Holding

The arbitral award is not in conflict with public policy nor vitiated by patent illegality; the holding company is bound, the claim is within limitation under Article 55, the specific counter‑claims are time‑barred, and the award is not perverse.

Summary

OPG Power Generation (the appellant) and its holding company Gita Power were sued by Enexio Power Cooling Solutions for unpaid amounts under supply and erection orders for an air‑cooled condenser unit. The arbitral tribunal held that Gita Power, as the holding company, was bound by the arbitration agreement and jointly and severally liable with OPG, and that Enexio's claim for the outstanding principal amount was within the limitation period under Article 55 of the Limitation Act, 1963, while the counter‑claims for repair/replacement of gear boxes and fan modules were time‑barred. The tribunal’s reasoning was found to be intelligible and not perverse, and the award was not in conflict with the public policy of India nor vitiated by patent illegality. Accordingly, the Supreme Court dismissed the appeals and restored the arbitral award.

Issues considered

Whether the holding company Gita Power can be subjected to arbitration and be held jointly and severally liable with OPG.
Whether Enexio's claim for the outstanding principal amount is barred by limitation.
Whether the counter‑claim for cost of repair/replacement of gear boxes and fan modules is barred by limitation despite the main claim being within limitation.
Whether the award for payment of the outstanding principal amount with interest is perverse for not adjusting debit notes.
Whether the arbitral tribunal adopted a different yardstick for the claim and the counter‑claim, rendering the award flawed.
Whether the award is in conflict with the public policy of India or vitiated by patent illegality.

Legislation cited

Amended Letters Patent, 1865
Arbitration and Conciliation Act, 1996s. 21, s. 23(2A), s. 28(1)(a), s. 28(3), s. 30, s. 31(3), s. 34(2‑A), s. 34(2)(b)(ii), s. 37, s. 43
Commercial Courts Act, 2015
Contract Act, 1872
Foreign Awards (Recognition and Enforcement) Act, 1961
Limitation Act, 1963s. Article 113, s. Article 14, s. Article 18, s. Article 55, s. Article 58, s. Section 18, s. Section 19

Subjects

Arbitral awardPublic policy of IndiaPatent illegalityHolding companyJointly and severally liableLimitationCounter claimContractual relationshipOutstanding principal amount with interestPerverse awardDifferent yardstickComposite tenderDeclaratory reliefLiquidated damagesCustoms dutyLimitation Act, 1963AcknowledgementGroup of companies doctrinePerformance guarantee testBreach of contractExtension of limitation

Judgment

[2024] 9 S.C.R. 490 : 2024 INSC 711

OPG Power Generation Private Limited
v.
Enexio Power Cooling Solutions India Private
Limited & Anr.
(Civil Appeal Nos. 3981-3982 of 2024)
20 September 2024
[Dr. Dhananjaya Y. Chandrachud, CJI,
J.B. Pardiwala and Manoj Misra,* JJ.]

Issue for Consideration
Issue arose as to whether the arbitral award is in conflict with the
public policy of India, or/and is vitiated by patent illegality appearing
on the face of the award; whether the holding company could
have been subjected to arbitration and made jointly and severally
liable along with the project beneficiary-appellant for the award;
whether respondent’s claim for the outstanding principal amount
barred by limitation; whether the counter claim, in respect of cost
of repair/replacement of gear boxes and fan modules, could be
treated as barred by time when the other side’s claim, arising out of
same contractual relationship, was found within limitation; whether
arbitral award for payment of the outstanding principal amount with
interest is perverse; whether the reasoning of the arbitral tribunal
is flawed and vitiated by adopting different yardstick for adjudging
the counterclaim than what was adopted for adjudging the claim;
if so, whether it vitiated the award and rendered it vulnerable to
a challenge u/s. 34 of the Arbitration and Conciliation Act, 1996.

Headnotes†
Arbitration and Conciliation Act, 1996 – s. 34(2)(b)(ii) – Arbitral
Award – Challenge to – Arbitral award, if in conflict with
the public policy of India, or/and vitiated by patent illegality
appearing on the face of the award – Appellant company floated
composite tender for design, manufacture and commissioning
of an air-cooled condenser unit, however, supply and
erection orders issued by its holding company – Appellant
later confirmed those orders – Respondent had bid for the
project – Dispute between parties as regards declaration qua
invalidity of debit notes, outstanding principal amount and
* Author
[2024] 9 S.C.R. 491

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

interest – Respondent invoked arbitration – Arbitral award
passed an award in favour of the respondent, holding that
the holding company and appellant jointly and severally
liable; that declaratory relief sought by respondent qua debit
notes-towards liquidated damages and customs duty beyond
the period of limitation, however, claim for unpaid dues payable
under the contract within the period of limitation – Single
Judge of the High Court set aside the award, however the
Division Bench restored the same – Justification:
Held: Division Bench of the High Court justified in setting aside
the judgment and order of the Single Judge and restoring the
arbitral award – No palpable error in the arbitral award as to be
termed ‘patently illegal’/‘perverse’, or in conflict with public policy
of India – Though the ACC Unit /project was of the appellant,
the holding company of the appellant actively participated in the
formation of the contract for the project – They not only acted as
a single economic entity but as agents of each other – Hence,
the arbitral tribunal justified in holding that holding company was
bound by the arbitration agreement and jointly and severally liable
along with appellant to pay the awarded amount – Claim of the
respondent was an indivisible claim for compensation in lieu of
goods supplied, and work done, based on breach of the contract,
thus limitation for the claim governed by Art. 55, and not by Arts.
14, 18 and 113, of the Schedule to the 1963 Act – Claimant’s claim
for the outstanding principal amount matured on 19 March 2016,
thus, limitation started to run from that date – However, even if
limitation is counted from 21 September 2015, deemed date of
completion of the supply/work (as found by the tribunal) it would
have no material bearing on the award – Limitation for the claim
as well as counterclaim, other than those relating to cost of repair/
replacement of gear boxes and fan modules, stood extended,
u/s. 18 of the 1963 Act, on the basis of acknowledgement made
in the minutes of meeting, and, thus, those were within limitation
and rightly considered on merit – Counterclaims qua cost of
repair /replacement of gear boxes and fan modules rightly held
barred by time as in respect thereof there was no recital in the
minutes of meeting – Rejection of prayer to declare debit notes
invalid, on ground of limitation, had no adverse impact on the
claimant’s claim for compensation, which was well within the
extended period of limitation – Also, the arbitral tribunal did not
492 [2024] 9 S.C.R.

Digital Supreme Court Reports

adopt different yardstick, the reasoning of the arbitral tribunal not
flawed or perverse – Limitation Act, 1963 – Arts. 14, 18 and 55
of the Schedule. [Paras 150, 151]
Arbitration and Conciliation Act, 1996 – Holding company of
appellant, if could be subjected to arbitral proceedings and
made jointly and severally liable along with appellant for the
dues of claimant:
Held: Holding company bound by the arbitration agreement and
thus, jointly and severally liable along with the appellant for the
dues payable to the claimant – Arbitral tribunal found that the
holding company of the appellant had issued the Purchase Orders
and had actively participated in the formation of the contract
even though the ACC unit was of the appellant; initial 10% of the
purchase price was provided by the holding company; subsequent
Purchase Orders issued by the appellant were on similar terms
and were issued by way of affirmation to obviate technical |
issues – Said circumstances had a material bearing for invocation
of Group of Companies doctrine to bind holding company with the
arbitration agreement and fasten it with liability, jointly and severally
with the appellant, in respect of the Purchase Orders relating to
ACC Unit – Thus, no reason to interfere with the findings of the
arbitral tribunal more so when it is based on a possible view of
the matter. [Para 81]
Limitation Act, 1963 – Art. 14, 18, 55 of the Schedule – Claim in
respect of declaration qua invalidity of debit notes; outstanding
principal amount; and interest – Applicability of Art. 14, 18,
55 to the claim – Limitation for the claim:
Held: On facts, there is an indivisible claim in respect of the
outstanding principal amount for the goods supplied and the work
done – Moreover, the payments under the supply purchase order
were to be on pro rata basis, and full payment for the supplies
was dependent on supporting documents, including certificates,
to be provided by the purchaser, which were not provided – Thus,
when full payments under the supply/erection purchase orders were
dependent on certificates relating to completion/commissioning/
guaranteed performance etc., the claimant waited till successful
completion/commissioning/guaranteed performance of the project
to file a composite claim for the balance amount payable under
both the purchase orders – Thus, Art. 14 not applicable to the
[2024] 9 S.C.R. 493

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

claim as framed – As regards applicability of Art. 18, since the
payments under the contract were to be made on pro rata basis,
dependent on work done and certificates issued, which were not
issued, hence, the claimant was entitled to make a composite
claim for the goods supplied and the work done after the project
was successfully complete-when the Unit was commissioned
followed by guaranteed performance because it is only then, when
the outstanding amount, as per the Bills/Invoices raised, became
due and payable to the claimant in terms of the contract, thus,
Art. 18 would also not apply – Art. 55 was applicable since the
claim was for compensation which includes a specified amount
payable under a contract, in respect of the goods supplied and
the work done under a contract – Claim was based on a breach
of the contractual obligation as, according to the findings returned
by the tribunal, the appellants failed to fulfil their obligations of
making payment of the outstanding principal amount payable
under the contract despite raising of bills/invoices by the claimant –
Thus, the claim for the outstanding principal amount not barred
by limitation. [Paras 105-107]
Limitation Act, 1963 – Starting point of limitation for the claim –
Date from which the limitation period is to be counted:
Held: Under Art. 55, the limitation period begins to run when the
contract is broken or where there are successive breaches, when
the breach in respect of which the suit is instituted occurs, or
where the breach is continuing, when it ceases – Claim is for the
outstanding principal amount due to the claimant on discharge of
his obligations under the contract – Thus, the cause of action for
the claim is appellants’ failure to make payment of the outstanding
principal amount to the claimant despite discharge of contractual
obligations by it – Nothing brought to the notice that there was
any fixed date, or period of credit, for payment of the balance
amount – Starting point of limitation should be the date when the
claimant had fulfilled all its obligations under the contract and
was entitled for release of the outstanding amount payable under
the contract – Tribunal concluded that commissioning took place
in the month of May 2015; technical issues were resolved by 21
September 2015; and performance guarantee period expired
on 19 March 2016 – Final payment of the principal outstanding
amount was dependent on meeting the requirement of performance
guarantee, the cause of action for the claim, as made, matured on
494 [2024] 9 S.C.R.

Digital Supreme Court Reports

expiry of that stipulated period of 180 days within which, despite
request, the appellants failed to undertake the performance
guarantee test – Thus, even though there might be several bills/
invoices raised/issued by the claimant during execution of the
contract, the claim of the claimant for the outstanding principal
amount matured on expiry of 180 days from the date of the notice
given by the claimant to the appellants to undertake the performance
guarantee test – Thus, limitation for the claim started to run from
19 March 2016. [Paras 109-113]
Limitation Act, 1963 – s. 18 – Limitation extended by
acknowledgement – By virtue of acknowledgment, if any, the
claimant, if entitled to extension of the period of limitation:
Held: s. 18 deals with the effect of acknowledgement in writing –
Sub-section (1) thereof provides that where, before the expiration
of the prescribed period for a suit or application in respect of any
right, an acknowledgement of liability in respect of such right has
been made in writing signed by the party against whom such right
is claimed, a fresh period of limitation to be computed from the
time when the acknowledgment was so signed – Explanation to
s. 18 provides that an acknowledgment may be sufficient though
it omits to specify the exact nature of the right or avers that the
time for payment has not yet come or is accompanied by a refusal
to pay, or is coupled with a claim to set off, or is addressed to a
person other than a person entitled to the right – On facts, the
limitation period started to run from 19 March 2016 – Within three
years therefrom, in the minutes of meeting dated 19 April 2018
there was a clear acknowledgement that the amount claimed by the
claimant is the balance amount payable, though subject to debit,
by way of set off, against various claims made by the appellant
upon the claimant – Such an acknowledgment was sufficient to
extend the limitation period as it admitted the existing liability of
the appellants qua the balance amount payable to the claimant
under the contract – Benefit of such an acknowledgement would
not be lost merely because a set off is claimed – Thus, minutes
of meeting dated 19 April 2018, though claims a set off, is a valid
acknowledgement of the existing liability within the ambit of s. 18
and it extends the period of limitation for a period of 3 years from
the date it was made – Thus, the claim made on 2 May 2019,
within the period of limitation. [Paras 116, 119]
[2024] 9 S.C.R. 495

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

Arbitration and Conciliation Act, 1996 – s. 23 (2A) – Counter
claim – Nature of – Counterclaim in respect of cost of repair/
replacement of gear box and fan modules, if barred by time:
Held: Counterclaim is a claim made by a defendant in a suit
against the plaintiff – It is a claim, independent of and separable
from the plaintiff’s claim, which can be enforced by a cross
action – Counterclaim preferred by the defendant in a suit is a
cross suit and even if the suit is dismissed, counterclaim shall
remain alive for adjudication – Purpose of the scheme relating to
counterclaim is to avoid multiplicity of proceedings – s. 23 (2A) gives
respondent to a claim a right to 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 – Counterclaim is like a cross suit, or a separate suit,
and the limitation of a counterclaim is to be counted from the date
of accrual of the cause of action which it seeks to espouse – As a
logical corollary thereof, it is quite possible that even though a suit
or a claim is within the period of limitation, the counterclaim may
well be barred by limitation, if the cause of action espoused therein
accrued beyond the prescribed period of limitation – On facts, the
counterclaim in respect of cost of repair/replacement of gear box
and fan modules, barred by time – Tribunal took 21 September 2015
as the start point of limitation for the counterclaim on the premise
that it would be the date when the Takeover Certificate is deemed
to have been issued, the supplier had fulfilled its obligations – On
basis thereof, the tribunal found counterclaims as regards cost of
repair/replacement of gear boxes and of fan modules barred by
time as the counterclaim was filed on 15 July 2019 i.e., more than
three years later, and there existed no acknowledgement in respect
thereof – However, for other issue, 19 March 2016 is found as the
start point of limitation for the claim because that is the date when
180 days period of guaranteed performance, part of supplier’s
liability, expired – Whether the limitation period is counted from
21 September 2015 or 19 March 2016, the counterclaim filed on
15 July 2019 was beyond the prescribed period of three years
inasmuch as its cause of action could not have arisen after 19
March 2016. [Paras 120, 122, 124, 125, 128, 129]
Limitation Act, 1963 – s. 18 – Effect of acknowledgment in
writing – Extension of the period of limitation – Minutes of
meeting, if extended the limitation of counterclaims:
496 [2024] 9 S.C.R.

Digital Supreme Court Reports

Held: To extend the period of limitation with the aid of s. 18, the
acknowledgment must involve an admission of a subsisting jural
relationship between the parties and a conscious affirmation of
an intention of continuing such relationship regarding an existing
liability – Such intention can be gathered from the nature of the
admission – Admission need not be express, or regarding a precise
amount, but must be made in circumstances and in words from
which the court can reasonably infer that the person making the
admission intended to refer to a subsisting liability as on the date of
the statement – However, where an acknowledgement is in respect
of a specified sum of money or a specific right only, and not in
general terms, it would extend the period of limitation only in respect
thereof, and not of other claims which, though may have arisen
out of same jural relationship, are not specified therein – On facts,
minutes of meeting did not extend the limitation of counterclaims –
Minutes of meeting made no reference to the items referable to
counterclaims-cost of repair/replacement of Gear Box and Fan
Modules – Also no acknowledgment in general terms in regard
to liabilities subsisting under the contract – Said minutes could
not be treated as acknowledgment for the purpose of extending
limitation of the counterclaims not specified therein – Thus, when
the counterclaims were otherwise barred by limitation on the date
of filing of counterclaim, the tribunal justified in rejecting them as
barred by limitation. [Paras 137, 138]
Limitation Act, 1963 – Rejection of claimant’s prayer to declare
debit notes invalid, if had adversely affected the claim for the
outstanding principal amount in respect of the goods supplied/
work done under the contract :
Held: Rejection of prayer to declare debit notes invalid did not
affect respondent’s claim for the outstanding principal amount –
Relief for declaratory relief was rightly held barred by limitation
by the tribunal – Rejection of declaratory relief did not impact
relief for compensation, since relief for compensation was not a
consequential relief, dependent on debit notes being declared
invalid because issuance of debit notes was a unilateral act of
the employer which on its own did not extinguish the right of the
contractor – No doubt, where the relief sought is consequential to
the declaration, and declaratory relief is found barred by time, the
prayer for consequential relief will also fail – But where declaration
is just an optional relief-on which the main relief is not dependent,
[2024] 9 S.C.R. 497

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

rejection of it as barred by limitation would not extinguish the
claim in respect of which substantive relief is sought – In such
circumstances, it was open for the contractor to sue for its dues
without seeking a declaration qua the debit notes – Thus, rejection
of the declaratory relief as barred by limitation, did not have a
material bearing on respondent’s claim against the appellants’ for the
outstanding principal amount payable under the contract – Amount,
as shown debited in the debit notes, was not to be automatically
adjusted against the principal outstanding amount payable to
respondent – While deciding the claim of respondent, the tribunal
was well within its remit to adjudicate upon the issue whether such
amount should be adjusted or not against the outstanding principal
amount payable to respondent – No perversity in the award on
this count. [Paras 139, 141]
Arbitration and Conciliation Act, 1996 – ss. 34, 37 – Arbitral
award – Setting aside of – Plea that the arbitral tribunal adopted
different yardstick for adjudicating the claim than what was
adopted for the counterclaim; and the reasoning is completely
flawed and perverse :
Held: Distinction would have to be drawn between an arbitral award
where reasons are either lacking/unintelligible or perverse and an
arbitral award where reasons are there but appear inadequate
or insufficient – In a case where reasons appear insufficient or
inadequate, if, on a careful reading of the entire award, coupled
with documents recited/relied therein, the underlying reason, factual
or legal, that forms the basis of the award, is discernible/intelligible,
and the same exhibits no perversity, the court need not set aside
the award while exercising powers u/s. 34 or s. 37, rather it may
explain the existence of that underlying reason while dealing with
a challenge laid to the award – In doing so, the court does not
supplant the reasons of the arbitral tribunal but only explains it for
a better and clearer understanding of the award – On facts, the
arbitral tribunal did not adopt different yardstick for adjudicating
the claim than what was adopted for the counterclaim and the
reasoning of the arbitral tribunal is not flawed or perverse – Though
reasons recorded in the award at first blush appear insufficient,
or a bit confusing, but, when those reasons are examined in the
context of the documents placed and the arguments advanced,
the underlying reasons, which form basis of the conclusion, are
not only intelligible but sound – Mistake, if any, committed by
498 [2024] 9 S.C.R.

Digital Supreme Court Reports

the arbitral tribunal in using the words ‘ongoing negotiations’ in
place of acknowledgement is trivial does not go to the root of the
matter as to have a material bearing on the conclusion – Thus,
for this mistake alone, the award is not liable to be set aside –
Furthermore, it cannot be said that the arbitral tribunal was obliged
to accept the admission contained in the minutes of meeting qua
liquidated damages and customs duties, because it relied on it for
extending the limitation – Tribunal was well within its jurisdiction
in drawing a conclusion that the claimant was not liable in respect
of those items which formed part of the counterclaim, based on
consideration of the entire evidence, at variance with the recitals
in the acknowledgement – Such conclusion is a plausible view
and cannot be termed perverse – Single Judge of the High Court
erred in law while interfering with the arbitral award – Furthermore,
as regards the plea that the appellate court-Division Bench of the
High Court exceeded its jurisdiction while providing its own reasons
to support the conclusion in the award, the appellate court took
pains, and rightly so, to understand and explain the underlying
reason on which the claim of the respondent was found within
limitation – Appellate court was well within its jurisdiction to explain
the underlying legal principle which the arbitral tribunal had applied;
and in doing so, it did not supplant the reasons provided in the
award – Impugned order of the Division Bench does not suffer
from any legal infirmity. [Paras 144-149]
Arbitration and Conciliation Act, 1996 – s. 34(2)(b)(ii) – Arbitral
Award – Challenge to – Award may be set aside when in conflict
with the public policy of India – Scope of public policy:
Held: For an award to be against public policy of India a mere
infraction of the municipal laws of India not enough – There must
be, inter alia, infraction of fundamental policy of Indian law including
a law meant to serve public interest or public good. [Para 36]
Arbitration and Conciliation Act, 1996 – ss. 34 and 48 (as
amended by the Amendment, 2015) – Amendment, 2015
adding Explanations to s. 34(2)(b)(ii) and s. 48(2)(b), in place
of the earlier Explanation, wherein Explanation 1 clause (ii) to
s. 34(2)(b)(ii) and s. 48(2)(b), specifies that an arbitral award
is in conflict with the public policy of India, only if, it is in
contravention with the fundamental policy of Indian law –
Expression “in contravention with the fundamental policy of
Indian law” – Meaning of:
[2024] 9 S.C.R. 499

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

Held: After the ‘2015 amendments’ in s. 34 (2)(b)(ii) and s. 48(2)
(b), the phrase “in conflict with the public policy of India” must
be accorded a restricted meaning in terms of Explanation –
Expression “in contravention with the fundamental policy of Indian
law” by use of the word ‘fundamental’ before the phrase ‘policy
of Indian law’ makes the expression narrower in its application
than the phrase “in contravention with the policy of Indian law”,
which means mere contravention of law is not enough to make
an award vulnerable – To bring the contravention within the fold
of fundamental policy of Indian law, the award must contravene
all or any of such fundamental principles that provide a basis for
administration of justice and enforcement of law in this country –
Violation of the principles of natural justice; disregarding orders of
superior courts in India or the binding effect of the judgment of a
superior court; and violating law of India linked to public good or
public interest, are considered contravention of the fundamental
policy of Indian law – However, while assessing whether there has
been a contravention of the fundamental policy of Indian law, the
extent of judicial scrutiny must not exceed the limit as set out in
Explanation 2 to s. 34(2)(b)(ii). [Para 52]
Arbitration and Conciliation Act, 1996 – ss. 34 and 48 (as
amended by the Amendment, 2015) – Explanation 1 clause (iii)
to s. 34(2)(b)(ii) and s. 48(2)(b) inserted by 2015 Amendment,
that an award is in conflict with the public policy of India, inter
alia, if it conflicts with the ‘most basic notions of morality or
justice’ – Most basic notions of ‘morality’ – Explanation:
Held: It would cover such agreements as are not illegal but would
not be enforced given the prevailing mores of the day – Interference
on this ground would be only if something shocks the court’s
conscience. [Para 59]
Arbitration and Conciliation Act, 1996 – ss. 34 and 48 (as
amended by the Amendment, 2015) – Explanation 1 clause (iii)
to s. 34(2)(b)(ii) and s. 48(2)(b) inserted by 2015 Amendment,
that an award is in conflict with the public policy of India, inter
alia, if it conflicts with the ‘most basic notions of morality or
justice’ – Most basic notions of ‘justice’ – Explanation:
Held: Term ‘legal justice’ is not used in Explanation 1, thus, simple
conformity or non-conformity with the law is not the test to determine
whether an award is in conflict with the public policy of India in
terms of Explanation 1 – Test is that it must conflict with the most
500 [2024] 9 S.C.R.

Digital Supreme Court Reports

basic notions of justice – For lack of any objective criteria, it is
difficult to enumerate the ‘most basic notions of justice’ – More
so, justice to one may be injustice to another – As regards justice
being done, it is about rendering, in accord with law, what is right
and equitable to one who has suffered a wrong – Dispensation of
justice in its quality may vary, dependent on person who dispenses
it – Thus, the placement of words “most basic notions” before “of
justice” in Explanation 1 has its significance – Object of inserting
Explanations 1 and 2 in place of earlier explanation to s. 34(2)(b)(ii)
was to limit the scope of interference with an arbitral award, thus
the amendment consciously qualified the term ‘justice’ with ‘most
basic notions’ of it – Giving a broad dimension to this category
would be deviating from the legislative intent – Thus, considering
that the concept of justice is open-textured, and notions of justice
could evolve with changing needs of the society, it would not be
prudent to cull out “the most basic notions of justice” – They ought
to be such elementary principles of justice that their violation could
be figured out by a prudent member of the public who may, or may
not, be judicially trained, which means, that their violation would
shock the conscience of a legally trained mind – This ground would
be available to set aside an award, if the award conflicts with such
elementary/fundamental principles of justice that it shocks the
conscience of the Court. [Paras 55, 58]
Arbitration and Conciliation Act, 1996 – s. 34 (2-A) (as inserted
by the Amendment, 2015) –Sub-section (2-A) of s. 34 providing
that the Court may also set aside an arbitral award if it is vitiated
by patent illegality appearing on the face of the award – Patent
illegality appearing on the face of the award – Meaning of:
Held: Proviso to sub-section (2-A) states that an award shall not
be set aside merely on the ground of an erroneous application of
the law or by reappreciation of evidence – Thus, an award could
be set aside if it is patently illegal – However, illegality must go
to the root of the matter and if the illegality is of trivial nature, it
cannot be held that award is against public policy. [Para 60]
Arbitration and Conciliation Act, 1996 – s. 34 –Arbitral Award –
Scope of interference – Perversity as a ground for setting
aside an arbitral award:
Held: Interference with an arbitral award is only on limited grounds
as set out in s. 34 – Possible view by the arbitrator on facts is to
be respected as the arbitrator is the ultimate master of the quantity
[2024] 9 S.C.R. 501

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

and quality of evidence to be relied upon – Arbitral decision must
not be perverse or so irrational that no reasonable person would
have arrived at the same – If an award is perverse, it would be
against the public policy of India – It is only when an arbitral award
could be categorized as perverse, that on an error of fact an arbitral
award may be set aside – Mere erroneous application of the law
or wrong appreciation of evidence by itself is not a ground to set
aside an award as is clear from the provisions of sub-section (2-A)
of s. 34. [Paras 63, 68]
Arbitration and Conciliation Act, 1996 – s. 31 – Forms and
contents of arbitral award – Scope of interference – Ground
of insufficient, or improper/erroneous or lack of reasons:
Held: Arbitral award on the ground of improper or inadequate
reasons, or lack of reasons, can be placed in three categories,
(1) where no reasons are recorded, or the reasons recorded are
unintelligible; (2) where reasons are improper, that is, they reveal
a flaw in the decision-making process; and (3) where reasons
appear inadequate – Awards falling in category (1) are vulnerable
as they would be in conflict with the provisions of s. 31(3), thus,
liable to be set aside u/s. 34, unless the parties have agreed that
no reasons are to be given, or the award is an arbitral award on
agreed terms u/s. 30 – Awards falling in category (2) are amenable
to a challenge on ground of impropriety or perversity, strictly in
accordance with the grounds set out in s. 34 – In a challenge to
award falling in category (3), before taking a decision the Court
must take into consideration the nature of the issues arising
between the parties in the arbitral proceedings and the degree of
reasoning required to address them – If reasons are intelligible
and adequate on a fair-reading of the award and, in appropriate
cases, implicit in the documents referred to therein, the award is
not to be set aside for inadequacy of reasons – However, if gaps
are such that they render the reasoning in support of the award
unintelligible, or lacking, the Court exercising power u/s. 34 may
set aside the award. [Paras 71.3, 71.6]
Arbitration and Conciliation Act, 1996 – Arbitral award –
Scope of interference with the interpretation/construction of
a contract accorded in the award :
Held: Arbitral tribunal must decide in accordance with the terms of
the contract – In a case where an arbitral tribunal passes an award
against the terms of the contract, the award would be patently
502 [2024] 9 S.C.R.

Digital Supreme Court Reports

illegal – However, an arbitral tribunal has jurisdiction to interpret
a contract having regard to terms and conditions of the contract,
conduct of the parties including correspondences exchanged,
circumstances of the case and pleadings of the parties – If the
conclusion of the arbitrator is based on a possible view of the
matter, the Court should not interfere – But where, on a full reading
of the contract, the view of the arbitral tribunal on the terms of a
contract is not a possible view, the award would be considered
perverse and as such amenable to interference. [Para 72]
Arbitration – Arbitration agreement/contract – Unexpressed
term, if can be read into a contract as an implied condition:
Held : Ordinarily, terms of the contract are to be understood in the
way the parties wanted and intended them to be – In agreements
of arbitration, where party autonomy is the grund norm, how the
parties worked out the agreement, is one of the indicators to
decipher the intention, apart from the plain or grammatical meaning
of the expressions used – However, reading an unexpressed
term in an agreement would be justified on the basis that such a
term was always and obviously intended by the parties thereto –
Unexpressed term can be implied if, and only if, the court finds
that the parties must have intended that term to form part of their
contract – It is not enough for the court to find that such a term
would have been adopted by the parties as reasonable men if
it had been suggested to them – Rather, it must have been a
term that went without saying, a term necessary to give business
efficacy to the contract, a term which, although tacit, forms part of
the contract – But before an implied condition, not expressly found
in the contract, is read into a contract, by invoking the business
efficacy doctrine, it must be reasonable and equitable; it must be
necessary to give business efficacy to the contract, that is, a term
will not be implied if the contract is effective without it; it must be
obvious, it must be capable of clear expression; and it must not
contradict any terms of the contract. [Paras 73, 75]
Limitation Act, 1963 – Arts. 14, 18 and 55 of the Schedule –
Applicability to the claim, when:
Held: Art. 14 applies where the suit/ claim is for the price of goods
sold and delivered; and no fixed period of credit is agreed upon
whereas Art.18 applies where the suit/claim is for the price of work
done by the plaintiff/claimant for the defendant at his request; and
no time has been fixed for payment – Thus, where a suit is for
[2024] 9 S.C.R. 503

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

goods supplied and work done by the plaintiff (a contractor) and the
price of materials and the price of work is separately mentioned,
and the time for payment is not fixed by the contract, Art. 14 will
apply to the former claim, and Art. 18 to the latter – But where a
claim is made for a specific sum of money as one indivisible claim
on the contract, without mentioning any specific sum as being the
price of goods or price of the work done, neither Art. 14 nor Art. 18
would apply, but only Art. 55, which provides for all actions based
on a contract, not otherwise provided for, would apply – Art. 55
is a residuary Article in respect of all actions based on a contract
not otherwise specially provided for – For the applicability of Art.
55, the suit should be based on a contract, there must be breach
of the contract, the suit should be for compensation and the suit
should not be covered by any other Article specially providing for
it – Phrase ‘compensation for breach of contract’, as occurring in
Art. 55 would comprehend also a claim for money due under a
contract – Thus, even a suit for recovery of a specified amount,
based on a contract, is a suit for compensation, and if the suit is
a consequence of defendant breaching the contract or not fulfilling
its obligation(s) thereunder, the limitation for institution of such a
suit would be covered by Art. 55, provided the suit is not covered
by any other Art. specially providing for it. [Paras 91, 92, 95, 98]
Words and phrases – Expression ‘public policy’ – Meaning
and scope of. [Paras 30-40]
Words and phrases – Term ‘justice’ – Meaning of:
Held: Justice is the virtue by which the society/court/tribunal gives
a man his due, opposed to injury or wrong – Justice is an act of
rendering what is right and equitable towards one who has suffered
a wrong – Thus, while tempering justice with mercy, the court must
be very conscious, that it has to do justice in exact conformity
with some obligatory law, for the reason that human actions are
found to be just or unjust on the basis of whether the same are
in conformity with, or in opposition to, the law – Thus, in ‘judicial
sense’, justice is nothing more nor less than exact conformity to
some obligatory law; and all human actions are either just or unjust
as they are in conformity with, or in opposition to, the law. [Para 54]

Case Law Cited
Dyna Technologies Pvt. Ltd. v. Crompton Greaves Lt. [2019] 15
SCR 295 : (2019) 20 SCC 1 – relied on.
504 [2024] 9 S.C.R.

Digital Supreme Court Reports

Bharat Sanchar Nigam Limited v. Nortel Networks Pvt. Ltd. [2021]
2 SCR 644 : (2021) 5 SCC 738; B & T AG v. Ministry of Defence
[2023] 7 SCR 599 : (2024) 5 SCC 358; Ssangyong Engg. &
Construction Co. Ltd. v. NHAI [2019] 7 SCR 522 : (2019) 15 SCC
131; Associate Builders v. Delhi Development Authority [2014]
13 SCR 895 : (2015) 3 SCC 49; UHL Power Company limited
v. State of Himachal Pradesh [2022] 1 SCR 1 : (2022) 4 SCC
116; Heidelbergh Cement India Ltd. v. The Indure Pvt. Ltd. 2022/
DHC/003952; MMTC Ltd. v. Vedanta Ltd. [2019] 3 SCR 1023 :
(2019) 4 SCC 163; Haryana Tourism Ltd. v. Kandhari Beverages
Ltd. [2022] 2 SCR 316 : (2022) 3 SCC 237; Geo Miller & Co. (P)
Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd [2019] 11 SCR 1108 :
(2020) 14 SCC 643; Steel Authority of India Ltd. v. Gupta Brothers
Steel Tubes Ltd. [2009] 14 SCR 253 : (2009) 10 SCC 63; Delhi
Airport Metro Express Pvt. Ltd. v. DMRC Ltd. [2022] 3 SCR 716 :
(2022) 1 SCC 131; Oil and Natural Gas Corporation Ltd. v. Afcons
Gunanusa JV [2022] 10 SCR 660 : (2024) 4 SCC 481; Gherulal
Parakh v. Mahadeodas Maiya and others [1959] Supp. 2 SCR 406:
AIR (1959) SC 781; Central Inland Water Transport Corporation
v. Brojo Nath Ganguly [1986] 2 SCR 278 : (1986) 3 SCC 156;
Renusagar Power Co. Ltd. v. General Electric Co. [1993] Supp. 3
SCR 22 : (1994) Supp (1) SCC 644; Oil and Natural Gas Corporation
(ONGC) v. Saw Pipes Ltd. [2003] 3 SCR 691 : (2003) 5 SCC 705;
D.D.A v. M/s. R.S. Sharma & Co. [2008] 12 SCR 785 : (2008) 13
SCC 80; Oil and Natural Gas Corporation Limited v. Western Geco
International Limited [2014] 12 SCR 1 : (2014) 9 SCC 263; Delhi
Administration v. Gurdip Singh Uban [1999] Supp. 1 SCR 650 :
(2000) 7 SCC 296; Patel Engineering Limited v. North Eastern
Electric Power Corporation Limited [2020] 4 SCR 156 : (2020) 7
SCC 167; Delhi Metro Rail Corporation Ltd. v. Delhi Airport Metro
Express Pvt. Ltd. [2024] 4 SCR 473 : 2024 INSC 292; Pure Helium
India (P) Ltd v. ONGC [2003] Supp. 4 SCR 561 : (2003) 8 SCC
593; McDermott International Inc. v. Burn Standard Co. Ltd. [2006]
Supp. 2 SCR 409 : (2006) 11 SCC 181; South East Asia Marine
Engg. & Construction Ltd. (SEAMEC Ltd.) v. Oil India Ltd. [2020]
4 SCR 254 : (2020) 5 SCC 164; Bharat Aluminium Co. V. Kaiser
Aluminium Technical Services Inc. [2016] 1 SCR 364 : (2016) 4
SCC 126; Adani Power (Mundra) Ltd. v. Gujarat ERC [2019] 8 SCR
1017 : (2019) 19 SCC 9; Nabha Power Limited (NPL) v. Punjab
State Power Corporation Limited (PSPCL) and Another [2017] 14
SCR 301 : (2018) 11 SCC 508; Cox & Kings Ltd. v. SAP India (P)
[2024] 9 S.C.R. 505

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

Ltd. [2023] 15 SCR 621 : (2024) 4 SCC 1; State of Goa v. Praveen
Enterprises [2011] 10 SCR 1026 : (2012) 12 SCC 581; Mahomed
Ghasita v. Siraj-ud-Din and others AIR (1922) Lah 198 (FB) : ILR
(1921) 2 Lah 376 (FB) : (1921) SCC OnLine Lah 303; Dhapia v.
Dalla (1969) All LJ 718 : AIR (1970) All 206 : (1969) SCC OnLine All
79; Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority
[1988] 3 SCR 351 : (1988) 2 SCC 338; Khan Bahadur Shapoor
Fredom Mazda v. Durga Prasad Chamaria and others [1962] 1
SCR 140 : AIR (1961) SC 1236; J.C. Budhraja v. Chairman Orissa
Mining Corporation Ltd. and Others [2008] 1 SCR 821 : (2008) 2
SCC 444; Rajni Rani v. Khairati Lal [2014] 10 SCR 971 : (2015) 2
SCC 682; Thomas Mathew v. KLDC Ltd. (2018) 12 SCC 560; Bans
Gopal v. Mewa Ram AIR (1930) All 461 : (1929) SCC OnLine All
152; Kali Das Chaudhuri v. Drapaudi Sundari Dassi AIR (1918) Cal
294: (1917) SCC OnLIne Cal 23; Prem Singh & Ors v. Birbal & Ors.
[2006] Supp. 1 SCR 692 : (2006) 5 SCC 353; Padhiyar Prahladji
Chenaji v. Maniben Jagmalbhai & Ors. [2022] 2 SCR 455 : (2022)
12 SCC 128 – referred to.

Books and Periodicals Cited
Chitty on Contracts Volume 1, 35th Edition, paragraph 19-112;
P. Ramanatha Aiyar’s Advanced Law Lexicon, 6th Edition,
Volume III, page 2621; U.N. Mitra’s Law of Limitation and
Prescription, Sixteenth Edition, Volume 1, at page 1063, published
by LexisNexis; P. Ramanatha Aiyar’s Advanced Law Lexicon, 4th
Edition at page 596; Russell on Arbitration (24th Edition, page 304);
Anson’s Law of Contract (29th Oxford Edition) – referred to.

List of Acts
Arbitration and Conciliation Act, 1996; Commercial Courts Act, 2015;
Amended Letters Patent, 1865; Limitation Act, 1963; Contract Act,
1872; Foreign Awards (Recognition and Enforcement) Act, 1961.

List of Keywords
Arbitral award; Conflict with the public policy of India; Patent
illegality; Holding company; Jointly and severally liable; Barred
by limitation; Counter claim; Contractual relationship; Limitation;
Outstanding principal amount with interest; Perverse; Adopting
different yardstick for adjudging counterclaim; Composite tender;
Declaration qua invalidity of debit notes; Liquidated damages;
Customs duty; Arts. 14, 18 and 113, of the Schedule to Limitation
506 [2024] 9 S.C.R.

Digital Supreme Court Reports

Act, 1963; Acknowledgement; Claim for compensation; Purchase
orders; Group of companies doctrine; Starting point of limitation;
Date from which the limitation period to be counted; Cause of action;
Discharge of contractual obligations; Performance guarantee test;
Breach of the contract; Limitation extended by acknowledgement;
Extension of the period of limitation; Acknowledgement in writing;
Claim to set off; Valid acknowledgement; Minutes of meeting;
Avoid multiplicity of proceedings; Takeover certificate; Subsisting
jural relationship; Declaratory relief; Mistake; Ongoing negotiations;
Scope of public policy; Infraction of municipal laws of India;
Infraction of fundamental policy of Indian law; Public interest or
public good; In contravention with fundamental policy of Indian law;
Administration of justice; Enforcement of law; Principles of natural
justice; Disregarding orders of superior courts; Judicial scrutiny;
Most basic notions of morality or justice; Legal justice; Dispensation
of justice; Judicial mind; Patent illegality appearing on face of award;
International commercial arbitrations; Erroneous application of law;
Re-appreciation of evidence; Improper or inadequate reasons;
Lack of reasons; Reasons recorded unintelligible; Impropriety or
perversity; Degree of reasoning; Fair-reading of award; Inadequacy
of reasons; Interpretation/construction of contract accorded in
award; Unexpressed term; Party autonomy; Grund norm; Implied
condition; Business efficacy doctrine.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 3981-3982
of 2024
From the Judgment and Order dated 01.09.2021 of the High Court
of Judicature at Madras in OSA (CAD) Nos. 174 and 175 of 2021
With
Civil Appeal Nos. 3983-3984 of 2024
Appearances for Parties

Abhimanyu Bhandari, Aman Gupta, Arjun Sayal, Shreyan Das, Advs.
for the Appellant.
Gaurab Banerjee, Sr. Adv., Mayank Mishra, Sarvesh Singh Baghel,
Ms. Ayshwarya Chandra, Ms. Anukriti Kudesia, Arun Pratap Singh
Rajawat, Advs. for the Respondents.
[2024] 9 S.C.R. 507

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

Judgment / Order of the Supreme Court

Judgment
Manoj Misra, J.
1. These two appeals are directed against a common judgment and
order of the High Court1 dated 1 September 2021 passed in OSA
(CAD) Nos. 174-175 of 2021, whereby, exercising powers under
Section 37 of the Arbitration and Conciliation Act, 19962 read with
Section 13(1) of the Commercial Courts Act, 20153 and Clause 15
of Amended Letters Patent, 1865 read with Order XXXVI Rule 9
of O.S. Rules, the Division Bench of the High Court allowed the
appeals, set aside the judgment and order of the Single Judge
dated 23 December 2020 and restored the arbitral award dated
13 July 2020.
THE CONTRACT
2. OPG Power Generation Private Ltd (in short OPG -the appellant in the
leading appeal), a subsidiary of Gita Power and Infrastructure Private
Limited (in short Gita Power – Respondent No.2 (R-2) in the leading
appeal, and appellant in the connected appeal), floated a composite
tender for design, manufacture, supply, erection and commissioning
of air-cooled condenser unit (ACC Unit) with auxiliaries for 160 MW
Coal Based Thermal Power Plant (Project) at Gummidipoondi in
the State of Tamil Nadu. Enexio Power Cooling Solutions (in short
Enexio - Respondent No.1 (R-1) in the leading appeal) bid for the
project. After a series of correspondences /negotiations, on 4 March
2013, R-2 issued two separate orders: (i) for design, engineering
and supply of one ACC Unit with auxiliaries for 160 MW Coal Based
Power Project at Gummidipoondi (in short, Supply Purchase Order);
and (ii) for erection and commissioning of one unit of ACC with
auxiliaries for 160 MW Coal Based Power Project at Gummidipoondi
(in short, Erection Purchase Order). Interestingly, the tender was
floated by OPG but the supply and erection orders were issued by
its holding company (Gita Power - R-2) on 4 March 2013. However,

1 High Court of Judicature at Madras
2 1996 Act
3 2015 Act
508 [2024] 9 S.C.R.

Digital Supreme Court Reports

later, in the month of July 2013, OPG confirmed those orders by
issuing two separate orders with same terms and bearing the same
date i.e. 4 March 2013.
3. The supply / erection purchase orders with its enclosures contained
an arbitration clause in the following terms:
“Clause 21. ARBITRATION
21.1. In the event of any dispute or difference arising
under the Order or in connection therewith including any
question relating to existence, meaning and interpretation
of the Order or any alleged breach thereof that cannot be
amicably settled between the Parties, the same shall be
referred to the arbitration.
21.2. Arbitration shall be conducted under the Rules of
Conciliation and Arbitration of the International Chamber
of Commerce by three arbitrators appointed in accordance
with said rules. The place of arbitration will be at Chennai.
The arbitration proceedings shall be conducted in the
English language.
21.3. The arbitrators shall take into consideration the will
of the Parties as expressed in the Order, the evidence
presented, the principles of equity and good faith. The
decision(s) of the arbitrators shall be final and both Parties
undertake to fulfil and execute the said decision(s).
21.4. Notwithstanding any dispute between the parties,
Parties shall not be entitled to withhold/ delay/defer their
obligations under the Order and same shall be carried out
strictly in accordance with the terms and conditions of the
Order.”
4. Clause 6 of the supply purchase order provided:
“6-Tax and duties:
6.1. Taxes, duties and levies payable and charged by the
competent authority such as Excise Duty, Sales Tax, Cess
will be borne and paid by the Purchaser.
6.2. The Purchaser shall issue Central Sales Tax Form C
or any other Form as applicable for interstate sale.”
[2024] 9 S.C.R. 509

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

5. Likewise, clause 6 of the erection purchase order provided:
“6-Tax and duties:
6.1. All taxes duties and local levies payable and charged
by the Competent Authority for the Services, such as
Service Tax, cess, work order tax and other charges which
could be levied in connection with and during the Order,
whether deducted at source or not, will be borne and paid
by the Purchaser.
6.2. Any statutory variation due to implication of new taxes
and duties shall be paid by Purchaser.”
THE DISPUTE BETWEEN PARTIES
6. The intended completion/ commissioning date, as originally
contemplated, was 31 March 2014. However, commissioning took
place in May 2015. The total amount billed by Enexio (R-1) for the
aforesaid two orders was Rs. 46,71,04,493 but the amount paid to
it was Rs. 39,59,19,629 only. This gave rise to a dispute. According
to Enexio (R-1), Rs.6,75,15,631 remained payable to it. Whereas,
according to the appellant, nothing was due as from the remaining
amount, following sums were deductible:
“(i) Rs.3,30,00,000, vide debit note dated 24.08.2015,
towards liquidated damages for delay in supply and
erection.
(ii) Rs.5,94,06,693, vide debit note dated 16.01.2016,
towards customs duty.
(iii) Rs. 1,72,854 towards dismantling modification - TG
building.
(iv) Rs. 27,40,161 towards ACC duct fabrication. Totaling
Rs. 9,53,19,708.”
7. On 19 April 2018 a meeting took place between the representatives
of the parties. Minutes of that meeting were drawn in the following
terms:
“Minutes of meeting with M/s. OPG Power Generation Pvt.
Ltd. and M/s. ENEXIO Power Cooling Solutions (I) Pvt.
Ltd. dated 19.04.2018.
510 [2024] 9 S.C.R.

Digital Supreme Court Reports

Members Present:

OPGS ENEXIO
1. Mr. S. Swaminathan 1. Mr. Parasuram
2. Mrs. C. Kiruthiga 2. Mr. Ravi Rengasamy
Sub.: Supply of Air-cooled condenser with auxiliaries
for 160 MW Coal based Power Project of OPG Power
Generation Pvt. Ltd. (OPGPG) – Debit Notes.
Ref.: 1. Order No. OPGPG/ED/P-III/SUPPLY/008, dated
04.03.2013.
2. O
rder No. OPGPG/ED/P-III/ ERECTION /009,
dated 04.03.2013

Description Amount in Rs.
Total Billed Amount 467,104,493
Amount Paid 395,919,629
Balance Payable incl Retention 67,515,618
OPGPG Debit
LD- Delay in Supply 30,900,000
LD- Delay in Erection 2,100,000
Customs Duty 59,406,693
Dismantling Modification – TG Building 172,854
ACC duct Fabrication (Debit raised
for Rs.63,40,161/- against which GEA
have accepted for Rs.36,00,000/- that is
reduced from payable) 2,740,161
Total OPGPS Debit 95,319,708

Final Payable by Enexio 27,804,090
The above figures are validated by respective Projects
and Finance departments.
However, we request that the CD, CVD and LD’s be looked
at leniently and mutually settled. The Contract calls for
all taxes such as ED, ST to be reimbursed and CVD is
equivalent to Excise duty.
[2024] 9 S.C.R. 511

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

LD is not only due to our ENEXIO’s fault. In any case, this
did not cause for any delay in Plant commissioning. We
have had huge losses due to US dollar increase during
Project stage to the tune of Rs.1.82 crores.
ENEXIO requested that the above amount of Rs.2,78,04,090/-
payable by them to M/s. OPG Power Generation Pvt. Ltd.
be adjusted against the amount to be received by M/s.
ENEXIO Power Cooling Solutions (I) Pvt. Ltd. from M/s.
OPGS Power Gujarat Pvt. Ltd.”
8. According to Enexio (R-1), in that meeting, the parties were ad idem
regarding the outstanding principal amount payable to Enexio (R-1)
and there was no consensus on any other item mentioned in the
minutes of the meeting.
9. On 26 May 2018 OPG extended an offer of Rs. 300 lacs to Enexio
(R-1) as full and final settlement of the account. This was not accepted
by Enexio. Hence, the claim.
ENEXIO’S (R-1’s) CLAIM
10. On 2 May 2019 Enexio (R-1) invoked the arbitration clause, under
the extant ICC Rules, raising the following claims:

S.No. Claim Amount (in INR)
A Outstanding principal amount as due 6,75,15,631
under the Purchase Orders
B Declaration that the Debit Note Nos.
076/2015-16 and 077/2015-16, both dated
-
24.08.2015, issued by the Employer,
claiming deduction of aggregate amount
of INR 3,30,00,000/- towards Liquidated
Damages for the delay, are unlawful and
unsustainable.
C Declaration that the Debit Note
No.032/2015-16 dated 12.01.2016, issued
-
by the Employer, claiming deduction of
Rs.5,94,06,693/- towards Customs Duty,
including CVD and SAD, is unlawful and
unsustainable.
512 [2024] 9 S.C.R.

Digital Supreme Court Reports

D Interest on outstanding principal amount 3,51,43,446
calculated @ 18% p.a. from respective
due date(s) of payments till 31.03.2019.
E Interest on outstanding principal amount
calculated @ 18% p.a. for further period
-
starting from 01.04.2019 till the date of
payment.
F Damages under the Purchase Orders 8,00,00,000
G Costs of arbitration
THE COUNTERCLAIM
11. On 15 July 2019 OPG submitted its defense, and raised counterclaims
in respect of: (a) liquidated damages for delay; (b) customs duties;
(c) cost of erection of horizontal and vertical exhaust through external
agency; (d) cost of repair/ replacement of gear boxes; and (e) cost
of repair/ replacement of fan modules.
The Award
12. On 13 July 2020 ICC Arbitral Tribunal, comprising of three members,
delivered a unanimous award, whereunder OPG and Gita Power,
who have separately filed these two appeals, were required to pay,
jointly and severally, to the claimant (R-1 - Enexio):
(i) Rs. 6,11,75,470/- towards outstanding principal
amount due under the purchase orders;
(ii) Rs. 95,27,533/- towards ICC Administrative Costs
and the Tribunal fees and expenses incurred in the
arbitration; and
(iii) Rs. 40,65,515/- towards claimant’s legal fees and
expenses.
In addition to the above, OPG and Gita Power were
directed to pay simple interest at a rate of 10% per
annum on: (a) Rs. 6,11,75,470/- from 30 October
2015 until the date of payment; (b) Rs.95,27,533/-
from the date of the award till the date of payment;
and (c) Rs. 40,65,515/- from the date of the award
till the date of payment.
[2024] 9 S.C.R. 513

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

However, all other claims including counterclaims
were rejected.
KEY FINDINGS IN THE AWARD
13. The key findings of the Arbitral Tribunal were:
(a) Gita Power and OPG are jointly and severally liable –
Gita Power, being the holding company of OPG, had actively
participated in the negotiations and had placed the purchase
orders, which were later confirmed by OPG. In fact, they both
acted as a single economic enterprise. Therefore, mere issuance
of another set of purchase orders by OPG with same terms
and conditions would not relieve Gita Power of its obligations,
rather both would be jointly and severally liable to the claimant
(Enexio).
(b) Claimant is entitled to the unpaid principal amount with
interest – Principal amount of Rs. 6,75,15,631/- is due and
payable to the claimant (Enexio) under the terms of the purchase
orders, subject to reconciliation of Rs.63,40,161 spent on vertical
duct erection. Thus, net amount payable to the claimant is Rs.
6,11,75,470 plus interest.
(c) No Damages are payable by Enexio to OPG/ Gita Power for
the delay – The claimant was entitled to extension up to the date
of completion i.e., 21 September 2015. Therefore, Enexio has
no liability towards liquidated damages for the delay. Moreover,
all the completion requirements were achieved by that date.
(d) No liability of Enexio to pay customs duty – Clause 6 of
the Supply / Erection Purchase orders stipulated that all taxes,
duties and local levies payable would be borne and paid by
the purchaser. Therefore, liability to pay customs duty would
fall upon the purchaser/ employer.
(e) Limitation -
(i) Declaratory relief sought by Enexio qua the debit notes
(i.e., towards liquidated damages and customs duty) is
beyond the period of limitation prescribed by Article 58 of
the Limitation Act, 1963;4

4 1963 Act
514 [2024] 9 S.C.R.

Digital Supreme Court Reports

(ii) However, Enexio’s claim for unpaid dues payable under
the contract is within the period of limitation; and
(iii) OPG’s counterclaim for cost of repair/replacement of
gearboxes and fan modules is barred by limitation.
Reasoning of the Arbitral Tribunal on limitation:
14. Regarding the finding on limitation, the Arbitral Tribunal (in short the
“Tribunal”) observed that the declaratory relief qua the debit notes
(i.e., towards: (a) Liquidated damages for the delay; and (b) Customs
duty) was sought beyond three years from the date when the right
to sue first accrued, therefore it was beyond the limitation period
prescribed by Article 58 of the Schedule to the 1963 Act. The Tribunal
noticed that the debit note for liquidated damages was issued on 24
August 2015; the claimant acknowledged its receipt vide letter dated
28 August 2015; whereas the request for arbitration was received by
ICC Secretariat on 2 May 2019. Likewise, the debit note for customs
duty was issued on 12 January 2016 that is, beyond three years
from the date of request for arbitration.
15. Insofar as the relief for recovery of the unpaid amount under the
purchase orders was concerned, the Tribunal opined that it was not
barred by limitation because meaningful negotiations were ongoing
between the parties as evidenced by the minutes of meeting dated
19 April 2018, which was followed by a written offer of the purchaser/
employer, dated 26 May 2018, to pay Rupees three crores to the
claimant as full and final settlement of the account. The relevant
observations in that regard are found in paragraph 16.03 (d) of the
award, which is extracted below:
“16.03 (d) Based on the arguments of the Parties’
respective Counsel and with reference to the case law and
statutes cited during the oral hearing in this arbitration, the
Tribunal finds that as long as meaningful negotiations were
ongoing between the parties the period of limitation of three
years had not begun to run. Following the meeting held
between the parties on 19th April 2018 the respondents
made a written offer to settle the matter on 26th May 2018.
Thus, the Tribunal finds that the period of limitation had
not commenced until 26th May 2018 and consequently had
not expired when the Request for Arbitration was received
[2024] 9 S.C.R. 515

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

by the ICC Secretariat on 2nd May 2019. Accordingly, the
Tribunal finds that items A, D, E and F claiming payment
of money are not time barred.”
16. Regarding the counterclaim for cost of repair/ replacement of
gearboxes and fan modules as barred by limitation, the Tribunal
reasoned thus:
“16.04 Time Bar in relation to the Respondents’
counterclaims for the cost of repair/replacement of
gearboxes and fan modules.
There is no evidence that these counterclaims were
included in the ongoing negotiations. The Tribunal has
found that the Taking Over Certificate is deemed to
have been issued on 21st September 2015. (See Section
13.13 above). On that date the Claimant is deemed to
have completed its obligations and thus, that is the latest
date from which the limitation period of three years must
run. The Claimant’s liabilities are barred by limitation on
or earlier than 21st September 2018. The Counterclaim
was delivered on 15th July 2019 and is, thus, barred by
limitation……….”
CHALLENGE TO THE AWARD U/S 34 OF THE 1996 ACT
17. Two applications, namely, O.P. Nos. 533 and 562 of 2020, were filed
by OPG (the appellant in the leading Civil Appeal) and Gita Power
(appellant in the connected appeal and R-2 in the leading appeal)
respectively, under Section 34 of the 1996 Act, for setting aside the
award dated 13 July 2020.
Grounds of Challenge
18. OPG and Gita Power laid challenge to the arbitral award, inter alia,
on the following grounds:
(i) Enexio’s (R-1’s) claim was made beyond the period of limitation
prescribed by Articles 14 and 18 of the Schedule to the 1963
Act. The arbitration clause was invoked on 2 May 2019, well
beyond three years from the date (i.e., 31 March 2014) when the
work ought to have been completed as per the contract. It was
also beyond three years from the deemed date of completion
(i.e., 21 September 2015).
516 [2024] 9 S.C.R.

Digital Supreme Court Reports

(ii) Different yardstick was adopted in computing the limitation period
of the claim than what was adopted for the counterclaim, which
was not at all justified as both arose out of same contractual
relationship.
(iii) One part of the minutes of meeting dated 19 April 2018 that
supported the counterclaim was discarded, while the other part,
which favored the claimant, was accepted. This is nothing but
perverse.
(iv) The time for completion of the work under the contract was
extended without any basis.
(v) Findings in the award are self-contradictory in as much as, if
challenge to the debit note for damages on account of the delay
was beyond limitation, there was no logic in denying adjustment
of those damages against the unpaid dues payable to Enexio
under the purchase orders.
(vi) Material evidence qua liability for customs duty was ignored.
SINGLE JUDGE’S ORDER U/S 34 OF THE 1996 ACT
19. The learned Single Judge in its judgment and order on the application,
under Section 34 of the 1996 Act, charted the undisputed dates as
follows:

Date Events
31.03.2014 Said work ought to have been completed by Enexio.
24.08.2015 Debit note pertaining to liquidated damages was raised
by Gita and OPG
21.09.2015 Deemed date of completion of said work
12.01.2016 Debit note regarding customs duty was raised by Gita
and OPG
19.04.2018 Talks between adversaries namely Enexio on one side
and Gita/OPG on the other side culminated in minutes
of meeting (Ex.C.78)
26.05.2018 Gita/OPG offered to settle at Rs. 300 lacs as full and
final settlement (Ex. C. 79)
22.08.2018 Gita/OPG sent communication enclosing cheque for Rs.
25 lakhs as part of Rs. 3 Crores in full quit (Ex. C. 80)
29.10.2018 Enexio returned Rs. 25 lakhs cheque (Ex. C. 82)
[2024] 9 S.C.R. 517

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

02.05.2019 Arbitral institution, namely, ICC request for arbitration
(to be noted, both parties agreed that this is the date
of commencement of arbitration within the meaning of
section 21 of A and C Act)
15.07.2019 Gita/OPG made counter claim vide its pleadings before
AT
20. After charting the relevant dates, and perusing the arbitral award, in
paragraph 25 of the judgment, the learned Single Judge observed:
“25. There is a clear dichotomy in impugned award
regarding the legal drill of testing limitation. AT has taken
26.05.2018 as the reckoning date, that being the date on
which written offer to settle the matter was made by Gita/
OPG vide Ex. C. 79, but for testing the counter claim of
Gita/OPG, AT has taken 21.09.2015 as the reckoning
date or starting point of limitation, that being the date of
deemed completion of said work. This Court is constrained
to observe that this dichotomy is akin to classical division
between science and mysticism. Therefore, this Court
unhesitatingly holds that this is patently illegal and an
implausible view. To be noted, this dichotomy is not a mere
erroneous application of law, and it needs no reappreciation
of evidence. It is also an infract of section 18 of A and C
Act which provides for equal treatment of parties. More
importantly, the law of limitation being based on public
policy, as already delineated supra, infract of the same
would clearly vitiate the impugned award as one being in
conflict with public policy of India.”
21. The learned Single Judge thereafter proceeded to observe that the
counterclaim and heads of claim were so intertwined with each other
that a decision on one, with no decision on the other, would vitiate
the entire award. Further, it was observed, if the arbitral tribunal had
taken the date of joint meeting (i.e., 19 April 2018), and the follow
up offer dated 26 May 2018, as the starting point of limitation for
the claim, the same would be the starting point of limitation for the
counterclaim as well. And if the starting point of limitation is taken
as 21 September 2015 (i.e., the date of completion of the work), the
claim, which was filed on 2 May 2019, was well beyond three years
and as such barred by limitation. Thus, according to the learned Single
518 [2024] 9 S.C.R.

Digital Supreme Court Reports

Judge there was inherent contradiction in the arbitral award which
made it vulnerable to a challenge under Section 34 of the 1996 Act.
Consequently, the learned Single Judge set aside the arbitral award.
22. Aggrieved by the judgment and order of the learned Single Judge,
dated 23 December 2020, Enexio (R-1 herein) filed two appeals,
namely, O.S.A. (CAD) Nos. 174 and 175 of 2021, before the Division
Bench of the High Court, which came to be allowed by the impugned
judgment.
IMPUGNED JUDGMENT
23. The Division Bench of the High Court, inter alia, took the view that
the minutes of meeting dated 19 April 2018, read with e-mail dated
26 May 2018, amounted to an acknowledgment of the dues payable
to Enexio, thereby satisfying the ingredients of Section 18 of the 1963
Act for a fresh period of limitation to run from that date. It observed
that when the last part of the minutes’ dated 19 April 2018 is read
with subsequent communication dated 26 May 2018, it belies the
stand of the counterclaimant that the counterclaims were admitted to
the claimant. Thus, the Division Bench, inter alia, held that the view
taken by the arbitral tribunal was a possible view and there was no
patent illegality in the award meriting interference under Section 34
of the 1996 Act. Consequently, the order of the learned Single Judge
was set aside, and the arbitral award was restored.
24. We have heard Mr. Abhimanyu Bhandari for the appellants; Mr. Gaurab
Banerjee for the claimant-respondent and have perused the record.
SUBMISSIONS ON BEHALF OF APPELLANT(S)
25. The learned counsel for the appellants, inter alia, submitted:
(i) The Arbitral Tribunal, in paragraph 16.03(d) of the award qua
claims (i), (iv), (v) and (vi) (corresponding claim numbers A, D,
E and F) of the claimant-respondent, observed:
“As long as meaningful negotiations were ongoing
between the parties, the period of limitation of three
years had not begun to run. Following the meeting
held between the parties on 19th April, 2018 the
respondents made a written offer to settle the matter
on 26 May 2018. Thus, the Tribunal finds that the
period of limitation had not commenced until 26
[2024] 9 S.C.R. 519

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

May 2018 and consequently had not expired when
the request for arbitration was received by the ICC
Secretariat on 2 May 2019.”
The afore-quoted observations are in teeth of decisions of this
Court in (i) Bharat Sanchar Nigam Limited v. Nortel Networks
Pvt. Ltd.5 and (ii) B & T AG v. Ministry of Defence6 where
it has been held that mere negotiations will not postpone the
cause of action for the purpose of limitation.
(ii) The period of limitation for the claim would have to be counted
as three years from the date of completion i.e., 21 September
2015, which got over before 2 May 2019 i.e., the date when
request was received for arbitration. Once the claim is barred
by limitation, the award allowing the claim would be deemed to
be violative of fundamental policy of Indian law and, therefore,
vulnerable in the light of the law declared in (i) Ssangyong
Engg. & Construction Co. Ltd. v. NHAI7 and (ii) Associate
Builders v. Delhi Development Authority.8
(iii) The Arbitral Tribunal applied different yardstick for computing
limitation of the claim than what was adopted for the counterclaim.
For example, the start point of limitation for the claim was taken
as 26 May 2018 whereas for the counterclaim it was taken as
21 September 2015. This amounted to unequal treatment of
the parties more so when claim as well as counterclaim arose
from the same contractual relationship.
(iv) Once the declaratory relief qua Debit Notes dated 24 August
2015 (i.e. in respect of Rs. 3,30,00,000 towards liquidated
damages for the delay in supply and erection under the purchase
orders) and 12 January 2016 (i.e. in respect of Rs. 5,94,06,693/-
towards Customs Duties) was held barred by limitation, the
amount reflected in the Debit Notes ought to have been deemed
payable by the claimant and that amount ought to have been
adjusted against any amount payable to the claimant.

5 [2021] 2 SCR 644 : (2021) 5 SCC 738, paragraphs 20 and 21
6 [2023] 7 SCR 599 : (2024) 5 SCC 358, paragraph 73
7 [2019] 7 SCR 522 : (2019) 15 SCC 131
8 [2014] 13 SCR 895 : (2015) 3 SCC 49
520 [2024] 9 S.C.R.

Digital Supreme Court Reports

(v) The Division Bench erroneously relied on the minutes dated
19 April 2018 to apply Section 18 of the 1963 Act for extending
the period of limitation of the claim when it was nobody’s case
that limitation stood extended thereby. Further, if the minutes
dated 19 April 2018 were to be relied, it ought to have been
relied in toto and not in part. That is, it should have been taken
as an admission of liability of the claimant towards liquidated
damages for the delay as well as customs duty.
(vi) In paragraph 13 of the impugned judgment, the Division
Bench sought to appreciate the evidence i.e. the minutes of
meeting dated 19 April 2018, which was beyond the scope of
powers exercisable under Section 37 read with Section 34 of
the 1996 Act. In this regard, reliance was placed on: (i) UHL
Power Company limited v. State of Himachal Pradesh;9 (ii)
Dyna Technologies Pvt. Ltd. v. Crompton Greaves Lt.;10 (iii)
Heidelbergh Cement India Ltd. v. The Indure Pvt. Ltd.;11 (iv)
MMTC Ltd. v. Vedanta Ltd.;12 (v) Ssangyong Engg (supra);
and (vi) Haryana Tourism Ltd. v. Kandhari Beverages Ltd.13
(vii) The learned Single Judge justifiably set aside the award that
was self-contradictory and perverse.
(viii) Counterclaims for cost of repair/ replacement of gear boxes,
which were defective, ought to have been adjudicated. In
absence thereof, the arbitral award is rendered bad in law.
(ix) The Division Bench of the High Court misconstrued the ratio
of the decision of this Court in Geo Miller & Co. (P) Ltd. v.
Rajasthan Vidyut Utpadan Nigam Ltd14 for treating the claim
within, and the counterclaim beyond, the period of limitation.
(x) The subsequent purchase orders issued by OPG replaced the
earlier purchase orders issued by Gita Power, and the supply/

9 [2022] 1 SCR 1 : (2022) 4 SCC 116, paragraphs 16 to 21
10 [2019] 15 SCR 295 : (2019) 20 SCC 1, paragraphs 27-43
11 2022/DHC/003952
12 [2019] 3 SCR 1023 : (2019) 4 SCC 163, paragraphs 11 to 13
13 [2022] 2 SCR 316 : (2022) 3 SCC 237, paragraphs 7 & 8
14 [2019] 11 SCR 1108 : (2020) 14 SCC 643 (para 28)
[2024] 9 S.C.R. 521

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

work was in respect of an OPG project, therefore Gita Power
could not have been dragged into arbitration and made jointly
and severally liable with OPG.
SUBMISSIONS ON BEHALF OF FIRST RESPONDENT/ENEXIO
26. The learned counsel for the first respondent, inter alia, submitted:
(i) The findings in the award are factually correct. There is no
patent illegality, as alleged, or otherwise, which may warrant
interference under Section 34 of the 1996 Act. Therefore, the
Division Bench of the High Court was justified in setting aside
the order of the Single Judge and restoring the award.
(ii) The appellant’s case that all counterclaims were treated as
barred by limitation and, therefore, not considered on merits,
is factually incorrect. In all five counterclaims were there. Out
of those five, counterclaims towards: (i) liquidated damages for
the delay in supply and erection; (ii) customs duty; and (iii) cost
of erection of horizontal and vertical exhaust duct through an
external agency, were considered and decided on merits. The
counterclaims for liquidated damages and customs duty were
rejected whereas counterclaim for cost of erection of vertical duct
was allowed. Only two counterclaims towards (i) cost of repair/
replacement of Gear Boxes, due to alleged defective supply,
amounting to Rs.9,76,000, and (ii) cost of repair/ replacement
of Fan Modules, due to alleged defective supply, amounting
to Rs.14,80,802, were dismissed as barred by limitation. The
finding that these two counterclaims were barred by limitation
is premised on there being no material to indicate that they
were included in the ongoing negotiation.
(iii) The arbitral tribunal considered the three counterclaims on
merit by adopting the same yardstick qua limitation as applied
to the claims. These three counterclaims were not treated as
barred by limitation as they were cited in the minutes of the
meeting dated 19 April 2018 wherein the principal amount due
to OPG was also acknowledged. It is thus incorrect to state that
the arbitral tribunal adopted different yardstick on the point of
limitation while deciding counterclaims than what was adopted
to decide the claims.
522 [2024] 9 S.C.R.

Digital Supreme Court Reports

(iv) Enexio’s claim of the balance amount was not barred by
limitation even if the limitation period is counted from the date
of completion of the project i.e., 21 September 2015, because
before expiry of the period of limitation of three years, that is
before 20 September 2018, vide minutes of the meeting dated 19
April 2018, OPG had acknowledged in writing its liability towards
the balance of the principal amount (i.e., Rs. 6,75,15,631)
albeit subject to deductions. Thus, by virtue of Section 18 of
the 1963 Act, from the date of written acknowledgment, which
was followed by written communication dated 26 May 2018,
fresh period of limitation of three years began to run.
(v) Inference drawn from the minutes of the meeting as well as
subsequent conduct of the parties to conclude lack of consent
on Enexio’s part for deductions in the outstanding amount, is a
decision within the remit of the arbitral tribunal. Therefore, any
error, if at all, would be an error within its jurisdiction, which
is not amenable to interference under Section 34 of the 1996
Act. Because, while examining the validity of an award under
Section 34, the Court exercises supervisory and not appellate
jurisdiction (vide: (i) Steel Authority of India Ltd. versus
Gupta Brothers Steel Tubes Ltd.;15 (ii) Associated Builders
(supra); (iii) Ssangyong Engg (supra); and (iv) Delhi Airport
Metro Express Pvt. Ltd. v. DMRC Ltd.16).
(vi) The learned Single Judge had erred in observing:
(a) That any infract qua limitation would violate public policy
and attract Section 34 (2) (b) (ii) read with Explanation 1
of the 1996 Act.’ Because limitation is a mixed question
of fact and law and if its determination depends on
interpretation / appreciation of evidence / materials on
record, any error, ipso facto, would not render the award
amenable to interference as is clear from the Proviso to
sub-section (2-A) of Section 34 of the 1996 Act.
(b) ‘That different dates could not have been taken for
determining limitation of the claim and the counterclaim,

15 [2009] 14 SCR 253 : (2009) 10 SCC 63
16 [2022] 3 SCR 716 : (2022) 1 SCC 131
[2024] 9 S.C.R. 523

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

when both were intertwined and had arisen from a
common supply/works contract.’ Because three out of
five counterclaims were decided on merits and not on
limitation. The remaining two were rejected on limitation
as they were not reflected in the minutes of meeting dated
19 April 2018. Therefore, benefit of Section 18 of the 1963
Act was not available qua those counterclaims. Moreover,
there cannot be a general rule that limitation for claims
and counterclaims must have a common run because
counterclaim is a separate action which must stand on
its own legs, as has been held by this Court in Oil and
Natural Gas Corporation Ltd. v. Afcons Gunanusa JV.17
(vii) The counterclaim for the cost of repair/ replacement of gearboxes
and fan modules was rightly rejected by the arbitral tribunal as
barred by limitation as regarding it there was no recital in the
minutes of meeting dated 19 April 2018. Moreover, it was not
intertwined with the claim for the balance amount as the cause
of action for the two were different. One arose from supply and
erection, and the other arose subsequently, post commissioning/
completion of the project, on account of alleged defect in the
material supplied.
(viii) Gita Power being the holding company of OPG and having
actively participated in the formation of the contract as also in
issuance of purchase orders for the supply/ works, which carried
the arbitration clause, was bound by the arbitration agreement
and also liable jointly and severally along with OPG for the dues.
ISSUES
27. Upon consideration of the rival submissions, the core issue which
falls for our determination is:
“Whether the arbitral award is in conflict with the public
policy of India, or/ and is vitiated by patent illegality
appearing on the face of the award?”
28. The answer to the above issue would depend, inter alia, on our
determination of the following sub-issues:

17 [2022] 10 SCR 660 : (2024) 4 SCC 481
524 [2024] 9 S.C.R.

Digital Supreme Court Reports

(a) Whether Gita Power (R-2) could have been subjected to
arbitration and made jointly and severally liable along with OPG
for the award, when the project beneficiary was OPG?
(b) Whether Enexio’s claim for the outstanding principal amount
barred by limitation?
(c) Whether the counter claim, in respect of cost of repair /
replacement of gear boxes and fan modules, could be treated
as barred by time when the other side’s claim, arising out of
same contractual relationship, was found within limitation?
(d) Whether arbitral award for payment of the outstanding principal
amount with interest is perverse because it makes no adjustment
for debit note(s) entries even though the prayer to declare them
as invalid was rejected as barred by time?
(e) Whether the reasoning of the arbitral tribunal is flawed and
vitiated by adopting different yardstick for adjudging the
counterclaim than what was adopted for adjudging the claim?
If so, whether it vitiated the award and rendered it vulnerable
to a challenge under Section 34 of the 1996 Act?
RELEVANT LEGAL PRINCIPLES GOVERNING A CHALLENGE
TO AN ARBITRAL AWARD
29. Before we delve into the issue/ sub-issues culled out above, it would
be useful to have a look at the relevant legal principles governing
a challenge to an arbitral award. Recourse to a Court against an
arbitral award may be made through an application for setting aside
such award in accordance with sub-sections (2), (2-A) and (3) of
Section 34 of the 1996 Act.18 Sub-section (2) of Section 34 has

18 Section 34. Application for setting aside arbitral award. --- (1) ………..
(2) An arbitral award may be set aside by the Court only if---
(a) the party making the application establishes on the basis of the record of the arbitral
tribunal that---
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected
it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with the dispute not contemplated by or not falling within the
terms of the submission to arbitration, or it contains decisions on matters beyond the
scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from
those not so submitted, only that part of the arbitral award which contains decisions on
[2024] 9 S.C.R. 525

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

two clauses, (a) and (b). Clause (a) has five sub-clauses which
are not relevant to the issues raised before us. Insofar as clause
(b) is concerned, it has two sub-clauses, namely, (i) and (ii). Sub-
clause (i) of clause (b) is not relevant to the controversy in hand.
Sub-clause (ii) of clause (b) provides that if the Court finds that the
arbitral award is in conflict with the public policy of India, it may set
aside the award.
Public Policy
30. “Public policy” is a concept not statutorily defined, though it has
been used in statutes, rules, notification etc. since long, and is also
a part of common law. Section 2319 of the Contract Act, 1872 uses
the expression by stating that the consideration or object of an

matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance
with the agreement of the parties, unless such agreement was in conflict with the
provision of this Part from which the parties cannot derogate, or, failing such agreement,
was not in accordance with this Part; or
(b) the Court finds that –
(i) the subject matter of the dispute is not capable of settlement by arbitration under
the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1. — For the avoidance of any doubt, it is clarified that an award is in conflict
with the public policy of India, only if, –
(i) the making of the award was induced or affected by fraud or corruption or was in
violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2--- For the avoidance of doubt, the test as to whether there is a contravention
with the fundamental policy of Indian law, shall not entail a review on the merits of the
dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations,
may also be set aside by the Court, if the Court finds that the award is vitiated by patent
illegality appearing on the face of the award:
Provided that an award shall not be set aside, merely on the ground of an erroneous application
of the law or by reappreciation of evidence.
(3) An application for setting aside may not be made after three months have elapsed from the
date on which the party making that application had received the arbitral award or, if a request
had been made under section 33, from the date on which that request had been disposed of
by the arbitral tribunal:
Provided that if the court is satisfied that the applicant was prevented by sufficient cause from
making the application within the set period of three months it may entertain the application
within a period of 30 days, but not thereafter.
19 Section 23.-- What consideration and objects are lawful, and what not. -- The consideration or
object of an agreement is lawful, unless –
it is forbidden by law; or
is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or
involves or implies, injury to the person or property of another; or
the court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every
agreement of which the object or consideration is unlawful is wide.
526 [2024] 9 S.C.R.

Digital Supreme Court Reports

agreement is lawful, unless, inter alia, opposed to public policy. That
is, a contract which is opposed to public policy is void.
31. In Chitty on Contracts,20 scope of public policy, largely accepted
across jurisdictions for invalidation of contracts, has been summarized
in the following terms:
“Objects which on grounds of public policy invalidate
contracts may, for convenience, be generally classified
into five groups: first, objects which are illegal by common
law or by legislation; secondly, objects injurious to good
government either in the field of domestic or foreign affairs;
thirdly, objects which interfere with the proper working of the
machinery of justice; fourthly, objects injurious to marriage
and morality; and, fifthly, objects economically against the
public interest, viz contracts in restraint of trade…..”
32. In Gherulal Parakh v. Mahadeodas Maiya and others,21 a three-
Judge Bench of this Court, in the context of Section 23 of the Contract
Act, summarized the doctrine of public policy as follows:
“Public policy or the policy of the law is an elusive concept;
it has been described as untrustworthy guide, variable
quality, uncertain one, unruly horse, etc; the primary duty
of a court of law is to enforce a promise which the parties
have made and to uphold the sanctity of contracts which
formed the basis of society, but in certain cases, the court
may relieve them of their duty on a rule founded on what is
called the public policy; for want of better words Lord Atkin
describes that something done contrary to public policy is
a harmful thing, but the doctrine is extended not only to
harmful cases but also to harmful tendencies; this doctrine
of public policy is only a branch of common law, and, just
like any other branch of common law, it is governed by
precedents; the principles have been crystallized under
different heads and though it is permissible for courts to
expound and apply them to different situations, it should
only be invoked in clear and incontestable cases of harm

20 Volume 1, 35th Edition, paragraph 19-112
21 [1959] Supp. 2 SCR 406 : AIR 1959 SC 781
[2024] 9 S.C.R. 527

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

to the public; Though the heads are not closed and though
theoretically it may be permissible to evolve a new head
under exceptional circumstances of a changing world, it
is advisable in the interest of stability of society not to
make any attempt to discover new heads in these days.
(Emphasis supplied)
33. In Central Inland Water Transport Corporation v. Brojo Nath
Ganguly,22 this Court observed that the expressions ‘public policy’,
‘opposed to public policy’, or ‘contrary to public policy’ are incapable
of precise definition. It was observed that public policy is not the policy
of a particular government. Rather it connotes some matter which
concerns the public good and the public interest. It was observed:
“92.……what is for the public good or in the public interest
or what would be injurious or harmful to the public good
or the public interest has varied from time to time. As
new concepts take the place of old, transactions which
were once considered against public policy are now being
upheld by the courts and, similarly, where there has been a
well- recognized head of public policy, the courts have not
shirked from extending it to new transactions and changed
circumstances and have at times not even flinched from
inventing a new head of public policy.”
(Emphasis supplied)
34. In Renusagar Power Co. Ltd. v. General Electric Co.,23 a three-
Judge Bench of this Court observed that the doctrine of public policy
is somewhat open- textured and flexible. By citing earlier decisions,
it was observed that there are two conflicting positions which are
referred to as the “narrow view” and the “broad view”. According to
the narrow view, courts cannot create new heads of public policy
whereas the broad view countenances judicial law making in these
areas. In the field of private international law, it was pointed out, courts
refuse to apply a rule of foreign law or recognize a foreign judgment
or a foreign arbitral award if it is found that the same is contrary to
the public policy of the country in which it is sought to be invoked

22 [1986] 2 SCR 278 : (1986) 3 SCC 156, paragraph 92
23 [1993] Supp. 3 SCR 22 : 1994 Supp (1) SCC 644
528 [2024] 9 S.C.R.

Digital Supreme Court Reports

or enforced. However, it was clarified, a distinction is to be drawn
while applying the rule of public policy between a matter governed by
domestic law and a matter involving conflict of laws. It was observed
that the application of the doctrine of public policy in the field of
conflict of laws is more limited than that in the domestic law and the
courts are slower to invoke public policy in cases involving a foreign
element than when a purely municipal legal issue is involved. It was
held that contravention of law alone will not attract the bar of public
policy, and something more than contravention of law is required.
35. In fact, in Renusagar (supra), this Court was dealing with the
enforceability of a foreign award. For that end, it had to interpret
the expression “contrary to public policy” in the context of Section
7(1)(b)(ii) of Foreign Awards (Recognition and Enforcement) Act,
1961.24 While doing so, this Court held that -- (a) contravention of
law alone will not attract the bar of public policy, and something
more than contravention of law is required;25and (b) the expression
‘public policy’ must be construed in the sense the doctrine of public
policy is applied in the field of private international law. Applying the
said criteria, it was held that enforcement of a foreign award could
be refused on the ground of being contrary to public policy if such
enforcement would be contrary to (a) fundamental policy of Indian
law or (b) the interests of India or (c) justice or morality.26 The Court
thereafter proceeded to hold that a contravention of the provisions of
the Foreign Exchange Regulation Act would be contrary to the public
policy of India as that statute is enacted for the national economic
interest to ensure that the nation does not lose foreign exchange
which is essential for the economic survival of the nation.27
36. What is clear from above is that for an award to be against public
policy of India a mere infraction of the municipal laws of India is not
enough. There must be, inter alia, infraction of fundamental policy of
Indian law including a law meant to serve public interest or public good.

24 Section 7. Conditions for enforcement of foreign awards. – (1) A foreign award may be enforced
under this Act—
*******
(b) if the court dealing with the case is satisfied that –
*******
(ii) the enforcement of the award will be contrary to the public policy.
25 paragraph 65 of Renusagar (supra)
26 paragraph 66 of Renusagar (supra)
27 paragraph 75 of Renusagar (supra)
[2024] 9 S.C.R. 529

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

37. In Oil and Natural Gas Corporation (ONGC) v. Saw Pipes Ltd.28
a two-Judge Bench of this Court, in the context of a challenge to a
domestic arbitral award under Section 34(2)(b)(ii) of the 1996 Act
as it stood prior to 2015 amendment, ascribed wider meaning to the
expression ‘public policy of India’ in the following terms:
“31. ……. the phrase public policy of India used in section
34 in context is required to be given a wider meaning. It
can be stated that the concept of public policy connotes
some matter which concerns public good and the public
interest. What is for public good or in public interest or what
would be injurious or harmful to the public good or public
interest has varied from time to time. However, the award
which is, on the face of it, patently in violation of statutory
provisions cannot be said to be in public interest. Such
award/ judgment/ decision is likely to adversely affect the
administration of justice. Hence, in our view, in addition
to narrower meaning given to the term “public policy” in
Renusagar case, it is required to be held that the award
could be set aside if it is patently illegal. The result would
be – award could be set aside if it is contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality, or
(d) in addition, if it is patently illegal.
Illegality must go to the root of the matter and if the illegality
is of trivial nature, it cannot be held that award is against
the public policy. Award could also be set aside if it is so
unfair and unreasonable that it shocks the conscience of
the court. Such award is opposed to public policy and is
required to be adjudged void.
(Emphasis supplied)
38. Following the expansive view of the concept “contrary to public
policy”, in D.D.A v. M/s. R.S. Sharma & Co.,29 which related to a

28 [2003] 3 SCR 691 : (2003) 5 SCC 705
29 [2008] 12 SCR 785 : (2008) 13 SCC 80
530 [2024] 9 S.C.R.

Digital Supreme Court Reports

matter arising from a proceeding under Section 34, as it stood prior
to 2015 amendment, a two-Judge Bench of this Court, on the scope
of the power to set aside an arbitral award, summarized the general
principles as follows:
“21. …
(a) An award, which is
(i) contrary to substantive provisions of law; or
(ii) the provisions of the arbitration and Conciliation
Act, 1996; or
(iii) against the terms of the respective contract; or
(iv) patently illegal; or
(v) prejudicial to the rights of the parties;
Is open to interference by the court under Section 34(2)
of the Act.
(b) The award could be set aside if it is contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality.
(c) The award could also be set aside if it is so unfair
and unreasonable that it shocks the conscience of
the court.
(d) It is open to the court to consider whether the award
is against the specific terms of contract and if so,
interfere with it on the ground that it is patently illegal
and opposed to public policy of India.”
39. In Oil and Natural Gas Corporation Limited v. Western Geco
International Limited,30 which also related to the period prior to
2015 amendment of Section 34 (2)(b)(ii),31 a three-Judge Bench
of this Court, after considering the decision in Saw Pipes (supra),

30 [2014] 12 SCR 1 : (2014) 9 SCC 263 paragraphs 35, 38 and 39
31 See Footnote 18
[2024] 9 S.C.R. 531

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

without exhaustively enumerating the purport of the expression
‘fundamental policy of Indian law’, observed that it would include all
such fundamental principles as providing a basis for administration of
justice and enforcement of law in this country. The Court thereafter
illustratively referred to three fundamental juristic principles, namely,
(a) that in every determination that affects the rights of a citizen or
leads to any civil consequences, the court or authority or quasi-
judicial body must adopt a judicial approach, that is, it must act bona
fide and deal with the subject in a fair, reasonable and objective
manner and not actuated by any extraneous consideration; (b) that
while determining the rights and obligations of parties the court or
tribunal or authority must act in accordance with the principles of
natural justice and must apply its mind to the attendant facts and
circumstances while taking a view one way or the other; and (c) that
its decision must not be perverse or so irrational that no reasonable
person would have arrived at the same.
40. In Associate Builders (supra), a two-Judge Bench of this Court,
held32 that audi alteram partem principle is undoubtedly a fundamental
juristic principle in Indian law and is enshrined in Sections 1833 nand
34 (2)(a)(iii)34 of the 1996 Act. In addition to the earlier recognized
principles forming fundamental policy of Indian law, it was held
that disregarding: (a) orders of superior courts in India; and (b)
the binding effect of the judgment of a superior court would also
be regarded as being contrary to the fundamental policy of Indian
law.35 Further, elaborating upon the third juristic principle (i.e., qua
perversity), as laid down in Western Geco (supra), it was observed
that where: (i) a finding is based on no evidence; or (ii) an arbitral
tribunal takes into account something irrelevant to the decision which
it arrives at; or (iii) ignores vital evidence in arriving at its decision,
such decision would necessarily be perverse.36 To this a caveat was
added by observing that when a court applies the ‘public policy test’
to an arbitration award, it does not act as a court of appeal and,

32 See paragraph 30 of the judgment in Associate Builders (supra)
33 Section 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.
34 See Footnote 18
35 See paragraph 27 of the judgment in Associate Builders (supra)
36 Paragraph 31 of the judgment in Associate Builders (supra)
532 [2024] 9 S.C.R.

Digital Supreme Court Reports

consequently, errors of fact cannot be corrected; and a possible
view by the arbitrator on facts has necessarily to pass muster as
the arbitrator is the ultimate master of the quantity and quality of
evidence to be relied upon when he delivers his arbitral award. It
was also observed that an award based on little evidence or on
evidence which does not measure up in quality to a trained legal
mind would not be held to be invalid on that score. Thus, once it is
found that the arbitrator’s approach is not arbitrary or capricious, it
is to be taken as the last word on facts.37
2015 Amendment in Sections 34 and 48
41. The afore-mentioned judicial pronouncements were all prior to 2015
Amendment. Notably, prior to the Amendment, 2015 the expression
“in contravention with the fundamental policy of Indian law” was not
used by the legislature in either Section 34(2)(b)(ii) or Section 48(2)
(b). The pre-amended Section 34(2)(b)(ii) and its Explanation read:
“S.34. Application for setting aside arbitral award—
(1) *******
(2) An arbitral award may be set aside by the court only if—
******
(b) the court finds that –
******
(ii) the arbitral award is in conflict with the public policy
of India.
Explanation.-- Without prejudice to the generality of sub-
clause (ii) it is hereby declared, for the avoidance of any
doubt, that an award is in conflict with the public policy of
India if the making of the award was induced or affected
by fraud or corruption or was in violation of section 75 or
section 81.
Whereas pre-amended Section 48(2)(b) and its Explanation
read:

37 Paragraph 33 of the judgment in Associate Builders (supra)
[2024] 9 S.C.R. 533

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

S. 48. Conditions for enforcement of foreign awards. –
(1) ********
(2) Enforcement of an arbitral award may also be refused
if the court finds that—
(a). ******
(b) the enforcement of the award would be contrary to the
public policy of India.
Explanation. – Without prejudice to the generality of sub-
clause (b) of this section, it is hereby declared, for the
avoidance of any doubt, that an award is in conflict with
the public policy of India if the making of the award was
induced or affected by fraud or corruption.
42. By the Amendment, 2015, in place of the old Explanation to Section
34(2)(b)(ii), Explanations 1 and 2 were added to remove any doubt as
to when an arbitral award is in conflict with the public policy of India.
43. At this stage, it would be pertinent to note that we are dealing with
a case where the application under Section 34 of the 1996 Act was
filed after the Amendment, 2015, therefore the newly substituted/
added Explanations would apply.38
44. The Amendment, 2015 adds two explanations to each of the two
sections, namely, Section 34(2)(b)(ii)39 and Section 48(2)(b),40 in place
of the earlier Explanation. The significance of the newly inserted
Explanation 1 in both the sections is two-fold. First, it does away with
the use of words: (a) “without prejudice to the generality of sub-clause
(ii)” in the opening part of the pre-amended Explanation to Section
34(2)(b)(ii); and (b) “without prejudice to the generality of clause (b)
of this section” in the opening part of the pre-amended Explanation

38 Ssangyong Engineering & Construction Co. Ltd (supra)
39 See footnote 18
40 Section 48(2)(b).--
Explanation 1. — For the avoidance of any doubt, it is clarified that an award is in conflict with the public
policy of India, only if ,--
the making of the award was induced or affected by fraud or corruption or was in violation of section 75
or section 81; or
it is in contravention with the fundamental policy of Indian law; or
it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the
fundamental policy of Indian law shall not entail a review on the merits of the dispute.
534 [2024] 9 S.C.R.

Digital Supreme Court Reports

to Section 48(2)(b); secondly, it limits the expanse of public policy
of India to the three specified categories by using the words “only
if”. Whereas, Explanation 2 lays down the standard for adjudging
whether there is a contravention with the fundamental policy of
Indian law by providing that a review on merits of the dispute shall
not be done. This limits the scope of the enquiry on an application
under either Section 34(2)(b)(ii) or Section 48(2)(b) of the 1996 Act.
45. The Amendment, 2015 by inserting sub-section (2-A)41 in Section
34, carves out an additional ground for annulment of an arbitral
award arising out of arbitrations other than international commercial
arbitrations. Sub-section (2-A) provides that the Court may also set
aside an award if that is vitiated by patent illegality appearing on the
face of the award. This power of the Court is, however, circumscribed
by the Proviso, which states that an award shall not be set aside
merely on the ground of an erroneous application of the law or by
re-appreciation of evidence.
46. Explanation 1 to Section 34(2)(b)(ii), specifies that an arbitral award
is in conflict with the public policy of India, only if,- (i) the making
of the award was induced or affected by fraud or corruption or was
in violation of Section 75 or Section 81; or (ii) it is in contravention
with the fundamental policy of Indian law; or (iii) it is in conflict with
the most basic notions of morality or justice.
47. In the instant case, there is no allegation that the making of the award
was induced or affected by fraud or corruption, or was in violation of
Section 75 or Section 81. Therefore, we shall confine our exercise in
assessing as to whether the arbitral award is in contravention with
the fundamental policy of Indian law, and/ or whether it conflicts with
the most basic notions of morality or justice. Additionally, in the light
of the provisions of sub-section (2-A) of Section 34, we shall examine
whether there is any patent illegality on the face of the award.
48. Before undertaking the aforesaid exercise, it would be apposite to
consider as to how the expressions (a) “in contravention with the
fundamental policy of Indian law”; (b) “in conflict with the most basic
notions of morality or justice”; and (c) “patent illegality” have been
construed.

41 See Footnote 18
[2024] 9 S.C.R. 535

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

In contravention with the fundamental policy of Indian law
49. As discussed above, till the Amendment, 2015 the expression “in
contravention with the fundamental policy of Indian law” was not
found in the 1996 Act. Yet, in Renusagar (supra), in the context of
enforcement of a foreign award, while construing the phrase “contrary
to the public policy”, this Court held that for a foreign award to be
contrary to public policy mere contravention of law would not be
enough rather it should be contrary to: (a) the fundamental policy
of Indian law; and /or (b) the interest of India; and/ or (c) justice or
morality.
50. In the judicial pronouncements that followed Renusagar (supra),
already discussed above, the domain of what could be considered
contrary to the ‘public policy of India’/ ‘fundamental policy of Indian
law’ expanded, resulting in much greater interference with arbitral
awards than what the lawmakers intended. This led to the Amendment,
2015 in the 1996 Act.
51. In Ssangyong Engineering (supra), this Court dealt with the
effect of the Amendment, 2015. While doing so, it took note of a
supplementary report of February 2015 of the Law Commission of
India made in the context of the proposed 2015 amendments. The
said supplementary report has been extracted in paragraph 30 of
that judgment. The key features of it are summarized below:
(a) Mere violation of law of India would not be a violation of public
policy in cases of international commercial arbitrations held in
India.
(b) The proposed 2015 amendments in 1996 Act (i.e., in Sections
34(2)(b)(ii) and 48(2)(b) including insertion of sub-section (2-A)
in Section 34) were on the assumption that the terms, such as,
“fundamental policy of Indian law” or conflict with “most basic
notions of morality or justice” would not be widely construed.
(c) The power to review an award on merits is contrary to the
object of the Act and international practice.
(d) The judgment in Western Geco (supra) would expand the
court’s power, contrary to international practice. Hence, a
clarification needs to be incorporated to ensure that the term
‘fundamental policy of Indian law’ is narrowly construed. The
536 [2024] 9 S.C.R.

Digital Supreme Court Reports

applicability of Wednesbury principles to public policy will open
the floodgates. Hence, Explanation 2 to Section 34(2)(b)(ii) has
been proposed.
After taking note of the supplementary report, the statement of
objects and reasons of the Amendment Act, 2015, and the amended
provisions of Sections 28, 34 and 48, this Court held:
“34. What is clear, therefore, is that the expression public
policy of India, whether contained in section 34 or in section
48, would now mean the fundamental policy of Indian law
as explained in paras 18 and 27 of Associate Builders i.e.
the fundamental policy of Indian law would be relegated
to Renusagar’s understanding of this expression. This
would necessarily mean that Western Geco expansion
has been done away with. In short, Western Geco, as
explained in Paras 28 and 29 of Associate Builders, would
no longer obtain, as under the guise of interfering with an
award on the ground that the arbitrator has not adopted
a judicial approach the court’s intervention would be on
the merits of the award, which cannot be permitted post
amendment. However, in so far as principles of natural
justice are concerned, as contained in sections 18 and
34(2)(a) (iii) of the 1996 Act, these continue to be the
grounds of challenge of an award, as is contained in para
30 of Associate Builders.
35.*****
36******
37. In so far as domestic awards made in India are
concerned, an additional ground is now available under
sub-section (2-A), added by the Amendment Act, 2015 to
section 34. Here, there must be patent illegality appearing
on the face of the award, which refers to such illegality as
goes to the root of the matter, but which does not amount
to mere erroneous application of the law. In short, what
is not subsumed within the fundamental policy of Indian
law, namely, the contravention of a statute not linked to
public policy or public interest, cannot be brought in by
the back door when it comes to setting aside an award
on the ground of patent illegality.
[2024] 9 S.C.R. 537

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

38. Secondly, it is also made clear that reappreciation of
evidence, which is what an appellate court is permitted
to do, cannot be permitted under the ground of patent
illegality appearing on the face of the award.
39. To elucidate, para 42.1 of Associate Builders, namely,
a mere contravention of the substantive law of India, by
itself, is no longer a ground available to set aside an
arbitral award. Para 42.2 of Associate Builders, however,
would remain, for if an arbitrator gives no reasons for an
award and contravenes section 31(3) of the 1996 Act,
that would certainly amount to a patent illegality on the
face of the award.
40. The change made in Section 28(3) by the Amendment
Act really follows what is stated in paras 42.3 to 45 in
Associate Builders, namely, that the construction of the
terms of a contract is primarily for an arbitrator to decide,
unless the arbitrator construes the contract in a manner
that no fair minded or reasonable person would; in short,
that the arbitrator’s view is not even a possible view to
take. Also, if the arbitrator wanders outside the contract
and deals with the matters not allotted to him, he commits
an error of jurisdiction. This ground of challenge will now
fall within the new ground added under Section 34 (2-A).
41. What is important to note is that a decision which is
perverse, as understood in paras 31 and 32 of Associate
Builders, while no longer being a ground for challenge
under “public policy of India”, would certainly amount to a
patent illegality appearing on the face of the award. Thus,
a finding based on no evidence at all or an award which
ignores vital evidence in arriving at its decision would be
perverse and liable to be set aside on the ground of patent
illegality. Additionally, a finding based on documents taken
behind the back of the parties by the arbitrator would also
qualify as a decision based on no evidence inasmuch as
such decision is not based on evidence led by the parties,
and therefore, would also have to be characterized as
perverse.
********* ******* *******
538 [2024] 9 S.C.R.

Digital Supreme Court Reports

69. We therefore hold, following the aforesaid authorities,
that in the guise of misinterpretation of the contract, and
consequent errors of jurisdiction, it is not possible to
state that the arbitral award would be beyond the scope
of submission to arbitration if otherwise the aforesaid
misinterpretation [which would include going beyond
the terms of the contract], could be said to have been
fairly comprehended as disputes within the arbitration
agreement or which were referred to the decision of the
arbitrators as understood by the authorities above. If an
arbitrator is alleged to have wandered outside the contract
and dealt with matters not allotted to him, this would be
a jurisdictional error which could be corrected on the
ground of patent illegality, which, as we have seen, would
not apply to international commercial arbitrations that
are decided under Part II of the 1996 Act. To bring in by
the back door grounds relatable to Section 28 (3) of the
1996 Act to be matters beyond the scope of submission
to arbitration under section 34(2)(a)(iv) would not be
permissible as this ground must be construed narrowly
and so construed, must refer only to matters which are
beyond the arbitration agreement or beyond the reference
to the arbitral tribunal.”
52. The legal position which emerges from the aforesaid discussion
is that after the ‘2015 amendments’ in Section 34 (2)(b)(ii) and
Section 48(2)(b) of the 1996 Act, the phrase “in conflict with the
public policy of India” must be accorded a restricted meaning in
terms of Explanation 1. The expression “in contravention with the
fundamental policy of Indian law” by use of the word ‘fundamental’
before the phrase ‘policy of Indian law’ makes the expression
narrower in its application than the phrase “in contravention with the
policy of Indian law”, which means mere contravention of law is not
enough to make an award vulnerable. To bring the contravention
within the fold of fundamental policy of Indian law, the award must
contravene all or any of such fundamental principles that provide
a basis for administration of justice and enforcement of law in this
country. Without intending to exhaustively enumerate instances of
such contravention, by way of illustration, it could be said that (a)
[2024] 9 S.C.R. 539

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

violation of the principles of natural justice; (b) disregarding orders
of superior courts in India or the binding effect of the judgment of
a superior court; and (c) violating law of India linked to public good
or public interest, are considered contravention of the fundamental
policy of Indian law. However, while assessing whether there has
been a contravention of the fundamental policy of Indian law, the
extent of judicial scrutiny must not exceed the limit as set out in
Explanation 2 to Section 34(2)(b)(ii).
Most basic notions of morality and justice
53. In Renusagar (supra) this Court held that an arbitral award is in
conflict with the public policy of India if it is, inter alia, contrary to
“justice and morality”. Explanation 1, inserted by 2015 Amendment,
makes it clear that an award is in conflict with the public policy of
India, inter alia, if it conflicts with the ‘most basic notions of morality
or justice’.
Justice
54. Justice is the virtue by which the society/ court / tribunal gives a man
his due, opposed to injury or wrong. Justice is an act of rendering
what is right and equitable towards one who has suffered a wrong.
Therefore, while tempering justice with mercy, the court must be very
conscious, that it has to do justice in exact conformity with some
obligatory law, for the reason that human actions are found to be just
or unjust on the basis of whether the same are in conformity with,
or in opposition to, the law.42 Therefore, in ‘judicial sense’, justice
is nothing more nor less than exact conformity to some obligatory
law; and all human actions are either just or unjust as they are in
conformity with, or in opposition to, the law.43
55. But, importantly, the term ‘legal justice’ is not used in Explanation
1, therefore simple conformity or non-conformity with the law is
not the test to determine whether an award is in conflict with the
public policy of India in terms of Explanation 1. The test is that it
must conflict with the most basic notions of justice. For lack of any
objective criteria, it is difficult to enumerate the ‘most basic notions

42 Union of India v. Ajeet Singh, (2013) 4 SCC 186, paragraph 26.
43 P. Ramanatha Aiyar’s Advanced Law Lexicon, 6th Edition, Volume III, page 2621.
540 [2024] 9 S.C.R.

Digital Supreme Court Reports

of justice’. More so, justice to one may be injustice to another. This
difficulty has been acknowledged by many renowned jurists, as is
reflected in the observations of this Court in Delhi Administration
v. Gurdip Singh Uban,44 extracted below:
“23. The words ‘justice’ and ‘injustice’, in our view, are
sometimes loosely used and have different meanings to
different persons particularly to those arrayed on opposite
sides. One man’s justice is another’s injustice [Raplph
Waldo Emerson: Essays (1803-82), First Series, 1841,
“Circles]. Justice Cardozo said: “The web is entangled and
obscure, shot through with a multitude of shades and colors,
the skeins irregular and broken. Many hues that seem to
be simple, are found, when analyzed, to be a complex and
uncertain blend. Justice itself, which we are wont to appeal
to what as a test as well as an ideal, may mean different
things to different minds and at different times. Attempts
to objectify its standards or even to describe them have
never wholly succeeded (Selected Writings of Cardozo,
pp 223-224, Falcon Publications, 1947).”
56. In Associate Builders (supra), while this Court was dealing with
the concept “public policy of India”, in the context of a Section 34
challenge prior to 2015 amendment, it was held that an award can be
said to be against justice only when it shocks the conscience of the
court.45 The Court illustrated by stating that where an arbitral award,
without recording reasons, awards an amount much more than what
the claim is restricted to, it would certainly shock the conscience of
the court and render the award vulnerable and liable to be set aside
on the ground that it is contrary to justice.
57. In Ssyangyong (supra), which dealt with post 2015 amendment
scenario, it was observed that an argument to set aside an award on
the ground of being in conflict with ‘most basic notions of justice’, can
be raised only in very exceptional circumstances, that is, when the
conscience of the court is shocked by infraction of some fundamental
principle of justice. Notably, in that case the majority award created
a new contract for the parties by applying a unilateral circular, and

44 [1999] Supp. 1 SCR 650 : (2000) 7 SCC 296
45 See paragraph 36 of the judgment in Associate Builders (supra)
[2024] 9 S.C.R. 541

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

by substituting a workable formula under the agreement by another,
dehors the agreement. This, in the view of the Court, breached the
fundamental principles of justice, namely, that a unilateral addition
or alteration of a contract can never be foisted upon an unwilling
party, nor can a party to the agreement be liable to perform a bargain
not entered with the other party.46 However, a note of caution was
expressed in the judgment by observing that this ground is available
only in very exceptional circumstances and under no circumstance
can any court interfere with an arbitral award on the ground that
justice has not been done in the opinion of the court because that
would be an entry into the merits of the dispute.
58. In the light of the discussion above, in our view, when we talk about
justice being done, it is about rendering, in accord with law, what
is right and equitable to one who has suffered a wrong. Justice is
the virtue by which the society/ court / tribunal gives a man his due,
opposed to injury or wrong. Dispensation of justice in its quality may
vary, dependent on person who dispenses it. A trained judicial mind
may dispense justice in a manner different from what a person of
ordinary prudence would do. This is so, because a trained judicial mind
is likely to figure out even minor infractions of law/ norms which may
escape the attention of a person with ordinary prudence. Therefore,
the placement of words “most basic notions” before “of justice” in
Explanation 1 has its significance. Notably, at the time when the 2015
Amendment was brought, the existing law with regard to grounds for
setting aside an arbitral award, as interpreted by this Court, was that
an arbitral award would be in conflict with public policy of India, if it is
contrary to: (a) the fundamental policy of Indian law; (b) the interest
of India; (c) justice or morality; and /or is (d) patently illegal. As we
have already noticed, the object of inserting Explanations 1 and 2
in place of earlier explanation to Section 34(2)(b)(ii) was to limit the
scope of interference with an arbitral award, therefore the amendment
consciously qualified the term ‘justice’ with ‘most basic notions’ of it.
In such circumstances, giving a broad dimension to this category47
would be deviating from the legislative intent. In our view, therefore,
considering that the concept of justice is open- textured, and notions
of justice could evolve with changing needs of the society, it would

46 See paragraph 76 of the judgment in Ssyanyong (supra)
47 in conflict with most basic notions of morality or justice
542 [2024] 9 S.C.R.

Digital Supreme Court Reports

not be prudent to cull out “the most basic notions of justice”. Suffice
it to observe, they48 ought to be such elementary principles of justice
that their violation could be figured out by a prudent member of the
public who may, or may not, be judicially trained, which means, that
their violation would shock the conscience of a legally trained mind.
In other words, this ground would be available to set aside an arbitral
award, if the award conflicts with such elementary/ fundamental
principles of justice that it shocks the conscience of the Court.
Morality
59. The other ground is of morality. On the question of morality, in
Associate Builders (supra), this Court, after referring to the
provisions of Section 23 of the Contract Act, 1872; earlier decision
of this Court in Gherulal (supra); and Indian Contract Act by Pollock
and Mulla, held that judicial precedents have confined morality to
sexual morality. And if ‘morality’ were to go beyond sexual morality,
it would cover such agreements as are not illegal but would not
be enforced given the prevailing mores of the day. The court also
clarified that interference on this ground would be only if something
shocks the court’s conscience.49
Patent Illegality
60. Sub-section (2-A) of Section 34 of the 1996 Act, which was inserted
by 2015 Amendment, provides that an arbitral award not arising out
of international commercial arbitrations, may also be set aside by the
Court, if the Court finds that the award is visited by patent illegality
appearing on the face of the award. The proviso to sub-section
(2-A) states that an award shall not be set aside merely on the
ground of an erroneous application of the law or by reappreciation
of evidence. In Saw Pipes (supra), while dealing with the phrase
‘public policy of India’ as used in Section 34, this court took the
view that the concept of public policy connotes some matter which
concerns public good and public interest. If the award, on the face
of it, patently violates statutory provisions, it cannot be said to be in
public interest. Thus, an award could also be set aside if it is patently
illegal. It was, however, clarified that illegality must go to the root of

48 most basic notions of justice
49 See paragraph 39 of Associate Builders (supra)
[2024] 9 S.C.R. 543

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

the matter and if the illegality is of trivial nature, it cannot be held
that award is against public policy.
61. In Associate Builders (supra), this Court held that an award would
be patently illegal, if it is contrary to:
(a) substantive provisions of law of India;
(b) provisions of the 1996 Act; and
(c) terms of the contract.50
The Court clarified that if an award is contrary to the substantive
provisions of law of India, in effect, it is in contravention of Section
28(1)(a)51 of the 1996 Act. Similarly, violating terms of the contract,
in effect, is in contravention of Section 28(3) of the 1996 Act.
62. In Ssangyong (supra) this Court specifically dealt with the 2015
Amendment which inserted sub-section (2-A) in Section 34 of the
1996 Act. It was held that “patent illegality appearing on the face
of the award” refers to such illegality as goes to the root of matter,
but which does not amount to mere erroneous application of law. It
was also clarified that what is not subsumed within “the fundamental
policy of Indian law”, namely, the contravention of a statute not
linked to ‘public policy’ or ‘public interest’, cannot be brought in
by the backdoor when it comes to setting aside an award on the
ground of patent illegality.52 Further, it was observed, reappreciation
of evidence is not permissible under this category of challenge to
an arbitral award.53

50 See also three-Judge Bench decision of this Court in State of Chhattisgarh v. SAL Udyog (P) Ltd. (2022)
2 SCC 275
51 Section 28. -- Rules applicable to substance of dispute. — (1) Where the place of arbitration is
situated in India,--
(a) In an arbitration other than an international commercial arbitration, the arbitral tribunal shall
decide the dispute submitted to arbitration in accordance with the substantive law for the
time being in force in India
*******
(2) *****
(3) while deciding and making an award, the arbitral tribunal shall, in all cases, take into
account the terms of the contract and trade usages applicable to the transaction. (As
substituted by Act 3 of 2016 w.e.f 23.10.2015)
Prior to substitution by Act 3 of 2016, sub-section (3) of Section 28 read as under:
“(3) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract
and shall take into account the usages of the trade applicable to the transaction.
52 See paragraph 37 of Ssyangyong (supra)
53 See paragraph 38 of Ssyangyong (supra)
544 [2024] 9 S.C.R.

Digital Supreme Court Reports

Perversity as a ground of challenge
63. Perversity as a ground for setting aside an arbitral award was
recognized in Western Geco (supra). Therein it was observed that
an arbitral decision must not be perverse or so irrational that no
reasonable person would have arrived at the same. It was observed
that if an award is perverse, it would be against the public policy
of India.
64. In Associate Builders (supra) certain tests were laid down to
determine whether a decision of an arbitral tribunal could be
considered perverse. In this context, it was observed that where: (i)
a finding is based on no evidence; or (ii) an arbitral tribunal takes
into account something irrelevant to the decision which it arrives at;
or (iii) ignores vital evidence in arriving at its decision, such decision
would necessarily be perverse. However, by way of a note of caution,
it was observed that when a court applies these tests it does not
act as a court of appeal and, consequently, errors of fact cannot be
corrected. Though, a possible view by the arbitrator on facts has
necessarily to pass muster as the arbitrator is the ultimate master
of the quantity and quality of evidence to be relied upon. It was also
observed that an award based on little evidence or on evidence
which does not measure up in quality to a trained legal mind would
not be held to be invalid on that score.
65. In Ssangyong (supra), which dealt with the legal position post
2015 amendment in Section 34 of the 1996 Act, it was observed
that a decision which is perverse, while no longer being a ground
for challenge under “public policy of India”, would certainly amount
to a patent illegality appearing on the face of the award. It was
pointed out that an award based on no evidence, or which ignores
vital evidence, would be perverse and thus patently illegal. It was
also observed that a finding based on documents taken behind the
back of the parties by the arbitrator would also qualify as a decision
based on no evidence in as much as such decision is not based on
evidence led by the parties, and therefore, would also have to be
characterized as perverse.54

54 See Paragraph 41 of Ssyangyong (supra).
[2024] 9 S.C.R. 545

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

66. The tests laid down in Associate Builders (supra) to determine
perversity were followed in Ssyanyong (supra) and later approved
by a three-Judge Bench of this Court in Patel Engineering Limited
v. North Eastern Electric Power Corporation Limited.55
67. In a recent three-Judge Bench decision of this Court in Delhi Metro
Rail Corporation Ltd. v. Delhi Airport Metro Express Pvt. Ltd.,56
the ground of patent illegality /perversity was delineated in the
following terms:
“40. In essence, the ground of patent illegality is available
for setting aside a domestic award, if the decision of
the arbitrator is found to be perverse, or so irrational
that no reasonable person would have arrived at it; or
the construction of the contract is such that no fair or
reasonable person would take; Or, that the view of the
arbitrator is not even a possible view. A finding based on
no evidence at all or an award which ignores vital evidence
in arriving at its decision would be perverse and liable to
be set aside under the head of patent illegality. An award
without reasons would suffer from patent illegality. The
arbitrator commits a patent illegality by deciding a matter
not within its jurisdiction or violating a fundamental principle
of natural justice.”
Scope of interference with an arbitral award
68. The aforesaid judicial precedents make it clear that while exercising
power under Section 34 of the 1996 Act the Court does not sit in
appeal over the arbitral award. Interference with an arbitral award
is only on limited grounds as set out in Section 34 of the 1996 Act.
A possible view by the arbitrator on facts is to be respected as
the arbitrator is the ultimate master of the quantity and quality of
evidence to be relied upon. It is only when an arbitral award could
be categorized as perverse, that on an error of fact an arbitral award
may be set aside. Further, a mere erroneous application of the law
or wrong appreciation of evidence by itself is not a ground to set
aside an award as is clear from the provisions of sub-section (2-A)
of Section 34 of the 1996 Act.

55 [2020] 4 SCR 156 : (2020) 7 SCC 167
56 [2024] 4 SCR 473 : 2024 INSC 292
546 [2024] 9 S.C.R.

Digital Supreme Court Reports

69. In Dyna Technologies (supra), a three-Judge Bench of this Court
held that Courts need to be cognizant of the fact that arbitral awards
are not to be interfered with in a casual and cavalier manner, unless
the court concludes that the perversity of the award goes to the root
of the matter and there is no possibility of an alternative interpretation
that may sustain the arbitral award. It was observed that jurisdiction
under Section 34 cannot be equated with the normal appellate
jurisdiction. Rather, the approach ought to be to respect the finality
of the arbitral award as well as party’s autonomy to get their dispute
adjudicated by an alternative forum as provided under the law.
70. Now, we shall examine the scope of interference with an arbitral award
on ground of insufficient, or improper/erroneous, or lack of, reasons.
Reasons for the Award – When reasons, or lack of it, could
vitiate an arbitral award.
71. Section 31 (3)57 of the 1996 Act provides that an arbitral award shall
state reasons upon which it is based, unless (a) the parties have
agreed that no reasons are to be given, or (b) the award is an arbitral
award on agreed terms under Section 30.
71.1 As to the form of a reasoned award, in Russell on Arbitration
(24th Edition, page 304) it is stated thus:
“6.032. No particular form is required for a reasoned
award although ‘the giving of clearly expressed
reasons responsive to the issues as they were
debated before the arbitrators reduces the scope
for the making of unmeritorious challenges’. When
giving a reasoned award the tribunal need only set
out what, on its view of the evidence, did or did not
happen and explain succinctly why, in the light of what
happened, the tribunal has reached its decision, and
state what that decision is. In order to avoid being
vulnerable to challenge, the tribunal’s reasons must
deal with all the issues that were put to it. It should
set out its findings of fact and its reasoning so as to

57 Section 31. Form and contents of arbitral award. – (1) ….. (2)….
(3) The arbitral award shall state the reasons upon which it is based, unless –
(a) the parties have agreed that no reasons are to be given, or
(b) the award is an arbitral award on agreed terms under section 30.
[2024] 9 S.C.R. 547

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

enable the parties to understand them and state why
particular points were decisive. It should also indicate
the tribunal’s findings and reasoning on issues argued
before it but not considered decisive, so as to enable
the parties and the court to consider the position
with respect to appeal on all the issues before the
tribunal. When dealing with controversial matters, it
is helpful for the tribunal to set out not only its view
of what occurred, but also to make it clear that it has
considered any alternative version and has rejected
it. Even if several reasons lead to the same result,
the tribunal should still set them out. That said, so
long as the relevant issues are addressed there is
no need to deal with every possible argument or to
explain why the tribunal attached more weight to some
evidence than to other evidence. The tribunal is not
expected to recite at great length communications
exchanged or submissions made by the parties. Nor
is it required to set out each step by which it reached
its conclusion or to deal with each and every point
made by the parties. It is sufficient that the tribunal
should explain what its findings are and the evidential
route by which it reached its conclusions.
71.2 On the requirement of recording reasons in an arbitral award
and consequences of lack of, or inadequate, reasons in an
arbitral award, this Court in Dyna Technologies (supra) held:
“34. The mandate under section 31 (3) of the
Arbitration Act is to have reasoning which is intelligible
and adequate and, which can in appropriate cases
be even implied by the courts from a fair reading of
the award and documents referred to thereunder, if
need be. The aforesaid provision does not require an
elaborate judgment to be passed by the arbitrators
having regard to the speedy resolution of dispute.
35. When we consider the requirement of a reasoned
order, three characteristics of a reasoned order
can be fathomed. They are: proper, intelligible and
adequate. If the reasonings in the order are improper,
548 [2024] 9 S.C.R.

Digital Supreme Court Reports

they reveal a flaw in the decision-making process. If
the challenge to an award is based on impropriety or
perversity in the reasoning, then it can be challenged
strictly on the grounds provided in section 34 of the
Arbitration Act. If the challenge to an award is based
on the ground that the same is unintelligible, the same
would be equivalent of providing no reasons at all.
Coming to the last aspect concerning the challenge
on adequacy of reasons, the court while exercising
jurisdiction under section 34 has to adjudicate the
validity of such an award based on the degree of
particularity of reasoning required having regard to the
nature of issues falling for consideration. The degree
of particularity cannot be stated in a precise manner
as the same would depend on the complexity of the
issue even if the court comes to a conclusion that
there were gaps in the reasoning for the conclusions
reached by the tribunal, the court needs to have
regard to the document submitted by the parties
and the contentions raised before the tribunal so
that awards with inadequate reasons are not set
aside in casual and cavalier manner. On the other
hand, ordinarily unintelligible awards are to be set
aside, subject to party autonomy to do away with the
reasoned award. Therefore, the courts are required to
be careful while distinguishing between inadequacy
of reasons in an award and unintelligible awards.”
71.3 We find ourselves in agreement with the view taken in Dyna
Technologies (supra), as extracted above. Therefore, in our
view, for the purposes of addressing an application to set aside
an arbitral award on the ground of improper or inadequate
reasons, or lack of reasons, awards can broadly be placed in
three categories:
(1) where no reasons are recorded, or the reasons recorded
are unintelligible;
(2) where reasons are improper, that is, they reveal a flaw in
the decision- making process; and
(3) where reasons appear inadequate.
[2024] 9 S.C.R. 549

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

71.4 Awards falling in category (1) are vulnerable as they would be
in conflict with the provisions of Section 31(3) of the 1996 Act.
Therefore, such awards are liable to be set aside under Section
34, unless (a) the parties have agreed that no reasons are to
be given, or (b) the award is an arbitral award on agreed terms
under Section 30.
71.5 Awards falling in category (2) are amenable to a challenge on
ground of impropriety or perversity, strictly in accordance with
the grounds set out in Section 34 of the 1996 Act.
71.6 Awards falling in category (3) require to be dealt with care.
In a challenge to such award, before taking a decision the
Court must take into consideration the nature of the issues
arising between the parties in the arbitral proceedings and
the degree of reasoning required to address them. The Court
must thereafter carefully peruse the award, and the documents
referred to therein. If reasons are intelligible and adequate on
a fair-reading of the award and, in appropriate cases, implicit
in the documents referred to therein, the award is not to be set
aside for inadequacy of reasons. However, if gaps are such that
they render the reasoning in support of the award unintelligible,
or lacking, the Court exercising power under Section 34 may
set aside the award.
Scope of interference with the interpretation / construction of
a contract accorded in an arbitral award.
72. An arbitral tribunal must decide in accordance with the terms of
the contract. In a case where an arbitral tribunal passes an award
against the terms of the contract, the award would be patently illegal.
However, an arbitral tribunal has jurisdiction to interpret a contract
having regard to terms and conditions of the contract, conduct of the
parties including correspondences exchanged, circumstances of the
case and pleadings of the parties. If the conclusion of the arbitrator
is based on a possible view of the matter, the Court should not
intefere.58 But where, on a full reading of the contract, the view of

58 See: Steel Authority of India Ltd. v. Gupta Brother Steel Tubes Limited, (2009) 10 SCC 63; Pure Helium
India (P) Ltd v. ONGC, (2003) 8 SCC 593; McDermott International Inc. v. Burn Standard Co. Ltd., (2006)
11 SCC 181; MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163
550 [2024] 9 S.C.R.

Digital Supreme Court Reports

the arbitral tribunal on the terms of a contract is not a possible view,
the award would be considered perverse and as such amenable to
interference.59
Whether unexpressed term can be read into a contract as an
implied condition.
73. Ordinarily, terms of the contract are to be understood in the way the
parties wanted and intended them to be. In agreements of arbitration,
where party autonomy is the grund norm, how the parties worked out
the agreement, is one of the indicators to decipher the intention, apart
from the plain or grammatical meaning of the expressions used.60
74. However, reading an unexpressed term in an agreement would be
justified on the basis that such a term was always and obviously
intended by the parties thereto. An unexpressed term can be implied
if, and only if, the court finds that the parties must have intended
that term to form part of their contract. It is not enough for the court
to find that such a term would have been adopted by the parties as
reasonable men if it had been suggested to them. Rather, it must
have been a term that went without saying, a term necessary to
give business efficacy to the contract, a term which, although tacit,
forms part of the contract.61
75. But before an implied condition, not expressly found in the contract,
is read into a contract, by invoking the business efficacy doctrine, it
must satisfy following five conditions:
a. it must be reasonable and equitable;
b. it must be necessary to give business efficacy to the contract,
that is, a term will not be implied if the contract is effective
without it;
c. it must be obvious that “it goes without saying”;
d. it must be capable of clear expression;
e. it must not contradict any terms of the contract.62

59 South East Asia Marine Engg. & Construction Ltd. (SEAMEC Ltd.) v. Oil India Ltd., (2020) 5 SCC 164
60 Bharat Aluminium Co. V. Kaiser Aluminium Technical Services Inc., (2016) 4 SCC 126.
61 Adani Power (Mundra) Ltd. v. Gujarat ERC, (2019) 19 SCC 9
62 Nabha Power Limited (NPL) v. Punjab State Power Corporation Limited (PSPCL) and Another, (2018) 11
SCC 508, followed in Adani Power (supra)
[2024] 9 S.C.R. 551

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

ANALYSIS/ DISCUSSION
76. Having noticed the legal principles governing a challenge to an
arbitral award, we shall now proceed to address the issues culled
out above, which arise for our consideration in these appeals.
GITA POWER (R-2) BOUND BY THE ARBITRATION AGREEMENT
AND THEREFORE JOINTLY AND SEVERALLY LIABLE
77. To have a clear understanding of the issue as to whether Gita Power
(R-2), the appellant in the connected appeal, could be subjected to
arbitral proceedings and made jointly and severally liable along with
OPG for the dues of Enexio, a look at the facts relating to formation
of the contract including the conduct of the parties would be apposite.
78. The relevant facts in this regard, which find mention in the award,
are as follows:
(a) There were two companies, namely, Gita Power (R-2) and
OPG (appellant). Gita Power is the holding company of OPG.
Two Tenders were floated. One by a Gujarat Company in the
same group, which related to design, manufacture, delivery
to site, erection testing and commissioning of two ACC units
with auxiliaries for a thermal power plant in Gujarat (for short
Gujarat Unit). The other was issued by OPG in respect of design,
manufacture, delivery to site, erection testing and commissioning
of an ACC unit with auxiliaries for a thermal power plant at
Gummidipoondi in Tamil Nadu (for short T.N. Unit).
(b) Enexio (R-1 – the claimant) submitted a single unpriced techno-
commercial offer covering both projects. Following negotiations,
a revised techno commercial offer covering both projects
was submitted in August 2012. Thereafter, following further
negotiations, another technical offer covering both projects was
submitted by Enexio on 6 October 2012.
(c) On 5 November 2012, with reference to the techno offers, OPG
addressed a letter to Enexio, in respect of T.N. Unit, stating thus:
“Design, Engineering, Supply, Installation, Testing
and Commissioning of Air Cooled Condenser with
auxiliaries for 1 X 160 MW (Phase III) Coal Based
Power Project at Gummudipoondi.
552 [2024] 9 S.C.R.

Digital Supreme Court Reports

We refer to your offer GCTQD/ OPG - Gujarat –
Gummidipoondi /4239/12 / Rev 2 dated October 6,
2012 and technical and commercial discussions we
had with you of date. We have pleasure in informing
you of our intent to award a contract for Air Cooled
Condenser with auxiliaries in conformance to the
discussions you had with us.
Price: The price for the total scope is Rs. 44,00,00,000/-
(Forty four crores only).
Price basis: F.O.R. destination (Power Project site
at Gummidipoondi)
Taxes and Duties: Extra at actuals, but inclusive of
port handling charges.
Delivery schedule: The overall agreed time for
takeover of equipment will be March 2014.”
(d) On 4 March 2013, Gita Power (R-2), holding company of OPG,
issued two separate Purchase Orders for:
(i) Design, Engineering and Supply of 1 Unit of ACC
with Auxiliaries for 160 MW Coal Based project at
Gummidipoondi (Supply Purchase Order); and
(ii) Erection and Commissioning of 1 Unit of ACC with
Auxiliaries for 160 MW Coal Based Power project at
Gummidipoondi (Erection Purchase Order).
(e) Pursuant to these purchase orders, on 1 April 2013 Enexio (R-
1) submitted a Work Schedule. As per which, commissioning
of the ACC Unit was planned on 31 March 2014.
(f) On 13 June 2013, the foundations for the ACC Unit were handed
over to Enexio (R-1) by OPG.
(g) On 4 July 2013 Enexio received 10% of the Order price and
on 23 July 2013 second payment of 10% of the Order price
was received by Enexio. Both payments were made by Gita
Power (R-2).
[2024] 9 S.C.R. 553

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

(h) While the work was in progress, OPG issued two separate
Purchase Orders, namely, supply purchase order and erection
purchase order, on similar terms and with similar references as
were there in the Purchase Orders issued by R-2 (Gita Power).
(i) In the statement of defense, it was stated that when the purchase
orders were ready for issue, since Gita Power (R-2) was the
holding company of OPG, it was felt that in the commercial
interest of the project, the order for supply and erection of ACC
Unit should be placed on the claimant by R-2. The statement of
defense further states that soon after issuance of the purchase
orders in the beginning of April 2013, OPG and R-2 were
advised that as the project was being set up by OPG, and it
had all the required registrations, etc. it would be advisable
that the Purchase Orders placed on the claimant by R-2 for
supply and erection of ACC Unit be substituted/ replaced by
Purchase Orders in the name of OPG. In addition to above,
OPG pleaded that the substitution/ replacement of purchase
orders maintained the continuity of the rights and obligations
undertaken from 4 March 2013.
79. Based on the above-noted facts, and the evidence brought on record
during the arbitral proceedings, the Tribunal concluded that the
‘Group of Companies’ doctrine is applicable, as OPG and R-2 have
represented themselves as a single economic entity which could
switch duties and obligations from one to the other. The Tribunal
held that – (a) R-2 is a proper party; (b) both OPG and R-2 were
bound by the arbitration agreements, which gave rise to the arbitral
proceedings; and (c) OPG and R-2 were jointly and severally liable
to the claimant for complying with the award.
80. In Cox & Kings Ltd. v. SAP India (P) Ltd.,63 a Constitution Bench of
this Court held that by interpreting the express language employed
by the parties in the record of agreement, coupled with surrounding
circumstances of its formation, performance, and discharge of the
contract, a Court or Arbitral Tribunal is empowered to determine
whether a non-signatory is a party to an arbitration agreement. It was
held that ‘Group of Companies’ doctrine is premised on ascertaining

63 [2023] 15 SCR 621 : (2024) 4 SCC 1
554 [2024] 9 S.C.R.

Digital Supreme Court Reports

the intention of the non- signatory to be party to an arbitration
agreement. The doctrine requires the intention to be gathered from
additional factors such as direct relationship with the signatory parties,
commonality of subject matter, composite nature of the transaction,
and performance of the contract.
81. In the instant case, the Arbitral Tribunal has found that: (a) Gita
Power is the holding company of OPG; (b) Gita Power had issued
the Purchase Orders and had actively participated in the formation
of the contract even though the ACC unit of Gummudipoondi was
of OPG; (c) initial 10% of the purchase price was provided by Gita
Power (R-2); (d) the subsequent Purchase Orders issued by OPG
were on similar terms and were issued by way of affirmation to obviate
technical issues. In our view, the above circumstances had a material
bearing for invocation of “Group of Companies doctrine” to bind Gita
Power (R-2) with the arbitration agreement and fasten it with liability,
jointly and severally with OPG, in respect of the Purchase Orders
relating to ACC Unit of Gummudipoondi project. Thus, bearing in mind
that an arbitral tribunal has jurisdiction to interpret a contract having
regard to the terms and conditions of the contract and conduct of the
parties including correspondences exchanged, and, further, taking
into account the provisions of sub-section (2-A) of Section 34 of the
1996 Act limiting the scope of interference with a finding returned
in an arbitral award, we do not find a good reason to interfere with
the above findings of the Arbitral Tribunal more so when it is based
on a possible view of the matter. We, therefore, reject the argument
on behalf of R-2 that it was not bound by the arbitration agreement
and that it ought not to have been made jointly and severally liable
along with OPG for the dues payable to Enexio. Sub-issue (a) is
decided in the aforesaid terms.
ENEXIO’S CLAIM NOT BARRED BY LIMITATION.
82. On the issue as to whether Enexio’s claim was barred by time, the
submissions of the appellants, inter alia, are:
(a) The date fixed by the contract for completion of the obligations
of supply of goods and erection of ACC unit is 31 March 2014.
Hence, the date of reckoning for the purposes of limitation ought
to be 31 March 2014.
[2024] 9 S.C.R. 555

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

(b) The contract was a mixture of supply of goods and services
(i.e., works). Therefore, Article 14 of the Schedule to the
1963 Act applied for the price of goods supplied, and Article
18 applied for the price of works provided, for computing the
limitation period of the claim. In either case, the limitation
period of three years would commence to run, not later than,
from 31 March 2014.
(c) Even if it is assumed that the deemed date of completion was
21 September 2015 (as held by the arbitral tribunal), the claim
being filed on 2 May 2019, was well beyond 3 years from that
date.
(d) Once the period of limitation started to run, in terms of Articles
14 and 18, mere negotiations could not have extended the
period of limitation. Therefore, the award, which takes a contrary
view, is patently illegal.
83. Before proceeding further, we must remind ourselves that sub-section
(1) of Section 4364 of the 1996 Act makes the Limitation Act, 1963 (in
short, 1963 Act) applicable to arbitrations as it applies to proceedings
in Court. Sub-section (2) of Section 43 provides that unless otherwise
agreed by the parties, an arbitral proceeding shall be deemed to
have commenced on the date specified in Section 21.65 On a conjoint
reading of sub-sections (1) and (2) of Section 43 of the 1996 Act

64 Section 43. Limitations. – (1) The Limitation Act, 1963 (36 of 1963) shall apply to arbitrations as it
applies to proceedings in Court.
(2) For the purposes of this section and the Limitation Act, 1963 (36 of 1963), an arbitration shall
be deemed to have commenced on the date referred in section 21.
(3) Where an arbitration agreement to submit future disputes to arbitration provides that any claim
to which the agreement applies shall be barred unless some step to commence arbitral proceedings is
taken within the time specified by the agreement, and a dispute arises to which the agreement applies,
the court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be
caused, and notwithstanding that the time so fixed has expired, may on such terms, if any, as the justice
of the case may require, extend the time for such period as it thinks proper.
(4) Where the Court orders that an arbitral award be set aside, the period between the
commencement of the declaration and the date of the order of the court shall be excluded in computing
the time prescribed by the Limitation Act, 1963 (36 of 1963), for the commencement of the proceedings
(including arbitration) with respect to the dispute so submitted.
65 Section 21. Commencement of arbitral proceedings. -- Unless otherwise agreed by the parties, the
arbitral proceedings in respect of a particular dispute commence on the date on which a request for that
dispute to be referred to arbitration is received by the respondent.
556 [2024] 9 S.C.R.

Digital Supreme Court Reports

along with Sections 366 and 2 (j)67 of the 1963 Act it is clear that if on
the date of commencement of the arbitral proceeding, as referred to
in Section 21 of the 1996 Act, the claim(s) is/are barred by limitation,
as per the provisions of the 1963 Act, the Arbitral Tribunal will have
to reject such claim(s) as barred by limitation.68
84. In the case in hand there is no dispute between the parties that
the arbitral proceedings, in terms of Section 21 of the 1996 Act,
commenced on 2 May 2019. Therefore, our exercise would be to
determine whether the period of limitation got over prior to that date
or not. For that purpose, it would be necessary to ascertain as to
which Article of the Schedule was applicable to the claim. And if
more than one applied, which one applied to which part of the claim.
85. According to the appellant(s) (i.e., OPG and Gita Power – appellant
in the connected appeal), Articles 14 and 18 of the Schedule to
the 1963 Act applied to the claim. Importantly, the award does not
specify the Article(s) which were applied except Article 58 which
was applied to the declaratory relief sought in the claim and which
was found barred by time. However, as the claim is based on a
contract, we will also consider the applicability of Article 55 and the
residuary Article 113 of the Schedule,69 if none other Article(s) were
applicable to the claim.

66 Section 3. — Bar of limitation. – (1) Subject to the provisions contained in sections 4 to 24 inclusive,
every suit instituted, appeal preferred, and application made after the prescribed period shall be
dismissed, although limitation has not been set up as a defense.
(2) For the purposes of this Act –
(a) a suit is instituted –
(i) in an ordinary case, when the plaint is presented to the proper officer;
(ii) in the case of a pauper, when his application for leave to sue as a pauper is
made; and
(iii) in the case of a claim against the company which is being wound up by the court,
when the claimant first sends in his claim to the official liquidator;
(b) any claim by way of a set-off or a counter claim, shall be treated as a separate suit and
shall be deemed to have been instituted –
(i) in the case of a set off, on the same date as the suit in which the set off is
pleaded;
(ii) in the case of a counter claim, on the date on which the counter claim is made
in court;
(c) an application by notice of motion in a High Court is made when the application is
presented to the proper officer of that court.
67 Section 2. Definitions. – In this Act, unless the context otherwise requires, --
(j) ‘period of limitation’ means the period of limitation prescribed for any suit, appeal or
application by the Schedule, and ‘prescribed period’ means the period of limitation
computed in accordance with the provisions of this Act.
68 State of Goa v. Praveen Enterprises, (2012) 12 SCC 581, paragraph 16.
69 The Schedule (PERIODS OF LIMITATION) See sections 2(j) and 3:
PART II - SUITS RELATING TO CONTRACTS
[2024] 9 S.C.R. 557

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

Facts having material bearing on limitation
86. For a proper determination of the aforesaid issue, we need to have
a close look at the material facts relevant to the issue of limitation.
In our view, the material facts,70 inter alia, are:
(a) There was a composite Tender inviting offer for design,
manufacture, delivery to site, erection, testing and commissioning
of an ACC unit with auxiliaries for a thermal power plant.
(b) Enexio submitted a composite unpriced techno-commercial
offer for the project.
(c) On 5 November 2012, with reference to the techno offer, OPG
addressed a letter71 expressing intent to award contract for the
project at a composite cost of 44 crores. This letter also sets
out a tentative date for completion / takeover of the project
i.e., March 2014.

Article No. Description of Suit Period of Limitation Time from which period begins
to run
14. For the price of goods sold Three years The date of the delivery of the
and delivered where no fixed goods
period is agreed upon
18. For the price of work done by Three years When the work is done.
the plaintiff for the defendant
at his request, where no time
has been fixed for payment.
55. For compensation for the Three years When the contract is broken or
breach of any contract, (where there are successive
express or implied not herein breaches) when the breach
specially provided for. in respect of which the suit is
instituted occurs or (where the
breach is continuing) when it
ceases.

PART III – SUITS RELATING TO DECLARATIONS
58. To obtain any other Three years When the right to sue first
Declaration accrues.

PART X – SUITS FOR WHICH THERE IS NO PRESCRIBED PERIOD
113. Any suit for which no period of Three years When the right to sue
limitation is provided elsewhere accrues.
in this Schedule

70 As gathered from paragraph 7 (including sub paragraphs 7.01 to 7.76) of the Arbitral Award under the
title ‘Background to the Dispute’
71 Quoted in paragraph 79 (c) above
558 [2024] 9 S.C.R.

Digital Supreme Court Reports

(d) In that backdrop, on 4 March 2013, Gita Power (R-2) issued
two separate orders, one, for Design, Engineering and Supply
of 1 Unit of ACC with Auxiliaries (Supply Purchase Order)
and, second, for Erection and Commissioning of it (Erection
Purchase Order).
(e) Pursuant to these purchase orders, on 1 April 2013, Enexio (R-
1) submitted a Work Schedule. As per which, commissioning of
the ACC Unit was planned on 31 March 2014. In furtherance
thereof, Enexio received 10% of the order price in advance
on 4 July 2013, and another 10% on 23 July 2013. Both the
advance payments were received from Gita Power (R-2).
(f) While the work was in progress, in July 2013 OPG issued two
orders replicating those that were issued by Gita Power (R-2)
with insignificant variation.
(g) As per the Supply Purchase Order, payments were to be made
in the following order:
Payments:
(i) 10% of Order Price as advance money on submission of
request for advance and advance payment bank guarantee
for 10% of the Order Price, valid until completion of supply;
(ii) 10% against approval of Engineering Documentation;
(iii) 65% of the Order Price on Pro Rata basis along with 100%
taxes after receipt of material at site;
(iv) 5% of the Order Price upon submission of (a) invoice, and
(b) certificate on completion of punch points duly signed
by Parties;
(v) 5% of the Contract Price upon submission of (a) invoice,
(b) take over certificate of Equipment issued by Purchaser;
and (iii) warranty bond for 10% of the contract valid up to
the end of warranty period;
(vi) 5% of the Contract Price upon submission of (a) invoice, (b)
certificate of completion of performance test of equipment
by purchaser;
[2024] 9 S.C.R. 559

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

(vii) Payments to be made within 25 days of submission of
invoice/ request for payment and other documents
(h) Annexure A of the Supply Purchase Order carried commercial
conditions, inter alia, providing for Performance Guarantee Test
in the following terms:
(1) The Performance Guarantee Test of the equipment shall be
carried out immediately after takeover of the equipment but
in no case later than two months from the date of takeover.
(2) Performance guarantee test will be carried out by the
representatives and manpower of the purchaser under
the supervision of the supplier’s engineer.
(3) In case the performance guarantee test is not carried out
due to reasons outside supplier’s control within 180 days
from the date of takeover, the guaranteed performance
shall be deemed to have been achieved and all liabilities
of supplier with respect to the performance guarantee test
shall be over. Within these said 180 days, the supplier
remains liable for the guaranteed performance of the
equipment.
(4) The Erection Purchase Order repeated most of the clauses
of the supply purchase order and provided for payment in
the following manner:
Payment
(i) 80% against progress of work on pro rata basis and
against certification by site officials.
(ii) 10% after mechanical completion / Punch list.
(iii) 10% of the contract price after Commissioning against
bank guarantee in favor of the owner for equivalent
value and valid for the entire warranty period.
(j) Enexio (R-1) asserted that it finished its work under the contract
on or about February 2015. However, on 12 March 2015, OPG
complained to Enexio in writing that certain work remained
and, therefore, Enexio must instruct its team to complete the
pending work.
560 [2024] 9 S.C.R.

Digital Supreme Court Reports

(k) Enexio claimed that successful operation of the vacuum pump
was carried out on 21 May 2015, which implies commissioning of
the ACC unit. In response OPG asserted that three components
of the ACC unit were defective.
(l) On 2 July 2015, OPG issued a debit note towards modifications
to the turbine generator building. Thereafter, on 24 August
2015, OPG issued two debit notes: (i) towards work related to
lifting of the vertical duct; and (ii) towards liquidated damages
permissible under the Supply Purchase Order and Erection
Purchase Order for the delay in execution.
(m) On 28 August 2015 Enexio wrote to OPG questioning the debit
notes.
(n) On 21 September 2015 Enexio informed OPG that the turbine
generator was running at full load and, thereby, requested OPG
to arrange for Performance Guarantee Test (PG Test). This
request was repeated by e-mails dated 3 October 2015 and 8
October 2015. Later, on 9 October 2015, Enexio sent a letter
to OPG attaching six protocols confirming commissioning of all
relevant segments of the project. Not only that, on 20 October
2015, Enexio sent a procedure for the PG Test. But the PG
Test was not undertaken.
(o) On 12 January 2016, OPG issued debit note against OPG’s
account for customs duty.
(p) On 22 August 2016 OPG informed Enexio that fan assembly
had detached. On 20 January 2017 Enexio sent an e-mail to
OPG, saying:
“Sir,
This is further to our visit to your site on 7/1/2016.
Considering the time availability and on the interest
of closing the issue, we suggest the following:
1. Using in-situ machining agency, the shaft dia
variation can be machined out after dismantling
the hub and blade assembly alone. Gearbox
will not be disturbed at all. We already obtained
offer for this.
[2024] 9 S.C.R. 561

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

2. To match the machined out shaft dia and key
way, existing fan hub bore and key way can
be rebuild and machined after machining out
existing bore by 5mm.
3. To start the work, the spare gearbox supplied
by us at free of cost can be used and remaining
seven gear boxes can be attended one or two
at a time.
4. You being a valuable customer to us, we wish
to execute the correction work even though
this failure happened after our guarantee. We
will depute our engineer to site for entire work.
5. But we could not bear the commercial implications
since we already suffered loss and our money
is also locked up in this project due to various
reasons cited in our various earlier letters.
6. Hence, we request you to pay the correction
cost and not to deduct the same from us.
We request you for above proposal.”
(q) On 2 March 2017 Enexio requested OPG to provide certificates
for completion of Gummudipoondi as well as Gujarat project.
The format of the desired certificate was sent by Enexio to OPG.
Therein it was mentioned that ACC Unit was commissioned
during May 2015 and was performing satisfactorily since then.
(r) On 6 March 2017 OPG confirmed that it would issue the
required certificate for marketing purpose and that certificate
would not absolve the claimant from its contractual obligations
under the purchase orders which, according to OPG, were yet
to be fulfilled.
(s) Following further exchanges between the parties, a meeting
was held on 19 April 2018. The minutes72 of that meeting, inter
alia, reflected that the principal amount outstanding towards
Enexio under the contract was the one that was claimed by

72 See Paragraph 7 of this judgment.
562 [2024] 9 S.C.R.

Digital Supreme Court Reports

Enexio in the claim. However, the minutes indicated that it was
not payable because of certain deductions claimed by OPG.
According to Enexio, those deductions (i.e. towards customs
duty and liquidated damages) were incorrectly recorded in
the minutes even though there was no agreement in respect
thereof.
(t) On 26 May 2018, on reiteration of demand by Enexio, OPG
responded, vide communication dated 26 May 2018, and
offered Rs.3 crores to Enexio as full and final settlement of
the account. This offer was rejected by Enexio. Whereafter,
arbitration proceeding commenced.
Material Observations in the Award.
87. We shall now extract few observations/ findings in the award which,
in our view, would be useful in determining the limitation issue. These
observations/ findings, with their corresponding paragraph number
in the award, are extracted below:
“1). On 1st April 2013 the Claimant prepared its L1 Network
Schedule which indicated the final activities leading to
commissioning ..:
Hook up with TG: 8-Mar-14 to 14-Mar-14
Commissioning 22-Mar-14 to 31-Mar-14.
……(para 13.02 of the award)
2). The Purchase Orders are silent on the mode of
payment of the Claimant’s invoices except to note that:
7.3. 65% of the Order Price shall be paid on Pro rata
basis along with 100% Taxes and Duties after receipt of
material at site.
7.7 Payments will be made within twenty-five days of
submission of Invoice/ request for payment and other
documents.
….. (para 13.08 (b) of the award)
3). No indication is given in the Purchase Orders as to
what ‘other documents are required.
…..(para 13.08 (c) of the award)
[2024] 9 S.C.R. 563

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

4). The claimant asserts that until November 2013 payments
were made to the claimant initially by Respondent no.2 and
subsequently by Respondent no.1 by cheque/ RTGS but
from 12th November 2013 all subsequent payments were
made by letter of credit. In order to receive payment by this
method the claimant asserts that additional documentation
was required which created delays in payment.
……(para 13.08 (d) of the award)
5). Respondent no.1 denies that there was delay in clearing
payments to the claimant and asserts that all payments
validly due to the claimant were made in time. Respondent
no.1 asserts that:
(i) Invoices were submitted by the claimant later than
the date on the face of the invoice;
(ii) To compute the period in which payment of an invoice
is to be made the start date is the date on which the
invoice, complete with all supporting documents, is
received by Respondent no.1 which must be after
receipt of the relevant material at site; and
(iii) In many cases, invoices were not accompanied by
the required backup documents and the payment of
the invoice could not be released until these backup
documents were submitted by the claimant.
……(para 13.08 (e) of the award)
6). The tribunal accepts that delays by the Claimant in
submitting its invoices, in providing the backup materials
and in crediting payment to its account would be included
in the times computed by the claimant between the date
of the invoice and the date of payment as included in its
tabulation of its invoices. However, examination of Exhibit
C-21 indicates that for invoices paid before 12 November
2013, over 90%, were paid in less than 50 days from the
invoice date. Whereas, for invoices paid after 12 November
only about 30% were paid within 50 days. Indeed, about
25% of the invoices dated after 12 November 2013 were
not paid for 100 days or longer. These percentages satisfy
564 [2024] 9 S.C.R.

Digital Supreme Court Reports

the tribunal that the introduction of payment by letter of
credit, as it was arranged by Respondent no.1, was more
onerous than could reasonably have been anticipated by
the claimant when it entered into the contracts.
…..(para 13.08 (g) of the award)
7). Respondent no.1 decided that the original design of the
Hot well drain pump was unnecessarily large and changed
the specified pump to a smaller pump on 21st November
2013. As a result, both the pump and the electric motor,
which was required to drive the pump, had to be re-
ordered. The claimant asserts, and respondent no.1 does
not deny, that the original pump and motor would have
been delivered to site on or about 17th February 2014.
……..(para 13.10 (a) of the award)
8). It was agreed at the hearing in this arbitration that the
actual delivery date of the motors (which arrived a few
days after the pump) could be taken as on or about 7th
May 2014. Thus, there was a delay of approximately 79
days in delivery.
……(para 13.10 (b) of the award).
9). On balance, the Tribunal is satisfied that the drain pump
together with its motor, although a low value component,
was a necessary part of the ACC unit and the decision
by Respondent no. 1 to replace it at a late stage risked
delaying the project. The time elapsed between the original
estimated delivery date, and the assumed actual delivery
date was 79 days.
…….(para 13.10 (e) of the award)
10). The tribunal finds the following facts to be significant:
(i) The ACC unit could not be connected to the turbine
generator flange until the turbine generator was in
place to have the connection made. Thus, welding of
the ACC unit to the turbine flange was dependent on
both completion of the horizontal duct and pressure
balancing bellows by the claimant and the installation
of the turbine on behalf of Respondent no.1.
[2024] 9 S.C.R. 565

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

(ii) The ACC unit could not be commissioned, nor could
the PG test be conducted without a flow of turbine
exhaust steam. The turbine must be operational
to provide the necessary flow of exhaust steam.
Thus, both commissioning and the PG test were
dependent on both the ACC unit and the turbine
being operational.
(iii) Up until the claimant was ready to erect the first
part of the horizontal duct there is no evidence that
the claimant was delayed by any other construction
activity on site. The claimant states that the vertical
duct erection was completed on 15th July 2014.
The vertical duct should have been completed on
7th February 2014. Thus, the tribunal finds that at
15th July 2014 the claimant was 158 days behind its
program which is not attributable to non-readiness
of Respondent no.1.
(iv) The tribunal is satisfied that steam flowing (steam
blowing) was being conducted by the turbine
generator contractor in early February 2015 which
would have been likely to have prevented the welding
of the duct to the turbine flange. This process also
indicates that the turbine was not operational.
(v) On the basis of Mr. Parasuram’s evidence, the
tribunal finds that the claimant had completed the
connection between the horizontal duct and the
turbine generator flange around February 2015 but
that commissioning of the ACC unit did not start
until April 2015. Mr. Parasuram attributes the delay
between February and April 2015 to Respondent
no.1’s other contractors having outstanding work.
Thus, completion of the Hook-up as described in
the L1 network Schedule which should have taken
place on 14th March 2014 did not take place until
mid- February 2015 by which time the ACC unit
construction was about 343 days behind schedule.
On the evidence presented to the tribunal it is not
possible to apportion the further delay of about 158
566 [2024] 9 S.C.R.

Digital Supreme Court Reports

days which occurred between 15th July 2014 and
mid- February 2015 between slow progress by the
claimant and hindrance to the claimant’s work by the
ongoing turbine generator installation. However, the
tribunal is satisfied that at least part of this delay was
not attributable to the claimant.
……..(para 13.13 (c) of the award)
11). The tribunal now considers when, if at all, the ACC
system was completed. There are three certificates which
are referred to in the erection purchase order. These are:
A certificate on competition of punch points;
A Take Over Certificate of Equipment; and
A certificate of competition of performance test.
None of these certificates have been issued.
………(para 13.13 (d) of the award)
12). The only certificate issued by the respondents was
dated 2 nd March 2017. In separate correspondence,
Respondent no.1 stated that this certificate was issued
for marketing purposes and did not absolve the claimant
from its contractual obligation under the Purchase Orders.
……..(para 13.13 (e) of the award)
13). Notwithstanding the respondents’ caveat, the issuance
by the respondents of the 2nd March 2017 certificate is
considered significant by the tribunal. The respondents
knew the purpose for which the certificate was required
by the claimant and, if it did not believe in the veracity
of what it was certifying, even for marketing purposes,
then it behaved dishonestly. The tribunal has no basis
for assuming that the respondents would have acted in
such a dishonest manner and thus, concludes that the
respondents must have believed that the ACC unit was
operating satisfactorily when it issued that certificate.
The certificate states that the ACC unit was operating
satisfactorily from May 2015. However, the tribunal does
[2024] 9 S.C.R. 567

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

not rely on this date as it was not material to the purpose
for which the certificate was required and was the date
included in the draft certificate provided by the claimant.
……….(para 13.13 (f) of the award)
14). The tribunal concludes that all the criteria for issuing
all three of the certificates listed above would have to
be met before the ACC unit could be certified to be
operating satisfactorily. The last alleged defects notified
by Respondent no.1 in 2015, which has been exhibited,
is dated 4th July 2015. (The fan assembly detached
more than a year later, and that event could not have
been the basis for withholding the relevant certificates
through 2015). In its e-mail of 4th July 2015, Respondent
no.1 notes gearbox defects but gave no details nor is the
tribunal provided with any information about what action,
if any, was taken in relation to the alleged gearbox defect.
However, the tribunal is satisfied that on 4th July 2015 the
ACC units were not yet in fit condition to merit the issue
of the three relevant certificates.
……….(para 13.13 (g) of the award)
15). The first indication that the claimant thought it was
ready for a performance guarantee test was in its e-mail
dated 21st September 2015. There is no evidence to
suggest that both the certificate on completion of punch
points and takeover certificate of equipment should not
have been issued on or before 21st September 2015. In
the absence of any evidence from Respondent no.1 that
there were any remaining punch points or that the ACC
system was not capable of being taken over, the tribunal
finds that these certificates are deemed to have been
issued on 21st September 2015 a delay from the planned
date of 539 days.
……(para 13.13 (h) of the award)
16). Equally, there is no further indication that the ACC unit
was not capable of passing the PG test on 21st September
2015. However, a PG test can only be deemed satisfactory
568 [2024] 9 S.C.R.

Digital Supreme Court Reports

if it is not carried out within 180 days of the issue of the
taking over certificate. Accordingly, the PG test would
be deemed to have been carried out satisfactorily only
after a further 180 days had elapsed. Thus, the tribunal
finds that the deemed achievement of Supplier’s liability
in respect to Performance Guarantee Test pursuant to
Clause 10.5 of Annexure A of the Erection Purchase
Order only became effective on 19th March 2016. As
the claimant was still requesting a PG test as late as
20th May 2016 the tribunal is satisfied that the deeming
provisions apply and the ACC unit is deemed to have
passed the PG test. The Erection Purchase Order states
that, where the PG test is deemed to have been carried
out, the respondents remained liable for the guaranteed
performance during the 180 days. However, it is silent on
whether the deemed achievement of supplier’s liability in
respect to Performance Guarantee test is retrospective
to the date when the performance can be said to have
been achieved. The tribunal finds that for the purposes
of determining the delay caused by the failure to arrange
a PG test it would be just to consider that the required
performance was achieved on 21st September 2015 - the
date on which the tribunal has found that the ACC unit
was deemed to have been taken over.
………(para 13.13 (i) of the award)
17). Respondent no.1 did not issue the takeover certificate of
equipment or a certificate of completion nor did it arrange a
PG test. However, it has offered no evidence of any defects
in the ACC unit that it has shown existed on 21st September
2015. Accordingly, the tribunal is satisfied, on the balance
of probabilities, that respondent no.1 delayed issuing the
said certificates and the PG test because it was not in a
position, due to other factors beyond the Claimant’s control,
to properly commission the ACC unit. Therefore, the tribunal
is satisfied that at 21st September 2015, Respondent no.1
had delayed completion by 539 days and the claimant is
entitled to 539 days’ extension of time.
…………(para 13.13 (j) of the award)
[2024] 9 S.C.R. 569

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

18). Summary of Delays

Delay in payment Nil
Delay in handing over site Nil
Due to change of specification
of the Drain Pump 79 days
Delay in BBU approval Nil
Staircase and pipe rack
Hindrance Nil
Non-readiness of
Respondent no.1 539 days
The tribunal finds that these delays are not cumulative but
parallel. The effect of the drain pump being changed would
have occurred before mid-February 2014 when the tribunal
found that the project was delayed by 158 days. Thus, the
delay at that point for which the claimant was responsible
was 158 days less 79 days allowed for the change of drain
pump. Thus, the claimant was in culpable delay of 79 days
in mid-February. The delay in commissioning occurred
after mid-February 2014. Thus, the total extension of time
granted by the tribunal is 539 days.
…….(para 13.14 of the award)
19). Liquidated Damages
As the tribunal has granted an extension of time for
completion of the ACC unit to 21st September 2015 and
has also found that the requirements for completion of the
ACC units were achieved on that date, the tribunal finds
that the claimant has no liability for liquidated damages….
……(para 13.15 of the award)”
Relevant Article(s) of the Schedule to the Limitation Act, 1963
applicable to the claim
88. Having taken note of the relevant facts as well as material observations
in the arbitral award, we shall now consider as to which Article, or
Articles(s), if more than one is applicable, of the Schedule to the
1963 Act would apply to the claim(s) of Enexio. Notably, the claim
570 [2024] 9 S.C.R.

Digital Supreme Court Reports

was in respect of: (a) declaration qua invalidity of Debit note(s); (b)
outstanding principal amount; and (c) interest. Insofar as relief qua
declaration was concerned, it was found barred by time prescribed
by Article 58, and there is no serious challenge to that finding. As
regards claim for the outstanding principal amount, it was a composite
claim for the balance amount payable for supplies made and work
done under the Supply Purchase Order and the Erection Purchase
Order respectively, which was found within limitation.
89. According to the appellant(s), Article 14 is applicable to the claim
in respect of balance amount for the price of the goods supplied
under the Supply Purchase Order; and Article 18 would apply to
the claim for the work done under the Erection Purchase Order. It is
their case that if the project was to be completed by 31 March 2014,
three years period should be counted from that date and, therefore,
claim would be barred by limitation as on 2 May 2019 i.e., the date
of commencement of the arbitral proceeding.
90. Per contra, Enexio’s case is that it is a composite contract for design,
manufacture, supply, erection and commissioning of air-cooled
condenser unit (ACC Unit) with auxiliaries for 160 MW Coal Based
Thermal Power Plant (Project) at Gummidipoondi in the State of
Tamil Nadu whereunder payments were to be made on pro rata
basis, and final payment was to be made only on completion of the
work, subject to issuance of relevant certificates. The completion
of work got delayed due to reasons beyond the control of Enexio,
as held by the Tribunal, therefore, 539 days of extension, up to the
deemed date of completion of the project i.e., 21 September 2015,
was granted. In between, the contract was not repudiated by either
party. Hence, the limitation period of three years would have to
be counted from the date of completion of the work, that is, from
21 September 2015. It is also their case that before expiry of the
prescribed period of three years, a written acknowledgment of the
outstanding amount was made vide minutes of the meeting dated 19
April 2018. Therefore, by virtue of Section 1873 of the 1963 Act, a fresh

73 Section 18. Effect of acknowledgment in writing.— (1) Where, before the expiration of the prescribed
period for a suit or application in respect of any property or right, an acknowledgement of liability in
respect of such property or right has been made in writing signed by the party against whom such
property or right is claimed, or by any person through whom he derives his title or liability, a fresh period
of limitation shall be computed from the time when the acknowledgment was so signed.
(2) Where the writing containing the acknowledgement is undated, oral evidence may be given of the
[2024] 9 S.C.R. 571

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

period of three years would start from the date of acknowledgement,
which got further extended, by virtue of the provisions of Section
1974 of the 1963 Act, on account of the offer made on 26 May 2018
to pay Rs. 3 crores as full and final settlement of all dues. Hence,
as on 2 May 2019, the claim was not barred by limitation.
91. A plain reading of Article 14 of the Schedule to the 1963 Act, which
is pari materia Article 5275 of the First Schedule to the Limitation
Act, 1908 (in short 1908 Act), would indicate that it applies where:
(a) the suit/ claim is for the price of goods sold and delivered;
and (b) no fixed period of credit is agreed upon. Whereas Article
18 of the Schedule, which is pari materia Article 5676 of the First
Schedule of the 1908 Act, applies where: (a) the suit/claim is for
the price of work done by the plaintiff/ claimant for the defendant
at his request; and (b) no time has been fixed for payment. Thus,
where a suit is for goods supplied and work done by the plaintiff
(a contractor) and the price of materials and the price of work is
separately mentioned, and the time for payment is not fixed by the
contract, Article 14 will apply to the former claim, and Article 18 to
the latter. But where a claim is made for a specific sum of money
as one indivisible claim on the contract, without mentioning any

time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral
evidence of its content shall not be received.
Explanation.-- for the purposes of this section, --
(a) an acknowledgement may be sufficient though it omits to specify the exact nature
of the property or right, or avers that the time for payment, delivery, performance or
enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or
permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other
than a person entitled to the property or right;
(b) the word ‘signed’ means signed either personally or by an agent duly authorized in
this behalf; and
(c) an application for the execution of a decree or order shall not be deemed to be an
application in respect of any property or right.
74 Section 19. Effect of payment on account of debt or of interest on legacy.--- Where payment on
account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the
person liable to pay the debt or legacy or by his agent duly authorized in this behalf, a fresh period of
limitation shall be computed from the time when the payment was made:
Provided that, save in the case of payment of interest made before the 1st day of January, 1928, an
acknowledgement of the payment appears in the handwriting of, or in writing signed by, the person
making the payment.
Explanation. — For the purposes of this section, --
(a) where mortgage land is in the possession of the mortgagee, the receipt of the rent or
produce of such land shall be deemed to be a payment;
(b) ‘debt’ does not include money payable under a decree or order of a court.
75 See Footnote 83
76 See Footnote 84
572 [2024] 9 S.C.R.

Digital Supreme Court Reports

specific sum as being the price of goods or price of the work done,
neither Article 14 nor Article 18 will apply, but only Article 55, which
provides for all actions ex contractu (i.e., based on a contract) not
otherwise provided for, would apply.77
92. Article 55, which is a combination of erstwhile Articles 11578 and 11679
of the First Schedule to the 1908 Act, is a residuary Article in respect
of all actions based on a contract not otherwise specially provided
for. For the applicability of Article 55, four requirements should be
satisfied, namely, (1) the suit should be based on a contract; (2)
there must be breach of the contract; (3) the suit should be for
compensation; and (4) the suit should not be covered by any other
Article specially providing for it.
93. A breach of a contract may be by non-performance, or by repudiation
or by both.80 In Anson’s Law of Contract (29th Oxford Edition), under the
heading ‘Forms of Breach Which Justify Discharge’, it is stated thus:
“The right of a party to be treated as discharged from further
performance may arise in any one of three ways: the other
party to the contract (a) may renounce its liabilities under
it; (b) may by its own act make it impossible to fulfil them,
(c) may fail to perform what it has promised. Of these
forms of breach, the first two may take place not only in
the course of performance but also while the contract is
still wholly executory i.e., before either party is entitled to
demand a performance by the other of the other’s promise.
In such a case the breach is usually termed an anticipatory
breach. The last can only take place at or during the time
for performance of the contract.”
94. Thus, failure of a party to a contract in performing its obligation(s)
thereunder could be considered a breach of contract for the purpose
of bringing an action against it by the other party. In such an event,
the other party can claim compensation or damages, or/ and, in
certain cases, obtain specific performance.

77 See U. N. Mitra’s Law of Limitation and Prescription, Sixteenth Edition, Volume 1, at page 1063,
published by LexisNexis.
78 See Footnote 86
79 See Footnote 87
80 P. Ramanatha Aiyar’s Advanced Law Lexicon, 4th Edition at page 596
[2024] 9 S.C.R. 573

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

95. The phrase ‘compensation for breach of contract’, as occurring in
Article 55 of the Schedule to the 1963 Act, would comprehend also
a claim for money due under a contract. ‘Compensation’ is a general
term comprising any payment which a party would be entitled to
claim on account of any loss or damage arising from a breach of a
contract, and the expression has not been limited only to a claim for
unliquidated damages. The expression is wide enough to include a
claim for payment of a certain sum.81
96. In Mahomed Ghasita v. Siraj-ud-Din and others,82 the plaintiff
was to supply Italian marble and other stone required for flooring
and was also to do all the work necessary for constructing the floor.
The plaintiff sued for the balance of the money due to him based
on this contract and the plaint made no mention of the price of the
materials as distinct from the price of the work. The matter came
before a Full Bench of the then Lahore High Court. Before the Full
Bench the question was, what Article of the Limitation Act, 1908 is
applicable to the suit. Sir Shadi Lal C.J., as His Lordship then was,
speaking for the Bench held:
“The action brought by the plaintiff was for the recovery
of the balance of the money due to him on the strength
of the contract described above; and the question for
consideration is what article of the Limitation Act governs
the claim. Our attention has been invited, in the first
instance, to article 52,83 which prescribes a period of
three years (enlarged to six years by the Punjab Loans
Limitation Act of 1904) for the recovery of the price of
goods sold and delivered to the defendant; and also to
article 56,84 which lays down a period of three years for a
suit to recover the price of work done by the plaintiff for

81 See U. N. Mitra’s Law of Limitation and Prescription, Sixteenth Edition, Volume 2, at pages 1342 & 1343,
published by LexisNexis.
82 AIR 1922 Lah 198 (FB) : ILR (1921) 2 Lah 376 (FB) : 1921 SCC OnLine Lah 303
83 First Schedule of Limitation Act, 1908
Article Description of Suit Period of Limitation Time from which
Period begins to run
52 For the price of goods sold and Three years The date of the
delivered, where no fixed period of delivery of the goods.
credit is agreed upon.

84 First Schedule of Limitation Act, 1908
574 [2024] 9 S.C.R.

Digital Supreme Court Reports

the defendant. Now, as stated above, the plaintiff supplied
not only the materials, but also the labour, and it is clear
that neither of the aforesaid articles governs the suit in
its entirety. It is, however, urged that the action comprises
two claims, one for the price of the material supplied by
the plaintiff, and the other relating to the price of the work
done by him, and that these two claims should be dealt
with separately, and that they are governed by article 52
and article 56, respectively. The rule of law is no doubt
firmly established that a combination of several claims
in one action does not deprive each claim of its specific
character and description. The Code of Civil Procedure
allows a plaintiff, in certain circumstances, to combine in
one action two or more distinct and independent claims,
and it is quite possible that one of the claims may be
barred by limitation, and the other may be within time;
though both of them arise out of one and the same cause
of action. In a case of that description there is no reason
why the court should not apply to each claim the rule of
limitation specially applicable thereto. It is nowhere laid
down that only one article should govern the whole of the
suit, though it may consist of several independent claims,
and that the suit should not be split up into its component
parts for the purpose of the law of limitation.
The question, however, is whether the action as brought by
the plaintiff can be treated as a combination of two distinct
claims. Now, the plaint makes no mention of the price of
the materials as distinct from the price of the work and
contains no reference whatsoever to two claims. There is
only one indivisible claim, and that is for the balance of
the money due to the plaintiff on the basis of a contract,
by which he was to be paid for everything supplied and

Article Description of Suit Period of Limitation Time from which
Period begins to run
56 For the price of work done by the Three years When the work is
plaintiff for the defendant at his done.
request where no time has been
fixed for payment.
[2024] 9 S.C.R. 575

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

done by him in connection with the flooring of the building
at a comprehensive rate. The claim, as laid in the plaint is
an indivisible one; it cannot be split up into two portions.
We must, therefore, hold that it falls neither under article
52, nor under article 56.
The learned advocate for the plaintiff contends that as
neither of the above articles governs the claim, it should
come within article 120.85 The judgment in Radha Kishen
v. Basant Lal, which is relied upon in support of this
contention, no doubt, related to a suit for the recovery of
a sum of money alleged to be due for the work performed
and material supplied by the plaintiff to the defendant under
a contract, and the learned judges held that neither article
52 nor article 56 was applicable to the entire claim. They
then made the following observation –
“There is no other articles specially applicable,
and hence the only article which can be applied
is article 120.”
Now with all deference to the learned judges we are
unable to hold that there is no other article governing
a claim of that character. It seems that their attention
was not drawn to article 115,86 which governs every

85 First Schedule of Limitation Act, 1908
Article Description of Suit Period of Limitation Time from which
Period begins to run
120 Suit for which no period of Six years When the right to sue
limitation is provided elsewhere in accrues.
this Schedule.

86 First Schedule of Limitation Act, 1908
Article Description of Suit Period of Limitation Time from which
Period begins to run
115 For compensation for the breach Three years When the contract
of any contract, express or is broken, or (where
implied, not in writing registered there are successive
and not herein specially provided breaches) when the
for. breach in in respect
of which the suit is
Instituted occurs, or
(where the breach is
continuing) when it
ceases.
576 [2024] 9 S.C.R.

Digital Supreme Court Reports

suit for compensation for the breach of a contract not in
writing registered and not specially provided for in the
Limitation Act. It is beyond doubt that this article is a
general provision applying to all actions ex contractu not
specially provided for otherwise; and the present claim
certainly arises out of a contract entered into between
the parties. The word ‘compensation’ in article 115 as
well as in article 11687 has the same meaning as it has
in section 7388 of the Indian Contract Act and denotes
a sum of money payable to a person on account of
the loss or damage caused to him by the breach of a
contract. It has been held, and we consider rightly, that
a suit to recover a specified sum of money on a contract
is a suit for compensation within articles 115 and 116
--- vide Nobocoomar Mookhopadhaya v. Siru Mullick89
and Husain Ali Khan v. Hajiz Ali Khan.90
We are accordingly of opinion that the present claim must
be regarded as one for compensation for the breach of
a contract, and that there is no special provision in the

87 First Schedule of Limitation Act, 1908
Article Description of Suit Period of Limitation Time from which Period
begins to run
116 For compensation for the Six years When the period of limitation
breach of a contract in writing would begin to run against
registered. a suit brought on a similar
contract not registered.

88 The Indian Contract Act, 1872.
Section 73. Compensation for loss or damage caused by breach of contract.-- When a
contract has been broken, the party who suffers by such breach is entitled to receive, from the
party who has broken the contract, compensation for any loss or damage caused to him thereby,
which naturally arose in the usual course of things from such breach, or which the parties knew,
when they made the contract, would be likely to result from the breach of it.
Such compensation is not to be given for any remote and indirect loss or damage sustained by
reason of the breach.
Compensation for failure to discharge obligation resembling those created by contract.---
When an obligation resembling those created by contract has been incurred and has not been
discharged, any person injured by the failure to discharge it is entitled to receive the same
compensation from the party in default, as if such person had contracted to discharge it and had
broken his contract.
Explanation.-- In estimating the loss or damage arising from a breach of contract, the means which
existed of remedying the inconvenience caused by the non-performance of the contract must be
taken into account
89 (1890) ILR 6 Cal 94
90 (1881) ILR 3 All 600 (FB)
[2024] 9 S.C.R. 577

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

Act which governs the claim. It must, therefore, come
under the general provision contained in article 115, which
governs every action arising out of contract, not otherwise
specially provided for.”
(Emphasis supplied)
97. In Dhapia v. Dalla91 before a Full Bench of the Allahabad High Court
the question was, what Article of the First Schedule to the 1908
Act would apply to a suit for recovery of a specified sum under a
contract. In that suit, the plaintiff had made defendant(s) partner to
one half of the fishery rights in the tank arising from a Theka, on
the condition that they would pay him half the Theka money. The
allegations made in the plaint showed that the defendant(s) had
already worked out the Theka in respect of their share in it. As that
suit was not filed within three years from the date of breach, it was
dismissed by the trial court as barred by limitation by applying Article
11592 of the First Schedule to the 1908 Act. The plaintiff preferred
appeal, which was allowed on the finding that Article 12093 of the
First Schedule to the 1908 Act applied, whereunder the limitation
was six years. When the matter travelled to the High Court, an
argument was raised that neither Article 115 nor Article 120 could
apply, rather Article 11394 would apply. It was contended before the
High Court that Article 113 should apply as the claim is nothing but
for specific performance. Rejecting this submission and holding
that Article 115 of the First Schedule to 1908 Act would apply, the
Full Bench held:
“8. In our opinion there is no force in this argument. It is true
that there was a contract between the parties inasmuch as
the plaintiff gave to the defendants one half of the fishery

91 1969 All LJ 718 : AIR 1970 All 206 : 1969 SCC OnLine All 79
92 See Footnote 86
93 See Footnote 85
94 First Schedule of Limitation Act, 1908
Article Description of Suit Period of Limitation Time from which Period begins
to run
113 For specific Three years The date fixed for the performance,
performance of or, if no such date is fixed, when
contract the plaintiff has notice that
performance is refused.
578 [2024] 9 S.C.R.

Digital Supreme Court Reports

rights in the tank, on the condition that they would pay
him half the theka money. The allegations made in the
plaint show that the defendants had already worked out
the theka in respect of their share in it. All that remained
to be done was to pay the proportionate theka money
to the plaintiff. In such circumstances no suit for specific
performance of contract could be filed: only a suit to enforce
the agreement so far as it related to the payment of the
proportionate theka money could be, and has been filed.
9. The relevant portion of section 12 of the Specific Relief
Act (Act 1 of 1877) reads as follows:
“… The specific performance of any contract
may in the discretion of the court be enforced—
(a) When the act agreed to be done is in the
performance, wholly or partly, of a trust;
(b) When there exists no standard for
ascertaining the actual damages caused
by the non-performance of the act agreed
to be done;
(c) When the act agreed to be done is such
that pecuniary compensation for its non-
performance would not afford adequate
relief, or
(d) When it is probable that pecuniary
compensation cannot be got for the
non- performance of the act agreed to be
done……”
10. A suit for the recovery of a specified sum under a
contract cannot be said to be a suit of the nature where
pecuniary compensation would not afford adequate relief.
We are, therefore, of the opinion that the suit out of which
this civil revision arises cannot be said to be a suit for
the specific performance of a contract and will not be
governed by Article 113 of the First Schedule to the Indian
Limitation Act, 1908
xxxxx xxxxx
[2024] 9 S.C.R. 579

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

13. We now proceed to consider why Article 115 of the
First Schedule to the Limitation Act should apply to the
facts of the present case. Article 115 applies when there is
a breach of contract, and suit is for compensation for the
loss suffered by the innocent party. A breach of contract
‘occurs where a party repudiates or fails to perform one or
more of the obligations imposed upon him by the contract’:
(vide Cheshire and Fifoot, p 484). ‘If one of two parties
to a contract breaks the obligation which the contract
imposes, a new obligation will in every case arise – a
right of action conferred upon the party injured by the
breach’ (vide Anson’s Law of Contract, p 412). Admittedly,
in the present case, there was a contract and according
to the plaintiff and the findings of the court a breach of
contract had occurred inasmuch as the defendants failed
to pay the stipulated amount upon the date fixed under
the contract.
14. Difficulty can, however, be caused by the word
‘compensation’ used in Article 115. It can be argued that
the words compensation for breach of contract point
rather to a claim for unliquidated damages than to the
payment of a certain sum, and, therefore, where the suit
is for the recovery of a specified sum, and not for the
determination of unliquidated damages, this article should
not apply. In our opinion this contention would be wholly
untenable because it was not accepted by this court in
the Full Bench case of Hussain Ali Khan versus Hafiz Ali
Khan95 and by the Privy Council in the case of Tricomdas
Coovarji Bhoja versus Sri Gopinath Jiu Thakur.96 In the
case of Husain Ali Khan Article 116 of Schedule II of
the Limitation Act (Act XV of 1877) was the subject of
interpretation. Articles 115 and 116 of Schedule II of Act
XV of 1877 have been reproduced verbatim in the Indian
Limitation Act, 1908. Article 115 deals with the breach of
contracts not in writing and registered while Article 116
provided for breach of contracts in writing and registered.

95 I.L.R. 3 All 600
96 AIR 1916 PC 182
580 [2024] 9 S.C.R.

Digital Supreme Court Reports

It is, therefore, obvious, that the meaning which has to be
given to the words ‘compensation for breach of contract’
occurring in both the Articles will have to be the same.
xxx xxx xxx
16. In the case of Tricomdas Cooverji Bhoja the argument
that the words ‘compensation for breach of a contract’
point rather to a claim of unliquidated damages than to
the claim of payment of certain sum was not accepted
because the word compensation has been used in the
Indian Contract Act in a very wide sense.
17. The relevant portion of section 73 of the Indian
Contract Act reads as follows:
‘73. When a contract has been broken, the party
who suffers by such breach is entitled to receive,
from the party who has broken the contract,
compensation for any loss or damage caused to
him thereby, which naturally arose in the usual
course of things from such breach, or which the
parties knew, when they made the contract, to
be likely to result from the breach of it.
Such compensation is not to be given for any
remote and indirect loss or damage sustained
by reason of the breach……
Illustrations
………………..
(n) A contracts to pay a sum of money to B on
a day specified. A does not pay the money on
that day; B, in consequence of not receiving the
money on that day is unable to pay his debts,
and is totally ruined. A is not liable to make
good to B anything except the principal sum
he contracted to pay, together with interest up
to the day of payment.’
18. It is, therefore, clear that the word compensation has
been used, in section 73 of the Indian Contract Act in a very
wide sense and the present case would be covered by it.
[2024] 9 S.C.R. 581

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

19. We see no reason why the words ‘compensation for
breach of contract’ as used in Article 115 should be given
a meaning different from the same words as used in Article
116. Article 115 being a residuary Article for suits based
on breach of contract, it is obvious that the suit out of
which this revision arises would be governed by the said
Article.”
(Emphasis supplied)
98. On a consideration of the aforesaid decisions as well as the provisions
of Section 73 of the Contract Act and Article 55 of the Schedule to
the 1963 Act, we are of the view that even a suit for recovery of a
specified amount, based on a contract, is a suit for compensation,
and if the suit is a consequence of defendant breaching the contract
or not fulfilling its obligation(s) thereunder, the limitation for institution
of such a suit would be covered by Article 55 of the Schedule to
the 1963 Act, provided the suit is not covered by any other Article
specially providing for it.
99. In the instant case, there is no dispute that the claim is based on a
contract. The finding of the Arbitral Tribunal in paragraph 13.13 (i)97
of the award is that the appellant(s) herein had failed to undertake
the performance guarantee test, despite request of the claimant,
within the period specified therefor. The final payment of the bill(s)
/ invoice(s) was dependent on issuance of certificate(s) including
one relating to successful completion of the performance guarantee
test (PG Test). Further, the contract provided that if the performance
guarantee is not undertaken by the purchaser (appellant(s) herein),
it could be deemed that the supplier (claimant -R-1) had fulfilled
its obligation of providing a guaranteed performance of the project
under the contract. In these circumstances, when, despite request of
the contractor /supplier, the employer/ purchaser failed to undertake
the PG Test, the Arbitral Tribunal justifiably concluded that even
though the supplier (claimant) had fulfilled its obligations under the
contract, the purchaser (appellant(s) herein) had failed in fulfilling its
obligation of making payment of the outstanding principal amount to
the claimant, which had become due and payable under the contract.
In our view, therefore, the claim being one for ‘compensation’ (which

97 Extracted in paragraph 88 (16) of this judgment.
582 [2024] 9 S.C.R.

Digital Supreme Court Reports

term includes a specified outstanding amount), based on breach of
a contract, the limitation for the claim would fall within the ambit of
Article 55 of the Schedule to the 1963 Act unless demonstrated that
the claim is specially covered by any other Article of the Schedule.
100. In Geo Miller (supra)98 a three-Judge Bench of this Court held that
in a commercial dispute, though mere failure to pay may not give
rise to a cause of action, once the applicant has asserted their claim
and the respondent fails to respond to such claim, such failure will
be treated as a denial of the applicant’s claim giving rise to a dispute
and, therefore, a cause of action for reference to arbitration would
come into existence. It was also observed that it would not lie in
the mouth of the claimant to plead that it waited to refer the dispute
to arbitration because it was making representations and sending
reminders to the respondent to settle the matter.
101. In Major (Retd.) Inder Singh Rekhi v. Delhi Development
Authority,99 in the context of commencement of the period of
limitation for making a reference application under Section 20 of
the erstwhile Arbitration Act, 1940, it was held by this Court that
to be entitled to have an order of reference under Section 20, it
is necessary that there should be an arbitration agreement and
secondly, differences must arise to which the agreement applied.
Once there is an assertion of claim by the appellant and silence as
well as refusal in respect of the same by the respondent, a dispute
would arise regarding non-payment of the alleged dues. The Court
thereafter went on to observe:
“4. ……. The High Court proceeded on the basis that the
work was completed in 1980 and therefore, the appellant
became entitled to the payment from that date, and the
cause of action under article 137 arose from that date.
But in order to be entitled to ask for the reference under
section 20 of the Act there must not only be an entitlement
to money but there must be a difference, or dispute must
arise. It is true that on completion of the work a right to
get payment would normally arise but where the final bills
as in this case have not been prepared as appears from

98 See paragraph 29 of the judgment in Geo Miller (supra)
99 (1988) 2 SCC 338
[2024] 9 S.C.R. 583

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

the record and when the assertion of the claim was made
on 28.2.1983 and there was non- payment, the cause of
action arose from that date, that is to say, 28.2.1983. It
is also true that a party cannot postpone the approval of
cause of action by writing reminders or sending reminders
but where the bill had not been finally prepared, the claim
made by a claimant is the accrual of the cause of action.
A dispute arises where there is a claim and a denial
and repudiation of the claim. The existence of dispute is
essential for appointment of an arbitrator under Section 8
or reference under section 20 of the Act. There should be
dispute and there can only be a dispute when a claim is
asserted by one party and denied by the other on whatever
grounds. Mere failure or inaction to pay does not lead to
the inference of the existence of dispute. Dispute entails
a positive element and assertion of denying, not merely
inaction to accede to a claim or a request. Whether in
a particular case a dispute has arisen or not has to be
found out from the facts and circumstances of the case.”
102. Interpreting the decision of this Court in Inder Singh Rekhi (supra),
in B & TG AG (supra) it was, inter alia, held that three principles of
law are discernible from the aforesaid decision: (1) ordinarily, on the
completion of the work, the right to receive the payment begins; (2)
a dispute arises when there is a claim on one side and its denial/
repudiation by the other; and (3) a person cannot postpone the accrual
of cause of action by repeatedly writing letters, or sending reminders.
In other words, bilateral discussions for an indefinite period would
not save the situation so far as the accrual of cause of action and
the right to apply for appointment of arbitrator is concerned.
103. In the case in hand, the award reveals that in respect of payment of
Claimant’s invoices, the Purchase Orders provided that 65% of the
Order Price was to be paid on pro rata basis along with 100% taxes
and duties after receipt of material at site, within 25 days of submission
of Invoice/ request for payment, and other documents.100 The award
recites that there is no indication in the Purchase Orders as to what

100 Paragraph 13.08 (b) of the Award
584 [2024] 9 S.C.R.

Digital Supreme Court Reports

‘other documents’ were required.101 Not only that, payment, including
balance payment, was dependent on issuance of: (i) certificate on
completion of punch points signed by parties; (ii) take over certificate
of equipment (to be issued by the Purchaser); and (iii) certificate of
completion of performance test of equipment (to be issued by the
Purchaser).102 But none of these certificates was issued.103 In these
circumstances, the Arbitral Tribunal had to consider various facts and
circumstances to come to a definite conclusion that the work was
completed on 21 September 2015. In holding so, Tribunal relied on:
(a) an e-mail sent by the claimant on 21 September 2015 showing
its readiness to a performance guarantee test; and (b) the fact that
there was no evidence to suggest that the certificates on completion,
as ought to have been issued, should not have been issued on or
before 21 September 2015.104 The Tribunal also took note of the
terms and conditions of the contract which were to the effect that the
performance guarantee test can be deemed satisfactory if, despite
request, it is not carried out within 180 days of the issue of the taking
over certificate. The Tribunal noticed that vide certificate dated 2 March
2017 the appellant(s) admitted that unit was commissioned in May
2015 and there was a request of the claimant dated 21 September
2015 to undertake performance guarantee test.105 Taking all of this
into account, the Tribunal held that the “deemed achievement of
supplier’s liability in respect to performance guarantee”, pursuant to
clause 10.5 of Annexure A of the Erection Purchase Order, became
effective on 19 March 2016.106
104. From the discussion thus far, following dates emerge which, in our
view, would be relevant for determining the start point of limitation
for the claim:
(a) 21 September 2015 i.e., the deemed date of completion of the
supply/ work undertaken by the claimant under the Purchase
Orders/ contract; and

101 Paragraph 13.08 (c) of the Award
102 Paragraph 7.32 of the Award
103 Paragraph 13.13 (d) of the Award
104 Paragraph 13.13 (h) of the Award.
105 See Paragraph 88 (16) above including paragraph 13.13 (f) of the Award.
106 Paragraph 13.13 (i) of the Award.
[2024] 9 S.C.R. 585

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

(b) 19 March 2016 i.e., the deemed date by which the supplier
(Claimant) had fulfilled its liability under the contract relating to
guaranteed performance of the Unit concerned.
105. Now, we shall consider whether Articles 14 and 18 of the Schedule
to the 1963 Act were applicable or not. Article 14 applies where
the suit is for the price of the goods sold and delivered, and
there is no fixed period of credit agreed upon. Here, there is an
indivisible claim in respect of the outstanding principal amount for
the goods supplied and the work done. Moreover, the payment(s)
under the supply purchase order were to be on pro rata basis,
and full payment for the supplies was dependent on supporting
documents, including certificates, to be provided by the purchaser,
which were not provided. Thus, when full payment(s) under the
supply/erection purchase order(s) were dependent on certificates
relating to completion/ commissioning /guaranteed performance
etc., the claimant waited till successful completion / commissioning /
guaranteed performance of the project to file a composite claim for
the balance amount payable under both the purchase orders. In our
view, therefore, Article 14 is not applicable to the claim as framed.
106. Insofar as Article 18 is concerned, it is to apply where the suit is
for the price of the work done by the plaintiff for the defendant at
his request, and where no time has been fixed for payment. In the
instant case, there is an indivisible claim for the outstanding amount
in respect of goods supplied and the work done. As already noticed
above, the payment(s) under the contract were to be made on pro
rata basis, dependent on work done and certificates issued, which,
as per the finding in the award, were not issued. Hence, the claimant
was entitled to make a composite claim for the goods supplied and
the work done after the project was successfully complete i.e., when
the Unit was commissioned followed by guaranteed performance.
Because it is only then, when the outstanding amount, as per the
Bills / Invoices raised, became due and payable to the claimant
in terms of the contract. Thus, in our view, Article 18 would also
not apply.
107. As it is not demonstrated that any other Article of the Schedule
specially providing for the claim, as was made by R-1, was applicable,
in our view, Article 55 of the Schedule was applicable to the claim,
inter alia, for the following reasons:
586 [2024] 9 S.C.R.

Digital Supreme Court Reports

(a) The claim was for compensation (in as much as the term
‘compensation’ includes a specified amount payable under a
contract107) in respect of the goods supplied and the work done
under a contract; and
(b) The claim was based on a breach of the contractual obligation
as, according to the findings returned by the Arbitral Tribunal,
the respondents to the claim (appellant(s) herein) had failed to
fulfil their obligation(s) of making payment of the outstanding
principal amount payable under the contract despite raising of
bills / invoices by the claimant.
Starting Point of Limitation for the Claim
108. Having determined that limitation for the claim would be governed by
Article 55 of the Schedule to the 1963 Act, we shall now ascertain
the date from which the limitation period is to be counted.
109. Under Article 55, the limitation period begins to run when the contract
is broken or where there are successive breaches, when the breach
in respect of which the suit is instituted occurs, or where the breach
is continuing, when it ceases.
110. In the case in hand, it is nobody’s case that either party repudiated
the contract. Further, the claim is not in respect of non-payment of
any specific bill or invoice during execution of the contract. Rather,
it is for the outstanding principal amount due to the claimant on
discharge of his obligations under the contract. No doubt, list of
unpaid bills / invoices was placed on record of the arbitral proceedings
to demonstrate that bills / invoices were raised / issued, but the
same was by way of evidence to support the claim, which was for
the entire outstanding principal amount payable to the claimant on
discharge of its obligations under the contract. Thus, simply put, the
cause of action for the claim in question is appellant(s)’ failure to
make payment of the outstanding principal amount to the claimant
despite discharge of contractual obligations by it.
111. At this stage, we would like to put on record that nothing was brought
to our notice that there was any fixed date, or period of credit, for
payment of the balance amount. In the above circumstances, in
our view, the starting point of limitation should be the date when

107 See our discussion in paragraphs 96 to 98 of this judgment
[2024] 9 S.C.R. 587

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

the claimant had fulfilled all its obligations under the contract and
was entitled for release of the outstanding amount payable under
the contract.
112. As per the contract, if, after takeover, the purchaser (appellant(s)
herein) fails to undertake the performance guarantee test, within 180
days from the date of request for it by the supplier (i.e., claimant), it
is to be deemed that the supplier has fulfilled its liability in respect of
the guaranteed performance. Apparently, passing the performance
guarantee test was last of the supplier’s (claimant’s) obligations,
whereafter the supplier was entitled for release of the balance amount.
The Tribunal has found: (a) that as per certificate dated 2 March
2017, the commissioning took place in May 2015; (b) at that time
there were certain technical issues, which were resolved later; (c)
on 21 September 2015, claimant sent request to the appellant(s) to
undertake performance guarantee test, but there was no response
to the request; and (d) the period of 180 days, counted from 21
September 2015, expired on 19 March 2016. In the light of the above
findings, the Tribunal concluded that commissioning took place in the
month of May 2015; technical issues were resolved by 21 September
2015; and performance guarantee period expired on 19 March 2016.
113. Based on the above, while bearing in mind that final payment of
the principal outstanding amount was dependent on meeting the
requirement of performance guarantee, in our view, the cause of
action for the claim, as made, matured on expiry of that stipulated
period of 180 days within which, despite request, the appellant(s)
(i.e., purchaser) failed to undertake the performance guarantee test.
Thus, even though there might be several bills/ invoices raised/
issued by the claimant during execution of the contract, the claim
of the claimant for the outstanding principal amount matured on
expiry of 180 days from the date of the notice given by the claimant
to the appellant(s) (i.e., respondents to the claim) to undertake the
performance guarantee test. We, therefore, conclude that limitation
for the claim started to run from 19 March 2016.
114. At this stage, we may notice, only to reject, an alternative submission
made on behalf of the appellant, which is, that if Article 55 was
applicable, the breach of the contract occurred when the claimant
failed to complete the project by 31 March 2014, as promised,
therefore, the period of limitation should be counted from that date.
588 [2024] 9 S.C.R.

Digital Supreme Court Reports

This argument, in our view, is not sustainable, because time was
not the essence of the contract in as much as there was a clause
for liquidated damages for delay in completion (See Clause 13 of
Annexure A of the Supply Purchase Order as extracted in paragraph
7.32 of the award). Moreover, there is no material on record to
indicate that the contract was repudiated by the appellant on any
date for non-completion of the project by the date stipulated. Rather,
the materials on record, as recited in the award, indicate that parties
continued to engage with each other and accepted performance of
contractual obligations even beyond the stipulated date. Further,
there is a clear finding in the award that the claimant was entitled
to extension of 539 days. For the above reasons, we reject the
alternative submission made on behalf of the appellant(s).
Limitation Extended by Acknowledgement dated 19.04.2018
under Section 18 of the 1963 Act
115. As the limitation period of three years prescribed by Article
55, if counted from 19 March 2016, expired before the date of
commencement of the arbitral proceeding (i.e., 2 May 2019), we will
have to consider whether, by virtue of acknowledgment, if any, the
claimant was entitled to extension of the period of limitation.
116. Section 18108 of the 1963 Act deals with the effect of acknowledgement
in writing. Sub-section (1) thereof provides that where, before the
expiration of the prescribed period for a suit or application in respect
of any right, an acknowledgement of liability in respect of such right
has been made in writing signed by the party against whom such
right is claimed, a fresh period of limitation shall be computed from
the time when the acknowledgment was so signed. The Explanation
to this section provides that an acknowledgment may be sufficient
though it omits to specify the exact nature of the right or avers that
the time for payment has not yet come or is accompanied by a
refusal to pay, or is coupled with a claim to set off, or is addressed
to a person other than a person entitled to the right.
117. In Khan Bahadur Shapoor Fredom Mazda v. Durga Prasad
Chamaria and others109 while dealing with Section 19 of the 1908
Act, which is pari materia Section 18 of the 1963 Act, this Court held

108 See Footnote 73
109 [1962] 1 SCR 140 : AIR 1961 SC 1236
[2024] 9 S.C.R. 589

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

that for a valid acknowledgement, under the provision, the essential
requirements are: (a) it must be made before the relevant period
of limitation has expired; (b) it must be in regard to the liability in
respect of the right in question; and (c) it must be made in writing
and must be signed by the party against whom such right is claimed.
In paragraph 6 of the judgment, it was observed:
“6. ….. The statement on which a plea of acknowledgement
is based must relate to a present subsisting liability though
the exact nature or the specific character of the said
liability may not be indicated in words. Words used in the
acknowledgment must, however, indicate the existence
of jural relationship between the parties such as that of
debtor and creditor, and it must appear that the statement
is made with the intention to admit such jural relationship.
Such intention can be inferred by implication from the
nature of the admission, and need not be expressed in
words. If the statement is fairly clear then the intention
to admit jural relationship may be implied from it. The
admission in question need not be express but must
be made in circumstances and in words from which the
court can reasonably infer that the person making the
admission intended to refer to a subsisting liability as
at the date of the statement. In construing words used
in the statements made in writing on which a plea of
acknowledgment rests oral evidence has been expressly
excluded but surrounding circumstances can always be
considered. Stated generally courts lean in favor of a liberal
construction of such statements though it does not mean
that where no admission is made one should be inferred,
or where a statement was made clearly without intending
to admit the existence of jural relationship such intention
could be fastened on the maker of the statement by an
involved or far-fetched process of reasoning……
7. …… The effect of the words used in a particular
document must inevitably depend upon the context in which
the words are used and would always be conditioned by
the tenor of the said document…….”
(Emphasis supplied)
590 [2024] 9 S.C.R.

Digital Supreme Court Reports

118. In J.C. Budhraja v. Chairman Orissa Mining Corporation Ltd.
and Others,110 following the decision in Khan Bahadur Shapoor
(supra), a three-Judge Bench of this Court held:
“21. It is now well settled that a writing to be an
acknowledgement of liability must involve an admission
of a subsisting jural relationship between the parties
and a conscious affirmation of an intention of continuing
such relationship in regard to an existing liability. The
admission need not be in regard to any precise amount
nor by expressed words. If a defendant writes to the
plaintiff requesting him to send his claim for verification
and payment, it amounts to an acknowledgment. But if
the defendant merely says, without admitting liability, it
would like to examine the claim or the accounts, it may
not amount to acknowledgment. In other words, a writing,
to be treated as an acknowledgement of liability should
consciously admit his liability to pay or admit his intention
to pay the debt. Let us illustrate. If a creditor sends a
demand notice demanding payment of Rs.1,00,000 due
under a promissory note executed by the debtor and
the debtor sends a reply stating that he would pay the
amount due, without mentioning the amount, it will still be
an acknowledgment of liability. If a writing is relied on as
an acknowledgement for extending the period of limitation
in respect of the amount or right claimed in the suit, the
acknowledgement should necessarily be in respect of the
subject matter of the suit. If a person executes a work and
issues a demand letter making a claim for the amount due
as per the final bill and the defendant agrees to verify the
bill and pay the amount, the acknowledgement will save
limitation for a suit for recovery of only such bill amount,
but will not extend the limitation in regard to any fresh or
additional claim for damages made in the suit, which was
not a part of the bill or the demand letter. ……….. What
can be acknowledged is a present subsisting liability. An

110 [2008] 1 SCR 821 : (2008) 2 SCC 444
[2024] 9 S.C.R. 591

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

acknowledgement made with reference to a liability, cannot
extend limitation for a time-barred liability or a claim that
was not made at the time of acknowledgement or some
other liability relating to other transactions. Any admission
of jural relationship in regard to the ascertained sum due
or a pending claim, cannot be an acknowledgment for a
new additional claim for damages.
(Emphasis supplied)
119. In the instant case, as found above, the limitation period started
to run from 19 March 2016. Within three years therefrom, in
the minutes of meeting dated 19 April 2018111 there was a clear
acknowledgement that the amount claimed by Enexio (as is there in
the claim) is the balance amount payable, though subject to debit,
by way of set off, against various claims made by the appellant(s)
herein upon the claimant. In our view, such an acknowledgment
is sufficient to extend the limitation period as it admits the existing
liability of the appellant(s) qua the balance amount payable to the
claimant under the contract. Benefit of such an acknowledgement
would not be lost merely because a set off is claimed, inasmuch
as clause (a) of the Explanation to Section 18, inter alia, provides
that an acknowledgement for the purposes of this Section may be
sufficient though it is accompanied by a refusal to pay, or is coupled
with a claim to set off. This would imply that, subject to fulfilment of
other conditions of Section 18, once the defendant acknowledges
that he owes a certain sum to the plaintiff there would be sufficient
acknowledgment within the meaning of Section 18, even though he
states that he is entitled to set off against this sum another sum which
the plaintiff owes him. Thus, in our view, the minutes of meeting dated
19 April 2018, though claims a set off, is a valid acknowledgement
of the existing liability within the ambit of Section 18 of the 1963 Act
and it extends the period of limitation for a period of 3 years from
the date it was made. In consequence, the claim of Enexio, made
on 2 May 2019, was well within the period of limitation. Sub-issue
(b) is decided in the aforesaid terms.

111 Minutes are quoted in paragraph 7 of this judgment
592 [2024] 9 S.C.R.

Digital Supreme Court Reports

APPELLANT(S) COUNTERCLAIM IN RESPECT OF COST OF
REPAIR/ REPLACEMENT OF GEAR BOX AND FAN MODULES
BARRED BY TIME
120. Now, we shall consider whether the counterclaim was barred by
limitation. Before that, we must understand the true nature of a
counterclaim. A counterclaim is a claim made by a defendant in a
suit against the plaintiff. It is a claim, independent of and separable
from the plaintiff’s claim, which can be enforced by a cross action.
Counterclaim preferred by the defendant in a suit is a cross suit
and even if the suit is dismissed, counterclaim shall remain alive for
adjudication. The purpose of the scheme relating to counterclaim is
to avoid multiplicity of proceedings.112
121. In Afcons Gunanusa JV (supra), after considering a plethora
of precedents and authoritative texts, this Court summarized the
legal principles relating to counterclaims, in the context of arbitral
proceedings, as under:
“168. On our analysis of the statutory framework of the
Arbitration Act and the CPC, related academic discourse
and judicial pronouncements, the following conclusions
emerge:
(i) Claims and counter-claims are independent and
distinct proceedings;
(ii) A counter-claim is not a defense to a claim and its
outcome is not contingent on the outcome of the
claim;
(iii) Counter-claims are independent claims which could
have been raised in separate proceedings but are
permitted to be raised in the same proceeding as a
claim to avoid a multiplicity of proceedings; and
(iv) the dismissal of proceedings in relation to the original
claim does not affect the proceedings in relation to
the counter-claim.”

112 Rajni Rani v. Khairati Lal, (2015) 2 SCC 682, paragraph 9.6.
[2024] 9 S.C.R. 593

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

122. Section 23 (2A)113 of the 1996 Act gives respondent to a claim a right
to 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. Section 43 (1)114of the 1996
Act provides that the 1963 Act shall apply to arbitrations as it applies
to proceedings in court. Section 3(2)(b)115 of the 1963 Act provides
that any claim by way of set off or a counterclaim, shall be treated
as a separate suit and shall be deemed to have been instituted –
(i) in the case of a set off, on the same date as the suit in which
the set off is pleaded; (ii) in the case of a counterclaim, on the date
on which the counterclaim is made in court. It is thus clear that a
counterclaim is to be treated as a separate suit for the purposes of
limitation and, to ascertain whether it is within limitation, the date of
reckoning is the date when the counterclaim is filed and not when
the claim/ suit is filed. At this stage, it be noted that Section 21 of
the 1996 Act is not relevant for determining the date of institution of
a counterclaim as it is for a claim. There is however one exception.
Where the respondent against whom a claim is made, had also
made a claim against the claimant and sought arbitration by serving
a notice to the claimant but subsequently raises that claim as a
counterclaim in the arbitration proceedings initiated by the claimant,
instead of filing a separate application under Section 11 of the 1996
Act, the limitation for such counterclaim should be computed, as on
the date of service of notice of such claim on the claimant and not
on the date of filing of the counterclaim.116
123. In Thomas Mathew v. KLDC Ltd.117 this Court, in the context
of a claim referable to Article 55 of the Schedule to the 1963
Act, by relying on Section 3 (2)(b) of the 1963 Act, held that a

113 Section 23. Statement of claim and defence.—
(1) …..
(2) …..
(2-A) The respondent, in support of his case, may also submit a counter-claim or plead set-off, which
shall be adjudicated by the arbitral tribunal, if such counter-claim or set-off falls within the scope of the
arbitration agreement.
114 See Footnote 64
115 See Footnote 66
116 See State of Goa v. Praveen Enterprises, (2012) 12 SCC 581, paragraph 20; and Voltas Ltd. v. Rolta
India Ltd., (2014) 4 SCC 516.
117 (2018) 12 SCC 560, paragraph 9
594 [2024] 9 S.C.R.

Digital Supreme Court Reports

counterclaim is required to be treated as a separate suit and the
period of limitation would be three years from the date of accrual
of the cause of action.
124. It is therefore well settled that a counterclaim is like a cross suit, or a
separate suit, and the limitation of a counterclaim is to be counted from
the date of accrual of the cause of action which it seeks to espouse.
As a logical corollary thereof, it is quite possible that even though a
suit or a claim is within the period of limitation, the counterclaim may
well be barred by limitation, if the cause of action espoused therein
accrued beyond the prescribed period of limitation.
125. In the instant case, the counterclaims were for: (a) liquidated
damages for the delay in supply and erection; (b) reimbursement of
customs duties; (c) cost of erection of horizontal and vertical exhaust
duct through an external agency; (d) cost of repair/ replacement of
Gear Box, due to alleged defective supply; and (e) cost of repair/
replacement of Fan Modules, due to alleged defective supply. Out of
the above five counterclaims, three counterclaims, namely, (a), (b)
and (c), were dealt by the Arbitral Tribunal on merits, as they stood
recited in the minutes of meeting dated 19 April 2018. Whereas
the remaining two, namely, (d) and (e), were treated as barred by
limitation because in respect thereof there was no recital / material
to show that they were subject matter of negotiation between the
parties. The counterclaim (a) (i.e., relating to liquidated damages
for the delay) was rejected because the Tribunal found the claimant
entitled to extension of time as the ACC Unit project envisaged
Hook-up / connection to the turbine generator flange which could
took place only in February 2015 as turbine generator installation,
which was being done by another contractor employed by OPG, got
delayed.118 The counterclaim (b) (i.e., reimbursement of customs
duties) was rejected because, according to the Tribunal, as per the
Supply Purchase Order, all Taxes, duties and levies were to be borne
by the purchaser (appellant(s) herein).119 Insofar as counterclaim
(c) was concerned, it was allowed and the counterclaimant was
allowed set off in respect thereof. The summary of how each of the
counterclaims were dealt with, is found in paragraph 17 of the Award.

118 See paragraphs 13.13 (c) and 13.15 of the Award, extracted in 88 (10) and 88 (19) above.
119 Paragraph 14 of the Award.
[2024] 9 S.C.R. 595

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

126. We have, therefore, to consider whether the two counterclaims (d)
and (e) were justifiably held time-barred or not. More particularly,
because claimant’s claim which arose out of same contract was
found within limitation.
127. Since counterclaim is to be treated as a separate suit or a cross-suit,
its limitation would have to be determined independent of the claim,
based on the cause of action espoused therein. Therefore, we would
have to determine as to when the right to seek for the counterclaims
(d) and (e) accrued. In this context, while dealing with the previous
issue i.e., regarding the claim being within limitation, we noticed a
few dates which, in our view, would be helpful in determining the
present issue. These dates are:
(a) May 2015 - when ACC Unit got commissioned and was operating
satisfactorily, as per certificate dated 2 March 2017 issued by
OPG.
(b) 21 September 2015 – deemed date of takeover of the project
i.e., when all alleged defects were removed by the claimant,
and a request was made by the claimant to the purchaser
(appellant(s) herein) to undertake performance guarantee test.
(c) 19 March 2016 – when the period of 180 days of guaranteed
performance expired. This date is important because, as per
the contract, if, within the aforesaid period, the performance
guarantee test is not undertaken, despite request of the supplier,
it is to be deemed that the supplier has discharged its liability
of a guaranteed performance of 180 days.
128. The Tribunal takes 21 September 2015 as the start point of limitation
for the counterclaim on the premise that it would be the date when
the Takeover Certificate is deemed to have been issued. That is, the
supplier had fulfilled its obligations. On basis thereof, the Tribunal
found counterclaims (d) and (e) barred by time as the counterclaim
was filed on 15 July 2019 i.e., more than three years later, and there
existed no acknowledgement in respect thereof.
129. However, while dealing with the previous issue, we found 19 March
2016 as the start point of limitation for the claim because that is the
date when 180 days period of guaranteed performance, which was
part of supplier’s liability, expired. Be that as it may, whether we
count the limitation period from 21 September 2015 or 19 March
596 [2024] 9 S.C.R.

Digital Supreme Court Reports

2016, the counterclaim which was filed on 15 July 2019 was beyond
the prescribed period of three years inasmuch as its cause of action
could not have arisen after 19 March 2016 because by 19 March
2016, the supplier / contractor had fulfilled its obligation of guaranteed
performance for 180 days.
Minutes of meeting dated 19 April 2018 did not extend limitation
of counterclaims (d) and (e)
130. In these circumstances, the question that falls for our consideration
is whether the minutes of meeting dated 19 April 2018 extended the
period of limitation for counterclaim(s)120 (d) and (e) as it did for the
claim as well as counterclaims (a) (b) and (c). The contention on behalf
of the appellant(s) is that the claim and the counterclaim arose out of
same contractual relationship, therefore, if the acknowledgment dated
19 April 2018 extends limitation of one part of the claim/ counterclaim,
it would automatically extend limitation of the remaining part of the
claim / counterclaim. Per contra, learned counsel for Enexio (R-1)
contended that there could be multiple claims arising out of the same
contract, if the acknowledgment extending limitation under Section
18 of 1963 Act relates to only few, limitation for the rest would not
get extended. Thus, the Tribunal committed no such error which may
warrant interference under Section 34 of the 1996 Act.
131. We have given our thoughtful consideration to the rival submissions.
The minutes of meeting dated 19 April 2018 was drawn within three
years of accrual of the cause of action for the claim, whether we
count limitation from 19 March 2016 (as determined by us) or 21
September 2015 (as determined by the Tribunal). Therefore, the
crucial question, which we must consider and decide, is whether those
minutes could be considered as an acknowledgment of subsisting
liability qua counterclaims (d) and (e).
132. The minutes121 of meeting dated 19 April 2018 incorporates a table
giving specific description of the items and their corresponding value
on which parties, purportedly, admitted their respective liabilities.
Interestingly, the balance amount payable to the contractor (Enexio -
R-1) finds mention there and so does contractor’s liability towards

120 For description of counterclaims (a) to (e), see paragraph 126 of this judgment.
121 Extracted in paragraph 7 of this judgment
[2024] 9 S.C.R. 597

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

liquidated damages, customs duty, dismantling – TG Building and
ACC Duct fabrication, which have all been addressed on merits in the
Award. But, there is no mention of items referable to counterclaims
(d) and (e), which have been held time barred. Further, the minutes
do not state that parties acknowledge, or are willing to settle, any
other, or all their rights/ obligations, arising from, or under, the
contract. Thus, the acknowledgment is specific and in respect of
certain items only.
133. In J.C. Budhraja (supra) this Court held that a writing to be an
acknowledgement of liability must involve an admission of a subsisting
jural relationship between the parties and conscious affirmation of an
intention of continuing such relationship regarding existing liability.
The Court added that the admission need not be in respect of any
precise amount nor by expressed words. However, it was clarified
that any admission of jural relationship in regard to a certain sum
due, or a pending claim, cannot be an acknowledgement for a new
additional claim for damages.122 That apart, in J.C. Budhraja (supra),
this Court rejected an argument that if there was acknowledgment of
any liability in regard to a contract, then one was at liberty to make
any claim in regard to the contract. Relevant portion of the judgment
is extracted below:
“27. The appellant next contended, relying on Section 18 of
the Limitation Act, that as there was acknowledgement of
liability in regard to Contract no. 30/F-2 in the letter dated
28-10-1978, and the notice invoking arbitration was issued
on 4-6-1980 within three years from 28-10-1978, he was at
liberty to make any claim in regard to the contract before
the arbitrator even though such claims had not been made
earlier and all such claims have to be treated as being
within the period of limitation. Such a contention cannot
be countenanced. As noticed above, the cause of action
arose on 14-4-1977. But for the acknowledgement on 28-
10-1978, on the date of invoking arbitration 4-6-1980, the
claims could have been barred by time as being beyond
the period of limitation. The limitation is extended only in
regard to the liability which was acknowledged in the letter

122 See paragraph 21 of J.C. Budhraja (supra) extracted in paragraph 119 of this judgment.
598 [2024] 9 S.C.R.

Digital Supreme Court Reports

dated 28-10-1978. It is not in dispute that either on 28-10-
1978 or on 4-3-1980, the contractor had not made the fresh
claims aggregating to Rs.67,64,488 and the question of
such claims made in future for the first time on 27-6-1986,
being acknowledged by OMC on 28-10-1998 did not arise.”
(Emphasis supplied)
134. On the question of extension of limitation, where only a part of the
liability, or a specific amount, is acknowledged during the period of
limitation, there are long-standing decisions of various High Courts
upholding the same principle as is discernible from the decision in
J.C. Budhraja (supra). Some of these decisions are being noticed
below.
135. In Bans Gopal v. Mewa Ram123 in the context of applicability of
Section 19 of the 1908 Act, which is pari materia Section 18 of the
1963 Act, the question before the Allahabad High Court was, whether
a creditor could recover Rs.585 when acknowledgment was in respect
of Rs.200 only. One of the arguments was that acknowledgment of
a sum of Rs.200 cannot be taken as an acknowledgment of a sum
of Rs.585. Accepting the argument, the Court held:
“4. ….. It is true that if no definite sum had been mentioned
and there had been an acknowledgement in general terms
the amount of the debt would have been discovered from
the evidence as mentioned in Explanation 1, Section 19
of the Limitation Act. In the present case, however, there
is a definite acknowledgement of Rs.200 and if this is
to be used to save limitation, it could be done only with
respect to the sum acknowledged, and not with respect
to any sum that may be proved to be due on that date.”
(Emphasis supplied)
136. In Kali Das Chaudhuri v. Drapaudi Sundari Dassi124 for the purpose
of seeking the benefit of extension of limitation, the letter sought to
be relied by the plaintiff as an acknowledgement made by solicitor
of the defendant stated thus:

123 AIR 1930 All 461 : 1929 SCC OnLine All 152
124 AIR 1918 Cal 294: 1917 SCC OnLIne Cal 23
[2024] 9 S.C.R. 599

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

“Your client Babu Hari Prasad Saha was the gomoshta
at Calcutta in the employ of the firm of Dwarka Nath
Makhan Lal Saha, remunerated by a share of the profits,
and being liable for a proportionate share of the losses.
He was struck by paralysis in the Bengali year 1307, from
which time he could not do active work. He, however,
continued to be in Calcutta till 1311 when he left Calcutta
and went away to his home at Urapara. Our clients have
all along been ready and willing to have the accounts
duly taken up to this time that your client retired from
Calcutta. Your client as the managing gomostha has
to make up and explain the accounts up to that time.
Our clients will offer every facility in the matter of the
adjustment of accounts. …… It is not the fact that your
client retired on 27th June 1910. He ceased to do active
work in 1307 and retired in 1311. Our clients have no
recollection of any notice from Messrs Dutta and Guha.
Our clients are ready to pay to your client whatever may
be found due on an adjustment of the accounts up to
1311.”
Interpreting the aforesaid letter, in the context of plaintiff’s argument
that it be treated as an acknowledgment of subsistence of relationship
up to 27 June 1910, the Calcutta High Court held:
“Now, as I read that letter, that contains three material
statements: it contains a statement that plaintiff was
gomostha of the defendants; the second statement is
that he was employed up to 1311 (BS) (corresponding
with 1904 - 1905], and no longer; and the third statement
is that the defendants were willing and ready to pay to
the plaintiff whatever might be found due to him on an
adjustment of the accounts up to 1311. Now, what is the
claim of the plaintiff in this case? He brought his suit in
order to establish his right to have the accounts taken
upon the basis that he was a partner, and that he was
entitled to have the accounts taken down to June 1910.
The defendants’ solicitors wrote that he was not a partner
and that he was not entitled to have the accounts taken
up to 1910, but that he was only entitled to have the
accounts up to 1311 (BS) (corresponding with 1904 –
600 [2024] 9 S.C.R.

Digital Supreme Court Reports

1905). I cannot understand how that can be taken to be
an acknowledgement of the right which the plaintiff was
endeavoring to substantiate in his plaint. I can understand
it being said and argued with considerable force that it
was an acknowledgement of some part of the plaintiffs
claim, inasmuch as his claim was to have the accounts
taken up to June 1910, and inasmuch as the defendants
admitted that he was entitled to have the accounts taken
up to 1904 - 1905: to that extent it is an acknowledgment,
but in my judgment it is not an acknowledgement of the
right alleged by the plaintiff, namely, that he was entitled
to have the accounts taking up to June 1910.”
(Emphasis supplied)
137. Having considered the judicial precedents on the subject, in our
view, to extend the period of limitation with the aid of Section 18,
the acknowledgment must involve an admission of a subsisting jural
relationship between the parties and a conscious affirmation of an
intention of continuing such relationship regarding an existing liability.
Such intention can be gathered from the nature of the admission.
In other words, the admission in question need not be express, or
regarding a precise amount, but must be made in circumstances and
in words from which the court can reasonably infer that the person
making the admission intended to refer to a subsisting liability as on
the date of the statement. However, where an acknowledgement is
in respect of a specified sum of money or a specific right only, and
not in general terms, it would extend the period of limitation only in
respect thereof, and not of other claims which, though may have
arisen out of same jural relationship, are not specified therein. In
other words, where an acknowledgement of liability is made only
with reference to a portion of the claim put forward by the plaintiff/
claimant, it would extend limitation only in respect of such portion,
and not of the entire claim of the plaintiff.
138. Reverting to the case in hand, the minutes of meeting dated 19 April
2018 made no reference to the items referable to counterclaims
(d) and (e). There is also no acknowledgment in general terms in
regard to liabilities subsisting under the contract. Therefore, in our
view, the said minutes could not be treated as an acknowledgment
for the purpose of extending limitation of counterclaims (d) and
[2024] 9 S.C.R. 601

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

(e), which were not specified therein. In consequence, when
counterclaims (d) and (e) were otherwise barred by limitation on
the date of filing of counterclaim, the Tribunal was legally justified
in rejecting them as barred by limitation. Sub-issue (c) is decided
in the aforesaid terms.
REJECTION OF PRAYER TO DECLARE DEBIT NOTES INVALID
DID NOT AFFECT ENEXIO’S CLAIM FOR THE OUTSTANDING
PRINCIPAL AMOUNT.
139. We shall now consider whether rejection of Enexio’s prayer to
declare debit notes invalid, had adversely affected the claim for the
outstanding principal amount in respect of the goods supplied/ work
done under the contract. In this regard, at the outset, we must bear
in mind that it is trite that limitation bars the remedy but does not
extinguish the right, save in a case which is covered by Section 27 of
the 1963 Act.125 It is equally settled that in a suit or a claim, multiple
reliefs may be claimed by virtue of Order II Rule 3 of the Code of
Civil Procedure, 1908,126 that is, the plaintiff may unite in the same
suit several causes of action against the same defendant(s). The
period of limitation is prescribed by the Schedule to the 1963 Act.127
The Schedule to the 1963 Act is divided into three Divisions. The
First Division, which deals with suits, is relevant for the purposes of
this case inasmuch as by virtue of Section 43 (1) of the 1996 Act
the provisions of the 1963 Act apply to arbitrations as they apply to
proceedings in Court. The First Division of the Schedule comprises
of ten (X) Parts. Each Part deals with suit(s) of a different nature.
The period of limitation, including its start point, is dependent on its
nature as well as event, if any, as specified in the Article(s) of the
Schedule. Therefore, when CPC, in certain circumstances, permits
combining in one action two or more distinct and independent claims,
it is quite possible that one of the claims may be barred by limitation
and the other may be within time.128

125 Prem Singh & Ors v. Birbal & Ors., (2006) 5 SCC 353, paragraphs 11 and 12.
126 Order II Rule 3, CPC.— Joinder of causes of action.— (1) Save as otherwise provided, a plaintiff may
unite in the same suit several causes of action against the same defendant, or the same defendants
jointly; and any plaintiffs having causes of action in which they are jointly interested against the same
defendant or the same defendants jointly may unite such causes of action in the same suit.
(2) Where causes of action are united, the jurisdiction of the Court as regards the suit shall depend
on the amount or value of the aggregate subject-matter at the date of instituting the suit.
127 See Section 2(j) of the Limitation Act, 1963.
128 See Mohamed Ghasita v. Siraj-ud-Din and Ors. (supra), extracted in paragraph 97 of this judgment.
602 [2024] 9 S.C.R.

Digital Supreme Court Reports

140. In the instant case, as already held, the claim for compensation i.e.,
recovery of outstanding principal amount was covered by Article
55 of the Schedule and the start point of limitation was 19 March
2016; whereas for the relief of declaration, Article 58 was applicable.
For which, the start point of limitation was the date when the debit
note was communicated to Enexio i.e., the claimant. According to
the arbitral tribunal, one debit note was issued on 24 August 2015,
which was acknowledged by the claimant vide letter dated 28 August
2015, and the other was issued on 12 January 2016. Therefore, the
period of limitation i.e., three years expired before 2 May 2019, that
is, when request for arbitration was received by ICC Secretariat. In
these circumstances, the relief for declaratory relief was held barred
by limitation, and rightly so, by the arbitral tribunal.
141. Now, the question is whether rejection of declaratory relief impacted
the relief for compensation. Answer to it, in our view, is obviously no.
The reason is that the relief for compensation was not a consequential
relief i.e., dependent on debit note(s) being declared invalid because
issuance of debit note(s) was a unilateral act of the employer which
on its own did not extinguish the right of the contractor. No doubt,
where the relief sought is consequential to the declaration, and
declaratory relief is found barred by time, the prayer for consequential
relief will also fail.129 But where declaration is just an optional relief
i.e., on which the main relief is not dependent, rejection of it as
barred by limitation would not extinguish the claim in respect of
which substantive relief is sought. In the instant case, debit note was
unilaterally issued by the employer of the contractor. It, therefore,
did not bind the contractor. In such circumstances, it was open for
the contractor to sue for its dues without seeking a declaration qua
the debit notes. Consequently, rejection of the declaratory relief as
barred by limitation, in our considered view, did not have a material
bearing on Enexio’s claim against the appellant(s) herein for the
outstanding principal amount payable under the contract. And, further,
that amount, as shown debited in the debit note(s), was not to be
automatically adjusted against the principal outstanding amount
payable to Enexio. In our view, while deciding the claim of Enexio,
the arbitral tribunal was well within its remit to adjudicate upon the

129 See Padhiyar Prahladji Chenaji v. Maniben Jagmalbhai & Ors., (2022) 12 SCC 128, paragraph 17
[2024] 9 S.C.R. 603

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

issue whether such amount should be adjusted or not against the
outstanding principal amount payable to Enexio. For the reasons
aforesaid, there is no perversity in the award on this count. Sub-
issue (d) is decided accordingly.
THE ARBITRAL TRIBUNAL DID NOT ADOPT DIFFERENT
YARDSTICK / REASONING OF THE ARBITRAL TRIBUNAL IS
NOT FLAWED OR PERVERSE
142. The next argument on behalf of the appellant(s) is that the arbitral
tribunal adopted different yardstick for adjudicating the claim than what
was adopted for the counterclaim; and the reasoning is completely
flawed and perverse. By referring to paragraphs 16.03 (d)130 and
16.04131 of the award it was submitted:
(a) If negotiations could extend limitation for the claim, it would
extend limitation for the counterclaim as well, because both
arise from same contractual relationship. Moreover, it is well
settled that negotiations by themselves do not extend limitation
as held by this Court in Geo Miller (supra) and B & T AG
(supra).
(b) If the minutes of meeting dated 19 April 2018 could be relied
on to hold that appellant(s) had admitted their liability qua the
claim for the outstanding principal amount, it ought to have
been relied also for upholding Enexio’s liability qua liquidated
damages for delay and customs duty.
143. At first blush, the above arguments appear attractive, but, when
we test them by reading the award in its entirety, we find that the
tribunal did not reject the counterclaims qua liquidated damages
and custom duties as barred by limitation. Rather, rejected them
on merit. Liquidated damages were denied because Enexio was
entitled to 539 days extension for completion; and customs duties
were found payable by the purchaser. The findings thereon are
based on construction of the terms of the contract with reference to
the conduct of the parties, therefore, it does not call for interference
under Section 34 of the 1996 Act.

130 See paragraph 15 of this judgment wherein paragraph 16.03(d) of the award has been extracted.
131 See paragraph 16 of this judgment wherein paragraph 16.04 of the award has been extracted.
604 [2024] 9 S.C.R.

Digital Supreme Court Reports

144. As far as extension of limitation by negotiation is concerned, a careful
look at paragraph 16.03(d) of the arbitral award would indicate that
there is a reference to two more aspects, ‘apart from meaningful
negotiations’, to conclude that limitation for the claim was saved.
These are: (a) the minutes of meeting dated 19 April 2018; and (b)
the written offer of OPG (respondent(s) to the claim) dated 26 May
2018 to settle the matter. We have already found, while deciding sub-
issues (b) and (c), that the minutes of meeting dated 19 April 2018
tantamounted to an acknowledgment under Section 18 of the 1963
Act qua the items mentioned therein. We also noticed that it carried
no mention regarding those items on which counterclaims were based,
and therefore, they were rejected as barred by limitation. In these
circumstances, though paragraph 16.03(d) of the award gives the
impression that limitation was extended because negotiations were
ongoing in respect of items related to the claim, the limitation was
extended by applying the principle of acknowledgment as enshrined
in Section 18 of the 1963 Act on basis of two documents i.e., the
minutes of meeting dated 19 April 2018; and the offer letter dated
26 May 2018. Importantly, the principle of extension of limitation
by acknowledgement was applied in respect of only those claims
regarding which a mention was there in the minutes of meeting
dated 19 April 2018. In respect of claims regarding which there was
no recital in the minutes, the tribunal observed that they were not
part of the negotiations. Thus, though the term used in paragraph
16.03(d) of the award is ‘negotiation(s)’, the tribunal, by referring
to minutes dated 19 April 2018 and settlement offer dated 26 May
2018, indicated the underlying legal principle / rationale behind its
conclusion. We, therefore, conclude that though reasons recorded
in the award at first blush appear insufficient, or a bit confusing, but,
when those reasons are examined in the context of the documents
placed and the arguments advanced, the underlying reasons, which
form basis of the conclusion, are not only intelligible but sound. For the
aforesaid reasons and in the light of the law expounded in paragraph
71.6 above, we reject the submission of the appellant(s)’ counsel
that the reasoning of the arbitral tribunal is flawed/perverse or that
the award is vitiated by adopting different yardstick for adjudging the
claim than what was adopted for the counterclaim. Even otherwise,
the mistake, if any, committed by the arbitral tribunal in using the
words ‘ongoing negotiations’ in place of acknowledgement is trivial
does not go to the root of the matter as to have a material bearing
[2024] 9 S.C.R. 605

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

on the conclusion. Therefore, for this mistake alone, the award is
not liable to be set aside.
145. The other submission on behalf of the appellant that the arbitral
tribunal was obliged to accept the admission contained in the minutes
of meeting dated 19 April 2018 qua liquidated damages and customs
duties, because it relied on it for extending the limitation, is equally
unacceptable. Reason being that acknowledgment is just a piece of
evidence, like an admission. An admission can always be explained.
Therefore, even if it is used for extending the limitation, it cannot be
regarded as conclusive proof of either the claim or the counterclaim
regarding which there is an acknowledgement. Because the Court
or the Tribunal would have to decide the claim or the counterclaim,
if within limitation, upon consideration of the entire evidence led
before it. No doubt, in that process, the acknowledgement would also
have to be considered as a piece of evidence. Thus, in our view,
the tribunal was well within its jurisdiction in drawing a conclusion,
based on consideration of the entire evidence, at variance with the
recitals in the acknowledgement.
146. Otherwise also, as is clear from the award, the claimant had
challenged the recital in the minutes i.e., regarding its liability for
liquidated damages and customs duties, by claiming that it was
economically coerced into making such admission. Circumstances,
proven on record, indicated that (a) soon after the meeting dated
19 April 2018, the claimant had sent a denial of its liability; and (b)
later, on 26 May 2018, the appellant(s) herein had made an offer
of Rs.3 crores to Enexio towards full and final settlement of all its
claim. In these circumstances, based on the evidence led by the
parties, the tribunal was well within its remit to conclude that the
claimant was not liable in respect of those items which formed part
of the counterclaim. Such conclusion, which is based on proven
circumstances, is a plausible view and cannot be termed perverse.
Hence, it is not amenable to interference in a challenge under Section
34 of the 1996 Act. In our view, therefore, the learned Single Judge
of the High Court erred in law while interfering with the arbitral award.
147. Before closing discussion on the issue, it would be necessary to
address an alternative submission raised on behalf of the appellants.
It was argued that the learned Single Judge and the Division Bench
of the High Court, admittedly, were exercising jurisdiction under
606 [2024] 9 S.C.R.

Digital Supreme Court Reports

Sections 34 and 37, respectively, of the 1996 Act. As, while exercising
jurisdiction under Section 34, the Court does not sit in appeal over
the award, it cannot substitute the reasoning in the award with its
own. Likewise, the appellate court exercising power under Section
37 cannot have greater power than what a Court possesses under
Section 34. Consequently, it was argued, the appellate court (i.e.,
the Division Bench of the High Court) exceeded its jurisdiction while
providing its own reasons to support the conclusion in the award. It
was also urged that in absence of proper reasons in the award, the
only course available was to set aside the award with liberty to the
parties to undertake fresh arbitration.
148. We have given due consideration to the above submission. In our
view, a distinction would have to be drawn between an arbitral award
where reasons are either lacking/unintelligible or perverse and an
arbitral award where reasons are there but appear inadequate
or insufficient.132 In a case where reasons appear insufficient or
inadequate, if, on a careful reading of the entire award, coupled
with documents recited/ relied therein, the underlying reason,
factual or legal, that forms the basis of the award, is discernible/
intelligible, and the same exhibits no perversity, the Court need
not set aside the award while exercising powers under Section 34
or Section 37 of the 1996 Act, rather it may explain the existence
of that underlying reason while dealing with a challenge laid to
the award. In doing so, the Court does not supplant the reasons
of the arbitral tribunal but only explains it for a better and clearer
understanding of the award.
149. In the instant case, the appellate court took pains, and rightly so, to
understand and explain the underlying reason on which the claim
of Enexio was found within limitation. As noticed above, paragraph
16.03 (d) of the award contains the reason based on which the
arbitral tribunal concluded that Enexio’s claim was within limitation.
However, in paragraph 16.03 (d), the arbitral tribunal failed to state,
in so many words, that it was treating the minutes of meeting dated
19 April 2018 as an acknowledgment within the meaning of Section
18 of the 1963 Act. This omission on the part of the arbitral tribunal
was trivial and did not travel to the root of the award, therefore, in our

132 See paragraphs 71.2 to 71.6 of this judgment.
[2024] 9 S.C.R. 607

OPG Power Generation Private Limited v.
Enexio Power Cooling Solutions India Private Limited & Anr.

view, the appellate court was well within its jurisdiction to explain the
underlying legal principle which the arbitral tribunal had applied; and
in doing so, it did not supplant the reasons provided in the award.
In this view of the matter, the impugned order of the Division Bench
does not suffer from any legal infirmity. Sub-issue (e) is decided in
the aforesaid terms.
SUMMARY OF OUR CONCLUSIONS
150. In the light of the analysis above, we summarize our conclusions
as follows:
(i) Though the ACC Unit /project was of OPG, Gita Power, as
the holding company of OPG, had actively participated in the
formation of the contract for the project. Not only did it place
purchase order(s) on Enexio but made advance payment(s)
thereunder to Enexio, which were subsequently affirmed by
OPG. The two, therefore, not only acted as a single economic
entity but as agents of each other. Hence, the arbitral tribunal
was justified in holding that Gita Power was bound by the
arbitration agreement and jointly and severally liable along with
OPG to pay the awarded amount.
(ii) The claim of Enexio was an indivisible claim for compensation
in lieu of goods supplied, and work done, based on breach of
the contract, therefore limitation for the claim was governed by
Article 55, and not by Articles 14, 18 and 113, of the Schedule
to the 1963 Act.
(iii) The claimant’s claim for the outstanding principal amount
matured on 19 March 2016. Therefore, limitation started to
run from that date. However, even if we count limitation from
21 September 2015 (as found by the Tribunal) it will have no
material bearing on the award for the reason indicated below.
(iv) The limitation for the claim as well as counterclaim(s), other
than those relating to cost of repair/replacement of gear boxes
and fan modules, stood extended, under Section 18 of the 1963
Act, on the basis of acknowledgement made in the minutes of
meeting dated 19 April 2018, and, therefore, those were within
limitation as on the date of : (a) commencement of arbitration
(i.e. 2 May 2019); and (b) the date of filing counterclaim (i.e.
15 July 2019) and were rightly considered on merit.
608 [2024] 9 S.C.R.

Digital Supreme Court Reports

(v) The counterclaims qua cost of repair /replacement of gear
boxes and fan modules were rightly held barred by time as in
respect thereof there was no recital in the minutes of meeting
dated 19 April 2018.
(vi) Rejection of prayer to declare debit notes invalid, on ground
of limitation, had no adverse impact on the claimant’s claim
for compensation, which was well within the extended period
of limitation.
151. Based on our conclusions above, we are of the view that there is no
palpable error in the arbitral award as to be termed ‘patently illegal’ /
‘perverse’, or in conflict with public policy of India. Therefore, the
Division Bench of the High Court was justified in setting aside the
judgment and order of the Single Judge and restoring the arbitral
award. Accordingly, the appeal(s) fail and are hereby dismissed.
Parties to bear their own costs.
152. Pending application(s), if any, stand disposed of.

Result of the Case: Appeal dismissed.

†
Headnotes prepared by: Nidhi Jain