Section 34 courts cannot interfere with a plausible contractual interpretation absent patent illegality.

On 21 December 2017, Ambrosia Corner House Pvt. Ltd. (“Petitioner”) entered into a Business Transfer Agreement (“BTA”) with Coldsmiths Retail Services Pvt. Ltd. (“Respondent”) for transfer of part of its business, trademarks, assets and associated rights for ₹25 crores. ₹20 crores was payable on closing, and ₹5 crores constituted the Additional Consideration.

The transaction closed on 4 January 2018 upon payment of ₹20 crores and execution of a Deed of Assignment. The parties thereafter executed ancillary agreements, including a Trademark Licence Agreement (“TMLA”) and a Rent Agreement.

Under the BTA, the Petitioner was required to change its corporate name to remove “Nirula’s”; the deadline was subsequently extended to 31 March 2021.

After payment of ₹2.5 crores and execution of a Letter Agreement dated 31 December 2020, the balance Additional Consideration of ₹2.5 crores was made payable in two tranches: ₹1 crore by 30 January 2021 and ₹1.5 crores by 30 June 2021.

The Respondent paid the first tranche but withheld ₹1.5 crores, alleging that the Petitioner had failed to change its corporate name within the extended deadline.

The Petitioner issued a notice dated 23 July 2021 purporting to terminate the BTA and Deed of Assignment for non-payment.

The disputes were referred to arbitration, and the parties subsequently agreed to consolidate disputes arising under the BTA, Deed of Assignment, Rent Agreement and TMLA before the same Tribunal.

By award dated 30 March 2026, the Tribunal rejected the Petitioner’s principal claims, held that payment of the Additional Consideration and the corporate-name change were reciprocal obligations, and granted certain reliefs to the Respondent under the TMLA.

The Petitioner challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996.

Whether the Tribunal’s interpretation of Clauses 3.3, 3.4 and 7.5.1 of the BTA, treating payment of the Additional Consideration and the Petitioner’s obligation to change its corporate name as reciprocal obligations, disclosed patent illegality or amounted to rewriting the contract.

Whether the Tribunal erred in holding that the Petitioner remained in breach of its obligation to change its corporate name and was consequently disentitled from terminating the BTA for non-payment of ₹1.5 crores.

Whether the Tribunal’s allegedly inconsistent findings, clerical errors in dates, and rejection of the Petitioner’s equipment claim justified interference under Section 34.

Whether the Tribunal exceeded the scope of the reference by adjudicating disputes arising under the TMLA, including its termination after the Tribunal had entered upon the reference, attracting Section 34(2)(a)(iv).

The Court applied the limited supervisory jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996, holding that a court does not sit in appeal over an arbitral award, cannot reappreciate evidence, and cannot substitute its interpretation merely because another view is possible.

A contractual interpretation adopted by an arbitral tribunal must ordinarily be upheld if it is possible or plausible.

The Court relied on DMRC Ltd. v. Delhi Airport Metro Express (P) Ltd., (2024) 6 SCC 357; PSA Sical Terminals (P) Ltd. v. V.O. Chidambaranar Port Trust, 2021 SCC OnLine SC 508; State of Chhattisgarh v. Sal Udyog Pvt. Ltd., (2022) 2 SCC 275; and Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, for the restricted scope of Section 34 review.

The Court further applied Section 34(2A), under which an award in a purely domestic arbitration cannot be set aside merely for an erroneous application of law or on reappreciation of evidence.

Clauses 3.3, 3.4 and 7.5.1 of the BTA were construed together: Clause 3.3 suspended the Respondent’s obligation to pay Additional Consideration upon the Petitioner’s default; Clause 3.4 granted a termination right for non-payment subject to the qualification “Save as otherwise provided in this Agreement”; and Clause 7.5.1 made payment subject to fulfilment of specified post-closing actions.

Under Section 34(2)(a)(iv), interference is warranted where the award deals with a dispute beyond the scope of the submission to arbitration.

The Court also relied on Adavaya Projects (P) Ltd. v. Vishal Structurals (P) Ltd., (2025) 9 SCC 686, for the principle that the scope of reference is not limited to the disputes initially stated, provided the dispute falls within the arbitration agreement.

The Court held that Clause 3.4 did not confer an unconditional termination right because it expressly operated “Save as otherwise provided in this Agreement”.

Clause 3.3 therefore had to be read with Clause 7.5.1, making payment of the Additional Consideration subject to the Petitioner’s performance of its post-closing obligations, including changing its corporate name.

The Letter Agreement merely rescheduled payment and extended the deadline; it did not amend, waive or dispense with Clauses 3.3 or 7.5.1.

Since the Petitioner had not changed its corporate name by 31 March 2021 and remained in breach when it issued the termination notice on 23 July 2021, the Tribunal plausibly concluded that the Respondent’s withholding of ₹1.5 crores could not constitute a default entitling the Petitioner to terminate the BTA.

The alleged inconsistencies in the award were found to arise from different issues being addressed, while the date errors were merely clerical and immaterial.

The challenge to the equipment finding impermissibly sought reconsideration of evidence and did not establish “no evidence” or perversity.

Regarding the TMLA, the Court found that the Petitioner had consented to consolidation of disputes concerning the interconnected transaction documents and had participated in the consolidated proceedings without establishing that the Tribunal lacked jurisdiction.

The later formal termination of the TMLA did not place the disputes outside the agreed reference.

It held that the Tribunal’s interpretation of the BTA was a possible and commercially plausible construction, did not rewrite the contract, and disclosed no patent illegality warranting interference under Section 34.

The Tribunal did not exceed the scope of the reference in adjudicating the TMLA disputes, and the remaining challenges merely sought reappreciation of evidence or correction of immaterial errors.

The petition under Section 34 was dismissed, and all pending applications were disposed of.