Misc. Case No. 134 of 2016 · Orissa High Court
Case Details
Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 IN THE HIGH COURT OF ORISSA AT CUTTACK ARBA No.21 of 2022 (From the judgment dated 22.3.2022 passed by the learned District Judge, Puri in Arbitration Misc. Case No.134 of 2016, arising out of award dated 8.3.2016 passed by the Ld. Sole Arbitrator in Arbitration Proceeding No.5 of 2012) Rasmi Ranjan Mohapatra State of Odisha & Ors. -versus- …. …. Appellant(s) Respondent(s) Advocates appeared in the case through Hybrid Mode: For Appellant (s) For Respondent (s) : : Mr. Jatindra Kumar Mohapatra, Adv. Mr. Debasish Nayak, AGA CORAM: DR. JUSTICE S.K. PANIGRAHI DATE OF HEARING:-08.05.2025 DATE OF JUDGMENT:-18.07.2025 Dr. S.K. Panigrahi, J. 1. This Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “A&C Act”) has been filed against the judgment dated 22.3.2022 passed by the learned District Judge, Puri in Arbitration Misc. Case No.134 of 2016, arising out of award dated 8.3.2016 passed by the Ld. Sole Arbitrator in Arbitration Proceeding No.5 of 2012. Page 1 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 I. FACTUAL MATRIX OF THE CASE: 2. For the sake of brevity, the facts involved in the appeals are pithily discussed herein: a. In pursuance to the tender call notice invited by the Respondents for the work “Construction of Multi-Purpose School-Cum-Cyclone Building at Ramachandi Sahi Girls Nodal U.P. School and at Rebana Nuagaon Nodal U.P. School”, the Appellant submitted its bid. b. The bid submitted by the Appellant was the lowest valid bid for contract value of Rs. 33,45,799/- and therefore, the tender was awarded in his favour. c. Accordingly, agreement for work was executed on 16.11.2004 and the work order was subsequently issued on 18.11.2004. As per the terms of the agreement, the work was to be completed by 17.4.2005. d. However, work did not commence in its true spirit due to certain exigent circumstances which led to the Respondents terminating the agreement on 13.10.2006. e. The order of termination intimated to the Appellant that it could make any claims, it had qua the work, which the Appellant did. However, disputes arose pertaining to the quantum of the claims raised by the Appellant. f. Thereafter, the Appellant approached this Court u/s 11(6) of the A&C Act in ARBP No. 9 of 2010 for appointment of an Page 2 of 29
Legal Reasoning
Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 arbitrator. Accordingly, vide order dated 5.10.2022 in ARBP No.
Legal Reasoning
9 of 2010, this Court appointed Sri. S.F. Ahmed, Retired District Judge as the Sole Arbitrator for adjudication of the disputes between the Parties. g. Accordingly, the Ld. Sole Arbitrator after hearing both sides and considering the documents as well as the oral evidences of the Parties was pleased to pass award dated 8.3.2016. In the said award, the Ld. Sole Arbitrator has been pleased to allow 6 of the 12 claims resulting in an amount of Rs. 5,97,084/- along with pre-reference and pendente lite interest @ 10% and future interest till the date of actual payment. h. Aggrieved, the present Respondents preferred an application u/s 34 of the A&C Act before the Court of the Ld. District Judge, Puri. The Ld. District Judge vide the impugned order dated 22.3.2022 was pleased to uphold the findings of the Ld. Sole Arbitrator but has modified the amount of the award, resulting in the present Petition. 1. Now, the facts leading to the instant Appeals 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: 3. The counsel for the Claimant assails the judgment of the Ld. District Judge mainly on the ground that though the Ld. District Judge has Page 3 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 held that the non-execution of the contract work was due to the fault of the Respondents and has acknowledged that the Court while exercising power u/s 34 cannot act as an appellate authority, the Ld. District Judge has still proceeded to modify the award amount on the sole ground that the same seem to be on the higher side. 4. Further, it is submitted that barring the few limited exceptions carved out by the Apex Court, Courts in exercise of their powers u/s 34 and 37 of the A&C Act cannot modify the award. Therefore, the impugned order is bad in law and liable to be set aside. III. RESPONDENT’S SUBMISSIONS: 5. Per contra, learned counsel for the Respondent’s main thrust of the argument is that the Appellant has violated the terms and conditions of the agreement which he had entered into and thereby he is not entitled to get any damage/compensation for his own wrong. It is further argued that the Ld. Sole Arbitrator failed to appreciate the averments made in the claim application which were not tallying with the evidence affidavit but awarded compensation in an arbitrary manner and the same ought to have been interfered with. It is also submitted that there is no error evident on the face of the record, nor any patent illegality in the Ld. District Judge’s order and 6. 7. therefore, the present Petition is liable to be dismissed. IV. ISSUE FOR CONSIDERATION 8. Having heard the parties and perused the materials available on record, this Court has identified the following solitary issue to be determined: Page 4 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 A. Whether the order of the Ld. District Judge warrants interference keeping in mind the limitations of this court’s powers under Section 37 of the A&C Act? V. ISSUE A: WHETHER THE ORDER OF THE LD. DISTRICT JUDGE WARRANTS ANY INTERFERENCE KEEPING IN MIND THE LIMITATIONS OF THIS COURT’S POWERS UNDER SECTION 37 OF THE A&C ACT? 9. First things first, it would be apposite to refer to the provisions of Section 34 & 37 of the Act, which provisions read as under: “34. Application for setting aside arbitral award. -(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with subsection (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if- (a) the party making the application establishes on the basis of the record of the arbitral tribunal that- (i) a party was under some incapacity; or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on Page 5 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 matters beyond to arbitration: the scope of the submission Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v.) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that— (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. Page 6 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 (2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence. (3) An application for setting aside may not be made after three months have elaaed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter. (4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. 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 authorised by law to hear appeals from original decrees of the Court passing the order, namely:— ((a) refusing to refer the parties to arbitration under Section 8; (b) granting or under Section 9; refusing to grant any measure Page 7 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 (c) setting aside or refusing to set aside an arbitral award under Section 34.) (2) An appeal shall also lie to a court from an order of the arbitral tribunal— (a) accepting the plea referred to in sub-section (2) or sub- section(3) of Section 16; or (b) granting or refusing to grant an interim measure under Section17. (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.” 10. On a careful perusal of Section 34 of the Act, it is clear that an arbitral award can only be set aside by moving an application on grounds mentioned under sub-section (2) and sub-section (3) of Section 34 of the Act. An award can be interfered with where it is in conflict with the public policy of India, i.e., if the award is induced or affected by fraud or corruption or is in contravention of the fundamental policy of Indian law, or if it is in conflict with basic notions of morality and justice. 11. A plain reading of Section 34 reveals that the scope of interference by the Court with the arbitral award under Section 34 is very limited, and the Court is not supposed to travel beyond the aforesaid scope to determine whether the award is good or bad. Even an award that may not be reasonable or is non-speaking to some extent cannot ordinarily be interfered with by the Courts. Page 8 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 21-Jul-2025 16:59:40 12. It is also a well settled proposition in law that the jurisdiction of the Court under Section 34 of the Act is neither in the nature of an appellate remedy or akin to the power of revision. It is also well ordained in law that an award cannot be challenged on merits except on the limited grounds that have been spelt out in sub-sections (2), (2- A) and (3) of Section 34 of the Act, by way of filing an appropriate application. 13. Having regard to the contentions urged and the issues raised, it shall also be apposite to take note of the principles enunciated by the Supreme Court in some of the relevant decisions cited by the parties on the scope of challenge to an arbitral award under Section 34 and the scope of appeal under Section 37 of the 1996 Act. 14. In MMTC Ltd. v. Vedanta Ltd.1, the Supreme Court took note of various decisions including that in Associate Builders2 and exposited on the limited scope of interference under Section 34 and further narrower scope of appeal under Section 37 of the 1996 Act. The Supreme Court, inter alia, held as under : “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 the Hon’ble Supreme Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a