𝐖𝐡𝐞𝐭𝐡𝐞𝐫 𝐚𝐧 𝐚𝐫𝐛𝐢𝐭𝐫𝐚𝐥 𝐚𝐰𝐚𝐫𝐝 𝐜𝐚𝐧 𝐛𝐞 𝐬𝐞𝐭 𝐚𝐬𝐢𝐝𝐞 𝐮𝐧𝐝𝐞𝐫 𝐒.34 𝐨𝐟 𝐭𝐡𝐞 𝐀𝐫𝐛𝐢𝐭𝐫𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐂𝐨𝐧𝐜𝐢𝐥𝐢𝐚𝐭𝐢𝐨𝐧 𝐀𝐜𝐭, 1996, 𝐟𝐨𝐫 𝐫𝐞𝐚𝐬𝐨𝐧𝐚𝐛𝐥𝐞 𝐚𝐩𝐩𝐫𝐞𝐡𝐞𝐧𝐬𝐢𝐨𝐧 𝐨𝐟 𝐛𝐢𝐚𝐬 𝐚𝐧𝐝 𝐥𝐚𝐜𝐤 𝐨𝐟 𝐫𝐞𝐚𝐬𝐨𝐧𝐞𝐝 𝐚𝐧𝐚𝐥𝐲𝐬𝐢𝐬.
Tarapore & Company v. M/s National Thermal Power Corporation Ltd.
𝐅𝐚𝐜𝐭𝐬:
In 1988, the Respondent (NTPC) awarded a construction contract to the Petitioner (Tarapore) for an Ash Bund structure. The relationship eventually deteriorated, leading to a legal dispute. Pursuant to the arbitration clause, the disputes were referred to arbitration. In 2008, the arbitral tribunal rendered its award, partly allowing the claims of both parties, though several substantial counterclaims were decided in favour of NTPC. Following this, the parties filed petitions under S.34 of the Arbitration and Conciliation Act, 1996 (the Act), to challenge the award, with the court noting that even though the disputes arose earlier, the Act’s framework applied to the challenges.
Tarapore argued that the arbitrator wrongly rejected or only partially allowed several of its claims, including claims for unpaid work, escalation, damages, prolongation costs, and interest. Additionally, counterclaims relating to mobilisation advance and risk-and-cost execution, which were allowed in favour of NTPC, were unsupported by evidence and barred by limitation. Conversely, NTPC argued that the arbitrator had erroneously granted several claims to Tarapore despite contractual provisions excluding such reliefs. It further stated that many findings lacked reasons and failed to properly assess its counterclaims.
𝐃𝐞𝐜𝐢𝐬𝐢𝐨𝐧 𝐚𝐧𝐝 𝐀𝐧𝐚𝐥𝐲𝐬𝐢𝐬:
The Delhi High Court held that the award was liable to be set aside independently on multiple grounds, i.e, reasonable apprehension of bias, failure to comply with S.31(3) of the Act, and patent illegality arising from findings contrary to the contract. The Court held that appointing a serving NTPC General Manager gave rise to a reasonable apprehension of bias, compromising the fundamental requirement of arbitral impartiality despite permissions for employee-arbitrators. Furthermore, under S.31(3), the award failed the mandate of being "intelligible, proper, and adequate" as the award must demonstrate a rational link between the material on record and the conclusions reached.
The Court held that awarding 50% of the escalation claims on vague 'equitable grounds', contrary to the contractual price adjustment mechanism, amounted to unauthorised ex aequo et bono adjudication and rendered the award patently illegal.
𝐂𝐫𝐞𝐝𝐢𝐭𝐬: Prasha Bhatia
𝐋𝐢𝐧𝐤 𝐭𝐨 𝐭𝐡𝐞 𝐉𝐮𝐝𝐠𝐞𝐦𝐞𝐧𝐭: https://lnkd.in/dPW_2-Jk
𝐂𝐚𝐬𝐞 𝐃𝐞𝐭𝐚𝐢𝐥𝐬:
𝐂𝐢𝐭𝐚𝐭𝐢𝐨𝐧: 2026 DHC 4203
𝐃𝐚𝐭𝐞 𝐨𝐟 𝐉𝐮𝐝𝐠𝐦𝐞𝐧𝐭: 12.05.2026
𝐂𝐨𝐮𝐫𝐭: Delhi High Court
𝐂𝐨𝐫𝐚𝐦: Jasmeet Singh, J.