2026 Supreme(Online)(Del) 6357

IN THE HIGH COURT OF DELHI AT NEW DELHI
Harish Vaidyanathan Shankar, J
National Highways Authority Of India – Appellant
Versus
Patel Knr Heavy Infrastructure Pvt Ltd – Respondent
O.M.P. (COMM) 195/2023

Under Section 34, a court cannot interfere with an arbitral award based on a different interpretation of a contract if the tribunal's view is plausible, internally consistent, and based on evidence. Judicial review is limited to correcting patent illegality, not substituting the court’s judgment for the tribunal's.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Challenge to arbitral award - Scope of judicial interference - Courts do not sit in appeal over commercial contracts - Findings of fact and interpretation of contract by a tribunal, if plausible and not perverse, are not to be set aside - Mere possibility of another view does not justify interference. (Paras 28, 74, 32-33)

(B) Contractual Interpretation - Distinction between periodic renewal and structural strengthening - Interpretation must align with the operational demands and the internal coherence of the Agreement - Assigning specific meanings to maintenance, renewal, and repair to ensure no contractual provisions are rendered redundant. (Paras 35, 36)

(C) Liquidated Damages vs. Penalties - Provisions mandating the higher of two amounts without nexus to actual loss may be viewed as penal - Tribunal's authority to evaluate reasonableness of compensation and avoid enforcement of punitive stipulations. (Paras 52, 53)

Facts of the case:
A dispute arose concerning the mandatory thickness of the bituminous wearing surface for a highway maintenance project. The concessionaire advocate for a 30mm thickness based on technical specifications and lack of structural deficiency, while the authority insisted on 40mm. Arbitral proceedings resulted in a majority award favoring the concessionaire’s interpretation, which also addressed claims and counter-claims regarding delays. The award was subsequently challenged by the authority under the law governing arbitration, citing patent illegality and misinterpretation of the agreement terms.

Findings of Court:
The court held that the tribunal's interpretation of the contract regarding the renewal coat was a plausible view, distinguishing between routine maintenance and structural strengthening based on the absence of defined structural deficiencies. The court further upheld the tribunal's refusal to enforce a damage clause that functioned as a penalty rather than a genuine pre-estimate of loss, noting that the tribunal acted within its jurisdiction in harmonizing contractual clauses with applicable legal principles.

Issues: The main issues were whether the tribunal’s interpretation of the contract regarding maintenance specifications was perverse, whether the tribunal was justified in limiting liquidated damages, and the limits of judicial interference in re-evaluating evidence upon a challenge to an arbitral award.

Ratio Decidendi: An arbitral award is shielded from judicial interference when the tribunal provides a cogent, well-reasoned interpretation of contractual provisions that does not amount to patent illegality or perversity, even if an alternative, equally plausible interpretation exists. The court’s supervisory jurisdiction does not extend to substituting its own view on the merits or reappreciating evidence assessed by the tribunal.

Result: Petition dismissed.