UHL POWER COMPANY LTD. versus STATE OF HIMACHAL PRADESH

[2022] 1 S.C.R. 1

UHL POWER COMPANY LTD.

STATE OF HIMACHAL PRADESH

(Civil Appeal No. 10341 of 2011)

JANUARY 07, 2022

[N. V. RAMANA, CJI, A. S. BOPANNA ANDHIMA KOHLI, JJ.]

Arbitration and Conciliation Act, 1996: Post award intereston the interest amount awarded – Held: Can be granted byArbitrator.

Arbitration and Conciliation Act, 1996: s.34 – Jurisdictionunder, Scope – Held: Court does not sit in appeal over the arbitralaward and may interfere on merits on the limited ground providedunder s.34(2)(b)(ii).

Arbitration: If there are two plausible interpretations of theterms and conditions of the contract then no fault can be found ifthe arbitrator proceeds to accept one interpretation as against theother.

Arbitration: Arbitral award – Scope of interference by courts– Held: Courts should not interfere with an award merely becausean alternate view on facts and interpretation of contract exists.

Deeds and Documents: Whether in the instant case, theMemorandum of Undertaking (MoU) dated 10[th] February, 1992merged into the Implementation Agreement dated 22[nd] August, 1997– Held: As admitted by State, the MoU was mentioned as “AppendixA” in the second recital of Implementation Agreement which itselfdemolished the plea taken by the State that the Arbitral Tribunaland the Appellate Court have erred in returning finding that theMoU dated 10th February, 1992 did not merge into theImplementation Agreement dated 22nd August, 1997 – The view isreinforced on reading of the definition of the word “Agreement”as used in Clause 2.2 of the Implementation Agreement which clearlystated that the word “Agreement” wherever used in theImplementation Agreement, shall include all its appendices andannexures – The MoU having been described by the parties as

[2022] 1 S.C.R.

AAppendix to the Implementation Agreement, would have to betreated as having merged with the Implementation Agreement for alleffects and purposes.

Disposing of the appeals, the Court

HELD: 1. As the judgment in the case of S.L. Arora, onBwhich reliance has been placed by the Division Bench of the HighCourt of Himachal Pradesh, has since been overruled by three-Judge Bench of this Court in the case of Hyder Consulting (UK)Ltd., the findings returned by the Appellate Court in the impugnedjudgment to the effect that the Arbitral Tribunal is not empoweredCto grant compound interest or interest upon interest and onlysimple interest can be awarded in favour of UHL on the principalamount claimed, is quashed and set aside. As result, the findingsreturned in para 54(a) of the impugned judgment insofar as itrelates to grant of the interest component, are reversed whilerestoring the arbitral award on the above aspect in favour of UHL.D[Para 6][8-E-G]

2. The very fact that the State admits to having executedthe MoU with UHL on 10th February, 1992 and the said MoUhas been mentioned as “Appendix A” in the second recital of theImplementation Agreement, itself demolishes the plea taken byEthe State that the Arbitral Tribunal and the Appellate Court haveerred in returning finding that the MoU dated 10th February,1992 did not merge into the Implementation Agreement dated22nd August, 1997. The said view is reinforced on reading ofthe definition of the word “Agreement” as used in Clause 2.2 ofFthe Implementation Agreement which clearly states that the word“Agreement” wherever used in the Implementation Agreement,shall include all its appendices and annexures. The MoU havingbeen described by the parties as Appendix to theImplementation Agreement, would have to be treated as havingmerged with the Implementation Agreement for all effects andGpurposes. In the light of the said recitals and clauses of theImplementation Agreement, this Court endorses the findingsreturned in para 47 of the impugned judgment, wherein it hasbeen held that plain reading of the second recital read withClause 2.2 of the Implementation Agreement suggested that the

MoU has merged with the Implementation Agreement and,therefore, the disputes that were referable to arbitration underthe Implementation Agreement in terms of Clause 20, were toinclude disputes arising under the MoU, even though the latterdocument did contain separate arbitration clause. [Para 10][10-B-F]

3. All the points of dispute between the parties regardingperformance of the contractual obligations including claims fordamages and expenses incurred by UHL either arising from theMoU dated 10th February, 1992, or under the ImplementationAgreement dated 22nd August, 1997, were referable to arbitrationin accordance with Clause 20 forming part of the ImplementationAgreement. [Para 11][11-B-C]

4. The second plea taken by the State is that the AppellateCourt has erred in setting aside the order of the Single Judgeand restoring the findings of the Sole Arbitrator on the aspect ofpre-mature termination of the Implementation Agreement on thepart of the State well before expiry of the prescribed period.[Para 12][11-D]

5. plain reading of Clauses 4.1(a) and (b) leaves no mannerof doubt that UHL was required to commence construction ofthe project within period of one year from the effective dateonly after obtaining techno-economic clearance from CEA andan environmental clearance from the Government of India,Ministry of Environment and Forests. However, it was agreedby the parties that since obtaining of the relevant clearancesreferred to above and under Clause 16.8 of the Agreementwhereunder the State was required to discharge certainobligations, were not entirely in the hands of UHL, in the eventof any delay beyond period of three months reckoned from theeffective date, the stipulated period of one year contemplated inthe Implementation Agreement could be extended, but notbeyond the additional period of twelve months. In the light of theaforesaid clauses of the Implementation Agreement, thesubmission made by the State that, under all circumstances, theImplementation Agreement had to be executed within periodof one year and since the provision for extension beyond one

Ayear was applicable only to the conditions contemplated in Clause4.1(a) and (b) and not to those stipulated in Clause 4.1(c) to (g),is found to be unmerited and is turned down. When the parties tothe Implementation Agreement were ad idem that the period ofone year available to UHL to commence the construction activitywas to be reckoned after the major requirements prescribed inBClause 4.1 could be obtained, then any argument sought to beadvanced to segregate the obligations under different sub-headsof Clause 4.1 only to lay the blame at the door of UHL when therequisite clearances were to be obtained by the State Governmentfrom the Central Government and Centralized Authorities, isCdevoid of merits, besides being completely unreasonable andillogical. [Para 13][12-D-H; 13-A]

6. This Court also accepts as correct, the view expressedby the Appellate Court that the Single Judge committed grosserror in re-appreciating the findings returned by the ArbitralDTribunal and taking an entirely different view in respect of theinterpretation of the relevant clauses of the ImplementationAgreement governing the parties inasmuch as it was not open tothe said Court to do so in proceedings under Section 34 of theArbitration Act, by virtually acting as Court of Appeal.[Para 14][13-B-C]

7. As it is, the jurisdiction conferred on Courts underSection 34 of the Arbitration Act is fairly narrow, when it comesto the scope of an appeal under Section 37 of the Arbitration Act,the jurisdiction of an Appellate Court in examining an order,setting aside or refusing to set aside an award, is all the moreFcircumscribed. [Para 15][13-C-D]

MMTC Limited v. Vedanta Limited (2019) 4 SCC 163 :[2019] 3 SCR 1023; K.Sugumar v. Hindustan PetroleumCorporation Ltd. (2020) 12 SCC 539; DynaTechnologies (P) Ltd. v. Crompton Greaves Ltd. (2019)G20 SCC 1; Parsa Kente Collieries Limited v. RajasthanRajya Vidyut Utpadan Nigam Limited (2019) 7 SCC 236: [2019] 8SCR 728; McDermott International Inc. v.Burn Standard Co. Ltd. And Others (2019) 20 SCC 1;

Rashtriya Ispat Nigam Ltd. V. Dewan Chand Ram Saran(2006) 11 SCC 181 : [2012] 4 SCR 1; South East AsiaMarine Engg. & Constructions Ltd. [SEAMAC Limited]v. Oil India Ltd. 2020 (5) SCC 164 : [2020] 5SCC 164 – relied on.

8. In the instant case, the interpretation of the relevantclauses of the Implementation Agreement, as arrived at by theSole Arbitrator, are both, possible and plausible. Merely becauseanother view could have been taken, can hardly be ground forthe Single Judge to have interfered with the arbitral award. Inthe given facts and circumstances of the case, the Appellate Courthas rightly held that the Single Judge exceeded his jurisdictionin interfering with the award by questioning the interpretationgiven to the relevant clauses of the Implementation Agreement,as the reasons given are backed by logic. [Para 21][17-C-D]

9. The decision of the Appellate Court is upheld that hasrestored the findings returned in the arbitral award dated 05thJune, 2005 to the effect that the State of Himachal Pradesh hadproceeded to terminate the Implementation Agreement beforeexpiry of the prescribed period which could have been extendedup to 24 months, reckoned from the “effective date”. In theinstant case, the State of H.P. had terminated the ImplementationAgreement five months prior to the stipulated period by adoptinga distorted interpretation of Clause 4 of the ImplementationAgreement, which was impermissible. [Para 22][17-E-F]

State of Haryana v. S.L. Arora and Co.(2010) 3 SCC690 : [2010] 2 SCR 297 – held overruled.

Hyder Consulting (UK) Ltd. V. Governor, State of Orissathrough Chief Engineer (2015) 2 SCC 189 : [2014]14 SCR 1029 – followed.

Case Law Reference

The Judgment of the Court was delivered by

HIMA KOHLI, J.

1. Both the present appeals arise from common judgment dated24[th] May, 2011, passed by the High Court of Himachal Pradesh partlyallowing Arbitration Appeal No. 2 of 2009 filed by UHL Power CompanyLimited[1] under Section 37 of the Arbitration and Conciliation Act, 1996[2].UHL has filed Civil Appeal No. 10342 of 2011 and the State of HimachalDPradesh[3] has filed Civil Appeal No. 10342 of 2011, as both the partiesare aggrieved by the impugned judgment.

2. Though several grounds have been taken by UHL in its appealto assail the impugned judgment, Mr. Jaideep Gupta, learned seniorcounsel for UHL has confined his grievance to the disallowance of theEpre-claim interest i.e., interest from the date when expenses were incurredby UHL, till the date of lodging the claim. It may be noted that in termsof the award dated 05[th] June, 2005, the learned Sole Arbitrator hadawarded sum of ¹ 26,08,89,107.35p. (Rupees Twenty six crores eightlakhs eighty nine thousand one hundred and seven and thirty five paise)in favour of UHL towards expenses claimed along with pre-claim interestFcapitalized annually, on the expenses so incurred. Further, compoundinterest was awarded in favour of UHL @ 9% per annum till the date ofclaim and in the event the awarded amount is not realized within periodof six months from the date of making the award, future interest wasawarded @ 18% per annum on the principal claim with interest.

3. Dissatisfied with the award, when the State of H.P. filed apetition under Section 34 of the Arbitration Act, vide judgment dated 16[th]December, 2008, the learned Single Judge disallowed the entire claim of

1 For short ‘UHL’

2 For short ‘the Arbitration Act’

H3 For short ‘the State’

UHL. The said judgment was challenged by UHL in petition filedunder Section 37 of the Arbitration Act that has been decided by theimpugned judgment whereunder, the Division Bench of the High Courthas awarded sum of ¹ 9,10,26,558.74 (Rupees Nine crores ten lakhstwenty six thousand five hundred fifty eight and seventy four paise) infavour of UHL, being the actual principal amount along with simpleinterest @ 6% per annum from the date of filing of the claim, till the dateof realization of the awarded amount. For declining payment of compoundinterest awarded by the learned Sole Arbitrator to UHL, the DivisionBench relied on the decision of this Court in State of Haryana v. S.L.Arora and Co.[4], wherein it was held that compound interest can beawarded only if there is specific contract, or authority under Statute,for compounding of interest and that there is no general discretion vestedin courts or tribunals to award compound interest. It was further heldthat in the absence of any provision for interest upon interest in thecontract, the Arbitral Tribunals do not have the power to award interestupon interest, or compound interest, either for the pre-award period orfor the post-award period.

4. By now, the aforesaid aspect has been set at rest by three-Judge Bench of this Court in Hyder Consulting (UK) Ltd. V. Governor,State of Orissa through Chief Engineer[5], that has overruled the verdictin the case of S.L. Arora (supra). The majority view is that post-awardinterest can be granted by an Arbitrator on the interest amount awarded.Writing for the majority, Justice Bobde (as His Lordship then was) hasheld thus:

“21. In the result, I am of the view that S.L. Arora case [State ofHaryana v. S.L. Arora and Co. (2010) 3 SCC] is wronglydecidedin that it holds that sum directed to be paid by an ArbitralTribunal and the reference to the award on the substantive claimdoes not refer to interest pendente lite awarded on the “sumdirected to be paid upon award” and that in the absence of anyprovision of interest upon interest in the contract, the ArbitralTribunal does not have the power to award interest upon interest,or compound interest either for the pre-award period or for thepost-award period. Parliament has the undoubted power to legislateon the subject and provide that theArbitral Tribunal may award

4 (2010) 3 SCC 690

5 (2015) 2 SCC 189

Ainterest on the sum directed to be paid by the award,meaning sum inclusive of principal sum adjudged and theinterest, and this has been done by Parliament in plain language.”

[emphasis supplied]

5. While giving concurring opinion in the aforesaid case, JusticeBSapre made the following pertinent observations:

“31. Coming now to the post-award interest. Section 31(7)(b) ofthe Act employs the words, “A sum directed to be paid by anarbitral award ... “. Clause (b) uses the words “arbitral award”and not the “Arbitral Tribunal”. The arbitral award. as heldC“”above, is made in respect of sum which includes theinterest.It is, therefore, obvious that what carries under Section31 (7)(b) of the Act is the “sum directed to be paid by an arbitralaward” and not any other amount much less by or under thename “interest”.In such situation. it cannot be said that whatDis being granted under Section 31(7)(b) of the Act is “interest”on interest.Interest under clause (b) is granted on the“sum” directed to be paid by an arbitral award wherein the“sum” is nothing more than what is arrived at under clause(a).”

[emphasis supplied]

6. As the judgment in the case of S.L. Arora (supra), on whichreliance has been placed by the Division Bench of the High Court ofHimachal Pradesh, has since been overruled by three-Judge Bench ofthis Court in the case of Hyder Consulting (UK) Ltd.(supra), theFfindings returned by the Appellate Court in the impugned judgment tothe effect that the Arbitral Tribunal is not empowered to grant compoundinterest or interest upon interest and only simple interest can be awardedin favour of UHL on the principal amount claimed, is quashed and setaside. As result, the findings returned in para 54(a) of the impugnedjudgment insofar as it relates to grant of the interest component, areGreversed while restoring the arbitral award on the above aspect in favourof UHL.

7. Proceeding to the submission made by Mr. Abhinav Mukerji,learned Additional Advocate General for the State for assailing theimpugned judgment, we may note that two-fold arguments have beenHput forth. Firstly, that the Division Bench has gravely erred in upsetting

the findings returned by the learned Single Judge vide judgment dated16[th] December, 2008 and has failed to appreciate that the Memorandumof Undertaking[6] dated 10[th] February, 1992, did not merge into theImplementation Agreement dated 22[nd] August, 1997, as both were distinctdocuments and that the MoU contained separate Arbitration clausenumbered as Clause 18, whereas the Implementation Agreementcontained Clause 20. Secondly, it has been canvassed that the AppellateCourt as also the Arbitral Tribunal have committed grave error in arrivingat the conclusion that the Implementation Agreement was prematurelyterminated by the State much before the expiry of the prescribed period.

8. Coming first to the argument urged on behalf of the State thatthe MoU dated 10[th] February, 1992 did not merge with the ImplementationAgreement dated 22[nd] August, 1997, perusal of the recitals and theclauses contained in the Implementation Agreement dated 22[nd] August,1997, belies such submission. One of the recitals on the second pageof the Implementation Agreement is as follows:

“WHEREAS the Government in accordance with the policyguidelines of Government of India (hereinafter referred to as “GOI”had entered into Memorandum of Understanding (MOU)(APPENDIX ‘A’) on February 10, 1992 with the Company tocarry out detailed investigations of the UHL-III Hydro - electricProject of 100 MW capacity and located in District Mandi,Himachal Pradesh (hereinafter referred to “Project”) and hassubmitted, within the stipulated period from the date of signing ofthe MOU, Detailed project Report (DPR).”

9. Further, the definition of different words used in theImplementation Agreement form part of Clause (2). The term“Agreement” has been defined in Clause 2.2 as follows:

“CLAUSE 2 DEFINITIONS

For all purposes of this Agreement, the. various terms shall havethe following meanings, except where the context otherwiserequires, definitions and other terms expressed in the singular shall,include the plural and vice versa.

2.1xxxxxxxxx

6 For short ‘MoU’

10SUPREME COURT REPORTS

A2.2“Agreement” shall mean this Agreement together withall its appendices and annexures and any amendmentsthereto made in accordance with the provisions hereincontained.”

10. The very fact that the State admits to having executed theBMoU with UHL on 10[th] February, 1992 and the said MoU has beenmentioned as “Appendix A” in the second recital of the ImplementationAgreement, as reproduced above, itself demolishes the plea taken bythe State that the Arbitral Tribunal and the Appellate Court have erred inreturning finding that the MoU dated 10[th] February, 1992 did not mergeinto the Implementation Agreement dated 22[nd] August, 1997. The aforesaidCview is reinforced on reading of the definition of the word “Agreement”as used in Clause 2.2 of the Implementation Agreement which clearlystates that the word “Agreement” wherever used in the ImplementationAgreement, shall include all its appendices and annexures. The MoUhaving been described by the parties as Appendix to the Implementation

DAgreement, would have to be treated as having merged with theImplementation Agreement for all effects and purposes. In the light ofthe aforesaid recitals and clauses of the Implementation Agreement,this Court endorses the findings returned in para 47 of the impugnedjudgment, wherein it has been held that plain reading of the secondrecital read with Clause 2.2 of the Implementation Agreement suggestedEthat the MoU has merged with the Implementation Agreement and,therefore, the disputes that were referable to arbitration under theImplementation Agreement in terms of Clause 20, were to include disputesarising under the MoU, even though the latter document did contain aseparate arbitration clause.

F11. No exception can be taken to the observations made by theAppellate Court that the learned Single Judge erred in singularly relyingon the contents of Clause 1 of the Implementation Agreement, whichstates as follows:

“CLAUSE 1 STATEMENT OF IMPLEMENTATION OFPROJECT :G

Both the parties i.e. the Government and the company agree thatthe Project shall be implemented, subject to the terms mentionedin the Agreement, as per the provisions of the DPR as approvedby· the Government/ GOI. The parties also agree that the MOUsigned on 10.2.1992 shall stand lapsed as on today the twentyHsecond August, 1997.”

This Court is in agreement with the Appellate Court that Clause 1of the Implementation Agreement could not have been read in isolationand when read in conjunction with the second recital and Clause 2.2 ofthe Implementation Agreement, it is apparent that the MoU was made apart and parcel of the Implementation Agreement. In view of the above,the view taken by the learned Sole Arbitrator that the MoU forms partof the Implementation Agreement, as has been upheld by the AppellateCourt, does not deserve any interference. All the points of disputebetween the parties regarding performance of the contractual obligationsincluding claims for damages and expenses incurred by UHL either arisingfrom the MoU dated 10[th] February, 1992, or under the ImplementationAgreement dated 22[nd] August, 1997, were referable to arbitration inaccordance with Clause 20 forming part of the ImplementationAgreement.

12. The second plea taken by the learned Additional AdvocateGeneral the State is that the Appellate Court has erred in setting asidethe order of the learned Single Judge and restoring the findings of theSole Arbitrator on the aspect of pre-mature termination of theImplementation Agreement on the part of the State well before expiryof the prescribed period. For examining this point, Clause 4 of theImplementation Agreement gains significance. The said clause prescribesthe starting date of the project and states as follows:

“CLAUSE 4 STARTING DATE OF PROJECT.

4.1Within one year from the Effective Date, the Company shallstart the construction of the Project after meeting the majorrequirements, e.g.:-

a)Obtain techno economic clearance from CEA.F

b)Obtain environmental clearance from GO!, Ministryof Environment and Forests (MOEF).

c)Identify the purchaser of power and finalise PowerSchedules Agreement(s).

d)Commence· detailed designs of Project components/structures.

e)Finalise selection of Engineering, Procurement andconstruction (EPC) contractor/ executing agencies,if required.

Af)Establish site office and take over the site fromGovernment including the Government land or privateland already acquired by Government on lease etc.,for the purpose of carrying out preparatory works.

g)Achieve Financial Closure.

Both parties acknowledge that fulfillment of activitiesenumerated at 4.1(a), 4.l(b) of this clause and clause 16.8 of thisAgreement are not totally under the control of the Company,therefore, if the fulfillment of these activities is delayed beyondthree 3 months from effective Date, the stipulated period of oneCyear, shall be extended by one month for each month of delay infulfillment of any of the activities enumerated at 4.1(a), 4.1 (b)and 16.8 provided that the total of the monthly extensions shallnot exceed twelve (12).”

13. plain reading of Clauses 4.1(a) and (b) leaves no manner ofDdoubt that UHL was required to commence construction of the projectwithin period of one year from the effective date only after obtaining atechno-economic clearance from CEA and an environmental clearancefrom the Government of India, Ministry of Environment and Forests.However, it was agreed by the parties that since obtaining of the relevantclearances referred to above and under Clause 16.8 of the AgreementEwhereunder the State was required to discharge certain obligations, werenot entirely in the hands of UHL, in the event of any delay beyond aperiod of three months reckoned from the effective date, the stipulatedperiod of one year contemplated in the Implementation Agreement couldbe extended, but not beyond the additional period of twelve months. InFthe light of the aforesaid clauses of the Implementation Agreement, thesubmission made by learned Additional Advocate General for the Statethat, under all circumstances, the Implementation Agreement had to beexecuted within period of one year and since the provision for extensionbeyond one year was applicable only to the conditions contemplated inClause 4.1(a) and (b) and not to those stipulated in Clause 4.1(c) to (g),Gis found to be unmerited and is turned down. When the parties to theImplementation Agreement were ad idem that the period of one yearavailable to UHL to commence the construction activity was to bereckoned after the major requirements prescribed in Clause 4.1 couldbe obtained, then any argument sought to be advanced to segregate theHobligations under different sub-heads of Clause 4.1 only to lay the blame

at the door of UHL when the requisite clearances were to be obtainedby the State Government from the Central Government and CentralizedAuthorities, is devoid of merits, besides being completely unreasonableand illogical.

14. This Court also accepts as correct, the view expressed by theAppellate Court that the learned Single Judge committed gross error inre-appreciating the findings returned by the Arbitral Tribunal and takingan entirely different view in respect of the interpretation of the relevantclauses of the Implementation Agreement governing the parties inasmuchas it was not open to the said Court to do so in proceedings under Section34 of the Arbitration Act, by virtually acting as Court of Appeal.

15. As it is, the jurisdiction conferred on Courts under Section 34of the Arbitration Act is fairly narrow, when it comes to the scope of anappeal under Section 37 of the Arbitration Act, the jurisdiction of anAppellate Court in examining an order, setting aside or refusing to setaside an award, is all the more circumscribed. In MMTC Limited v.Vedanta Limited7, the reasons for vesting such limited jurisdiction onthe High Court in exercise of powers under Section 34 of the ArbitrationAct has been explained in the following words:

“11. As far as Section 34 is concerned, the position is well- settledby now that the Court does not sit in appeal over the arbitralaward and may interfere on merits on the limited ground providedunder Section 34(2)(b) (ii) i.e. if the award is against the publicpolicy of India. As per the legal position clarified through decisionsof this Court prior to the amendments to the 1996 Act in 2015, aviolation of Indian public policy, in turn, includes violation of thefundamental policy of Indian law, violation of the interest ofIndia, conflict with justice or morality, and the existence of patentillegality in the arbitral award. Additionally, the concept of the“fundamental policy of Indian law” would cover compliance withstatutes and judicial precedents, adopting 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, “patentillegality” itself has been held to mean contravention of thesubstantive law of India, contravention of the 1996 Act, andcontravention of the terms of the contract.”

A16. similar view, as stated above, has been taken by this Courtin K. Sugumar v. Hindustan Petroleum Corporation Ltd.8, where ithas been observed as follows:

“2. The contours of the power of the Court under Section 34 ofthe Act are too well established to require any reiteration. Even aBbare reading of Section 34 of the Act indicates the highlyconstricted power of the civil court to interfere with an arbitralaward. The reason for this is obvious. When parties have chosento avail an alternate mechanism for dispute resolution, they mustbe left to reconcile themselves to the wisdom of the decision ofthe arbitrator and the role of the court should be restricted to theCbare minimum. Interference will be justified only in cases ofcommission of misconduct by the arbitrator which can findmanifestation in different forms including exercise of legalperversity by the arbitrator.”17. It has also been held time and again by this Court that if thereDare two plausible interpretations of the terms and conditions of thecontract, then no fault can be found, if the learned Arbitrator proceedsto accept one interpretation as against the other. InDyna Technologies(P) Ltd. V. Crompton Greaves Ltd.9, the limitations on the Court whileexercising powers under Section 34 of the Arbitration Act has beenhighlighted thus:E“24. There is no dispute that Section 34 of the Arbitration Actlimits challenge to an award only on the grounds provided thereinor as interpreted by various Courts. We need to be cognizant ofthe fact that arbitral awards should not be interfered with in acasual and cavalier manner, unless the Court comes to conclusionFthat the perversity of the award goes to the root of the matterwithout there being possibility of alternative interpretation whichmay sustain the arbitral award. Section 34 is different in itsapproach and cannot be equated with normal appellatejurisdiction. The mandate under Section 34 is to respect the finalityof the arbitral award and the party autonomy to get their disputeGadjudicated by an alternative forum as provided under the law. Ifthe Courts were to interfere with the arbitral award in the usualcourse on factual aspects, then the commercial wisdom behindopting for alternate dispute resolution would stand frustrated.”

8 (2020) 12 SCC 539H9 (2019) 20 SCC 1

18. InParsa Kente Collieries Limited v. Rajasthan Rajya VidyutUtpadan NigamLimited10, adverting to the previous decisions of thisCourt in McDermott International Inc. v. Burn Standard Co. Ltd.And Others11 and Rashtriya Ispat Nigam Ltd. V. Dewan Chand RamSaran12, wherein it has been observed that an Arbitral Tribunal mustdecide in accordance with the terms of the contract, but if term of thecontract has been construed in reasonable manner, then the awardought not to be set aside on this ground, it has been held thus:

“9.1 ………..It is further observed and held that constructionof the terms of contract is primarily for an Arbitrator todecide unless the Arbitrator construes the contract in sucha way that it could be said to be something that no fair-minded or reasonable person could do. It is further observedby this Court in the aforesaid decision in paragraph 33 that whena court is applying the “public policy” test to an arbitration award,it does not act as court of appeal and consequently errors offact cannot be corrected. possible view by the Arbitratoron facts has necessarily to pass muster as the Arbitrator isthe ultimate master of the quantity and quality of evidenceto be relied upon when he delivers his arbitral award. It isfurther observed that thus an award based on little evidence or onevidence which does not measure up in quality to trained legalmind would not be held to be invalid on this score.

9.2 Similar is the view taken by this Court in NHAI v. ITDCementation (India) Ltd. (2015) 14 SCC 21, para 25 and SAILv. Gupta Brother Steel Tubes Ltd. (2009) 10 SCC 63, para 29.”

[emphasis supplied]

19. InDyna Technologies (P) Ltd.(supra), the view taken abovehas been reiterated in the following words:

“25. Moreover, umpteen number of judgments of this Court havecategorically held that the courts should not interfere with an awardmerely because an alternative view on facts and interpretation ofcontract exists. The courts need to be cautious and should deferto the view taken by the Arbitral Tribunal even if the reasoning

10 (2019) 7 SCC 236

11 (2006) 11 SCC 181

12 (2012) 5 SCC 306

16SUPREME COURT REPORTS

Aprovided in the award is implied unless such award portraysperversity unpardonable under Section 34 of the Arbitration Act.”

20. An identical line of reasoning has been adopted inSouth EastAsia Marine Engg. & Constructions Ltd.[SEAMAC Limited] V. OilIndia Ltd.13 and it has been held as follows:

“12. It is settled position that court can set aside the awardonly on the grounds as provided in the Arbitration Act as interpretedby the courts. Recently, this Court in Dyna Technologies (P)Ltd. v. Crompton Greaves Ltd. [Dyna Technologies (P) Ltd. v.Crompton Greaves Ltd., (2019) 20 SCC 1 : 2019 SCC OnLineCSC 1656] laid down the scope of such interference. This Courtobserved as follows : (SCC pp. 11-12, para 24)

“24. There is no dispute that Section 34 of the Arbitration Actlimits challenge to an award only on the grounds providedtherein or as interpreted by various Courts. We need to beDcognizant of the fact that arbitral awards should not beinterfered with in casual and cavalier manner, unlessthe Court comes to conclusion that the perversity of theaward goes to the root of the matter without there being apossibility of alternative interpretation which may sustainEthe arbitral award. Section 34 is different in its approach andcannot be equated with normal appellate jurisdiction. Themandate under Section 34 is to respect the finality of the arbitralaward and the party autonomy to get their dispute adjudicatedby an alternative forum as provided under the law. If the Courtswere to interfere with the arbitral award in the usual course onFfactual aspects, then the commercial wisdom behind optingfor alternate dispute resolution would stand frustrated.”

13. It is also settled law that where two views are possible,the Court cannot interfere in the plausible view taken bythe arbitrator supported by reasoning. This Court in DynaGTechnologies [Dyna Technologies (P) Ltd. V. CromptonGreaves Ltd., (2019) 20 SCC 1 : 2019 SCC OnLine SC 1656]observed as under : (SCC p.12, para 25)

25. Moreover, umpteen number of judgments of this Court havecategorically held that the Court should not interfere with anaward merely because an alternative view on facts andinterpretation of contract exists. The Courts need to be cautiousand should defer to the view taken by the Arbitral Tribunaleven if the reasoning provided in the award is implied unlesssuch award portrays perversity unpardonable under Section34 of the Arbitration Act.”

[emphasis supplied]

21. In the instant case, we are of the view that the interpretationof the relevant clauses of the Implementation Agreement, as arrived atby the learned Sole Arbitrator, are both, possible and plausible. Merelybecause another view could have been taken, can hardly be groundfor the learned Single Judge to have interfered with the arbitral award.In the given facts and circumstances of the case, the Appellate Courthas rightly held that the learned Single Judge exceeded his jurisdiction ininterfering with the award by questioning the interpretation given to therelevant clauses of the Implementation Agreement, as the reasons givenare backed by logic.

22. We, therefore, uphold the decision of the Appellate Court thathas restored the findings returned in the arbitral award dated 05[th] June,2005 to the effect that the State of Himachal Pradesh had proceeded toterminate the Implementation Agreement before expiry of the prescribedperiod which could have been extended up to 24 months, reckoned fromthe “effective date”. In the instant case, the State of H.P. had terminatedthe Implementation Agreement five months prior to the stipulated periodby adopting distorted interpretation of Clause 4 of the ImplementationAgreement, which was impermissible.