Union Of India v. M/S Gainwell Commosales Pvt. Ltd.

IN THE HIGH COURT AT CALCUTTA

CIVIL APPELLATE JURISDICTION [CIRCUIT BENCH AT PORT BLAIR] ******** PRESENT: THE HON'BLE JUSTICE TIRTHANKAR GHOSH And THE HON'BLE JUSTICE CHAITALI CHATTERJEE (DAS) FMAT (ARBAWARD)/1/2026 UNION OF INDIA ...

APPELLANT

Versus

M/S GAINWELL COMMOSALES PVT. LTD. ... RESPONDENT For the appellants :

Mr. V.D.Sivabalan For the respondents :

Mr. Soumabho Ghosh Mr. Zulfiqar Ali AI Quaderi (through virtual mode) Mr. Aditya Sarkar Heard on :

March 17, 2026 Judgment on :

March 20, 2026 CHAITALI CHATTERJEE (DAS), J.

1.

This application has been filed under Section 37 (2) of the Arbitration and Conciliation Act, 1996. The matter is fixed for admission of this first Miscellaneous Appeal. 2.

The present appeal has been filed challenging the judgment dated October 13, 2025 passed by the learned Additional District Judge, South Andaman District, dismissing the appellant's petition under Section 34 of the Arbitration and Conciliation Act, 1996. The rejection

was mostly on the ground that Court cannot interfere with the finding of the arbitrator.

3.

Learned advocate appearing on behalf of the appellant filed a written notes of argument assailing that the learned District Judge treated the arbitral award as if it was immuned from judicial scrutiny, but the law is settled that an arbitral award can be interfered with when the award is contrary to terms of the contract and the award contains perverse finding. It is further argued that in this case, the arbitrator ignored the material evidence and rejected the appellant's claim.

That apart learned Court of Additional District Judge failed to consider that the arbitrator award was of the view that there was an excess consumption of high speed diesel oil to be computed with reference to the bills/invoices submitted by the claimant and also that there was no hesitation to hold that claimant has consumed excess quantity of high speed diesel oil over and above the permissible limit under the contract and is liable to be penalized as per Clause 14.1.3 read with Clause 15.1.3 of the contract. Despite such observation the award was passed in favour of the present respondents, which was not considered by the learned Court under Section 34 of the Arbitration and Conciliation Act, 1996.

4.

The learned advocate relied upon the decision of the Division Bench of this Court dated February 18, FMAT (ARBAWARD)/3/2026 (Union of India-Vs- C. Palniswamy). Further reliance was placed upon the decision of the Hon'ble Supreme Court in Associate Builders-Vs-DDA (2015), where it was held that an award

ignoring contractual provision on material evidence is liable to be setaside. Furthermore it is assailed that because of erroneous approach adopted by the concerned Court the department has been saddled with the liability exceeding Rs.2.35 Crore with interest, despite such finding that the claimant breached the contractual condition. 5.

Per contra the learned advocate representing the respondent on the other hand raises objection and submits that the scope of Section 37 of the Arbitration and Conciliation Act is very limited and only to consider whether or not the parameters of law was followed while passing order under Section 34 or not. Furthermore, there is no question of appreciation of evidence at the stage of hearing of Section 37 or even Section 34 of the Arbitration and Conciliation Act, 1996 and the learned arbitrator was of the clear view that though the point raised on behalf of the present appellant regarding excess consumption, he failed to produce any supportive document to that extent. The learned advocate has relied upon the decision of Division Bench of this High Court in Dr. Debojit Dey-Vs- Tata Housing Development Company Ltd. F.M.A 2386 of 2016 dated 27th August, 2025, (2024) 1 SCC 479 Reliance Infrastructure Limited-Vs- State of Goa, (2023) 9 SCC 85 Konkan Railway Corporation Limited-Vs-Chenab Bridge Project Undertaking.

6.

Heard the submission. This appeal has been filed under Section 37 of the Arbitration and Conciliation Act, which as follows:-

1. Notwithstanding anything contained in any other law for the time being in force, an appeal shall lie from the following orders (and from no others) to the court authorized by law to

hear appeals from original decrees of the Court passing the order, namely:- (a) refusing to refer the parties to arbitration under Section8;

(b) granting or refusing to grant any measure under Section 9;

(c) setting aside or refusing to set aside an arbitral award under Section 34.

2. An appeal shall also lie to a court from an order of the arbitral tribunal- (a) accepting the plea referred to in sub-section (2) or subsection (3) of Section 16; or (b) granting or refusing to grant an interim measure under Section 17.

3.

No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court. 7.

The fact of the case reveals that an agreement was entered into between the parties on August, 12 for supply and operation of DG sets for generation of electricity and the contract stipulated performance standards including specific fuel consumption as per terms stipulated therein. An amount of Rs.1,23,83,243/- was sanctioned as full and final settlement by the department after deduction of Rs.6,51,750/-towards liquidation of damage and after deducting the TDS. A claim of Rs.5,81,10,877/- with interest @ 18% per annum was raised by the respondent and the matter was referred before the Arbitral Tribunal. An award was passed on May 17, 2023, whereby the department was directed to pay a sum of Rs.2,35,35,454/-along with 10 % interest per annum from August 12, 2020 till the date of realization. The Arbitral Tribunal also rejected the counter claim filed by the department. 8.

An application under Section 34 of the Arbitration and Conciliation Act was filed for setting aside such award before the learned Additional District Judge, South Andaman District and learned Court discussed the scope of Section 34 of the Arbitration and

Conciliation Act. The Arbitral Tribunal found that the agreement entered into between the parties after the claimant was selected as the successful bidder on the basis of a consolidated fixed monthly higher charge of Rs.9,87,160/- for supply of 0.670 M.U of power inclusive of all charges.

9.

The learned Court further discussed that the scope of Section 34 is very narrow, restrictive and limited and law is well settled that the factual findings are not to be disturbed under Section 34 of the Act of 1996. The learned Court found that cogent reason was assigned and it was not perverse and then passed the order dismissing the said application under Section 34 of the Arbitration and Conciliation Act, 1996.

On a cursory glance of the award passed by the learned Arbitral Tribunal also it can be found that categorically it was mentioned that the learned Arbitrator was handicapped in passing award in favour of the respondent for want of material evidence and also observed that respondent has not taken any positive step to prove as to the exact quantity of high speed diesel oil which was consumed by the claimant over and above the contract. The learned Arbitrator was unable to access the cost of such excess diesel allegedly consumed by the claimant as the price of high speed oil per litter at the relevant point of time was not brought on record by the respondent as required under the law. Therefore, the tribunal held that respondent cannot get the benefit of Clause 14.1.3 and Clause 15.1.

3 of the contract, even though the tribunal found that the claimant committed a breach of terms contained in such Clause.

award was perverse in nature and without any reason and opposed to public policy for which the same was to be interfered with. The arbitration agreement was very much valid and all other required formalities was complied, but when the appellant failed to adduce any cogent evidence before the Arbitral Tribunal which compelled the tribunal to pass such award in their favour, it cannot be reopened by appreciating and re-appreciating evidence adduced before the Arbitral Tribunal either under section 34 of the Arbitration and Conciliation Act, 1996 or under Section 37 of the Arbitration and Conciliation Act, 1996. 10.

In the decision of Reliance Infrastructure Limited-Vs- State of Goa, the order under Section 37 of the Arbitration and Conciliation Act was of the High Court. The Ho'ble Supreme Court discussed the scope of challenge to an arbitral award under Section 34 as well as 37 of the 1996 Act. It was held that:- " 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 wards 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 of arbitral award has been confirmed by the court under Section 34 and by the Court in appeal under Section 37, Court must be extremely cautious and sure to disturb such concurrent finding".

It is undisputed that principles of natural justice mentioned in Section 18 and 34 (2)(a)(iii) of the Arbitration Act is always a ground for challenge of an award and also the award can be set-aside on the ground of patent illegality appearing on the face of the award which goes to the root of the matter. But re-appreciation of evidence would not

be permissible on the ground of even patient illegality appearing on the face of the award.

11.

In the decision of Konkan Railway Corporation Limited (supra) the appeal was filed from the decision of the Division Bench of the High Court of Bombay under Section 37 of the Arbitration and Conciliation Act, whereby the concurrent finding of Arbitral Tribunal and the Single Judge of High Court under Section 34 of the Act were allowed. Hon'ble Supreme Court considered catena of decisions including Associate Builders-Vs-DDA (2015) and set-aside the order passed by the Division Bench of the High Court with the observation that the award of the Arbitral Tribunal and the decision of the Single Judge of the High Court under Section 34 of the Act cannot be termed as perverse or patently illegal.

12.

In the decision as relied upon by the learned advocate of the respondent of the Division Bench of this High Court in Dr. Debojit Dey (Supra) the learned Division Bench put reliance on the decision of Reliance Infrastructure Limited (Supra), where the scope of challenge in an arbitral award under Section 34 and scope of appeal under Section 37 of the Act of 1996 was considered. It was observed by the learned Division Bench that:- " A Court while exercise in jurisdiction under Section 34 of the Act of 1996 is not called upon to re-evaluate the evidence led before the arbitrator and substitute the findings of the learned arbitrator. The award in question contains reasons. Respective arguments/contentions of the parties are noted in the award. Parties were heard by the arbitrator prior to the passing of the award. The award cannot be said to be passed in breach of principles of natural justice or that the appellant was not aware of the arbitration proceedings".

13.

Therefore on conspectus of the facts and circumstances and the law laid down in this regard, there remains no room left to hold that the award was perverse or opposed to the public policy or that the tribunal findings is factually incorrect.

14.

It is no more res-integra and settled law backed by various judicial pronouncements that there cannot be re-appreciation of evidence and hence, the factually incorrect finding, even if raised at all cannot be gone into when the award has been affirmed under Section 34 of the Arbitration & Conciliation Act.

15.

Therefore, we do not find any merit in this case for which the appeal cannot be admitted.

16.

Hence this FMAT(ARBAWARD)/1/2026 stands dismissed. 17.

No order as to costs.

18.

Urgent Photostat certified copy of the judgment, if applied for, be supplied to the parties upon compliance with all requisite formalities. (CHAITALI CHATTERJEE (DAS), J.) I Agree (TIRTHANKAR GHOSH, J.)