Case Citation: (2023) ibclaw.

in 754 HC

* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Pronounced on: 13th September, 2023

+ O.M.P. (COMM) 294/2019 & I.A. 764/2020

NATIONAL HIGHWAYS AUTHORITY OF INDIA
..... Petitioner
Through: Ms. Madhu Sweta and Ms.
Raveena Dewan, Advocates
versus
ASHOKA BUILDCON LTD. ..... Respondent
Through: Mr. Jay Salva, Sr. Advocate with
Mr. Rajpal Singh, Advocate
CORAM:
HON’BLE MR. JUSTICE CHANDRA DHARI SINGH

JUDGMENT

CHANDRA DHARI SINGH, J.

1. The instant petition under section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter The Act) has been filed on behalf of
the petitioner seeking the following reliefs:

“a) To quash and set aside the arbitral award dated

25.03.2019 passed by the Arbitral Tribunal, and/or
(b) To pass such other order or direction as deemed fit and
proper in the facts and circumstances of the present case.”

FACTUAL MATRIX
2. The petitioner, National Highways Authority of India (NHAI), is
an autonomous body constituted under the National Highways Authority
of India Act, 1988 having its office at G-5 & 6, Sector- 10, Dwarka, New
Delhi-110075. NHAI functions towards developing, maintaining, and

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managing the country’s National Highways and for matters connected

thereto.
3. The respondent, Ashoka Buildcon Ltd., is a company incorporated
under the provisions of the Companies Act, 1956 having its office at
S.No.861, Ashoka House, Ashoka Marg, Vadala, Nashik-422011
(Maharashtra).
4. The petitioner on 15th February 2016 invited a proposal for the
construction of the Project Highway for the construction of Two/Four
laning with paved shoulders of Govindpur (Rajgunj) -Chas-West Bengal
Border section of NH-32 from km. 0.000 to km. 56.889 (hereinafter
referred to as "Project Highway") in the State of Jharkhand on NHDP
Phase-IV on Engineering, Procurement, and Construction (hereinafter
“EPC”) mode involving vide RFP no. NHAI/11012/JH/IV/2004/04 as per
which, it prescribed the technical and commercial terms and conditions
for undertaking the project.
5. The respondent submitted its bid pursuant to the proposal by the
petitioner and the same was accepted by the petitioner vide Letter of
Acceptance no. NHAI/11012/JH/4/2004/04/85826 dated 19th July 2016.
Accordingly, the Contract Agreement dated 1st August 2016 was entered
into between the parties for the execution of the above mentioned project.
6. Thereafter, the respondent invoked the provisions of arbitration as
per Clause 26.3 of the Contract Agreement on 31st July 2017 and
accordingly submitted a list of disputes to the petitioner leading to the
setting up of the Arbitral Tribunal on 26th September 2017.
7. The respondent filed its Statement of Claims before the learned
Arbitral Tribunal which was followed by the Statement of Defence on

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behalf of the petitioner on 11th November 2017 and 10th March 2018
respectively. The respondent further filed a rejoinder on 30th April 2018.
8. The learned Arbitral Tribunal passed the impugned Arbitral Award
on 25th March 2019, whereby, a sum of Rs. 3628.79 lakhs plus GST as
per actual was awarded in favour of the respondent.
9. Hence, on being aggrieved by the impugned Award dated 25th
March 2019, the petitioner has approached this Court challenging the
abovesaid Award by way of the instant petition under Section 34 of the
Act, 1996.
SUBMISSIONS
(On behalf of the petitioner)
10. Learned counsel appearing on behalf of the petitioner submitted
that the learned Arbitral Tribunal had allowed the claim of the respondent
towards the delay by completely omitting the applicable provisions
namely Clause 4.1.4, 8.3, and 10.5 of the Contract Agreement.
11. It is submitted that the appointed date is consequent to the handing
over of the Right of Way (hereinafter “ROW”) and is not mutually
independent. The petitioner's counsel further stated that the claim was
wrongfully approved because the petitioner had failed to transfer at least
90 percent of the ROW as required by the Contract Agreement. It is
further submitted that the ROW was handed over to the respondent as per
the Contract Agreement vide the petitioner’s letter dated 7th October 2016.
12. Learned counsel for the petitioner submitted that the learned
Arbitral Tribunal ought to have adverted to clause 8.3 which provides the
formula for calculating the damages in case of delay in handing over the
site.

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13. It is contended that even if it had been assumed that there was an
error in providing the ROW, as the damages, has to be calculated in
accordance with Article 4 of the Contract Agreement. They had referred
to Clause 4.1.4, which had provided for damages and time extension in
case of any delay in providing the ROW.
14. Learned counsel for the petitioner submitted that the learned
Arbitral Tribunal failed to consider Clause 4.1.5 of the Contract
Agreement which states that damages provided under Clause 8.3 shall be
full and final of all claims of the respondent and such compensation shall
be the sole remedy and final cure against the delays of the respondent.
15. It is further submitted that the learned Arbitral Tribunal failed to
consider the Non-Obstante Clause which clearly states that aggregate
damages payable to the respondent would be limited to 1% of the contract
price.
16. Learned counsel for the petitioner submitted that the amount
awarded towards overhead charges, idle charges, and charges of
demobilization of plant and machinery are perverse and without any
reasoning. It is submitted that the respondent's allegations lacked support
and evidence, rendering them speculative, hypothetical, and baseless.
17. It is contended that the learned Arbitral Tribunal failed to consider
that the amount awarded under Claim no. 5 including the interest clearly
contravenes Clause 26.3 (iv) of the Contract Agreement which has clearly
mentioned that the cost of Arbitration shall be borne by each party itself.
18. It is contended that the learned Arbitral Tribunal went against the
provisions of the Contract Agreement in awarding both the pre-lite and
pendent lite interest on the amount awarded from the date of the

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submissions of the Statement of Claims i.e., 12 th November 2017 till 25th

March 2019 i.e., the date of the impugned Award at the rate of 10% per
annum. The petitioner has further relied on the judgment in the case of
ONGC v. Wig Brothers Builders and Engineers Private Limited (2010)
13 SCC 377, where it was held that the Arbitrator's jurisdiction is
confined to the terms and conditions of the contract. Therefore, the
petitioner argued that the Arbitral Award exceeded its jurisdiction and
should be set aside.
19. It is further contended by the petitioner that they had relied on
Clause 26.3.1(vi) of the Agreement, which had stated that each party
would bear its own expenses in connection with the arbitration
proceedings.
20. It is submitted that the awarding of interest on the entire award \ to
the respondent is against the applicable law and further contrary to the
provisions of the Contract Agreement. It is submitted that the learned
Arbitral Tribunal unlawfully and unreasonably upheld the respondent's
arguments by failing to take their substantive concerns into account.
21. It is further submitted that the finding in the impugned Award at
paragraph 8.4(e) is wholly perverse and in contradiction to its own
finding at Para 7.1(b). The learned Arbitral Tribunal while passing the
Impugned Award had erred in overlooking the fact that the fixing of the
appointed date was consequent to handing over the ROW and were not
mutually independent.
22. It is submitted that the finding in the Arbitral Award at para 8.4(g)
was wholly perverse, non-speaking, and suffered from non-application of
mind. The learned Arbitral Tribunal had failed to consider Clause 4.1.5 of

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the Contract Agreement, which was a non-obstante clause and clearly

stated that the aggregate damages payable to the respondent in case of any
breach of its obligations under the Contract Agreement would be limited
to 1% of the Contract Price.
23. It is submitted that the Impugned Award is wholly perverse and
contrary to the law of damages under Section 73 and 74 of the Contract
Act. The learned Arbitral Tribunal had awarded damages beyond the
maximum cap stipulated in the Contract Agreement, which was not
permissible under the law.
24. It is submitted that the Impugned Award is in complete
contravention to the settled law and the same is evident from the findings
of the learned Arbitral Tribunal at paragraph 6.3.2 and 6.3.3, which
indicated that there were various omissions, non-application of mind, and
failure to consider relevant contractual provisions and pleadings of the
respondent.
25. It is further submitted that the learned Arbitral Tribunal had erred
in awarding claim in favor of the respondent which is contrary to Clause
26.3.1(vi) of the Contract Agreement, which stated that each party shall
bear its own expenses in connection with the arbitration proceedings.
26. It is submitted that the Impugned Award is in conflict with the
'public policy' of India within the meaning and scope of Section 34 (2) (b)
(ii) of the Act, 1996. It was contended that the impugned majority award
is wholly vitiated as the Arbitral Tribunal had failed to consider the
petitioner's detailed submissions concerning various disputes and had
rendered its findings dehors the provisions of the Contract Agreement.

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27. The petitioner had further contended that the Impugned Award is
patently illegal as the learned Arbitral Tribunal had completely
disregarded the provisions of the Contract Agreement, thus, rendering the
award untenable. Therefore, it is submitted that the Impugned Award is
liable to be set aside under Section 34 of the Act, 1996.
(On behalf of the respondent)
28. Mr. Jay Salva, learned senior counsel for the respondent submitted
that the instant petition is nothing but an abuse of the process of law. It is
submitted that it is the settled position of law that a Court shall not sit in
appeal over the award of an arbitral tribunal by re-assessing or re-
appreciating evidence of the arbitral proceeding. It is also submitted that
an award can be challenged only on limited grounds mentioned Act.
Therefore, in the absence of any such ground, it is not possible to re-
examine the facts or evidence on the record.
29. Learned counsel for the respondent submitted that the NHAI under
Section 26 of the Act of 2002 was under an obligation to remove the
unauthorized occupants and further take steps to remove the occupations
which was not adhered to by the petitioner.
30. Learned counsel for the respondent submitted that the damages of
1% shall be applicable only if there was any delay in providing the ROW
to the land which forms part of the appendix i.e., if there is a delay in
handling oversite of the remaining 10% of the total length of the Project.
It is further submitted that the learned Arbitral Tribunal clearly held that
none of the Clauses provides for aggregate damages to be limited to 1%
of the Contract Price applied.

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31. It is further submitted that Clause 4.1.5 of Contract Agreement only

restricts the aggregate damages with regard to clauses 4.1.4, 8.3, and 9.2
and not for violation of the specific warranties and representation and
removing occupations agreed under Clause 8.4.
32. It is submitted that this Court in its order dated 2nd August 2019
held that there was an inordinate delay of 16 months in fixing the
appointed date. Further, it is submitted that the authority was under an
obligation to provide Right of Way (ROW) to a minimum of 90% of the
Project Highway, which was the requirement under the Contract
Agreement.
33. Learned counsel for the respondent submitted that the Contract
Agreement is dated 1st August 2016 while the date of appointment fixed
under the Contract was 10th December 2017 which clearly breaches the
warranties and representations of the Contract Agreement.
34. It is submitted that the Clause restricting the damages to 1% is
unconscionable and would be against the Public Policy of India. The
parties can only determine genuine pre-estimated damage under Section
74 of the Indian Contract Act, of 1872 and restricting the damages to 1%
of the Contract Value cannot be genuine pre-estimated damages.
35. It was further submitted that the petitioner had not handed over the
required 90% of the length of the Project Highway within 15 days of the
Contract Agreement's execution. Due to this failure, the respondent
claimed that they could not commence the work on the Project Highway.
36. It is contended by the respondent that the ROW handed over by the
petitioner constituted only 83% of the required length, making it
impossible to commence the physical work at the site.

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37. It is submitted that the contents of the petitioner's petition and the
grounds therein were false and frivolous. The respondent asserted that the
petition was not maintainable under the provisions of Section 34 of the
Arbitration and Conciliation Act, 1996, as it was in the nature of an
appeal. The petitioner could not seek re-appreciation of the evidence or
interpretation of the contract, as the learned tribunal had already
considered and interpreted the same.
38. It is contended that the petitioner has wrongly alleged that the
impugned award was illegal, contrary to applicable provisions of law, or
against the terms of the contract agreement or fundamental policy of
Indian law.
39. It is submitted that there is no alleged requirements which were to
be performed by the respondent such as approval of the change of scope,
work delay, tree plantation, identification of the trees to be felled,
approval of the proof consultant, submission of design and drawings, etc.,
which were attributable to the respondent.
40. It is submitted that the letter dated 09th September 2019 addressed
by them to the petitioner contradicted the petitioner's claim of losses, as it
showed the petitioner's willingness to bid for future projects. Finally, the
respondent submitted that the award amount with interest as of 02nd
August 2019 was Rs. 44.11 crores, not Rs. 36.28 crores as claimed by the
petitioner.
41. It is further contended that in respect of the claim no.4 is there is no
arbitrariness in awarding overheads for the delay period in
para8.4(h),(ii),(iv),(vi) of the Award. The petitioner has wrongly
contended that there is no basis for passing the Award.

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42. It is submitted that the award does not go beyond the terms of
contract and law. It is denied that the arbitrator has exceeded his
jurisdiction. The objection to jurisdiction was never taken by the
petitioner and cannot be taken for the first time in the present
proceedings.
43. It is submitted that the impugned award did not suffer from patent
illegality or contravene the law. While, the petitioner's submission
regarding the provisions of clause 26.3.1(vi) of the Contract Agreement
restricted the arbitral tribunal's discretion in determining costs had been
refuted by the respondent. There is no prohibition in the contract for grant
of compensation for delay in making the 90% project length available for
work and appointed date. The conduct of the petitioner shows that he
expected the respondent to take steps for execution of work such as
mobilization and applicable permits etc. prior to appointed date including
the utility shifting and tree cuttings and change of scope etc.
44. It is submitted that the damages agreed between the parties in the
contract pertain to the period after appointed date whereas compensation
awarded is pertaining to the period of delay caused by petitioner prior to
the appointed date. The reliance placed by the petitioner of the Apex
Court judgment in this regard is not correct as the facts in the judgment
cited and the present case are different. The petitioner admits to the
entitlement of the respondent for compensation under Section 73 of the
Indian Contract Act is applicable to the present dispute also. The
respondent has proved the damages and the damages awarded are found
reasonable by the arbitral tribunal.

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45. It is contended that the petitioner on one hand pleads that the
damages for delay if are to be awarded are required to be mutually agreed
in the contract and wrongly uses the words liquidated damages'.
46. It is submitted that learned Tribunal in Claim no. 5 awarded interest
is nor against applicable law of arbitration neither contrary to the
provisions of contract agreement hence, the objection of the petitioner is
vague and may kindly be rejected by this Court.
47. It is further contended with reference to Para 19, it had been
clarified by the respondent that the letter dated 09th September 2019,
addressed by the petitioner to the respondent, had been misleading and
had presented a different portrayal of the situation.
48. It is submitted that the arbitral tribunal has rightly appreciated all
the arguments and judgments. The award cannot be equated with the
judgment of the Courts. The petitioner has not shown as to how the RJ-6
has affected the award. The judgment cited by the petitioner have facts
which are different from the facts in the present case the judgment is not
applicable.
49. Learned senior counsel for the respondent submits that the
impugned Award is in accordance with the law and cannot be set aside on
the ground of re-appreciation of evidence.
50. It further submits that it is within the jurisdiction of the learned
Arbitral Tribunal to interpret the Contract or its any particular Clause.
51. Learned senior counsel for the respondent submits that where two
views prevail, the view taken by the learned Arbitral Tribunal would be
considered as a plausible view.

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52. It is submitted that Court does not sit as a Court of Appeal over the
decision of an Arbitral Tribunal and to adjudicate the correctness of an
Award passed unless there is a patent illegality or perversity on the face
of the Award.
53. Therefore, it is submitted that the instant petition is liable to be
dismissed for being devoid of any merit.
FINDINGS AND ANALYSIS
54. Heard both the parties at length and perused the material on record
including the pleadings and judgments relied upon.
55. Before proceeding further, this Court finds it necessary to briefly
revisit the existing of position of law with respect to the scope of
interference with an arbitral award in India.
56. Under Section 34 of the Act it is well-settled position that the Court
does not sit in appeal over the arbitral award and may interfere on merits
on the limited ground as provided under Section 34(2)(b)(ii) of the Act,
i.e., if the award is against the Public Policy of India. As per the legal
position clarified through decisions of this Court prior to the amendments
in the 1996 Act in 2015, a violation of India Public Policy in turn,
includes a violation of the fundamental policy of Indian law, a violation
of the interest of India, conflict with justice or morality and existence of
patent illegality in the arbitral award. The concept of the fundamental
policy of Indian Law would cover the compliance with the statutes under
judicial precedents adopting a judicial approach, compliance with the
principles of nature justice, and reasonableness.
57. It is only if one of the conditions is met that the Court may interfere
with an arbitral award in terms of Section 34(2)(b)(ii) of the Act, but the

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said interference does not entail a review of the merits of the dispute as it
is limited to the situations where the findings of the arbitration are
arbitrary, capricious, or perverse, or when the conscience of the Court is
shocked, or when the illegality is not trivial but goes to the root of the
matter. An arbitral award may not be interfered with, if the view taken by
the learned arbitrator is a possible view based on the facts.
58. Hence, there is a limitation on the powers of this Court while
examining its jurisdiction under Section 34 of the Act, 1996, however, at
the same time, if the interpretation put forward by the Arbitral Tribunal,
on the face of it, is incorrect, rendering a Clause in the
Agreement to be redundant, such interpretation cannot be sustained.
59. It is a settled law that there are essentially three broad areas in
which an arbitral award is likely to be challenged under Section 34 of the
Act, 1996. Firstly, an award may be challenged on jurisdictional grounds-
for example, the non-existence of a valid and binding arbitration
Agreement on grounds that go to the admissibility of the claim
determined by the Tribunal. Secondly, an award may be challenged on
what may broadly be described as procedural grounds, such as failure to
give a party an equal opportunity to be heard. Thirdly and most rarely, an
award may be challenged on substantive grounds on the basis that the
Arbitral Tribunal made a mistake of law.
60. In the case of PSA Sical Terminals Pvt. Ltd. vs. The Board of
Trustees of V.O. Chidambranar Port Trust Tuticorin and Others, 2021
SCC OnLine SC 508, the Hon'ble Supreme Court held as under:-
"41. It will be relevant to refer to the following observations
of this Court in the case of MMTC Limited (supra):

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“11. As far as Section 34 is concerned, the position is

well-settled by now that the Court does not sit in appeal
over the arbitral award and may interfere on merits on
the limited ground provided under Section 34(2)(b)(ii)
i.e., if the award is against the public policy of India. As
per the legal position clarified through decisions of this
Court prior to the amendments to the 1996 Act in 2015,
a violation of Indian public policy, in turn, includes a
violation of the fundamental policy of Indian law, a
violation of the interest of India, conflict with justice or
morality, and the existence of patent illegality in the
arbitral award. Additionally, the concept of the
“fundamental policy of Indian law” would cover
compliance with statutes and judicial precedents,
adopting a judicial approach, compliance with the
principles of natural justice, and Wednesbury
[Associated Provincial Picture Houses v. Wednesbury
Corpn., [1948] 1 K.B. 223 (CA)] reasonableness.
Furthermore, “patent illegality” itself has been held to
mean contravention of the substantive law of India,
contravention of the 1996 Act, and contravention of the
terms of the contract.
12. It is only if one of these conditions is met that the
Court may interfere with an arbitral award in terms of
Section 34(2)(b)(ii), but such interference does not
entail a review of the merits of the dispute, and is
limited to situations where the findings of the arbitrator
are arbitrary, capricious or perverse, or when the
conscience of the Court is shocked, or when the
illegality is not trivial but goes to the root of the matter.
An arbitral award may not be interfered with if the view
taken by the arbitrator is a possible view based on
facts.(See Associate Builders v. DDA [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204]. Also see ONGC Ltd. v. Saw Pipes Ltd.
[ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC
705]; Hindustan Zinc Ltd. v. Friends Coal
Carbonisation [Hindustan Zinc Ltd. v. Friends Coal

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Carbonisation, (2006) 4 SCC 445]; and McDermott

International Inc. v. Burn Standard
Co. Ltd. [McDermott International Inc. v. Burn
Standard Co. Ltd., (2006) 11 SCC 181])
13. It is relevant to note that after the 2015 Amendment
to Section 34, the above position stands somewhat
modified. Pursuant to the insertion of Explanation 1 to
Section 34(2), the scope of contravention of Indian
public policy has been modified to the extent that it now
means fraud or corruption in the making of the award,
violation of Section 75 or Section 81 of the Act,
contravention of the fundamental policy of Indian law,
and conflict with the most basic notions of justice or
morality. Additionally, sub-section (2-A) has been
inserted in Section 34, which provides that in case of
domestic arbitrations, violation of Indian public policy
also includes patent illegality appearing on the face of
the award. The proviso to the same states that an award
shall not be set aside merely on the ground of an
erroneous application of the law or by reappreciation
of evidence.
14. As far as interference with an order made under
Section 34, as per Section 37, is concerned, it cannot be
disputed that such interference under Section 37 cannot
travel beyond the restrictions laid down under Section
34. In other words, the court cannot undertake an
independent assessment of the merits of the award, and
must only ascertain that the exercise of power by the
court under Section 34 has not exceeded the scope of
the provision. Thus, it is evident that in case an arbitral
award has been confirmed by the court under Section
34 and by the court in an appeal under Section 37, this
Court must be extremely cautious and slow to disturb
such concurrent findings.”
42. In Ssangyong Engineering and Construction Company
Limited (supra), this Court after considering various
judgments including the judgment in Associate
Builders (supra) observed thus:

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“34. What is clear, therefore, is that the expression

“public policy of India”, whether contained in Section
34 or in Section 48, would now mean the “fundamental
policy of Indian law” as explained in paras 18 and 27
of Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ)
204] i.e. the fundamental policy of Indian law would be
relegated to “Renusagar” understanding of this
expression. This would necessarily mean that Western
Geco [ONGC v. Western Geco
International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC
(Civ) 12] expansion has been done away with. In
short, Western Geco [ONGC v. Western Geco
International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC
(Civ) 12], as explained in paras 28 and 29 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC
49 : (2015) 2 SCC (Civ) 204], would no longer obtain,
as under the guise of interfering with an award on the
ground that the arbitrator has not adopted a judicial
approach, the Court's intervention would be on the
merits of the award, which cannot be permitted post
amendment. However, insofar as principles of natural
justice are concerned, as contained in Sections 18 and
34(2)(a)(iii) of the 1996 Act, these continue to be
grounds of challenge of an award, as is contained in
para 30 of Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ)
204].
35. It is important to notice that the ground for
interference insofar as it concerns “interest of India”
has since been deleted, and therefore, no longer
obtains. Equally, the ground for interference on the
basis that the award is in conflict with justice or
morality is now to be understood as a conflict with the
“most basic notions of morality or justice”. This again
would be in line with paras 36 to 39 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC
49 : (2015) 2 SCC (Civ) 204], as it is only such arbitral

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awards that shock the conscience of the court that can

be set aside on this ground.
36. Thus, it is clear that public policy of India is now
constricted to mean firstly, that a domestic award is
contrary to the fundamental policy of Indian law, as
understood in paras 18 and 27 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC
49 : (2015) 2 SCC (Civ) 204], or secondly, that such
award is against basic notions of justice or morality as
understood in paras 36 to 39 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC
49 : (2015) 2 SCC (Civ) 204]. Explanation 2 to Section
34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii)
was added by the Amendment Act only so that Western
Geco [ONGC v. Western Geco
International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC
(Civ) 12], as understood in Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC
49 : (2015) 2 SCC (Civ) 204], and paras 28 and 29 in
particular, is now done away with.
37. Insofar as domestic awards made in India are
concerned, an additional ground is now available
under sub-section (2-A), added by the Amendment Act,
2015, to Section 34. Here, there must be patent
illegality appearing on the face of the award, which
refers to such illegality as goes to the root of the matter
but which does not amount to mere erroneous
application of the law. In short, what is not subsumed
within “the fundamental policy of Indian law”, namely,
the contravention of a statute not linked to public policy
or public interest, cannot be brought in by the backdoor
when it comes to setting aside an award on the ground
of patent illegality.
40. The change made in Section 28(3) by the
Amendment Act really follows what is stated in 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

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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).
38. Secondly, it is also made clear that reappreciation
of evidence, which is what an appellate court is
permitted to do, cannot be permitted under the ground
of patent illegality appearing on the face of the award.
39. To elucidate, para 42.1 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC
49 : (2015) 2 SCC (Civ) 204], namely, a mere
contravention of the substantive law of India, by itself,
is no longer a ground available to set aside an arbitral
award. Para 42.2 of Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ)
204], however, would remain, for if an arbitrator gives
no reasons for an award and contravenes Section 31(3)
of the 1996 Act, that would certainly amount to a patent
illegality on the face of the award.
41. What is important to note is that a decision which is
perverse, as understood in paras 31 and 32 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC
49 : (2015) 2 SCC (Civ) 204], while no longer being a
ground for challenge under “public policy of India”,
would certainly amount to a patent illegality appearing
on the face of the award. 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

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by the parties, and therefore, would also have to be

characterised as perverse.
42. Given the fact that the amended Act will now apply,
and that the “patent illegality” ground for setting aside
arbitral awards in international commercial
arbitrations will not apply, it is necessary to advert to
the grounds contained in Sections 34(2)(a)(iii) and (iv)
as applicable to the facts of the present case.”
43. It will thus appear to be a more than settled legal
position, that in an application under Section 34, the court is
not expected to act as an appellate court and reappreciate
the evidence. The scope of interference would be limited to
grounds provided under Section 34 of the Arbitration Act.
The interference would be so warranted when the award is
in violation of “public policy of India”, which has been held
to mean “the fundamental policy of Indian law”. A judicial
intervention on account of interfering on the merits of the
award would not be permissible. However, the principles of
natural justice as contained in Section 18 and 34(2)(a)(iii) of
the Arbitration Act would continue to be the grounds of
challenge of an award. The ground for interference on the
basis that the award is in conflict with justice or morality is
now to be understood as a conflict with the “most basic
notions of morality or justice”. It is only such arbitral
awards that shock the conscience of the court, that can be set
aside on the said ground. An award would be set aside on
the ground of patent illegality appearing on the face of the
award and as such, which goes to the roots of the matter.
However, an illegality with regard to a mere erroneous
application of law would not be a ground for interference.
Equally, reappreciation of evidence would not be permissible
on the ground of patent illegality appearing on the face of
the award.

34. In the case of SAIL vs. Gupta Brother Steel Tubes Ltd., (2009) 10
SCC 63, the Hon'ble Supreme Court has, on the aspect of extent of

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limitation imposed upon a court while adjudicating a petition challenging

an arbitral award, held as under: -
"16. In ONGC Ltd. [(2003) 5 SCC 705] , while dealing with
the aspects of liquidated damages, this Court considered the
aforesaid Constitution Bench decisions in Chunilal V. Mehta
& Sons [AIR 1962 SC 1314] and Fateh Chand [AIR 1963 SC
1405] and after reference to relevant parts of Sections 73
and 74 of the Contract Act held thus: (ONGC Ltd.
case [(2003) 5 SCC 705] , SCC p. 733, para 46)
“46. From the aforesaid sections, it can be held that
when a contract has been broken, the party who suffers
by such breach is entitled to receive compensation for
any loss which naturally arises in the usual course of
things from such breach. These sections further
contemplate that if parties knew when they made the
contract that a particular loss is likely to result from
such breach, they can agree for payment of such
compensation. In such a case, there may not be any
necessity of leading evidence for proving damages,
unless the court arrives at the conclusion that no loss is
likely to occur because of such breach. Further, in case
where the court arrives at the conclusion that the term
contemplating damages is by way of penalty, the court
may grant reasonable compensation not exceeding the
amount so named in the contract on proof of damages.
However, when the terms of the contract are clear and
unambiguous then its meaning is to be gathered only
from the words used therein. In a case where agreement
is executed by experts in the field, it would be difficult
to hold that the intention of the parties was
different from the language used therein. In such a
case, it is for the party who contends that stipulated
amount is not reasonable compensation, to prove the
same.”
17. In Tarapore & Co. [(1994) 3 SCC 521] , a two-Judge
Bench of this Court considered few decisions of this
Court including the decisions in Sudarsan Trading

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Co. v. Govt. of Kerala [(1989) 2 SCC 38 : AIR 1989 SC 890]

, Associated Engg. Co. v. Govt. of A.P. [(1991) 4 SCC 93 :
AIR 1992 SC 232] and J&K Handicrafts v. Good Luck
Carpets [(1990) 4 SCC 740] and held that where an
arbitrator travels beyond a contract, the award would be
without jurisdiction and the same would amount to
misconduct and such award would become amenable for
being set aside by a court. In Sudarsan Trading Co. [(1989)
2 SCC 38 : AIR 1989 SC 890] this Court held that an error
by the arbitrator relatable to interpretation of the contract is
not amenable to correction by courts.
18. It is not necessary to multiply the references. Suffice it to
say that the legal position that emerges from the decisions of
this Court can be summarised thus:
(i) In a case where an arbitrator travels beyond the
contract, the award would be without jurisdiction and
would amount to legal misconduct and because of
which the award would become amenable for being set
aside by a court.
(ii) An error relatable to interpretation of the
contract by an arbitrator is an error within his
jurisdiction and such error is not amenable to
correction by courts as such error is not an error on the
face of the award.
(iii) If a specific question of law is submitted to the
arbitrator and he answers it, the fact that the answer
involves an erroneous decision in point of law does not
make the award bad on its face.
(iv) An award contrary to substantive provision of
law or against the terms of contract would be patently
illegal.
(v) Where the parties have deliberately specified the
amount of compensation in express terms, the party
who has suffered by such breach can only claim the
sum specified in the contract and not in excess thereof.
In other words, no award of compensation in case of
breach of contract, if named or specified in the
contract, could be awarded in excess thereof.

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(vi) If the conclusion of the arbitrator is based on a

possible view of the matter, the court should not
interfere with the award.
(vii) It is not permissible to a court to examine the
correctness of the findings of the arbitrator, as if it were
sitting in appeal over his findings."

61. The abovesaid principle on limited interference by this Court has

also been enunciated by the Hon’ble Supreme Court in the judgment of
M/S Larsen Air Conditioning and Refrigration Company v. Union of
India & Ors. CA no. 3798 of 2023 dated 11th August 2023, wherein the
Hon’ble Court held as follows:
“15. The limited and extremely circumscribed jurisdiction of
the court under Section 34 of the Act, permits the court to
interfere with an award, sans the grounds of patent illegality,
i.e., that “illegality must go to the root of the matter and
cannot be of a trivial nature”; and that the tribunal “must
decide in accordance with the terms of the contract, but if an
arbitrator construes a term of the contract in a reasonable
manner, it will not mean that the award can be set aside on
this ground” [ref: Associate Builders (supra)]. The other
ground would be denial of natural justice. In appeal, Section
37 of the Act grants narrower scope to the appellate court to
review the findings in an award, if it has been upheld, or
substantially upheld under Section 34. It is important to
notice that the old Act contained a provision14 which
enabled the court to modify an award. However, that power
has been consciously omitted by Parliament, while enacting
the Act of 1996. This means that the Parliamentary intent
was to exclude power to modify an award, in any manner, to
the court. This position has been iterated decisively by this
court in Project Director, National Highways No. 45E and
220 National Highways Authority of India v M. Hakeem:
“42. It can therefore be said that this question has now
been settled finally by at least 3 decisions [McDermott

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International Inc. v. Burn Standard Co. Ltd., (2006) 11

SCC 181] , [Kinnari Mullick v. Ghanshyam Das
Damani, (2018) 11 SCC 328 : (2018) 5 SCC (Civ) 106]
, [Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant
Technologies (P) Ltd., (2021) 7 SCC 657] of this Court.
Even otherwise, to state that the judicial trend appears
to favour an interpretation that would read into Section
34 a power to modify, revise or vary the award would
be to ignore the previous law contained in the 1940
Act; as also to ignore the fact that the 1996 Act was
enacted based on the Uncitral Model Law on
International Commercial Arbitration, 1985 which, as
has been pointed out in Redfern and Hunter on
International Arbitration, makes it clear that, given the
limited judicial interference on extremely limited
grounds not dealing with the merits of an award, the
“limited remedy” under Section 34 is coterminous with
the “limited right”, namely, either to set aside an
award or remand the matter under the circumstances
mentioned in Section 34 of the Arbitration Act, 1996.”

62. Keeping these principles in mind, I will now examine the present
case.
63. The petitioner is partially challenging the Impugned Award qua
Claim No.4, Claim No.5 and Claim No.6.This Court will adjudicate upon
the whether the abovesaid claims of the impugned Award.
64. Now this Court will examine Claim no. 4 of the Impugned Award.
Claim No. 4 – Compensation on account of delay on account of access
to site for the period from signing of agreement to appointed date.
65. The relevant portion of the Award pertaining to Claim no. 4 which
deals with determination of the losses and entitlement of the damages by
the Claimant on account of various factors during the time lapsed after

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the execution of the agreement and till the fixation of the 'Appointed
Date' has been reproduced below:
“8.4 Claim No.4: This Claim fundamentally emanates from
the factum of non commencement of work due to Inability of
Respondent to hand over Right of Way no less than 90% of
the total unencumbered length of Project Highway thereby.
Parties not able to fix the 'Appointed Date' under the CA. In
effect this Claim is by way of quantification in pursuance of
the arguments given in Claim no. 1. Claim No. 4 is for the
determination of the losses and entitlement of the damages
by the Claimant on account of various factors during the
time lapsed after the execution of the agreement till fixation
of the 'Appointed Date'.

a) In this context, we have noticed that after the

Claimant had performed his obligations as per Clause
7.1 of CA, the Contract provisions do not recognize the
unreasonable delay caused for commencement of work
on the part of Respondent for meeting his reciprocal
obligation to provide the Right of Way on no less than
90% (Ninety per cent) of the total length of Project
Highway as per warranties represented by Respondent
thus enabling Parties to fix the 'Appointed Date'.
b) AT considers Its mandate is to decide the Claim No.
4 based on principles of what is fair and just.
c) We also observe that Respondent has misrepresented
the provision of Clause 5.2 (g) and (h) thereby, causing
breach of Contract provisions leading to non fixation of
'Appointed Date' by the Parties.
d) The Claimant, soon after signing of CA and
furnishing Performance Security in compliance to
Article 7.1.1, has not to wait to get directions for
mobilization of his resources (machinery and
manpower) from any quarter and is contractually
expected to appropriately mobilise his resources
conforming to the agreed scope of work. We feel that
such an action by the Claimant towards mobilisation is

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a step in the right direction, and if such mobilised

resources are rendered "idle" on account of breach of
Contract, then the opposite Party has to compensate the
damages caused due to un-fulfillment of the reciprocal
obligations foreseen under the Contract on its part.
e) We are of the opinion that provisions of Clause 8.3
as proposed by the Respondent is not applicable as the
instant case relates to 'non commencement' of work due
to inability of fixing 'Appointed Date' and is not a case
of 'delay' per say in handing over the site. One has to
differentiate between 'non commencement' of work and
'delay' in carrying out the work. As such, the prescribed
formula for working out the damages is only applicable
to the 'delay' caused in handing over the remaining
10% of site of work.
f) The Claimant laid emphasis on provisions in law and
in judicial decisions on compensation payable in
general as a consequence of breach in contract
performance by the other party.
g) The Clause 4.1.5 provides for the aggregate
damages under Clause 4.1.4, 8.3 and 9.2 to be limited
to 1% of the Contract Price. These Clauses deal with
'delay' in providing ROW or approval of GAD by
Railways (Clause 4.1.4); delay in handing over site
(Clause 8.3) and shifting of utilities (Clause 9.2). The
AT notices that the constituents of Claim No. 4 does not
fall within the aforesaid categories aad hence the
ceiling of 1% is not applicable. h) We have noticed that
the Claimant has preferred a very significant amount of
Rs. 9098.06 lakhs as basic Claim and an Rs. 257.54
lakhs towards interest @ 10% compounded quarterly
for the period from the date of notice of Arbitration
(31.07.2017) to the date of submission of SOC
(11.11.2017) for the purported breaches of
performance of the Respondent. The Claimant has
submitted details of Claim No. 4 (refer Exhibit C-729,
modified Annexure 2.0 in "CD -23", on page 6609) as
follows:

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i). Expenditure on the bidding and entering into the

contract including estimating the cost to be quoted,
survey, consultancy, purchase of bid security and
keeping it alive, pre-qualification, submission of the
bid, entering into agreement etc. (Annexure - 2.1): Rs.
23.76 lakhs - NOT PRESSED.

AT has not considered the Claim of Rs. 23.76 lakhs

since the Claimant has not pressed for it.

ii). Overheads of the project after signing of the

agreement (Annexure 2.2): As per actual. (C-707 Rs.
3865.49 lakhs).

AT has deliberated on this Claim and concluded: (a). In

SOC "CD-I" (page 203) the Claimant has shown an
amount of Rs. 3777 lakhs instead, (b). Keeping in view
the agreed scope of work under the contract, AT found
that the level of mobilization was not adequate since no
earth moving and paving machinery for the Highway
Project were brought by the Claimant to the site. The
Overhead charges(OH) @ 8 % and 25% as given in
Ministry's Standard Data Book are for the full
mobilization of equipment and other resources for
Highway upgradation works, whereas in this case the
resources have been only partially mobilized and the
saving accrued to the Claimant has not been accounted
for while preparing the Claim amount, (c). The OH
charges as per - ' MORTH'S Standard Data Book
considers that the equipment and other resources are
carrying out productive work consuming POL and
incurring expenditure on the maintenance etc for the
mobilized equipment. However, in the instant case I
since the 'Appointed Date' was not fixed so no work had
commenced and the resources mobilized remained idle.
The saving so accrued on account of POL saving to the
Claimant has not been accounted for in Claim No.
4.(d). Claimant has worked out ("CD-23" Part -I, page

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6612) an amount of Rs. 3973.98 lakhs considering 8%

O.H. charges on road and culvert works for Rs. 35919
lakhs and 25% for major and minor bridges for Rs.
12681 lakhs for a proportionate period of 480 days.
Claimant also submitted CA Certificate based on
balance sheet of FY 2016-17 and FY 2017-18 as Rs.
38.65 Crore (C-707 Page No. 6377 and 6378). AT
observed that CA certificate on page 6377 shows turn
over of Rs. 202,512.56 lakhs during FY 2016-17 and
worked out O.H. charges @ 11.84%. Since no work
was carried out prior to 'Appointed Date' as it was fixed
on 10.12.2017 which is beyond the FY 2016-17, so AT
had not considered such o certificate issued by CA. AT
has decided the amount of OH charges which is 'just'
and 'fair' under the circumstances.

iii). Arrangement for supply of the material, Sub

Contractors and labours for the project (Annexure
2.3):Rs. 847.63 lakhs. Since the contract has not been
terminated by the Respondent, such claim is not
reasonable / admissible.
iv). Idle charges of machinery and plant (Annexure 2.4)
Rs. 1122.97 lakhs.

The Claimant has furnished a list of 58 nos. of

Machinery and Plants in SOC "CD-I" on page 206
showing the date of deployment and demobilization /
status as on 31.10.2017. Claimant has also given a list
of above mentioned 58 nos. Machinery and Plants in
"CD-23" on page 6615-6617 showing date of
deployment and / or demobilization / status as on
10.12.2017. A close look of the above two documents
shows that the dates so mentioned do not match in case
of several machineries and plants listed therein. Most of
machineries and plants are shown 'Idle' but few are
shown as 'Working' for which also the amount due to
Idling has been claimed and included in Rs. 1122.97
lakhs. AT has deliberated and decided to include only

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those machinery and plants that have been stated to be

'Idle' and for the shortest period shown in two different
submissions of the Claimant. Accordingly, AT has
worked out the admissible amount of the claim.

v). Additional expenditure on the Items arising out of

peculiar situation (Annexure 2.5): Rs. 12.23 lakhs.
Claimant has furnished the details of his above claim
of Rs. 12.23 lakhs in "CD- 1" on page 210 - 214 and
also in "CD-23" on pages 7312 - 7316 and the same
has been deliberated upon by AT. AT is of the opinion
that such expenditure ) forms part of the OH charges
and, therefore, decided it to be not admissible.

vi). Demobilization of plant, machinery, manpower and

sub-contractors etc. (Annexure 2.6)Rs. 4.46 lakhs +
approx Rs. lakhs + 10 lakhs =Rs. 19.46 lakhs.
Including in point no.(2) above.

The Claimant has given details of this claim of Rs.

19.46 lakhs in "CD-I" on page 215 and also in "CD-23"
on page 7317. AT appreciates the step taken for
demobilizing few equipment and manpower to mitigate
the losses of the defaulting party i.e. the Respondent in
this case and therefore, agree to consider the relevant
expenditure in the Award. For demobilization of Sub-
contractors (Annexure 2.6.3) on page 219 ("CD-I") and
on page 7321 ("CD- 23"), AT observed that no details
of whatsoever nature (equipment type, manpower etc)
have been furnished in this regard in the claim. As
such, AT decided not to consider the claim of
demobilization of Sub-contractor. AT has decided to
consider the demobilization of machinery, plant and
manpower.

vii). Losses on account of cost of works and

maintenance not commenced / not completed (Annexure
2.7): Rs. 3195.62 lakhs.

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Claimant submitted in SOC ("CD-I" on page 190-191)

in para (g) that 'Since the Claimant was fully mobilized
for execution of work he suffered losses on account of
cost of works and maintenance not commenced / not
completed at the rate of 10% of the project cost which
works out to Rs. 3037.50 lakhs in Annexure 2.7 on page
220. For the same claim the Claimant has subsequently
submitted "CD-23", page 7322 modifying the amount of
Rs. 3195.62 lakhs citing Clause 23.6.2 (c). AT
deliberated the claim considering modified amount and
found that Clause 23.6.2 (c) of CA relates to sub-head
'Termination Payment'. AT found that in the instant
case after fixing 'Appointed Date' on 10.12.2017, the
execution of work at site has commenced and no
termination of contract has taken place. In view of this,
the claim sought under Clause 23.6.2 (c) has not been
appreciated by AT and therefore, not admissible.

viii). Loss of Bonus (Annexure 2.8):- NOT PRESSED -

Claimant has submitted of Rs. 911.25 lakhs value of
claim in "CD-I" on page 221 and also in "CD-23" on
page 7323, but has preferred not to press for it. As
such, AT has not considered it.

ix). The expenditure incurred in barricading and

repairing the barricades for Telmachu bridge and
keeping the machinery ready for demolition of
structures as ordered by Respondent (Annexure 2.9):
Rs. 10.90 lakhs.

Claimant has. included this claim in "CD-I" on page

222 and in "CD-23" on page 7324. No details have
been furnished by the Claimant in his submission of see
justifying the need for erecting barricades for
demolition of Telmachu bridge which seems to be
additional work outside the agreed scope of work.
During execution of the Project Highway, there will be
always few additional items of work which are executed

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and paid for. As this claim item under Claim No. 4 is

missing from the SOC, therefore, the Respondent has
not made any mentioned / comments on this claim item.
The Claimant while submitting "CD- 23" which
includes this claim of Rs. 10.90 lakhs under Claim No.
4 has submitted some details on page 7324 regarding
Telmachu bridge barricading without justifying need
for the same / authorization of carrying out such work
by the Respondent. AT therefore, decides that since this
claim item is not under dispute of the Parties, the cost
incurred in erecting barricades if any, for Telmachu
bridge forms additional work item and can still be
claimed by the Claimant separately as undisputed item
and AT has no role to play in this regard.

x). Loss of opportunity: Rs. 0.00001 lakhs- AT has not

considered it.

xi). Pre-lite interest and pendent-elite interest -

Claimant in his submission of SOC ("CD-I") on page
154 has claimed interest @ 18% on the award amount
of Claim No. 1 to 5 awarded from the date of Award to
date of realization (as actual) without mentioning the
amount involved. Claimant while submitting "CD-23",
on page 6609 has claimed 'Pre-lite interest and
pendent-lite interest as actual'. Against the claimed
Pre-Lite interest and pendent-elite interest @ 18%, the
Respondent in his SOD at page 74 has submitted that as
per section 31 of Arbitration Act, the interest rate shall
be 2% higher then the current rate of interest of
deposits as per RBI. Respondent further submitted that
the current rate of interest of deposits is 6.25% and
therefore objected the claimed Interest @ 18% as It has
not been stipulated In Clause 19.2.7 as agreed rate by
the Parties.

AT has deliberated on the applicable rate of Interest In

this case for Pre-lite Interest and pendent-lite Interest.

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AT does not agree with the Claimant's Interest rate

@18% . AT found that Interest rate during the
Intervening period has remained low. Since this claim
form part of Claim No. 7 so It has been dealt therein.

In view of above, the claimed amount of Total (1) to (10)

= 9098.06 lakhs + actual under Claim No. 4 stands
modified as given in the Award.”
66. The above mentioned claim pertains to non- commencement of the
work due to the fact that there was inability on behalf of the petitioner in
handing over the ROW to the respondent. As per the terms of the
Contract, the petitioner was bound to hand-over 90 % of the ROW, to the
respondent.
67. The learned Tribunal had allowed the claim of the respondent on
the various grounds which are overheads of the project after signing of
the agreement; idle charges of machinery and plant; additional
expenditure on the items arising out of peculiar situation; demobilization
of plant, machinery, manpower and sub-contractors etc.; losses on
account of cost of works and maintenance not commenced/not completed;
the expenditure incurred in barricading and repairing the barricades for
Telmachu bridge and keeping the machinery ready for demolition of
structures as ordered by the petitioner etc. Under the Clause 4.1.5
provides for the aggregate damages under Clause 4.1.4, 8.3 and 9.2 of the
Contract Agreement to be limited to 1% of the Contract Price. These
Clauses deal with 'delay' in providing ROW or approval of GAD by
Railways (Clause 4.1.4); delay in handing over site (Clause 8.3) and
shifting of utilities (Clause 9.2) and the leaned Tribunal is of the view

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that the damages as claimed under Claim No. 4 does not fall within the
aforesaid categories and hence the ceiling of 1% is not applicable.
68. Upon bare perusal of the reasoning mentioned in the Impugned
Award, it is observed by this Court that the learned Tribunal has taken
into account the various factors which have influenced the appointment
date and accordingly, arrived at the decision as to whether the respondent/
claimant is entitled for the loss as claimed by it.
69. This Court after taking into the consideration the reasons given
above by the learned Arbitrator, finds it is crystal clear that all the
submissions made by the parties as well as the documents which were
referred by them have been duly taken into the consideration and after
such due consideration, it reached to the conclusion that there was no
delay in the arbitral proceedings.
70. In view of the above facts and circumstances, I do not find any
reason to interfere in the findings given by the learned Arbitrator qua the
claim No. 4.
Claim no. 5 - Cost of Arbitration
71. I will now adjudicate upon the Claim no. 5 which pertains to cost
of arbitration amounting to Rs. 71,32,071/- .The relevant portion of the
Claim has been reproduced as under:

“ 8.5 Claim No. 5: Claimant on 01.02.2019 had submitted

"CD-27" containing Exhibit C-743 (page 8131 to page 8245)
seeking reimbursement of the expenditure of Rs. 71,32,071/-
(for details refer table below) towards 'Cost of Arbitration'
(till sittings upto 22.01.2019) which Is an Interim Claim of
the Claimant and Include cost of getting arbitrators
appointed, fees of the arbitrator, cost of venue, transport,
legal and technical experts, administrative cost etc. Each

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time when the arbitration fee and other receivables became

due, AT had ordered the Parties to deposit the amount but
the Respondent stopped making any further payment to each
member of AT towards arbitration fee and other receivables
after depositing Rs. 2,41,000/- for each member, though AT
had ordered the Parties .The claim amount is Rs. 71,32,071/-
and inclusive of the expenditure upto the sitting dated
22.01.2019 and Rs. 15,00,000/- estimated for future sittings
and other related expenditure. Details are tabulated below:

Subsequently, AT in his order dated 25.02.2019, sought

advance deposit of fee and other receivables till the date of
Award from the Parties. In the order it was made clear that
in the event of any default on the part of the Respondent of
making advance payment to AT, the Claimant shall make
such defaulted payments to AT on behalf of Respondent and
the same should be notified to AT so that such amount paid
on behalf of Respondent by the Claimant get reflected in the
Award. Since the Respondent did not comply with the AT's
order dated 25.02.2019 in making advance payment to AT up
to the date of Award, the Claimant complying to AT's order
dated 25.02.2019 under such circumstances made payment
of the balance pending amount on behalf of Respondent to
AT. With this, AT has received full and final payments due to
it from the Parties on this Arbitration case. The Claimant

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while revising the amount, submitted final Claim No. 5

amounting to Rs. 1,03,83,376/- to AT with a copy to the
Respondent. Details of final Claim No. 5 are shown in
Exhibit C-743-R vide CD-27-R dated 14.03.2019 (page no.
8252 to page 8291). The details of final Claim No. 5 as
submitted by the Claimant are tabulated below:

AT has examined the above submission of the Claimant vide "CD-

27-R" giving details of revised cost/expenditure of Arbitration
subsequent to payment of fee and other receivables to the members
of AT, inclusive of the expenditure incurred by the Claimant on
behalf of the Respondent in making payments to AT. After
deliberations, AT has decided that the Respondent is liable to pay
to the Claimant, reasonable cost/expenditure incurred by the
Claimant towards Arbitration and accordingly, modified the
amount and included in the Award.”
72. Before delving into merits of the instant claim no. 5, this Court has
examined the law pertaining to the awarding of the cost.
73. Section 31A of the Act, 1996 pertaining to power of the Tribunal in
awarding Cost for the reference of this Court has been reproduced as
follows:

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“31A. Regime for costs.—

(1) In relation to any arbitration proceeding or a
proceeding under any of the provisions of this Act
pertaining to the arbitration, the Court or arbitral
tribunal, notwithstanding anything contained in the
Code of Civil Procedure,1908 (5 of 1908), shall have
the discretion to determine— (a) whether costs are
payable by one party to another; (b) the amount of such
costs; and (c) when such costs are to be paid.
Explanation.—For the purpose of this sub-section,
“costs” means reasonable costs relating to— (i) the
fees and expenses of the arbitrators, Courts 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 or Court proceedings and
the arbitral award.
(2) If the Court or arbitral tribunal decides to make an
order as to payment of costs,— (a) the general rule is
that the unsuccessful party shall be ordered to pay the
costs of the successful party; or (b) the Court or
arbitral tribunal may make a different order for reasons
to be recorded in writing.
(3) In determining the costs, the Court or arbitral
tribunal shall have regard to all the circumstances,
including— (a) the conduct of all the parties; (b)
whether a party has succeeded partly in the case; (c)
whether the party had made a frivolous counterclaim
leading to delay in the disposal of the arbitral
proceedings; and (d) whether any reasonable offer to
settle the dispute is made by a party and refused by the
other party. (4) The Court or arbitral tribunal may
make any order under this section including the order
that a party shall pay— (a) a proportion of another
party‟s costs; (b) a stated amount in respect of another
party‟s costs; (c) costs from or until a certain date only;
(d) costs incurred before proceedings have begun; (e)

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costs relating to particular steps taken in the

proceedings;
(f ) costs relating only to a distinct part of the
proceedings; and (g) interest on costs from or until a
certain date.
(5) An agreement which has the effect that a party is to
pay the whole or part of the costs of the arbitration in
any event shall be only valid if such agreement is made
after the dispute in question has arisen.”
74. The Hon’ble Supreme Court has enunciated upon the principle
regarding cost which can be imposed by an Arbitral Tribunal in the case
of ONGC v. Afcons Gunanusa JV, 2022 SCC OnLine SC 1122, and
held as follows:

“91. Section 31A provides that the arbitral tribunal or the

court has the discretion to determine costs of arbitration
which includes, inter alia, reasonable costs relating to the
fees and expenses of the arbitrators, courts and witnesses.
Sub-Section (5) of Section 31A specifies that an agreement
between parties apportioning costs is only valid if it is made
after the dispute has arisen. The provision has an effect of
limiting party autonomy when an agreement regarding
apportioning of costs can be entered between the parties.
However, it does not completely efface the principle of party
autonomy.
xxx
97. The above interpretation of this Court is in harmony with
the observations of the Law Commission in the LCI
246th Report (supra) where it had recommended changes to
the regime of costs only to provide a statutory recognition to
the “loser pays” principle. The Report contained the
following observations:
“70. Arbitration, much like traditional adversarial dispute
resolution, can be an expensive proposition. The savings of a
party in avoiding payment of court fee, is usually offset by
the other costs of arbitration - which include arbitrator's fees

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and expenses, institutional fees and expenses, fees and

expenses in relation to lawyers, witnesses, venue, hearings
etc. The potential for racking up significant costs justify a
need for predictability and clarity in the rules relating to
apportionment and recovery of such costs. The Commission
believes that, as a rule, it is just to allocate costs in a manner
which reflects the parties' relative success and failure in the
arbitration, unless special circumstances warrant an
exception or the parties otherwise agree (only after the
dispute has arisen between them).
71. The loser-pays rule logically follows, as a matter of law,
from the very basis of deciding the underlying dispute in a
particular manner; and as a matter of economic policy,
provides economically efficient deterrence against frivolous
conduct and furthers compliance with contractual
obligations.”
98. The Law Commission was seeking to regulate how costs
are apportioned and recovered between parties by
suggesting amendments to the legal framework on costs. The
same LCI 246th Report (supra) dealt with redressing the
issue of exorbitant fees being charged by arbitrators and
recommended the introduction of a model schedule of fees,
based on which High Courts could frame rules on fixing fees,
to decrease the control arbitrators have over fixing their own
fees. Hence, it is evident that the Law Commission
understood that the issue of arbitrators' fees is independent
of the issue of allocation of costs. The LCI
246th Report (supra) was attempting to address the concern
of arbitrary and unilateral fixation of fees by the arbitrators.
The interpretation suggested by the respondents, that while
allocating costs the arbitral tribunal can enter into a fresh
and unilateral determination of fees, would be contrary to
what the Law Commission sought to achieve by
recommending the regulation of fees charged by arbitrators.
99. The concepts of costs and fees in arbitration must be
distinguished. Fees constitute compensation or remuneration
payable to the arbitrators for their service. Arbitrators are
entitled to “financial remuneration by the parties in return

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for performance of his or her mandate”. While the national

laws governing arbitration give a quasi-judicial status to
arbitrators where they have to be impartial adjudicators,
many aspects of the relationship between the parties and
arbitrators are contractual in nature. Without
acknowledging the contractual nature of the relationship,
there is no satisfactory explanation for the parties' right to
appoint arbitrator(s) (and the corresponding right of the
arbitrator(s) to decline such appointment), arbitrators'
remuneration, arbitrators' duty to conduct arbitration in
terms of the arbitration agreement (independently of the
requirement of fairness and equality) and the parties' right to
jointly remove arbitrator(s). In Voestalpine Schienen
GmbH v. Delhi Metro Rail Corpn. Ltd, this Court, while
holding that the arbitrator has to act impartially and
independently, recognised the contractual nature of the
relationship between the parties and arbitrator(s) in the
following extract:
“20. Independence and impartiality of the arbitrator are the
hallmarks of any arbitration proceedings. Rule against bias
is one of the fundamental principles of natural justice which
applied to all judicial and quasi-judicial proceedings. It is
for this reason that notwithstanding the fact that
relationship between the parties to the arbitration and the
arbitrators themselves are contractual in nature and the
source of an arbitrator's appointment is deduced from the
agreement entered into between the parties,
notwithstanding the same non-independence and
nonimpartiality of such arbitrator (though contractually
agreed upon) would render him ineligible to conduct the
arbitration. The genesis behind this rational is that even
when an arbitrator is appointed in terms of contract and by
the parties to the contract, he is independent of the parties.
Functions and duties require him to rise above the partisan
interest of the parties and not to act in, or so as to further,
the particular interest of either parties. After all, the
arbitrator has adjudicatory role to perform and, therefore,
he must be independent of parties as well as impartial. The

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United Kingdom Supreme Court has beautifully highlighted

this aspect
in Hashwani v. Jivraj [Hashwani v. Jivraj, [2011] 1 WLR
1872 : 2011 UKSC 40] in the following words : (WLR p.
1889, para 45)
“45. … the dominant purpose of appointing an arbitrator or
arbitrators is the impartial resolution of the dispute between
the parties in accordance with the terms of the agreement
and, although the contract between the parties and the
arbitrators would be a contract for the provision of personal
services, they were not personal services under the direction
of the parties.”
(emphasis supplied)
100. The relationship between parties and arbitrator(s) is
contractual in nature. Upon that relationship, the law
superimposes a duty upon the arbitrator(s) to act as an
impartial and independent adjudicator. The principle of
party autonomy plays a substantial role in the determination
of arbitrators' fees. We have noted in Section C.1 of this
judgment that party autonomy plays a central role in the
determination of arbitrators' fees in the rules of international
arbitral institutions and domestic legislation of other
countries. Aside from institutional arbitration, arbitrators'
fees in ad hoc arbitration are arrived at through negotiations
between the parties and the arbitrator(s. The primacy of
parties' agreement in determination of arbitrators' fees was
also reaffirmed by this Court in Gayatri Jhansi Roadways
Ltd. (supra). However, there may be instances where the
parties have not entered into any agreement with respect to
the fees. In ad hoc arbitrations this leads to a peculiar
situation where it has to be determined who will fix the fees
in such circumstances. While certain foreign jurisdictions
enable the arbitral tribunal to fix the fees typically subject to
review by courts, there are jurisdictions which continue to
give value to parties' consent in determining renumeration
for arbitrators. As discussed above in Section C.1, in certain
jurisdictions like Germany, arbitrators are prohibited from
unilaterally fixing their fees because it violates the doctrine

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of the prohibition of in rem suam decisions, i.e., arbitrators

cannot give an enforceable ruling on their own fees. Austria
and Switzerland also do not allow arbitrators to issue
binding and enforceable orders regarding fixation of their
own fees. In Italy, while the arbitrators can determine fees in
absence of an agreement between parties, such fees become
binding only once the parties' consent to it. In Singapore, in
absence of a written agreement, a party may approach the
Registrar of the Supreme Court within the meaning of the
Supreme Court of Judicature Act 1969 for the assessment of
fees.
101. In contrast, costs are typically compensation payable by
the losing party to the winning party for the expenses the
latter incurred by participating in the proceedings. In Salem
Advocate Bar Assn. (II) v. Union of India, this Court has
defined costs in a similar manner in the context of litigation:
“37. Judicial notice can be taken of the fact that many
unscrupulous parties take advantage of the fact that either
the costs are not awarded or nominal costs are awarded
against the unsuccessful party. Unfortunately, it has become
a practice to direct parties to bear their own costs. In a large
number of cases, such an order is passed despite Section
35(2) of the Code. Such a practice also encourages the filing
of frivolous suits. It also leads to the taking up of frivolous
defences. Further, wherever costs are awarded, ordinarily
the same are not realistic and are nominal. When Section
35(2) provides for cost to follow the event, it is implicit
that the costs have to be those which are reasonably
incurred by a successful party except in those cases where
the court in its discretion may direct otherwise by recording
reasons therefore. The costs have to be actual reasonable
costs including the cost of the time spent by the successful
party, the transportation and lodging, if any, or any other
incidental costs besides the payment of the court fee,
lawyer's fee, typing and other costs in relation to the
litigation. It is for the High Courts to examine these aspects
and wherever necessary make requisite rules, regulations or
practice direction so as to provide appropriate guidelines for

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the subordinate courts to follow.”

(emphasis supplied)
102. The principle of the payment of “costs” remains the
same in litigation and arbitration even though the form of
expenses may vary. Redfern and Hunter on International
Commercial Arbitration (supra) has classified the various
components of costs under the following headings:
“•„costs of the tribunal‟ (including the charges for
administration of the arbitration by any arbitral institution);
•„costs of the arbitration‟ (including hiring the hearing
rooms, interpreters, transcript preparation, among other
things); and
•„costs of the parties' (including the costs of legal
representation, expert witnesses, witness and other travel-
related expenditure, among other things).”
103. The first category of “costs of the tribunal” includes the
fees, travel-related and other expenses, payable to the
arbitrators. However, this category also includes fees and
expenses relating to the experts appointed by the tribunal,
administrative secretary or registrar and other incidental
expenses incurred by the tribunal in respect of the case. Fees
of arbitrators constitute a component of the diverse elements
which make up the costs that are payable by one party to
another. The purpose of awarding costs is to “indemnify the
winning party”. The “loser pays” principle apportions the
costs between the parties through the costs follow the
event method. The primary purpose of the CFE method is to
“make the claimant whole”. The CFE method has been
statutorily recognised in some national legislations. The
English Arbitration Act provides that “unless the parties
otherwise agree, the tribunal shall award costs on the
general principle that costs should follow the event except
where it appears to the tribunal that this principle is not
appropriate in relation to whole or part of the costs”. Since
costs are typically awarded at the conclusion of the
proceedings on the basis of the relative success or failure of
parties, an award of costs forms a part of the final award.
However, interim awards or rulings on costs may also be

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issued. Most international arbitral institutions give arbitral

tribunals the discretion to allocate costs unless there is an
agreement between the parties regarding the apportionment
of costs. It has been noted that the “loser pays” principle is
a common approach followed for awarding costs. The
UNCITRAL Rules, while providing that costs of arbitration
shall be “borne by the unsuccessful party” as a general
principle, allow the arbitral tribunal to take the ultimate
decision. The LCIA Rules allow the arbitral tribunal to
depart from the general principle “in circumstances (in
which) the application of such a general principle would be
inappropriate”. The Arbitration Act also provides statutory
recognition to the principle of “loser pays” in Section 31A
(2) as the general principle of allocating costs, which can be
derogated from at the discretion of the tribunal provided it
records its reasons in writing. Further, the Arbitration Act
seeks to limit the ability of parties to contractually allocate
fees by specifying in Section 31A(5) that such an agreement
will only be valid “if such agreement is made after the
dispute in question has arisen”. The intention of the
legislature to limit party autonomy in allocation of costs is
also evident from the deletion of the phrase “unless
otherwise agreed by the parties” from Section 31(8) through
the Amendment Act 2015.
104. We can see that the functional role of costs and fees is
different. While fees represent the payment of remuneration
to the arbitrators, costs refer to all the expenses incurred in
relation to arbitration that are to be allocated between the
parties upon the assessment of certain parameters by the
arbitral tribunal or the court. Section 31A(3) provides that
an arbitral tribunal or the court has to take into account the
following factors for determining costs:
“(a) the conduct of all the parties;
(b) whether a party has succeeded partly in the case;
(c) whether the party had made a frivolous counter claim
leading to delay in the disposal of the arbitral proceedings;
and
(d) whether any reasonable offer to settle the dispute is made

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by a party and refused by the other party.”

105. This is accompanied by the general rule under Section
31A(2) that the unsuccessful party has to bear the costs of
arbitration.
106. Another way to understand the difference between costs
and fees is to distinguish between the nature of the claim that
both reflect. Redfern and Hunter on International
Commercial Arbitration (supra) discusses costs in Chapter
9, titled “Awards”. It states that “[a] claim in respect of the
costs incurred by a party in connection with an international
arbitration is, in principle, no different from any other claim,
except that it usually cannot be quantified until the end of the
arbitral proceedings”. The decision of an arbitral tribunal
ordering one party to pay arbitration costs is considered as
an “award” within the meaning of the New York Convention
and UNCITRAL Model Law since the decision resolves a
claim one party has towards another in respect to the
entitlement of being repaid by the other party for expenses
incurred during arbitration. Gary Born on
Arbitration (supra) specifically notes the difference between
costs and fees, and states that any decision of the arbitral
tribunal relating to payment of fees to the members of the
tribunal is not considered an award since it does not resolve
a claim between the parties; rather it resolves a claim
between the arbitrator(s) against the parties. The Swiss
Federal Tribunal has observed in this context that:
“[A]ccording to the majority of legal writing the arbitral
tribunal has no authority to issue an enforceable decision as
to the fees it may derive from the arbitration agreement
(receptum arbitri). This is because claims resulting from the
relationship between the arbitral tribunal and the parties do
not fall within the arbitration clause; also because this
would be an unacceptable decision in one's own case. The
decision on costs in an arbitral award is therefore nothing
else as a rendering of account which does not bind the
parties or a circumscription of the arbitrators' private law
claim based on the arbitration agreement on which in case
of dispute the State Court will have to decide.”

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107. The German arbitration law also takes the above

position, where a portion of the award relating to costs of
arbitration was denied enforcement as arbitrators are
prohibited from fixing their own fees and costs, except when
there is an agreement between the parties and arbitrators137.
108. Since fees of the arbitrators are not a claim that needs
to be quantified at the end of the proceedings based, inter
alia, on the conduct of parties and outcome of the
proceedings, they can be determined at the stage when the
arbitral tribunal is being constituted. Redfern and Hunter on
International Commercial Arbitration (supra) discusses the
concept of fees of arbitrators in Chapter 4, titled
“Establishment and Organisation of an Arbitral Tribunal”,
indicating that fees have to be determined much earlier at
the inception of the proceedings. In fact, the commentary
states that in ad hoc arbitrations, “it is necessary for the
parties to make their own arrangements with the arbitrators
as to their fees. The arbitrators should do this at an early
stage in the proceedings, in order to avoid
misunderstandings later”.
109. It has been argued on behalf of the respondents that the
power of arbitrator(s) under Section 38(1) of the Arbitration
Act to demand a deposit as an advance on costs “which it
expects will be incurred” in relation to the claim and
counterclaim (if any) indicates that the tribunal is entitled to
determine its own fees. If such a deposit is not paid, the
tribunal can suspend or terminate the proceedings under
Section 38(2) of the Arbitration Act. It can also hold a lien
on the award if the costs of arbitration remain unpaid under
Section 39(1) of the Arbitration Act.
110. Gary Born on Arbitration (supra) explains the concept
of an advance on costs or deposits in the following terms:
“Once the arbitral tribunal is in place, the parties are
generally required to provide security for the fees and costs
of the arbitrators. Most institutional arbitration rules
contain express provisions for payment by the parties of an
advance on costs (or deposit), and arbitrators often have the
power under national law to require payment of an advance

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even absent express provision to that effect in either the

arbitration agreement or institutional rules.
The amount of the advance on costs is based upon the
expected total amount of fees and expenses of the arbitrators
and institutional administrative costs. If the parties do not
pay the advance, the arbitration will not go forward; if one
party fails to make payment, the other may do so on its
behalf, so that the arbitration will proceed, hopefully to
conclude with a decision in its favor, in which the prevailing
party will be awarded (among other things) reimbursement
of the amounts it advanced on behalf of its counter-party.”
75. As per Section 31 A of the Act which enunciates upon the principle
of awarding cost, the Tribunal has the discretion to award cost to the
parties. Section 31A(1) provides that in relation to any arbitration
proceeding, the arbitral tribunal has discretion to determine whether costs
are payable by one party to another,the amount of such costs and when
such costs are to be paid. Section 31A(2) provides that if a tribunal
decides to make an order as to the payment of costs, the general rule is
that the unsuccessful party will be ordered to pay the successful party's
costs. Alternatively, a tribunal may make a different order for reasons
which must be recorded in writing. In exercising their powers under
Section 31A of the Act. Under Section 31 A (3) enunciates various factors
which have to taken into account for awarding the cost. Further, upon
perusal of the observation of the Hon’ble Supreme Court in the
aforementioned judgment, it is observed that the Court is entitled to
award cost as it deems as per the circumstances of the case.
76. Section 31A(1) of the Act allows only for reasonable costs to be
recovered and not actual costs as claimed by the party. Therefore, the test
of reasonableness must be done by the Tribunal and the Tribunal must

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consider the reasonableness of the costs claimed by the claimant. The

factors which may be taken into consideration to determine
reasonableness vary and such an assessment is not straightforward
formula. The issues in determining reasonable costs are further
compounded by the significant costs imposed on parties by their solicitors
and counsel, which, along with the manner of billing, vary.
77. Now keeping in mind the principle governing awarding of cost by
the Arbitral Tribunal. This Court will now examine claim no. 5.
78. The claim no. 5 pertains to the cost of the arbitration. The learned
Tribunal vide Tribunal’s order dated 25th February 2019 directed the
parties to pay in advance the fees of the learned Tribunal and in case of
default on account of the petitioner in making the said payment the
petitioner shall make such payment to the learned tribunal. Thereafter,
when the petitioner did not make the pay towards the arbitral fees due to
the Tribunal and respondent in compliance with the said order paid the
learened Arbitral Tribunal. Hence, the Tribunal held that the respondent is
entitled for the cost of arbitration.
79. This Court is of the view that test of reasonableness of cost has
been taken into account by the Tribunal towards the cost/expenditure
incurred by the respondent towards Arbitration and accordingly, modified
the amount and included in the Award for claim no. 5.In view of the
above facts and circumstances, I do not find any reason to interfere in the
findings given by the learned Arbitrator qua the claim No. 5.
Claim no. 6 - Interest on amount claimed both Pre-lite and Pendent
elite.

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80. The relevant portion of Claim no. 6 has been reproduced herein
below:

“8.6 Claim No. 6: This Claim includes component of

interest, both Pre-lite, Pendent elite @18% p.a. on the
Award. AT deems it fit to allow Pre-lite and Pendent elite
Interest on the amounts of Award against Claims No. 3 to
Claim no. 5 which the Respondent is liable to pay from the
date of submission of SOC (11.11.2017) till the date of
Award (25.03.2019). Keeping in view the prevailing low
rates of interest in the past, AT decides the payable rate of
Interest @ 10% (simple) per annum, on the relevant amounts
as included in the Award towards Pre-lite and Pendent-lite
interest.
81. Before delving into merits of this claim no. 6, this Court will
examine the law applicable on Tribunal’s power in awarding interest.
82. This Court has placed reliance on Section 31 (7)(a) of the Act
pertaining to Tribunal awarding interest has been reproduced below:

“(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.
1
[(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.”
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).]”

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83. In regard to the Tribunal’s discretion in awarding interest under

Section 31 (7) (a) of the Act, 1996, the Hon’ble Supreme Court in the
judgment of Morgan Securities & Credits (P) Ltd. v. Videocon
Industries Ltd., (2023) 1 SCC 602 held as follows:

“25. Section 31(7)(a) confers a wide discretion upon the

arbitrator in regard to the grant of pre-award interest. The
arbitrator has the discretion to determine the rate of
reasonable interest, the sum on which the interest is to be
paid, that is whether on the whole or any part of the
principal amount, and the period for which payment of
interest is to be made — whether it should be for the whole
or any part of the period between the date on which the
cause of action arose and the date of the award. When a
discretion has been conferred on the arbitrator in regard to
the grant of pre-award interest, it would be against the grain
of statutory interpretation to presuppose that the legislative
intent was to reduce the discretionary power of the
arbitrator for the grant of post-award interest under clause
(b). Clause (b) only contemplates a situation where the
arbitration award is silent on post-award interest, in which
event the award-holder is entitled to a post-award interest of
eighteen per cent.
26. The arbitrator has the discretion to grant post-award
interest. Clause (b) does not fetter the discretion of the
arbitrator to grant post-award interest. It only contemplates
a situation in which the discretion is not exercised by the
arbitrator. Therefore, the observations in Hyder
Consulting [Hyder Consulting (UK) Ltd. v. State of Orissa,
(2015) 2 SCC 189 : (2015) 2 SCC (Civ) 38] on the meaning
of “sum” will not restrict the discretion of the arbitrator to
grant post-award interest. There is nothing in the provision
which restricts the discretion of the arbitrator for the grant
of post-award interest which the arbitrator otherwise holds
inherent to their authority.
27. The purpose of granting post-award interest is to ensure
that the award-debtor does not delay the payment of the

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award. With the proliferation of arbitration, issues involving

both high and low financial implications are referred to
arbitration. The arbitrator takes note of various factors such
as the financial standing of the award-debtor and the
circumstances of the parties in dispute before awarding
interest. The discretion of the arbitrator can only be
restricted by an express provision to that effect. Clause (a)
subjects the exercise of discretion by the arbitrator on the
grant of pre-award interest to the arbitral award. However,
there is no provision in the Act which restricts the exercise of
discretion to grant post-award interest by the arbitrator. The
arbitrator must exercise the discretion in good faith, must
take into account relevant and not irrelevant considerations,
and must act reasonably and rationally taking cognizance of
the surrounding circumstances.
28. In view of the discussion above, we summarise our
findings below:
28.1. The judgment of the two-Judge Bench in S.L.
Arora [State of Haryana v. S.L. Arora & Co., (2010) 3
SCC 690 : (2010) 1 SCC (Civ) 823] was referred to a
three-Judge Bench in Hyder Consulting [Hyder
Consulting (UK) Ltd. v. State of Orissa, (2015) 2 SCC
189 : (2015) 2 SCC (Civ) 38] on the question of
whether post-award interest could be granted on the
aggregate of the principal and the pre-award interest
arrived at under Section 31(7)(a) of the Act.
28.2. Bobde, J.'s opinion in Hyder Consulting [Hyder
Consulting (UK) Ltd. v. State of Orissa, (2015) 2 SCC
189 : (2015) 2 SCC (Civ) 38] held that the
arbitrator may grant post-award interest on the
aggregate of the principal and the pre-award interest.
The opinion did not discuss the issue of whether the
arbitrator could use their discretion to award post-
award interest on a part of the “sum” awarded under
Section 31(7)(a).
28.3. The phrase “unless the award otherwise directs”
in Section 31(7)(b) only qualifies the rate of interest.

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28.4. According to Section 31(7)(b), if the arbitrator

does not grant post-award interest, the award holder is
entitled to post-award interest at eighteen per cent.
28.5. Section 31(7)(b) does not fetter or restrict the
discretion that the arbitrator holds in granting post-
award interest. The arbitrator has the discretion to
award post-award interest on a part of the sum.
28.6. The arbitrator must exercise the discretionary
power to grant post-award interest reasonably and in
good faith, taking into account all relevant
circumstances”
84. Under Section 31(7)(b) of the Act, 1996, the Arbitrator has the
discretion to determine the rate of reasonable interest, the sum on which
the interest is to be paid, that is whether on the whole or any part of the
principal amount, and the period for which payment of interest is to be
made. This discretion to the Court is subjected to be exercised by the
learned Tribunal in a reasonable manner.
85. In the light of claim No. 6, it is, hereby, held by the learned
Tribunal that in view of the prevailing low rates of interest in the past, it
has decided the payable interest amount by way of simple interest at the
rate of 10% per annum on the amounts as included in the Impugned
Award towards the pre-lite and pendent-lite interest.
86. Therefore, this Court is of the view that the learned Tribunal has
correctly exercised its discretion of awarding interest under Section
31(7)(b) of the Act, 1996 in a reasonable manner and has given its reason
for awarding the interest. In view of the above facts and circumstances, I
do not find any reason to interfere in the findings given by the learned
Arbitrator qua the claim No. 6.

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87. The relevant portion of the Award dated 25th March 2019 is
reproduced hereunder:

9. AWARD
9.1 This Award is based on the facts adduced before the AT
consequent to Parties signing the CA on 01.08.2016 and
later after a long gap fixed the 'Appointed O Date' as
10.12.2017 based on the 'waiver' given by the Claimant
pursuant to Clause 27.4 of CA vide Claimant letter no.
ABL/RCB/GM/NH-32/EPC/2017- 18/248 dated 20.11.2017
(refer "CD-12", page 5608: Exhibit C-526).
9.2 The Arbitral Record comprises of Pleadings and
Documents as were filed by the Parties with copies endorsed
to the opposite Party. There is no original Document In the
Arbitral Record other than the final Award, of which signed
copies are provided to both the Parties.
9.3 The AT decides that the finalized Award amount has to
be paid by the Respondent to the Claimant. The details of the
finalized Award amount as allowed after adjudication of
disputes by the AT are as follows:
(i). AT observed that Claim no. 1 and 2 do not carry
any monetary value. Award amount as finalized by AT
for the Claim no. 3, 4, 5 and 7 up to the date of
submission of SOC on 11.11.2017 is Rs. 3192.36 lakhs
plus the amount towards GST as per actual.
(ii). AT allowed the reasonable amount towards Claim
no. 6 i.e., component of interest for the period from
12.11.2017 till 25.03. 2019(the Date of Award )
considering 499 days period @ 10% simple interest per
annum. The interest amount so worked out is given
below:
(3192.36x499x0.1)/ 365 = Rs. 436.43 lakhs.
So the Total Award amount payable by the Respondent
to Claimant till the date of Award (25.03.2019) =
(3192.36+436.43) lakhs+ GST as per actual = Rs.
3628.79 lakhs plus the amount towards GST, if any, as
per actual.

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9.4 Amount towards 'Goods and Service Tax' (GST), if any,

is to be paid by the Respondent to the Claimant as per law of
the land. The exact amount involved shall be determined and
agreed between the Parties at the time of making payment.

9.5 This Award Is made on Non-Judicial Stamp Paper of Rs.

500/- at New Delhi on this the Twenty Fifth day of March

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2019. The cost of this stamp paper was borne by the

Claimant. Deficiency in the value of Non-Judicial Stamp
Paper, if any, will be supplied by the Parties on equal
sharing basis.
9.6 We, however, hold that in case the Respondent pays the
awarded amount (Rs 3628.79 Lakhs +GST as per actual) to
the Claimant within 90 days from the date of this Award
(25.03.2019), no post award interest shall be payable. In the
event payment of the awarded amount is not made by the
Respondent within the said 90 days, the Respondent shall be
liable to pay interest on the total awarded amount @ 10%
(simple) per annum, from the date of award (25.03.2019) till
the actual date of payment to the Claimant.”
88. I do not find any reason to interfere in the findings given by the
learned Arbitrator qua the claims No. 4,5 and 6 which have been
challenged in the instant petition.Accordingly, this Court upholds the
claims as awarded by the learned Tribunal
CONCLUSION
89. In light of the facts, submissions, and contentions in the pleadings,
this Court finds no cogent reasons to entertain the instant petition. This
Court finds that the petitioner has failed to corroborate with evidence as
to how the learned Arbitrator had erred in adjudicating upon the dispute.
90. The law which has been settled by the Hon’ble Supreme Court is
that the scope of interference with an Arbitral Award under Section 34 of
the Act, 1996 is fairly limited and narrow. The Courts shall not sit in an
appeal while adjudicating a challenge to an Award which is passed by an
Arbitrator, the master of evidence, after due consideration of facts,
circumstances, evidence, and material before him.
91. In the instant petition, it was argued that the Impugned Award is
patently illegal and thus liable to be set aside. As stipulated by the

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aforementioned precedents, it is essential that there be illegalities or

deficiencies at the face of the Award which shocks the conscience of the
Court in order for it to qualify to be set aside by an act of this Court while
adjudicating upon a petition filed under Section 34 of the Act, 1996
92. In light of the facts of the instant case, the petitioner has failed to
make out such a case and has been unable to show that the Impugned
Award is patently illegal on the face of it.
93. A perusal of the Impugned Award makes it evident that there is no
patent illegality or error apparent on the face of the record. The learned
Arbitrator has passed the Impugned Award after considering all the
relevant material placed before it during the arbitral proceedings. The said
Award is well-reasoned and is not in contravention of the fundamental
policy of Indian law. Therefore, as the petitioner has failed to show that
any grounds that are stipulated under Section 34 of the Act, 1996 are
being met, there is no reason for interfering with the Impugned Award.
94. In view of the above discussion of facts and law, this Court finds
no reason to set aside the Impugned Arbitral Award.
95. The instant petition is, accordingly, dismissed. Pending
applications, if any, also stand dismissed.
96. The judgment be uploaded on the website forthwith.

(CHANDRA DHARI SINGH)

JUDGE
SEPTEMBER 13, 2023
gs/db

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