Absence of Contest Before Arbitrator Precludes Setting Aside Award on Grounds of Contractual Interpretation under Section 34.

The Appellant, a contractor, was awarded a tender for road and drain improvements in 2018

Delays occurred in project execution, which the Appellant attributed to the Respondent’s failure to acquire private property, delay in providing drawings, and failure to relocate electrical poles

The Appellant completed 72.2% of the work and submitted a price adjustment bill for ₹46,87,473 under Clause 40 of the General Conditions of Contract (GCC)

When the Respondent failed to pay, the matter was referred to a Sole Arbitrator, who passed an award in favor of the Appellant on 14.03.2024

The Respondent, who stayed ex-parte during arbitration, challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996

The Commercial Court set aside the award, finding an inherent contradiction between Clause 40 and 40.1 of the GCC and concluding that price adjustment should have been limited to "star rates" for specific materials as per a 2008 Government Order

The Appellant then moved the High Court in appeal

Whether the Commercial Court exceeded its jurisdiction under Section 34 of the A&C Act by re-adjudicating the merits of the price adjustment claim

Whether an arbitral award can be set aside on the ground of "patent illegality" for an interpretative exercise of contract clauses that were not contested during arbitral proceedings

The court primarily applied Section 34 of the Arbitration and Conciliation Act, 1996, which limits the grounds for setting aside an award to specific instances such as "patent illegality" appearing on the face of the award or conflict with the "public policy of India"

It relied on the principle that "patent illegality" must go to the root of the matter and cannot be invoked for mere errors in the interpretation of a contract

The court also examined Clause 40 and 40.1 of the GCC alongside Government Orders dated 26.11.2004 and 21.11.2008 regarding price adjustments for labor, materials, and machinery

The High Court found that the Commercial Court had improperly embarked on a de novo adjudication of the price adjustment bill

The Respondent had failed to participate in the arbitration or raise objections regarding the applicability of the 2008 Government Order at the relevant time

The High Court noted that Clause 40.1(a) allowed for price adjustments during extended periods of completion, and the Arbitral Tribunal had found the delays attributable to the Respondent

The court reasoned that since the Appellant’s claim was sustainable under a plain reading of Clause 40.1 and its associated formulae (which included labor, fuel, and machinery), any perceived conflict between Clauses 40 and 40.1 was a matter of contractual interpretation

Such interpretation falls within the sole domain of the Arbitrator and does not constitute "patent illegality" unless the view taken is perverse or impossible

The court held that the Commercial Court erred by substituting its own interpretation for that of the Arbitrator on issues that were not even raised as grounds for challenge in the Section 34 petition

It held that the Commercial Court’s interference was unwarranted as the award was not vitiated by patent illegality or conflict with public policy

The High Court set aside the Commercial Court’s order dated 04.08.2025 and restored the arbitral award

The appeal was allowed with no orders as to costs