Patna High Court

TATA AIG GENERAL INSURANCE COMPANY LIMITED,versusM/S TIRHUT FOOD PRODUCTS,

Decided: 3 February 2026
Disposal: ALLOWED
Bench: RAJEEV RANJAN PRASAD PRAVEEN KUMAR

Holding

The award is set aside as it was passed in violation of natural justice and constitutes a patent illegality under Section 34(2)(a)(iii) of the Arbitration and Conciliation Act, 1996.

Summary

Tata AIG General Insurance Company (appellant) insured M/s Tirhut Food Products (respondent) for fire loss. After a fire in December 2018 the insurer paid Rs 1.61 crore as full and final settlement, which the respondent later contested and invoked the arbitration clause in the policy. The arbitral tribunal proceeded to hear the case without allowing either party to adduce evidence, treated the respondent’s annexure as an admission, and awarded Rs 1.20 crore plus interest. The appellant challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, alleging violation of natural justice and patent illegality. The Patna High Court examined the tribunal’s failure to determine procedural rules under Section 19 and to give the parties a chance to present evidence, finding the award contrary to Sections 18, 24 and 26 of the Act. Consequently, the court set aside the award and allowed the appeal.

Issues considered

The arbitral tribunal’s failure to determine procedural rules under Section 19 of the Arbitration and Conciliation Act, 1996.
Whether the award was passed in violation of the principles of natural justice and the right to present evidence under Sections 18, 24 and 26.
Whether the award constitutes a patent illegality justifying setting aside under Section 34(2)(a)(iii).
The effect of the prior full and final settlement on the jurisdiction of the arbitral tribunal.

Legislation cited

Arbitration and Conciliation Act, 1996 — s. 13(1-A), 18, 19, 23, 24, 34, 37
Commercial Courts Act, 2015 — s. 13(1-A)
Companies Act, 2013
Indian Partnership Act, 1932
Insurance Act, 1938 — s. 64UM

Subjects

Arbitration
Natural Justice
Patent Illegality
Section 34
Section 37
Accord and Satisfaction
Insurance Claim
Procedural Fairness
Evidence

Judgment

IN THE HIGH COURT OF JUDICATURE AT PATNA
COMMERCIAL APPEAL No.1 of 2025
======================================================
TATA AIG GENERAL INSURANCE COMPANY LIMITED, a company
within the meaning of the Companies Act. 2013 having its Registered Office
at 15th Floor, Tower A, Peninsula Business Park, GK Marg, Lower Parel,
Mumbai-400013, through its Authorized Representative and having its
Branch Offices at AMS Park Building, 4th Floor, Near Boring Road Crossing,
Patna-800001, and 2nd Floor, KPS Complex, Shankar Nagar, Muzaffarpur
842002.
... ... Appellant
Versus
M/S TIRHUT FOOD PRODUCTS, a firm within the meaning of the Indian
Partnership Act. 1932, Having Office at Village- Bajitpur, PO Sarfuddinpur,
District - Muzaffarpur – 843118, Represented by its Partner Smt. Sunita
Chaudhary, W/o Mukesh Kumar, Presetly Residing at Mohalla- Chhoti
Saraiyaganj, Jawahar Lal Road, PO- Head Post Office, Near Chamber of
Commerce, PS-Town, Muzaffarpur-842001.
... ... Respondent
======================================================
Appearance :
For the Appellant : Mr. Hrishikesh, Advocate
For the Respondent : Mr. Ajay Kumar, Advocate
Mr. Mahendra Kumar, Advocate
Mr. Mukesh Prasad Singh, Advocate
======================================================
CORAM: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD
and
HONOURABLE MR. JUSTICE PRAVEEN KUMAR
ORAL JUDGMENT
(Per: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD)

Date : 03-02-2026

Heard Mr. Hrishikesh, learned counsel for the appellant

and Mr. Ajay Kumar, learned counsel for the Respondent.

2. This Commercial Appeal has been preferred under

Section 37 of the Arbitration and Conciliation Act, 1996

(hereinafter referred to as the ‘Act of 1996’) read with Section

13(1-A) of the Commercial Courts Act, 2015 (hereinafter referred

to as the ‘Act of 2015’) for setting aside the judgment dated 23 rd
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day of July, 2024 passed by learned Additional District Judge-XIV

Court, Patna in Miscellaneous (Arbitration) Case No. 173 of 2021

whereby and whereunder the learned Additional District Judge,

XIV Court, Patna has refused to interfere with the arbitral award

dated 25th August, 2021 passed by the learned Arbitral Tribunal.

Brief Facts of the Case

3. It is a matter of record that the respondent obtained an

insurance policy from the appellant who is in the business of

general insurance and provides diverse insurance covers to its

customers across India. The insurance policy bearing no.

2260088270 and titled ‘My Business My Choice- Package’ from

the appellant assured the respondent against loss and damages due

to fire and special perils during the period 1st day of August, 2018

to 31st July, 2019.

4. It appears that the Respondent had its factory situated

at Bajitpur, P.O.- Sarfuddinpur in the district of Muzaffarpur. The

policy in question covered the said factory from the various kind

of losses arising out of any accidental fire and special perils.

5. Under the general conditions of the policy, there is an

arbitration clause being clause no. 11 whereunder the parties

agreed inter alia for settlement and compromise of disputes in

connection with the policy and it is not in dispute that in terms of
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clause 11 of the Insurance Policy, in the present case as the dispute

arose over the payment of the insurance claim, the parties chose to

refer the matter to the learned Arbitral Tribunal.

6. It is the case of the respondent that at about 03:00 AM

on 31st December, 2018, due to electric short circuit in the factory,

a fire broke out which resulted into death and injuries to some of

the respondent’s workers. The fire also damaged the respondent’s

stock, plant, machinery and building at its factory. In terms of the

policy conditions, the respondent reported the incident to the

appellant and made a claim on account of loss under various heads

including stock, building and shed, plant and machinery, furniture,

fixtures and fittings and electrical wiring. The total amount

claimed by the respondent came to Rs.3,40,70,091/-. Thereafter, in

terms of Section 64UM of the Insurance Act, 1938, the appellant

appointed a surveyor, namely, Proclaim Insurance Surveyors and

Loss Assessors Private Limited (in short called the ‘Surveyor’).

The Surveyor was an approved surveyor of the Insurance

Regulatory and Development Authority of India (IRDAI) in terms

of the IRDAI (Insurance Surveyors and Loss Assessors)

Regulation, 2015.

7. The Surveyor prepared its reports which were

communicated to the respondent, the respondent replied to the
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same with its comments and after numerous correspondences

between the parties, the Surveyor submitted a report. It is the case

of the appellant that the respondent sought payment of the sum

admitted to be payable by the appellant. The Surveyor prepared its

final survey report dated 16th December, 2019 and based on that,

the appellant proposed to make payment of Rs.1,61,00,258/- in full

and final satisfaction of the respondent’s claim under the policy. It

is the case of the appellant that the respondent’s banker State Bank

of India issued a letter dated 9th January, 2020 enclosing a

discharge note issued under the agreed bank clause of the policy

requesting for payment of the said proposed full and final

settlement. The discharge note was signed by the respondent’s

partners. The appellant made payment of Rs.1,61,00,258/- to the

respondent on 13th January, 2020 in full and final satisfaction of

the claim made by the respondent under the policy. It is the case of

the appellant that the respondent accepted such payment

unconditionally and the policy obligations stood discharged by

accord and satisfaction. According to the policy, no further

obligation or liability remained as against the appellant under the

said policy.

8. It, however, appears that after receipt of the said

amount of Rs.1,61,00,258/-, the respondent invoked the arbitration
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agreement in the policy by its letter dated 23rd January, 2020. The

learned Tribunal was constituted by and between the parties as per

the arbitration clause contained in the policy.

9. It is stated that in course of the arbitration proceeding,

the parties exchanged their pleadings. The respondent herein filed

a statement of claim praying for award of an amount of

Rs.1,04,24,488/- (including delayed payment interest and further

interest and litigation cost). The appellant filed a statement of

defence disputing the claim of the respondent. The appellant put

forth two primary contentions before the learned Arbitral Tribunal,

(1) that the policy stood discharged by accord and satisfaction/full

and final settlement, and (2) the assessment of loss as arrived at in

the final survey report was true and correct and no ground for

challenging the same has been made out by the respondent. The

respondent, however, filed an amendment application to the

statement of claim adding Annexure ‘25’ which contained a

breakup of the claim under the policy and thereby the respondent

enhanced the claim to Rs.1,20,32,274/- by additionally accounting

for (i) interest on the claimed amount, (ii) compensation for mental

agony and harassment, and (iii) tentative legal cost. The appellant

submits that this amendment was allowed without affording any

opportunity of hearing to the appellant. The appellant, however,
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filed a supplementary written statement bringing on record various

documents including the discharge voucher and the valuation

report prepared by the respondent’s banker State Bank of India as

well as the stock summary of the respondent’s assets/stocks.

10. It is submitted that after completion of the pleadings

of the parties, the learned Tribunal proceeded to fix the hearing of

the matter vide order dated 28th February 2021 which is said to

have been passed with the consent of the appellant even as no such

consent was given by the appellant. The learned Tribunal decided

to directly proceed to arguments in the arbitral reference without

there being any order or opportunity granted to the appellant or the

respondent to lead evidence and cross-examine the witness of the

respondent. It is the case of the appellant that in its statement of

defence and supplementary written statement, the appellant had

categorically disputed the contentions of the claimant-respondent

and the appellant had filed two applications dated 06 th March,

2021 and 20th June, 2021 seeking a direction from the learned

Tribunal for framing of issues and for allowing the appellant to

adduce evidences in support of its case but both the applications of

the appellant were turned down by the learned Tribunal. The

learned Tribunal proceeded to pass the impugned award dated 25th
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August, 2021 without allowing or requiring the parties to the

reference to adduce evidence.

11. It is submitted that the award of the learned Tribunal

was assailed by the appellant before the learned District Judge,

Patna on the ground that the impugned award was passed without

any evidence being led by either party and the arbitral procedure

was never decided by the learned tribunal. The impugned award is

in conflict with Sections 18, 19 and 24 of the Act of 1996 as well

as the fundamental policy of Indian law.

12. Various other grounds were raised before the learned

District Judge, Patna by way of objections and a prayer was made

for setting aside of the impugned award. It is, however, submitted

that the application for setting aside of the impugned award being

Miscellaneous (Arbitration) Case No. 173 of 2021 came to be

finally heard by learned Additional District Judge-XIV Court,

Patna. The learned court vide its order dated 23.07.2024 was

pleased to dismiss the application. It is submitted that the learned

Additional District Judge-XIV, Patna having perused the

ordersheets of the learned Tribunal came to a conclusion that the

Insurance Company-appellant herein had been given due

opportunity at each stage to present it’s case. The learned court

was of the view that there was no agreement between the parties as
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to the mode and manner of arbitral procedure, thus, the learned

Tribunal adjudicated the matter on the basis of the materials

brought on the record through pleadings and documents after

affording the opportunity to the applicant Insurance Company to

present its case. The learned Additional District Judge-XIV, Patna

held that there was no patent illegality or perversity in the

impugned award.

13. The learned court placed reliance on the judgment of

the Hon’ble Supreme Court in the case of Reliance

Infrastructure Ltd. Vs. State of Goa reported in 2023 SCC

OnLine SC 604 wherein the Hon’ble Supreme Court reiterated its

views expressed in the case of Delhi Airport Metro Express Pvt.

Ltd. Vs. Delhi Metro Rail Corporation Ltd. reported in (2022) 1

SCC 131. The learned court also rejected the contention of the

appellant that despite the acceptance of the final settlement by the

claimant at pre-arbitration stage, the claimant opted for arbitration,

therefore, the claim raised by the claimant was wrongly allowed

by the learned Arbitral Tribunal.

14. In its ultimate analysis, the learned court held that

there was neither any apparent illegality or perversity in the

impugned order nor the same appears to be in conflict with any

public policy of India, therefore, there is no reason present to
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question the impugned award. After holding that none of the

grounds as available under Section 34 of the Act of 1996 is present

in this case, the learned court dismissed the miscellaneous case

preferred by the present appellant.

Submissions on behalf of the Appellant

15. Mr. Hrishikesh, learned counsel for the appellant

submits that the learned Additional District Judge-XIV, Patna

while considering the application of the appellant under Section 34

of the Act of 1996 could not appreciate that the impugned award is

liable to be set aside on the solitary ground that it was passed

without following the principles of natural justice and there was no

evidence on the record save and except the pleadings of the

parties.

16. Attention of this Court has been drawn towards

Section 19 of the Act of 1996. It is submitted that Section 19

provides for determination of rules of procedure. A reading of sub-

section (3) of Section 19 would show that failing any agreement

referred to in sub-section (2), the Arbitral Tribunal may, subject to

this Part, conduct the proceedings in the manner it considers

appropriate. Under sub-section (4) of Section 19, it is stipulated

that power of the Arbitral Tribunal under sub-section (3) includes
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the power to determine the admissibility, relevance, materiality

and weight of any evidence.

17. Learned counsel submits that in this case, the learned

Tribunal was at the outset required to determine the rules of

procedure in terms of Section 19 of the Act of 1996, but that was

not done. The learned Arbitral Tribunal was required to follow the

principles of natural justice and fair play in action by providing the

parties an opportunity to adduce their respective evidences. In this

case, neither the list of documents were exchanged between the

parties for admissions or denial nor the author of those documents

came to prove either the existence of the document or the contents

thereof. The basic principles and procedures which were required

to be followed at the end of the Tribunal before relying upon any

document as an evidence on the record has not been followed.

18. Learned counsel submits that there are catena of

judgments of the Hon’ble Supreme Court in which the scope and

ambit of the powers of the Court under Section 34 and Section 37

of the Act of 1996 have come up for consideration. Reliance in this

regard has been placed on the judgment of the Hon’ble Supreme

Court in the case of MMTC Ltd. Vs. Vedanta Ltd. reported in

(2019) 4 SCC 163, Konkan Railway Corpn. Ltd. Vs. Chenab

Bridge Project reported in (2023) 9 SCC 85 and a recent
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judgment of the Hon’ble Supreme Court in the case of Jan DE

NUL Dredging India Pvt. Ltd. Vs. Tuticorin Port Trust reported

in 2026 INSC 34. It is submitted that while all these judgments

have succinctly laid down that the scope of interference with the

award is very restricted and in an appeal under Section 37 of the

Act of 1996, the Court is not supposed to undertake an

independent assessment of the merits of the award, all these

judgments have consistently laid down that where the learned

Tribunal has passed an award in violation of principles of natural

justice and the award suffers from patent illegality on the face of it,

the award may be set aside. The Hon’ble Apex Court has also held

in the case of Ssangyong Engineering and Construction

Company Limited Vs. National Highways Authority of India

(NHAI) reported in (2019) 15 SCC 131 that where the Arbitrator

gives no reason for an award, it would amount to patent illegality.

19. Learned counsel submits that the impugned order

suffers from patent illegality and is liable to be set aside.

Submissions on behalf of the Respondent

20. On the other hand, Mr. Ajay Kumar, learned

Advocate for the respondent would submit that the learned Arbitral

Tribunal has rightly proceeded to pass the impugned award on the

basis of the materials available on the record. It is submitted that
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the arbitral proceeding was conducted during the Covid-19 period

when all the parties were connecting to the proceeding with the

learned Arbitral Tribunal through WhatsApp. It is submitted that

on 06.09.2020, the claim petition along with annexures were filed

on behalf of the respondent through online mode, however, the

hard copy was filed on 12.10.2020 together with an amendment

petition after serving copy of the same upon the respondent. That

day, the case was fixed for filing reply on behalf of the Insurance

Company and the Arbitrators’ fee was fixed. On 29.11.2020, the

Insurance Company filed its reply through email with a copy to the

claimant. The claimant filed a petition through WhatsApp for time

in order to file a rejoinder along with proposed issues which was

allowed. The learned Arbitral Tribunal fixed the matter for

20.12.2020 at 04:00 PM.

21. It further appears that on behalf of the Insurance

Company, an objection petition was filed on 29.11.2020 to the

effect that the amendment petition filed by the claimant on

12.10.2020 during the physical hearing was allowed as per order

dated 22.11.2020 behind the back of the respondent. The Insurance

Company claimed that on 12.10.2020, there was no hearing either

physical or virtual. This application of the Insurance Company was

contested by the claimant. It was submitted on behalf of the
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claimant that the amendment petition was considered and allowed

on 12.10.2020 itself when both the parties had participated in the

physical hearing of the case. It is stated that the objection filed on

behalf of the Insurance Company on 29.11.2020 was rejected vide

order dated 22.12.2020.

22. It is submitted on behalf of the claimant-respondent

that on 24.01.2021, the respondent-insurance company was

directed to file remaining annexures by next date and with the

consent of learned counsel of both the parties, the matter was fixed

for 28.02.2021 for final hearing. In the meantime, both the parties

were directed to file their respective notes of argument. On that

day, the learned Arbitrators fixed the date for filing of the written

notes of arguments by the parties and final hearing. It is submitted

that only at the fag end, a petition was filed on behalf of the

insurance company wherein they repeated their earlier prayer for

examination of witnesses. The request for examination of

witnesses was made earlier also which was rejected by the learned

Tribunal. Once again this request was rejected vide order dated

21.06.2021.

23. Learned counsel has relied upon the judgment of the

Hon’ble Supreme Court in the case of Ramesh Kumar Jain vs.

Bharat Aluminium Co. Ltd. reported in 2025 SCC OnLine SC
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2857. It is submitted that in case of Ramesh Kumar Jain (supra),

the Hon’ble Supreme Court has considered the newly introduced

sub-section (2A) to Section 34 of the Act of 1996 in the Act of

2015. It is submitted that the proviso to the newly inserted clause

clearly provides that an award shall not be set aside merely on the

ground of an erroneous application of the law or by reappreciation

of evidence. The expression “patent illegality” in Ssangyong

Engg. & Construction Co. Ltd. (supra) has been taken into

consideration by the Hon’ble Court. It has been held that the

terminology of “patent illegality” indicates more than one scenario

such as the findings of the Arbitrator must shock the judicial

conscience or the Arbitrator took into account matters he should

not have or he must have failed to take into account vital matters,

leading to an unjust result; or the decision is so irrational that no

fair or sensible person would have arrived at it given the same

facts.

24. It is submitted that in the present case, no patent

illegality may be found in the impugned award. The learned

Tribunal has taken into consideration the materials on the record

and has passed the impugned award. Attention of this Court has

been drawn toward paragraphs ‘43’ to ‘48’ of the impugned award

to submit that the learned Arbitral Tribunal has relied on the
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uncontroverted Annexure ‘25’ filed by the claimant, therefore no

fault may be found with the award.

Consideration

25. Having heard learned counsel for the parties and on

perusal of the records of the present appeal, we found that in the

present case, the learned Tribunal has proceeded to pass the

impugned award on the basis of the pleadings of the parties. The

Tribunal has heavily relied upon the annexures to the statement of

the claim. The Tribunal did not determine any rules of procedures

in terms of Section 19 of the Act of 1996. The documents which

were enclosed with the pleadings have been treated as an evidence

without giving opportunity to either parties to either admit or deny

the existence of the document or contents thereof. We extract

Section 19 of the Act of 1996 hereunder for a ready reference:-

“19. Determination of rules of
procedure.-(1) The arbitral tribunal
shall not be bound by the Code of Civil
Procedure, 1908 (5 of 1908) or the
Indian Evidence Act, 1872 (1 of 1872).
(2) Subject to this Part, the parties are
free to agree on the procedure to be
followed by the arbitral tribunal in
conducting its proceedings.
(3) Failing any agreement referred to in
sub-section (2), the arbitral tribunal may,
subject to this Part, conduct the
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proceedings in the manner it considers
appropriate.
(4) The power of the arbitral tribunal
under sub-section (3) includes the power
to determine the admissibility,
relevance, materiality and weight of any
evidence. ”

26. On a bare reading of Section 19, it would appear that

the strict rules of the Code of Civil Procedure or the Indian

Evidence Act are not applicable to an arbitration proceeding and

the Arbitral Tribunal shall not be bound by those provisions. The

parties’ autonomy to agree on the procedure to be followed by the

Arbitral Tribunal in conducting its proceedings is evident under

sub-Section (2) of Section 19. In case of failure of the parties to

reach to an agreement in terms of sub-Section (2) of Section 19,

the Arbitral Tribunal may, subject to this part, conduct the

proceedings in the manner it considers appropriate. Section 19

falls under Chapter V containing the heading “Conduct of Arbitral

Proceedings”. Section 18 talks of equal treatment of parties and it

specifically says that the parties shall be treated with equality and

each party shall be given a full opportunity to present his case.

27. In this case, we have found from the various orders

passed by the learned Arbitral Tribunal that during the pendency of

the arbitration proceeding, the Insurance Company being
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respondent before the Tribunal filed an application seeking to

adduce evidences but the application was rejected. The Tribunal

proceeded to pass the impugned award. The award is contained in

48 paragraphs. The learned Tribunal has recorded its finding from

paragraph ‘30’ to ‘42’, a perusal of these paragraphs would show

that the Tribunal has simply recorded the submissions of the

parties. The Tribunal has recorded the documents which have been

filed on behalf of the parties with their respective pleadings and

these may be found in paragraph ‘43’ and ‘44’. At this stage, we

think it just and proper to reproduce paragraphs ‘45’ to ‘48’ which

are, in fact, the final outcome of the discussions of the Arbitral

Tribunal. Paragraph ‘45’ to ‘48’ are as under:-

“45. We minutely examined every
papers/documents filed by Respdts and
tried our best to gauge any relevancy for
decision of this arbitration proceeding but
failed; therefore, they are of no use. So far
claim of the claimant is concerned, it has
been detailed in Annexure 25. These
claims have not been specifically
challenged in Reply or suppl reply.
Annexure 25, does not find any place for
rebuttal. Thus, in other words claimant’s
claim is deemed to be admitted.
46. We also compared final survey Report
dated 16.12.2019 with Annexure 25 and
considered protest letters of the claimant
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sent to the surveyor against wrong
assessment of loss and damage and
acceptance of final report under duress and
compulsion. We also considered findings
of surveyor under “Concurrence” heading.
It clearly mentions that the report
concluded without concurrence of the
claimant.
47. In view of the aforesaid as well as
facts and circumstances we are of the view
that claimant is entitled to receive
claim/damage as detailed in Annx-25 filed
by the claimant from the respondents.
Claim detailed in Annx-25 has also not
been denied by the respondents either in
their additional W.S or in their any petition
filed subsequently to filing of Annx-25 by
the claimant.
48. In the result the claim petition of the
claimant is allowed and accordingly
following AWARD is passed in favour of
the claimant and against the respondents.
AWARD
(i) The claimant is entitled to get
claim/damages as per Annx-25 i.e.. Rs.
12032274/- (One core twenty lakh thirty
two thou from the date of filing of claim
petition, excluding item(w) sand two
hundred seventy four only) with interest
@10% Ρ.Α. Tentative legal cost.
(ii) Both parties shall bear their respective
share of Arbitrator's fee.
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(ii) Cost of litigation to the tune of Rs.
100000/- (one lac) only is allowed.
The respondents are directed to pay the
above claim amount within three months
of date of AWARD failing which claimant
is entitled to get interest @ 10% PA over
total amount till final realization through
due process of law.
Before parting with the order we would
like to clarify that in view of order dated
23.03.2020 and dated 27.04.2021 passed
by Hon'ble Supreme Court in suo moto
writ petition No. 3 of 2020 the period of
limitation prescribed in any law or laws
shall be extended till further order, in all
Judicial or quasi-Judicial proceeding in
view of pandemic situation in Country.
In view of above decision of Hon'ble
Supreme Court, the period for making
award as prescribed in sec. 29A of
Arbitration Act 1996 shall automatically
be extended. Hence this award is quite
within limitation.
In view of above award, this proceeding
stands terminate/u/s 2 (i) of the Arbitration
Act. 1996”

28. It is evident on a bare reading of the aforementioned

paragraphs that the Tribunal rejected all the documents filed on

behalf of the respondents after holding that those were not relevant

for the decision in the arbitration proceeding and that they are of
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no use. On the other hand, the Tribunal has taken Annexure ‘25’ to

the supplementary affidavit/amendment petition of the claimant as

an admitted document for the reason that there was no rebuttal of

Annexure ‘25’ and this has been taken as admission of the

claimant’s claim. The statements recorded in paragraph ‘45’ of the

impugned award are in the nature of a patent illegality on the part

of the Tribunal. Annexure ‘25’ is nothing but a compilation in

tabular form of the claims which are mentioned in the statements

of claims by the claimant-respondent herein. It is a matter of

record that Insurance Company has denied those claims in its

statement of defence and put the claimant to the strictest proof.

The claims having been denied and contested by the Insurance

Company, a mere calculation of those claims in a tabular from in

Annexure ‘25’ cannot be taken as an admission of claim by any

stretch of imagination. The fact remains that the Tribunal did not

lay down any procedure and the parties were not allowed to

adduce the evidence. The pleadings of the parties together with the

annexures have been taken into consideration and the award has

been passed.

29. We have further noticed that the claimant had raised

claims on various heads, the learned Arbitral Tribunal has not

given any reason for allowing each of the claims. After a brief
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discussion as recorded hereinabove in paragraphs ‘45’, ‘46’ and

‘47’, the learned Arbitral Tribunal went on to allow the entire

claim in favour of the claimant and against the respondent.

30. Both the parties have relied upon the judgments of

the Hon’ble Supreme Court as regards the scope and ambit of

interference with an award in an appeal under Section 37 of the

Act of 2015. We have carefully gone through the judgments. In the

case of MMTC Limited (supra), the Hon’ble Supreme Court has

observed in paragraph ‘14’ as under:-

“14. 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 words, 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 an
arbitral award has been confirmed by the court
under Section 34 and by the court in an appeal
under Section 37, this Court must be extremely
cautious and slow to disturb such concurrent
findings.”
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31. In Konkan Railway Corpn Ltd. (supra), the

observations of a Three-Judges Bench of the Hon’ble Supreme

Court may be profitably quoted hereunder for a ready reference:-

18. At the outset, we may state that the
jurisdiction of the court under Section 37 of
the Act, as clarified by this Court in MMTC
Ltd. v. Vedanta Ltd.9, is akin to the
jurisdiction of the court under Section 34 of
the Act.10 Scope of interference by a court
in an appeal under Section 37 of the Act, in
examining an order, setting aside or
refusing to set aside an award, is restricted
and subject to the same grounds as the
challenge under Section 34 of the Act.
19. Therefore, the scope of jurisdiction under
Section 34 and Section 37 of the Act is not
akin to normal appellate jurisdiction. 11

9. (2019) 4 SCC 163 : (2019) 2 SCC (Civ) 293
10. Id, SCC p. 167, para 14:
“14. 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 words, 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.”
11. UHL Power Co. Ltd. v. State of H.P., (2022) 4 SCC 116, para 15 :
(2022) 2 SCC (Civ) 401. See also : Dyna Technologies (P) Ltd. v.
Crompton Greaves Ltd., (2019) 20 SCC 1, paras 24, 25.
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It is well-settled that courts ought not to interfere
with the arbitral award in a casual and cavalier
manner. The mere possibility of an alternative view
on facts or interpretation of the contract does not
entitle courts to reverse the findings of the Arbitral
Tribunal.12 In Dyna Technologies (P) Ltd. v.
Crompton Greaves Ltd.13, this Court held : (Dyna
Technologies case13, SCC p. 12, paras 24-25)
“24. There is no dispute that Section 34 of the
Arbitration Act limits a challenge to an award
only on the grounds provided therein or as
interpreted by various courts. We need to be
cognizant of the fact that arbitral awards should
not be interfered with in a casual and cavalier
manner, unless the court comes to a conclusion
that the perversity of the award goes to the root
of the matter without there being a possibility of
alternative interpretation which may sustain the
arbitral award. Section 34 is different in its
approach and cannot be equated with a normal
appellate jurisdiction. The mandate under
Section 34 is to respect the finality of the arbitral
award and the party autonomy to get their
dispute adjudicated by an alternative forum as
provided under the law. If the courts were to
interfere with the arbitral award in the usual
course on factual aspects, then the commercial
wisdom behind opting for alternate dispute
resolution would stand frustrated.

12. Ibid; Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC
131 : (2020) 2 SCC (Civ) 213; Parsa Kente Collieries Ltd. v. Rajasthan
Rajya Vidyut Utpadan Nigam Ltd., (2019) 7 SCC 236, para 11.1 : (2019) 3
SCC (Civ) 552
13. (2019) 20 SCC 1
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25. Moreover, umpteen number of
judgments of this Court have categorically
held that the courts should not interfere
with an award merely because an
alternative view on facts and interpretation
of contract exists. The courts need to be
cautious and should defer to the view taken
by the Arbitral Tribunal even if the
reasoning provided in the award is implied
unless such award portrays perversity
unpardonable under Section 34 of the
Arbitration Act.”
32. In Ssangyong Engg. & Construction Co. Ltd.

(supra), the Hon’ble Supreme Court has observed in paragraph

‘49’ to ‘52’ as under:-

“The ground of challenge under Section 34(2)(a)(iii)
49. Under Section 34(2)(a)(iii), one of the grounds of
challenge of an arbitral award is that a party is unable
to present its case. In order to understand the import of
Section 34(2)(a)(iii), Section 18 of the 1996 Act should
also be seen. Section 18 reads as follows:
“18. Equal treatment of parties.—The parties shall be
treated with equality and each party shall be given a
full opportunity to present his case.”
(emphasis supplied)
Section 24(3) also states as follows:
“24. Hearings and written proceedings.—(1)-(2) * * *
(3) All statements, documents or other information
supplied to, or applications made to the Arbitral
Tribunal by one party shall be communicated to the
other party, and any expert report or evidentiary
document on which the Arbitral Tribunal may rely in
making its decision shall be communicated to the
parties.”
Section 26 of the 1996 Act is also important and states
as follows:
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“26. Expert appointed by Arbitral Tribunal.—(1)
Unless otherwise agreed by the parties, the Arbitral
Tribunal may—
(a) appoint one or more experts to report to it on
specific issues to be determined by the Arbitral
Tribunal; and
(b) require a party to give the expert any relevant
information or to produce, or to provide access to, any
relevant documents, goods or other property for his
inspection.
(2) Unless otherwise agreed by the parties, if a party so
requests or if the Arbitral Tribunal considers it
necessary, the expert shall, after delivery of his written
or oral report, participate in an oral hearing where the
parties have the opportunity to put questions to him
and to present expert witnesses in order to testify on
the points at issue.
(3) Unless otherwise agreed by the parties, the expert
shall, on the request of a party, make available to that
party for examination all documents, goods or other
property in the possession of the expert with which he
was provided in order to prepare his report.”
50. Section 24(3) is a verbatim reproduction of Article
24(3) of the UNCITRAL Model Law on International
Commercial Arbitration (the UNCITRAL Model Law).
Similarly, Sections 26(1) and (2) are a verbatim
reproduction of Article 26 of the UNCITRAL Model
Law. Sub-section (3) of Section 26 has been added by
the Indian Parliament in enacting the 1996 Act.
51. Sections 18, 24(3) and 26 are important pointers to
what is contained in the ground of challenge
mentioned in Section 34(2)(a)(iii). Under Section 18,
each party is to be given a full opportunity to present
its case. Under Section 24(3), all statements,
documents, or other information supplied by one party
to the Arbitral Tribunal shall be communicated to the
other party, and any expert report or document on
which the Arbitral Tribunal relies in making its
decision shall be communicated to the parties. Section
26 is an important pointer to the fact that when an
expert's report is relied upon by an Arbitral Tribunal,
the said report, and all documents, goods, or other
property in the possession of the expert, with which he
was provided in order to prepare his report, must first
be made available to any party who requests for these
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things. Secondly, once the report is arrived at, if
requested, parties have to be given an opportunity to
put questions to him and to present their own expert
witnesses in order to testify on the points at issue.
52. Under the rubric of a party being otherwise unable
to present its case, the standard textbooks on the
subject have stated that where materials are taken
behind the back of the parties by the Tribunal, on
which the parties have had no opportunity to comment,
the ground under Section 34(2)(a)(iii) would be made
out.”
33. All these judgment recently came for consideration

before the Hon’ble Supreme Court in the case of JAN DE NUL

Dredging India Pvt. Ltd. (supra). The observations of the

Hon’ble Supreme Court in the earlier judgments have been

reiterated. While it is evident on perusal of all these judgments that

the jurisdiction of the Court in an appeal under Section 37 of the

Act of 1996 is limited and extremely circumscribed jurisdiction

but in case of violation of principles of natural justice, it is the

consistent view that the award is liable to be interfered with.

34. At this stage, we reproduce Section 23 and 24 of the

Act of 1996 hereunder to demonstrate that the Act itself provides

for the various stages of the arbitration proceedings right from the

stage of statement of claim and defence to hearing and written

proceedings:-

“23. Statements of claim and defence.—(1)
Within the period of time agreed upon by the
parties or determined by the arbitral tribunal, the
claimant shall state the facts supporting his claim,
the points at issue and the relief or remedy sought,
and the respondent shall state his defence in
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respect of these particulars, unless the parties have
otherwise agreed as to the required elements of
those statements.
(2) The parties may submit with their statements
all documents they consider to be relevant or may
add a reference to the documents or other evidence
they will submit.
1
[(2A) The respondent, in support of his case, may
also submit a counterclaim or plead a set-off,
which shall be adjudicated upon by the arbitral
tribunal, if such counterclaim or set-off falls within
the scope of the arbitration agreement.]
(3) Unless otherwise agreed by the parties, either
party may amend or supplement his claim or
defence during the course of the arbitral
proceedings, unless the arbitral tribunal considers
it inappropriate to allow the amendment or
supplement having regard to the delay in making
it.
2
[(4) The statement of claim and defence under this
section shall be completed within a period of six
months from the date the arbitrator or all the
arbitrators, as the case may be, received notice, in
writing of their appointment.]
24. Hearings and written proceedings.—(1)
Unless otherwise agreed by the parties, the arbitral
tribunal shall decide whether to hold oral hearings
for the presentation of evidence or for oral
argument, or whether the proceedings shall be
conducted on the basis of documents and other
materials:
Provided that the arbitral tribunal shall hold oral
hearings, at an appropriate stage of the
proceedings, on a request by a party, unless the
parties have agreed that no oral hearing shall be
held:
3
[Provided further that the arbitral tribunal shall, as
far as possible, hold oral hearings for the
presentation of evidence or for oral argument on
day-to-day basis, and not grant any adjournments
unless sufficient cause is made out, and may
impose costs including exemplary costs on the
party seeking adjournment without any sufficient
cause.]
1.Ins. By Act 3 of 2016, s.11 (w.e.f. 23-10-2015).
2. Ins. By Act 33 of 2019, s.5 (w.e.f. 30-8-2019).
3. Ins. By Act 3 of 2016, s.12 (w.e.f. 23-10-2015).
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(2) The parties shall be given sufficient advance
notice of any hearing and of any meeting of the
arbitral tribunal for the purposes of inspection of
documents, goods or other property.
(3) All statements, documents or other information
supplied to, or applications made to the arbitral
tribunal by one party shall be communicated to the
other party, and any expert report or evidentiary
document on which the arbitral tribunal may rely
in making its decision shall be communicated to
the parties”

A bare reading of these provisions would show that

statement of claim and defence are to be filed at the stage of

Section 23 of the Act whereafter under Section 24, the arbitral

tribunal is obliged to decide whether to hold oral hearings for the

presentation of evidence or for oral argument or whether the

proceedings shall be conducted on the basis of documents and

other materials.

35. In the present case, the learned Tribunal has not

followed the mandate of Section 19 read with Section 24 of the

Act of 1996.

36. Having regard to the aforesaid discussions, finding

that the learned Arbitral Tribunal in this case has not followed the

principles of natural justice by allowing the parties to adduce their

evidences and the impugned award has been passed after rejecting

the prayer of the appellant to allow it to adduce the evidences, we

are of the considered opinion that the impugned award suffers

from patent illegality and it is liable to be interfered with.
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37. We accordingly set aside the impugned judgment in

Miscellaneous (Arbitration) Case No. 173 of 2021 and set aside

the award dated 25.08.2021.

38. This appeal is allowed.

(Rajeev Ranjan Prasad, J)

(Praveen Kumar, J)
lekhi/-rishi/-
AFR/NAFR AFR
CAV DATE
Uploading Date 06.02.2026
Transmission Date

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