Uttar Pradesh Power Transmission Corp. ... vs Shri Ram Gopal Agarwal

APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 No. - 21 of 2026

Uttar Pradesh Power Transmission Corp. Ltd. And Another

.....Appellant(s)

Versus

Shri Ram Gopal Agarwal

.....Respondent(s)

Counsel for Appellant(s)

:

Puneet Chandra, Utkarsh Srivastava

Counsel for Respondent(s)

:

Court No. - 5

HON'BLE ALOK MATHUR, J.

HON'BLE AMITABH KUMAR RAI, J.

1. Heard Sri Puneet Chandra, along with Mr. Utkarsh Srivastava, Ms. Niharika Sahai, Mr. Somnath Shukla and Mr. Shreyash Shukla learned counsel appearing on behalf of the appellant.

2. By means of present arbitration appeal U/S 37 of Arbitration and Conciliation Act, the petitioner has challenged the order dated 10.02.2026 passed by Commercial Court-I, Lucknow in Arbitration Case No. 71 of 2021 (Uttar Pradesh Power Corporation Vs. Ram Gopal Agarwal) and rejected the application of the petitioner U/S 34 of the Act of 1996.

3. It has been submitted on behalf of the petitioner that opposite parties were the claimants in the arbitration proceedings before the sole Arbitrator and it is described as M/S Ram Gopal Agarwal which is a firm and also described as contractor and granted a contract by the appellant for construction special type foundation (Well Foundation) for 220 KV, Unnao ? Phoolbagh Transmission line in river Ganga at location No. 22/2 Kanpur (vide Agreement No. K ? 32/ECTCJ/2018-19, dated 21.02.2019).

4. For the aforesaid work, opposite parties made a bid and the bid being the lowest was duly accepted and after initiation with the petitioner the price was further reduced by 8% of the quoted rates. It has been submitted on behalf of the petitioner that the contracted work was between Kanpur and Unnao between two flowing in two streams of river Ganga ? one on the river bank of Unnao side and the other on the bank of Kanpur side and to make it accessible for execution of the work, an approach road was required to be constructed. It was further stated that the construction of the road was not part of the contracted work but was necessary to execute the contract by the opposite parties and further similar other works were claimed to have been done by the opposite parties for the purposes of execution of the contracted work which was subject matter of the claim during arbitration proceedings.

5. It was the case of the opposite parties that at the time of the sinking of the wells in the river bed, they have encountered a heavy iron chain, which had been left out in the past in connection with some other work by a third party, and was obstructing the sinking of the well. The said iron chain had to be cut and removed and this aspect was also part of the extra work done by them.

6. The claim of the opposite parties with regard to the extra work and other conditions of contract were rejected by the petitioners due to which the arbitration clause was invoked by the opposite parties and accordingly it is the petitioners who had appointed a former Judge of this Court as sole Arbitrator.

7. The Arbitrator had formulated 10 issues for determination during arbitration. The summary of the claims made and the findings of the Arbitrator are summarized in the following chart :-

S.No.

Particulars of Claim

Amount claimed

Status

1

For 961.62 m of work done under Item No.16 of BOQ

Rs.57,69,720/-

Rejected

2

For500RMofroadconstructedunderItemNo.17ofBOQ

Rs.23,50,000/-

Rejected

3

Extra payment of 8% of the contract value due to the work being directed to be done from the No-entry zone Phoolbagh side

Rs.53,44,000/-

Rejected

4

Release of three FDRs worth Rs. 20,00,000/- each

Allowed

5

Payment of unrealized period overhead charges due to prolongation of contract

Rs.42,48,800/-

Partially allowed to the extent of Rs. 21,00,000/-

6

Payment of maintenance of temporary service road constructed under Item No. 17 of BOQ

Rs.15,00,000/-

Rejected

7

Escalation costs

Rs.7,71,258/-

Rejected

8

Refund of withheld amounts

Rs.39,62,078/-

Partially allowed to the extent of Rs. 39,27,337/-

9

Costs of the arbitration

Rs.10,00,000/-

Partially allowed to the extent of Rs. 7,00,000/-

8. A perusal of the aforesaid would indicate that out of 9 amounts claimed by the opposite parties, 5 claims were out-rightly rejected. Claim No. 4 was allowed while claim No. 5, 8 & 9 were partially allowed. With regard to Claim No. 5 pertain to the claim of opposite party on account of prolongation of the contract execution time on account of extra work done by him and due to fault on the part of Corporation which were not attributable to the contractor.

9. Before the Arbitrator, it was contended that the commencement of the work was 11.11.2018 and the schedule completion of the work as per contract was 10.03.2019. It is submitted that on account of extra item of the work relating to construction of hume pipe bridge and extra item of cutting of heavy iron chain which encountered sinking of the Well, it took three months extra work which could be completed by 31.05.2019. It was further considered that the delay was also on account of location changed by the River Crossing Committee for the Ganga river and the Tower of 22/2 was shifted by 80 meters into river and all this happened subsequent to the commencement of the work by the opposite parties. It is on this account that a claim of Rs. 42,48,800/- was made by the opposite parties. The petitioner before the Arbitrator had contended that the delay had occurred on account of slow work by the opposite parties but their own witness had stated on affidavit and admitted that certain extra work was to be carried out by the opposite parties and therefore the date of completion of work was extended to 31.05.2019.

10. The Arbitrator also considered various letters and communications between petitioner and the opposite parties from which it transpired that due to factors beyond the control of the contractor there was a delay in completion of the said work. He further found that the construction of the hume pipe bridge and the chain cutting were extra work which was not disclosed by the opposite parties at the time of grant of contract.

11. It is in the aforesaid circumstances and after considering the entire evidence on record, the Arbitrator was of the view that the prolongation time in execution of the work is solely attributable to the fault of the petitioner who had failed to conduct necessary inspection and survey prior to signing of the contract and prior to fixing of the date for the commencement of the work and therefore found that opposite parties were entitled to recover damages for suffering additional overhead charges for this period.

12. With regard to quantum of the award granted by the Arbitrator, he duly considered that the amount of contract was Rs. 6,23,16,200/- and in case 10% of the aforesaid amount is held to be entitled to the opposite parties on account of overhead charges and the prime cost of the work comes to Rs. 5,65,51,090/- and after making necessary computation was of the view that the amount admissible to the opposite parties was 21 lakhs which he was entitled to receive on account of claim No. 5.

13. In the application U/S 34 of the Act, by means of impugned order the commercial court while considering the arguments of the petitioner, found that there is no such ground was raised by the petitioner so as to interfere with the award in exercise of powers U/S 34 of the Arbitration and Conciliation Act and rejected the contention of the petitioner. 14. In the case of ?Mmtc Ltd. vs M/S.Vedanta Ltd., 2019 (4) SCC 163? the Hon?ble Supreme Court has observed:- ?12. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the Court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the Court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the Court under Section 34 and by the Court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.?

15. In the case of Reliance Infrastructure Ltd. v. State of Goa, (2024) 1 SCC 479 : 2023 SCC OnLine SC 604 at page 514; the Hon'ble Supreme Court has observed in MMTC Limited (Supra), this Court took note of various decisions including that in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] and exposited on the limited scope of interference under Section 34 and further narrower scope of appeal under Section 37 of the 1996 Act, particularly when dealing with the concurrent findings (of the arbitrator and then of the Court). This Court, inter alia, held as under : (MMTC case [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163 : (2019) 2 SCC (Civ) 293] , SCC pp. 166-67, paras 11-14)

?11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the ?fundamental policy of Indian law? would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] reasonableness. Furthermore, ?patent illegality? itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.

12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. (See Associate Builders v. DDA [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] Also see ONGC Ltd. v. Saw Pipes Ltd. [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705] ; Hindustan Zinc Ltd. v. Friends Coal Carbonisation [Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445] ; and McDermott International Inc. v. Burn Standard Co. Ltd. [McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181] )

13. It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the Court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the Court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the Court under Section 34 and by the Court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.

16. In Ssangyong Engg. [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] , this Court has set out the scope of challenge under Section 34 of the 1996 Act in further details in the following words : (SCC pp. 170-71, paras 37-41)

?37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within ?the fundamental policy of Indian law?, namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.

38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.

39. To elucidate, para 42.1 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.

40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A).

41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , while no longer being a ground for challenge under ?public policy of India?, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.?

17. The limited scope of challenge under Section 34 of the Act was once again highlighted by this Court in PSA Sical Terminals [PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust, (2023) 15 SCC 781 : 2021 SCC OnLine SC 508] and this Court particularly explained the relevant tests as under : (SCC paras 40 to 42)

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

41. A decision which is perverse, though would not be a ground for challenge under ?public policy of India?, would certainly amount to a patent illegality appearing on the face of the award. However, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.

42. To understand the test of perversity, it will also be appropriate to refer to paras 31 and 32 from the judgment of this Court in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , which read thus : (SCC pp. 75-76)

?31. The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law 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.

32. A good working test of perversity is contained in two judgments. In CCE & Sales v. Gopi Nath & Sons [CCE & Sales v. Gopi Nath & Sons, 1992 Supp (2) SCC 312] , it was held : (SCC p. 317, para 7)

?7. ? It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law.?

18. After carefully considering the award, various precedents and analyzing the legal propositions laid down therein, we find no merit in the contentions raised. the findings recorded in the impugned order cannot, by any stretch of imagination, be termed as perverse, irrational or legally infirm. On a holistic review of the record, we find no infirmity, illegality or jurisdictional error in the decision of the Commercial Court that would warrant interference by this Court.

19. It is noticed that the commercial court merely examined the arguments of the petitioner on the touchstone of the grounds mentioned under Section 34 of the Act of 1996 and found that none of the grounds are referable to the grounds mentioned U/S 34 of the Act and accordingly has rejected the application.

20. We have gone through the award, wherein various submissions made on behalf of claimants and the opposite have been duly considered as well as the evidence which were placed before the Arbitrator, we find that on all the issues, the Arbitrator has gone through the entire material duly considered the arguments of respective parties while deciding 9 issues framed by him. The issues which are allowed in favour of claims have been duly considered by him as discussed above and we do not find any infirmity in the same. 21. No ground made out. The appeal stands dismissed.

(Amitabh Kumar Rai,J.) (Alok Mathur,J.) May 7, 2026

Ravi/