[Cites 24, Cited by 0]
Delhi High Court
Sujit Kumar Jaiswal vs The Managing Director Dalmia Research ... on 1 April, 2026
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 16.02.2026
Judgment pronounced on: 01.04.2026
+ O.M.P. 110/2009
SUJIT KUMAR JAISWAL .....Petitioner
Through: Ms. Hemlata Rawat, Advocate.
versus
THE MANAGING DIRECTOR DALMIA RESEARCH
INTERNATIONAL PVT. LTD .....Respondent
Through: Mr. Subhranshu Padhi, Mr.
Aman Varma, Ms. Riya
Wasade, Ms. Minal Mishra and
Ms. Vandana Bedi, Advocates.
CORAM:
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
JUDGMENT
HARISH VAIDYANATHAN SHANKAR, J.
1. The present Petition has been filed under Section 34 of the
Arbitration and Conciliation Act, 19961, seeking to set aside the
Arbitral Award dated 11.08.20082 delivered by the learned sole
Arbitrator in arbitral proceedings titled "Shri Sujit Kumar Jaiswal vs.
M/s Dalmia Resorts International Pvt. Ltd. & Ors.". By the Impugned
Award, the learned Arbitrator dismissed the claims of the Petitioner
with costs in favor of the Respondent.
Act
Impugned Award
BRIEF FACTS:
2. The Petitioner herein is Sujit Kumar Jaiswal, proprietor of
Alark Orient Tibet Teppich Exports, having its place of business in
the District of Sant Ravi Das Nagar, Uttar Pradesh.
3. The Respondent herein, i.e., Dalmia Resorts International Pvt.
Ltd., through its Managing Director, is a company incorporated under
the Companies Act, 1956, having its registered office in New Delhi.
4. The Petitioner‟s case is that, pursuant to negotiations held with
Mr. Anuroadh Srivastava, who was serving as the Area Sales
Representative for the Kanpur region of the Respondent, the Petitioner
entered into an Agreement dated 31.07.19963 with the Respondent.
Under the terms of the said Agreement, the Respondent undertook to
extend to the Petitioner a facility involving self-renting and the
allotment of vacation ownership units in resorts operated by the
Respondent, including, inter alia, Dalmia Resorts at Mussoorie and
Goa, along with other locations across India. In consideration of the
same, the Petitioner agreed to make payment of specified amounts,
upon which the Petitioner was to receive assured rental returns from
the allotted units, to be disbursed by the Respondent through cheques
or bank drafts.
5. As per the Petitioner, the said Agreement further contemplated
a buy-back facility, whereby the Respondent undertook the repurchase
of the premises allotted as vacation ownership after a period of two
years at a discount of 10 percent of the prevailing market rates, if
certain stipulated conditions were not fulfilled by the Respondent.
Agreement
6. It is also the case of the Petitioner that the Agreement envisaged
an additional incentive, namely, that upon booking 52 weeks of
ownership, the Petitioner would be entitled to a bonus period of seven
weeks, over and above the ownership rights contemplated under the
Agreement.
7. Pursuant to the aforesaid Agreement, the Petitioner is stated to
have issued seven cheques in favour of the Respondent, aggregating to
a total sum of Rs. 24,77,000/-. It is further the case of the Petitioner
that, in accordance with the terms and understanding governing the
transaction, the said cheques were to be subsequently substituted with
bank drafts.
8. According to the Petitioner, despite having made the aforesaid
payments, no benefits of vacation ownership were ever extended to
him in terms of the Agreement. However, three of the cheques issued
by the Petitioner, each amounting to Rs. 3,56,550/-, were encashed by
the Respondent.
9. Consequently, the Petitioner, aggrieved by the aforestated
conduct, breach of the Agreement and unresponsiveness of the
official(s) of the Respondent for allotment of vacation ownership
units, visited the General Manager (Finance) of the Respondent,
wherein the Petitioner was told that the Area Sales Representative had
no powers to enter into any Agreement as entered into by the
Petitioner.
10. By this stage, as the Petitioner contends, he had already paid a
total sum of Rs. 17,63,900/- to the Respondent company. In view of
the above development, the Petitioner requested the said General
Manager to adjust the amounts already paid and to allot to him 21
deluxe apartments at Mussoorie and 11 executive apartments at Goa
during the peak season. Pursuant thereto, the Petitioner paid an
additional amount of Rs. 33,100/-.
11. It is the Petitioner‟s case that even after making this additional
payment and after the earlier payments were adjusted, no vacation
ownership units were allotted to him, contrary to the assurances
allegedly extended by the Respondent.
12. Thereafter, as the Petitioner states, he addressed several
communications to the Respondent, requesting allotment of the agreed
vacation ownership units, and in the alternative, sought a refund of the
amounts paid along with interest at the rate of 24% per annum.
13. It is stated that, eventually, after various communications, the
Petitioner received two letters, dated 22.04.1998 and 30.04.1998
respectively, by way of which the Respondent intimated their inability
to provide the vacation ownership units to the Petitioner.
14. Consequently, the Petitioner is stated to have issued a legal
notice dated 07.08.1998, followed by a reminder letter dated
16.10.1998, calling upon the Respondent to refund the amounts
deposited by him along with interest and other charges. However,
these communications allegedly remained unacknowledged by the
Respondent.
15. Thereafter, the Petitioner is stated to have issued another legal
notice dated 31.08.1999, demanding refund of Rs. 17,97,000/- along
with interest at the rate of 24% per annum. The said notice was replied
to by the Respondent vide letter dated 24.09.1999, though according
to the Petitioner, the response did not address the substantive
grievances raised by him.
16. Aggrieved by the said conduct, the Petitioner filed a Company
Petition bearing No. 46/2000 before this Court seeking winding up of
the Respondent-Company. However, the said Petition was disposed of
vide the Order dated 23.08.2004, by appointing an arbitrator for
adjudication of the disputes between the parties.
17. Before the learned Arbitrator, the Petitioner raised the following
claims:
Refund of the principal amount paid to Rs. 17,97,000/-
the Respondent
Loss of rental income calculated on the Rs. 49,92,590/-
basis of the Goa and Mussoorie units
Cumulative interest calculated on the said Rs.1,24,36,156/-
rental income till 15.11.2006
Litigation expenses incurred before Rs. 9,20,000/-
earlier counsel
Arbitrator‟s fees Rs. 50,000/-
Legal fees paid to present counsel Rs. 20,000/-
Miscellaneous litigation expenses Rs. 1,00,000/-
Compensation for mental agony and Rs. 18,00,000/-
harassment
18. After pleadings, the learned Arbitrator framed 11 issues to
adjudicate upon the disputes between the parties, which are
reproduced herein under for ready reference:
".......
i. Whether the respondent has not allotted the units of Dalmia
Resorts to the Claimant despite the Claimant having paid
Rs.17,97,000/- as initial amount - OPP
ii. Whether the claimant has been deprived of the facilities and
benefits for which he was entitled from Dalmia Resorts
International as per the agreement - OPP
iii. Whether the claimant and respondents have executed any
purchase agreement or not - OPP
iv. Whether the claimant is guilty of any misrepresentation? OPD
v. Whether the respondent is guilty of non-fulfilment of terms of
"Vacation Owner's Agreement" - OPP
vi. Whether the claimant is entitled for the alleged refund of the
amount-OPP
vii. Whether the alleged agreement dated 31.07.1996 is binding on
the Respondent-OPP
viii. Whether the claimant is entitled for any amounts claimed for
alleged loss suffered and mental torture?-OPP
ix. Whether the respondent has not been fair and has been
malicious in realising the money from the claimant?-OPP
x. Whether claimant should be compensated as claimed-OPP
xi. Whether the claimants claim is barred by limitation-OPD."
19. After weighing the evidence, especially the rival versions of
alledged Agreements of both the parties, and hearing the parties, the
learned Arbitrator passed the Impugned Arbitral Award, dismissing
the claims of the Petitioner with costs in favor of the Respondent.
20. It is the case of the Petitioner that the learned Arbitrator, while
deciding upon the issues as framed by him, did not accord any sound
reasoning to the conclusions arrived at by him, therefore rendering the
award liable to be set aside on the grounds of being contrary to law
and public policy.
21. In the aforesaid factual backdrop, the learned counsel appearing
for the parties advanced their respective submissions assailing as well
as defending the Impugned Award. The principal challenge raised by
the Petitioner is that the learned Arbitrator failed to properly
appreciate the material evidence placed on record and proceeded to
reject the Agreement relied upon by the Petitioner without furnishing
cogent reasons, while simultaneously accepting the Respondent‟s
version of the Agreement as the governing contractual document
between the parties. It is in this context that the rival contentions of
the parties are required to be examined.
CONTENTIONS ON BEHALF OF THE PETITIONER:
22. Learned counsel appearing on behalf of the Petitioner would, at
the outset, submit that although several grounds have been urged in
the pleadings assailing the Impugned Award, the Petitioner confines
the present challenge primarily to the ground that the Impugned
Award suffers from perversity in appreciation of evidence, rendering
it unsustainable in law and liable to be set aside under Section 34 of
the Act.
23. Learned counsel for the Petitioner would contend that the
learned Arbitrator failed to consider and appreciate one of the most
material documents placed on record by the Petitioner, namely, the
Agreement dated 31.07.1996, which formed the very foundation of
the Petitioner‟s claim. It would be submitted that the learned
Arbitrator discarded the said Agreement without undertaking any
meaningful evaluation of the document or the surrounding
circumstances and without assigning cogent reasons for rejecting the
same.
24. Learned counsel for the Petitioner, in this regard, would draw
the attention of this Court to Paragraph No. 18 of the Impugned
Award, wherein the learned Arbitrator has considered the rival
versions of the Vacation Ownership Agreement relied upon by the
parties. Upon such consideration, the learned Arbitrator rejected the
Agreement relied upon by the Petitioner and accepted the Agreement
filed by the Respondent, to be the operative and binding Agreement,
governing the relationship between the parties. The relevant
paragraph, being Paragraph No. 18 of the Impugned Award, is
reproduced herein below:
"18. I have carefully considered the averments of the parties on this
aspect of the matter. The document Annexure A-4 filed by the
Claimant is supposed to run into 2 pages, but the second page of
this document has not been filed by the Claimant although it is
specifically written at the end of the page 1 that the document is
continued on page 2. Further the Vacation Ownership agreement
filed by the Respondent as Exhibit RW 1/1 to Exhibit RW 1/4 is a
comprehensive document and bears the signatures of the Claimant
at all material places. In clause 7 G, it is of Ex. RW 1/1 it is stated
that the Vacation Owner agrees that all his rights and liabilities
connected with the Vacation Ownership are all contained in this
Agreement and that this Agreement supersedes of all earlier
agreements, understandings, representation, arrangements,
correspondence etc., between the parties and that the Vacation
Owner further represents that he has neither relied upon any
other/additional information nor has relied upon any other/further
representation/promises made by the employee(s)/agent(s) of the
Respondent with respect to the Vacation Ownership and/or the
rights and liabilities of the Vacation Owner. It is further clarified
that no Respondent's employee/agent is authorized to make any
representation/promises beyond what is stated in that Agreement.
In the event of this provision in this Vacation Ownership
Agreement it is difficult to proceed on the basis of the alleged
agreement Annexure A-4 filed by the Claimant and any Claim
based on annexure A-4 is liable to be rejected."
25. Learned counsel would submit that the reasoning adopted by
the learned Arbitrator, in rejecting the Agreement relied upon by the
Petitioner, is wholly inadequate and unsustainable. It would be urged
that the learned Arbitrator, instead of undertaking a reasoned
examination of the rival documents placed before him, summarily
discarded the Petitioner‟s Agreement and proceeded to accept the
Respondent‟s Agreement to be the binding contractual document
between the parties, thereby discarding material evidence which is
perversity and, in turn, against the fundamental policy of India.
26. It would further be contended that the learned Arbitrator
appears to have placed reliance solely on Clause 7(G) of the
Agreement relied upon by the Respondent, which stipulates that the
said Agreement supersedes all prior Agreements, understandings,
representations or arrangements between the parties.
27. Learned counsel for the Petitioner would submit that the
reliance placed on the said clause by the learned Arbitrator is
fundamentally flawed. The very question which arose for
determination before the learned Arbitrator was as to which of the two
competing Agreements constituted the binding contractual
arrangement between the parties. By relying upon a clause contained
in the Respondent‟s version of the Agreement to reject the Petitioner‟s
Agreement, the learned Arbitrator effectively presumed the
correctness and validity of the Respondent‟s Agreement, without
independently determining whether the same was indeed the
governing agreement between the parties.
28. It would therefore be contended by the learned counsel for the
Petitioner that the rejection of the Petitioner‟s Agreement, solely on
the basis of a clause contained in the Respondent‟s versions of
Agreement itself, demonstrates a non-application of mind and renders
the conclusion of the learned Arbitrator perverse and legally
unsustainable.
29. Learned counsel for the Petitioner would further submit that the
arbitral proceedings themselves were conducted in a manner which
deprived the Petitioner of a fair opportunity to establish his case. In
this regard, reliance is placed on the Order dated 25.10.2007, passed
by the learned Arbitrator during the course of the arbitral proceedings.
30. It would be contended that by the said Order, three Applications
filed by the Petitioner were taken up for consideration by the learned
Arbitrator. One of the said Applications sought production of certain
documents from the Respondent, including the purchase agreement,
allotment advice and offer documents, while the other Application
sought production of three individuals, who were allegedly in the
employment of the Respondent and, who were stated to be material
witnesses in the matter.
31. Learned counsel for the Petitoner would submit that the learned
Arbitrator dismissed the aforesaid Applications in a summary manner
vide Order dated 25.10.2007 and without assigning any cogent or
intelligible reasoning. The relevant portion of the said Order reads as
follows:
"2. As regards the application of the claimant asking the
respondent to produce the following 3 documents is concerned the
same is also frivolous as all these documents are supposed to be
with the claimant also
a) Purchase agreement
b) Allotment advice
c) Offer documents
3. The 3rd application of the claimant for requiring respondent to
produce the 3 persons as witnesses allegedly in the employment of
the respondent company. The respondent states that they are no
longer in the employment of the company and as such they are not
in a position produce them. This application is also therefore,
dismissed."
32. Learned counsel for the Petitioner would, in this backdrop,
submit that the rejection of the aforesaid Applications effectively
prevented the Petitioner from producing relevant documentary
evidence and the witness testimony necessary for substantiating the
Agreement relied upon by him. It would therefore be urged that the
learned Arbitrator curtailed the Petitioner‟s opportunity to place
material evidence on record and establish the authenticity and
enforceability of the Agreement relied upon by him.
33. Learned counsel for the Petitioner would further submit that
during the arbitral proceedings, the opportunity for cross-examination
was dispensed with by consent of both the parties. Consequently, none
of the rival Agreements, relied upon by the parties, were proved
through oral testimony or by examination of any witness. In such
circumstances, both documents were required to be assessed by the
learned Arbitrator only on the basis of the material available on record
and the surrounding circumstances.
34. In this light, learned counsel would submit that despite standing
on identical evidentiary footing, the learned Arbitrator proceeded to
accept the Agreement relied upon by the Respondent, while rejecting
the Agreement relied upon by the Petitioner. In this light, it would be
contended that such selective acceptance of one document and
rejection of the other, without any supporting evidence or adequate
reasoning, amounts to a manifestly arbitrary exercise of adjudicatory
discretion, thereby rendering the conclusions, reached at by the
learned Arbitrator in the Impugned Award, perverse and unsustainable
in law.
35. Learned counsel for the Petitioner would therefore submit that
the cumulative effect of the aforesaid circumstances clearly
demonstrates that the learned Arbitrator ignored material evidence,
rejected the Petitioner‟s Agreement without proper reasoning, and
relied upon the Respondent‟s Agreement without subjecting the same
to a meaningful evidentiary scrutiny.
36. Learned counsel for the Petitioner, while concluding his
arguments, would submit that the Impugned Award suffers from
perversity and violation of principles of natural justice, which is
against the fundamental policy of India, and thus goes to the very root
of the arbitral proceedings. In light of the foregoing grounds, it would
therefore be urged that the Impugned Award is liable to be set aside
under Section 34 of the Act.
CONTENTIONS ON BEHALF OF THE RESPONDENT:
37. Per contra, the learned counsel appearing on behalf of the
Respondent would submit that the challenge mounted by the
Petitioner is wholly misconceived and falls far short of the narrow
parameters of interference contemplated under Section 34 of the Act.
It would be contended that the Impugned Award represents a reasoned
determination, rendered upon appreciation of the material placed
before the learned Arbitrator, and does not suffer from any perversity,
illegality or infirmity warranting interference by this Court.
38. Learned counsel for the Respondent would submit that the
principal grievance of the Petitioner pertains to the finding recorded
by the learned Arbitrator regarding the Vacation Ownership
Agreement. However, it would be contended that the learned
Arbitrator, after examining both the documents placed before him, has
returned a well-reasoned finding that the document relied upon by the
Petitioner could not be accepted as the binding agreement governing
the relationship between the parties, as the signatory to the said
Agreement was not authorised to enter into any such Agreement.
39. Learned counsel for the Respondent would further submit that
the Agreement produced by the Petitioner, appended to the Statement
of Claims as Annexure A-4, was admittedly incomplete inasmuch as
the second page of the document was never produced before the
learned Arbitrator, despite the first page itself clearly recording that
the Agreement continued on the subsequent page. In contrast, the
Respondent had placed on record the Vacation Ownership Agreement
(marked as Ex. RW-1/1 to Ex. RW-1/4 of the arbitral proceedings),
which was a comprehensive and complete document duly bearing the
signatures of the Petitioner at all material places. Learned counsel
would therefore contend that the learned Arbitrator was fully justified
in placing reliance upon a complete and duly executed Agreement
produced by the Respondent rather than an incomplete document
relied upon by the Petitioner.
40. Learned counsel would further submit that the said Vacation
Ownership Agreement expressly contained Clause 7(G), which
unequivocally stipulated that the Agreement constituted the entire
understanding between the parties and superseded all prior
Agreements, negotiations, representations or arrangements. The clause
further clarified that the vacation owner had not relied upon any
representation made by any employee or agent of the Respondent
beyond what was recorded in the Agreement itself. In view of this
express contractual stipulation, it would be contended that the learned
Arbitrator rightly rejected any claim founded upon the alleged
Agreement produced and relied by the Petitioner.
41. Learned counsel for the Respondent would further submit that
the contention of the Petitioner that the learned Arbitrator did not
provide reasons for rejecting the Petitioner‟s version of the Agreement
is factually incorrect. It would be submitted that the Impugned Award
clearly records the reasons which weighed with the learned Arbitrator,
including the incomplete nature of the document produced by the
Petitioner and the existence of a duly executed and comprehensive
Agreement placed on record by the Respondent.
42. It would further be submitted that the learned Arbitrator, while
exercising his adjudicatory discretion, is the final authority on the
appreciation of evidence and interpretation of documents placed
before him. According to the Respondent, once the learned Arbitrator
examined the rival documents and arrived at a plausible conclusion
regarding the binding agreement between the parties, the same cannot
be interfered with merely because the Petitioner seeks to advance a
different interpretation of the evidence on record.
43. With regard to the grievance raised by the Petitioner concerning
the Order dated 25.10.2007, whereby certain Applications filed by the
Petitioner were dismissed, learned counsel for the Respondent would
submit that the said Applications were rightly rejected by the learned
Arbitrator as they were unnecessary and devoid of merit. It would be
submitted that the documents sought to be produced were not
exclusively within the possession of the Respondent and could equally
have been produced by the Petitioner himself.
44. Learned counsel would therefore contend that the Petitioner‟s
attempt to portray the arbitral proceedings as being unfair or in
violation of the principles of natural justice is wholly unfounded.
According to the Respondent, the arbitral proceedings were conducted
strictly in accordance with law and both parties were afforded
adequate and reasonable opportunity to present their respective cases.
45. Learned counsel for the Respondent would, while concluding
his submissions, submit that the Petitioner is essentially inviting this
Court to re-appreciate the evidence and re-assess the findings of fact
recorded by the learned Arbitrator, which is impermissible in
proceedings under Section 34 of the Act. It would be urged that the
conclusions reached at by the learned Arbitrator represent a plausible
view based on the material available on record and cannot be
characterised as perverse merely because the Petitioner may hold a
different interpretation of the evidence.
46. In light of the foregoing submissions, learned counsel for the
Respondent would submit that the Impugned Award does not suffer
from any perversity or illegality going to the root of the matter and
therefore does not warrant interference under Section 34 of the Act.
The present Petition, it would be submitted, is devoid of merit and
liable to be dismissed.
ANALYSIS:
47. This Court has heard the learned counsel appearing for both
parties and, with their able assistance, perused the material available
on record.
48. At the outset, it is apposite to note that this Court is conscious
of the limited scope of its jurisdiction while examining an objection
Petition under Section 34 of the Act. The contours of judicial
intervention in such proceedings have been authoritatively delineated
and settled by a consistent and evolving line of precedents of the
Hon‟ble Supreme Court.
49. In this regard, a three-Judge Bench of the Hon‟ble Supreme
Court in OPG Power Generation (P) Ltd. v. Enexio Power Cooling
Solutions (India) (P) Ltd.4, after an exhaustive consideration of a
catena of earlier decisions, while dealing with the grounds of conflict
with the public policy of India, perversity and patent illegality, the
grounds which have also been urged in the present case, made certain
pertinent observations, which are reproduced hereunder:
"Relevant legal principles governing a challenge to an arbitral
award
30. Before we delve into the issue/sub-issues culled out above, it
would be useful to have a look at the relevant legal principles
governing a challenge to an arbitral award. Recourse to a court
against an arbitral award may be made through an application for
setting aside such award in accordance with sub-sections (2), (2-A)
and (3) of Section 34 of the 1996 Act. Sub-section (2) of Section
34 has two clauses, (a) and (b). Clause (a) has five sub-clauses
which are not relevant to the issues raised before us. Insofar as
clause (b) is concerned, it has two sub-clauses, namely, (i) and (ii).
Sub-clause (i) of clause (b) is not relevant to the controversy in
hand. Sub-clause (ii) of clause (b) provides that if the Court finds
that the arbitral award is in conflict with the public policy of India,
it may set aside the award.
Public policy
31. "Public policy" is a concept not statutorily defined, though it
has been used in statutes, rules, notification, etc. since long, and is
also a part of common law. Section 23 of the Contract Act, 1872
uses the expression by stating that the consideration or object of an
agreement is lawful, unless, inter alia, opposed to public policy.
That is, a contract which is opposed to public policy is void.
*****
35. In Renusagar Power Co. Ltd. v. General Electric Co., 1994
Supp (1) SCC 644, a three-Judge Bench of this Court observed
that the doctrine of public policy is somewhat open--textured and
flexible. By citing earlier decisions, it was observed that there are
two conflicting positions which are referred to as the "narrow
view" and the "broad view". According to the narrow view, courts
(2025) 2 SCC 417
cannot create new heads of public policy whereas the broad view
countenances judicial law making in these areas. In the field of
private international law, it was pointed out, courts refuse to apply
a rule of foreign law or recognise a foreign judgment or a foreign
arbitral award if it is found that the same is contrary to the public
policy of the country in which it is sought to be invoked or
enforced. However, it was clarified, a distinction is to be drawn
while applying the rule of public policy between a matter governed
by domestic law and a matter involving conflict of laws. It was
observed that the application of the doctrine of public policy in the
field of conflict of laws is more limited than that in the domestic
law and the courts are slower to invoke public policy in cases
involving a foreign element than when a purely municipal legal
issue is involved. It was held that contravention of law alone will
not attract the bar of public policy, and something more than
contravention of law is required.
*****
37. What is clear from above is that for an award to be against
public policy of India a mere infraction of the municipal laws of
India is not enough. There must be, inter alia, infraction of
fundamental policy of Indian law including a law meant to serve
public interest or public good.
*****
40. In ONGC Ltd. v. Western Geco International Ltd., (2014) 9
SCC 263, paras 35, 38 & 39, which also related to the period prior
to the 2015 Amendment of Section 34(2)(b)(ii), a three-Judge
Bench of this Court, after considering the decision inONGC
Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705, without exhaustively
enumerating the purport of the expression "fundamental policy of
Indian law", observed that it would include all such fundamental
principles as providing a basis for administration of justice and
enforcement of law in this country. The Court thereafter
illustratively referred to three fundamental juristic principles,
namely:
(a) that in every determination that affects the rights of a
citizen or leads to any civil consequences, the court or
authority or quasi-judicial body must adopt a judicial
approach, that is, it must act bona fide and deal with the
subject in a fair, reasonable and objective manner and not
actuated by any extraneous consideration;
(b) that while determining the rights and obligations of parties
the court or Tribunal or authority must act in accordance with
the principles of natural justice and must apply its mind to the
attendant facts and circumstances while taking a view one way
or the other; and
(c) that its decision must not be perverse or so irrational that no
reasonable person would have arrived at the same.
41. In Associate Builders v. DDA, (2015) 3 SCC 49, a two-Judge
Bench of this Court, held that audi alteram partem principle is
undoubtedly a fundamental juristic principle in Indian law and is
enshrined in Sections 18 and 34(2)(a)(iii) of the 1996 Act. In
addition to the earlier recognised principles forming fundamental
policy of Indian law, it was held that disregarding:
(a) orders of superior courts in India; and
(b) the binding effect of the judgment of a superior court
would also be regarded as being contrary to the fundamental
policy of Indian law.
Further, elaborating upon the third juristic principle (i.e. qua
perversity), as laid down in ONGC Ltd. v. Western Geco
International Ltd., (2014) 9 SCC 263, it was observed that where:
(i) a finding is based on no evidence; or
(ii) an Arbitral Tribunal takes into account something
irrelevant to the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, such
decision would necessarily be perverse[Associate Builders
case, (2015) 3 SCC 49, para 31].
To this a caveat was added by observing that when a court applies
the "public policy test" to an arbitration award, it does not act as a
court of appeal and, consequently, errors of fact cannot be
corrected; and a possible view by the arbitrator on facts has
necessarily to pass muster as the arbitrator is the ultimate master of
the quantity and quality of evidence to be relied upon when he
delivers his arbitral award. It was also observed that an award
based on little evidence or on evidence which does not measure up
in quality to a trained legal mind would not be held to be invalid on
that score. Thus, once it is found that the arbitrator's approach is
not arbitrary or capricious, it is to be taken as the last word on
facts.
The 2015 Amendment in Sections 34 and 48
42. The aforementioned judicial pronouncements were all prior to
the 2015 Amendment. Notably, prior to the 2015 Amendment the
expression "in contravention with the fundamental policy of Indian
law" was not used by the legislature in either Section 34(2)(b)(ii) or
Section 48(2)(b). The pre-amended Section 34(2)(b)(ii) and its
Explanation read:
*****
44. By the 2015 Amendment, in place of the old Explanation to
Section 34(2)(b)(ii), Explanations 1 and 2 were added to remove
any doubt as to when an arbitral award is in conflict with the public
policy of India.
45. At this stage, it would be pertinent to note that we are dealing
with a case where the application under Section 34 of the 1996 Act
was filed after the 2015 Amendment, therefore the newly
substituted/added Explanations would apply [SsangyongEngg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131].
46. The 2015 Amendment adds two Explanations to each of the
two sections, namely, Section 34(2)(b)(ii) and Section 48(2)(b), in
place of the earlier Explanation. The significance of the newly
inserted Explanation 1 in both the sections is two-fold. First, it does
away with the use of words : (a) "without prejudice to the
generality of sub-clause (ii)" in the opening part of the pre-
amended Explanation to Section 34(2)(b)(ii); and (b) "without
prejudice to the generality of clause (b) of this section" in the
opening part of the pre-amended Explanation to Section 48(2)(b);
secondly, it limits the expanse of public policy of India to the three
specified categories by using the words "only if".
Whereas, Explanation 2 lays down the standard for adjudging
whether there is a contravention with the fundamental policy of
Indian law by providing that a review on merits of the dispute shall
not be done. This limits the scope of the enquiry on an application
under either Section 34(2)(b)(ii) or Section 48(2)(b) of the 1996
Act.
47. The 2015 Amendment by inserting sub-section (2-A) in Section
34, carves out an additional ground for annulment of an arbitral
award arising out of arbitrations other than international
commercial arbitrations. Sub-section (2-A) provides that the Court
may also set aside an award if that is vitiated by patent illegality
appearing on the face of the award. This power of the Court is,
however, circumscribed by the proviso, which 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.
48.Explanation 1 to Section 34(2)(b)(ii), specifies that an arbitral
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.
49. In the instant case, there is no allegation that the making of the
award was induced or affected by fraud or corruption, or was in
violation of Section 75 or Section 81. Therefore, we shall confine
our exercise in assessing as to whether the arbitral award is in
contravention with the fundamental policy of Indian law, and/or
whether it conflicts with the most basic notions of morality or
justice. Additionally, in the light of the provisions of sub-section
(2-A) of Section 34, we shall examine whether there is any patent
illegality on the face of the award.
50. 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.
In contravention with the fundamental policy of Indian law
51. As discussed above, till the 2015 Amendment the expression
"in contravention with the fundamental policy of Indian law" was
not found in the 1996 Act. Yet, in Renusagar Power Co.
Ltd. v. General Electric Co., 1994 Supp (1) SCC 644, in the
context of enforcement of a foreign award, while construing the
phrase "contrary to the public policy", this Court held that for a
foreign award to be contrary to public policy mere contravention of
law would not be enough rather it should be contrary to:
(a) the fundamental policy of Indian law; and/or
(b) the interest of India; and/or
(c) justice or morality.
*****
55. The legal position which emerges from the aforesaid discussion
is that after "the 2015 Amendments" in Section 34(2)(b)(ii) and
Section 48(2)(b) of the 1996 Act, the phrase "in conflict with the
public policy of India" must be accorded a restricted meaning in
terms of Explanation 1. The expression "in contravention with the
fundamental policy of Indian law" by use of the word
"fundamental" before the phrase "policy of Indian law" makes the
expression narrower in its application than the phrase "in
contravention with the policy of Indian law", which means mere
contravention of law is not enough to make an award vulnerable.
To bring the contravention within the fold of fundamental policy of
Indian law, the award must contravene all or any of such
fundamental principles that provide a basis for administration of
justice and enforcement of law in this country.
56. Without intending to exhaustively enumerate instances of such
contravention, by way of illustration, it could be said that:
(a) violation of the principles of natural justice;
(b) disregarding orders of superior courts in India or the
binding effect of the judgment of a superior court; and
(c) violating law of India linked to public good or public
interest, are considered contravention of the fundamental
policy of Indian law.
However, while assessing whether there has been a contravention
of the fundamental policy of Indian law, the extent of judicial
scrutiny must not exceed the limit as set out in Explanation 2 to
Section 34(2)(b)(ii).
*****
Patent illegality
65. Sub-section (2-A) of Section 34 of the 1996 Act, which was
inserted by the 2015 Amendment, provides that an arbitral award
not arising out of international commercial arbitrations, may also
be set aside by the Court, if the Court finds that the award is visited
by patent illegality appearing on the face of the award. The proviso
to sub-section (2-A) 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.
66. InONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705, while
dealing with the phrase "public policy of India" as used in Section
34, this Court took the view that the concept of public policy
connotes some matter which concerns public good and public
interest. If the award, on the face of it, patently violates statutory
provisions, it cannot be said to be in public interest. Thus, an award
could also be set aside if it is patently illegal. It was, however,
clarified that illegality must go to the root of the matter and if the
illegality is of trivial nature, it cannot be held that award is against
public policy.
67. In Associate Builders v. DDA, (2015) 3 SCC 49, this Court
held that an award would be patently illegal, if it is contrary to:
(a) substantive provisions of law of India;
(b) provisions of the 1996 Act; and
(c) terms of the contract [See also three-Judge Bench decision
of this Court in State of Chhattisgarh v. SAL Udyog (P) Ltd.,
(2022) 2 SCC 275].
The Court clarified that if an award is contrary to the substantive
provisions of law of India, in effect, it is in contravention of
Section 28(1)(a) of the 1996 Act. Similarly, violating terms of the
contract, in effect, is in contravention of Section 28(3) of the 1996
Act.
68. In SsangyongEngg. & Construction Co. Ltd. v. NHAI, (2019)
15 SCC 131 this Court specifically dealt with the 2015
Amendment which inserted sub-section (2-A) in Section 34 of the
1996 Act. It was held that "patent illegality appearing on the face
of the award" refers to such illegality as goes to the root of matter,
but which does not amount to mere erroneous application of law. It
was also clarified that 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 [ See SsangyongEngg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131]. Further, it
was observed, reappreciation of evidence is not permissible under
this category of challenge to an arbitral award
[See SsangyongEngg. & Construction Co. Ltd. v. NHAI, (2019)
15 SCC 131].
Perversity as a ground of challenge
69. Perversity as a ground for setting aside an arbitral award was
recognised in ONGC Ltd. v. Western Geco International Ltd.,
(2014) 9 SCC 263. Therein it was observed that an arbitral
decision must not be perverse or so irrational that no reasonable
person would have arrived at the same. It was observed that if an
award is perverse, it would be against the public policy of India.
70. In Associate Builders v. DDA, (2015) 3 SCC 49 certain tests
were laid down to determine whether a decision of an Arbitral
Tribunal could be considered perverse. In this context, it was
observed that where:
(i) a finding is based on no evidence; or
(ii) an Arbitral Tribunal takes into account something
irrelevant to the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, such
decision would necessarily be perverse.
However, by way of a note of caution, it was observed that when a
court applies these tests it does not act as a court of appeal and,
consequently, errors of fact cannot be corrected. Though, a possible
view by the arbitrator on facts has necessarily to pass muster as the
arbitrator is the ultimate master of the quantity and quality of
evidence to be relied upon. It was also observed that an award
based on little evidence or on evidence which does not measure up
in quality to a trained legal mind would not be held to be invalid on
that score.
71. In SsangyongEngg. & Construction Co. Ltd. v. NHAI, (2019)
15 SCC 131, which dealt with the legal position post the 2015
Amendment in Section 34 of the 1996 Act, it was observed that a
decision which is perverse, 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. It was
pointed out that an award based on no evidence, or which ignores
vital evidence, would be perverse and thus patently illegal. It was
also observed that 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 by the parties, and therefore, would also have to be
characterised as perverse [ See SsangyongEngg. & Construction
Co. Ltd. v. NHAI, (2019) 15 SCC 131].
72. The tests laid down in Associate Builders v. DDA, (2015) 3
SCC 49 to determine perversity were followed in SsangyongEngg.
& Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 and later
approved by a three-Judge Bench of this Court in Patel Engg.
Ltd. v. North Eastern Electric Power Corpn. Ltd., (2020) 7 SCC
73. In a recent three-Judge Bench decision of this Court in DMRC
Ltd. v. Delhi Airport Metro Express (P) Ltd., (2024) 6 SCC 357,
the ground of patent illegality/perversity was delineated in the
following terms: (SCC p. 376, para 39)
"39. In essence, the ground of patent illegality is available
for setting aside a domestic award, if the decision of the
arbitrator is found to be perverse, or so irrational that no
reasonable person would have arrived at it; or the
construction of the contract is such that no fair or
reasonable person would take; or, that the view of the
arbitrator is not even a possible view. 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 under the head of "patent illegality".
An award without reasons would suffer from patent
illegality. The arbitrator commits a patent illegality by
deciding a matter not within its jurisdiction or violating a
fundamental principle of natural justice."
Scope of interference with an arbitral award
74. The aforesaid judicial precedents make it clear that while
exercising power under Section 34 of the 1996 Act the Court does
not sit in appeal over the arbitral award. Interference with an
arbitral award is only on limited grounds as set out in Section 34 of
the 1996 Act. A possible view by the arbitrator on facts is to be
respected as the arbitrator is the ultimate master of the quantity and
quality of evidence to be relied upon. It is only when an arbitral
award could be categorised as perverse, that on an error of fact an
arbitral award may be set aside. Further, a mere erroneous
application of the law or wrong appreciation of evidence by itself is
not a ground to set aside an award as is clear from the provisions of
sub-section (2-A) of Section 34 of the 1996 Act.
75. InDyna Technologies (P) Ltd. v. Crompton Greaves Ltd.,
(2019) 20 SCC 1, paras 27-43, a three-Judge Bench of this Court
held that courts need to be cognizant of the fact that arbitral awards
are not to be interfered with in a casual and cavalier manner, unless
the court concludes that the perversity of the award goes to the root
of the matter and there is no possibility of an alternative
interpretation that may sustain the arbitral award. It was observed
that jurisdiction under Section 34 cannot be equated with the
normal appellate jurisdiction. Rather, the approach ought to be to
respect the finality of the arbitral award as well as party's autonomy
to get their dispute adjudicated by an alternative forum as provided
under the law.
*****
Scope of interference with the interpretation/construction of a
contract accorded in an arbitral award
84. An Arbitral Tribunal must decide in accordance with the terms
of the contract. In a case where an Arbitral Tribunal passes an
award against the terms of the contract, the award would be
patently illegal. However, an Arbitral Tribunal has jurisdiction to
interpret a contract having regard to terms and conditions of the
contract, conduct of the parties including correspondences
exchanged, circumstances of the case and pleadings of the parties.
If the conclusion of the arbitrator is based on a possible view of the
matter, the Court should not interfere [See: SAIL v. Gupta Brother
Steel Tubes Ltd., (2009) 10 SCC 63; Pure Helium India (P)
Ltd. v. ONGC, (2003) 8 SCC 593; McDermott International
Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181; MMTC
Ltd. v. Vedanta Ltd., (2019) 4 SCC 163]. But where, on a full
reading of the contract, the view of the Arbitral Tribunal on the
terms of a contract is not a possible view, the award would be
considered perverse and as such amenable to interference [South
East Asia Marine Engg. & Constructions Ltd. v. Oil India Ltd.,
(2020) 5 SCC 164].
Whether unexpressed term can be read into a contract as an
implied condition
85. Ordinarily, terms of the contract are to be understood in the
way the parties wanted and intended them to be. In agreements of
arbitration, where party autonomy is the grund norm, how the
parties worked out the agreement, is one of the indicators to
decipher the intention, apart from the plain or grammatical
meaning of the expressions used [BALCO v. Kaiser Aluminium
Technical Services Inc., (2016) 4 SCC 126].
86. However, reading an unexpressed term in an agreement would
be justified on the basis that such a term was always and obviously
intended by the parties thereto. An unexpressed term can be
implied if, and only if, the court finds that the parties must have
intended that term to form part of their contract. It is not enough for
the court to find that such a term would have been adopted by the
parties as reasonable men if it had been suggested to them. Rather,
it must have been a term that went without saying, a term necessary
to give business efficacy to the contract, a term which, although
tacit, forms part of the contract [Adani Power (Mundra)
Ltd. v. Gujarat ERC, (2019) 19 SCC 9].
87. But before an implied condition, not expressly found in the
contract, is read into a contract, by invoking the business efficacy
doctrine, it must satisfy the following five conditions:
(a) it must be reasonable and equitable;
(b) it must be necessary to give business efficacy to the
contract, that is, a term will not be implied if the contract is
effective without it;
(c) it must be obvious that "it goes without saying";
(d) it must be capable of clear expression;
(e) it must not contradict any terms of the contract [Nabha
Power Ltd. v. Punjab SPCL, (2018) 11 SCC 508, followed
in Adani Power case, (2019) 19 SCC 9].
(emphasis supplied)
50. In view of the above extract, it stands clearly established that an
arbitral award which proceeds on findings unsupported by evidence,
or which ignores vital evidence placed before the arbitral tribunal, is
liable to be set aside and that a finding rendered without considering
material evidence on record would amount to perversity and would
attract judicial interference under Section 34 of the Act.
51. In the present case, the central controversy before the learned
Arbitrator concerned the authenticity and binding nature of the
Vacation Ownership Agreement dated 31.07.1996, relied upon by the
Petitioner. The Petitioner‟s claim was founded upon the said
Agreement, whereas the Respondent relied upon a different version of
the Vacation Ownership Agreement.
52. A perusal of Paragraph No. 18 of the Impugned Award would
reveal that the learned Arbitrator rejected the Agreement relied upon
by the Petitioner primarily on the ground that the said document
produced by the Petitioner was incomplete, inasmuch as the second
page of the document had not been produced, and further proceeded to
accept the Agreement produced by the Respondent as to be the
operative contractual document governing the relationship between
the parties.
53. In the considered view of this Court, such reasoning does not
withstand scrutiny. The rejection of the Petitioner‟s Agreement was
undertaken without any meaningful examination of the circumstances
surrounding its execution or the role of the individuals through whom
the transaction was allegedly concluded.
54. The Petitioner‟s case before the learned Arbitrator was that the
Agreement was entered into pursuant to negotiations with the Area
Sales Representative, who also produced a letter of authority before
the Petitioner to prove his bona fide authority to enter into the said
Agreement. Further, the Respondent, in their Statement of Defence,
before the learned Arbitrator, never denied the existence or execution
of the said Agreement, rather it merely denied its operation and effect
on the ground that their employee, with whom the Petitioner entered
into the Agreement, on behalf of the Respondent, was not „authorised‟
to enter into such an Agreement.
55. In this context, the „Doctrine of Indoor Management' also
assumes relevance. The said doctrine protects third parties dealing
with a company in good faith by entitling them to presume that the
internal requirements of the company have been duly complied with.
Therefore, where an individual represents himself as an authorised
representative of a company and enters into a transaction on its behalf,
a third party dealing with such individual cannot ordinarily be
expected to inquire into the internal authorisation of the company.
Consequently, the Respondent cannot avoid the consequences of the
Agreement merely by asserting that its employee lacked internal
authority to enter into the same.
56. The record of the arbitral proceedings indicates that the
Petitioner had, in fact, made an Application seeking the summoning of
certain individuals allegedly in employement of the Respondent and
involved in the transaction in question. These individuals, including
Mr. Anuroadh Srivastava, an employee of the Respondent during the
relevant time, who, according to the Respondent, lacked the authority
to execute the Agreement relied upon, were stated to be signatories to
the said Agreement. However, the learned Arbitrator declined this
request, primarily on the ground that the said individuals were no
longer in the employment of the Respondent.
57. In the opinion of this Court, the mere fact that such individuals
were no longer in the employment of the Respondent could not have
constituted a valid ground for refusing their examination, particularly
when their testimony had a direct bearing on the authenticity of the
disputed Agreement.
58. The adjudication of the dispute before the learned Arbitrator
primarily hinged upon the question of the authenticity and validity of
the Agreement and the authority of the representative through whom
the transaction was concluded. The refusal to facilitate the
examination of such witnesses, who are central to the dispute,
effectively deprived the Petitioner of the opportunity to establish the
circumstances under which the Agreement came to be executed.
59. It is a settled and fundamental principle of Arbitration law that
notwithstanding the procedural flexibility accorded to an arbitral
tribunal, such flexibility cannot be exercised in a manner that
compromises the core tenets of fairness and justice. The conduct of
arbitral proceedings must, at all times, remain aligned with the basic
principles of natural justice, which constitute the bedrock of any
adjudicatory process. These principles, inter alia, require that no party
be condemned unheard and that the decision-making process be fair,
transparent, and free from arbitrariness.
60. In this context, it is apposite to refer to Section 18 of the Act,
which statutorily embodies these foundational requirements. The
provision mandates that the parties shall be treated with equality and
that each party shall be afforded a full and fair opportunity to present
its case. This obligation is not merely procedural in nature but goes to
the very root of the legitimacy of the arbitral process. Any deviation
from these principles, whether by denial of adequate opportunity or
unequal treatment, would vitiate the proceedings and render the
resultant award vulnerable to challenge. Section 18 of the Act is
reproduced herein under for ready reference:
"Section 18. Equal treatment of parties. -
The parties shall be treated with equality and each party shall be
given a full opportunity to present his case."
61. In the present case, the refusal of the learned Arbitrator to
permit the examination of the individuals who were directly party to
the said disputed Agreement, entered on behalf of the Respondent,
effectively curtailed the Petitioner‟s ability to substantiate the
circumstances in which the Agreement relied upon by him came to be
executed. Such a course of action is inconsistent with the statutory
mandate embodied in Section 18 of the Act and consequently
undermines the fairness of the arbitral process.
62. Further, at this juncture, this Court deems it apposite to advert
to Section 34(2)(a)(iii) of the Act. The relevant portion of Section 34
of the Act is reproduced herein under:
"Section 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
sub-section (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
....."
(emphasis supplied)
63. A perusal of the same makes it apparent that even after having a
circumscribed scope, an arbitral award may be set aside if the party
making the application under Section 34 establishes that it "was
otherwise unable to present his case". The said expression has been
judicially interpreted to include situations where the conduct of the
arbitral proceedings effectively deprives a party of a meaningful
opportunity to present material evidence in support of its case.
64. Where a party seeks production of witnesses, whose testimony
bears directly upon the core issue in dispute, a summary and
unintelligible rejection of such request, without any sound reasoning,
would result in the party being effectively disabled from
substantiating its case. Such a situation would fall squarely within the
ambit of Section 34(2)(a)(iii) of the Act and would, therefore, call for
the setting aside of the Arbitral Award rendered as a result of such
proceedings.
65. In the present case, once the learned Arbitrator declined the
Petitioner‟s request to summon the very individuals through whom the
transaction was allegedly negotiated and concluded, the Petitioner was
effectively precluded from substantiating its case regarding the
authenticity, validity, and binding nature of the Agreement. The
refusal to permit the examination of such material witnesses, who
were directly connected with the execution and circumstances
surrounding the Agreement, resulted in a situation where a crucial
evidentiary avenue was foreclosed. Consequently, the adjudication of
the dispute proceeded in the absence of oral testimony that could have
materially assisted in ascertaining the true nature of the transaction
and the respective roles of the parties involved.
66. Further, it is an admitted position, as recorded in the Impugned
Award itself, that both parties dispensed with their right to cross-
examination. As a result, neither the competing rival Agreements nor
their respective signatories were subjected to any form of cross-
examination. In such a scenario, where the evidentiary record
remained untested, the selective reliance by the learned Arbitrator on
one Agreement while discarding the other, without the benefit of
cross-examination and in the absence of cogent, reasoned justification,
assumes serious significance. Such an approach not only undermines
the evidentiary rigor expected in arbitral adjudication but also renders
the findings susceptible to being characterized as perverse, arbitrary,
and contrary to the fundamental policy of Indian law.
67. More significantly, the learned Arbitrator relied upon Clause
7(G) of the Agreement produced by the Respondent to conclude that
all earlier representations or agreements stood superseded. This
approach, however, suffers from a fundamental infirmity. The very
question before the learned Arbitrator was which of the two
documents constituted the binding Agreement between the parties. By
relying upon a clause contained in the Respondent‟s Agreement to
reject the Petitioner‟s Agreement without first independently
determining the authenticity and binding nature of the respective
documents, the learned Arbitrator effectively assumed the correctness
of the Respondent‟s document at the outset.
68. Such reasoning, in the opinion of this Court, amounts to a
circular determination, where the Respondent‟s Agreement was
treated as binding in order to reject the Petitioner‟s Agreement, and
the Petitioner‟s Agreement was rejected precisely because the
Respondent‟s Agreement purported to supersede all earlier
arrangements. This cannot be regarded as a rational or legally
sustainable evaluation of the dispute.
69. The arbitral proceedings further reveal that the Petitioner had
indeed filed an Application seeking production of certain documents,
including the purchase agreement and related documents, as well as an
Application seeking the presence of certain individuals who were
allegedly associated with the Respondent. These applications were
dismissed by the learned Arbitrator vide Order dated 25.10.2007. The
said Applications were also rejected in a summary manner, without
any substantive reasoning.
70. The learned Arbitrator observed that the documents sought
were "supposed to be with the claimant also" and that the witnesses
sought to be examined were "no longer in the employment of the
Respondent". However, the learned Arbitrator did not examine
whether the documents sought were material for adjudication of the
dispute, nor did the learned Arbitrator consider whether the production
of the said witnesses was necessary for determining the authenticity of
the rival Agreements relied upon by the parties.
71. An arbitral tribunal is undoubtedly vested with procedural
flexibility. Nevertheless, the proceedings must be conducted in a
manner consistent with the principles of natural justice, including the
requirement that each party be afforded a fair and reasonable
opportunity to present its case.
72. The rejection of the Petitioner‟s Applications, seeking
production of documents and examination of witnesses, coupled with
the summary rejection of the Agreement relied upon by the Petitioner,
materially impaired the Petitioner‟s ability to substantiate his case.
73. The cumulative effect of these circumstances leads this Court to
conclude that the learned Arbitrator failed to properly evaluate the
material evidence placed on record and rejected the Petitioner‟s
Agreement without adequate reasoning. The findings recorded in the
Impugned Award therefore suffer from perversity in appreciation of
evidence and violation of the fundamental policy of Indian law.
74. The law governing arbitral review under Section 34 of the Act
strikes a delicate balance between judicial restraint and judicial
correction. While courts must ordinarily defer to the autonomy of
arbitral adjudication and refrain from substituting their own view on
the merits of the dispute, such deference cannot extend to sustaining
an award that proceeds on a fundamentally flawed evaluative process.
Where the arbitral tribunal disregards material evidence, adopts a
circular line of reasoning, or arrives at conclusions unsupported by the
record, the resulting determination ceases to be a legitimate exercise
of arbitral discretion and instead falls within the realm of perversity.
In such circumstances, judicial intervention is not an intrusion into
arbitral autonomy but a necessary exercise to preserve the integrity of
the adjudicatory process.
75. Tested on the touchstone of the principles laid down in line of
precedents, which have been noted and summarised in OPG Power
Generation (supra), this Court is of the considered view that the
Impugned Award cannot be sustained. The learned Arbitrator
accepted one version of the Agreement and rejected the other without
subjecting either document to any evidentiary scrutiny, and further
relied upon a clause contained in the Respondent‟s Agreement to
invalidate the Petitioner‟s Agreement, without first determining which
of the two documents constituted the binding contract between the
parties.
76. Such reasoning reflects a clear non-application of mind and
results in findings which cannot be said to represent a plausible or
rational view of the material on record. The Impugned Award
therefore suffers from perversity in appreciation of evidence and
violation of the fundamental policy of Indian law, thereby attracting
interference under Section 34 of the Act.
77. Consequently, the refusal to permit the examination of material
witnesses, when viewed in conjunction with the summary and
unreasoned rejection of the Petitioner‟s Application seeking the
examination of such witnesses, effectively resulted in a negation of
the Petitioner‟s Agreement, which leads this Court to conclude that
the Petitioner was effectively prevented from proving his case, which
is against the basic notions of justice causing perversity going to the
very root of the matter, and thereby rendering the Impugned Award
subject to judicial interference.
DECISION:
78. In view of the foregoing discussion and the comprehensive
analysis undertaken hereinabove, this Court is of the considered
opinion that the Impugned Arbitral Award dated 11.08.2008 cannot
be sustained in law, and is therefore set aside in exercise of the powers
conferred under Section 34 of the Act.
79. Accordingly, the present Petition, along with pending
Application(s), if any, is disposed of in the above terms.
80. No order as to costs.
HARISH VAIDYANATHAN SHANKAR, J.
APRIL 1, 2026/DJ
