SOMDATT BUILDERS-NCC-NEC(JV)versusNATIONAL HIGHWAYS AUTHORITY OF INDIA & ORS.

                 [2025] 2 S.C.R. 203 : 2025 INSC 113

                Somdatt Builders-NCC-NEC(JV)
                              v.
           National Highways Authority of India & Ors.
                       (Civil Appeal No. 2058 of 2012)
                               27 January 2025
               [Abhay S. Oka and Ujjal Bhuyan,* JJ.]


                           Issue for Consideration
       Issue arose as regards correctness of the judgment of the Division
       Bench setting aside the arbitral award u/s.37 of the Arbitration and
       Conciliation Act.

                                  Headnotes†
       Arbitration and Conciliation Act, 1996 – s.34 and 37 –
       Jurisdiction under – Exercise of – Interference with the
       decision of the arbitrator – Execution of contract awarded by
       National Highways Authority of India-NHAI to the appellant
       regarding construction of lanes on National Highway – Dispute
       as regards geogrid/geotextile material exceeded the Bill of
       Quantities-BOQ quantities in the contract, and the power
       of the Engineer to revise the rates given in the BOQ in the
       event of increase in actual quantities – Appellant’s case that
       the Engineer/Employer intending wrongful application of the
       Conditions of Particular Application for downward revision of
       rates for BOQ item of geogrid for quantity in excess of BOQ
       quantity – Recommendation by Dispute Review Board-DRB that
       quantities of geogrid required limited to facia area provided
       in the BOQ to be paid as per the BOQ rates – Invocation of
       arbitration clause by NHAI – Arbitral tribunal holding that the
       quantity of geogrid given at the tender stage by NHAI was
       wrong, there was no change in the design but mere increase
       in the quantity beyond the BOQ quantity, directed NHAI to pay
       the appellant for the actual quantity of geogrid required to be
       executed to complete the work as per the approved design
       at the BOQ rate – Application by NHAI u/s.34 – Single Judge
       of the High Court upheld the arbitral award – However, the
       Division Bench set aside the same – Sustainability:


* Author
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       Held: Not sustainable – Great deal of restraint is required to
       be shown by the Courts while examining the validity of an
       arbitral award when such an award has been upheld, wholly or
       substantially, u/s.34 – Court cannot undertake an independent
       assessment of the merits of the award and must only ascertain that
       the exercise of power by the court u/s. 34 has not exceeded the
       scope of the provision – View taken by DRB and arbitral tribunal,
       both comprising of technical experts, that there is no variation
       either in the form or quality or quantity of the works is the correct
       one which was acknowledged by the Single Judge – At the time
       of execution of the contract, the geogrid required turned out to
       be much more than the estimated figure given in the contract –
       As such both the fact finding authorities held that there was no
       variation in terms of Clause 51.1 and the Engineer did not have
       the competence to renegotiate the price or rate of the geogrid
       for the excess quantity of geogrid required – This is clearly a
       plausible view – It is the correct interpretation of Clause 51 made
       by the DRB and the arbitral tribunal, in a reasonable manner
       based on the evidence on record – As such, the Single Judge
       rightly declined to interfere with the award of the arbitral tribunal
       u/s.34, affirming the decision of the DRB – Division Bench of the
       High Court not at all justified in setting aside the arbitral award
       exercising extremely limited jurisdiction u/s.37 by merely using
       expressions like ‘opposed to the public policy of India’, ‘patent
       illegality’ and ‘shocking the conscience of the court’ – Thus, the
       judgment and order passed by the Division Bench of the High
       Court is set aside and the arbitral award is restored. [Paras 27.3,
       28, 33, 34, 36, 42, 43]

       Arbitration and Conciliation Act, 1996 – Arbitral award – Public
       policy in India – Explanation:
       Held: Public policy in India means the fundamental policy of Indian
       law – Violation of Indian statutes linked to public policy or public
       interest and disregarding orders of superior courts in India would
       be regarded as being contrary to the fundamental policy of Indian
       law – It would also mean that the arbitral award is against basic
       notions of justice or morality – Arbitral award can be set aside on
       the ground of patent illegality, where the illegality goes to the root
       of the matter but reappreciation of evidence cannot be permitted
       under the ground of patent illegality. [Para 37]
[2025] 2 S.C.R.                                                                205

                    Somdatt Builders-NCC-NEC(JV) v.
               National Highways Authority of India & Ors.

                               Case Law Cited
     Ssangyong Engineer and Construction Company Ltd. v. NHAI
     [2019] 7 SCR 522 : (2019) 15 SCC 131; Reliance Infrastructure
     Ltd. v. State of Goa [2023] 8 SCR 379 : (2024) 1 SCC 479 –
     relied on.
     S.V. Samudram v. State of Karnataka [2024] 1 SCR 281 :
     (2024) 3 SCC 623; M/s. Hindustan Construction Company Ltd. v.
     M/s NHAI [2023] 11 SCR 623 : (2024) 2 SCC 613; Konkan Railway
     Corporation Limited v. Chenab Bridge Project Undertaking [2023]
     11 SCR 215 : (2023) 9 SCC 85; M/s. Larsen Air Conditioning
     and Refrigeration Company v. Union of India 2023 INSC 708 :
     [2023] 11 SCR 86; MMTC Ltd. v. Vedanta Limited [2019] 3 SCR
     1023 : (2019) 4 SCC 163; MP Power Generation Company Ltd. v.
     Ansaldo Energia SPA (2018) 16 SCC 661; Associate Builders v.
     DDA [2014] 13 SCR 895 : (2015) 3 SCC 49; PSA Sical Terminals
     Private Ltd. v. Board of Trustees of V.O. Chidambranar Port Trust
     Tuticorin [2021] 5 SCR 408 : (2023) 15 SCC 781– referred to.
     Grinaker Construction (TVL) Ltd Vs. Transvaal Provincial
     Administration, 1982 (1) AD 78 – referred to.

                                  List of Acts
     Arbitration and Conciliation Act, 1996.

                              List of Keywords
     Dispute Review Board; Arbitral award; Interference with arbitral
     award; Public policy; Public policy in India; Patent illegality; Bill of
     quantities; Geogrid; Geotextile; General Conditions of Contract;
     National Highway; Variation in quantity; Variation in design;
     Technical experts; Interference with the decision of arbitrator;
     Execution of contract awarded by National Highways Authority of
     India; Construction of lanes on National Highway; Arbitration clause;
     Court of appeal; Interpretation of contractual terms; Opposed to
     the public policy of India; Patent illegality; Shocking the conscience
     of the court; Basic notions of justice or morality.

                             Case Arising From
     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2058 of 2012
     From the Judgment and Order dated 17.11.2009 of the High Court
     of Delhi at New Delhi in FAO No. 427 of 2007
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                          Appearances for Parties
       Arvind Minocha, Sr. Adv., Rakesh Kharab, Mayank Kshirsagar,
       Ms. Dhanlaxmi Iyer, Advs. for the Appellant.
       Krishnan Venungopal, Sr. Adv., Vikas Goel, Abhishek Kumar,
       Avinash Mathews, Ms. Garima Kaul, Santosh Kumar - I,
       Advs. for the Respondents.

                 Judgment / Order of the Supreme Court

                                 Judgment

       Ujjal Bhuyan, J.

       Heard learned counsel for the parties.
2.     This civil appeal by special leave is directed against the judgment
       and order dated 17.11.2009 passed by the High Court of Delhi at
       New Delhi (‘High Court’) in FAO(OS) No. 427 of 2007 [National
       Highways Authority of India Vs. Som Datt Builders-NCC-NEC(JV)].
       2.1. By the aforesaid judgment, the High Court allowed the
            appeal of the respondent-National Highways Authority of
            India (‘respondent’ or ‘NHAI’ hereinafter) under Section 37 of
            the Arbitration and Conciliation Act, 1996 (briefly ‘the 1996
            Act’ hereinafter). It may be mentioned that respondent had
            challenged, by way of the aforesaid appeal, the judgment and
            order of the learned Single Judge in OMP No. 316/2005 dated
            29.08.2007 whereby the learned Single Judge dismissed the
            application filed by NHAI under Section 34 of the 1996 Act
            for setting aside the award dated 03.06.2005 passed by the
            Arbitral Tribunal.
3.     The matter relates to execution of a contract awarded by NHAI to the
       appellant regarding the work of four laning and strengthening of the
       existing two lane section between Km. 470.000 and Km. 38.000 on
       NH-2 (construction package II-B) near Kanpur in the State of Uttar
       Pradesh under World Bank Loan Assistance.
4.     At the outset, it would be apposite to advert to the relevant facts.
5.     Following a process of open bid tender, the related contract was
       allotted by NHAI to the appellant vide the contract agreement dated
[2025] 2 S.C.R.                                                        207

                   Somdatt Builders-NCC-NEC(JV) v.
              National Highways Authority of India & Ors.

     27.03.2002 who undertook to execute the work at the contract price
     of Rs. 4,961,183,599.00. Appellant is a joint venture of Somdatt
     Builders Pvt. Ltd., Nagarjuna Construction Company and Navayug
     Engineering Company Limited having its principal place of business
     at East of Kailash, New Delhi.
6.   A joint venture between Consulting Engineering Services (I) Ltd.
     and BECA International Consultants Ltd. was appointed by NHAI
     as the Engineer of the project in terms of the contract agreement
     to supervise the construction work.
7.   It was a unit rate contract comprising of a detailed Bill of Quantities
     (BOQ). The BOQ contained description of the items of the work to be
     executed by the appellant as contractor and the estimated quantity
     of each item. The rates of each BOQ item were to be filled in by
     the contractor (appellant).
8.   The contract agreement provided for a mechanism of dispute
     resolution at the first instance through a Dispute Review Board (‘DRB’)
     prior to the parties availing of their remedy by way of arbitration.
     A three-member panel of DRB was constituted comprising of one
     member appointed by each of the two parties and the third member
     appointed by the aforesaid two members.
9.   While executing the contract, a dispute arose between the parties in
     respect of item No. 7.07 of the BOQ which provided for reinforced
     earth structure including soil reinforcing geogrid with all fixtures
     and accessories complete as per approved design and drawing of
     specialised firm and matters connected therewith. The dispute was
     not really in respect of the nature of the work to be performed but
     was the consequence of the geogrid/geotextile material exceeding
     the BOQ quantities in the contract. In essence, the dispute relates
     to power of the Engineer to revise the rates given in the BOQ in
     the event of increase in actual quantities. This was contested by
     the appellant.
10. Appellant raised the aforesaid dispute before the DRB contending
    that the Engineer/Employer was intending wrongful application of
    Clause 52.2 of the Conditions of Particular Application (COPA) for
    downward revision of rates for BOQ item No. 7.07 (ii) of geogrid for
    quantity in excess of BOQ quantity. DRB heard both the sides and
    deliberated upon the issue in detail. DRB vide its decision dated
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       15.03.2004 recommended that quantities of geogrid required limited
       to the facia area provided in the BOQ have to be paid as per the
       BOQ rates.
11. Respondent NHAI was not satisfied with the aforesaid decision of
    DRB and invoked the arbitration clause in the contract agreement
    whereafter the dispute was referred to arbitration before an Arbitral
    Tribunal comprising of three arbitrators: one arbitrator appointed by
    each of the two parties and the third arbitrator appointed by the two
    arbitrators so appointed. It is on record that each of the arbitrators
    were technical experts conversant with the nature of the contract.
    Arbitral Tribunal, by a majority of 2:1, passed the award dated
    03.06.2005. Arbitral Tribunal held that the quantity of geogrid given
    at the tender stage by NHAI was wrong. Therefore, the increase in
    quantity was a mere increase to meet the requirement for completion
    of the RE wall work which was indicated by the RCC facia quantity
    at the tender stage. There was no change in the design but mere
    increase in the quantity beyond the BOQ quantity which did not attract
    Clause 52.2. In this context, Arbitral Tribunal held that the Engineer
    does not possess the power to revise the rates for additional quantity
    of geogrid required for actual execution of work as per the approved
    design. Upholding the recommendations of DRB, Arbitral Tribunal
    held that variation in terms of Clause 51.1 was not established and
    directed NHAI to pay the appellant for the actual quantity of geogrid
    required to be executed to complete the work of RE wall as per the
    approved design at the BOQ rate.
12. The aforesaid award dated 03.06.2005 was challenged by the
    respondent-NHAI under Section 34 of the 1996 Act which was heard
    and decided by a learned Single Judge of the High Court. Learned
    Single Judge examined the contours of Clauses 51.1, 51.2, 52.1,
    52.2, 52.3 and 55.1 and came to the definite conclusion that there
    was no change in the design. The BOQ rate would apply since the
    matter was one of mere change in quantity. By the judgment and
    order dated 29.08.2007, learned Single Judge of the High Court
    found no merit in the application filed by NHAI under Section 34 of
    the 1996 Act and dismissed the same.
13. It was thereafter that NHAI as the appellant preferred the appeal
    before a Division Bench of the High Court under Section 37 of the
    1996 Act. The Division Bench examined the primary contention
[2025] 2 S.C.R.                                                        209

                   Somdatt Builders-NCC-NEC(JV) v.
              National Highways Authority of India & Ors.

     of NHAI that under the contractual terms, all variations in quantity
     beyond the tolerance limits set out in the contract, whether arising as
     a result of issuance of instructions by the Engineer or arising even
     without the issuance of instructions, were open to renegotiation of the
     rates by the Engineer. By the judgment and order dated 17.11.2009
     (‘impugned judgment’), Division Bench agreed with the contention
     of NHAI and set aside the award of the Arbitral Tribunal as well as
     the order of the learned Single Judge.
14. Being aggrieved, the contractor (appellant) preferred the related
    special leave petition. On 14.12.2009, this Court had issued notice
    and passed an interim order staying encashment of the bank
    guarantee subject to the appellant renewing it for a period of one
    year. Vide order dated 10.02.2012, this Court granted leave and
    directed continuance of the interim order. Hence the civil appeal.
15. Contention of the appellant is that it is NHAI who had provided the
    wrong quantity in respect of item No. 7.07 of the BOQ on the basis
    of which appellant had tendered. Upon approval of the design by
    the Engineer when the increased quantity became known in April,
    2003, the Engineer held that BOQ rate would be payable for the
    entire quantity which was not acceptable to NHAI. The increase in
    quantity was not as a result of any change in the design or as a
    result of any instructions given by the Engineer. The enhancement
    in the quantity was necessitated because wrong information was
    furnished by the respondent at the stage of tender itself. On dispute
    being raised, this position was accepted by the DRB and thereafter
    by the Arbitral Tribunal. Application filed by the respondent under
    Section 34 of the 1996 Act for setting aside of the arbitral award
    was rightly rejected by the learned Single Judge of the High Court.
    Division Bench of the High Court fell in error and committed a
    manifest mistake in overturning the technical findings of the three
    authorities below while exercising limited jurisdiction under Section 37
    of the 1996 Act.
16. Counter affidavit has been filed by respondent NHAI. Reliance has
    been placed on Clauses 51 and 52 of COPA. Clause 51 of COPA
    has two parts: 51.1 and 51.2. Clause 51.1 covers instructed variations
    which includes any increase or decrease in the quantity of work. As
    per Clause 51.2, for increase or decrease in quantity of any material,
    instructions of the Engineer are not required. A combined reading
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       of Clauses 51.1 and 51.2 would indicate that though increase or
       decrease in the quantity of any work may be without instructions but
       it nonetheless remains a variation. Once it is a variation, Engineer
       has got the power to fix a new rate. This power is traceable to
       Clause 52.1, which does not make any distinction between instructed
       variation or uninstructed variation; on the other hand, it provides
       that all variations referred to in Clause 51 are to be valued by the
       Engineer. In case of instructed variation only, notice is required to
       be given in terms of the second proviso to Clause 52.2. If this be
       the position, view taken by the Division Bench of the High Court is
       the correct one and calls for no interference.
17. Mr. Arvind Minocha, learned senior counsel for the appellant, at
    the outset submits that the core issue involved in this appeal is
    the justification or otherwise of the decision of the Division Bench
    of the High Court upsetting concurrent findings of three authorities
    while exercising jurisdiction under Section 37 of the 1996 Act. He
    submits that the dispute raised by the appellant was decided in its
    favour by the DRB comprising wholly of technical experts. Arbitral
    Tribunal again comprising of technical persons passed the award
    in favour of the appellant by confirming the decision of the DRB.
    When the respondent filed application under Section 34 of the 1996
    Act for setting aside of the award, learned Single Judge of the High
    Court dismissed the same and affirmed the award passed by the
    Arbitral Tribunal.
       17.1. Learned senior counsel submits that scope of interference
             by the appellate court under Section 37 of the 1996 Act
             is extremely limited. None of the grounds for invocation of
             jurisdiction under Section 37 of the 1996 Act were satisfied.
             Learned Single Judge while exercising jurisdiction under
             Section 34 of the 1996 Act had repelled the challenge of the
             respondent to the arbitral award. View taken by the learned
             Single Judge is a plausible view, if not the only possible view.
             Therefore, Division Bench committed a manifest error in setting
             aside the arbitral award as well as the order passed by the
             learned Single Judge affirming the same.
       17.2. Adverting to the facts of the case, learned senior counsel
             submits that the scope of the contract involved construction
             of 50 Kms. of road, service roads on both sides, drains,
[2025] 2 S.C.R.                                                        211

                       Somdatt Builders-NCC-NEC(JV) v.
                  National Highways Authority of India & Ors.

            17 main bridges, 65 culverts and 20 under-passes. The 51
            Kms. stretch of road included raised carriageway of about 22
            Kms. having Reinforced Concrete wall (RCC wall) on both
            sides for 9.5 Kms. and Reinforced Earth wall (RE wall) for
            about 12 Kms. with concrete facia panels. After the award of
            work, the design of the wall was to be done by the appellant
            based on the design criteria given in the contract with the
            approval of the Engineer appointed by the respondent. The
            item RE wall is mentioned at item No. 7.07 in the BOQ having
            three sub-items:
            (i)     RCC facia wall on both sides,
            (ii)    filter media,
            (iii) geogrid.
     17.3. He submits that dispute in the present matter relates to the sub-
           item geogrid as the respondent had given a wrong estimate of
           the quantity in respect of geogrid while correct quantities were
           given for the other two sub-items. This mistake was detected
           when the design was prepared by the appellant and approved
           by the Engineer. When the quantity of material in respect of
           geogrid increased, the Engineer decided that the BOQ rate
           would be applicable for the increased quantity of geogrid.
     17.4. After the appellant commenced the work, the respondent was
           making the monthly payment for the said item as per the BOQ
           rate. After a new Engineer was appointed by the respondent, it
           was decided that the rate for the increased quantity of geogrid
           should be renegotiated.
     17.5. Thereafter, the matter was referred by the appellant to the
           DRB which decided in favour of the appellant. DRB held that
           variation in terms of Clause 51.1 was not established and
           recommended payment of geogrid at the BOQ rate for the
           entire quantity.
     17.6. Respondent did not accept the above recommendations of
           the DRB and invoked the arbitration clause in the contract.
           Arbitral Tribunal, comprised wholly of technical persons, by
           a majority of 2:1 held that increase in the quantity of geogrid
           for erection of the RE wall as per the approved design could
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              not be termed as a variation in terms of Clause 51.1. Further
              holding that the Engineer did not have the power to revise the
              rate qua the BOQ rate for the additional quantity of geogrid
              required for execution of the work as per the approved design,
              Arbitral Tribunal directed payment as per the BOQ rate for
              the additional quantity.
       17.7. In the application filed by the respondent under section 34
             of the 1996 Act for setting aside of the arbitral award, the
             challenge centred around Clauses 51 and 52 only. Learned
             Single Judge rejected the challenge of the respondent and
             upheld the arbitral award. After the award was confirmed
             by the learned Single Judge under Section 34 of the 1996
             Act, the Division Bench acting as the appellate court was
             not at all justified to overturn the concurrent findings of three
             adjudicating fora while exercising extremely limited jurisdiction
             under Section 37 of the 1996 Act.
       17.8. He further submits that the interpretation given by the Division
             Bench is not only contrary to Clause 51.1 and the proviso to
             Clause 52.2 but renders those provisions completely otiose.
             Division Bench misdirected itself by stretching the meaning of
             the word variation by referring to dictionary meanings whereas
             the said expression has to be understood in the context of
             the relevant clauses of the contract. Division Bench failed to
             appreciate that in so far automatic increase in the quantity is
             concerned, the rate which is payable is the one as agreed
             in the BOQ. If any other rate is to be fixed, the same can be
             considered only in case of instructed variation provided 14
             days prior notice before commencement of the work is given
             which was admittedly not done in the present case. In this
             connection he places reliance on a Delhi High Court judgment
             in the case of NHAI vs. M/s ITD Cementation India Limited.1
       17.9. On the limited scope of interference under Section 37 of the
             1996 Act, learned senior counsel for the appellant has placed
             reliance on the following decisions:




1   (2009) 113 DRJ 176
[2025] 2 S.C.R.                                                         213

                         Somdatt Builders-NCC-NEC(JV) v.
                    National Highways Authority of India & Ors.

              (i)     S.V. Samudram Vs. State of Karnataka,2
              (ii)    M/s. Hindustan Construction Company Ltd. Vs. M/s NHAI 3
              (iii) Reliance Infrastructure Ltd. Vs. State of Goa 4
              (iv) Konkan Railway Corporation Limited Vs. Chenab Bridge
                   Project Undertaking 5
              (v)     M/s Larsen Air Conditioning and Refrigeration Company
                      Vs Union of India 6
              (vi) MMTC Ltd. Vs. Vedanta Limited 7
              (vii) MP Power Generation Company Ltd. Vs. Ansaldo Energia
                    SPA8
18. Per contra, Mr. Krishnan Venugopal, learned senior counsel appearing
    for NHAI submits that Division Bench of the High Court has rightly
    set aside the arbitral award finding the same to be perverse.
     18.1. He submits that the core issue involved in the present appeal
           is whether the arbitral award dated 03.06.2005 goes contrary
           to the only interpretation of Clauses 51 and 52 of the General
           Conditions of Contract (GCC) read with COPA as contained in
           the contract dated 27.03.2002 executed between the parties.
     18.2. Learned senior counsel submits that subject matter of the
           dispute relates to BOQ item No. 7.07 (II) i.e. geogrid. Due
           to change in design of the RE wall, quantity of geogrid
           increased almost by 300 percent during execution. Since the
           twin conditions contemplated under Clause 52.2 were being
           fulfilled i.e. overall quantity of geogrid executed by more
           than 25 percent from the estimated quantity and the cost of
           geogrid being more than 2 percent of the contract value, the
           rate for the additional quantity of geogrid was required to be
           reworked. Therefore, the present case is that of instructed


2   [2024] 1 SCR 281 : (2024) 3 SCC 623
3   [2023] 11 SCR 623 : (2024) 2 SCC 613
4   [2023] 8 SCR 379 : (2024) 1 SCC 479
5   [2023] 11 SCR 215 : (2023) 9 SCC 85
6   [2023] 11 SCR 86 : 2023 INSC 708
7   [2019] 3 SCR 1023 : (2019) 4 SCC 163
8   (2018) 16 SCC 661
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             variation under Clause 51.1(a) for which the appellant was also
             notified on 28.10.2003 fulfilling the requirement of 14 days’
             notice contained in Clause 52.2.
       18.3. Referring to the arbitral award, Mr. Venugopal submits that
             contrary to the evidence on record and contrary to the relevant
             clauses of the contract, Arbitral Tribunal held that it was not
             a case of instructions issued by the Engineer but a case of
             automatic increase of quantity. Referring to Clause 51.1(a),
             he submits that increase or decrease in quantity is also a
             variation and as per Clause 51.2, no instructions are required
             for such increase or decrease of quantity though the same
             continues to be a variation.
       18.4. Even assuming but not admitting that the Engineer did not
             issue any notice to the appellant then also, according to Mr.
             Venugopal, a bare reading of Clause 52.2 would make it
             apparent that for a non-instructed variation, the condition of
             giving 14 days’ notice would not apply.
       18.5. Learned senior counsel also submits that the contention
             of the appellant that the quantity of geogrid had increased
             due to negligence and wrong mentioning of figures by the
             respondent is totally fallacious in as much as Clause 55.1 of
             the contract clarifies that the quantity set out in the contract
             are the estimated quantities only.
       18.6. He would therefore contend that this is not a case of plausible
             interpretation but a case of adopting an interpretation which is
             contrary to the only possible interpretation of the contractual
             clauses. Arbitral Tribunal has rewritten the contract by
             ignoring the plain and simple language of the relevant
             clauses and the parties’ intentions besides overlooking the
             evidence on record which is legally impermissible. All these
             aspects were raised by the respondent in its application
             under Section 34 of the 1996 Act but the learned Single
             Judge failed to consider the same by placing reliance on a
             South African judgment which is clearly distinguishable in
             the facts of the present case. Therefore, Division Bench of
             the High Court acting as the appellate court under Section
             37 of the 1996 Act rightly interfered in the matter by setting
             aside the arbitral award.
[2025] 2 S.C.R.                                                               215

                          Somdatt Builders-NCC-NEC(JV) v.
                     National Highways Authority of India & Ors.

      18.7. Learned senior counsel has placed reliance on the following
            decisions to buttress his submissions:
               (i)     Associate Builders Vs. DDA9
               (ii)    Ssangyong Engineer and Construction Company Ltd.
                       Vs. NHAI 10
               (iii) PSA Sical Terminals Private Ltd. Vs. Board of Trustees
                     of V.O. Chidambranar Port Trust Tuticorin11
      18.8. Learned senior counsel further submits that the judgment in
            the case of NHAI Vs. M/s ITD Cementation India Limited, cited
            and relied upon by the appellant, is not applicable to the facts
            of the present case. Firstly, the judgment is by a Single Bench
            whereas the impugned order has been passed by a Division
            Bench which is also later in point of time. Secondly, the said
            judgment does not deal with the power of the Engineer to fix
            a new rate in terms of Clause 52.
      18.9. He finally submits that the present appeal is devoid of any merit
            and the same is therefore liable to be dismissed by this Court.
19. Submissions made by learned counsel for the parties have received
    the due consideration of the court.
20. At the outset, it would be relevant to advert to Clauses 51 and 52 of
    the GCC read with COPA. Clauses 51 and 52 are as under:
             Alteration, Additions and Omissions
             51.1 Variations (GCC)
             The Engineer shall make any variation of the form, quality
             or quantity of works or any part thereof that may, in his
             opinion, be necessary and for the purpose, or if for any
             other reason it shall, in his opinion, be appropriate, he
             shall have the authority to instruct the Contractor to do
             and the Contractor shall do any of the following:-
             (a)      increase or decrease the quantity of any work included
                      in the Contract.


9    [2014] 13 SCR 895 : (2015) 3 SCC 49
10   [2019] 7 SCR 522 : (2019) 15 SCC 131
11   [2021] 5 SCR 408 : (2023) 15 SCC 781
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       (b)   omit any such work (but not if the omitted work is to be
             carried out by the Employer or by another contractor),
       (c)   change the character or quality or kind of any such
             work,
       (d)   change the levels, lines, position and dimensions of
             any part of the works,
       (e)   execute additional work of any kind necessary for
             the completion of the works, or
       (f)   change any specified sequence or timing of
             construction of any part of the works.
       No such variation shall in any way vitiate or invalidate the
       Contract, but the effect, if any, of all such variations shall
       be valued in accordance with Clause 52.
       Provided that where the issue of an instruction to vary
       the works is necessitated by some default of or breach of
       contract by the Contractor or for which he is responsible,
       any additional cost attributable to such default shall be
       borne by the Contractor.
       51.2 Instructions for Variations (GCC)
       The Contractor shall not make any such variation without
       an instruction of the Engineer.
       Provided that no instruction shall be required for increase or
       decrease in the quantity of any work where such increase
       or decrease is not the result of an instruction given under
       this Clause, but is the result of the quantities exceeding
       or being less than those stated in the Bill of Quantities.
       52.1 Valuation of Variations (GCC)
       All variations referred to in Clause 51 and any additions to
       be Contract Price which are required to be determined in
       accordance with Clause 52 (for the purposes of this Clause
       referred to as “varied work”), shall be valued at the rates
       and prices set out in the Contract if, in the opinion of the
       Engineer, the same shall be applicable. If the contract does
       not contain any rates or prices applicable to the varied
       work, the rates and prices in the Contract shall be used
[2025] 2 S.C.R.                                                             217

                    Somdatt Builders-NCC-NEC(JV) v.
               National Highways Authority of India & Ors.

           as the basis for valuation so far as may be reasonable,
           failing which, after due consultation by the Engineer with the
           Employer and the Contractor, suitable rates or prices shall
           be agreed upon between the Engineer and the Contractor.
           In the event of disagreement, the Engineer shall fix such
           rates or prices as are, in his opinion, appropriate and
           shall notify the Contractor accordingly, with a copy to the
           Employer. Until such time as rates or prices are agreed
           or fixed, the Engineer shall determine provisional rates or
           prices to enable on-account payments to be included in
           certificates issued in accordance with Clause 60.
           (COPA)
           Where the Contract provides for the payment of the Contract
           Price in more than one currency, and varied work is valued
           at, or on the basis of, the rates and prices set out in the
           Contract, payment for such varied work shall be made
           in the proportions of various currencies specified in the
           Appendix to Bid for payment of the Contract Price. Where
           the Contract provides for payment of the Contract Price
           in more than one currency, and new rates or prices are
           agreed, fixed, or determined as stated above, the amount
           or proportion payable in each of the applicable currencies
           shall be specified when the rates or prices are agreed, fixed,
           or determined, it being understood that in specifying these
           amounts or proportions the Contractor and the Engineer (or,
           failing agreement, the Engineer) shall take into account the
           actual or expected currencies of cost (and the proportions
           thereof) of the inputs of the varied work without regard to the
           proportions of various currencies specified in the Appendix
           to Bid for payment of the Contract Price.
           52.2 Power of Engineer to fix Rates (GCC)
           Provided that if the nature or amount of any varied work
           relative to the nature or amount of the whole of the works
           or to any part thereof, is such that, in the opinion of the
           Engineer, the rate or price contained in the Contract for
           any item of the works is, by reason of such varied work,
           rendered inappropriate or inapplicable, then, after due
           consultation by the Engineer with the Employer and the
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       Contractor, a suitable rate or price shall be agreed upon
       between the Engineer and the Contractor. In the event
       of disagreement the Engineer shall fix such other rate
       or price as is, in his opinion, appropriate and shall notify
       the Contractor accordingly, with a copy to the Employer.
       Until such time as rates or prices are agreed or fixed, the
       Engineer shall determine provisional rates or prices to
       enable on-account payments to be included in certificates
       issued in accordance with Clause 60.
       (COPA)
       Where the Contract provides for the payment of the
       Contract Price in more than one currency, the amount or
       proportion payable in each of the applicable currencies
       shall be specified when the rates or prices are agreed, fixed
       or determined as stated above, it being understood that
       in specifying these amounts or proportions the Contractor
       and the Engineer (or, failing agreement, the Engineer)
       shall take into account the actual or expected currencies
       of cost (and the proportions thereof) of the inputs of the
       varied work without regard to the proportions of various
       currencies specified in the Appendix to Bid for payment
       of the Contract Price.
       (GCC)
       Provided also that no varied work instructed to be done by
       the Engineer pursuant to Clause 51 shall be valued under
       Sub-Clause 52.1 or under this Sub-Clause unless, within
       14 days of the date of such instruction and, other than
       in the case of omitted work, before the commencement
       of the varied work, notice shall have been given either:
       (a)   by the Contractor to the Engineer of his intention
             to claim extra payment or a varied rate or price, or
       (b)   by the Engineer to the Contractor of his intention to
             vary a rate or price. (GCC)
       (COPA)
       Provided further that no change in the rate or price for
       any item contained in the Contract shall be considered
[2025] 2 S.C.R.                                                           219

                      Somdatt Builders-NCC-NEC(JV) v.
                 National Highways Authority of India & Ors.

           unless such item accounts for an amount more than 2
           percent of the Contract Price, and the actual quantity of
           work executed under the item exceeds or falls short of
           the quantity set out in the Bill of Quantities by more than
           25 percent.
           52.3 Variations Exceeding 15 per cent (GCC)
           If, on the issue of the Taking-Over Certificate for the whole
           of the works, it is found that as result of :
           (a)    all varied work valued under Sub-Clauses 52.1 and
                  52.2 and
           (b)    all adjustments upon measurement of the estimated
                  quantities set out in Bill of Quantities, excluding
                  provisional sums, dayworks and adjustments of price
                  made under Clause 70.
           But not from any other cause, there have been additions to
           or deductions from Contract Price which taken together are
           in excess of 15 per cent of the “Effective Contract Price”
           (which for the purposes of this Sub-Clause shall mean
           Contract Price, excluding provisional sums and allowance
           for dayworks, if any) then and in such event (subject to
           any action already taken under any of Sub-Clauses of this
           Clause), after due consultation by the Engineer with the
           Employer and the Contractor, there shall be added to or
           deducted from Contract Price, such further sum as may
           be agreed between the Contractor and Engineer or, failing
           agreement, determined by the Engineer having regard to
           the Contractor’s site and general overhead costs of the
           Contract. The Engineer shall notify the Contractor of any
           determination made under this Sub-Clause, with copy
           to the Employer. Such sum shall be based only on the
           amount by which such additions or deductions shall be
           in excess of 15 per cent of the Effective Contract Price.
           (COPA)
           Where the Contract provides for the payment of the
           Contract Price in more than one currency, the amount or
           proportion payable in each of the applicable currencies
           shall be specified when such further sum is agreed or
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          determined, it being understood that in specifying these
          amounts or proportions the Contractor and the Engineer
          (or, failing agreement, the Engineer) shall take into account
          the currencies (and the proportions thereof) in which the
          Contractor’s site and general overhead cost of the Contract
          were incurred without being bound by the proportions of
          various currencies specified in the Appendix to Bid payment
          of the Contract Price.
21. DRB while rejecting the contention of NHAI was of the view that the
    design of geogrid is contingent to the height and area of facia panel
    within the prescribed length mentioned in the BOQ and based on the
    parameters/specifications as prescribed in the agreement, there was
    no change in the concept or design. Basically, the design submitted
    by the appellant was approved and accepted by the Engineer. Since
    the work was done as per the valid approved design, plea taken by
    NHAI that there was a change of form in terms of the wall heights and
    length of RE wall could not be evidenced by NHAI. After an in-depth
    analysis, DRB concluded that there was no change of form but only
    a working arrangement. The design having been approved after the
    full knowledge of the Engineer that enhancement in quantity to a large
    extent was involved and accordingly, the matter was referred by the
    Engineer for allocation of funds. Therefore, there was no variation
    as per Clause 51.1 or Clause 51.2 and hence payment as per the
    BOQ rate should be made for the entire quantity. Though NHAI
    had contended that appellant had changed the form and varied the
    design, this could not be proved in any way. Therefore, DRB held
    that variation in terms of Clause 51.1 could not be established. As
    such, DRB recommended that quantities of geogrid required, limited
    to the facia area, should be paid as per the BOQ rates.		
22. As already noticed, the DRB recommendations were not acceptable
    to NHAI which thereafter invoked the arbitration clause. Arbitral
    Tribunal comprised of three arbitrators; one each appointed by the
    two parties who thereafter appointed the third arbitrator. All the
    three arbitrators were technical experts. Arbitral Tribunal referred
    to Clause 67.1 of the GCC which says that recommendations of
    the DRB shall be binding on both parties giving prompt effect to it
    until and unless the same is revised by the Arbitral Tribunal. Arbitral
    Tribunal, therefore, was of the view that NHAI should have complied
    with the DRB recommendations which was subject to outcome of the
[2025] 2 S.C.R.                                                          221

                   Somdatt Builders-NCC-NEC(JV) v.
              National Highways Authority of India & Ors.

     arbitral award. However, NHAI failed to do so. Thereafter, Arbitral
     Tribunal framed the core issue to be considered viz. whether as per
     the contract, Engineer has the right to revise the rate for additional
     quantities of geogrid in excess of the BOQ quantities which are
     required for actual execution of the RE wall as per approved design.
     After thorough examination of the rival claims, Arbitral Tribunal
     recorded the finding that the quantity of geogrid given at the tender
     stage which was part of the responsibility of NHAI was found to be
     erroneous. Therefore, the increase in quantity was merely to meet
     the requirement for completion of the RE wall which was indicated
     by the RCC facia quantity at the tender stage. NHAI had admitted
     the fact that the design evolved by the appellant’s consultant met
     the specified criteria. In other words, there was no change in the
     design and NHAI could not establish the same before the Arbitral
     Tribunal which held as follows:
           8.3 In a contract of the type in question which is an item
           rate contract based on the price schedule of provisional
           quantities the ultimate contract amount can be ascertained
           when all the work done in terms of the contract is finally
           measured and the contract amount computation done
           on the. basis of the prices and rates set out in the Bill of
           Quantities. The contract between the parties, therefore,
           is a frame work which determines the parties rights and
           obligations. The scope of work in this case was indicated
           by RCC facia quantity as mentioned hereinbefore which
           determines the length of the RE Wall to be constructed
           for raised carriage way and the quantity of other sub-item
           i.e. the geogrid quantity to be used is contingent to the
           facia quantity. Both the parties knew about the scope of
           work of RE Wall in this manner and both knew that it was
           impossible to determine the ultimate contract amount before
           the completion of RE Wall work and if ultimate quantity
           exceeds the BOQ quantity, it will be an automatic change
           and shall be paid at BOQ rate in such type of measurement
           contracts where the quantities are provisional and ultimate
           quantities required for completion of the work are to be
           executed and paid as per the quoted rate.
           8.4 The fact that ultimate measured amount of work
           performed is different from estimated quantity is irrelevant
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            because both the parties contracted on the basis that the
            ultimate quantity may increase or decrease.
       22.1. On the above basis, Arbitral Tribunal concluded that the
             change in quantity did not constitute a variation so as to attract
             the provisions of Clause 52.2, further noting that this clause
             clearly provides that it would be applicable only in respect
             of varied work instructed to be done by the Engineer as per
             Clause 51 and that the present was not a case where such
             instructions were required. While upholding the interpretation
             of the appellant of Clauses 51 and 52, Arbitral Tribunal held
             that the Engineer does not possess the power to revise the
             rates for additional quantity of geogrid required for actual
             execution of the work as per the approved design. Arbitral
             Tribunal upheld the recommendations of DRB and passed
             the following award:
             (i)    The variation in terms of Clause 51.1 is not established.
             (ii)   Claimant (NHAI) was directed to pay the Respondent
                    (Som Datt Builders - NCC-NEC- JV) the actual quantity
                    of geogrid required to be executed to complete the work
                    of RE wall as per the approved design at the BOQ rate.
23. DRB had recorded a finding of fact that there was no change in
    the concept or design. As a matter of fact, the design prepared and
    submitted by the appellant was approved by the Engineer whereafter
    the related work was executed as per the approved design. On the
    basis of such finding of fact, DRB interpreted Clauses 51 and 52 to
    hold that there was no instructed variation and, therefore, the excess
    quantity of geogrid required while executing the work, limited to the
    facia area, should be paid as per the BOQ rates. Arbitral Tribunal
    reiterated the aforesaid finding of fact and affirmed the interpretation
    given by the DRB. On that basis, Arbitral Tribunal concluded that
    the change in quantity did not constitute a variation so as to attract
    the provisions of Clause 52.2. Arbitral Tribunal concurred with the
    DRB that the Engineer did not have the competence to revise the
    rates for the additional quantity of geogrid required for execution of
    the work as per the approved design.
24. In the proceedings under Section 34 of the 1996 Act, learned Single
    Judge examined Clauses 51 and 52 in detail and thereafter opined
    that the decision of the Arbitral Tribunal could not be faulted. Analysis
[2025] 2 S.C.R.                                                         223

                           Somdatt Builders-NCC-NEC(JV) v.
                      National Highways Authority of India & Ors.

      of Clause 51.1 read with the other clauses would indicate that the
      variations referred therein are instructed variations. In the present
      case, Clause 52 would not come into play since the same arises
      only in the case of instructed variations. Learned Single Judge noted
      with approval the finding of the Arbitral Tribunal that the ultimate
      measured work performed was different from the estimated quantity
      but the parties had contracted on the basis that such quantity may
      increase or decrease. There was no change in the design in view
      of the clear admission of NHAI before the DRB that the design was
      reviewed and found according to the specified criteria and that NHAI
      was unable to establish any change in the design. Learned Single
      Judge while exercising jurisdiction under Section 34 of the 1996 Act
      after analysing Clauses 51 and 52 held that the Arbitral Tribunal
      had reached the conclusion that the second para of Clause 52.2,
      which mandates that the said provision would be applicable only for
      varied work instructed to be done by the Engineer as per Clause 51,
      was not attracted to the facts of the present case, and therefore,
      the Engineer did not give any notice of 14 days of his intention to
      vary the rate. Since the matter fell within the domain of uninstructed
      variations, there was no need to give 14 days’ notice which is the
      requirement in the case of instructed variation.
      24.1. Learned Single Judge also referred to a decision of the Appellate
            Division of the South African Court in Grinaker Construction
            (TVL) Ltd Vs. Transvaal Provincial Administration12, where
            similar contractual clauses came up for interpretation. Learned
            Single Judge agreed with the interpretation given by the
            South African Court that automatic increase or decrease in
            the quantity did not form part of the variation.
      24.2. Learned Single Judge highlighted the aspect that the
            interpretation given to the aforesaid clauses was also the
            interpretation arrived at by the DRB as also by the Arbitral
            Tribunal. The contractual clauses have been interpreted by
            technical people who were well conversant with the nature of
            the dispute and for this reason also greater weight has to be
            given to such a view. Learned Single Judge held that once
            a contracted price is provided and the quantities are held



12   1982 (1) AD 78
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            to be tentative, any increase or decrease in quantity must
            be governed by the same price. It is only in respect of any
            instructed variation arising from the instruction of the Engineer
            on account of any additional work or less work that there can
            be some element of renegotiation and determination in terms
            of Clauses 51 and 52 of the GCC. Therefore, learned Single
            Judge concurred with the view taken by the Arbitral Tribunal
            which had affirmed the view of the DRB.
25. Learned Single Judge also reiterated the well-recognised principle in
    arbitration that the court exercising jurisdiction under Section 34 of
    the 1996 Act does not sit as a court of appeal over the decision of
    an arbitral tribunal, further reiterating the proposition that a contract
    has to be interpreted by the arbitrator who is the chosen judge of
    the parties. So long as the view of the arbitrator is a plausible one
    though it may not be the only possible view, there should be no
    interference by the court under Section 34 of the 1996 Act.
26. According to us, learned Single Judge had adopted the correct
    approach and had rightly declined to interfere with the award of the
    Arbitral Tribunal affirming the decision of the DRB.
27. Let us now deal with the impugned order. Division Bench of the
    High Court exercising jurisdiction under Section 37 of the 1996
    Act acknowledged that primarily it was for the Arbitral Tribunal to
    interpret the contractual terms and if the interpretation given by
    the Arbitral Tribunal is a plausible one, then the court would not
    interfere with the award merely because according to the court,
    another interpretation is preferable. Having said that, Division Bench
    examined Clauses 51 and 52 of the contract. Instead of interpreting
    the aforesaid clauses in the contractual context, Division Bench
    went into the dictionary meaning of the expression ‘variation’ and
    opined that variation would mean the difference between what
    is provided for or contemplated in relation to the work under the
    contract and what is the final effect or outcome. Such variation or
    outcome may be or may not be the result of an instruction given
    by the Engineer. It has further been observed that the instruction
    issued by the Engineer to the contractor does not necessarily mean
    that the contractor should carry out a ‘variation’. It may relate to
    performance of one or more of the specific acts enumerated in
    Clause 51.1. According to the Division Bench, variation in quantity,
    even when it is not a result of an instruction given under Clause
[2025] 2 S.C.R.                                                       225

                   Somdatt Builders-NCC-NEC(JV) v.
              National Highways Authority of India & Ors.

     51.1 by the Engineer to the contractor does not cease to be a
     variation within the meaning of that expression used in Clause 51.1.
     Division Bench, therefore, opined that there is no basis or underlying
     principle stated either by the Arbitral Tribunal or by the learned
     Single Judge that only if the variation is the result of instruction
     given by the Engineer under Clause 51.1, rates and prices of the
     BOQ items in question would be open to renegotiation and not
     otherwise; variation in quantity, even when it is not a result of an
     instruction given by the Engineer to the contractor under Clause
     51.1, does not cease to be a ‘variation’ within the meaning of the
     expression used in Clause 51.1.
     27.1. Division Bench disagreed with the observations of the
           Arbitral Tribunal as upheld by the learned Single Judge that
           even if there was error in estimating the quantity of geogrid
           while preparing the BOQ, that by itself would not lead to the
           conclusion that NHAI cannot seek renegotiation of the rates
           even if the actual quantity exceeds by over 300 percent. The
           contract does not provide that NHAI should suffer on account
           of the estimated quantities mentioned in the BOQ turning out
           to be way off the mark when the contract is executed.
     27.2. It was on the above basis, Division Bench held that there is
           no reason as to why variation in quantity beyond the limits
           set out in the contract, whether instructed or not instructed,
           should not lead to renegotiation of the rates at the instance
           of either party. That would be the only fair, reasonable and
           equitable way to work the contract.
     27.3. Division Bench, therefore, held that interpretation of the
           contractual terms given by the Arbitral Tribunal and accepted
           by the learned Single Judge cannot be accepted as a plausible
           interpretation. Division Bench observed that such interpretation
           is unreasonable and wholly implausible and that the arbitral
           award is opposed to the public policy of India, shocking the
           conscience of the court. Therefore, the order of the learned
           Single Judge as well as the arbitral award were set aside.
28. We are afraid we cannot accept such sweeping conclusions reached
    by the Division Bench. Interpretation given by the Division Bench
    to the plain language of Clauses 51 and 52 is not at all a plausible
    one, not to speak of being the only possible interpretation and,
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       therefore, committed a manifest error in interfering with an arbitral
       award in a proceeding under Section 37 of the 1996 Act when the
       learned Single Judge did not find any justification at all to interfere
       with the arbitral award within the limited scope under Section 34 of
       the 1996 Act. A closer look at Clauses 51 and 52 would clearly show
       that the view taken by DRB and Arbitral Tribunal, both comprised
       of technical experts, is the correct one which was acknowledged by
       the learned Single Judge.
29. As per Clause 51.1, Engineer has the competence to make any
    variation of the form, quality or quantity of works, either wholly
    or any part thereof, if in his opinion, it is necessary to do so. In
    that event, Engineer has the authority to instruct the contractor to
    carry out the same and the contractor shall in such event would be
    under an obligation to do what is contemplated in sub-clauses (a)
    to (f) thereunder, such as, increase or decrease in the quantity of
    any work included in the contract, etc.. Clause 51.1 clarifies that
    such instructed variation shall not vitiate or invalidate the contract,
    but such variation shall be valued in accordance with Clause 52.
    What Clause 51.2 indicates is that it is not open to the contractor
    to make such variation without any instruction from the Engineer.
    Proviso to Clause 51.2 is relevant. It says that no instruction from
    the Engineer would be required for the increase or decrease in
    the quantity of any work where such increase or decrease is not
    the result of any instruction given under Clause 51.1 but is the
    result of the quantities exceeding or being less than those stated
    in the BOQ.
30. Clause 52.2, on the other hand, mentions that all variations referred
    to in Clause 51 (which means instructed variations) shall be valued at
    the rates and prices in the contract, if in the opinion of the Engineer,
    the same is applicable. If the contract does not contain any rates
    or prices applicable to the varied works, the rates and prices in
    the contract shall be used as the basis for valuation so far it may
    be reasonable. If this is not possible, then the Engineer shall carry
    out the valuation after due consultation with the Employer and the
    contractor. The GCC proviso to Clause 52.2 says that no varied
    work instructed to be done by the Engineer shall be valued under
    Clause 52.1 or under Clause 52.2 unless 14 days’ notice is given
    by either of the parties.
[2025] 2 S.C.R.                                                        227

                   Somdatt Builders-NCC-NEC(JV) v.
              National Highways Authority of India & Ors.

31. The further proviso under COPA to Clause 52.2 says that no change
    in the rate or price for any item contained in the contract shall be
    considered unless such item accounts for more than 2 percent of
    the contract price and the actual quantity of the work executed under
    the item exceeds or falls short of the quantity set out in the BOQ by
    more than 25 percent.
32. The aforesaid provision is not a mandate for change in the rate or
    price for any item contained in the contract, if such item accounts for
    an amount which is more than 2 percent of the contract price and
    the actual quantity of work executed under the item exceeds or falls
    short of the quantity set out in the BOQ by more than 25 percent.
    Rather, it is an enabling provision which enables either of the parties
    to consider change in the rate or price of any item mentioned in the
    contract, in the event, the above two conditions are fulfilled.
33. In so far Clause 51.1 is concerned, the variation contemplated
    thereunder relates to the form, quality or quantity of the works which
    in the opinion of the Engineer is necessary. In the present case,
    there is a clear finding of fact by two authorities i.e. DRB and the
    Arbitral Tribunal, both comprised of technical experts, that there is no
    variation either in the form or quality or quantity of the works. What
    actually happened is that at the time of execution of the contract
    pertaining to the RE wall, the geogrid required turned out to be much
    more than the estimated figure given in item No. 7.7 of the contract.
    It is in this backdrop that both the fact finding authorities held that
    there was no variation in terms of Clause 51.1 and that the Engineer
    did not have the competence to renegotiate the price or rate of the
    geogrid for the excess quantity of geogrid required.
34. As already discussed above, this is clearly a plausible view. In fact,
    according to us, it is the correct interpretation of Clause 51 made by
    the DRB and the Arbitral Tribunal. As such, learned Single Judge
    rightly declined to interfere with the award under Section 34 of the
    1996 Act. If that be the position, there was no justification at all for
    the Division Bench of the High Court to set aside the award under
    Section 37 of the 1996 Act.
35. Though learned counsel for the parties had cited a number of decisions
    at the time of hearing, it is not necessary to refer to and discuss
    each one of them. However, reference to a few of the judgments
    would suffice.
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36. In MMTC Ltd. Vs. Vedanta Ltd.,13 this Court held that as far as
    Section 34 is concerned, the position is well settled that the court
    does not sit in appeal over an arbitral award and may interfere on
    merits only on the limited ground provided under Section 34(2)(b)(ii)
    i.e. if the award is against the public policy of India. Even then, the
    interference would not entail a review on the merits of the dispute
    but would be limited to situations where the findings of the arbitrator
    are arbitrary, capricious or perverse or when the conscience of the
    court is shocked or when the illegality is not trivial but goes to the
    root of the matter. An arbitral award may not be interfered with if the
    view taken by the arbitrator is a possible view based on facts. As far
    as interference with an order made under Section 34 by the court
    under Section 37 is concerned, it has been held that such interference
    under Section 37 cannot travel beyond the restrictions laid down
    under Section 34. In other words, the court cannot undertake an
    independent assessment of the merits of the award and must only
    ascertain that the exercise of power by the court under Section 34
    has not exceeded the scope of the provision.
37. What is public policy of India has been explained in Ssangyong
    Engineer and Construction Company Ltd. (supra). It means the
    fundamental policy of Indian law. Violation of Indian statutes linked
    to public policy or public interest and disregarding orders of superior
    courts in India would be regarded as being contrary to the fundamental
    policy of Indian law. It would also mean that the arbitral award is
    against basic notions of justice or morality. An arbitral award can be
    set aside on the ground of patent illegality i.e. where the illegality
    goes to the root of the matter but re-appreciation of evidence cannot
    be permitted under the ground of patent illegality.
38. In PSA Sical Terminals Private Ltd. (supra), this Court reiterating
    the well settled principles held as under:
             40. It will thus appear to be a more than settled legal
             position, that in an application under Section 34, the court is
             not expected to act as an appellate court and reappreciate
             the evidence. The scope of interference would be limited
             to grounds provided under Section 34 of the Arbitration
             Act. The interference would be so warranted when the


13   [2019] 3 SCR 1023 : (2019) 4 SCC 163
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                       Somdatt Builders-NCC-NEC(JV) v.
                  National Highways Authority of India & Ors.

             award is in violation of “public policy of India”, which has
             been held to mean “the fundamental policy of Indian law”.
             A judicial intervention on account of interfering on the
             merits of the award would not be permissible. However,
             the principles of natural justice as contained in Sections
             18 and 34(2)(a)(iii) of the Arbitration Act would continue to
             be the grounds of challenge of an award. The ground for
             interference on the basis that the award is in conflict with
             justice or morality is now to be understood as a conflict
             with the “most basic notions of morality or justice”. It is
             only such arbitral awards that shock the conscience of
             the court, that can be set aside on the said ground. An
             award would be set aside on the ground of patent illegality
             appearing on the face of the award and as such, which
             goes to the roots of the matter. However, an illegality with
             regard to a mere erroneous application of law would not
             be a ground for interference. Equally, reappreciation of
             evidence would not be permissible on the ground of patent
             illegality appearing on the face of the award.
             41. A decision which is perverse, though would not be a
             ground for challenge under “public policy of India”, would
             certainly amount to a patent illegality appearing on the face
             of the award. However, 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.
39. In Reliance Infrastructure Ltd. (supra), this Court referring to one
    of its earlier decisions in UHL Power Company Ltd. Vs. State of
    Himachal Pradesh,14 held that scope of interference under Section 37
    is all the more circumscribed keeping in view the limited scope of
    interference with an arbitral award under Section 34 of the 1996
    Act. As it is, the jurisdiction conferred on courts under Section 34
    of the 1996 Act is fairly narrow. Therefore, when it comes to scope
    of an appeal under Section 37 of the 1996 Act, jurisdiction of the
    appellate court in examining an order passed under Section 34,
    either setting aside or refusing to set aside an arbitral award, is all
    the more circumscribed.


14   (2022) 4 SCC 116
230                                                           [2025] 2 S.C.R.

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40. Again in M/s Larsen Air Conditioning and Refrigeration Company
    (supra), this Court reiterated the position that Section 37 of the
    1996 Act grants narrower scope to the appellate court to review the
    findings in an arbitral award if it has been upheld or substantially
    upheld under Section 34.
41. This Court in M/s. Hindustan Construction Company Ltd. (supra)
    declared that it is the settled jurisprudence of the courts in the country
    that arbitral awards which contain reasons especially when they
    interpret contractual terms ought not to be interfered with lightly. An
    error in the interpretation of contractual terms by an arbitrator is an
    error within his jurisdiction and would, therefore, not be a ground to
    interfere with an arbitral award.
42. As already discussed above, the Arbitral Tribunal had interpreted
    Clause 51 in a reasonable manner based on the evidence on record.
    This interpretation was affirmed by the learned Single Judge exercising
    jurisdiction under Section 34 of the 1996 Act. Therefore, Division Bench
    of the High Court was not at all justified in setting aside the arbitral
    award exercising extremely limited jurisdiction under Section 37 of
    the 1996 Act by merely using expressions like ‘opposed to the public
    policy of India’, ‘patent illegality’ and ‘shocking the conscience of the
    court’. As reiterated by this Court in Reliance Infrastructure Ltd. (supra),
    it is necessary to remind the courts that a great deal of restraint is
    required to be shown while examining the validity of an arbitral award
    when such an award has been upheld, wholly or substantially, under
    Section 34 of the 1996 Act. Frequent interference with arbitral awards
    would defeat the very purpose of the 1996 Act.
43. For all the aforesaid reasons, we are of the unhesitant view that the
    impugned order cannot be sustained. Accordingly, judgment and
    order dated 17.11.2009 passed by the Division Bench of the High
    Court is hereby set aside and the arbitral award dated 03.06.2005 is
    restored. Consequently the appeal is allowed. However, there shall
    be no order as to cost.

       Result of the case: Appeal allowed.



       †
           Headnotes prepared by: Nidhi Jain