RELIANCE INFRASTRUCTURE LTD. versus STATE OF GOA

Citation: [2023] 8 S.C.R. 379 · Decided: 10-05-2023 · Supreme Court of India · Bench: DINESH MAHESHWARI · Disposal: Disposed off

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Judgment (excerpt)

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379
[2023] 8 S.C.R. 379
379
RELIANCE INFRASTRUCTURE LTD.
v.
STATE OF GOA
(Civil Appeal No. 3615 of 2023)
MAY 10, 2023
[DINESH MAHESHWARI AND SANJAY KUMAR, JJ.]
Arbitration and Conciliation Act, 1996: ss. 34, 37 – Arbitral
award – Scope of interference – Held: Arbitral award is not an
ordinary adjudicatory order so as to be lightly interfered with by
the Courts u/ss. 34 or 37 as if dealing with an appeal or revision
against a decision of any subordinate Court – An award could be
said to be suffering from “patent illegality” only if it is an illegality
apparent on the face of the award and not to be searched out by
way of re-appreciation of evidence – Possibility of interference would
arise only if the construction of the arbitrator is such which could
not be made by any fair-minded and reasonable person – Narrow
scope of “patent illegality” cannot be breached by mere use of
different expressions which nevertheless refer only to “error” and
not to “patent illegality” – If an arbitrator construes the term of
contract in a reasonable manner, the award cannot be set aside
with reference to the deduction drawn from construction – Restraint
is required to be shown while examining the validity of arbitral award
by the Courts, else interference with the award after reassessing
the factual aspects would be defeating the object of the Act – On
facts, the appellants constructed a power plant for the State under
a power purchase agreement-PPA, however, the State failed to pay
for the power generated by the plant – Matter referred to the
arbitrator, wherein the appellants awarded a sum of Rs. 292.22
crore along with an interest of 15% p.a. from the date of the award
till the date of payment, however, the High Court reduced the interest
rate awarded to 10% p.a.– High Court misdirected itself on the
major issues concerning the merits of the award – Nothing of a
patent illegality apparent on the face of the award pointed out – As
the prevailing interest rates at the time were in the range of 13% to
14% p.a., the arbitrator acted within his jurisdiction in awarding
the interest rate of 15% p.a. post award and there was no
justification to reduce the same to 10% p.a. – There had been no
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SUPREME COURT REPORTS
[2023] 8 S.C.R.
such flaw in the judgment and order passed by the Commercial
Court which called for interference by the High Court on the
parameters and within the periphery of ss. 34/37 – Part of the
impugned judgment and order passed by the High Court, which
modifies the award and the order of the Commercial Court is set
aside and the award is restored in its entirety.
Disposing of the appeals, the Court
HELD: 1.1 Arbitral award is not an ordinary adjudicatory
order so as to be lightly interfered with by the courts under
sections 34 or 37 of the Arbitration and Conciliation Act, 1996 as
if dealing with an appeal or revision against a decision of any
subordinate court. The significant aspect is that it is not a mere
illegality which would call for interference, but it has to be “a
patent illegality”, which obviously signifies that it ought to be
apparent on the face of the award and not the one which is culled
out by way of a long-drawn analysis of the pleadings and evidence.
Of course, when the terms and conditions of the agreement
governing the parties are completely ignored, the matter would
be different and an award carrying such a shortcoming shall be
directly hit by Section 28(3) of the Act, which enjoins upon an
arbitral tribunal to decide in accordance with the terms of contract
while taking into account the usage of trade applicable to the
transaction. If an arbitrator construes the term of contract in a
reasonable manner, the award cannot be set aside with reference
to the deduction drawn from construction. The possibility of
interference would arise only if the construction of the arbitrator
is such which could not be made by any fair-minded and reasonable
person. [Para 18][433-D-G]
1.2 The instant case had not been a case of the fundamental
alteration of the terms of contract during the currency of contract
and for that matter, the parties having definitely exchanged
communication and having brought into existence an agreement
which, even if construed as supplemental to original one, had
been of material difference in regard to the use of particular fuel
and then raising of invoices on that basis with reference to
fluctuating price of fuel as also the exchange rate of foreign
currenc

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