SUTLEJ CONSTRUCTION versus UNION TERRITORY OF CHANDIGARH
[2017] 12 S.C.R. 134, Supreme Court of India, 2017
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
A 
[2017] 12 S.C.R. 134 
SUTLEJ CONSTRUCTION 
v. 
UNION TERRITORY OF CHANDIGARH 
(Civil Appeal No. 20885 of 2017) 
B 
DECEMBER 05, 2017 
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D 
E 
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[J. CHELAMESWAR AND SANJAY KISHAN KAUL, JJ.] 
Arbitration: 
Award of contract -
By respondent to appellant -
Termination of contract by respondent - Arbitration clause invoked 
- Award partly allowing claim of appellant and rejecting counter-
claims of respondent - Objections against the award u/s. 34 of 
Arbitration and Conciliation Act, 1996, rejected by Addi. District 
Judge - High Court set aside the award - On appeal, held: When it 
comes to setting aside of an award under the public policy ground, 
the award should shock the conscience of the court and the court 
should not substitute its view for that of the arbitrator - An 
arbitrator is a chosen judge by the parties and it is on limited 
parameters that an award be inteifered with - High Court acted as 
if it was the first appellate court against a decree - The dispute had 
resulted in a reasoned award after proper appreciation of evidence 
-Enforcement of award in toto is upheld. 
Allowing the appeal, the Court 
HELD: 1. The dispute in question had resulted in a 
reasoned award. It is not as if the arbitrator has not appreciated 
the evidence. The arbitrator has taken a plausible view and the 
correct view. The ability of the appellant to comply with its 
obligations were inter dependent on the respondent meeting its 
obligations in time, to facilitate appropriate
areas for· unloading 
of the earth and for its compacting. At least it is certainly a 
G plausible view. [Para 11] [140-B, D] 
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2. When it comes to setting aside of an award under the 
public policy ground, it would mean that the award should shock 
the conscience of the court and would not include what the court 
thinks is unjust on the facts of the case seeking to substitute its 
. 134
SUTLEJ CONSTRUCTION v. 
UNION TERRITORY OF 
135 
CHANDIGARH 
view for that of the arbitrator to do what it considers to be 
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"justice." [Para 12] [140-E] 
Associate Builders v. Delhi Development Authority 
(2015) 3 sec 49 - relied on. 
3. The approach adopted by the Additional District Judge 
was, thus, correct in not getting into the act of re-appreciating B 
the evidence as the first appellate court from a trial court 
decree. An arbitrator is a chosen Judge by the parties and it is 
on limited parameters can the award be interfered with. [Para 
13] [140-F-G] 
Sudarsan Trading Co. v. The Government of Kerala 
[1989] 1 SCR 665 ; Harish Chander & Co. v. State of 
U.P AIR 2016 SC 4257 : [2016] 8 SCR 773 ; Swan 
Gold Mining v. Hindustan Copper Limited 2014 (4) 
ArbLR 1 (SC) - relied on. 
c 
4. The High Court ought to have restrained itself from D 
getting into the meanderings of evidence appreciation and 
acting like a second appellate court. In fact, even in second 
appeals, only questions of law are to be determined while the 
first appellate court is the final court on facts. In the present case 
the High Court has, thus, acted in the first appeal against 
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objections dismissed as if it was the first appellate court against 
a decree passed by the trial court. The impugned order cannot 
be sustained and is accordingly set aside and the enforcement of 
the award in toto is upheld. [Paras 15-16] [141-A-B] 
Case Law Reference 
(2015) 3 sec 49 
relied on 
Para 11 
[1989] 1
SCR 665 
relied on 
Para 12 
[2016] 8 SCR 773 
relied on 
Para 12 
2014 (4) ArbLR 1 (SC) 
relied on 
Par.a 12 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 20885 
of2017. 
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136 
SUPREME COURT REPORTS 
[2017] 12 S.C.R. 
A 
From the Judgment and Order dated 01.04.2015 of the High Court 
B 
of Punjab and Haryana at Chandigarh in F.A.O. No. 1621 of 2014 
(O&M). 
Nidhesh Gupta, Sr. Adv., Tarun Gupta, Puneet Varshney, Advs 
for the Appellant. 
Rimali Batra, Ravi Prakash, Ms. Nikita Choukse, Chandra Prakash, 
U.T. Chandra Prakash, Advs for the Respondents .. 
The Judgment of the Court w~s delivered by 
SANJAY KISHAN KAUL, J. I. Leave granted. 
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2. The appellant was awarded a contract by the respondent of 
earth excavation work and loading into trucks and unloading for purposes 
of widening of the approach road Sukhna Choe on Chandigarh Kalka 
Road, Chandigarh vide memo No.201 dated 5.1.1996. The earth was 
required to be lifted from the first source near the regulator and carried 
D 
through trucks from Golf side initially. There was a second source of 
lifting the earth as per permission of the Superintendent Engineer but it 
is not necessary to go into the details of the contract for the present 
purposes. Suffice to say that the respondent alleges that the appellant 
did not fulfil its obligations while the appellant, on the other hand, alleges 
that what was required to be done by the respondent to facilitate execution 
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of the contract was not so done. This resulted in the respondent 
terminating the contract on 12.11.1996. 
3. The conditions of the contract provided for arbitration and despite 
the appellant invoking the arbitration clause,
the Superintendent 
Engineer failed to nominate an Arbitrator resulting in the appellant 
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approaching the Court. In the course of the said proceedings Mr. R.N. 
Singal, retired District & Sessions Judge was appointed as an arbitrator 
in terms of order dated 31.7.2002 of the learned Civil Judge (Senior 
Division), Chandigarh. 
4. The parties put forth their respective claims before the arbitrator. 
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The appellant laid the claims while the respondent filed the counterclaims. 
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The arbitrator made and published an Award dated 18.12.2013, partly 
allowing the claim of the appellant while rejecting the counterclaims of 
the respondent. The claims laid and the extent awarded as well as the 
counterclaims laid are as under:
SUTLEJ CONSTRUCTION v. 
UNION TERRITORY OF 
137 
CHANDIGARH [SANJAY KISHAN KAUL, J.] 
A 
Claims made b~· the Appellant 
Amounts awarded by the Arbitrator 
S.Xo. 
Particulars 
Amount 
Particulars 
Amount(in 
(in J:\"R) 
L"'l,"R.) 
I. 
Balance pajment 
2,00,014 Claim No.I and 
1,20,299 
accruing from the last 
amount deposited by 
32,000 
B 
running bill 
way of earnest 
1. 
Payment due on 
1,11,231 Claim No.3 
65,076 
account of 
transportation oreanh 
not measured by 
c 
deparnnent 
3. 
Pa \ment due on 
95,400 Claim No. 4 
7,74,375 
account ofless lead 
paid 
4. 
Idle hour charges of 
31,22,280 Claim No.6 
45,435 
hea\'y earthmoving 
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machinery and labour 
deployed on the 
machillery 
5. 
Paymell! due on 
1,69,206 
--
--
account of earth 
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eroded by heavy rains 
due to non-
compactiOll of earth 
and leaking water 
pipelines 
6. 
Payment on account 
90,835 
--
--
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ofloss of profit on 
balance work 
7. 
Loss due to 
12,80,000 
-
--
prolongation of work 
8. 
Litigation expenses 
25,000 
-
-
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Total 
50,93,966 
Total 
10,37,185 
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138 
SUPREME COURT REPORTS 
[2017] 12 S.C.R. 
A 
Interest@ 12% per annum was also allowed by the arbitrator in 
favour of the appellant. 
Counterclaims made by the Respondent 
Liquidated damages and the expe11ses [ 
8,01,808 
B 
incurred by it for completion of work 
I 
Loss due to delay in completion of work 
20,00,000 
Tuia I 
28,01808 
C 
5. The respondent aggrieved by the Award filed objections under · 
Section 34 of the Arbitration & Conciliatio:i Act, 1996 (hereinafter 
referred to as the 'said Act'), which were, however, rejected by the 
learned Additional District Judge, Chandigarh vide order dated 23.7.2013. 
The respondent thereafter preferred an appeal before the Punjab & 
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Haryana High Court and the said appeal succeeded whereby the Award 
was set aside opining that the contract was rightly terminated and the 
Department rightly imposed the penalty. 
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6. ·We have heard learned counsel for the parties and have 
perused the record. The Award is a reasoned one. The arbitrator has 
taken note of the peculiar features of the contract inter se the parties 
that while the work of excavation of the earth, its loading into the trucks, 
unloading and transportation to site of the work was awarded to the 
appellant .as contractor, the spreading of the earth brought to the site of 
the work by the contractor and its compaction was to be done by the 
respondent Department itself. It is, thus, that the appellant claimed that 
even though they had taken up the work
with right earnest to complete 
it within the scheduled period, the bi·eaches of the respondent has caused 
the delay. Such breaches enumerated are: 
a. 
Obstruction in the disposal area due to overhead lines and 
poles; 
b. 
Delay in makirig available approached to the disposal site, wan 
of lighting arrangement at the excavation as well as disposal 
sites by the respondent; 
c. 
Inadequate compaction plant and machinery. and other 
auxiliary equipment
SUTLEJ CONSTRUCTION v. 
UNION TERRITORY OF 
CHANDIGARH [SANJAY KISHAN KAUL, J.] 
It is in order to cover up their own lapses it is alleged that the 
respondent chose to terminate the contract. 
7. The respondent, of course, denies the aforesaid allegations but 
on the other hand contended that the work was carried on by the 
appellant at slow pace leaving the respondent-Department with no 
alternative but to levy penalty and to finally terminate the contract vide 
letter dated 12.11.1996. 
8. In the opinion of the arbitrator the performance of the 
contractual obligations by the appellant were dependent on reciprocal 
performances by the respondent. On appreciation of evidence on record 
it was concluded that the respondent had failed to comply with its 
obligations and, thus, held the contract to be illegally terminated. 
Thereafter the arbitrator, once again, on appreciation of evidence 
decided to award the amounts as specified aforesaid. 
9. The learned Additional District Judge, Chandigarh while 
dismissing the application of the respondent under Section 34 of the said 
Act came to the conclusion that the findings of the arbitrator were based 
on appraisal of evidence and it was certainly not the function of the 
Court to re-appreciate the evidence so long as it is not a case of 
completely devoid of evidence. Since the spreading of the earth and its 
compaction was required to be done by the respondent, the 
non-carrying out of that activity would naturally impede the
performance 
of the obligations by the appellant. Accessibility to the site was 
obviously an important part of the execution of the contractual 
obligations. In fact, the contract was carried over a period of four and a 
half years against the original time period of 45 days, which would show 
the unpreparedness of the respondent. 
10. The learned single Judge of the High Court, however, appears 
to have made an endeavour to re-appreciate the evidence and sought to 
come to a different conclusion than what was arrived at by the 
arbitrator, the objections to which were dismissed by the learned 
Additional District Judge, Chandigarh. The reasoning of the learned 
single Judge is predicated on the absence of any contractual obligation 
that the spreading of the earth brought to site was to be done by the 
Department nor was there a stipulation that the overhead lines and poles 
had to be removed by the respondent to make the area accessible. The 
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140 
SUPREME COURT REPORTS 
[2017) 12 S.C.R. 
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respondent-Department had not specified any space for unloading of 
the earth but only charges up to 5 kilometres were to be paid. Thus, the 
finding is that the arbitrator mis-conducted himself by acting contrary to 
the terms of the contract. 
11. We are not in agreement with the approach adopted by the 
B 
learned single Judge. The dispute in question had resulted in a reasoned 
award. It is not as if the arbitrator has not appreciated the evidence. 
The arbitrator has taken a plausible view and, an in our view, as per us 
the correct view, that the very nature of job to be performed would 
imply that there has to be an area for unloading and that too in the 
vicinity of 5 kilometres as that is all that the appellant was to be paid for. 
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The route was also determined. In such a situation to say that 
the respondent owed no obligation to make available the site cannot be 
accepted by any stretch of imagination. The unpreparedness of the 
respondent is also apparent from the fact that even post termination it 
took couple of years for the work to be carried out, which was meant to 
D 
be completed within 45 days. The ability of the appellant to comply with 
its obligations were inter dependent on the respondent meeting its 
obligations in time to facilitate appropriate areas for unloading of the 
earth and for its compacting. At least it is certainly a plausible view. 
12. It has been opined by this Court that when it
comes to setting 
E 
aside of ae it ward under the public policy ground, it would mean that the 
award should shock the conscience of the court and would not include 
what the court thinks is unjust on the facts of the case seeking to substitute 
its view for that of the arbitrator to do what it considers to be "justice." 
(Associate Builders v. Delhi Development Authority') 
F 
13. The approach adopted by the learned Additional District Judge, 
Chandigarh was, thus, correct in not getting into the act of 
re-appreciating the evidence as the first appellate court from a trial court 
decree. An arbitrator is a chosen Judge by the parties and it is on limited 
parameters can the award be interfered with. (Sudarsan Trading Co. 
v. The Government of Kerala2; Barish Chander & Co. v. State of 
G 
U.P. 3 and Swan Gold Mining v. Hindustan Copper Limited"). 
• (2015) 3 sec 49 
2 (1989) 1 SCR 665 
3 AIR 2016 SC 4257 
4 2014 (4) ArbLR I (SC) 
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SUTLEJ CONSTRUCTION v. 
UNION TERRITORY OF 
141 
CHANDIGARH [SANJAY KISHAN KAUL, J.] 
15. The learned single Judge ought to have restrained himself A 
from getting into the meanderings of evidence appreciation and acting 
like a second appellate court. In fact, even in second appeals, only 
questions of law are to be determined while the first appellate court is 
the final court on facts. In the present case the learned single Judge 
has, thus, acted in the first appeal against objections dismissed as if it 
B 
was the first appellate court against a decree passed by the trial court. 
16. We have, thus, no hesitation in concluding that the impugned 
order cannot be sustained and is accordingly set aside .and the 
enforcement of the award in toto is upheld. 
17. The appeal is accordingly allowed but in the given facts of the c 
case we do not impose costs. 
Kalpana K. Tripathy 
Appeal allowed.