MBL INFRASTRUCTURES LIMITED vs DELHI METRO RAIL CORPORATION

2023-12-12 Information

* IN THE HIGH COURT OF DELHI AT NEW DELHI
Pronounced on: 12th December, 2023
% O.M.P. (COMM) 311/2021
MBL INFRASTRUCTURES LIMITED ….. Petitioner
Through: Ms. Anusuya Salwan, Ms.Nikita Salwan, Ms. Sonika Singh and Mr. Rachit Wadhwa, Advocates

versus

DELHI METRO RAIL CORPORATION ….. Respondent
Through: Mr. Ankur Chhibber, Mr.Parv Garg, Mr. Pawas Kulshreshtha and Mr. K.S. Rekhi, Advocates
CORAM:
HON’BLE MR. JUSTICE CHANDRA DHARI SINGH

JUDGMENT

1. The instant petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter the Act ) has been filed on behalf of the petitioner seeking the following reliefs:
i. Set aside the award passed by the Hon’ble Arbitral Tribunal dated 06.03.2020 with respect to Claim No. 3, 4, 6, 7 & 8.
ii. Any other order or relief as this Hon’ble Court deems fit and proper may be passed in the facts and circumstances of the present case.

FACTUAL MATRIX
2. The facts of the case in a nutshell are extracted hereinbelow-
(a) The Petitioner is M/s MBL Infrastructure Ltd. is Public Limited Company engaged in the business of Civil Engineering projects and has a Pan India presence. The respondent is Delhi Metro Railway Corporation, a joint venture of Government of NCT of Delhi and Government of India and is a registered company under the Companies Act.
(b) The respondent invited tenders for ‘Construction of Sarai Station including architectural finishing, water supply, sanitary installation, external development works etc. and structure works of PD area on Badarpur – Faridabad Corridor of Delhi, MRTS Phase III ‘ on 9th March, 2012.
(c) On 9th March 2012, the petitioner submitted its tender which was accepted by the respondent on 9th May 2012.
(d) The stipulated dates for commencement and completion of the project were 21st May, 2012 and 20th November, 2013 respectively, spanning over a period of 18 months. The value of the contract was Rs. 41.57 crores.
(e) The petitioner furnished 2 performance bank guarantees amounting to Rs.4,15,71,525/- @ 10 % contract values. The petitioner had also furnished two Bank Guarantees for a total amount of Rs.2,28,64,240/- dated 23rd July 2012 valid upto 20th November 2013 issued by Bank of Baroda in terms of Clause 11.2.1 of the General Conditions of Contract (hereinafter GCC) towards mobilization advance. In lieu of the same, on 6th September 2012, the respondent released the first instalment of mobilization advance amounting to Rs.1,03,92,881/- vide bankers cheque dated 6th September 2012.
(f) Thereafter, the petitioner was handed over the construction site partially after a delay of more than six months on 20th December, 2012. On 28th January 2013, the petitioner requested for handing over the possession of the remaining plot for Sarai Metro Station which was subsequently denied by the respondent.
(g) On 2nd August, 2013, the respondent issued a Notice under clause 13.1 of GCC for alleged failure of the petitioner to adhere to work programs and non-compliance of other obligations.
(h) The respondent vide letter dated 30th September 2023, denied the facts on record and informed the petitioner that it was liable for action under Clause 13.1 of GCC. The petitioner replied to the said letter on 11th October 2013 stating that there was no delay on the part of the petitioner.
(i) On 1st November, 2013, the respondent terminated the contract and encashed the bank guarantees furnished by the petitioner.
(j) The matter was referred to arbitration vide letter dated 1st April, 2015, and accordingly an Arbitral Tribunal was convened on 15th April, 2015.
(k) The Arbitral Tribunal after hearing the parties rendered its award on 6th March, 2020. The learned Tribunal held that the default in terms of delay of the project was on part of the respondent and accordingly, it allowed Claim No. 1 and partly allowed Claim No.5, however, dismissed Claim Nos. 2,3,4,6,7 & 8. It also dismissed all the Counter claims of the respondent.
(l) The learned Tribunal after examining the evidence on record concluded that as the respondent was in breach of contract, thus, the termination of the contract was illegal. The learned Tribunal also held the encashment of Performance Bank Guarantee to be totally unjustified in view of reach of the agreement on behalf of the respondent and thus disallowed the claims for damages, loss of profits, interest and costs under Claims 3, 4, 6, 7 and 8.
(m) Aggrieved by the rejection of claim nos. 3, 4, 6, 7 and 8 in the impugned Award, the petitioner has filed the present petition on the grounds of patent illegality.
SUBMISSIONS
3. The parties argued the instant matter at length on several dates of listing before this Court on the issue of limitation as well as on merits. A combined consideration of the contentions raised in the pleadings, written submissions as well as the contentions raised during the course of hearing lay out the following broad arguments on behalf of the parties.
(on behalf of the petitioner)
4. Learned Counsel, Ms. Salwan appearing for the petitioner submitted that the instant petition under Section 34 of the Act, 1996 is to raise important issues relating to a limb of public policy on the grounds that the impugned Award is in contravention with the fundamental policy of Indian law and that the impugned Award is vitiated by patent illegality appearing on the face of the Award on extraneous considerations de hors and contrary to the terms of the contract executed between the parties and in complete disregard of the evidence on record, in deciding the controversy between the parties.
5. It is submitted that the learned Tribunal had accepted the expenditure incurred by the petitioner for tools, plant, overheads and the injury that has been caused to the petitioner on account of the actions of the respondent. However, the learned Tribunal still refused to allow petitioners claim for damages, cost and interest.
6. It is further submitted that as per Para 6.3.3.2 of the impugned Award the learned Tribunal held that the petitioner was not in breach of contract but in fact it was the respondent. However, the denial of damages was inconsistent with the aforesaid conclusion arrived at by the learned Tribunal.
7. It is contended that once the learned Tribunal has concluded that it is the respondent who has committed a fundamental breach and is responsible for delay in completion of work, then the learned Tribunal cannot reject payment of damages as the parties cannot contract out of provisions of Indian Contract Act 1872 and the rights created by Section 73 and 55 of the said Act cannot be contractually waived.
8. It is further contended that findings of the learned Tribunal to the effect that the petitioner is not entitled to overheads towards mobilization/demobilization are contrary to its own findings at Para 6.3.5.2 of the Impugned Award.
9. It is submitted that the learned Tribunal failed to appreciate the position of law under Section 73 of Indian Contract Act as per which, the petitioner is entitled to compensate for the losses incurred on overheads and reduction in the productivity from machinery and other tools deployed as well as damages on account of breach of contract/illegal termination of conditions by the respondent. Thus, the award rendered by learned Tribunal in respect of Claim 3 and 4 is unsustainable.
10. It is contended that the rejection of Claim 6 is erroneous insofar as there is no clause in the contract providing for damages on account of loss of commercial reputation. However, the learned Tribunal failed to appreciate the illegality on part of respondent has directly impacted financial position of the petitioner. Due to said actions of the respondent, there was initiation of Corporate Insolvency Resolution Process under Insolvency and Bankruptcy Code, 2016 against the petitioner.
11. It is submitted that the learned Tribunal has wrongly placed reliance upon Clause 17.10 of GCC to reject the Claim No. 7 for costs and the same is patently illegal as a bare perusal of Section 31-A of Arbitration and Conciliation Act, 1996 clearly states that absolute discretion is vested with learned Tribunal to determine the said costs.
12. It is further submitted that the rejection of Claim No. 8 is also rebutted by stating that the petitioner was entitled to award of interest and wrongful deprivation of the same is bad in law.
13. Learned counsel appearing on behalf of the petitioner contended that Impugned Award passed by the Arbitral Tribunal is arbitrary and inconsistent, therefore, liable to be partially set-aside in accordance with the provision of Section 34 (2A) of the Act.
14. Hence, in view of the above, it is prayed that the instant petition may be allowed and the Impugned Award may be set aside.
(on behalf of the respondent)

15. Per Contra, Mr. Ankur Chhibber learned counsel appearing on behalf of respondent submitted that the instant petition is nothing but an abuse of the process of law. It is submitted that it is a settled law that a Court shall not sit in appeal over the award of an Arbitral Tribunal by re-assessing or re-appreciating evidence of the arbitral proceeding since an arbitrator is the master of the quality and quantity of the evidence.
16. It is further submitted that an award can be challenged only under the grounds mentioned in Section 34 of the Act, 1996. Therefore, in the absence of any such ground, it is not possible to re-examine the facts or evidence on the record.
17. Learned counsel for the respondent submitted that the learned Arbitral Tribunal had adopted a judicial approach by considering all the evidence placed on record by both the parties. It is further submitted that the Arbitral Tribunal has given a detailed award which runs into seventy two pages and the award provides analysis of the detailed facts and the arguments of both the parties.
18. It is contended that the learned Arbitral Tribunal after examining the contentions of both parties and the documents furnished thereof and having heard the parties on several dates passed the award in favour of the respondent in regards to the claims which has been challenged by the petitioner before this Court.
19. It is submitted that the Tribunal has rightly looked into the conduct of the parties and the correspondence exchange between the parties to decide the issues at hand and award the claim. The interpretation of the contract is within the domain of the learned Arbitral Tribunal, and such interpretation ought not to be interfered with in a challenge under Section 34 of the Act, especially in view of the fact that no cogent grounds have been set out by the petitioner that warrants interference.
20. It is submitted that reliance by petitioner on Section 73 of the Indian Contract Act is misplaced since Claim No. 3 is sought on account of delay by respondent and not on any breach of contract. Further in respect of Claim No. 4, it is averred that the petitioner has not been able to point out a single patent illegality in the Impugned Award. It is a well settled principle that any claim before the Arbitrator must be proved and in case of no evidence, the Arbitrator cannot allow the claim merely on the basis of statement of claim.
21. It is further submitted that the learned Tribunal has rightly in accordance with the Clause 2.2 of GCC and Clause 8.3 of GCC has held that there is no provision of only monetary claim in cases there is a delay on the part of the respondent and the petitioner is entitled to only reasonable extension of time.
22. It is submitted in respect of Claim No. 6 that the petitioner has not adduced any evidence to show that it entered into a liquidity crunch due to breach of contract by the respondent herein and in the absence of any direct nexus, the said claim is barred for being remote and indirect.
23. It is submitted in respect of Claim No. 7 that merely because the petitioner is the successful party, it would not entitle it to costs of arbitration. Further, in respect of Claim No. 8, it is submitted that Clause 17.0 of GCC specifically bars payment of any interest for any period, till the date on which award is made. Therefore, in terms of contractual provision, no interest is accrued to the petitioner.
24. Accordingly, there are no grounds available to the petitioner herein for challenging the instant award on the grounds under Section 34 of the Act.
25. In view of the facts and circumstances, the instant petition is de hors of any merit and deserves to be rejected outrightly.
ANALYSIS AND FINDINGS
26. I have heard learned counsel for the parties at length, who have taken me through the award passed by the learned Arbitral Tribunal, provisions of the contract executed between the parties and the correspondence exchanged between them as well as other relevant documents.
27. I may, at this stage, deal with the contention urged on behalf of the respondent that as per the jurisdiction of the Court to set aside an arbitral award is limited to grounds set out in Section 34 of the Act, this Court ought not to interfere with the same. It was contended that none of the grounds on which a Court is authorized to interfere with an arbitral award are present in the case at hand. Alternatively, it was contended that even if a contrary view is possible on the facts proved before the Arbitral Tribunal, the Court cannot, in the absence of any compelling reason, interfere with the view taken by the arbitrators as if it was setting in appeal over the award made by the Tribunal. Therefore, it is imperative to revisit section 34 of the Act.
30. Section 34 of the Act, 1996 reads as under:-

“34. Application for setting aside arbitral award.
(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if
(a) the party making the application [establishes on the basis of the record of the arbitral tribunal that]
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India. [Explanation 1.For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,
(i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.]
[(2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.]
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested bya party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.
[(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.
(6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.]”
28. Under Section 34 of the Act it is well-settled position that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground as provided under Section 34(2)(b)(ii) of the Act, i.e., if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments in the 1996 Act in 2015, a violation of India public policy in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality and existence of patent illegality in the arbitral award. The concept of the fundamental policy of Indian Law would cover the compliance with the statutes under judicial precedents adopting a judicial approach, compliance with the principles of nature justice, and reasonableness.
29. It is only if one of the conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii) of the Act, but the said interference does not entail a review of the merits of the dispute as it is limited to the situations where the findings of the arbitration are arbitrary, capricious, or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with, if the view taken by the learned arbitrator is a possible view based on the facts.
30. Hence, there is a limitation on the powers of this Court while examining its jurisdiction under Section 34 of the Act, 1996, however, at the same time, if the interpretation put forward by the Arbitral Tribunal, on the face of it is incorrect and rendering a Clause in the
Agreement to be redundant, such interpretation cannot be sustained.
31. This Court relied on the case of Reliance Infrastructire Ltd. v. State of Goa 2023 SCC OnLine SC 604 wherein the Hon’ble Supreme Court held as under
47. Having regard to the contentions urged and the issues raised, it shall also be apposite to take note of the principles enunciated by this Court in some of the relevant decisions cited by the parties on the scope of challenge to an arbitral award under Section 34 and the scope of appeal under Section 37 of the Act of 1996.

48. In MMTC Limited (supra), this Court took note of various decisions including that in the case of Associate Builders (supra) and exposited on the limited scope of interference under Section 34 and further narrower scope of appeal under Section 37 of the Act of 1996, particularly when dealing with the concurrent findings (of the Arbitrator and then of the Court). This Court, inter alia, held as under:
11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the fundamental policy of Indian law would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., [1948] 1 K.B. 223 (CA)] reasonableness. Furthermore, patent illegality itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.

12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. (See Associate Builders v. DDA [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204]. Also see ONGC Ltd. v. Saw Pipes Ltd. [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705]; Hindustan Zinc Ltd. v. Friends Coal Carbonisation [Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445]; and McDermott International Inc. v. Burn Standard Co. Ltd. [McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181])

13. It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.
49. In the case of Ssangyong Engineering (supra), this Court has set out the scope of challenge under Section 34 of the Act of 1996 in further details in the following words:
37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within the fundamental policy of Indian law, namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
39. To elucidate, para 42.1 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator’s view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A).
41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], while no longer being a ground for challenge under public policy of India, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.

50. The limited scope of challenge under Section 34 of the Act was once again highlighted by this Court in the case of PSA SICAL Terminals (supra) and this Court particularly explained the relevant tests as under:

43. It will thus appear to be a more than settled legal position, that in an application under Section 34, the court is not expected to act as an appellate court and reappreciate the evidence. The scope of interference would be limited to grounds provided under Section 34 of the Arbitration Act. The interference would be so warranted when the award is in violation of public policy of India, which has been held to mean the fundamental policy of Indian law. A judicial intervention on account of interfering on the merits of the award would not be permissible. However, the principles of natural justice as contained in Section 18 and 34(2)(a)(iii) of the Arbitration Act would continue to be the grounds of challenge of an award. The ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the most basic notions of morality or justice. It is only such arbitral awards that shock the conscience of the court, that can be set aside on the said ground. An award would be set aside on the ground of patent illegality appearing on the face of the award and as such, which goes to the roots of the matter. However, an illegality with regard to a mere erroneous application of law would not be a ground for interference. Equally, reappreciation of evidence would not be permissible on the ground of patent illegality appearing on the face of the award.
44. A decision which is perverse, though would not be a ground for challenge under public policy of India, would certainly amount to a patent illegality appearing on the face of the award. However, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
45. To understand the test of perversity, it will also be appropriate to refer to paragraph 31 and 32 from the judgment of this Court in Associate Builders (supra), which read thus:
31. The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where:

(i) a finding is based on no evidence, or(ii) an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at; or(iii) ignores vital evidence in arriving at its decision, such decision would necessarily be perverse.
32. A good working test of perversity is contained in two judgments. In Excise and Taxation Officer-cum-Assessing Authority v. Gopi Nath & Sons [1992 Supp (2) SCC 312], it was held : (SCC p. 317, para 7)
7. It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law.
51. In Delhi Airport Metro Express (supra), this Court again surveyed the case-law and explained the contours of the Courts’ power to review the arbitral awards. Therein, this Court not only re-affirmed the principles aforesaid but also highlighted an area of serious concern while pointing out a disturbing tendency of the Courts in setting aside arbitral awards after dissecting and re-assessing factual aspects. This Court also underscored the pertinent features and scope of the expression patent illegality while reiterating that the Courts do not sit in appeal over the arbitral award. The relevant and significant passages of this judgment could be usefully extracted as under:
26. A cumulative reading of the UNCITRAL Model Law and Rules, the legislative intent with which the 1996 Act is made, Section 5 and Section 34 of the 1996 Act would make it clear that judicial interference with the arbitral awards is limited to the grounds in Section 34. While deciding applications filed under Section 34 of the Act, Courts are mandated to strictly act in accordance with and within the confines of Section 34, refraining from appreciation or reappreciation of matters of fact as well as law. (See Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd. [Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd., (2020) 2 SCC 455 : (2020) 1 SCC (Civ) 570], Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd. [Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75] and Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran [Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5 SCC 306].)
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28. This Court has in several other judgments interpreted Section 34 of the 1996 Act to stress on the restraint to be shown by Courts while examining the validity of the arbitral awards. The limited grounds available to Courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the well-established principles for interference to the facts of each case that come up before the Courts. There is a disturbing tendency of Courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. This approach would lead to corrosion of the object of the 1996 Act and the endeavours made to preserve this object, which is minimal judicial interference with arbitral awards. That apart, several judicial pronouncements of this Court would become a dead letter if arbitral awards are set aside by categorising them as perverse or patently illegal without appreciating the contours of the said expressions.
29. Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression patent illegality. Likewise, erroneous application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression patent illegality. What is prohibited is for Courts to reappreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as Courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression patent illegality.
30. Section 34(2)(b) refers to the other grounds on which a court can set aside an arbitral award. If a dispute which is not capable of settlement by arbitration is the subject-matter of the award or if the award is in conflict with public policy of India, the award is liable to be set aside. Explanation (1), amended by the 2015 Amendment Act, clarified the expression public policy of India and its connotations for the purposes of reviewing arbitral awards. It has been made clear that an award would be in conflict with public policy of India only when it is induced or affected by fraud or corruption or is in violation of Section 75 or Section 81 of the 1996 Act, if it is in contravention with the fundamental policy of Indian law or if it is in conflict with the most basic notions of morality or justice.
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42. The Division Bench referred to various factors leading to the termination notice, to conclude that the award shocks the conscience of the court. The discussion in SCC OnLine Del para 103 of the impugned judgment [DMRC v. Delhi Airport Metro Express (P) Ltd., 2019 SCC OnLine Del 6562] amounts to appreciation or reappreciation of the facts which is not permissible under Section 34 of the 1996 Act. The Division Bench further held [DMRC v. Delhi Airport Metro Express (P) Ltd., 2019 SCC OnLine Del 6562] that the fact of AMEL being operated without any adverse event for a period of more than four years since the date of issuance of the CMRS certificate, was not given due importance by the Arbitral Tribunal. As the arbitrator is the sole Judge of the quality as well as the quantity of the evidence, the task of being a Judge on the evidence before the Tribunal does not fall upon the Court in exercise of its jurisdiction under Section 34. [State of Rajasthan v. Puri Construction Co. Ltd., (1994) 6 SCC 485] On the basis of the issues submitted by the parties, the Arbitral Tribunal framed issues for consideration and answered the said issues. Subsequent events need not be taken into account.
(emphasis supplied)
52. In the case of Haryana Tourism Ltd. (supra), this Court yet again pointed out the limited scope of interference under Sections 34 and 37 of the Act; and disapproved interference by the High Court under Section 37 of the Act while entering into merits of the claim in the following words:
8. So far as the impugned judgment and order passed by the High Court quashing and setting aside the award and the order passed by the Additional District Judge under Section 34 of the Arbitration Act are concerned, it is required to be noted that in an appeal under Section 37 of the Arbitration Act, the High Court has entered into the merits of the claim, which is not permissible in exercise of powers under Section 37 of the Arbitration Act.
9. As per settled position of law laid down by this Court in a catena of decisions, an award can be set aside only if the award is against the public policy of India. The award can be set aside under Sections 34/37 of the Arbitration Act, if the award is found to be contrary to : (a) fundamental policy of Indian Law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. None of the aforesaid exceptions shall be applicable to the facts of the case on hand. The High Court has entered into the merits of the claim and has decided the appeal under Section 37 of the Arbitration Act as if the High Court was deciding the appeal against the judgment and decree passed by the learned trial Court. Thus, the High Court has exercised the jurisdiction not vested in it under Section 37 of the Arbitration Act. The impugned judgment and order passed by the High Court is hence not sustainable.

53. As regards the limited scope of interference under Sections 34/37 of the Act, we may also usefully refer to the following observations of a 3-Judge Bench of this Court in the case of UHL Power Company Limited v. State of Himachal Pradesh, (2022) 4 SCC 116:
15. This Court also accepts as correct, the view expressed by the appellate court that the learned Single Judge committed a gross error in reappreciating the findings returned by the Arbitral Tribunal and taking an entirely different view in respect of the interpretation of the relevant clauses of the implementation agreement governing the parties inasmuch as it was not open to the said court to do so in proceedings under Section 34 of the Arbitration Act, by virtually acting as a court of appeal.
16. As it is, the jurisdiction conferred on courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an appellate court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed.

54. The learned Attorney General has referred to another 3-Judge Bench decision of this Court in the case of Sal Udyog Private Limited (supra), wherein this Court indeed interfered with the award in question when the same was found suffering from non-consideration of a relevant contractual clause. In the said decision too, the principles aforesaid in Delhi Airport Metro Express, Ssangyong Engineering and other cases were referred to and thereafter, this Court applied the principles to the facts of that case. We shall refer to the said decision later at an appropriate juncture.
55. Keeping in view the aforementioned principles enunciated by this Court with regard to the limited scope of interference in an arbitral award by a Court in the exercise of its jurisdiction under Section 34 of the Act, which is all the more circumscribed in an appeal under Section 37, we may examine the rival submissions of the parties in relation to the matters dealt with by the High Court.
32. It is settled law that the ground under Section 34 of the Act gives way to setting aside an Arbitral Award with a very minimal scope of intervention. A party cannot simply raise an objection on the ground of Section 34 if the Award is simply against them. Section 34 of the Act, 1996 requires a distinct transgression of law, the clear lack of which thereof makes the petition simply a pointless effort of objection towards an Award made by a competent Arbitral Tribunal.
33. Keeping these principles in mind, I will now examine the present case.
34. In the instant petition, the petitioner has challenged claim no. 3, 4, 6, 7 and 8. This Court will peruse each and every claim and adjudicate upon whether they merit interference by way of the instant petition.
Claim no. 3- Damages on Account of Idling of Machines and loss of overheads
35. Claim 3 pertains to damages on account of idling of machines and loss of overheads due to inaction and delays by the respondent amounting to Rs. 1,57,84,798/-, the Arbitral Tribunals analysis is reproduced hereinunder-
iv) As discussed above. Contractual provisions governing delay is covered under Clause 8.3 of GCC and that for Extension of Time under Clause 8.4 of GCC. Clause 8.3 (along with Clause 2.2) clearly indicates that failure or delay by the Employer or the Engineer to hand over site etc. shall not entitle the contractor to damages or compensation, it provides simply for extension of time as, in the opinion of the Engineer are reasonable. Clause 8.4.1 of GOG dealing with Extension of Time not on Contractor’s fault also includes:
‘a) The Contractor’s work held up for not being given possession of or access to site in accordance with the Contract (sub para ‘b’ of Clause 8.4.1 of GCC);
b) Any act of prevention or Breach of Contract by the Employer and not mentioned in this Clause (sub para ‘e’ of Clause 8.4.1. of GCC).’ Such a provision encompasses all delays over which the contractor has no control. This will also include any delays for which both the Respondent and the Claimant are responsible. However, as is seen. Clause 8.3 of GCC of the Contract Agreement does not provide for any financial compensation to the Claimant even if the Claimant is not responsible for the delay.
v) The Claimant have cited a number of judgments of High Courts and the Supreme Court, as mentioned In Paragraphs 8.1.3 supra, in support of their case and applicability of Section 73 of the Indian Contract Act, 1872, providing for compensation to be paid in case of breach of a contract, to the party who suffers loss due to such breach. The Tribunal have studied the relevant paragraphs of these judgments, as referred to by the Claimant. It is seen that these judgments pertain to cases having different dimensions and different provisions of the contracts, which may not be applicable to the situations of the present case. The Tribunal is guided by the Sub-section (3) of Section 28 of the Arbitration and Conciliation Act, 1996 as amended by Arbitration and Conciliation (Amendment) Act, 2015, which provides as under: “(3) While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contact and trade usages applicable to the transactions”.
The Tribunal has considered the case in the spirit of the above provision of the Act. It has also come out that the Respondent were eager to get the Project completed at the earliest. The Respondent have admitted that there were certain delays, like handing over of the land, on their part and certain other delays including planning and execution issues (amply discussed in Claim-1) on the part of the Claimant.
8.3.4 After careful consideration of the facts and circumstances of the case, written and oral submissions by the Parties and as discussed above, the Tribunal have come to the conclusion that the Respondent is not bound, as per terms and conditions of the Contract, to compensate the Claimant for delayed performance of the Contract.
36. The learned Tribunal held that the petitioner suffered certain damages on account of idling of machinery and loss of overheads because there was a default on the part of the respondent in fulfilling the obligations under the Contract.
37. Moreover, the Tribunal has referred to the relevant clauses of the Contract i.e., Clause 2.1 of GCC, Clause 2.2 of GCC as well as Clause 8.3 of GCC. The Tribunal has further held that in accordance with these clauses it is explicitly mentioned that the petitioner shall be entitled only to reasonable extension of time and there can be monetary claims payable in this regard.
38. According to Clause 8.3 of GCC, it enunciates that any delay on account of the respondent shall entitle the contractor to a remedy of extension of time which the Engineer deems reasonable. The delay includes in its ambit the handing over of site necessary for execution of work, giving of necessary notice for the purpose of commencement of work, provide necessary drawing or instructions or clarification or clarification or to supply any material, plant or machinery, which as per the terms and conditions of the Contract is the obligation of the employer. Hence, the Tribunal finally held that as per the Clause 8.3 of GCC the Contract does not provide any compensation to the petitioner by way of damages.
39. The learned Tribunal further held that it is acting in accordance with Section 28 of the Act as per which the Tribunal shall take into its consideration the terms of the contract and trade usages which are applicable to the transactions. Accordingly, the Tribunal held that respondent is not bound as per the Contract for any compensation to the Claimant for delayed performance of the Contract.
40. This Court before commenting on the merits of the case deems it fit that the reference shall be made to Award passed by the learned tribunal for Claim no. 1 wherein the Tribunal attributed the delay pertaining to the completion project on the respondent. The relevant paras of the Impugned Award are reproduced herein below:
6.3.3.2 Conclusion: Examination of above allegations made by the Respondent indicates that the reasons brought out by the Respondent as above are not the basic reasons why the work did not achieve the desired progress with time. The expected date for land availability as also not known to the Claimant to be in readiness for the same. The activities alleged to be delayed by the Claimant would have been critical if the land for the work area as well as construction were made available from the beginning. Even the first set of drawings for pile foundations was issued after more than two months after the result of pile load test was available. Ideally, the pile rig should have been remobilized soon after 21.12.2012, when part land for construction was made available, but then there were no structural drawings for carrying out of execution till 21.02.2012. The pile load test was required for the final drawings, but the land for installation of initial piles for load test could be temporarily made available on 16.10.2012. As time for availability of land was uncertain, there was no tempo for carrying out preparatory works. The Batching plant was not installed till 28.08.2012 (though no further activity was held up on this account) as land for work area became available on 27.06.2012. Thus, one is to consider cause and effect. Thus, under facts and circumstances of the case Tribunal finds that the Claimant is not responsible for delay in mobilization and start of the work as alleged by the Respondent;
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6.3.5.3 Conclusion:
(i) In view of above, delays in making available land does not get condoned by the GCC 2.2 as there is a difference between ‘no land’ and ‘making available land progressively’. There is no provision in the Contract for payment for idling rig. Piling rig was demobilized twice-once after execution of test piles in October 2013; second after completing piles in grid 2 and 3 on 29.05 2013 due to obstructions in grid 1. Though advance drawings were available on 18.01.2013, GFC drawings for the pile foundations was issued on 21.02.2013. When the notice under Clause 13.1 alleging failure in meeting obligation under 13.2.1 (g) & (i) was issued on 2.08.2013, there was no agreed programme of work due to various delays. The revised programme was approved on 19.09.2013, yet in the second notice dated 30.09.2013 the Respondent states that according to the revised programme the piling work was to be completed by 30.08.2013 and there is a delay of 45 days. Surely, the slippage of 45 days could not have occurred in just 11 days from 19.09.2019. Thus, provision of GCC Clause 4.13 does not seem to have been followed by the Respondent. The reality of obstructions due to close proximity of existing electric poles or flooding of the site due to poor drainage facility in the area, which became acute due to excavations for the pile caps, cannot be wished away by provisions of Construction Specifications Section 1.2.12, 3.6 Earthwork. Such hindrances do affect the progress and are to be considered while evaluating progress on any date.
(ii) Notice dated 2.08.2013 is under GCC Clause 13.2 for failure to meet Contractor’s obligation as specified in Clause 13.2.1 (g) and (i). Clause 13.2 has the heading ‘Termination of Contract due to Contractor’s Default’. 13.2.1 (g) is about failure to adhere to agreed programme or is unlikely to complete the works. Clause 13.2.1(i) is about failure to employ competent or additional staff or labour. Analysis of sequence of events indicates that till 2.08.2013 (date of first notice) or subsequently also, the delays were beyond the control of the Claimant and as such it cannot be construed that it is due to Contractor’s Default. Additional workers were deployed in the key categories of carpenters and fitters according to data provided by the Respondent. Thus, finding of the Tribunal is that delays are not due to Claimants default. Considering above findings, the Tribunal has come to the conclusion that under fact and circumstances of the case, termination of the Contract and forfeiture of the performance security by the Respondent is not tenable under the Contract Agreement.
41. Upon perusal of the abovesaid paras pertaining to the award of Claim no. 1, it is crystal clear that the learned Tribunal has held that the delay in completion of the project is attributable to the respondent. It has further categorically held that as per notice dated 2nd August 2013, under clause 13.2 of the GCC regarding failure to meet contractors obligations as per the contract has been given wrongly. Since as per the material on record the tribunal held that the delays were beyond the control of the petitioner and the same cannot be construed as its fault.
42. Furthermore, the Tribunal highlighted the fact that there were surplus workers deployed in the key categories of Carpenter and fitters as per the data provided by the respondent. Therefore, the Tribunal held that the termination of the contract and forfeiture of performance security by the respondent is not in accordance with the contract.
43. This Court is of the opinion that the clauses which restricts the right of the party in claiming damages is a restrictive clause. Such a clause will defeat the purpose of the Indian Contract Act, 1872. Under section 55 and 73 of the said Act, the aggrieved party is entitled to claim damages, and there cannot be any restriction or prohibition exercised by the other party. It is the right of the aggrieved party to claim such damages.
44. Under section 23 of the Indian Contract Act, 1872, states that such clause is opposed to public policy since it aims at restraining the aggrieved party from claiming its rightful dues.
45. Such kind of clauses are also not in public interest since they hinder the smooth operation of the commercial transaction. Furthermore, they create an environment which is not conducive for the purpose of business transactions. Moreover, the said clauses cannot restrain the Tribunal from awarding damages, which are otherwise payable by the employer on account of its breach of contract
46. This Court will now discuss the various judgments passed by the Courts regarding whether the Tribunal can award damages for delay on the part of the employer in completion of the project when the Contract executed between the parties does not provide for any monetary damages to the contractor and entitles the Contractor merely for extension of time.
47. The Honble Supreme Court held in the judgment of Asian Techs Ltd. v. Union of India, (2009) 10 SCC 354 as follows:
12. The High Court by the impugned order allowed the appeal and revision making the following observations:
We, therefore, hold that the award passed by the arbitrator in respect of Claims 1 to 3, 5, 9, 17, 19, 21, 23, 24, 26, 30, 33, 35, 37, 38, 40, 41, 44 and 46 is against the conditions agreed to by the contracting parties and in conscious disregard of the terms of the contract and also the arbitration clause from which the arbitrator derives his authority. We are, however, not interfering with the award in respect of Claim 12 alone, which in our view is binding on the appellants. We hold that Arbitration Clause 70 was a conditional one giving finality to the decisions of CWE as per the various provisions, Clauses 62(G) and 11(C) of the contract. The award of the arbitrator and the orders of the court below in arbitration, OPs Nos. 4 and 18 of 1994 to the extent to which they are covered by Clauses 62(G) and 11(C) except Claim 12 are set aside and the arbitration, OP No. 18 of 1994 filed by the Union of India is allowed as above. The appeal and the revision are allowed as above. In the facts and circumstances of this case, we are not awarding costs.
It can be seen that the High Court has set aside the arbitrator’s award holding that under the finality clause under Clauses 11(C) and 62(G), the decision of the Commander Works Engineer (CWE) is final and binding and has been exempted from the purview of the arbitration clause, which is Clause 70 of the contract. Thus the High Court held that the arbitrator travelled beyond the terms of reference.
13. In this connection we may refer to Clause 70 of the contract which is the arbitration clause. The said clause reads as follows:
70. Arbitration.All disputes, between the parties to the contract (other than those for which the decision of CWE or any other person is by the contract expressed to be final and binding) shall, after written notice by either party to the contract to the other of them, be referred to the sole arbitration of an Engineer Officer to be appointed by the authority mentioned in the tender documents.
14. Clause 11 of the contract reads as follows:
11. Time, delay and extension.(A) Time is of the essence of the contract and is specified in contract documents or in each individual works order.
As soon as possible after the contract is let or any substantial works order is placed and before work under it has begun, the GE and the contractor shall agree upon a time progress chart. The chart shall be prepared in direct relation to the time stated in the contract documents or the works order for completion of the individual items thereof, and/or the contract or works order as a whole.
(B) If the works be delayed:
(a) by reason of non-availability of government stores mentioned in Schedule 13; or
(b) by reason of non-availability or breakdown of government tools and plant mentioned in Schedule C then, in any such event, notwithstanding the provisions hereinbefore contained, the GE may in his discretion, grant such extension of time as may appear reasonable to him and the contractor shall be bound to complete the works within such extended time. In the event of the contractor not agreeing to the extension granted by the Garrison Engineer, the matter shall be referred to the accepting officer (or CWE in case of contract accepted by the Garrison Engineer) whose decision shall be final and binding.
(C) No claim in respect of compensation or otherwise, howsoever arising, as a result of extensions granted under Conditions (A) and (B) above shall be admitted.
15. Clause 62(G) of the contract states as under:
(G) For all contracts
If any work, the rate for which cannot be obtained by any of the methods referred to in Paras (A) to (E) above, has been ordered on the contractor, the rate shall be decided by the GE on the basis of the cost to the contractor at site of works plus 10% to cover all overheads and profit. Provided that if the contractor is not satisfied with the decision of the GE he shall be entitled to represent the matter to the CWE within seven days of receipt of the GE’s decision and the decision of the CWE thereon shall be final and binding.
If any alterations or additions (other than those authorised to be executed by day work or for an agreed sum) have been covered up by the contractor without his having given notice of his intention to do so, the Engineerin-charge shall be entitled to appraise the value thereof and in the event of any dispute the decision of the GE thereon shall be final and binding.
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19. It is well settled that in the case of non-speaking awards under the Arbitration Act, 1940 the court has very little scope of interference vide State of Rajasthan v. Nav Bharat Construction Co. [(2006) 1 SCC 86] , Raipur Development Authority v. Chokhamal Contractors [(1989) 2 SCC 721] , Arosan Enterprises Ltd. v. Union of India [(1999) 9 SCC 449] , Ispat Engg. & Foundry Works v. SAIL [(2001) 6 SCC 347] and D.D. Sharma v. Union of India [(2004) 5 SCC 325] .
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21. Apart from the above, it has been held by this Court in Port of Calcutta v. Engineers-De-Space-Age [(1996) 1 SCC 516] that a clause like Clause 11 only prohibits the Department from entertaining the claim, but it did not prohibit the arbitrator from entertaining it. This view has been followed by another Bench of this Court in Bharat Drilling & Treatment (P) Ltd. v. State of Jharkhand [(2009) 16 SCC 705] .

48. This Court has extensively dealt with the position of law in the judgment of Simplex Concrete Piles (India) Ltd. v. Union of India, 2010 SCC OnLine Del 821 as follows:
10. In deciding this issue of the disentitlement to damages to the contractor (because of Ramnath International’s case) or the entitlement to damages (on account of Asian Techs Limited’s case), however, I would prefer to decide this case and base this judgment wholly, independently on my view that clauses which bar and disentitle a contractor to claim its just claims/damages/monetary entitlement, and which a contractor is entitled to by virtue of provisions of Sections 73 and 55 of the Contract Act, are void by virtue of Section 23 of the Contract Act, 1872. I am also taking up this aspect of Section 23 first because the present discussion will help in deciding whether correct law is laid down in Ramnath International’s case or in Asian Techs Limited’s case. It is therefore necessary, at this stage, to reproduce Section 23 of the Contract Act. The same reads as under:

23. What considerations and objects are lawful, and what not. The consideration or object of an agreement is lawful, unless

it is forbidden by law 1; or

is of such a nature that, if permitted, it would defeat the provisions of any law; or

is fraudulent; or

involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.

In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful, is void.

A reading of the aforesaid provision of Section 23 shows that where the consideration or object of an agreement is unlawful, the said agreement is void. The consideration or object of an agreement is unlawful if it is forbidden by law or it is of such a nature that if permitted it defeats the provisions of law or the same involves injury to the person or property of another or the Court regards it as immoral or opposed to public policy. Two parts of this Section are relevant for determining the issue in the present case. The first part being that a clause in an agreement is unlawful and void when the same is opposed to public policy. The second part is that such a contractual clause is void if allowing operation of such clause will defeat the provisions of law.

11. The expression public policy has been a subject matter of various decisions of the Supreme Court. It has been held that the expression public policy has to be interpreted in the context of the statute in which such expression appears. The expression public policy as per the requirement and the context of the statute in which the expression is found, has been accordingly interpreted by the Supreme Court. What is therefore the meaning which should be attributed to this expression as found in Section 23 is the question. Instead of referring to various judgments, I would seek to refer to the observations and the ratio of the Supreme Court in one of its recent judgments reported as Indian Financial Association of Seventh Day Adventists v. M.A. Unneerikutty, (2006) 6 SCC 351 on the meaning of this expression in Section 23. I refer to this judgment because in a few paragraphs the Supreme Court has encapsulated the law with regard to the expression public policy and in the process has also referred to its earlier decisions on the point as also the relevant commentaries of certain authors. Paras 16 to 19 of the said judgment lays down the ratio with regard to the meaning of the expression public policy, and which I with all humility adopt, for the purpose of the decision in the present case. These paragraphs 16 to 19 read as under:

16. Section 23 of the Contract Act lays down that the object of an agreement becomes unlawful if it was of such a nature that, if permitted, it would defeat the provisions of any law.

17. The term public policy has an entirely different and more extensive meaning from the policy of the law. Winfield defined it as a principle of judicial legislation or interpretation founded on the current needs of the community. It does not remain static in any given community and varies from generation to generation. Judges, as trusted interpreters of the law, have to interpret it. While doing so, precedents will also guide them to a substantial extent.

18. The following passage from Maxwell, Interpretation of Statutes, may also be quoted to advantage here:

Everyone has a right to waive and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the individual in his private capacity which may be dispensed with without infringing any public right or public policy. Where there is no express prohibition against contracting out of it, it is necessary to consider whether the Act is one which is intended to deal with private rights only or whether it is an Act which is intended as a matter of public policy.

19. The doctrine of public policy may be summarised thus 11:

Public policy or the policy of the law is an illusive concept; it has been described as untrustworthy guide, variable quality, uncertain one, unruly horse, etc.; the primary duty of a court of law is to enforce a promise which the parties have made and to uphold the sanctity of contracts which form the basis of society, but in certain cases, the court may relieve them of their duty on a rule founded on what is called the public policy; but the doctrine is extended not only to harmful cases but also to harmful tendencies; this doctrine of public policy is only a branch of common law, and just like any other branch of common law, it is governed by precedents; the principles have been crystallised under different heads and though it is permissible for the courts to expound and apply them to different situations, it should only be invoked in clear and incontestable cases of harm to the public.

(Underlining supplied)

12. The following principle