Gadi Praveen Kumar, J.
1. Heard Sri Surya Satish, learned counsel appearing for the appellant and Sri Cheruku Ravi Kumar, the learned Assistant Government Pleader representing the learned Advocate General appearing for the respondent No.1.
2. The present Appeal is filed by the appellant assailing the order dated 08.02.2005 passed by the XIV Additional Chief Judge, City Civil Court at Hyderabad (Fast Track Court) (for short ‘the Trial Court’), which is filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short ‘the 1996 Act’) to set aside the Award dated 23.05.2001 passed by the learned Arbitrators in favour of the respondent No.1.
3. The respondent No.1 is the Andhra Pradesh Nutrition Council, a Society registered under the Telangana Area Public Societies Registration Act, 2001 (erstwhile united Andhra Pradesh) and fully owned by the Government. The respondent No.1 Society is a non-profit Organization established to provide nutritious food to school and pre-school children, pregnant women and lactating mothers and others by the Government.
4. On 30.09.1996, the respondent No.1 called tenders for supply of golden yellow coloured jaggery powder required for manufacturing the nutritious food to supply to the children etc. Initially, the said tender was allotted in favour of a third party, and on the appellant filing Writ Petition, the appellant’s case was also considered, and after negotiations, the tender of the appellant was accepted by proceedings dated 31.01.1997. The appellant and respondent No.1 have entered into an agreement on 04.01.1997 for supply of 4.200 Metric Tons (MTs) of jaggery powder. The appellant agreed to supply 420 MTs of jaggery powder in January, 1997 and thereafter at the rate of 378 MTs of jaggery powder each month upto November, 1997, but the appellant could not keep up the said promise and there was delay in supplying the jaggery powder from January, 1997 itself and as such, the respondent No.1 purchased sugar from the Nizam’s Sugar Factory. The appellant could supply 769.89 MTs of jaggery powder only between 22.01.1997 and 11.03.1997 and subsequently did not supply at all. The respondent No.1 initially issued notice dated 05.04.1997 calling upon the appellant to resume supply within three days and treating that otherwise, the agreement would be cancelled. The appellant did not resume the supply. As such, the agreement was terminated by letter dated 17.04.1997.
5. The respondent No.1 again purchased sugar for some time and later called for fresh tender and entrusted the work of supply of jaggery powder to two other Companies at a higher price. The respondent No.1 forfeited the Earnest Money Deposit (EMD) furnished by the appellant and encashed the Bank Guarantee and also demanded the appellant for payment of extra amount incurred towards purchase of sugar and payment of extra amounts to the new contractors. The appellant did not comply the same.
6. Ultimately, at the instance of both parties, the High Court appointed two Retired Judges i.e. (1) Sri Justice A.Venkatrami Reddy and (2) Sri Justice S.Dasaratharami Reddy as Arbitrators and Retired Chief Justice i.e., Sri Justice A.Lakshman Rao as the Presiding Arbitrator, before whom the both parties herein filed pleadings and adduced oral and documentary evidence.
7. The respondent No.1 claimed an amount of Rs.1,12,80,306.81 paise under different Heads upto 04.12.1999 and a sum of Rs.54,44,216.05 paise as interest upto 04.12.1999 and future interest 24% p.a. from 05.11.1999. The appellant herein denied the said claim and made a counter-claim for Rs.1,84,84,710.46 paise with interest at 24% p.a. with quarterly rests.
8. Basing on the respective pleadings, the learned Arbitrator framed the following issues:
“i) Whether the respondent committed breach of the terms and conditions of the Order dated 03.01.1997 and the contract dated 04.01.1997?
(ii) Whether the claimant was justified in terminating the contract?
(iii) Whether the award of the contracts in favour of M/s.Christy Fried gram Industry and M/s.Vidarbha Jaggery Supplies is justified?
(iv) Whether the claimant is entitled to receive and the respondent is liable to pay Rs.1,12,80,307.00?
(v) Whether the claimant is entitled to receive and the respondent is liable to pay Rs.54,44,216/- towards interest from 01.12.1997 to 04.12.1999?
(vi) Whether the respondent is entitled to receive and the claimant is liable to pay Rs.1,03,55,906.00?
(vii) Whether the respondent is entitled to receive and the claimant is liable to pay Rs.81,28,804/- towards interest from 21.02.1997 to 04.12.1999?
(viii) Whether the claimant or respondent is entitled to future interest on the amounts claimed by them, and if so, at what rate?
(ix) Whether the claimant or the respondent is entitled to any other relief?”
9. Before the learned Arbitral Tribunal, on behalf of respondent No.1, Sri R.Bharathudu, Deputy Manager and Sri C.D. Deshmukh, Laboratory Chemist-C were examined and Exs.B-1 to B-312 were marked. On behalf of the appellant, Bansilal Agarwal was examined and Exs.A-1 to A-36 were marked.
10. Upon appreciation of oral and documentary evidence adduced by the parties, the learned Arbitral Tribunal passed Award on 23.05.2001 holding that the respondent No.1 is entitled to recover a sum of Rs.1,03,61,052-81 Ps from the appellant with interest at 12% p.a. from 01.12.1997 till the date of Award and at the same rate of 12% p.a. from the date of Award till payment. Sri Justice Dasaratha Rami Reddy, one of the learned Arbitrators gave a separate Award holding that the respondent No.1 is entitled to only forfeiture of the security deposit and bank guarantee and cannot claim anything more as per Clause 11 of the Agreement. The learned Presiding Arbitrator also gave a separate order stating that the respondent No.1 is entitled to Rs.1,03,052.81 Ps.
11. Being aggrieved by the Award dated 23.05.2001, the appellant herein approached the learned Trial Court by filing O.P.No.1282 of 2002, and the order passed therein is impugned herein.
12. Learned counsel for the appellant contended before the learned Trial Court that the contract is frustrated as the respondent No.1 terminated the contract during the period when the truck owners were on strike and it is impossible for the appellant herein to perform it’s part of the contract; that the respondent No.1 is not entitled to the difference between the price of sugar and jaggery powder, as it was not mentioned in the contract that sugar is the substitute for jaggery powder; and that the respondent No.1 is not entitled to forfeit the security deposit and also claim the difference between the price of sugar and jaggery powder and also the difference between the price of jaggery powder supplied by the other contractors and the price at which the appellant agreed to supply the jaggery powder, for the reason that Clause 11 of the agreement stipulates the forfeiture of security deposit and payment of one per cent per a day as penalty only.
13. On the other hand, the learned counsel appearing on behalf of respondent No.1 before the learned Trial Court supported the Award of the learned Arbitrators. Reliance was placed on the judgment of the Hon’ble Supreme Court in Oil and Natural Corporation Limited Vs. Saw Pipes Limited ((2003) 5 SCC 5) wherein it was held that the Award can be set aside if it is against the public policy, if it is contrary to fundamental policy of Indian law, or the Interest of India, or justice or morality or it is patently illegal.
14. Basing on the pleadings of the parties, the learned Trial Court framed the following points for consideration:
“(i) Whether the contract is frustrated due to the respondent terminating the contract when the truck owners were on strike?
(ii) Whether the respondent is not entitled to the difference between the price of sugar and the price of jiggery powder?
(iii) Whether the respondent is not entitled to forfeit the security deposit as well as to collect the excess amounts paid by it for purchase of sugar and for purchase of jiggery from other sources?”
15. The learned Trial Court while deciding the Point No.1 held that when compared Ex.A-25 letter addressed by the respondent No.1 to the appellant is dated 05.04.1997, Exs.A-26 and A-33 i.e. letters addressed by the appellant to the Deputy Manager of respondent No.1 and letter addressed by respondent No.1 to the appellant are dated 17.04.1997, which are actual termination notices, it is evident that the appellant is following the file in the office of the respondent No.1 with the active cooperation of the staff and officers of respondent No.1 and sending letters to save his own skin, and the appellant could have resumed supplies from the next date as required under Ex.A-25 notice instead of sending letter on the day requesting for reducing the Bank Guarantee amount etc. Similarly, on coming to know that the contract is being terminated on 17.04.1997 by Ex.A-33 letter, the appellant got the Ex.A-26 letter typed with the date ‘19.04.1997’, corrects it as ‘17.04.1997’ and submits the same. Therefore, upon reading all the documents, the learned Trial Court held that the contract was terminated on 17.04.1997, and as such, there is no frustration of contract.
16. While dealing with Point No.2 with respect to whether the respondent is not entitled to the difference between the price of sugar and the price of jaggery, the learned Trial Court held that the jaggery powder available in Andhra Pradesh is of inferior quality and the sugar is the next best nutritious food after the jaggery powder available in Tamil Nadu. As such, the respondent No.1 purchased the sugar at different intervals i.e., when the appellant failed to supply the jaggery powder in January, 1997 and in the interval between the stoppage of supply by the appellant and starting of supply by another contractor and again in the interval between the two contracts. The learned Trial Court further held that learned Arbitrators considered the purchase of sugar when the jaggery powder is not available and observed that the jaggery powder is preferred than sugar as it is considered more nutritious, and that the learned Arbitrators also found that as it would take time for calling for tenders from the contractors, as this quality of the jaggery powder is not available in the State of Andhra Pradesh, the respondent No.1 is justified in purchasing the sugar. Considering the said observations of the learned Arbitrators, the learned Trial Court rejected the contention of the appellant.
17. Similarly, while addressing the Point No.3 i.e. whether the respondent No.1 is entitled to forfeit the security deposit etc., the learned Trial Court held that Clause 11(a) and (b) of the agreement stipulates that any breach under any clause or clauses of these conditions, the contractor shall have rendered himself liable to pay compensation amounting to the whole security deposit, consequently, to terminate the contract and call for any other contractor and get work done through him and if there is any difference in the present rate contract and cost that may be incurred to complete the contract, the difference of the amount shall be recovered from the contractor out of the security deposit money and the balance due to the first party as on the date of the termination of the contract. The learned Trial Court further held that the respondent No.1 in its initial notice Ex.A-25 has only stated that they would forfeit the EMD and the contract would be terminated, if the supplies are not resumed within three days, and it was only mentioned that the jaggery powder is purchased from others and the loss sustained by the respondent No.1 would be recovered from the security deposit. The learned Trial Court therefore held that the respondent No.1 is entitled to recover the loss sustained by it from the appellant, and dismissed the OP.
18. Sri T.Surya Satish, learned counsel appearing for the appellant contended that respondent No.1 wanted to entrust the contract to other company i.e. M/s.Vidarbha Jaggery Supplies, Nagpur and that the respondent No.1 became inimical towards the appellant for filing the Writ Petition and setting aside the award of contract in favour of M/s.Vidarbha Jaggery Supplies and started vindictive attitude towards the appellant.
19. Learned counsel for the appellant further contended that the respondent No.1 purchased sugar even though the same was not authorized under the contract and deducted the purchase of sugar from the running bills, thereby caused the appellant financially crippled. It is further contended that the contract was terminated during the period of the strike of the Truck Owners, even though the respondent No.1 was informed about the impossibility of performing the contract initially for non-availability of jaggery powder during the period due to strike. Further, the respondent No.1 made wrongful claim by invoking Clause 11(a) and (b) of the agreement dated 04.01.1997. Once the respondent No.1 had issued notice stating that the contract stands terminated and forfeited the EMD by invoking Clause-7, respondent No.1 cannot again invoke Clause-11, which is contrary to the contract.
20. Learned counsel for the appellant urged that respondent No.1 cannot purchase the sugar in place of jaggery powder under Ex.B-1 agreement even though no such agreement or consent was made by the parties to the contract and the said act amounts to unilateral modification of the contract which makes the contract illegal. Further, the respondent No.1 has no power under Ex.B-1 to deduct the expenditure incurred towards purchase of sugar as substitute to jaggery powder and deduct the same from the running bills.
21. It is further contended that majority of the learned Arbitrators misdirected themselves in reaching to something which is not part of the contract and thereby modified the contract between the parties and the same is impermissible under law.
22. Learned counsel for the appellant submitted that the learned Trial Court ought to have considered that the arbitrators have exceeded their jurisdiction and power to hold that sugar is substitute to jaggery powder contrary to the terms and conditions under Ex.B-1.
23. It is further contended that respondent No.1 is not justified in terminating the contract more particularly during the period of Indian Truck Operators’ strike and for the said reason, the appellant could not supply jaggery powder to the respondent No.1.
24. It is contended that the learned Trial Court failed to appreciate that majority of the Arbitrators erroneously held that the sugar is substitute to jaggery powder and that respondent No.1 purchased the same under the contract, while the minority arbitrators held that respondent No.1 purchased the sugar and the same is evident from the detailed purchases given from January, 1997 to December, 1997. It is further contended that majority of the arbitrators ought not to have held that respondent No.1 is entitled to forfeiture of EMD/Security deposits.
25. On the issue of substitution of the contract in the agreement, learned counsel for the appellant placed reliance on the judgment in Transmission Corporation of Andhra Pradesh and others M/s.GMR Vemagiri Power Generation Limited and another (AIR 2018 SC 2965/(2018) 3 SCC 716) wherein it was held that there cannot be modification of the contract and that what was spelt in the contract has to be taken into consideration and even the other forms of the term of the contract cannot be read into the contract.
26. Learned counsel for the appellant placed reliance on the decision in Suresh Kumar Wadhwa Vs. State of Madhya Pradesh and others ((2017) 16 SCC 757) and contended that the terms of contract cannot be altered unilaterally without consent of both parties.
27. Learned counsel for the appellant further placed reliance on the decision of the Hon’ble Supreme Court in Associate Builders Vs. Delhi Development Authority((2015) 3 SCC 49) and contended that the findings of the Arbitral Tribunal are arbitrary and the same to be set aside since the Arbitral Tribunal must decide in accordance with the terms of the contract.
28. Learned counsel for the appellant placed reliance on the decision in Sepvo Electric Power Construction Corporation Vs. GMR Kamalanga Energy Ltd (2025 SCC Online SC 2088) on the point that the Arbitrator cannot go outside the scope of the contract.
29. Per contra, Sri Cheruku Ravi Kumar, learned Assistant Government Pleader representing on behalf of the Office of the learned Advocate General appearing for the respondent No.1 vehemently contended that the learned Trial Court is justified in deciding the OP considering the findings arrived at by the learned Arbitral Tribunal and that the reasons adopted for arriving at such conclusion resulting in dismissal of the OP. In this context, he relied upon a decision in UHL Power Company Limited Vs. State of Himachal Pradesh ((2022) 4 SCC 116) and contended that the scope of CMA is very narrow and the jurisdiction conferred on the Courts under Section 34 of the 1996 Act is fairly narrow, when it comes to the scope of appeal under Section 37 of the 1996 Act, the jurisdiction of an Appellate Court in examining an order, setting aside or refusing to set aside an award is all the more circumscribed. It is therefore contended that in the absence of any grounds made the Arbitration Award or the order passed under Section 34 of the 1996 Act suffers from a violation of the provisions mentioned in Section 34(2), the scope of adjudication of the merits of the CMA is limited.
30. It is further contended that the appellant had not maintained the supply of jaggery powder as per the supply schedule which was part of the Contract Agreement and that the respondent No.1 is a fully owned Government Enterprise established with the main object to provide, expand and facilitate supply of nutritious foods to school and preschool children, pregnant women and lactating mothers and such other categories of beneficiaries of the Government may decide having regard to its social welfare program for improving the nutritional status of vulnerable sections of the lower income groups. It is further contended that since the appellant defaulted in supply of the jaggery powder right from the very beginning, the respondent No.1 was forced to buy an alternative material i.e. sugar to maintain the supply of nutritious products, and that the sugar was purchased as a last resort since at the relevant point of time, jaggery powder was not available in the State of Andhra Pradesh. It is contended that respondent No.1 being a Non-Profit Organization and a Society fully owned by the Government, was required to re-tender for the jaggery powder and during those spells, was constrained to purchase sugar, and this aspect was very well dealt by the learned Arbitral Tribunal and while noting Exs.A-8, A-10, A-12, A-14 to A-16 and Es.B-1 & B-2, the learned Arbitral Tribunal came to a conclusion that there was nothing wrong in procuring sugar as an alternative material for jaggery powder.
31. The learned Assistant Government Pleader places reliance upon Ex.B-32, which is a statement showing different heads to arrive at the amount as resultant loss for purchase of sugar. The concise version is as under:
| S.No. | Rupees | Description |
| 1. | 2,33,851.50 | Cost incurred for purchasing 150MTs of sugar (13.01.1997) |
| 2 | 6.41.802.00 | Cost incurred for purchasing 200MTs of sugar (05.05.1997) |
| 3. | 5,80,351.50 | Cost incurred for purchasing 150MTs of sugar (24.07.1997) |
| 4. | 5,93,851.50 | Cost incurred for purchasing 150MTs of sugar (05.08.1997) |
| 5. | 59,09,963.57 | Difference amount i.e. loss sustained in purchase of 1139.032 MTs of jaggery powder from M/s.ChristyFried Gram (15.05.1997- 22.06.1997) |
| 6. | 72,24,548.00 | Difference amount i.e. loss sustained in purchase of 1500 MTs of jaggery powder from M/s.Vidarbha(14.08.1997- 17.11.1997) |
| 7. | 26,780.00+ 26,800.00 | Advertisement charges, legal expenses |
| Total | (Valid claim of Rs.1,52,37,948.07/-)– (Security deposit + payment to be made towards supplies held by AP Foods Rs.48,76,895.26) = Rs.1,03,61,052.81/-) | |
33. Learned Assistant Government Pleader by placing reliance on Exs.A-26 and A-27 and B-1 dated 04.01.1997 justified the Award by the learned Arbitral Tribunal and contended that the learned Arbitral Tribunal, considering Section 73 of the Indian Contract Act, 1872, stated that the appellant pleaded that respondent took recourse to clause 11(a) of the Agreement, as such the respondent is not entitled to invoke the provision of clause 11(b) and recover the difference of amount. It is further contended that the learned Arbitral Tribunal contra-distincted Section 73 and 74 of the Indian Contract Act, 1872 and after minute dissection of the applicable case law on the issue, concluded that the appellant has committed breach of the terms and that respondent No.1 was justified in terminating the agreement.
34. Learned Assistant Government Pleader contended that though one of the learned Arbitrator Sri Justice Dasaratha Rami Reddy deferred from the findings rendered by the learned Presiding Arbitrator Sri Justice A.Lakshmana Rao and Sri Justice A.Venkata Rami Reddy, merely because there is a possibility of different interpretation, the same would not entail re-appreciation of evidence in an Appeal under Section 37 of the 1996 Act.
35. It is therefore contended that the concurrent findings recorded by both the learned Arbitral Tribunal as well as the learned Trial Court do not call for any indulgence by this Court.
36. Learned Assistant Government Pleader in support of his contentions relied upon the order of a Coordinate Bench of this Court in C.R.P.No.7291 of 2018 dated 07.01.2022, Kalyan Railway Corporation Limited Vs. Chenab Bridge Project Undertaking ((2023) 9 SCC 85), National Highways Authority of India Vs. Hindustan Construction Company Limited ((2024) 6 SCC 809) and Somdatt Builders-NCC-NEC (JV) Vs. National Highways Authority of India and others ((2025) 6 SCC 757), and prayed for dismissal of the Appeal.
37. We have given our earnest contentions raised and perused the voluminous record.
38. The contention of the appellant that the learned Arbitral Tribunal ought to have granted damages in terms of purchase of alternative to jaggery powder i.e. sugar, particularly in the light of the forfeiting of the security deposit, has been duly considered. The record reveals that the appellant failed to comply the agreed supply schedule, which constituted a fundamental breach of the terms of the contract. The obligation to supply jaggery powder was not merely contractual but was also linked to a welfare scheme aimed at providing nutritious food to school children, pregnant women, and lactating mothers.
39. Upon considering the judgment passed by the learned Trial Court, considering the material both oral and documentary placed on record, the termination of the contract notice under Ex.A-33 dated 17.04.1997 was issued long after truck owners calling off the strike. The appellant was asked to release the total payments under Ex.A-26 as per the supplies along with the security deposit and EMD and as such, the appellant understood Ex.A-25 as termination notice, and appellant could have resumed the supply from the next day under Ex.A-25, instead he sent a letter on the same day requesting for refund of the Bank Guarantee. The appellant’s conduct, particularly the request for refund of bank guarantee instead of resuming supply shows a clear intention not to perform contractual obligations. This is in contrary to their submission that contract is frustrated under Section 56 of the Indian Contract Act. The doctrine of frustration applies only when performance becomes impossible, not merely difficult or inconvenient.
40. The respondent No.1 called tenders from Tamil Nadu and sought supply of jaggery powder, since respondent No.1 is unable to procure the jaggery powder in open market within the State of Andhra Pradesh. Therefore, respondent No.1 resorted to purchase sugar that too from Nizam Sugars Limited, which is fully controlled by the Government, as the Officers thought that if they purchase the same from the private mills, collusion or corruption would be attributed to them.
41. Clause 11(a) and (b) of the agreement states as under:
“(11) In any case of breach under any clause or clauses of these conditions, the contract shall have rendered himself liable to pay compensation amounting to the whole security. Deposit (Whether deducted in one sum or deducted in instalments) the first party shall have powers to adopt the following forces as may deemed best, suited to its interests:
(a) To rescind the contract of which recession notice in writing to the contract shall be conclusive evidence and in which case the security deposit of the contract together with such sum or sums due to him under the contract shall stand forfeited and be absolutely at the disposal of A.P.Foods, [b] to terminate the contract and call any other contractor and get work done through him and if there is any difference in the present rate contract and cost that may be incurred to complete the contract, the difference of the amount shall be recovered from the contractor out of the security deposited and the balance due to the first party as on the date of termination of the contract”.
42. Clause 11 of the agreement explicitly provides for a dual remedy mechanism. (i) Under Clause 11(a), forfeiture of security deposit upon breach and (ii) Under Clause 11(b), recovery of differential cost incurred in completing the contract through alternative arrangements.
43. A plain reading of the clause indicates that these remedies are cumulative and not mutually exclusive. Therefore, the appellant’s contention that invocation of one remedy bars the other cannot be considered. The damages awarded are consequential to such breach and fall within the framework of contractual liability. The Tribunal has rightly interpreted Clauses 11(a) and 11(b) of the agreement to hold that the respondent No.1 is entitled not only to forfeit the security deposit but also to recover the loss suffered due to the breach. The Arbitral Tribunal has also correctly distinguished between compensation under Section 74 and damages under Section 73 of the Indian Contract Act. Clause 11(b) does not impose a penalty but enables recovery of actual loss suffered due to breach. Hence, the respondent No.1 was justified in claiming the differential cost incurred in procuring jaggery powder from alternate suppliers.
44. The appellant contended that the procurement of sugar amounts to unilateral modification of the contract but the material on record clearly shows that the purchase of sugar was only a temporary measure, necessitated by the failure of the appellant to supply jaggery powder and was essential to ensure the uninterrupted implementation of a public welfare programme. Therefore, the action of respondent no.1 is to mitigate the damages, by taking reasonable steps to reduce the loss arising from the breach.
45. It is also significant to note that the respondent no.1 is a government entity discharging public welfare functions. The urgency and necessity of maintaining uninterrupted supply of nutritional food justify the steps taken by it, including procurement from alternate sources.
46. Section 34 of the Act 1996 states :
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 1 [establishes on the basis of the record of the arbitral tribunal that]—
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: 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
(3) An application for setting aside may not be made after three months have elapsed 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.
(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. (6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.”
47. The scope of judicial interference under Section 34 of the Arbitration and Conciliation Act, 1996 is limited. The above provision permits setting aside an arbitral award only on specific grounds such as incapacity, invalidity of agreement, procedural unfairness, excess of jurisdiction, or conflict with public policy. It is well settled that the Court does not sit in appeal over the arbitral award and cannot re-appreciate evidence or substitute its own findings merely because another view is possible.
48. On perusal of the latest judgment passed by the Hon’ble Supreme Court in Somdatt Builders-NCC-NEC (JV) (supra), it was held that it is settled legal position that in an application under Section 34 of the 1996 Act, the Court is not expected to act as an appellate Court and re-appreciate the evidence unless the ground of interference is made out on the basis of morality or justice or patent illegality appearing on the face of the record. Therefore, mere erroneous application of law or an alternative possible view on the facts does not constitute a valid ground for setting aside the award.
49. The judgments relied upon by the appellant are not applicable to the present facts and circumstances of the case. The principles laid down in those decisions relates to situations involving unilateral modification of contractual terms or instances where the arbitral tribunal acted beyond the scope of the contract. However, in the present case, as discussed above, there is no alteration or rewriting of the contractual terms by the respondent No.1 or by the Arbitral Tribunal. The procurement of sugar was only a temporary measure necessitated by the appellant’s breach and was undertaken to mitigate the loss and ensure continuity of a public welfare programme.
50. Further, the Arbitral Tribunal has acted strictly within the framework of the agreement, particularly Clause 11, and has awarded damages based on actual loss suffered. The existence of a dissenting opinion by one of the Arbitrators does not affect the validity of the majority award. It is settled law that the majority view prevails and is binding.
51. From the aforesaid discussion, it is clear that the findings recorded by the learned Arbitral Tribunal are based on a proper appreciation of both oral and documentary evidence and a reasonable interpretation of the terms of the agreement. We find that the arbitral award does not suffer from any patent illegality or perversity to interfere under Section 37 of the Act. Therefore, we do not find any scope for interference with the findings in the impugned order and particularly with the conclusion arrived at.
52. Accordingly, C.M.A.No.715 of 2005, along with all connected applications, is dismissed. Interim orders granted if any, shall stand vacated. No costs.