Page 1 IN THE HIGH COURT OF ORISSA AT CUTTACK ARBA No.35 of 2019 Along with ARBA No.37 of 2019 (In the matters of Appeals under Section 37 of the Arbitration and Conciliation Act, 1996) (In ARBA No.35 of 2019) M/S Abhoy Charan Bakshi …. Appellant(s) -versus- State of Odisha & Ors. …. Respondent (s) Advocates appeared in the case through Hybrid Mode: For Appellant (s) : Mr. Nilakanthar Jujharsingh, Adv. For Respondent (s) : Mr. Sonak Mishra, ASC. (In ARBA No.37 of 2019) State of Odisha& Ors. …. Appellant (s) -versus- M/S Abhoy Charan Bakshi …. Respondent (s) Advocates appeared in the case through Hybrid Mode: For Appellant (s) : Mr. Sonak Mishra, ASC. For Respondent(s) : Mr. Nilakanthar Jujharsingh, Adv. Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 2 CORAM: DR. JUSTICE SANJEEB K PANIGRAHI DATE OF HEARING:-07.03.2026 DATE OF JUDGMENT:-13.03.2026 Dr. Sanjeeb K Panigrahi, J. 1. Since both the appeals arise out of arbitral award relating to the contract executed by the same party and involve common questions concerning the scope of interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 (for short “the Act”), they are taken up together and are being disposed of by this common judgment. 2. The present appeals arises out of judgment dated 12.9.2019 passed in ARBP No.161 of 2017, wherein the learned District Judge, Dhenkanal partly allowed the said application and set aside the award in respect of refund of royalty amounting to Rs.61,17,354/-, while affirming the remaining claims allowed by the Arbitrator. Aggrieved by the interference with the award on that limited aspect, the contractor as well as the State have preferred the present appeals under Section 37 of the Act. However, for the sake of convenience and effective adjudication, ARBA No.35 of 2019 is treated as the lead case. I. FACTUAL MATRIX OF THE CASE: 3. The dispute traces its origin to a contract awarded by the Government of Odisha for execution of irrigation infrastructure works. The Chief Engineer and Basin Manager, Brahmani Left Basin, Samal, Angul, on behalf of the Government, invited item-rate bids Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 3 for the work described as “Balance work for construction of structured system in the command area of Bhairpur Branch Canal with provision of minors and sub-minors including all structures of Baruan Distribution System of O.E.C.F. Package No.12(E)”. 4. The appellant contractor participated in the tender process and submitted its bid for execution of the said work. Upon evaluation of the bids received, the bid of the appellant was accepted by the authorities through Letter No.3000 dated 22.5.2008. Consequent upon acceptance of the bid, a formal agreement was executed on 16.6.2008 between the Governor of Odisha acting through the Executive Engineer, OECF Division No.III, Jiridamali, and the appellant contractor. 5. Under the said agreement, the work was registered as Agreement No. LCB-I of 2008–2009 and the total contract value was fixed at Rs.10,32,97,050/-. The contract stipulated that the work would commence on 16.6.2008 and would be completed within a period of twenty-four months, the scheduled date of completion being 15.6.2010. 6. The nature of the work primarily involved excavation of earth, transportation of the excavated material, and formation of canal embankments as part of the irrigation infrastructure. Among the various items of work incorporated in the Bill of Quantities, Item No.5 related to “Earth work in canal embankment”. For this item the appellant quoted a rate of Rs.60/- per cubic metre, which was Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 4 accepted by the departmental authorities at the time of finalization of the contract. 7. According to the appellant, prior to submission of bids a pre-bid meeting was convened by the departmental authorities to clarify the scope and conditions of the work. It is the case of the contractor that during the said meeting the Executive Engineer informed the participating contractors that no royalty would be levied on earth excavated from the canal for the purpose of forming the canal embankment. It was further indicated that in the event additional earth was required beyond the excavated quantity, the same would be obtained from nearby Government land identified as approved borrow areas. Relying on this understanding, the appellant claims to have quoted the rate for BOQ Item No.5 without including any component towards royalty. The contractor asserts that the departmental authorities also accepted the rate on that basis. 8. After commencement of the work, the appellant undertook excavation and embankment formation in accordance with the specifications of the agreement. During the course of execution, the appellant addressed a letter dated 4.2.2009 to the Executive Engineer requesting that no deduction towards royalty be made from the bills submitted for earthwork, as such deduction was allegedly contrary to the terms understood between the parties. The Executive Engineer, however, disputed the claim of the contractor by letter dated 18.3.2009. The appellant again reiterated its request through another communication dated 23.3.2009. Despite these Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 5 representations, the departmental authorities proceeded to deduct amounts towards royalty from the running account bills submitted by the contractor during execution of the work. 9. It is the case of the appellant that deductions towards royalty were made progressively from the running account bills and continued up to the eighteenth running account bill. According to the contractor, a total sum of Rs.61,17,354/- was recovered by the department from the bills submitted for the execution of earthwork under BOQ Item No.5. The appellant contends that such deduction was made without modifying the accepted rate of the item of work by adding royalty at the prescribed rate and was therefore contrary to the agreed contractual terms. The contractor asserts that the royalty component had never formed part of the quoted rate and that the deduction consequently resulted in financial loss to the contractor during execution of the work. 10. The appellant further alleged that during the execution of the project, the departmental authorities rejected the earth obtained from excavation of the canal for the purpose of embankment formation and instead instructed the contractor to procure earth from borrow areas. According to the contractor, although the agreement contemplated supply of earth from approved Government borrow areas, no such areas were handed over by the authorities. The contractor therefore arranged borrow areas from private landowners and incurred expenditure for securing their consent and compensating them for extraction of earth. The earth so obtained was Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 6 transported to the work site and utilized for formation of canal embankments with the approval of the departmental engineers supervising the work. 11. The contractor further asserted that procurement of earth from private borrow areas resulted in additional financial burden. It was stated that the earth had to be transported to the work site from locations situated approximately five kilometres away, thereby involving additional transportation costs. In addition, the contractor claims to have incurred expenditure in stripping the borrow areas to obtain suitable earth and subsequently restoring the land by refilling it with the stripped soil. According to the appellant, these additional operations were undertaken in compliance with the instructions of the departmental authorities, but the department did not reimburse the expenses incurred towards stripping of borrow areas, transportation of earth, or restoration of the lands from which the material had been obtained. 12. Another grievance originally raised by the contractor relates to escalation in labour costs during the course of execution of the work. It is stated that during the relevant period the Government of Odisha revised the minimum wages payable to unskilled labourers from Rs.70/- to Rs.90/- per day by notification dated 13.7.2009 issued by the Labour and Employment Department. According to the appellant, the increase in minimum wages and the rise in cost of petrol, oil and lubricants resulted in additional expenditure in executing the extra and additional items of work. The contractor Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 7 claims that the department failed to compensate these increased costs despite repeated requests made during execution of the project. 13. The appellant also alleged that an amount of Rs.19,00,000/- was withheld by the department from the eighth running account bill dated 23.9.2009 and kept in miscellaneous deposit without assigning any justification. According to the contractor, the deductions and withholding of payments caused financial hardship and were repeatedly brought to the notice of the departmental authorities. 14. Ultimately, the contractor received the eighteenth running account bill along with the final bill on 31.3.2011, wherein the earlier deductions towards royalty were reflected. The appellant contends that despite several representations seeking release of the withheld amount and refund of the royalty deducted, the departmental authorities did not take steps to resolve the dispute. 15. In view of the unresolved claims, the appellant addressed further communications to the Chief Engineer and the Executive Engineer requesting settlement of the outstanding dues. The contractor ultimately raised a formal claim by letter dated 6.6.2011 demanding payment of various amounts including refund of royalty deducted, compensation for stripping and transportation of earth from borrow areas, labour escalation and refund of the amount withheld. The department disputed these claims through its reply dated 8.7.2011. Thereafter, the appellant requested the authorities to refer the dispute to arbitration in terms of the relevant clause of the contract. As the request was not accepted within the stipulated time, the Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 8 contractor approached the High Court seeking appointment of an arbitrator. 16. Pursuant to proceedings initiated under Section 11 of the Arbitration and Conciliation Act, 1996, learned former Judge of the High Court was appointed as the Sole Arbitrator to adjudicate the disputes between the parties. In the arbitration proceedings the appellant raised six claims including refund of royalty deducted, cost of stripping of borrow areas, transportation of earth, balance payment for compacting, labour price escalation and refund of the withheld amount. By award dated 6.5.2017, the learned Sole Arbitrator allowed the claims partly and awarded a total sum of Rs.6,10,54,178/- in favour of the claimant along with interest. The State authorities thereafter challenged the award before the District Judge under Section 34 of the Act, leading to the judgment presently under appeal. 17. Upon consideration of the rival contentions advanced by the parties, the learned District Judge, Dhenkanal, by judgment dated 12.9.2019 in ARBP No.161 of 2017, partly allowed the application filed under Section 34 of the Arbitration and Conciliation Act, 1996. The learned court below examined the award passed by the learned Sole Arbitrator in respect of the several claims adjudicated therein. While doing so, the learned District Judge declined to interfere with the findings of the arbitrator in respect of Claim Nos.2 to 6 and affirmed the award to that extent. However, insofar as Claim No.1 relating to refund of royalty deducted from the running account bills Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 9 amounting to Rs.61,17,354/- was concerned, the learned District Judge came to the conclusion that the award on that issue could not be sustained and accordingly set aside that portion of the arbitral award. As a result, the interference by the learned District Judge remained confined only to the question of refund of royalty. It is this limited part of the judgment setting aside Claim No.1 which is the subject matter of challenge in the present appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996. 18. This Court shall now endeavour to summarise the contentions of the Parties and the broad grounds that have been raised. II. APPELLANT’S SUBMISSIONS: 19. Learned counsel appearing for the appellant contends that the learned District Judge committed an error in setting aside the award in respect of the claim relating to refund of royalty while otherwise affirming the arbitral award. It is submitted that the learned Sole Arbitrator had examined the contractual terms, the materials placed on record and the conduct of the parties during execution of the work, and upon such consideration had rightly concluded that the deduction of royalty from the running account bills was not justified. According to the appellant, the arbitrator had arrived at the said conclusion on appreciation of evidence and interpretation of the contract, and therefore the court exercising jurisdiction under Section 34 of the Arbitration and Conciliation Act ought not to have interfered with that finding in the absence of any patent illegality or perversity in the award. Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 10 20. It is further contended on behalf of the appellant that the work in question involved excavation and utilization of earth for formation of canal embankments under BOQ Item No.5. According to the appellant, during the pre-bid meeting held prior to submission of bids, the departmental authorities had indicated that royalty would not be levied on earth excavated from the canal for the purpose of embankment formation. Relying on such clarification, the appellant quoted the rate of Rs.60/- per cubic metre for the said item of work without including any component towards royalty, and the said rate was accepted by the respondents at the time of finalization of the contract. It is therefore submitted that the subsequent deduction of royalty from the contractor’s bills was contrary to the understanding on which the bid had been submitted and accepted. 21. Learned counsel for the appellant also submits that the arbitrator had taken note of the fact that the departmental authorities did not provide the approved borrow areas as contemplated under the contract. The contractor was instead required to procure earth from private lands by compensating the landowners and arranging for transportation of the material to the work site. According to the appellant, the earth so procured was utilized for embankment work with the approval of the departmental engineers supervising the project. In such circumstances, it is argued that the deduction of royalty from the contractor’s bills lacked contractual justification, particularly when the contractor had itself incurred expenditure for obtaining the earth from private borrow areas. Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 11 22. The appellant further submits that the contractor had consistently objected to the deduction of royalty during the execution of the work by addressing letters to the departmental authorities requesting that such deductions be discontinued. It is argued that despite these representations the respondents continued to deduct royalty from the running account bills up to the eighteenth bill, resulting in recovery of a total sum of Rs.61,17,354/-. According to the appellant, the arbitrator, upon considering the correspondence exchanged between the parties and the contractual provisions, had rightly held that the said deduction was not sustainable and had therefore directed refund of the amount. 23. It is lastly contended that the learned District Judge, while exercising jurisdiction under Section 34 of the Arbitration and Conciliation Act, exceeded the permissible scope of interference by reassessing the merits of the claim relating to royalty. The appellant submits that the arbitral award had dealt with the claims in detail and had granted relief after evaluating the evidence and contractual provisions. In such circumstances, it is argued that the finding of the arbitrator on the issue of royalty constituted a possible and reasonable view arising from the material on record and ought not to have been disturbed by the court below. The appellant therefore submits that the judgment of the learned District Judge insofar as it sets aside Claim No.1 relating to refund of royalty deserves to be reversed. Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 12 III. RESPONDENTS’ SUBMISSIONS: 24. Per contra, learned counsel appearing for the respondents–State supports the judgment of the learned District Judge and submits that the court below was justified in setting aside the award in respect of the claim relating to refund of royalty. It is contended that the contract documents themselves clearly indicated that the bid price quoted by the contractor was required to include all costs associated with execution of the work. In particular, reference is made to the provisions relating to BOQ Item No.5 dealing with earthwork in canal embankment, which according to the respondents contemplated procurement of earth from approved borrow areas along with all ancillary operations including excavation, loading, transportation and other incidental activities. It is therefore submitted that the contractor was fully aware of the nature of the work and the costs involved while quoting the rate for the said item. 25. Learned counsel for the State further contends that the contractual conditions specifically provided that the bid price shall include all duties, taxes and levies payable by the contractor. Royalty being a statutory levy payable on excavation of minor minerals, it is argued that the contractor was under an obligation to factor such levy into the rate quoted in the bid. The respondents also rely upon government communications issued in this regard, which, according to them, required deduction of royalty on earth extracted for construction works executed through the tender process. It is therefore submitted that the deduction of royalty from the Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 13 contractor’s bills was in accordance with the applicable statutory provisions as well as the contractual terms governing the work. 26. It is also submitted on behalf of the respondents that the appellant cannot rely upon any alleged assurance said to have been given during the pre-bid meeting. According to the State, records relating to the pre-bid meeting show that no contractor, including the appellant, had attended the meeting to seek clarification regarding the conditions of the tender. In such circumstances, it is argued that the contention that royalty was not to be deducted is without factual basis. The respondents therefore submit that the learned District Judge rightly held that the arbitral award directing refund of royalty was unsustainable and that no interference with the impugned judgment is warranted in the present appeal. IV. ISSUE FOR CONSIDERATION: 27. Having heard the parties and perused the materials available on record, this court here has identified the following issue to be determined: A. Whether the order of the Ld. District Judge warrants interference keeping in mind the limitations of this court’s powers under Section 37 of the A&C Act? V. ISSUE A: WHETHER THE ORDER OF THE LD. DISTRICT JUDGE WARRANTS INTERFERENCE KEEPING IN MIND THE LIMITATIONS OF THIS COURT’S POWERS UNDER SECTION 37 OF THE A&C ACT? 28. Before going into the merits of the contentions, it is necessary to outline the ambit and scope of Section 37of the 1996 Act. Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 14 29. The Supreme Court and this Court in catena of judgments have held that the powers of appellate court while exercising jurisdiction under Section 37 of the 1996 Act against orders passed by the Arbitral Tribunal is very restricted and narrow and the same should be exercised when the orders seems to be perverse, arbitrary and contrary to law. 30. In Reliance Infrastructure Ltd. v. State of Goa1, the Apex Court noticing its previous decision in MMTC Ltd. v. Vedanta Ltd.2 has noted the limited scope of interference under Section 34 and further narrower scope of appeal under Section 37 of the Act particularly when dealing with the concurrent findings of the arbitrator and that of the Court. Relevant paragraph ‘14’ of MMTC Ltd.(supra) as noted in paragraph ‘26’ in Reliance Infrastructure Ltd.(supra) is to be extracted hereinunder:— “14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.” 1(2024) 1 SCC 479 2(2019) 4 SCC 163 Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 15 31. The same view has been expressed in UHL Power Company Ltd. v. State of Himachal Pradesh3 in paragraph ‘16’ while noticing paragraph ‘11’ in MMTC Ltd.(supra):— “16. As it is, the jurisdiction conferred on courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an appellate court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed. In MMTC Ltd. v. Vedanta Ltd. [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163 : (2019) 2 SCC (Civ) 293], the reasons for vesting such a limited jurisdiction on the High Court in exercise of powers under Section 34 of the ArbitrationAct have been explained in the following words : (SCC pp. 166-67, para 11) “11. As far as Section 34 is concerned, the position is well- settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the “fundamental policy of Indian law” would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses Ltd. v. WednesburyCorpn., [1948] 1 K.B. 223(CA)] reasonableness. Furthermore, “patent illegality” itself has been held to mean contravention of the substantive 3(2022) 4 SCC 116 Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 16 law of India, contravention of the 1996 Act, and contravention of the terms of the contract.” 32. In Haryana Tourism Ltd. v. Kandhari Beverages Ltd.4 as noted in paragraph ‘30’ in Reliance Infrastructure Ltd.(supra), it was held on the scope of interference under Sections 34 and 37 of the Act' 1996 as under:— “30. In Haryana Tourism [Haryana Tourism Ltd. v. Kandhari Beverages Ltd., (2022) 3 SCC 237 : (2022) 2 SCC (Civ) 87], this Court yet again pointed out the limited scope of interference under Sections 34 and37 of the Act; and disapproved interference by the High Court under Section 37 of the Act while entering into merits of the claim in the following words : (SCC p. 240, paras 8-9) “8. So far as the impugned judgment and order [Kandhari Beverages Ltd. v. Haryana Tourism Ltd., 2018 SCC OnLine P&H 3233] passed by the High Court quashing and setting aside the award and the order passed by the Additional District Judge under Section 34 of the Arbitration Act are concerned, it is required to be noted that in an appeal under Section 37 of the Arbitration Act, the High Court has entered into the merits of the claim, which is not permissible in exercise of powers under Section 37 of the Arbitration Act. 9. As per settled position of law laid down by this Court in a catena of decisions, an award can be set aside only if the award is against the public policy of India. The award can be set aside under Sections 34/37 of the Arbitration Act, if the award is found to be contrary to : (a) fundamental policy of Indian Law; or 42022) 3 SCC 237 Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 17 (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. None of the aforesaid exceptions shall be applicable to the facts of the case on hand. The High Court has entered into the merits of the claim and has decided the appeal under Section 37 of the Arbitration Act as if the High Court was deciding the appeal against the judgment and decree passed by the learned trial court. Thus, the High Court has exercised the jurisdiction not vested in it under Section 37 of the Arbitration Act. The impugned judgment andorder [Kandhari Beverages Ltd. v. Haryana Tourism Ltd., 2018 SCC OnLine P&H 3233] passed by the High Court is hence not sustainable.” 33. It was, thus, observed in paragraph ‘33’ of Reliance Infrastructure Ltd.(supra) as under:— “33. Keeping in view the aforementioned principles enunciated by this Court with regard to the limited scope of interference in an arbitral award by a Court in the exercise of its jurisdiction under Section34 of the Act, which is all the more circumscribed in an appeal under Section 37, we may examine the rival submissions of the parties in relation to the matters dealt with by the High Court.” 34. It is observed in Punjab State Civil Supplies Corpn. Ltd. v. Sanman Rice Mills5 that: “9. The object of the Act is to provide for a speedy and inexpensive alternative mode of settlement of dispute with the minimum of intervention of the courts. Section 5 of the Act is implicit in this regard and prohibits interference by the judicial authority with the arbitration proceedings except where so provided in Part-I of the Act. The judicial 52024 SCC OnLine SC 2632 Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 18 interference, if any, is provided inter-alia only by means of Sections 34 and 37 of the Act respectively. 10. Section 34 of the Act provides for getting an arbitral award set aside by moving an application in accordance with sub-Section (2) andsub-Section (3) of Section 34 of the Act which inter-alia provide for the grounds on which an arbitral award is liable to be set aside. One of the main grounds for interference or setting aside an award is where the arbitral award is in conflict with the public policy of India i.e. if the award is induced or affected by fraud or corruption or is in contravention with the fundamental policy of Indian law or it is in conflict with most basic notions of morality and justice. A plain reading of Section 34 reveals that the scope of interference by the court with the arbitral award under Section 34 is very limited and the court is not supposed to travel beyond the aforesaid scope to find out if the award is good or bad. 11. Section 37 of the Act provides for a forum of appeal inter-alia against the order setting aside or refusing to set aside an arbitral award under Section 34 of the Act. The scope of appeal is naturally akin to andlimited to the grounds enumerated under Section 34 of the Act. 12. It is pertinent to note that an arbitral award is not liable to be interfered with only on the ground that the award is illegal or is erroneous in law that too upon reappraisal of the evidence adduced before the arbitral trial. Even an award which may not be reasonable or is non-speaking to some extent cannot ordinarily be interfered with by the courts. It is also well settled that even if two views are possible there is no scope for the court to reappraise the evidence and to take the different view other than that has been taken by the arbitrator. The view taken by the arbitrator is normally acceptable and ought to be allowed to prevail. xxxxxx Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 19 14. It is equally settled law that the appellate power under Section 37of the Act is not akin to the normal appellate jurisdiction vested in the civil courts for the reason that the scope of interference of the courts with arbitral proceedings or award is very limited, confined to the ambit of Section 34 of the Act only and even that power cannot be exercised in a casual and a cavalier manner. xxxxxx 16. It is seen that the scope of interference in an appeal under Section37 of the Act is restricted and subject to the same grounds on which an award can be challenged under Section 34 of the Act. In other words, the powers under Section 37 vested in the court of appeal are not beyond the scope of interference provided under Section 34 of the Act.” Here, the Supreme Court has once again reiterated that even an award which may not be reasonable or is nonspeaking to some extent cannot ordinarily be interfered with by the courts. It is also well settled that even if two views are possible there is no scope for the court to reappraise the evidence and to take the different view other than that has been taken by the arbitrator. The view taken by the arbitrator is normally acceptable and ought to be allowed to prevail. 35. In Konkan Railway Corpn. Ltd. v. Chenab Bridge Project6 referring to MMTC Limited (supra) it has been held that: “19….The scope of jurisdiction under Section 34 and Section 37 of the Act is not akin to normal appellate jurisdiction. It is well-settled that courts 6(2023) 9 SCC 85 Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 20 ought not to interfere with the arbitral award in a casual and cavalier manner. The mere possibility of an alternative view on facts or interpretation of the contract does not entitle courts to reverse the findings of the arbitral tribunal…” 36. In Dyna Technology Private Limited v. Crompton Greaves Limited7, the Apex Court observed as under: “24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated. 25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.” 7(2019) 20 SCC 1 Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 21 37. Judicial scrutiny of arbitral awards is stringently limited under Indian law. Section 34 of the Arbitration and Conciliation Act, 1996, provides the exclusive grounds upon which an arbitral award can be challenged. Courts, therefore, are not empowered to interfere merely because another interpretation or outcome may seem more reasonable. The jurisdiction under Section 34 is confined to procedural and legal infirmities such as lack of jurisdiction, violation of natural justice, or patent illegality. Consequently, appellate jurisdiction under Section 37 is even narrower in its scope. Its purpose is to evaluate whether the court adjudicating under Section 34 has remained within the permissible statutory boundaries. The appeal court cannot re-evaluate evidence or reconsider the factual matrix afresh. The statutory framework thus reflects an overarching legislative intent to insulate arbitral decisions from excessive judicial intervention. The entire architecture of Sections 34 and 37 reinforces the finality and autonomy of arbitral proceedings. Arbitration is designed to offer an efficient, expert-led, and expedited alternative to litigation. Courts must therefore resist the temptation to intervene unless the decision by the court under Section 34 itself amounts to a significant transgression of legal boundaries. 38. Judicial restraint under Section 37 also reflects respect for institutional competence of arbitral tribunals in resolving technical and commercial disputes. Courts are cautious not to intrude into operational or industry-specific assessments unless such assessments are manifestly disconnected from evidence or contractual terms. Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 22 Arbitration is valued precisely because it permits specialized adjudication, and appellate courts must avoid substituting judicial perceptions for commercial judgment, unless the latter is demonstrably arbitrary or legally unsound. 39. The balance, therefore, lies between two competing imperatives: preserving arbitral autonomy and ensuring legal accountability. Excessive deference risks validating legally flawed awards, while excessive interference undermines arbitration as an effective dispute resolution mechanism. Section 37 embodies this balance by allowing interference only when legal thresholds are crossed. Courts must carefully calibrate intervention to correct illegality without re- opening factual controversy, thereby preserving both rule of law and arbitral efficiency. 40. Now this Court shall endeavour to answer the main question framed herein. The controversy in the present appeal lies within a narrow compass. As noticed earlier, the learned District Judge interfered with the arbitral award only in respect of Claim No.1 relating to refund of royalty amounting to Rs.61,17,354/-. The remaining findings of the learned Sole Arbitrator with regard to the other claims were allowed to stand. The limited question that therefore arises for consideration in this appeal is whether the learned District Judge was justified, within the parameters of jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996, in setting aside the arbitral award on the issue of royalty. The determination of this question necessarily requires examination of the contractual Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 23 provisions governing the work, the nature of the claim raised before the arbitrator, and the reasoning adopted in the arbitral award. 41. The contract between the parties related to execution of canal works involving excavation of earth and formation of embankments. For the purpose of execution of the work, the agreement incorporated a Bill of Quantities specifying the various items of work and the rates applicable to each item. The dispute in the present case revolves around the interpretation of the provisions relating to earthwork contained in the Bill of Quantities, particularly Item Nos.4 and 5. These provisions governed excavation of earth from the canal and the utilization of earth for formation of canal embankments. The contractor had quoted the rates for these items during the tender process and the same had been accepted by the departmental authorities while entering into the agreement. 42. BOQ Item No.4 essentially related to excavation of earth from the canal section. The specification of this item described the work of excavation in soil for the canal, including dressing of the excavated surfaces and disposal of the excavated material as required for the execution of the project. The item thus contemplated excavation of earth as part of the process of constructing the canal system. The excavated earth formed a material component in the execution of the work and could also be utilized for the formation of canal embankments depending upon the requirements of the project and the instructions issued by the departmental engineers supervising the work. Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 24 43. BOQ Item No.5, on the other hand, dealt with earthwork in canal embankment. The specification of this item contemplated formation of embankments using earth obtained either from the canal excavation or from approved borrow areas. The item included the processes necessary for formation of the embankment such as excavation of earth, loading into transport vehicles, transportation to the work site, deposition in layers and compaction. The provision further indicated that the quoted rate would cover the various operations required for embankment formation including construction and maintenance of haul roads and borrow areas as may be required for execution of the work. 44. The contractor had quoted a rate of Rs.60/- per cubic metre for BOQ Item No.5 relating to earthwork in canal embankment. It is the case of the appellant that this rate had been quoted on the understanding that earth required for the embankment would be obtained from the canal excavation at the first instance and that royalty would not be levied on such earth. According to the appellant, the departmental authorities had conveyed during the pre-bid stage that if additional earth was required beyond what could be obtained from the canal excavation, the same would be made available from Government borrow areas. On that basis, the contractor asserts that the rate quoted did not include any component towards royalty. 45. During execution of the work, however, the departmental authorities deducted royalty from the contractor’s running account bills in respect of the earth utilized for embankment formation. The Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 25 materials on record indicate that deductions were made progressively from the bills submitted by the contractor for the earthwork carried out under BOQ Item No.5. According to the contractor, such deductions continued up to the eighteenth running account bill, resulting in recovery of an amount of Rs.61,17,354/-. The contractor had addressed letters during the course of execution objecting to such deductions and requesting that the royalty component be excluded from the bills. 46. The respondents, on the other hand, relied upon the contractual provision which stipulated that the bid price quoted by the contractor would include all duties, taxes and levies payable in connection with execution of the work. Royalty being a statutory levy payable on extraction of minor minerals, the State contended that the contractor was obliged to factor such levy into the rate quoted in the tender. The respondents also relied upon government communications governing deduction of royalty in works executed through the tender process, contending that the departmental authorities were bound to deduct royalty in accordance with the statutory framework regulating extraction of earth. 47. The arbitral tribunal examined the rival contentions in the light of the materials produced before it. The arbitrator took note of the correspondence exchanged between the parties during the execution of the work, including the letters addressed by the contractor requesting that royalty should not be deducted from the bills submitted for earthwork. The arbitrator also considered the Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 26 circumstances in which earth for embankment formation was procured and utilized during the execution of the project. 48. The materials placed before the arbitrator indicated that the contractor had been required to procure earth from borrow areas for the purpose of embankment formation. The contractor asserted that approved borrow areas had not been handed over by the department and that it had therefore arranged earth from private lands by compensating the landowners. It was further stated that the earth so procured had to be transported to the work site and utilized for formation of the canal embankment under the supervision of departmental engineers. These factual aspects formed part of the evidence considered by the arbitrator while examining the claim relating to royalty. 49. Another aspect considered in the arbitral proceedings related to the nature of the deductions made from the running account bills. The contractor had raised objections to the deduction of royalty during execution of the work and had reiterated such objections through written communications addressed to the departmental authorities. Despite such objections, the deductions were continued and were reflected in the bills prepared by the department. The contractor ultimately received the final bill wherein the royalty deductions were incorporated, though the contractor recorded an endorsement accepting the bill with a royalty objection. 50. The arbitrator analysed the contractual provisions and the factual circumstances surrounding the execution of the work. In doing so, Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 27 the arbitrator took into account the nature of BOQ Item Nos.4 and 5 and the manner in which the work had actually been carried out. The arbitrator also considered whether the rate quoted for embankment formation could reasonably be construed as including the royalty component, particularly in the context of the contractor’s assertion that earth had been procured from private borrow areas and that the contractor had already incurred expenditure for obtaining such earth. 51. Since the learned District Judge interfered with the award only in respect of Claim No.1 relating to refund of royalty, it becomes necessary to examine the reasoning which weighed with the learned Sole Arbitrator while allowing the said claim. The award reveals that the arbitrator addressed the issue by closely examining the contractual documents, particularly the estimate prepared by the department, the description of the relevant items in the Bill of Quantities, and the oral and documentary evidence placed on record by the parties. The arbitrator proceeded on the premise that the determination of the claim essentially depended upon whether the rate quoted by the contractor for BOQ Item No.5—namely “Earth work in canal embankment”—was inclusive of royalty or whether royalty had been separately deducted by the department without contractual authority. 52. In the course of the award, the arbitrator first adverted to the estimate prepared by the departmental authorities for the work in question. On examination of the rate analysis forming part of the Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 28 estimate, the arbitrator recorded a finding that the calculation of the unit rate corresponding to BOQ Item No.5 did not include any component towards royalty on earth. The estimate, which formed part of the contractual documents, indicated the factors taken into account while determining the rate for the said item of work. According to the arbitrator, the absence of any reference to royalty in the rate analysis suggested that the departmental authorities themselves had not factored royalty charges while preparing the estimate on the basis of which the tender was invited. 53. The arbitrator then examined the description of the various items contained in the Bill of Quantities forming part of the agreement between the parties. It was noticed that several items in the BOQ expressly referred to royalty as a component of the work. In particular, BOQ Item Nos.4, 9, 10, 11, 14 and 15 contained references to royalty in their respective descriptions. However, BOQ Item No.5, which related to “Earth work in canal embankment”, did not contain any mention of royalty. The arbitrator considered this difference to be of significance. According to the arbitrator, where the employer intended that royalty should form part of the contractor’s liability under a particular item of work, the same had been expressly stated in the description of that item. The omission of such reference in BOQ Item No.5 therefore indicated that royalty was not intended to be included in the rate quoted for that item. 54. The arbitrator further considered the oral evidence adduced by the respondents during the arbitral proceedings. In particular, the Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 29 evidence of the respondents’ witness was examined in relation to the contents of the BOQ. The witness admitted during cross-examination that BOQ Item No.5 did not contain any stipulation relating to royalty, whereas other items in the agreement specifically mentioned royalty charges. The arbitrator treated this admission as corroborating the contractor’s case that the rate quoted for the embankment work had not been framed with the inclusion of royalty. The arbitrator therefore concluded that the contractual documents themselves did not support the deduction of royalty from the contractor’s bills under BOQ Item No.5. 55. Another aspect considered by the arbitrator related to the alleged clarification said to have been given during the pre-bid meeting convened prior to submission of the bids. The contractor had asserted that during the pre-bid meeting it had been indicated that royalty would not be levied on earth excavated from the canal for use in embankment formation. The respondents relied upon the minutes of the pre-bid meeting to contend that no such clarification had been given. The arbitrator examined the document relied upon by the respondents and observed that the minutes produced did not clearly establish that the bidders had been informed that royalty would be chargeable on the earth utilized for the work. The arbitrator also found that the authenticity of the said minutes had not been satisfactorily proved through the concerned departmental officer. On that basis, the arbitrator declined to place reliance upon Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 30 the document produced by the respondents in support of their contention. 56. The arbitrator also took into account the conduct of the parties during the execution of the work. The materials on record indicated that the contractor had objected to the deduction of royalty during the course of execution and had addressed letters requesting the departmental authorities not to deduct such amounts from the running account bills. Despite such objections, deductions continued to be made from the bills submitted by the contractor. The arbitrator observed that the consistent objection raised by the contractor during execution lent support to the contention that royalty had not been contemplated as part of the rate quoted for the work. 57. Having considered the contractual documents, the estimate prepared by the department and the evidence led by the parties, the arbitrator arrived at the conclusion that the rate quoted by the contractor for BOQ Item No.5 did not include the element of royalty. The arbitrator held that the deduction of royalty from the contractor’s running account bills was therefore not supported by the terms of the agreement. On that basis, the arbitrator allowed Claim No.1 and directed the respondents to refund the amount of Rs.61,17,354/- which had been recovered from the contractor’s bills towards royalty. 58. It is thus evident that the arbitrator did not proceed merely on a general assumption but undertook a detailed examination of the contractual provisions, the estimate forming part of the tender Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 31 documents and the evidence placed before the tribunal. The conclusion reached by the arbitrator was founded upon the interpretation of the BOQ items and the surrounding contractual material. 59. When the matter came before the learned District Judge under Section 34 of the Arbitration and Conciliation Act, the court interfered with the award on the ground that royalty constituted a statutory levy and that the contractor was liable to bear the same. However, the reasoning adopted by the arbitrator demonstrates that the issue before the tribunal was essentially one of contractual interpretation, namely whether the rate quoted for BOQ Item No.5 was intended to include royalty. The arbitrator interpreted the contractual documents and reached a conclusion on the basis of the materials available before him. 60. In the opinion of this Court, the reasoning adopted by the arbitrator reflects a possible interpretation of the contractual terms governing the work. The arbitrator examined the estimate prepared by the department, compared the language of different BOQ items and considered the evidence of the departmental witness before arriving at the conclusion that royalty had not been included in the rate quoted for the embankment work. Such an interpretation cannot be said to be irrational or unsupported by the record. 61. In arbitral jurisprudence, once the arbitrator has interpreted the terms of the contract and arrived at a conclusion based on the materials placed before the tribunal, the court exercising jurisdiction Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 32 under Section 34 cannot substitute its own interpretation merely because another view is possible. The role of the court is confined to examining whether the award suffers from patent illegality or perversity. Where the arbitrator’s view is a plausible one arising from the evidence and contractual provisions, interference is not warranted. 62. Viewed in that light, the reasoning adopted by the learned Sole Arbitrator in allowing Claim No.1 represents a plausible view on the basis of the contractual documents and the evidence placed on record. The interpretation of BOQ Item No.5 and the conclusion that royalty had not been included in the quoted rate constitute a possible construction of the agreement between the parties. In such circumstances, the award on that aspect could not have been interfered with in proceedings under Section 34 of the Arbitration and Conciliation Act. 63. In the present case, the issue before the arbitrator involved interpretation of the contractual provisions governing earthwork and examination of the factual circumstances under which the earth required for embankment formation had been procured and utilized. The arbitrator considered the correspondence exchanged between the parties, the objections raised by the contractor during execution of the work, and the manner in which deductions had been made from the running account bills. On the basis of such materials, the arbitrator arrived at a conclusion that the contractor was entitled to refund of the royalty deducted. Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 33 64. Having regard to the materials considered by the arbitrator and the reasoning reflected in the award, it cannot be said that the view taken by the arbitral tribunal was one that no reasonable person could have arrived at. The interpretation adopted by the arbitrator with regard to the contractual provisions and the factual circumstances surrounding procurement and utilization of earth constitutes a plausible view arising from the evidence on record. In such circumstances, the award directing refund of royalty cannot be said to suffer from patent illegality or perversity warranting interference. The finding of the arbitrator on this issue therefore represents a possible view on the materials placed before the tribunal. 65. It is well settled that the jurisdiction of a court under Section 34 of the Arbitration and Conciliation Act is supervisory in nature and does not extend to reappreciation of evidence or substitution of the court’s own interpretation of the contract in place of that adopted by the arbitral tribunal. Where the arbitrator has interpreted the contractual provisions and assessed the evidence placed before it, the court may interfere only if the award suffers from patent illegality, perversity, or contravention of the fundamental policy of law. A possible view taken by the arbitrator on the basis of the materials on record ordinarily does not warrant interference in proceedings under Section 34. Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 34 VI. CONCLUSION: 66. In view of the discussion made hereinabove, this Court is of the considered opinion that the learned Sole Arbitrator had examined the contractual provisions, the estimate forming part of the tender documents, the description of the items contained in the Bill of Quantities and the evidence adduced by the parties before arriving at the conclusion that the rate quoted for BOQ Item No.5 was not inclusive of royalty. The reasoning recorded in the award demonstrates that the arbitrator interpreted the contractual documents and assessed the materials placed before the tribunal in order to determine the entitlement of the claimant. The conclusion so reached represents a possible and reasonable view arising from the record. In proceedings under Section 34 of the Arbitration and Conciliation Act, 1996, the court does not sit in appeal over the arbitral award and cannot substitute its own interpretation of the contract in place of that adopted by the arbitrator merely because another view may also be possible. 67. The learned District Judge, while partly allowing the application under Section 34, interfered with the award only in respect of Claim No.1 relating to refund of royalty. However, having regard to the reasoning contained in the arbitral award, this Court finds that the view taken by the arbitrator on the issue of royalty cannot be said to suffer from patent illegality or perversity so as to justify interference within the limited scope of jurisdiction under Section 34 of the Act. The learned District Judge, in effect, substituted his own Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Mar-2026 16:52:38 Signature Not Verified Page 35 interpretation of the contractual provisions in place of that adopted by the arbitrator, which is impermissible in law. The interference with the award on that limited aspect was therefore not warranted. 68. Consequently, the judgment dated 12.9.2019 passed by the learned District Judge, Dhenkanal in ARBP No.161 of 2017, insofar as it sets aside the arbitral award dated 6.5.2017 with respect to Claim No.1 relating to refund of royalty amounting to Rs.61,17,354/-, cannot be sustained and is hereby set aside. The arbitral award dated 6.5.2017 passed by the learned Sole Arbitrator in Arbitration Proceeding No.26 of 2015 is restored in its entirety. The appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 is accordingly allowed. 69. Accordingly, both the ARBAs are disposed of. 70. Any interim orders passed during pendency of the appeal shall stand vacated. Pending interlocutory applications, if any, shall also stand disposed of. 71. There shall be no order as to costs. (Dr. Sanjeeb K Panigrahi) Judge Orissa High Court, Cuttack, Dated the 13th March, 2026/