Bombay HC Upholds Arbitral Award Against ONGC, Says Courts Cannot Re-Appreciate Evidence Under Section 37

The Bombay High Court has refused to interfere with an arbitral award holding that once an arbitral tribunal has taken a plausible view based on evidence, courts exercising jurisdiction under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 cannot re-appreciate evidence or substitute their own interpretation merely because another view is possible.

The Court upheld findings that termination of a contract by Oil and Natural Gas Corporation (ONGC) was wrongful and reaffirmed that arbitral awards can only be set aside where they suffer from patent illegality, perversity, or complete absence of reasoning.

A Division Bench of Chief Justice Shree Chandrashekhar and Justice Gautam A. Ankhad, dismissed a commercial arbitration appeal filed by ONGC challenging the rejection of its Section 34 petition and the underlying arbitral award dated August 26, 2021.

The Court held that the arbitral tribunal’s findings were based on a detailed appreciation of evidence and contractual terms, and did not disclose any perversity or patent illegality warranting interference.

The Court also reiterated that the scope of appellate interference under Section 37 is even narrower than under Section 34 and does not permit reassessment of facts.

The dispute arose out of a turnkey contract awarded by ONGC to Newton Engineering & Chemicals Limited for modernization of the Effluent Treatment Plant at its Uran facility.

The contract was awarded in May 2015 following a bid submitted by the respondent, which had identified UEM India Pvt. Ltd. as its technical collaborator.

Disputes arose during execution, with ONGC alleging extremely slow progress, failure to meet milestones, and unresolved issues between the contractor and its technical collaborator.

A show cause notice was issued in May 2017, followed by termination of the contract in June 2017 on grounds of unsatisfactory performance.

The contractor disputed these allegations, attributing the delay primarily to ONGC’s failure to provide clarity and approvals on critical aspects, particularly sludge disposal, which it claimed was foundational to execution of the project.

It was also contended that delays in payments and insistence on unnecessary approvals from the technical collaborator contributed to the stagnation of the project.

The disputes were referred to arbitration, where a three-member tribunal framed multiple issues relating to delay, scope of work, validity of termination, and claims for damages.

Upon appreciation of evidence, the arbitral tribunal held that the termination of the contract by ONGC was wrongful and that the delay was attributable to the employer’s own conduct, including indecision regarding sludge disposal and insistence on conditions not mandated by the contract.

The tribunal further held that the contract did not require approval or signature of the technical collaborator on all engineering documents and that the contractor could not be faulted on that basis.

It awarded approximately Rs. 27.43 crore to the contractor under various heads including refund of the performance bank guarantee, value of work done, loss of revenue, and loss of profit, along with interest and costs, while rejecting ONGC’s counterclaims.

ONGC’s challenge under Section 34 was rejected by the Single Judge, who held that the arbitral award reflected a plausible view based on material on record. In appeal under Section 37, ONGC contended that the award was perverse, suffered from internal contradictions particularly regarding the role of UEM, and was unsupported by evidence. It was further argued that loss of profit and other monetary claims were arbitrarily awarded without proof.

Rejecting these submissions, the Division Bench held that the tribunal had undertaken a detailed analysis of the contractual framework and evidence, and had drawn a clear distinction between the role of UEM as a technical collaborator and the contractual obligations of the contractor towards ONGC.

The Court held that there was no contradiction in the tribunal’s findings and that the interpretation adopted was a reasonable and plausible one. It further held that the issue of delay and attribution of responsibility was a pure question of fact, which could not be reopened in proceedings under Section 37.

On the issue of damages, the Court upheld the award of amounts towards work done, loss of revenue and loss of profit, observing that the tribunal had relied on documentary evidence including invoices, work orders and bank statements.

It reiterated that arbitral tribunals are not bound by strict rules of evidence and that sufficiency of evidence is within the tribunal’s domain.

The Court also upheld the grant of loss of profit at 15%, noting that such quantification is permissible in cases of wrongful termination and cannot be interfered with unless shown to be arbitrary or without basis.

The Court further held that once termination was found to be wrongful, the direction to refund the performance bank guarantee was a natural consequence.

It rejected the argument that the award suffered from patent illegality or perversity, observing that the reasoning was clear, intelligible and supported by material on record.

Concluding that no ground for interference was made out, the Court dismissed the appeal.

Adv. Navroz Seervai, Senior Advocate, along with Adv. Vishal Kanade, Adv. Anagh Pradhan, Adv. Aneesha Munshi, Adv. Anand Iyer and Adv. Palak Jain, instructed by Divya Shah Associates, appeared for the appellant. Adv. Mayur Khandeparkar appeared for the respondent along with Adv. Bernardo Reis and Adv. Pratik Dixit i/b Dr. Prem Motiramani.

Case Title: Oil and Natural Gas Corporation Ltd. v. Newton Engineering & Chemicals Ltd.

Bench: Chief Justice Shree Chandrashekhar and Justice Gautam A. Ankhad

Date of Judgment: April 30, 2026