ARBITRAL AWARD INTERPRETATION OF CONTRACT: PLAUSIBLE VIEW CANNOT BE INTERFERED WITH.

Two appeals were heard analogously, stemming from a judgment and order dated November 8, 2024, by a learned Single Judge under Section 34 of the Arbitration and Conciliation Act, 1996.

The Single Judge partly set aside and modified an arbitral award dated March 20, 2023, by setting aside Claim No. A3 for Commitment Charges and modifying the interest rate on the repayment of mobilisation advance from 9% to 14.5%.

The parties had entered into a contract on January 27, 2016, to set up a captive manufacturing unit for cement end products for the respondent's captive consumption.

The respondent paid Rs. 31.98 crores as a mobilisation advance (50% of the total project investment of Rs. 65.74 crores), repayable in 96 equated monthly installments at 14.5% interest on a reducing balance.

The contract included a 10-year lock-in period, extendable by 6 years, and the respondent was obligated to utilise 100% of the plant's capacity.

The claimant established manufacturing units between August 2016 and March 2017.

On March 7 and 8, 2017, the respondent sent emails asking the claimant to stop procuring raw materials "till further instructions".

Disputes arose, leading the claimant to invoke arbitration.

The Arbitral Tribunal published its award on March 20, 2023.

Whether the learned Single Judge erred in setting aside the arbitral award for future commitment charges, considering the contract's lock-in period and exit clauses?

Whether the learned Single Judge erred in modifying the interest rate on the mobilisation advance from 9% to 14.5% per annum?

The court applied Sections 34 (setting aside arbitral awards) and 37 (appeals from orders setting aside arbitral awards) of the Arbitration and Conciliation Act, 1996, which establish a narrow scope of intervention for courts in arbitral matters.

Key precedents cited include *Punjab State Civil Supplies Corporation Ltd. v. Sanman Rice Mills* (2024 SCC Online SC 2632) outlining the limited appellate scope of Section 37.

*Sepco Electric Power Construction Corporation v. Gmr Kamalanga Energy Limited* (2025 SCC Online SC 2088) on the narrowness of Section 37.

*Reliance Infrastructure Ltd. v. State of Goa* (2024 Volume 1 Supreme Court Cases 479) restricting courts from re-appreciating evidence under Sections 34 and 37.

The court also relied on *Ssangyong Engineering & Construction Company Limited v. National Highways Authority of India (NHAI)* (2019 Volume 15 Supreme Court Cases 131) stating that non-consideration of vital evidence vitiates an award due to perversity or patent illegality.

The principle that an Arbitral Tribunal cannot rewrite a contract was also implicitly applied.

The court found that the Single Judge correctly applied the law within the limited scope of Section 34.

Regarding commitment charges, the Arbitral Tribunal's interpretation that the contract was not terminated, leading to an award of future commitment charges for ten years from the production commencement date, was not plausible.

The emails of March 2017, the subsequent conduct of the parties, and the claimant obtaining an interim order under Section 17 relieving parties, indicated that the contract was practically terminated on March 7, 2017.

The Arbitral Tribunal erred by overlooking that the contract limited commitment charges to ten years from the contract date, not production commencement.

The Single Judge rightfully applied the ratio of *Amritsar Gas Service* (supra), limiting future commitment charges to six months, considering the de facto termination.

On the interest rate, the Arbitral Tribunal held the claimant liable for 14.5% interest on the mobilisation advance but then reduced it to 9% without justification.

This reduction was explicitly contrary to the contract's express terms and constituted a manifest error.

It concluded that the learned Single Judge's exercise of jurisdiction under Section 34 of the Act of 1996 was not vitiated.

Therefore, the Single Judge's decision to set aside the award for future commitment charges to the tune of Rs. 127,12,64,892/- and modify the interest on the mobilisation advance to 14.50% per annum (from 9%) was upheld.