Arbitration Petition No. 5 of 2022 · Orissa High Court
Case Details
Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:35 IN THE HIGH COURT OF ORISSA AT CUTTACK ARBA No. 5 of 2024 (From the judgment dated 13.3.2024 passed by the learned District Judge, Keonjhar in Arbitration Petition No.5 of 2022 arising out of award dated 25.9.2019 passed by the Ld. Sole Arbitrator in Arbitration Proceeding No.1 of 2009, further modified on 15.2.2020 and 10.6.2020.) M/s. ESSEL MINING AND INDUSTRIES LTD (EMIT) & Anr. …. Appellant (s) -versus- M/s Ravi Udyog Private Limited …. Respondent (s) Advocates appeared in the case through Hybrid Mode: For Appellant (s) For Respondent (s) : : Ms. Pami Rath, Sr. Advocate along with Mr. Ipsit Aurobindo Acharya, Advocate Mr. Biplaba P. B. Bahali, Advocate CORAM: DR. JUSTICE S.K. PANIGRAHI DATE OF HEARING:-02.04.2025 DATE OF JUDGMENT:-20.06.2025 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 13.3.2024 passed by the learned District Judge, Page 1 of 34 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:35 Keonjhar in Arbitration Petition No. 5 of 2022 arising out of award dated 25.9.2019 passed by the Ld. Sole Arbitrator in Arbitration Proceeding No. 1 of 2009, further modified on 15.2.2020 and 10.6.2020. I. FACTUAL MATRIX OF THE CASE: 2. For the sake of brevity, the facts involved in the appeals are pithily discussed herein: a. The Appellant is a company incorporated under the Companies Act,1956 forming the mining division of the Aditya Birla Group and being a leading player in the mining sector. Similarly, the Respondent is also a company incorporated under the Companies Act,1956 having its registered office at 190, Purbalok, 9th Street, PO- Kalikapur, Near Calcutta Public School, Kolkota-700099. b. On 19.12.2000, the Appellant issued a letter of intent for excavation, drilling, blasting and transportation of iron ore and overburden in its mine at Barbil, Odisha for a period of 36 months with stipulation that the Respondent would be paid hire charges at the consolidated rate of Rs.36.50 per M.T of material handled which was based on the diesel price of Rs.16.38 per ltr. c. It was agreed between the Parties that the rate would be revised suitably pro-rata in increase in diesel price. It was further agreed that the rate would be increased by 5% Page 2 of 34 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:35 towards employee cost i.e. Rs.1.90 per annum after 31.3.2002. d. Pursuant to the contract, the Respondent mobilized its equipment and staff to the site on 12.2.2001 and satisfactorily executed the work. However, allegedly the Appellant did not increase the employee cost of 5% despite being reminded to do so. e. Ultimately on 4.8.2003, the Appellant wrote to the Respondent that, it has revised the rate with effect from 1.7.2003 which would be valid till 30.04.2004. However, the Respondent submitted on this front that, the revision of rate ought to have been given effect from 1.4.2003 and not from 1.7.2003 and had it been given effect from 1.4.2003, the Respondent would have received Rs.18,55,884.30 more. f. Again on 25.06.2004, the Appellant wrote to the Respondent to submit its revised offer taking the diesel rate of Rs.25.31 per ltr for its consideration and accordingly, the Respondent vide letter dated 16.7.2004 intimated the Appellant about the revised rate, however, the same was not revised. g. On 10.1.2005 the Appellant executed another agreement
Legal Reasoning
with the Respondent extending the original and first agreement dated 19.12.2000 with similar scope of work with a little variation and it was made valid till 31.12.2005. Though the work was extended from time to time and the Page 3 of 34 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:35 last extension was from 30.6.2008 to 30.9.2008 vide letter dated 25.6.2008, the Appellant did not increase the rate as stipulated in the first agreement dated 19.12.2000. h. The work was alleged to be completed in all aspect within the extended period of 30.9.2008, but the final payment was not made by the present Appellant. Dispute emerged on multiple other fronts and the Respondent approached this Court u/s 11 of the A&C Act for appointment of an arbitrator. i. Accordingly, vide order dated 6.3.2009, this Court was pleased to refer the dispute to Hon’ble Justice C.R.Pal (Retd.) Judge, Orissa High Court for arbitration. j. As, Hon’ble Justice C.R.Pal (Retd.) Judge, Orissa High Court withdrew from the arbitration, this Court vide order
Legal Reasoning
dated 20.7.2012 was pleased to appoint Sri. R.N.Biswal, Former Judge of the Orissa High Court as the new arbitrator. k. It is to be mentioned here that, initially the Respondent had claimed Rs.7,74,30,837.41/- under four heads, after adjusting Rs.32,38,505/- which it had received from the Appellant towards advance. As there was mistake in calculation in second head of claim, by way of an amendment application dated 11.5.2013, it was enhanced from Rs.5,38,77,609.49/- to Rs.14,80,66,355.83/-. So the total claim amount was enhanced to Rs.17,16,20,583/-. This Page 4 of 34 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:35 amendment application was allowed on 4.8.2013. Apart from that, the Respondent had also claimed pre-reference, pendent lite and future interest at the rate of 18% per annum upon the amount of Rs.17,16,20,583.75/- to be paid by the Appellant. l. The Ld. Arbitrator passed the award of Rs. 3,11,42,207/- in favour of the Respondent in respect of one Claim, i.e. Claim No. 2 which pertained to increase towards employee cost, after deducting the advance payment made to the Respondent on 25.9.2019. This awarded amount was modified on account of correction to Rs. 3,18,95,916/- on 15.2.2020. A further modification was made in pursuance of this Court’s order dated 23.2.2022 in W.P.(C) No. 11868 of 2021 and Rs.2,76,49,789/- was added to the awarded amount, making the total awarded amount - Rs. 5,95,45,705/-. This amount was directed to be paid within a period of three months, failing which interest was payable at the rate of 15% per annum till payment. m. Aggrieved, the Appellant approached the Ld. District Judge, Keonjhar in Arbitration Petition No. 5 of 2022 u/s 34 of the A&C Act. The same was rejected vide impugned order and judgment dated 13.3.2024. 3. Now that the facts leading up 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 Page 5 of 34 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:35 exercise of this Court’s limited jurisdiction available under S. 37 of the A&C Act. II. APPELLANTS’ SUBMISSIONS: 4. The counsel for the Claimant assails the judgment of the Ld. District Judge mainly on the ground that the Ld. District Judge has failed to note that the Ld. Arbitrator has not considered that the claim dated 9.5.2009 in respect of Claim Item No.2 for the Work Order dated 19.12.2000 for the period 19.12.2000 to 31.12.2004 is barred by limitation under Section 43 read with Section 21 of the Act, 1996 and Section 2(j), Section 3 and Article 137 of the Limitation Act, 1963 and therefore, the award in respect of said Claim No.2 is illegal and violative of Section 34(2A) of the Act, 1996. 5. Moreover, it is submitted that the calculation of interest is without any basis as there is no existing agreement between the parties regarding the % of interest and hence 15% interest is high. Therefore, the award is bad in law and liable to be set aside. III. RESPONDENT’S SUBMISSIONS: 6. Per contra, learned counsel for the Respondent submits that this Court or the court below is not entitled to re-appreciate evidence given the narrow scope of its powers under Section 34/37 of the A&C Act. It is submitted that the arbitration proceeding was initiated by the parties for resolution of their disputes pertaining to non-payment of its legitimate dues. There is no error evident on the face of the record, nor any patent illegality in the Arbitral Award, much less the Ld. District Page 6 of 34 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:35 Judge’s order and therefore, the present Petition is liable to be dismissed. IV. ISSUE FOR CONSIDERATION 7. Having heard the parties and perused the materials available on record, this court here has identified the following solitary issue to be determined: 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? 8. First things first, it would be apposite to refer to the provisions of Section 34 & 37 of the Act, which provisions read as under: for setting aside arbitral award. -(1) “34. Aplication 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 Page 7 of 34 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:35 (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 matters beyond submission to arbitration: scope of the the 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 of Section 75 corruption or Section 81; or in violation or was (ii) it is in contravention with the fundamental policy of Indian law; or Page 8 of 34 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:35 (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. (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 Page 9 of 34 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:35 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 arbitration under Section 8; to refer the parties (b) granting or under Section 9; refusing to grant any measure (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.” 9. 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. 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 Page 10 of 34 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:35 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. 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 Hon’ble 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. Page 11 of 34 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:35 14. Before undertaking the aforesaid exercise, it would be apposite to consider as to how the expressions (a) “in contravention with the fundamental policy of Indian law”; (b) “in conflict with the most basic notions of morality or justice”; and (c) “patent illegality” have been construed. 15. The phrase “fundamental policy of Indian law” entered arbitral discourse long before the 2015 amendments, when Renusagar Power Co. Ltd. v. General Electric Co.1confined “public policy” challenges to three narrow heads: (i) fundamental policy of Indian law, (ii) interests of India, and (iii) justice or morality. 16. Subsequent decisions—most notably ONGC v. Western Geco2— stretched that first head by equating “fundamental policy” with Wednesbury-style reasonableness review, permitting courts to re-enter the merits on the pretext of testing arbitral reasoning. Because that approach threatened the speedy, final nature of arbitration, Parliament rolled it back through the Arbitration and Conciliation (Amendment) Act, 2015. 17. Explanation 1 to Section 34(2)(b)(ii) and 48(2)(b) now insists that an award offends public policy ‘only’ if it violates India’s “fundamental policy,” a concept deliberately narrower than “contrary to the policy of Indian law.” Ssangyong Engg. & Construction Co. Ltd. v. NHAI3 crystallised the post-amendment position: “fundamental policy”