Arbitration Petition No. 3 of 2019 · Orissa High Court
Case Details
Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Sep-2025 19:35:19 IN THE HIGH COURT OF ORISSA AT CUTTACK ARBA No.8 of 2023 Along with W.P.(C) No.7019 of 2024 (From the judgment dated 04.02.2023 passed by the learned District Judge, Jagatsinghpur in ARBP No.3 of 2019 arising out of arbitral award dated 12.4.2019 passed by the learned Sole Arbitrator Retd. Justice M.M.Das) (ARBA No.8 of 2023) Paradip Port Trust (PPT) …. Appellant (s) -versus- M/s.- Modi Projects Limited …. Respondent (s) Advocates appeared in the case through Hybrid Mode: For Appellant (s) For Respondent (s) : : Mr. Goutam Mishra, Sr. Adv. Along with Mr. Jyoti Ranjan Deo, Adv. Ms. Pami Rath, Sr. Adv. Along with Mr. J.Mohanty, Adv. (W.P.(C) No.7019 of 2024) M/s.- Modi Projects Limited, Kanke Road, Ranchi …. Petitioner (s) Union of India & Anr. …. Opposite Party (s) -versus- Advocates appeared in the case through Hybrid Mode: For Petitioner (s) For Opp. Party (s) : : Ms. Pami Rath, Sr. Adv. Along with Mr. J. Mohanty, Adv. Mr. Goutam Mishra, Sr. Adv. Along with Mr. Jyoti Ranjan Deo, Adv. (for O.P.2/PPT) Mr. P.K. Parhi, (DSGI) (for O.P.1/Union of India) Page 1 of 31 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Sep-2025 19:35:19 CORAM: DR. JUSTICE SANJEEB K. PANIGRAHI DATE OF HEARING:-30.05.2025 DATE OF JUDGMENT:-26.08.2025 Dr. S.K. Panigrahi, J. 1. Since these applications arise from the same facts and involve the same parties, the same were taken up for hearing together and are being dealt with by this Common Judgment and Order 2. This Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “A&C Act” for brevity) has been filed seeking setting aside of the judgment dated 04.02.2023 passed by the learned District Judge, Jagatsinghpur in Arbitration Petition No.3 of 2019 arising out of arbitration award dated 12.04.2019 passed by the Ld. Sole Arbitrator Retd. Justice M.M.Das. The Writ Petition is preferred by the Respondent in ARBA No.8 of 2023 seeking a direction to the Appellant in ARBA No.8 of 2023 to accept the proposal submitted by the Respondent on 03.08.2023 in pursuance of the Vivad Se Viswas II Scheme. 3. As the Writ Petition seeks a direction that pertains to execution of the award that is under challenge in the ARBA, it is considered apposite to first deal with the questions raised vis-(cid:224)-vis sustainability of the award itself. I. FACTUAL MATRIX OF THE CASE: 4. The Appellant invited tenders for the work of “Railway Works for Deep Drought Berths at Paradip Port”. Pursuant to such invitation, the Page 2 of 31 Signature Not Verified
Facts
Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Sep-2025 19:35:19 Respondent submitted its tender on 30.11.2013. Subsequently, the letter of award was issued in favour of the Respondent on 4.12.2014 for a total value of Rs.78,65,64,301.50/. The date of commencement of work was stipulated to be 5.1.2015 and the scheduled date of completion was by 4.4.2016. 5. On 1.6.2015 an agreement was executed between the Parties specifying all the terms and conditions for the work in question. 6. The Respondent submitted an application on 29.3.2016 seeking extension of time. The extension was provided up till 30.3.2017 with imposition of liquidated damages/penalty. 7. As the work could not be completed within the extended period, the Appellant terminated the contract vide letter dated 4.4.2017. The Respondent thereafter, invoked arbitration for adjudication of the dispute arising out of the termination, imposition of damages, delay and incidental issues. 8. Thereafter, Ld. Single Arbitrator, Retd. Justice M.M. Das was appointed to adjudicate upon the dispute between the Parties. 9. After hearing the parties, the Ld. Sole Arbitrator was pleased to pass his final award on 12.4.2019 wherein, the Ld. Sole Arbitrator was pleased award Rs.13,66,01,820/- in favour of the Respondent. 10. Aggrieved, the Appellant assailed the final award dated 12.4.2019 under Section 34 of the A&C Act in the Court of the learned District Judge, Jagatsinghpur in Arbitration Petition No. 3 of 2019. Vide judgment dated 4.2.2023, the Ld. District Judge, Jagatsinghpur was pleased to dismiss the same upon arriving at the conclusion that the award was not in violation of the public policy of India, did not contain any plausible fact Page 3 of 31 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Sep-2025 19:35:19 that would shock the conscience of the court and did not have any patent illegality on the face of the record. 11. Aggrieved by the same, the instant Appeal has been preferred. 12. The Appeal u/s 37 of the A&C Act was filed on 23.3.2023. During the pendency of the same before this Court, the Respondent preferred Writ Petition No. 7019 of 2024 on 18.3.2024 seeking a direction against the Appellant to accept the proposal submitted by it on 3.8.2023 in pursuance to the Vivad se Vishwas II (contractual disputes) scheme dated 29.5.2023. 13. As the facts leading up to the instant Applications have been laid down, this Court shall endeavour to summarise the contentions of the Parties and the broad grounds that have been raised to seek the exercise of this Court’s limited jurisdiction available under S. 37 of the A&C Act. II. APPELLANT’S SUBMISSIONS 14. The counsel for the Appellants assails the arbitral award and the judgment passed by the learned District Judge, mainly on the ground that the learned District Judge has completely failed to deal with or cogently answer the grounds raised by the present appellant in its application under Section 34 of the A & C Act, 1996, challenging the Award dated 1.3.2016, passed by the learned Sole Arbitrator, and has disposed of the matter in a cursory, casual and lackadaisical manner with complete non-application of mind contrary to the well settled propositions of law and, hence, both the impugned order and the Final Award are liable to be set aside. 15. It is also contended that the Ld. District Judge being the final court on facts did not take into account the alleged errors in facts that had been Page 4 of 31 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Sep-2025 19:35:19 committed by the Ld. Arbitrator and therefore by allegedly relying on the erroneous findings of the Ld. Arbitrator, the Ld. District Judge has committed gross illegality and such a judgment is liable to be interfered with and set aside. III. RESPONDENT’S SUBMISSIONS
Legal Reasoning
scope of interference of this Court in an application u/s Section 37 of the A&C Act is extremely limited and this Court cannot reappreciate evidence at this stage, therefore it may not revisit the factual findings of the Ld. Tribunal apart from testing the same on the touchstone of reasonableness. It was also submitted that the Ld. District Judge had considered all the material aspects of the contentions raised by the parties and also duly regarded their submissions thereby warranting no interference with the concurrent views of the Ld. Arbitral Tribunal as well as the Ld. District Judge. 17. It is submitted that the award is based on appreciation of the material and evidence that were placed before the arbitrator and it is not open in these proceedings to re-appraise the same. It is, thus, prayed that the present appeal needs to be dismissed. 18. On the question of its prayers in the Writ Petition, it was contended by the Ld. Counsel for the Respondent that the intent of the Government, reflected in Clause 18 of the scheme, is unmistakable. It envisions reducing the burden of litigation by ensuring that smaller disputes are Page 5 of 31 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Sep-2025 19:35:19 concluded without unnecessary prolongation. Any contrary interpretation would defeat the very object of the scheme, which is to prevent the government machinery from being entangled in avoidable disputes, especially where the monetary value falls well within the specified threshold. Therefore, the proposal submitted by it on 3.8.2023 in pursuance to the Vivad se Vishwas II (contractual disputes) scheme dated 29.5.2023 ought to be accepted by the present Appellant. IV. ISSUES FOR CONSIDERATION 19. Having heard the parties and perused the materials available on record, this court here has identified the following issues to be determined: A. Whether this Court should interfere with the impugned order given the narrow scope of its powers under Section 37 of the A&C Act? B. Whether Clause 18 of the Vivad se Vishwas II (contractual disputes) scheme dated 29.5.2023 is mandatory in nature? V. ISSUE A: WHETHER THIS COURT SHOULD INTERFERE WITH THE IMPUGNED ORDER GIVEN THE NARROW SCOPE OF ITS POWERS UNDER SECTION 37 OF THE A&C ACT? 20. Before going into the merits of the contentions, it is necessary to outline the ambit and scope of section 37(2)(b) of 1996 Act. The said section is extracted below:— “37. Appealable orders.—(1)[Notwithstanding anything contained in any other law for the time being in force, an appeal] shall lie from the following orders (and from no others) to the Court authorized by law to hear appeals from original decrees of the Court passing the order, namely:— xxxxxxxxxxx (2) Appeal shall also lie to a court from an order of the arbitral tribunal— Page 6 of 31 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Sep-2025 19:35:19 (a) accepting the plea referred to in sub-section (2) or subsection (3) of section 16; or (b) granting or refusing to grant an interim measure under section 17.” 21. The Supreme Court and this Court in catena of judgments have held that the powers of Appellate Court while exercising jurisdiction under section 37(2)(b) of 1996 Act against orders passed by the Arbitral Tribunal is very restricted and narrow. 22. Further, in Haryana Tourism Limited v. Kandhari Beverages Limited1, wherein the Supreme Court observed that while the Courts in an appeal under Section 37 are empowered to set aside an award, the Court cannot enter into the merits of the claim and the award may be interfered with only when the award stands contrary to:— (a) the fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) if the order is patently illegal. The Supreme Court in Punjab State Civil Supplies Corpn. Ltd. v. Sanman Rice Mills2, further observed that an impugned award cannot be interfered unless the substantive provision of law or the terms of the agreement are breached. Further, reference can be made to the decisions of the Delhi High Court in the cases of Shamlaji Expressway (P) Ltd. v. National Highway Authority of India3, wherein the Delhi High Court reiterated the principles laid down in Dinesh Gupta v. Anand Gupta4, Augmont Gold Pvt. Ltd. v. One 97 1 (2022) 3 SCC 237 2 2024 SCC OnLine SC 2632 3 2024 SCC OnLine Del 7131 4 2020 SCC OnLine Del 2099 Page 7 of 31 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Sep-2025 19:35:19 Communication Ltd.5, and Sanjay Arora v. Rajan Chadha6. These decisions reaffirm that judicial interference is warranted only in cases of patent illegality, violation of principles of natural justice, or perversity in the arbitral order. 23. Given the recurrent usage of the terms patent illegality, natural justice, perverse, reasonable among other terms, which are not amenable to rigid legal definition and each being susceptible to varying interpretations, the Court finds it appropriate, at the outset, to ascertain their precise meanings and the same would serve as the essential benchmarks in determining the permissible scope of appellate intervention under Section 37 of the Act. It is equally necessary to examine how the Courts have interpreted and delineated the scope of these terms generally, and specifically within the context of Arbitration. 24. The term patent illegality was first elaborated by the Supreme Court in ONGC v. Saw Pipes7, in the context of arbitration law, wherein it was observed that if an award is contrary to substantive law, the provisions of the Act, or the terms of the contract, it would be patently illegal and could be interfered with under Section 34. However, such procedural failure must be evident. 25. Subsequently, based on the recommendations of the 246th Law Commission Report, an amendment was introduced in Section 34 of the AC Act in 2015. This amendment expanded the scope of “public policy of India,” which had been narrowly interpreted in earlier judicial 5 (2021) 4 HCC (Del) 642 6 (2021) 3 HCC(Del) 654 7 (2003) 5 SCC 705 Page 8 of 31 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Sep-2025 19:35:19 pronouncements. Over time, various cases have relied on the ground of patent illegality. In general, patent illegality refers to an error of law that goes to the root of the matter. Such an error may involve inconsistency with common law, the Constitution, or a statutory provision. The definition of patent illegality and other related terms, as provided in Ramanath Aiyar’s Major Law Lexicon, offer a comprehensive understanding of the concept of patent illegality. The treatise defines patent illegality as a legal defect that is apparent on the face of the record without requiring extrinsic evidence or interpretation. This concept is closely linked to patent ambiguity, which refers to an ambiguity that is evident from the language of an instrument itself. A latent ambiguity, in contrast, is one that is not immediately visible but emerges when extrinsic evidence is examined. 26. A patent ambiguity is an ambiguity that arises solely from the language of an instrument. It is distinguished from a latent ambiguity, which occurs when the words in an instrument apply equally well to two distinct things or subject matters and require external evidence to resolve. A patent defect is a defect that is plainly visible and can be discovered through reasonable inspection and diligence. The definition emphasizes that it is not necessary for the defect to have been observed by a party, rather, it must be observable upon exercising ordinary caution itself. It is understood that this principle is relevant in cases where defects are apparent on the face of it. A patent error is an error that is self-evident, requiring no elaborate reasoning or extensive analysis to be demonstrated. The Supreme Court in Surya Dev Rai v. Page 9 of 31 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Sep-2025 19:35:19 Ram Chander Rai8 held that a patent error must be one that is demonstrable without engaging in a long-drawn argument. Similarly, in Ranjeet Singh v. Ravi Prakash9 it was observed that when two opinions are reasonably possible on the same material, the finding of one over the other cannot be termed as a patent error. 27. Moving back to the context of arbitration, it becomes imperative to examine the scope and relevance of a patent illegality in the realm of arbitral proceedings. While patent error, patent ambiguity, and patent defect generally refer to errors or defects that are self-evident and discernible without elaborate reasoning, the concept of patent illegality, in arbitration jurisprudence has acquired a distinct connotation. The Supreme Court in Delhi Airport Metro Express (P) Ltd. v. DMRC10 elucidated the contours of patent illegality in the context of arbitral awards. It was observed that patent illegality must be of such a nature that it goes to the root of the matter and fundamentally affects the fairness and legality of the arbitral process. 28. The Supreme Court has clarified that not every error of law committed by the Arbitral Tribunal qualifies as patently illegal. Similarly, a mere erroneous application of the law does not amount to patent illegality, unless it has a direct impact on the outcome of the case. Contraventions of law that do not involve public policy or public interest fall beyond the scope of the doctrine. It is equally important to note that the terms ambiguity, error and defect, command a lesser threshold as compared
Arguments
16. Per contra, learned counsel for the present Respondent contends that the Appellant has not been able to showcase any reasonable ground for interfering with the impugned judgment apart from making bald statements towards the same. It was vehemently submitted that the