Court affirms limited scope of judicial interference under Section 34 of Arbitration and Conciliation Act, 1996; rejects petitioner’s challenge on grounds of waiver, contractual interpretation, and procedural fairness
In a significant ruling delivered on August 17, 2026, the Delhi High Court, presided over by Justice Mini Pushkarna, dismissed the challenge filed by Ratnagiri Gas and Power Pvt. Ltd. (RGPPL) against an arbitral award favoring Dinowic Pte Ltd., a Singapore-based company, in an international commercial arbitration dispute relating to the sale and lifting of approximately 40,000 metric tonnes of Naphtha from Dabhol, Maharashtra.
The dispute arose after RGPPL deducted USD 714,960.74 from Dinowic’s security deposit as liquidated damages for alleged delay in lifting the Naphtha and delayed payments. Dinowic contested the deduction, leading to arbitration under the Delhi International Arbitration Centre (DIAC). The Sole Arbitrator allowed Dinowic’s claims for refund of the deducted amount plus interest at 6% per annum from June 17, 2014, and rejected RGPPL’s counterclaims for losses due to delayed payments and lifting.
RGPPL challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), arguing that the Arbitrator erred in finding waiver of contractual timelines, misapplied Sections 55 and 63 of the Indian Contract Act, 1872, wrongly rejected their application to admit additional documents, and failed to provide reasons for rejecting counterclaims. They also contended that liquidated damages were a genuine pre-estimate of loss and that the Arbitrator’s refusal to grant interest on delayed payments was perverse.
The Delhi High Court meticulously analyzed the factual matrix, contractual provisions—including Clauses 5, 6, 9 of the Sale Order, and Clauses 5.6, 5.10, and 6.0 of the Special Conditions of Contract—and the conduct of the parties. It affirmed the Arbitrator’s key findings that:
- There was delay by Dinowic in payment and lifting, but RGPPL accepted the delayed performance without reservation, thereby waiving strict compliance and setting time at large.
- RGPPL failed to raise timely claims or notices for liquidated damages as mandated by the contract, rendering the deduction from the security deposit improper.
- The liquidated damages clause was not a genuine pre-estimate of loss, and RGPPL did not prove actual loss suffered due to delay.
- Denial of the petitioner’s belated application to admit additional documents did not violate natural justice as it was filed after evidence closure without satisfactory explanation.
- The rejection of counterclaims was reasoned and logically flowed from the waiver and failure to prove loss.
On the legal front, the Court reiterated the limited scope of judicial interference under Section 34 of the Arbitration Act in international commercial arbitrations, emphasizing that:
- Patent illegality is not a ground to set aside an award in international commercial arbitration.
- The Court does not sit in appeal and cannot reappreciate evidence or contract interpretation.
- Public policy grounds are narrowly construed to mean violation of fundamental policy of Indian law, fraud, corruption, or basic notions of morality and justice.
- Contractual interpretation and factual findings of waiver and acceptance of delayed performance fall within the arbitrator’s domain.
The Court relied heavily on recent Supreme Court and Delhi High Court precedents, including the landmark decisions in Ssangyong Engg. & Construction Co. Ltd. v. NHAI (2019), Associate Builders v. DDA (2015), Renusagar Power Co. Ltd. v. General Electric Co. (1994), and Vijay Karia v. Prysmian Cavi E Sistemi SRL (2020), which have progressively curtailed judicial interference in international arbitration awards.
Further, the Court upheld the Arbitrator’s award of interest under Section 31(7)(a) of the Arbitration Act from the date of wrongful withholding of the security deposit amount, noting this was a proper exercise of discretion consistent with established jurisprudence.
In conclusion, the Delhi High Court held that the impugned arbitral award was a well-reasoned and plausible construction of contractual terms, based on evidence and applicable law, and did not violate any provision of the fundamental policy of Indian law or public policy. It dismissed the petition filed by RGPPL, thereby affirming the award in favor of Dinowic Pte Ltd.
Bottom Line :
Arbitration - International Commercial Arbitration - Scope of court's interference under Section 34 of Arbitration and Conciliation Act, 1996 is limited - Findings of the Arbitrator on waiver of contractual timelines and denial of liquidated damages upheld.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 Section 2(1)(f), Section 31(7)(a), Section 34(2)(a)(iii), Section 34(2)(b)(ii), Indian Contract Act, 1872 Sections 55, 63, 73, 74
Ratnagiri Gas and Power Pvt. Ltd. v. Dinowic Pte Ltd., (Delhi) : Law Finder Doc id # 2961951
