Sanjay Gandhi Post Graduate Institute of Medical Sciences, Lko. Thru. Director vs M/S S.D. Sharma and Associates , Haryana

HIGH COURT OF JUDICATURE AT ALLAHABAD LUCKNOW

APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 No. - 42 of 2024

Sanjay Gandhi Post Graduate Institute of Medical Sciences, Lucknow through Director .....Appellant(s) Versus M/S S.D. Sharma And Associates , Haryana .....Respondent(s) Counsel for Appellant(s) : Pritish Kumar, Shubham Tripathi Counsel for Respondent(s) : Komal Prasad Tiwari, Anshuman Singh, Ashok Kumar Singh

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Reserved on:- 18.12.2025 Delivered on :-21.01.2026

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Chief Justice's Court

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HON'BLE ARUN BHANSALI, CHIEF JUSTICE HON'BLE JASPREET SINGH, J.

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(Per:-Jaspreet Singh, J.)

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Sanjay Gandhi Post Graduate Institute of Medical Sciences, Lucknow (hereinafter referred to as the ‘appellant/institute’) has challenged the judgment and order dated 29.06.2024 passed by the Commercial Court-I, Lucknow in Arbitration Case No. 268 of 2018 whereby a petition filed by the appellant under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act of 1996’) has been rejected.

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Before adverting to the submissions advanced by the learned counsel for the parties, this Court deems appropriate to notice the relevant facts giving rise to the instant appeal.

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An agreement was entered between the appellant-institute and the respondent dated 23.02.1996 in terms whereof the respondent was to provide consultancy services for design, detailing and full supervision of construction of an Auditorium and Lecture Theater Complex. The dispute between the parties was in context of certain dues which were payable to the respondent by the appellant-institute. The agreement contained an arbitration clause and since the parties could not arrive at any amicable settlement regarding payment of dues, hence, the respondent invoked the

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arbitration clause.

The respondent filed his statement of claim and the dispute inter-alia was centered around the payment of remuneration to the respondent in terms of Clause 9 of the agreement as well as non-payment of additional traveling amount in light of Clause 3.3 (p) of the agreement, while other claims were also raised and the total value of the claims was around 33,89,000/-.

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The appellant-institute contested the proceedings before the Arbitral Tribunal and inter-alia raised the defence that the remuneration payable to the respondent was as per Clause 9 of the agreement which contained an upper cap. The appellant-institute had paid on the basis of the estimate furnished by the respondent which was approved by the appellantinstitute which was only up to 397.91 lakhs upon which 4% of it was payable and it had been paid and the respondent was not entitled to any other remuneration. The extra cost in terms of Clause 3.3 (p) of the agreement was also not payable as it could not be established that the respondent had incurred any additional amount in this regard nor any evidence was led to show that the respondent had actually paid it to seek reimbursement from the appellant.

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The other defence was that the respondent had already been paid more than what was due to him, accordingly, the claims of the respondent were not justified and the claims were liable to be dismissed.

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The Arbitral Tribunal after hearing the parties made its award on 13.02.2009 allowing part of the claims.

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The appellant-institute being aggrieved preferred a petition under Section 34 of the Act, 1996 before Commercial Court, Lucknow registered as Arbitration Case No. 2681 of 2018 and after hearing the parties, the said Court dismissed the petition under Section 34 of the Act of 1996 by means of judgment and order dated 29.06.2024.

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It is in the aforesaid backdrop that the appellant-institute had challenged the order passed by the Commercial Court -I, Lucknow dated 29.06.2024 as well as the award dated 13.02.2009 passed by the Arbitral Tribunal.

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Mr. Pritish Kumar, learned Senior Advocate duly assisted by Sri Shubham Tripathi, learned counsel for the appellant-institute has primarily confined his challenge to the two claims awarded by the Arbitral Tribunal relating to the remuneration in terms of Clause 9 of the Agreement as well as in respect of additional supervisory expenses as

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envisaged in Clause 3.3 (p) of the agreement and as awarded by the Tribunal.

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Elaborating his submissions, Mr. Kumar, learned Senior Counsel has urged that from bare reading of the Clause 9 of the agreement, it would reveal that any extra work, which was beyond the scope of work, for which approval of the Director of appellant-institute was granted could have been claimed but in absence of the approval any claim for extra work was bad.

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It was urged that no extra work was got done by the appellant-institute which was beyond the scope of the work as per the agreement. Moreover, there was no evidence on record by which it could be ascertained that the Director had given its approval to any such extra work. Accordingly, in absence of the approval, the claim of the respondent was not justified and this aspect has not been noticed by the Arbitral Tribunal and it has also been ignored by the Commercial Court-I, Lucknow.

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It was further submitted that in order to succeed in claiming remuneration for the additional work in terms of Clause 9, it was necessary for the respondent to have first shown and proved that there was some increase in the scope of work and for which the Director had given its approval and unless the twin conditions were met, the claim of the respondent on the aforesaid count could not succeed.

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It was also urged that the record only indicated that though the claim was raised by the respondent and it had been forwarded for processing, this cannot be confused with grant of approval. Hence, merely to suggest that the claim had been forwarded for processing by itself cannot be construed as as approval and in absence of any clear approval from the Director, it cannot be said that the respondent was entitled to any extra remuneration.

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It was further urged that the appellant-institute had already paid an excess amount to the respondent to cover all expenses but despite having received the extra sum, the respondent yet again made claims and the same was not legally justiciable.

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Learned Senior Counsel for the appellant-institute has further submitted that the claim for extra supervisory work in terms of Clause 3.3 (p) could only be claimed if it could be established that the respondent had spent and had paid that extra amount for extra supervisory work. Without proving the fact of extra supervision done and actual payment made till then the respondent was not entitled to seek reimbursement. It

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was urged that this burden was clearly on the respondent and having failed to discharge the same, it would not entitle the respondent to the aforesaid amount.

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It was further submitted that even if at all, the appellant-institute did not lead any evidence on this count yet, as the respondent was the claimant, it was his duty to establish his own claim on the basis of material and evidence, led by him. In absence of any such evidence, the Arbitral Tribunal erred in putting a reverse burden on the appellantinstitute to allow the claim of the respondent and this aspect has been ignored by the Commercial Court-1, Lucknow resulting in sheer miscarriage of justice.

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It was thus urged that for the reasons, aforesaid, the award suffered from the patent illegality and an incorrect meaning has been ascribed to the terms of the contract, hence, the finding of the Arbitral Tribunal on the aforesaid count was perverse and erroneous. Accordingly, the award was patently illegal and against the public policy of India. For the said reasons, the appeal deserves to be allowed after setting aside the award dated 13.02.2009.

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Per contra, Sri Prashant Chandra, learned Senior Counsel assisted by Sri Anshuman Singh, learned counsel for the respondent urged that the Court while exercising powers, conferred under Section 37 of the Act of 1996, does not have the advantage of re-appraising the evidence. It was urged that the parties had led evidence before the Arbitral Tribunal and after affording a full opportunity to contest, the Arbitrator considered the evidence and based upon it, Clause 9 of the Agreement was considered and findings were recorded. Once, a view had been taken by the Arbitrator based on evidence, which is in the domain of the Arbitrator to do, then the said view is not open to challenge in proceedings under Section 34 of the Act nor before this Court under Section 37 of the Act of 1996, unless it is shown to be perverse.

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It was further urged that if a view taken by the Arbitrator is plausible on the given facts then merely because another view may be possible it will not entitle the Court to interfere with such an award, in exercise of powers under Section 34 or by this Court in terms of Section 37 of the Act of 1996.

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Mr. Chandra, learned Senior Counsel for the respondent had taken the Court through the award to indicate that full opportunity was granted to the parties to lead evidence. The claimant had categorically lead both oral and documentary evidence to buttress his claims. From the documentary

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evidence filed it was established that the additional claim raised by the respondent was approved by the appellant-institute and in furtherance thereof a sum of Rs. 9,00,000/- was paid, however, the remaining amount was withheld and this led the claimant to raise his claims before the Arbitral Tribunal for the remaining sum payable for the additional work done.

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Mr. Chandra also urged that the sole witness examined on behalf of the appellant-institute was cross-examined and his testimony also corroborated the claims of the respondent. It was further submitted that there was never any issue that the Director was to give the approval. Moreover, the person who had signed the agreement on behalf of the appellant-institute, was also the witness on behalf of the appellantinstitute who was confronted with the documents in his cross-examination and the said witness also corroborated the claims, which stood proved.

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The entire material was considered threadbare by the Arbitral Tribunal and thereafter it returned its findings, allowing some of the claims and the said findings cannot be said to be either perverse or patently illegal, hence, the appeal deserves to be dismissed.

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The Court has heard the learned Senior Counsel for the parties at length and also perused the material on record.

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Before proceeding further, it will be appropriate to notice the observations of the Apex Court in AC Chokshi Share Broker (P) Ltd. v. Jatin Pratap Desai, (2025) 5 SCC 321 which are as under:-

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"29. The limited supervisory role of courts while reviewing an arbitral award is stipulated in Section 34 of the Act, beyond whose grounds courts cannot intervene and cannot correct errors in the arbitral award. [McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181, para 52] The appellate jurisdiction under Section 37 is also limited, as it is constrained by the grounds specified in Section 34 and the court cannot undertake an independent assessment of the merits of the award by reappreciating evidence or interfering with a reasonable interpretation of contractual terms by the Arbitral Tribunal. [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163, para 14; Konkan Railway Corpn. Ltd. v. Chenab Bridge Project, (2023) 9 SCC 85, para 25 ] The court under Section 37 must only determine whether the Section 34 court has exercised its jurisdiction properly and rightly, without exceeding its scope. [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163, para 14 : ; Bombay Slum Redevelopment Corpn. (P) Ltd. v. Samir Narain Bhojwani, (2024) 7 SCC 218, para 26.]

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The term “public policy” in Section 34(2)(b)(ii) has been interpreted by this Court as meaning (a) the fundamental policy of Indian law, or (b) the interest of India, or (c) justice or morality. [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644, para 66 ] In ONGC v. Saw Pipes Ltd. [ONGC v. Saw Pipes, (2003) 5 SCC 705] , this Court further held that an arbitral award can be set aside as being contrary to public policy if it is patently illegal. The illegality must go to the root of the matter and must be so unfair and unreasonable that it shocks the court's conscience; it cannot be of a trivial nature. [Id, para 31; McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181, para 59.] Such patent illegality includes a situation where the award is in contravention with substantive law. [ONGC v. Saw Pipes Ltd., (2003) 5 SCC 705, para 54; Associate Builders v. DDA, (2015) 3 SCC 49, para 42.1]

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Further, an award can be set aside as being opposed to the “fundamental policy of India” if it is perverse, [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263, para 39] i.e. the finding is not based on evidence, or the Arbitral Tribunal takes something irrelevant into account, or ignores vital evidence. [Associate Builders v. DDA, (2015) 3 SCC 49, para 31 ] However, an award is not perverse if the finding of fact is a possible view that is based on some reliable evidence. [Kuldeep Singh v. Delhi Police, (1999) 2 SCC 10, para 10 : as cited in Associate Builders v. DDA, (2015) 3 SCC 49, paras 32-33 : (2015) 2 SCC (Civ) 204.]"

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The aforesaid view was followed by this Court in UCM Coal Company Ltd. v. Adani Enterprises Ltd.: 2025:2025 SCC OnLine All 7608.

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Having considered the submissions advanced by the learned Senior Counsel from both sides and in order to examine the strength of the same, it will be appropriate to notice Clause 9 of the agreement, which is in the vortex of the disputes, between the parties.

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“FEE AND REMUNERATIONS:

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a) The fees accruing to the Consultants for rendering the services as aforesaid for the project would be 4.0% (Four Percent) for the scope of work defined at clauses, 3.1 to 3.3 including full supervision as defined in clause 3.3 of the actual cost of the package as envisaged hereinbefore, subject to the upper limit as set out in clause 9.

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b) The cost for site survey and subsoil investigations shall be

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reimbursed to the consultants or paid directly to the specialized agency, in addition to other usual fees.

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c) The upper limit on the Architectural fees to be paid to the Consultants would be limited to 1.2. (one point two) times of the fees that would have become payable to them, calculated on the basis of detailed estimates prepared by the consultant and approved by the Owner except for any increase in cost estimate due to increase in the scope of work not envisaged earlier. In case a part or whole of the project is not executed, or termination of the contract as per clause 12 or for any other reason whatsoever, the cost of the project for the purpose of calculating the fees shall be taken as the detailed called estimated cost and fee prorata on the basis of the terms of payment as setout in clause 10 shall be paid as full and final settlement of the architects dues. The Owner shall have a right to use the drawing and designs prepared by architect for further work in case so required.”

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In this regard, the gist of the contention and claim of the respondent was that the respondent was entitled to 4% of the final cost of work as actually executed. It was the case of the respondent that the final estimate of Rs. 983 lakhs was prepared after incorporating the amendments, additions and alterations, and it was also approved by the State Government Authorities. After accounting for the amount already paid to the claimant, the remaining sum of Rs. 90.06 lakhs was claimed. In contrast, the appellant-institute had contested before the Arbitral Tribunal that whatever amount had to be paid was already paid and the amount claimed by the respondent was not justified.

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In this backdrop the Court sifted through the record and it reveals that though the appellant-institute had stated before the Arbitral Tribunal that excess amount had been paid but the fact remains that the appellantinstitute had made no counter claim before the Arbitral Tribunal.

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The record further indicates that as per the respondent, the final approval of the project cost was Rs. 983 lakhs and the remuneration payable to the respondent was Rs. 39,77,969/- out of which the respondent had received Rs. 20,71,969, even though in parts and the last payment in this regard was received on 02.11.2002 and a sum of Rs. 19,06,000/- remained outstanding.

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The record further reflects that the Arbitrator took specific note of Clause 9 of the agreement and also the fact that evidence was led by the respondent establishing that the project was successfully handed over to the appellant-institute in December, 2021. Reliance was placed on a letter

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dated 21.03.2002 indicating that there were certain obstacles regarding the payment to be made to the respondent. Reference was also made to the minutes of a meeting, held on 10.07.2003 between the appellantinstitute and the respondent which specifically related to the issue of payments to be made to the respondent. The said minutes of meeting reflects that there was no dispute regarding payment to be made to the respondent, on principal, rather the impediment appeared to be that a copy of the detailed estimate, which was to be furnished by the respondent was not available and the respondent was required to submit this additional document.

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From the tenor and texture of the evidence, the Arbitrator noticed that there was no dispute regarding the payment except that some additional document was mislaid in the record of the appellant-institute. Once, the said document was handed over to the appellant-institute thereafter an additional sum of Rs. 9,00,000/- was paid by the appellant-institute to the respondent as late as on 02.11.2002 and this fact was admitted to the witness of the respondent. Thus the Arbitral Tribunal considering the evidence found the claim of the respondent was successfully proved.

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The Arbitrator also recorded reasons inter-alia that in case if the final amount as allegedly approved by the appellant-institute was a sum of Rs. 397.1 lakhs then its 4% would have been much less than the amount which was already paid prior to November, 2002 and there was no occasion for the appellant-institute to have paid Rs. 9,00,000/- on 02.11.2002. No clear explanation was given that in what circumstances, a sum of Rs. 9,00,000/- was paid to the respondent on 02.11.2002. This assumed significance for the reason that if 4% of the claim was payable and the approved sum was Rs. 397.91 lakhs then under what circumstances the excess payment was made and why this stand was never communicated to the respondent and why no counter claim was made to reimburse the excess amount paid.

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This Court finds that the view taken by the Arbitrial Tribunal is based on material evidence on record and it has arrived at a conclusion which is based of evidence and it cannot be said to be unreasonable or perverse. Moreover, this Court has also meticulously perused the judgment of the Commercial Court and it finds that the Commercial Court too has noticed the contentions of the parties and has gone through the material to confirm a finding returned by the Tribunal. Once, the Commercial Court has refused to interfere and no patent error or illegality could be demonstrated before this Court, hence, we are unable to persuade ourselves to interfere with the said finding. In light of the above, the

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submissions advanced by the learned Senior Counsel for the appellantinstitute does not find favour with this Court.

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Now considering the second limb of the argument, relating to the payment of supervisory charges in terms of Clause 3.3 (p) of the agreement, to the effect that the Arbitral Tribunal put a reverse burden on the appellant-institute. The record would indicate that in terms of Clause 3.3 (p) of the agreement, the respondent was required to place a diploma holder (Junior Engineer) at the site for supervision. The agreement also contemplated that for period beyond the stipulated time as agreed in the agreement, the appellant-institute would pay Rs. 4,000/- per month for the said diploma holder (Junior Engineer) posted at the site.

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This contention was refuted by the appellant-institute before the Arbitral Tribunal with the plea that the appellant-institute did not ask the respondent to place an extra supervisory staff, hence, the respondent was not entitled to the claim.

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In this regard, the Arbitral Tribunal noticed that in terms of the agreement, it was clearly stated that the respondent was obliged to place one staff for the entire contract period. It was not disputed that the agreed time span had been extended and it was an obligation of the contractor to place a supervisory staff at the site.The agreement further contemplated that for the period beyond the agreed time span, the appellant-institute would pay extra. Hence, noting that the completion was beyond the agreed period and considering the fact that a supervisory staff was all along placed at the site till it was handed over, accordingly, for the extended period, the claim has been allowed.

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In context of this claim, as well, the learned Senior Counsel for the appellant-institute could not point out any evidence which was led by the appellant-institute to indicate that no such staff was deputed for the extended period and it also could not be disputed that there was an obligation on the respondent to place a supervisory staff at the site. The findings returned by the Tribunal based on facts and evidence cannot be said to be perverse or patently illegal nor there is any issue of reverse burden as alleged by the appellant-institute. The respondent had proved its claim and to the contrary, the appellant-institute could not lead evidence to disprove the contention or the evidence of the respondent. Hence, on the second count also, the submission of the learned Senior Counsel does not find favour with this Court.

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As far as the claim for traveling charges is concerned that same was rejected by the Arbitral Tribunal and it was never assailed by the

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respondent, hence, the contention attempted to be made by the learned Senior Counsel for the appellant for the aforesaid claim pales into insignificance.

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Thus, In light of the aforesaid discussions, this Court is satisfied that the finding recorded by the Arbitral Tribunal is based on evidence and the view taken is a just and plausible. The award does not suffer from any patent illegality nor the order passed by the Commercial Court-1, Lucknow falls foul of any of the parameters as laid down by the Apex Court while dealing with a petition under Section 34 of the Act of 1996. Thus, for all the aforesaid reasons, the appeal has no merit and is accordingly dismissed. There shall be no order as to costs.

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(Jaspreet Singh,J.) (Arun Bhansali,CJ.)

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January 21, 2026

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Asheesh

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Digitally signed by :- ASHEESH KUMAR High Court of Judicature at Allahabad, Lucknow Bench

Sanjay Gandhi Post Graduate Institute of Medical Sciences, Lko. Thru. Director v. M/S S.D. Sharma and Associates , Haryana

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Sanjay Gandhi Post Graduate Institute of Medical Sciences, Lko. Thru. Director v. M/S S.D. Sharma and Associates , Haryana

Case brief

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