Mere Possibility of an Alternative View on Contract or Evidence Cannot Justify Interference; Arbitrator Is Master of Quality and Quantity of Evidence: Punjab and Haryana High Court

Case Name: Punjab State Power Corporation Limited v. M/s Ganz Energetic Limited and Others

Date of Judgment: 7 August 2026

Citation: FAO No. 4011 of 2017

Bench: Hon’ble Ms. Justice Lapita Banerji

Held: The Punjab and Haryana High Court held that the jurisdiction exercised under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 is not equivalent to ordinary appellate jurisdiction. Courts cannot reappreciate evidence, correct factual errors or substitute their interpretation of a contract merely because another view is possible.

An arbitrator is the ultimate authority regarding the quality and quantity of evidence required to decide the dispute. Where the arbitrator’s interpretation of a contractual term is reasonable and the resulting view is neither arbitrary nor capricious, the award cannot be interfered with unless it suffers from patent illegality or falls within another statutorily recognised ground for setting it aside.

Summary: Punjab State Power Corporation Limited challenged an arbitral award concerning the alleged defective supply of runners used in an old 50 MW machine. PSPCL contended that the suppliers were obligated under Clause 8 of the Purchase Order-cum-Contract Agreement to replace the runners because they had developed defects.

The Arbitrator examined the warranty clause and concluded that the suppliers’ obligation to replace the runners arose only where the defect was attributable to design, engineering, material or workmanship. The evidence showed that the runners had been subjected to frequent and prolonged use in a machine that was approximately 26 years old. The Arbitrator considered the possibility that the defects had resulted from ordinary wear and tear rather than any deficiency covered by the warranty.

The Arbitrator also found that PSPCL had terminated the contract under the force majeure clause and awarded the repair work to another agency instead of first identifying the defects and recommending corrective measures to the suppliers. This course of action was considered unjustifiably harsh, and PSPCL’s claim was consequently rejected.

The Additional District Judge dismissed PSPCL’s application under Section 34, holding that a court could not sit in appeal over the award or reappreciate the evidence in the absence of patent illegality. The High Court agreed that the award was reasoned and based upon an assessment of the contractual terms and evidence. Even if another interpretation was possible, that alone could not justify interference under Section 37.

Decision: The High Court dismissed the appeal and upheld both the arbitral award and the judgment rejecting the Section 34 challenge. It found no patent illegality, arbitrariness or unreasonable interpretation warranting interference.