of penalty, the party complaining of the breach
is entitled whether or not actually damage or loss is
proved to have been caused thereby, to receive from the
party who has broken the contract reasonable
compensation not exceeding the amount so named or
the penalty stipulated for.
43 . A conjoint reading of Sections 55, 73 and 74 would
indicate that in a contract whether time is of the
essence or not, if the contractor fails to execute the
contract within the specified time, the contract
becomes voidable at the option of the promisee and the
promisee would be entitled to compensation from the
promisor for any loss occasioned to him by such
failure. However, in case of a contract where time is of
the essence, the contract becomes voidable on account
of the contractor's failure to execute the contract
within the agreed time. The promisee cannot claim
compensation for any loss occasioned by such breach
of the contract unless he gives notice to the promisor of
his intention to claim compensation. This is made more
specific in Section 73. Section 74 contemplates a
situation where penalty is provided for and quantified
as compensation for breach of contract. In such a case,
the party complaining of the breach is entitled to
compensation whether or not actual damage or loss is
proved to have been caused thereby but such
compensation shall not exceed the quantum of penalty
stipulated. ”
38. It light of the above enumerated principle, this Court is the opinion
that the arbitrator has rightly and reasonably imposed an amount of INR
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
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O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 23 of 39
3,92,70,552/- on the Petitioner, which is 50 percent of what was originally
imposed by the Respondent.
39. Hence, on this aspect, no interference is warranted.
Non-payment of APBG by the Parent Company of the Petitioner and
withholding of an amount of Rs. 52376868 by the Respondent as a result
of non-payment.
40. It was undisputed that to qualify as a bidder, the Petitioner had to
submit the bid under option 'B' of the Technical Qualification Requirement.
To be a successful bidder, the Petitioner was required to submit a
confirmation letter from its Parent Company along with the bid document
stating therein that its Parent Company shall furnish APBG equivalent to
10% of the cost of the equipments. It is also undisputed that this APBG was
in addition to the Performance Bank Guarantee to be deposited by the
Petitioner. The Petitioner and the Petitioner‟s Parent Company had also
submitted a joint deed of undertaking for the same.
41. The Arbitrator observed that the Respondent was entitled to withhold
the amount of Rs. 5,23,76,868/- from the dues of the Petitioner till the
requisite APBG by its Parent Company was furnished. While holding so, it
observed that the Parent Company being a corporate entity, can act through
some person. Considering the prayer of the Petitioner who had sought
permission to submit an APBG on behalf of its Parent Company without a
plea of a specific direction to the Respondent to accept the APBG from the
Petitioner, the Arbitrator observed that the Petitioner could deposit the
APBG, after being duly authorised by the Parent Company of the Petitioner,
who can act through a representative.
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 24 of 39
42. This observation of the Arbitrator cannot be termed as contrary to the
terms of arrangement between the parties. Neither can it be said that the
Arbitrator has gone beyond its power and jurisdiction to rewrite the terms of
the agreement between the parties.
43. There is a fine distinction between the interpretation of a contract and
disregard of the terms of the Contract. It can be said that instead of giving a
restrictive meaning to the terms of the contract, the Arbitrator took a
practical and commercial approach. Notwithstanding this, the construction
of the terms of a contract is within the realms of the Arbitrator to adjudicate
upon. If, after considering the material on record, the Arbitral Tribunal takes
a particular view on the interpretation of the contract, the Court under
Section 34 does not sit in appeal over the findings of the arbitrator. The
Apex Court in NHAI v. Hindustan Construction Co. Ltd., (2024) 6 SCC
809 , Observed as under:
“ 16 . Now, we turn to the issue of whether the claim for
the construction of embankment forms part of the
activity of clearing and grubbing and was not payable
as embankment work. We may note here that two expert
members of the Arbitral Tribunal held in favour of the
respondent on this point, whereas the third member
dissented. There cannot be any dispute that as far as
the construction of the terms of a contract is
concerned, it is for the Arbitral Tribunal to adjudicate
upon. If, after considering the material on record, the
Arbitral Tribunal takes a particular view on the
interpretation of the contract, the Court under Section
34 does not sit in appeal over the findings of the
arbitrator. ”
44. In fact, it is the opinion of this Court that by permitting the Petitioner,
upon due authorization, to furnish the APBG on behalf of its Parent
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 25 of 39
Company, the Arbitrator has, in effect, ensured adherence to and
enforcement of the underlying terms of the contract. Such permission does
not amount to any modification, novation, or alteration of the contractual
framework agreed upon between the parties. The Arbitrator has merely
facilitated the practical compliance of a contractual obligations without
disturbing the substantive rights and liabilities arising therefrom. It is further
submitted that this measure neither results in the creation of a new contract
nor does it alter the essential character, scope, or intent of the relevant
contractual clause. Rather, it represents accommodation aimed at
effectuating its due performance.
Award of Cost by the Arbitral Tribunal
45. On this aspect of award of cost by the Arbitrator in favour of the
Petitioner on the principal amount of Rs. 3,92,70,552/-, to be calculated in
terms of the Affidavit of Costs filed by the Petitioner, the following
observation has been made by the Arbitrator:
“ 60. Issue / Point No. 11
The general rule with respect to payment of cost,
incorporated in Section 3 1 A (2)(a) of the Act is that
the unsuccessful party will be ordered to pay the costs
to the successful party. In determining the costs, the
Tribunal is required to have regard to all the
circumstances prescribed in sub-section (3) of Section
31 A of the Act. In terms of sub-section ( 4) of the said
Section, the Arbitrator can also make an Award for
payment of a proportion of another party' s costs.
Considering all the facts and circumstances of the
case, the Claimant is awarded proportionate costs on
the principal amount of Rs. 392705 52/-, to be
calculated in terms of the Affidavit of Costs filed by the
Claimant. ”
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 26 of 39
46. Insofar as the challenge to the award of costs is concerned, this Court
finds no infirmity warranting interference. The learned Arbitrator has
exercised discretion in consonance with Section 31A of the Arbitration and
Conciliation Act, 1996, which embodies the principle that costs ordinarily
follow the event. The Arbitrator has duly taken into consideration the facts
and circumstances of the case and has awarded proportionate costs on the
principal amount, to be computed in terms of the Affidavit of Costs. Such
determination falls within the domain of the arbitral tribunal‟s discretion and
does not suffer from perversity, illegality, or arbitrariness.
47. With respect to issues (I), (II) and (III) mentioned in paragraph 3(i),
this court will now proceed to analyse the contours of the Court‟s power
under Section 34 of the Act.
48. After a perusal of the award to the extent of issues (I), (II) and (III)
mentioned in para 3(i), this court is satisfied that no grounds are made out
under Section 34 of the Act.
49. The specific ground for challenging the impugned award dated
06.01.2022 is that the impugned award is patently illegal and goes against
the Public Policy of India. There are plethora of jurisprudence on the aspect
of scope of inquiry by court on these ground. The Apex Court in DMRC
Ltd. v. Delhi Airport Metro Express (P) Ltd., (2024) 6 SCC 357 , observed
as under:
“34. The contours of the power of the competent court
to set aside an award under Section 34 has been
explored in several decisions of this Court. In addition
to the grounds on which an arbitral award can be
assailed laid down in Section 34(2), there is another
ground for challenge against domestic awards, such as
the award in the present case. Under Section 34(2-A)
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 27 of 39
of the Arbitration Act, a domestic award may be set
aside if the Court finds that it is vitiated by “patent
illegality” appearing on the face of the award.
35. In Associate Builders v. DDA [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204] , a two-Judge Bench of this Court held that
although the interpretation of a contract is exclusively
within the domain of the arbitrator, construction of a
contract in a manner that no fair-minded or
reasonable person would take, is impermissible. A
patent illegality arises where the arbitrator adopts a
view which is not a possible view. A view can be
regarded as not even a possible view where no
reasonable body of persons could possibly have taken
it. This Court held with reference to Sections 28(1)(a)
and 28(3), that the arbitrator must take into account
the terms of the contract and the usages of trade
applicable to the transaction. The decision or award
should not be perverse or irrational. An award is
rendered perverse or irrational where the findings are:
(i) based on no evidence;
(ii) based on irrelevant material; or
(iii) ignores vital evidence.
36. Patent illegality may also arise where the award is
in breach of the provisions of the arbitration statute, as
when for instance the award contains no reasons at all,
so as to be described as unreasoned.
37. A fundamental breach of the principles of natural
justice will result in a patent illegality, where for
instance the arbitrator has let in evidence behind the
back of a party. In the above decision, this Court
in Associate Builders v. DDA [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
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Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
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O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 28 of 39
(Civ) 204] observed : (SCC pp. 75 & 81, paras 31 &
42)
“31. The third juristic principle is that a decision
which is perverse or so irrational that no
reasonable person would have arrived at the same
is important and requires some degree of
explanation. It is settled law that where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account
something irrelevant to the decision which it
arrives at; or
(iii) ignores vital evidence in arriving at its
decision,
such decision would necessarily be perverse.
*
42.1. … 42.2. (b) A contravention of the
Arbitration Act itself would be regarded as a
patent illegality — for example if an arbitrator
gives no reasons for an award in contravention of
Section 31(3) of the Act, such award will be liable
to be set aside.”(emphasis supplied)
38. In Ssangyong Engg. & Construction Co.
Ltd. v. NHAI [Ssangyong Engg. & Construction Co.
Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ)
213] , a two-Judge Bench of this Court endorsed the
position in Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204] , on the scope for interference with domestic
awards, even after the 2015 Amendment : (Ssangyong
Engg. & Construction Co. case [Ssangyong Engg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 :
(2020) 2 SCC (Civ) 213] , SCC p. 171, paras 40-41)
“40. The change made in Section 28(3) by the
Amendment Act really follows what is stated in
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Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
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O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 29 of 39
paras 42.3 to 45 in Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204] , namely, that the construction of the
terms of a contract is primarily for an arbitrator
to decide, unless the arbitrator construes the
contract in a manner that no fair-minded or
reasonable person would; in short, that the
arbitrator's view is not even a possible view to
take. Also, if the arbitrator wanders outside the
contract and deals with matters not allotted to
him, he commits an error of jurisdiction. This
ground of challenge will now fall within the new
ground added under Section 34(2-A).
41. … Thus, a finding based on no evidence at all
or an award which ignores vital evidence in
arriving at its decision would be perverse and
liable to be set aside on the ground of patent
illegality. Additionally, a finding based on
documents taken behind the back of the parties by
the arbitrator would also qualify as a decision
based on no evidence inasmuch as such decision
is not based on evidence led by the parties, and
therefore, would also have to be characterised as
perverse.” (emphasis supplied)
39. In essence, the ground of patent illegality is
available for setting aside a domestic award, if the
decision of the arbitrator is found to be perverse, or so
irrational that no reasonable person would have
arrived at it; or the construction of the contract is such
that no fair or reasonable person would take; or, that
the view of the arbitrator is not even a possible view.
[Patel Engg. Ltd. v. North Eastern Electric Power
Corpn. Ltd., (2020) 7 SCC 167 : (2020) 4 SCC (Civ)
149.] A “finding” based on no evidence at all or an
award which ignores vital evidence in arriving at its
decision would be perverse and liable to be set aside
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
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O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 30 of 39
under the head of “patent illegality”. An award
without reasons would suffer from patent illegality.
The arbitrator commits a patent illegality by deciding
a matter not within his jurisdiction or violating a
fundamental principle of natural justice.”
50. It is trite law that the arbitrator is the master of evidence and the court
cannot reopen or look into the evidence relied upon by the Arbitrator. In,
Prakash Atlanta (JV) v. National Highways Authority of India, 2026 SCC
OnLine SC 98, the apex Court ruled as under :
“ 24. In Associate Builders v. Delhi Development
Authority18, this Court noted that the expression
„public policy of India‟ in Section 34(2)(b)(ii) of the
Arbitration Act was given a wider meaning in Oil &
Natural Gas Corporation Ltd. v. Saw Pipes Ltd.19. It
was held therein that the concept of public policy
connotes some matter which concerns public good and
public interest. It was observed that what is for public
good or in public interest or what would be injurious
or harmful to the public good or public interest has
varied from time to time but an arbitral award which,
on the face of it, is patently in violation of statutory
provisions, cannot be said to be in public interest. It
was further observed that such an award is likely to
adversely affect the administration of justice. This
Court, therefore, held that, in addition to the narrower
meaning given to the term „public policy‟ by a 3-Judge
Bench of this Court in Renusagar Power Co. Ltd. v.
General Electric Co.20, an arbitral award can be set
aside if it is patently illegal. The result was that an
arbitral award could be set aside if it was contrary to
the fundamental policy of Indian law; or the interest of
India; or justice or morality; or if it is patently illegal.
It was observed that illegality must go to the root of the
matter but, if the illegality is of trivial nature, it cannot
be held that the award is against public policy. It was
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
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O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 31 of 39
further held that if the award is so unfair and
unreasonable that it shocks the conscience of the
Court, it would be opposed to public policy.
25. Thereafter, in Oil and Natural Gas Corporation
Limited v. Western Geco International Ltd.21, a 3-
Judge Bench of this Court added three other distinct
and fundamental juristic principles which must be
understood as part and parcel of the fundamental
policy of Indian law. The first is the principle that in
every determination that affects the rights of a citizen
or leads to civil consequences, whether by a Court or
other authority, such Court or authority is bound to
adopt what is, in legal parlance, called „judicial
approach‟. The second principle is that a Court and so
also a quasi-judicial authority, while determining
rights and obligations of parties before it, must do so
in accordance with the principles of natural justice. It
was observed that, in addition to audi alteram partem,
the Court/authority deciding the matter must apply its
mind to the attendant facts and circumstances as non-
application of mind is a defect that is fatal to any
adjudication. It was, therefore, held that the
requirement that an adjudicating authority must apply
its mind is so deeply embedded in our jurisprudence
that it can be described as the fundamental policy of
Indian law. The last principle is that a decision which
is perverse or so irrational that no reasonable person
would have arrived at the same cannot be sustained.
Decisions that fall short of the standards of
reasonableness were, therefore, held liable to
challenge in a Court of law and even in statutory
processes wherever the same were available.
26. It was further held in Associate Builders (supra)
that when a Court is applying the public policy test to
an arbitral award, it does not act as a Court of appeal
and, consequently, errors of fact cannot be corrected.
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
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O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 32 of 39
A plausible view by the arbitrator on facts necessarily
has to pass muster as the arbitrator is the ultimate
master of the quantity and quality of evidence to be
relied upon when he delivers his award. It was
observed that an award based on little evidence or on
evidence which does not measure up in quality to a
trained legal mind would not be invalid on this score.
Once it is found that the arbitrator's approach was not
arbitrary or capricious, then he is the last words on
facts.
27. As long back as in the year 2006, in McDermott
International Inc. v. Burn Standard Co. Ltd.22, this
Court affirmed that construction of a contract is within
the jurisdiction of the arbitrator and interpretation
thereof is a matter for the arbitrator to determine, even
if it gives rise to a question of law. This was affirmed in
National Highways Authority of India v. ITD
Cementation India Limited23, wherein this Court held
that construction of the terms of a contract is primarily
for an arbitrator to decide and he is entitled to take the
view that he holds to be the correct one, after
considering the material and after interpreting the
terms of the contract. It was observed that the Court,
while considering a challenge to an arbitral award,
does not sit in appeal over the findings and decision
therein, unless the arbitrator construed the contract in
such a way that no fair-minded or reasonable person
would do. We may note that, in this case, the issue was
whether additional costs owing to a change in the
seigniorage fee had been taken into account in the
indexing of inputs, while providing for price
adjustment in the contract. NHAI had contended that
the said levy was already factored into the indexing
price formula and, therefore, no further payments were
to be made to the contractor. ”
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 33 of 39
51. Applying the aforesaid principles to the facts of the present case, this
Court finds that the findings rendered by the Arbitrator as far as issue (I),
(II) and (III) in paragraph 3(i) are based on due appreciation of evidence on
record and a reasonable interpretation of the contractual terms. It cannot be
said that the conclusions drawn are perverse, irrational, or based on no
evidence, nor is it demonstrated that any vital evidence has been ignored or
irrelevant considerations have been taken into account so as to attract the
ground of patent illegality or to be against the Public Policy of India under
Section 34.
52. Furthermore, there is no material to indicate any breach of the
principles of natural justice, jurisdictional error, or contravention of the
fundamental policy of Indian law. As reiterated by the Apex Court, this
Court does not sit in appeal over arbitral awards and cannot interfere merely
because another view or interpretation is possible.
53. Now, the only issue that remains to be considered by this Court is
issue (IV) mentioned in paragraph 3(i) which deals with the refusal of the
Arbitrator to grant future interest to the Petitioner.
54. Section 31 of the Act entails the legal framework for the grant of
interest by the Arbitrator. The relevant section is reproduced hereunder:-
“ 31. Form and contents of arbitral award .—
(1) An arbitral award shall be made in writing and
shall be signed by the members of the arbitral tribunal.
(2) For the purposes of sub-section (1), in arbitral
proceedings with more than one arbitrator, the
signatures of the majority of all the members of the
arbitral tribunal shall be sufficient so long as the
reason for any omitted signature is stated.
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 34 of 39
(3) The arbitral award shall state the reasons upon
which it is based, unless—
(a) the parties have agreed that no reasons are to be
given, or
(b) the award is an arbitral award on agreed terms
under section 30.
(4) The arbitral award shall state its date and the place
of arbitration as determined in accordance with
section 20 and the award shall be deemed to have been
made at that place.
(5) After the arbitral award is made, a signed copy
shall be delivered to each party.
(6) The arbitral tribunal may, at any time during the
arbitral proceedings, make an interim arbitral award
on any matter with respect to which it may make a final
arbitral award.
(7) (a) Unless otherwise agreed by the parties, where
and in so far as an arbitral award is for the payment
of money, the arbitral tribunal may include in the
sum for which the award is made interest, at such
rate as it deems reasonable, on the whole or any part
of the money, for the whole or any part of the period
between the date on which the cause of action arose
and the date on which the award is made.
(b) A sum directed to be paid by an arbitral award
shall, unless the award otherwise directs, carry
interest at the rate of two per cent higher than the
current rate of interest prevalent on the date of
award, from the date of award to the date of payment.
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 35 of 39
Explanation.—The expression “current rate of
interest” shall have the same meaning as assigned to it
under clause (b) of section 2 of the Interest Act, 1978
(14 of 1978).
(8) The costs of an arbitration shall be fixed by the
arbitral tribunal in accordance with section 31A.
Explanation.—For the purpose of clause (a), “costs”
means reasonable costs relating to—
(i) the fees and expenses of the arbitrators and
witnesses,
(ii) legal fees and expenses,
(iii) any administration fees of the institution
supervising the arbitration, and
(iv) any other expenses incurred in connection with
the arbitral proceedings and the arbitral award. ”
55. Section 31(7)(b) of the Act addresses the grant of future interest by
the Arbitrator. The use of the term “shall” indicates that the grant of future
interest is a statutory mandate unlike the grant of pendente lite interest,
which is entirely upon the discretion of the Arbitrator.
56. The statutory mandate of Section 31(7)(b) of the Act has been
discussed by the Apex Court in a plethora of cases. In Oil and Natural Gas
Corporation Ltd vs. G & T Beckfield Drilling Services Pvt Limited, 2025
SCC OnLine SC 1888, the Apex Court observed as under:-
“ 12. Sub-section (7) of Section 31 of 1996 Act deals
with award of interest when the arbitral award is for
the payment of money. Sub-section (7) has two clauses.
Clause (a) deals with interest for the period between
the date on which the cause of action arose and the
date on which the award is made. Clause (a) says that
when the arbitral award is for the payment of money,
the arbitral tribunal may include in the sum for which
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 36 of 39
the award is made, interest, at such rate as it deems
reasonable, on the whole or any part of the money, for
the whole or any part of the period between the date on
which the cause of action arose and the date on which
the award is made. However, arbitral tribunal's power
to award interest for the aforesaid period is subject to
the agreement between the parties. Therefore, if the
agreement stipulates that no interest is payable, the
arbitral tribunal cannot award interest for the
aforesaid period and an award contrary to the terms of
the contract would be vulnerable to a challenge under
Section 34 of 1996 Act. Moreover, such an agreement
to waive interest is not ultra vires in terms of
Section 28 of the Contract Act, 1872. However, if the
agreement is silent on award of interest, the arbitral
tribunal can award interest in terms of clause (a) of
sub-section (7) of Section 31. As far as clause (b) of
sub-section (7) of Section 31 is concerned, it deals with
post-award interest. Prior to 2015 amendment, clause
(b) mandated payment of interest on the sum awarded
at the rate of 18% per annum from the date of the
award to the date of payment, unless the award
directed otherwise. Interestingly, clause (b) is not
subject to an agreement between the parties and,
therefore, if the arbitral award is with regard to
payment of money, it would carry interest at such rate
as the arbitral award directs and if it is not so directed,
it would carry statutorily prescribed rate of interest
from the date of the award till the date of payment. In a
nutshell, the arbitral tribunal has jurisdiction to award
interest for three distinct periods, namely, pre-
reference, pendente lite, and future i.e., post-award.
Award of pre-reference and pendente-lite interest is
subject to the agreement between the parties whereas
post award interest is statutorily governed and is not
subject to the agreement between the parties. In other
words, clause (b) does not give the parties the right to
„contract out‟ interest for the post award period.”
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 37 of 39
57. In Gayatri Balasamy v. ISG Novasoft Technologies Ltd. , (2025) 7
SCC 1, the Apex Court has observed as under:-
“ 74. There can be instances of violation of Section
31(7)(a), and the pendente lite interest awarded may
be contrary to the contractual provision. We are of the
opinion that, in such cases, the Court while examining
objections under Section 34 of the 1996 Act will have
two options. First is to set aside the rate of interest or
second, recourse may be had to the powers of remand
under Section 34(4).
75. For the post-award interest in terms of Section
31(7)(b), the courts will retain the power to modify the
interest where the facts justify such modification. This
is why the standard rate stipulated in clause (b) applies
when the award itself does not specify the applicable
post-award interest. There can be a situation where the
party to be paid money is at fault and is guilty of delay
which may require a modification in the rate of
interest. In the absence of grant of post-award interest
in the award, the Court also possesses the power to
grant post-award interest. Clearly, as per the
legislative mandate, it is not the sole prerogative of the
arbitrator.
76. Compare Section 31 of the 1996 Act with Section
31 of the Model Law. While both sections are titled
similarly—“Form and Contents of Award”—only the
1996 Act addresses interest in Section 31(7). The
Model Law does not provide standards governing the
determination of interest rates. Thus, Section 31(7) is a
unique creation of the Indian legislature. It was not
borrowed from the Model Law. Specifically, under
Section 31(7)(b), the legislature has established a
standard rate of interest to guide the arbitrator's
discretion when it comes to determining the post-
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 38 of 39
award interest rate. While the arbitrator retains his
flexibility based on facts and circumstances of the case,
the standard set by the legislature must weigh in on
their consideration. Further, as there is a standard
prescribed by the legislature, the post-award interest
awarded can be scrutinised by courts against the
standards prescribed.”
58. In light of the above settled position, this Court is of the opinion that
the Petitioner, is indeed entitled to future interest at the rate of 2 percent
higher than the current rate of interest prevalent on the date of the award,
from the date of the award to the date of payment.
59. While the reliance on Manraj Enterprises (supra) for barring pendente
lite interest holds ground, the Court is of the opinion that future interest
could not have been denied by the arbitrator as post award interest is a
statutory mandate and is not subject to an agreement between the parties.
The judgement of Manraj Enterprises (supra) does not discuss a narrative
wherein future interest could be denied to the parties.
60. Accordingly, O.M.P. (COMM) 294/2022 is dismissed and O.M.P.
(COMM) 307/2022 is allowed to the extent of grant of post-award interest.
All pending applications, if any, are also disposed of.
SUBRAMONIUM PRASAD, J
JULY 01, 2026
VG
Signature Not Verified
Signed By:HARIOM
SINGH KIRMOLIYA
Signing Date:02.07.2026
18:53:24
O.M.P. (COMM) 307/2022 & O.M.P. (COMM) 294/2022 Page 39 of 39