Arbitral Awards may be Partially Set Aside if Invalid Portions are Severable and Not Intrinsically Intertwined

The Petitioner (MTNL) filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an Arbitral Award dated 11.03.2016

The challenge was limited to the rejection of the Petitioner’s Counter Claim No. 1, which sought recovery of excess payments totaling Rs. 66,25,499/-

The Arbitrator had found that an excess payment was indeed made based on a price-fixing letter dated 14.05.2002

However, the Arbitrator rejected the claim as time-barred, holding that limitation commenced on 10.07.1995 upon the completion of supplies

Whether the learned Arbitrator erred in law by determining the commencement of limitation from the date of supply (1995) rather than the date the basis for excess payment emerged (2002)

Whether a specific portion of an arbitral award (Counter Claim No. 1) can be severed and set aside while leaving the remainder of the award intact

The court applied Section 34 of the Arbitration and Conciliation Act, 1996, regarding the setting aside of arbitral awards

It relied heavily on the doctrine of severability as articulated in Gayatri Balasamy v. M/s ISG Novasoft Technologies Limited (2025 SCC OnLine SC 986), which establishes that the power to set aside an award includes the power to set it aside in part per the maxim omne majus continet in se minus (the greater includes the lesser), provided the valid and invalid portions are not intrinsically intertwined

The Court observed that both parties admitted to a manifest error in the Arbitrator's calculation of limitation

It reasoned that since the entitlement to recover excess payment was based on a 2002 letter, it was "legally and logically untenable" to trigger the limitation period in 1995, seven years before the basis for the claim existed

Applying the Gayatri Balasamy precedent, the Court found that Counter Claim No. 1 was a distinct, "self-contained" issue that did not affect the other adjudicated claims

Consequently, the Court determined it had the jurisdiction to sever this specific finding of limitation without disturbing the rest of the Award

The Court set aside the Arbitral Award only to the limited extent of the rejection of Counter Claim No. 1 on the ground of limitation

The Petition was disposed of without re-appreciating evidence on the merits of the claim