Neutral Citation No. - 2025:AHC-LKO:49600-DB Chief Justice's Court Case :- APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 No. - 27 of 2025 Appellant :- U.P. Power Transmission Corporation Ltd. through its Superintending Engineer, Lucknow Respondent :- CG Power and Industrial Solutions Ltd., Mumbai through its Authorised Representative/Power of Attorney Holder Counsel for Appellant :- Manish Jauhari Counsel for Respondent :- Meha Rashmi Hon'ble Arun Bhansali, Chief Justice Hon'ble Jaspreet Singh, J. 1. This appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short 'the Act') is directed against judgment and order dated 09.06.2025 passed by Commercial Court No.2, Lucknow, whereby application under Section 34 of the Act filed by the appellant for setting aside the arbitral award dated 04.03.2023 has been dismissed. 2. The respondent participated in a tender issued by the appellant during the year 2010-2011 for the construction of a 400 KV Sub Station at Banda on a turnkey basis. Upon being declared successful bidder on 24.09.2011, its financial bid was accepted and three separate contract agreements were executed between the parties on 28.12.2011 – (i) a supply contract for equipment and materials, (ii) a contract for erection, testing and commissioning, and a two years operation and maintenance, and (iii) a civil works contract. 3. Dispute arose between the parties regarding payment for supply of equipment. It was indicated in the statement of claim before the Arbitral Tribunal that the appellant approved project implementation schedule for supply, erection, testing and commissioning pertaining to the transformer. After the transformer was ready, the respondent requested for inspection and testing, which was carried out and as the same was found as per technical 2 specifications, the appellant authorised the respondent to dispatch the transformer. However, as per the said letter, the dispatch was subject to conditions which inter alia provided that no payment will be made against the supply till August 2013 and no delivery extension will be given on that basis. On receipt of the dispatch order, the respondent dispatched the transformer for delivery on site at Banda. 4. Similarly, reactor was also supplied after following the procedure and similar condition pertaining to the fact that no payment will be made against the supply till August 2013. The transformer and reactor were supplied at the site in May 2013. The appellant released an advance sum of Rs. 10 crores for payment towards price of transformer and reactor as against Rs. 11,76,88,156/- and a sum of Rs. 1,76,88,156/- remained due. 5. It appears that the said payment of Rs. 10 crores was made to the respondent on account of their seeking preponement of the payment as it was a condition of the contract that the appellant would be liable for payment of the equipment only in August 2013. The appellant, though agreed to make the payment of Rs. 10 crores prior to August 2013, it was provided that on the said amount, interest at the rate of 12 percent would be charged till the erection of the equipment. The amount of Rs. 10 crores, though was accepted by the respondent, it disputed the liability to pay interest on the said amount and repeatedly sought payment of balance sum of Rs. 1.76 crores. 6. Ultimately, it appears that the Executing Engineer, by a communication dated 06.02.2018, addressed to the Superintending Engineer, calculated the recoverable interest for the period 28.06.2013 to 21.01.2017 at Rs. 5,01,46,387/- and indicated that a sum of Rs. 1,76,88,156/- has been adjusted and balance amount of Rs. 3,24,58,231/- needs to be deducted, pursuant to which, on 12.02.2018, a communication was addressed by the Executive Engineer to the Chief Engineer of the appellant Corporation that a 3 sum of Rs. 3,24,58,231/- be deducted from the bills of the respondent and balance amount of Rs. 8,10,12,035/- be got released for payment to the firm. 7. Aggrieved, the respondent sought appointment of Arbitrator, on failure, application under Section 11 of the Act was filed and the Arbitral Tribunal was constituted. 8. Before the Tribunal, against the claim made by the respondent, plea pertaining to the claim being barred by limitation was raised. The Arbitral Tribunal came to the conclusion that the cause of action arose on 12.02.2018 and the claim was within limitation. The Tribunal also came to the conclusion that the agreement did not provide for charge of interest and as such, the claim made for interest was de hors the agreement and consequently, passed the award impugned ordering for payment of Rs. 5,01,46,387/- deducted from the bills of the respondent with interest at the rate of 10 percent per annum from 05.05.2018 till actual payment along with costs of the arbitration. Feeling aggrieved, the present appeal has been filed. 9. Learned counsel for the appellant made vehement submissions that the Tribunal was not justified in coming to the conclusion that the claim was within limitation, as the same was ex facie barred by limitation. It was submitted that as the respondent had, by its letter dated 24.04.2014, disputed/rejected the appellant's claim of 12 percent interest on the sum of Rs. 10 crores, the cause of action, if any, arose from the said date and the limitation started running and consequently, as the claim was made after six years, the same was barred by limitation. 10. Further submissions were made that the Tribunal failed to consider the provisions of Section 28(3) of the Act, which recognise trade usages and as charging of interest was based on trade usages, mere fact that the same did not form part of the agreement, could not be made the basis for awarding claim made by the respondent and on that count, the award impugned being against public policy and being patently illegal, deserves to be set aside. 4 11. Learned counsel for the respondent supported the award and the order passed under Section 34 of the Act. Submissions were made that the Tribunal and the Commercial Court have rightly come to the conclusion that the cause arose only on 12.02.2018 when an amount of Rs. 5 crores towards interest was sought to be deducted from the final payment of the respondent, prior to which, though the appellant claimed interest on the amount of Rs. 10 crores, no action and/or indication was made regarding adjusting the amount of Rs. 1.76 crores towards interest at any point of time, therefore, the plea raised in this regard has no substance. 12. Further submissions were made that the plea raised regarding charging interest based on the ground of recognised trade usages is ex facie baseless, inasmuch as neither any plea was raised before the Arbitral Tribunal nor any evidence in this regard was led and in absence whereof, the trade usages cannot be assumed and consequently, the appeal deserves to be dismissed. 13. We have considered the submissions made by counsel for the parties and have perused the material available on record. 14. The Arbitral Tribunal, under Issue No.1 pertaining to the claim being barred by limitation, after going through the entire documentary evidence led by the parties, came to the conclusion that the final deduction having been made on 12.02.2018, the said date would be considered for reckoning the period of limitation. The Commercial Court, by its impugned judgment, also came to the conclusion that only by way of communication dated 12.02.2018, the information pertaining to deduction of a sum of Rs. 5,01,46,387/- as well as adjustment of Rs. 1.76 crores was given to the respondent, which essentially was the accrual of cause of action and not the demand raised by the appellant which was duly contested by the respondent and consequently, rejected the contention in this regard. 15. A perusal of entire sequence of events would reveal that the agreement provided payment of amount towards supply of transformer and reactor in 5 August 2013. The respondent made supplies prior to the same and on a request made for preponing the payment, the part payment to the tune of Rs. 10 crores was released in June 2013 but a condition was added that the respondent would be required to make payment of intrest at the rate of 12 percent per annum from the date of payment of Rs. 10 crores till the erection of the equipment, which took place in the year 2017. The respondent immediately contested the liability to make payment of interest on the said amount. Apparently, the parties continued to exchange correspondence on the said aspect of the matter and ultimately, at the time of final payment, by communication dated 12.02.2018, the respondent was informed of deduction of a sum of Rs. 5,01,46,387/- towards interest as well as an adjustment of Rs. 1.76 crores. 16. The submissions made that as the respondent denied liability to make payment of interest by its communication dated 24.04.2014, the same would constitute cause of action, apparently is fallacious inasmuch as the denial by the respondent may have given cause to the appellant to enforce its claim against the respondent, however, by disputing the liability, till such time that the liability was enforced against the respondent, no cause arose for the respondent to seek any redressal in this regard. It is only when the appellant sought deduction of the amount from the final bill, that the cause arose and from the said date i.e. 12.02.2018, the claim was well within limitation. 17. The said aspect may also be examined from another angle, as on 24.04.2014, only the amount of Rs. 1.76 crores, was outstanding from the bills, and therefore qua the balance amount of Rs. 3.34 crores, it cannot be said, by any stretch of imagination, that cause had arisen in the year 2014 based on the said letter. It is not even the case of the appellant that at any point of time prior to 12.02.2018, the respondent was informed of having adjusted a sum of Rs. 1.76 crores towards interest. 6 18. In that view of the matter, the plea sought to be raised pertaining to the claim being barred by limitation is ex facie baseless and the finding recorded by the Tribunal, as upheld by the Commercial Court, cannot be faulted. 19. So far as the second ground raised is concerned, it is not in dispute that the contract/agreement does not provide for charging of any interest and as such, the appellant has chosen to fall back upon trade usages with the aid of Section 28(3) of the Act. 20. Apparently, the said plea pertaining to the trade usages was not raised before the Arbitral Tribunal and no evidence worth the name in this regard was adduced and for the first time, the plea is sought to be projected before this Court. In absence of any plea pertaining to trade usages having been raised/evidence led before the Arbitral Tribunal, the plea sought to be raised for the first time before this Court cannot be countenanced and as such, the plea raised in this regard also apparently has no substance. 21. In view of above discussion, we do not find any reason to interfere with the order passed by the Commercial Court. There is no substance in the appeal, the same is therefore, dismissed. Order Date :- 22.8.2025 AHA (Jaspreet Singh, J) (Arun Bhansali, CJ) Digitally signed by :- AFZAL HUSAIN ABBASI High Court of Judicature at Allahabad, Lucknow Bench