MMTC Limited vs Knowledge Infrastructure & Anr - Arbitration Award Challenge

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Mmtc Limited vs M/S Knowledge Infrastructure & Anr on 19 March, 2026

Author: Subramonium Prasad

Bench: Subramonium Prasad

• IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision: 19th MARCH, 2026 IN THE MATTER OF: + O.M.P. (COMM) 404/2020 & I.A. 3167/2020, I.A. 7887/2025, I.A. 28279/2025 MMTC LIMITED .....Petitioner Through: Mr. Akhil Sachar, Ms. Sunanda Tulsyan, Ms. Babita Rawat, Ms. Kashish Maheshwari, Advs. versus M/S KNOWLEDGE INFRASTRUCTURE & ANR. .....Respondents Through: Mr. Darpan Wadhwa, Sr. Advocate with Ms.Manali Singhal Adv and Mr Santosh Sachin Adv and Ms. Tarini Khurana Adv CORAM: HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD JUDGMENT 1. The instant petition is filed under Section 34 of the Arbitration & Conciliation Act, 1996, challenging an Award dated 07.11.2019 passed by the Sole Arbitrator in the arbitration proceedings between the Petitioner and the Respondents.

1. Shorn of unnecessary details, the facts leading to the filing of the instant petition are as follows:-

i. Damodar Valley Corporation required supply of non-cooking
steam coal for its thermal power stations situated at Koderma,
Mejia and Durgapur.

ii. Damodar Valley Corporation entered into an agreement with the
Petitioner herein on 27.07.2012 for supply of non-cooking steam
coal to its thermal power stations at Koderma, Mejia and

Durgapur. The scope of work under the contract included
arranging vessels, stevedoring, handling, storage port clearances,
arranging railway rakes etc. at the various power stations for
which coal was required.

iii. The Petitioner, thereafter, issued a Notice Inviting Tender (NIT)
for the procurement of imported non-cooking steam coal on
'Freight on Road (FOR) Destination Basis' to the thermal power
stations of the Damodar Valley Corporation. Respondent No.1
was declared as one of the successful bidders.
iv. The Petitioner, Respondent No.1 and Respondent No.2 entered
into a tripartite agreement on 01.08.2012 for the supply of 1.119
metric tonnes of imported non-cooking steam coal to the thermal
power stations under the Damodar Valley Corporation.
v. As per the tripartite agreement, the Respondent No. 1 had to
arrange for stevedoring, handling, clearing, storage, port
clearances, arranging railway rakes, loading, transporting and
delivering at the Damodar Valley Corporation Power Stations.
vi. The tripartite agreement provided that all activities such as
forwarding and clearing of consignments, customs clearance etc.
was in the scope of work of the Respondents. The NIT and the
terms and conditions stipulated therein form a part of the tripartite
agreement.

vii. It is the case of the Respondents that they have duly performed
their obligations under the tripartite agreement in a timely manner.
Disputes arose between the parties in the matter of payment. Since
the agreement provided that the disputes were to be resolved

through arbitration, an Arbitral Tribunal, comprising of Sole
Arbitrator, was constituted. The following claims were raised by
the Respondents before the Arbitral Tribunal:-

viii. The learned Arbitrator awarded a sum of Rs.2,51,85,670/- to the
Respondents for contractual payment towards stevedoring,
handling, clearing and forwarding charges. The learned Arbitrator
awarded a sum of Rs. 1,64,38,456/- towards railway surcharge
which was retained by the Petitioner and a sum of Rs. 56,93,579/-
towards railway detention charges which were also retained by the

Petitioner. The Petitioner had approached this Court challenging
these three amounts i.e., Claim Nos. 1, 3 and 4 which have been
awarded against the Petitioner and in favour of the
Respondents/Claimants.
3. It is an admitted case of the Petitioner that Claim No.1 which is
towards stevedoring, handing, clearing and forwarding charges and Claim
No.5 which is for withholding the amount towards entry tax stand already
paid and therefore this case is restricted only to Claim No.3 and 4.

1. Claim No.3 is towards railway surcharge for the sum of
                     Rs.1,64,38,456/- and Claim No.4 is for an amount of Rs.56,93,579/- towards
                     detention charges of adjustment of overloaded wagons.
   

2. It is the case of the Petitioner that under the tripartite agreement, for
                     the entire works performed under the agreement and the NIT, the liability
                     towards payment to railways was on the Respondents.
   

3. It is the case of the Petitioner that the East Central Railways vide its
                     letter dated 23.01.2014 had placed a combined demand of Rs.4,78,17,458/-
                     raised against 165 Railway Rakes on the Petitioner for the month of April to
                     August, 2013 towards surcharge for delay in payment for rakes loaded from
                     Paradip Port to the thermal power station of the Damodar Valley
                     Corporation. Out of the said amount, an amount of Rs.1,64,38,456/- is
                     towards the surcharge demanded by the East Central Railways for 49 Rakes
                     for the coal supplied by the Respondents. It is the case of the Petitioner that
                     the amount has not been paid and therefore, the Petitioner is entitled to
                     withhold the said amount as it was the duty of the Respondents to keep the
                     Petitioner indemnify against its losses.
   

4. Similarly, it is the case of the Petitioner that a sum of Rs.56,93,579/-
   

has been withheld towards performance of contractual obligations on
account of detention charges of adjustment of overloading of wagons. It is
stated that demands have been received from the East Central Railways
towards adjustments of overload wagons. It is the case of the Petitioner that
these amounts are liable to be paid by the Respondents and since they are
not being paid, the said amount has been withheld.

1. The Arbitral Tribunal has allowed the claims stating the amounts have
                     not been claimed by the East Central Railways for five years and therefore,
                     the said amount cannot be retained by the Petitioner till the eternity. It is
                     these findings which are subject matter of challenge in this petition.
   

2. Pleadings have been completed.
   

3. Learned Counsel for the Petitioner draws the attention of this Court to
   the various clauses under the NIT and the tripartite agreement.

4. The tripartite agreement provides that the part of the NIT would be
   read as a part of the said agreement. Attention of this Court has been drawn
   at Clause 2.2 and 5.2 of the agreement, which reads as under:-

"2.2 KISPL:-

KISPL shall arrange stevedoring, handling, storage
port clearances, railway rakes, loading transportation
and delivery at DVC's power station. All other
activities for clearing and forwarding of the
consignments like customs clearance, including
payment of customs duty/CVD on behalf of MMTC,
coordination with discharge port(s), railways and any
statutory authorities, all liaison, etc. shall be
obligation and also be a part of the scope of work on
KISPL Unloading of Coal consignment at Power
Station(s) end from Railway Wagons shall be arranged
by DVC.
xxx

                                    5.2 HANDLING          CHARGES        AND OTHER
                                    REIMBURSABLE          EXPENSES       PAYABLE TO
                                    KISPL

                                    MMTC shall pay to KISPL the charges for

"Stevedoring, Handling, Clearing & Forwarding
charges and Service Charges" per MT, which will
remain firm during the currency of the Agreement and
other charges like Customs duty, Railway freight (up to
the Coal stack yard of DVC's Thermal Power Plants).
Insurance charges, Service Tax and other statutory
duties and Port charges are payable at actuals".

a) The Price, therefore, shall have two components
namely fixed and actuals as under:

A. Fixed

• Stevedoring, Handling, Clearing & Forwarding
charges, etc.

B. Actuals
• Customs Duty
• Railway freight (delivered at coal stock yard of DVC
Thermal Power Plants)
• Insurance charges
• Port charges
• Service Tax and other statutory duties etc.

(i) The fixed component defined at 'A' above shall
remain firm during the entire period of
Contract/Agreement, including extension(s), if any.

(ii) KISPL has to ensure that there is no under loading
of wagons. However, in case of under loading the
charges on proportionate basis shall be recovered

from KISPL's dues. All other charges like Demurrage/
Dispatch, Wharfage. Overloading/Under loading
charges etc. as applicable for Ports and Railways shall
be to the account of KISPL. Any delay/ detention
charges of Rakes at DVC's Power plants shall be to the
account of MMTC/DVC. " (emphasis supplied)
12. Learned Counsel for the Petitioner, therefore, states that it is the
obligation of the Respondents to pay all the charges due and payable.
Learned Counsel for the Petitioner has then taken this Court to various
portions of the evidence and contends that the officer of the Respondents has
in his deposition acknowledged that it was the liability of the Respondents to
pay these amounts. He therefore states that the Petitioner was well within its
right to withhold these amounts.

1. Learned Counsel for the Petitioner contends that the Award should be
   set aside because the Arbitrator's findings violated the fundamental policy
   of Indian law and basic notions of justice. He contends that regarding Claim
   No.4 and 5, the learned Arbitrator has provided an unreasoned Award that
   failed to consider the Petitioner's submissions or the material on record. He
   states that the Award is contrary to the tripartite agreement between the
   parties and therefore, violated Section 28 of the Arbitration & Conciliation
   Act, 1996. He also states that the learned Arbitrator has failed to consider
   the liability to the Eastern Coast Railways for surcharge and detention which
   still persists and has not been revoked.

2. Per contra, learned Senior Counsel for the Respondents contends that
   there is no provision in the tripartite agreement which empowers the
   Petitioner to withhold the amounts as done by the Petitioner and in the

                      absence of any specific contractual agreement to withhold the amounts, the
                     Petitioner cannot claim to have a right to withhold the said amounts. He
                     states that there are no recovery proceedings which have been initiated by
                     the East Central Railway against the Petitioner and therefore, the finding of
                     the learned Arbitrator that the Petitioner cannot withhold the amount for
                     eternity, does not require any interference.
   

3. Heard learned Counsel for the parties and perused the material on
   record.

4. It is pertinent to note that the Award was passed by the Sole
   Arbitrator on 02.11.2019. In the year 2015, an amendment was made to Section 34 of the Arbitration and Conciliation Act, 1996 wherein
   Explaination-1 and Explaination-2 were added to Section 34(2)(b). The said
   amendment was made with an objective of removing any doubt to the test of
   whether an award is in contravention with the fundamental policy of Indian
   law or that the challenge is against the very basic notions of morality and
   justice.

5. The scope and ambit of Section 34 of the Arbitration Act has been
   crystallized in various judgments of the Apex Court wherein it has been held
   that an Award can be challenged only if it is in violation of the principles of
   natural justice; or it disregards orders of superior courts in India or the
   binding effect of the judgment of a superior court; or it is violating law of
   India linked to public good or public interest, are considered contravention
   of the fundamental policy of Indian law. The Award can only be challenged
   if it is in contravention with the fundamental policy of Indian law; or in
   conflict with the 'most basic notions of morality'; or in violation of
   principles of natural justice. Similarly, in order to bring a challenge under

                      the concept 'most basic notions of morality and justice‟, the Award must
                     have been rendered without following elementary principles of justice and
                     that violation would be such that it will shock the conscience of a legally
                     trained mind. Awards are never set aside just because a different or better
                     view is possible.
   

6. In its latest Judgment, the Apex Court in OPG Power Generation
   Limited v. Enexio Power Cooling Solutions India Private Limited & Anr.,
   2025 (2) SCC 417, after taking into account the law on the aforesaid policy
   has succinctly laid down as to what is the meaning of the expression 'in
   contravention with the fundamental policy of India law‟ and 'in conflict with
   the most basic notions of morality and justice‟. The Apex Court in the said
   Judgment has observed as under:-

"51. As discussed above, till the 2015 Amendment the
expression "in contravention with the fundamental
policy of Indian law" was not found in the 1996 Act.

Yet, in Renusagar [Renusagar Power Co.

Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] ,
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.
52. In the judicial pronouncements that
followed Renusagar [Renusagar Power Co.

Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] ,
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 2015 Amendment in the 1996 Act.

1. In [Ssangyong Engg. Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 :

(2020) 2 SCC (Civ) 213] , this Court dealt with the
effect of the 2015 Amendment. 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 para 30 of that judgment.
The key features of it are summarised 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 the 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 [ONGC
Ltd. v. Western Geco International Ltd., (2014) 9
SCC 263 : (2014) 5 SCC (Civ) 12] 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 applicability
of Wednesbury [Associated Provincial Picture
Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223
(CA)] principles to public policy will open the
floodgates. Hence, Explanation 2 to Section
34(2)(b)(ii) has been proposed.

1. After taking note of the supplementary report, the Statement of Objects and Reasons of the 2015 Amendment Act, and the amended provisions of Sections 28, 34 and 48, this Court held : (Ssangyong Engg. case [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] , SCC pp. 169-71 & 194, paras 34, 37-41 & 69) "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 Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to [Renusagar Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] understanding of this expression. This would necessarily mean that Western Geco [ONGC Ltd. v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC Ltd. v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] , as explained in paras 28 and 29 of [Associate Builders Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , 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, insofar 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 Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] .

35.-36.***

1. Insofar 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 backdoor when it comes to
   setting aside an award on the ground of patent
   illegality.

2. 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.

3. To elucidate, para 42.1 [ofAssociate
   Builders Associate Builders v. DDA, (2015) 3 SCC
   49 : (2015) 2 SCC (Civ) 204] , 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 Associate Builders v. DDA, (2015) 3 SCC
   49 : (2015) 2 SCC (Civ) 204] , 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.

4. 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 Associate
   Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
   (Civ) 204] , 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](https://indiankanoon.org/doc/536284/) (2-A).
   

5. What is important to note is that a decision
   which is perverse, as understood in paras 31 and 32 [ofAssociate Builders Associate Builders v. DDA,
   (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , 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 characterised
   as perverse.

1. 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 backdoor grounds
                                     relatable to [Section 28(3)](https://indiankanoon.org/doc/1943211/) of the 1996 Act to be
                                     matters beyond the scope of submission to
                                     arbitration under [Section 34(2)(a)(iv)](https://indiankanoon.org/doc/148869/) 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."
   

(emphasis supplied)

1. 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.

2. Without intending to exhaustively enumerate
   instances of such contravention, by way of illustration,
   it could be said that:

(a) 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

1. In Renusagar [Renusagar Power Co.

Ltd. v. General Electric Co., 1994 Supp (1) SCC 644]
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 the 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

1. 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 [Union of India v. Ajeet Singh, (2013) 4 SCC 186, para 26 :

(2013) 2 SCC (Cri) 347 : (2013) 2 SCC (L&S) 321] .
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 [P.
                                    Ramanatha Aiyar's Advanced Law Lexicon, 6th Edn.,
                                    Vol. III, p. 2621.] .

1. 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 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 State (NCT of Delhi) v. Gurdip Singh Uban [State (NCT of Delhi) v. Gurdip Singh Uban, (2000) 7 SCC 296] , extracted below : (SCC p. 310, para 23) "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" [Ralph 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 analysed, to be a complex and uncertain blend. Justice itself, which we are wont to appeal to 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)."

(emphasis in original)

1. In [Associate Builders Associate Builders v. DDA,
   (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , while this
   Court was dealing with the concept "public policy of
   India", in the context of a Section 34 challenge prior to
   the 2015 Amendment, it was held that an award can be
   said to be against justice only when it shocks the
   conscience of the court [ See Associate Builders case,
   (2015) 3 SCC 49, para 36 : (2015) 2 SCC (Civ) 204] .
   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.

2. In [Ssangyong Ssangyong Engg. & Construction
   Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC
   (Civ) 213] , which dealt with post the 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 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 [
   See Ssangyong Engg. case, (2019) 15 SCC 131, para
   76 : (2020) 2 SCC (Civ) 213] . 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.
   

3. 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.
63. 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
                                    category [ In conflict with most basic notions of
                                    morality or justice.] 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 not be prudent to cull out "the most
                                    basic notions of justice". Suffice it to observe, they [
                                    Most basic notions of justice.] 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

1. The other ground is of morality. On the question of
   morality, in [Associate Builders Associate
   Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
   (Civ) 204] , this Court, after referring to the provisions
   of Section 23 of the Contract Act, 1872; earlier
   decision of this Court in [Gherulal Gherulal
   Parakh v. Mahadeodas Maiya, 1959 SCC OnLine SC 4
   : AIR 1959 SC 781] ; 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 [ See Associate Builders case, (2015) 3
   SCC 49, para 39 : (2015) 2 SCC (Civ) 204] ."

2. In the present case, the learned Arbitrator has taken a view that the
   demands were made in the year 2014 and that the Award was rendered in
   the year 2019. Five years have passed since the demands were raised and
   yet, the Railways had not processed the claims raised by the Respondents,
   particularly Claim No. 3 and 4, thereby withholding the same. The view
   taken by the learned Arbitrator that the claims cannot be withheld till
   eternity, cannot come within the four corners of the expression 'in
   contravention with the fundamental policy of India law‟ or 'in conflict with
   the most basic notions of morality and justice‟.

3. In any event, there is an indemnity given by the Respondents to the
   Petitioner. What is the nature of indemnity and whether that claim is
   enforceable or not at the relevant point of time, would be seen as and when a
   claim is made by the Railways. A mere apprehension that these claims can
   be adjusted by the Railways in other ongoing contracts with the Petitioner
   cannot be a valid reason to retain these amounts till eternity. The view of the
   Arbitrator that these claims cannot be withheld till eternity is a plausible
   view. Further, if such amounts are deducted then it is always open for the
   Petitioner to invoke the indemnity given by the Respondents by taking
   appropriate steps. In view of the fact that the view of the Arbitrator is a
   plausible view, it does not warrant any interference from this Court under Section 34 of the Arbitration Act and the same is upheld.

4. Resultantly, the present petition is dismissed along with pending
   application(s), if any.

SUBRAMONIUM PRASAD, J
MARCH 19, 2026/hsk