Court reiterates limited scope of interference under Section 34 of Arbitration and Conciliation Act, emphasizing arbitral tribunal's authority on evidence and contract interpretation; rejects contractor's claims for extra work, security deposit refund, and damages
In a significant ruling on 13th October 2026, the Delhi High Court, presided over by Justice Subramonium Prasad, dismissed the petition filed by M/s Abhoy Charan Bakshi challenging an arbitral award in a dispute with the National Highways Authority of India (NHAI). The petitioner had sought to overturn the majority award passed by the arbitral tribunal, which rejected all claims raised by the contractor for additional compensation and refunds related to a highway maintenance contract.
The dispute arose from a short-term maintenance contract awarded by NHAI to the petitioner for the repair and maintenance of a section of National Highway 34. The petitioner claimed compensation totaling over Rs. 21 crore for alleged execution of non-agreemental extra items of work, repair work during the defect liability period caused by heavy rainfall, refund of security deposit and performance security, as well as consequential damages including loss of goodwill and business loss.
The arbitral tribunal, constituted under Clause 25.3 of the General Conditions of Contract, delivered a majority award rejecting all claims and passed a nil award against the petitioner. A minority award had directed NHAI to pay over Rs. 6 crore to the petitioner, but the majority findings prevailed.
The petitioner's primary contentions before the Court were that the tribunal failed to consider substantial evidence proving the execution of extra work beyond the contract scope, that the repair work during the defect liability period warranted compensation, and that the unilateral encashment of the performance bank guarantee and withholding of security deposit by NHAI were illegal. Additionally, claims for loss of goodwill, business losses, breach of contract, and interest were also contested.
However, the Delhi High Court reiterated the well-established principles governing the scope of judicial interference under Section 34 of the Arbitration and Conciliation Act, 1996. The Court emphasized that it cannot act as an appellate forum to reappreciate evidence or substitute its own interpretation merely because another plausible view exists. The arbitral tribunal, being the master of evidence and contractual interpretation, is entitled to its findings unless the award is patently illegal, perverse, based on no evidence, or shocks the conscience of the Court.
In its detailed analysis, the Court observed that the tribunal's conclusion that the repair work carried out during the defect liability period fell within the contract's scope was a plausible interpretation supported by the terms of the agreement and the material on record. The petitioner's failure to produce interim payment certificates or documentary proof for the alleged extra non-agreemental work was fatal to its claim. The tribunal's reliance on joint inspection reports that defects remained uncured justified the withholding of performance security and security deposit by NHAI under Clauses 44.2 and 44.3 of the contract.
Regarding claims of loss of goodwill and business loss, the Court held that these could not survive once the foundational claims for extra work and security refunds were rejected. The Court also dismissed the contention that the tribunal acted arbitrarily or violated public policy, noting that mere error of fact or law does not amount to patent illegality.
The Court's ruling aligns with Supreme Court precedents, including Associate Builders v. Delhi Development Authority and Ssangyong Engineering & Construction Co. Ltd. v. NHAI, affirming that judicial scrutiny in arbitration challenges is narrowly circumscribed to maintain arbitral autonomy and minimize court interference.
Consequently, the petition under Section 34 of the Arbitration and Conciliation Act was dismissed, upholding the majority arbitral award in favor of NHAI.
Bottom Line:
Arbitration and Conciliation Act, 1996 Section 34 Scope of interference with arbitral award is extremely limited - Court cannot re-appreciate evidence or sit in appeal over findings of Arbitral Tribunal - Majority award rejecting contractor's claims for extra work, repair during defect liability period, refund of security deposit/performance security, loss of goodwill, business loss, breach of contract and interest upheld as Tribunal's view was a plausible view based on contract terms and material on record.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 Section 34
