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Case Analysis Steel Authority of India Limited vs Primetals Technologies India Pvt Ltd 2026 DHC 1325

Synopsis

This judgment, delivered by the Delhi High Court, deals with a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award. The core dispute between the parties arose from a contract for setting up industrial plants. The challenge was primarily on three grounds: that two of the claims allowed by the Arbitral Tribunal were barred by limitation, and that the Tribunal erred in interpreting a contractual clause related to the deduction of shortfall in Minimum Guaranteed CENVAT Credit (MGCC). The High Court dismissed the petition, holding that the Arbitral Tribunal's findings on limitation were factually correct and its interpretation of the contract was not only plausible but also aligned with a previous judgment between the same parties, which had attained finality. The court reiterated the narrow scope of interference under Section 34 of the Act, emphasizing that it is not an appellate forum.

1. Heading for the Judgment

In the High Court of Delhi at New Delhi
O.M.P. (COMM) 233/2025 & I.A. 15455/2025

Steel Authority of India Limited ....Petitioner
versus
Primetals Technologies India Pvt. Ltd. ....Respondent

Coram: Hon'ble Mr. Justice Avneesh Jhingan

Date of Judgment: 18.02.2026

2. Legal Framework

This judgment primarily operates within the framework of the following laws and legal principles:

The Arbitration and Conciliation Act, 1996 (The Act): The entire proceeding is a statutory challenge under this Act. The court's jurisdiction and the scope of its review are strictly confined to the provisions of this legislation.
Section 34 of the Act: This is the pivotal section under which the petition was filed. It allows for setting aside an arbitral award only on limited grounds, including:
Patent Illegality: An error that is evident on the face of the award.
Perversity: A finding that is based on no evidence, or ignores vital evidence, or is so unreasonable that no reasonable person could arrive at it.
Contravention of Public Policy of India: This includes a breach of the fundamental policy of Indian law, or if the award is in conflict with the most basic notions of morality or justice.
Law of Limitation: The petitioner's arguments invoked the principles of the Limitation Act, 1963, specifically concerning when the "cause of action" accrues for filing a claim. The court examined whether the claims were filed within the prescribed period of three years from the date the right to sue first accrued.
Principles of Contract Interpretation: The court analyzed the General Conditions of Contract (GCC), specifically clauses 12.1.6, 14.5.6, and the note in Appendix-I, to determine the correctness of the Arbitral Tribunal's interpretation regarding deductions from the contract value.

Related Precedents Cited and Relied Upon:

Steel Authority of India Limited v. M/s Primetals Technologies India Pvt. Limited 2020 SCC OnLine Del 2496: A previous judgment between the same parties concerning an identical contractual clause. This precedent was central to the court's reasoning, establishing that the deduction for shortfall in MGCC must be made from the gross contract price.
Ramesh Kumar Jain vs. Bharat Aluminium Company Limited 2025 SCC OnLine SC 2857: Reiterated the narrow scope of Section 34, stating courts do not sit in appeal over arbitral awards.
Prakash Atlanta (JV) v. National Highways Authority of India 2026 INSC 76: Held that if the arbitrator's view is plausible, it cannot be substituted even if another view is possible.
Indian Oil Corporation Ltd. v. Shree Ganesh Petroleum Rajgurunagar (2022) 4 SCC 463: Affirmed that courts do not interfere with an arbitrator's interpretation of a contract unless it is patently unreasonable.
Parsa Kente Collieries Limited. v. Rajasthan Rajya Vidyut Utpadan Nigam Limited (2019) 7 SCC 236: Stated that the arbitrator is the master of facts and evidence, and errors of fact cannot be corrected under Section 34.

3. Basic Relevant Facts of the Case

The Contract: On 03.03.2008, the parties entered into a contract for the petitioner (SAIL) to engage the respondent (Primetals) to set up a Hot Dip Galvanising Line (HDGL) and an Electrolytic Cleaning Line (ECL). The projects were successfully commissioned in 2017 and 2018.
The Dispute: A dispute arose concerning two main financial claims by the respondent:
Claim No. 1: Related to a deduction made by the petitioner from the respondent's bills on account of a shortfall in the Minimum Guaranteed CENVAT Credit (MGCC).
Claim No. 2: Pertained to the reimbursement of excise duty paid by the respondent, which the petitioner had withheld.
Arbitration: The matter was referred to an Arbitral Tribunal, which passed an award in favor of the respondent on both claims.
Challenge: Aggrieved by the award, the petitioner (SAIL) filed the present petition under Section 34 of the Act in the Delhi High Court.

4. Issues in the Judgment (as framed by the court)

The primary issues raised by the petitioner and examined by the High Court were:

Issue of Limitation for Claim No. 1: Whether the Arbitral Tribunal erred in holding that the claim for deduction on account of shortfall in MGCC was not barred by limitation. The petitioner argued that the cause of action arose 45 days after the submission of invoices in 2017 and 2018, while arbitration was invoked only in 2022.
Issue of Limitation for Claim No. 2: Whether the claim for reimbursement of excise duty was time-barred. The petitioner contended that the cause of action arose 45 days after invoices were submitted between 2009 and 2016, making the 2022 claim far beyond the limitation period.
Issue of Contract Interpretation (Clause 14.5.6): Whether the Tribunal's interpretation of Clause 14.5.6 and the note in Appendix-I was correct. The petitioner argued that it was entitled to deduct the shortfall in MGCC from either the gross or the net contract value, whereas the Tribunal held it must be deducted only from the gross contract value.

5. Ratio Decidendi (The Reasoning of the Court)

The court dismissed the petition, providing the following reasoning for each issue:

On Limitation for Claim No. 1: The court held that the cause of action for this claim did not arise upon submission of the invoices, but on 09.03.2019, when the petitioner actually deducted the amount for the shortfall in MGCC from the net contract value. The arbitration was invoked on 02.03.2022, which is within three years of this date. The tribunal's finding on this point was factually correct.
On Limitation for Claim No. 2: The court found the petitioner's argument "ill-founded." It noted that while the invoices were old, the parties were engaged in conciliation proceedings regarding this very claim until 14.02.2022, when the petitioner finally refused to reimburse the amount. The right to arbitrate accrued only upon the failure of these conciliation proceedings. Therefore, invoking arbitration on 02.03.2022 was within the limitation period.
On Interpretation of Clause 14.5.6: The court provided a detailed analysis:
It noted that while the main clause (14.5.6) did not specify which contract value to deduct from, the note in Appendix-I was unambiguous: the shortfall shall be deducted from the contract price at serial no. 12, which is the gross contract price (inclusive of taxes and duties).
It relied heavily on the precedent in Steel Authority of India v. Primetals Technologies India Pvt. Ltd. (2020) , which dealt with an identical clause between the same parties and conclusively held that deduction must be from the gross contract value. This decision had been upheld by the Division Bench and the Supreme Court, making it final inter se the parties.
The court provided a practical example to demonstrate the correctness of this interpretation: deducting from the net value would result in the petitioner unjustly benefiting twice—first by not reimbursing the shortfall and second by reducing the payable net contract value.
The court concluded that the tribunal's view was not only plausible but also the only logical interpretation of the contract.

6. New Legal Framework Established

This judgment does not establish a new legal principle. Instead, it serves as a robust reiteration and application of existing, well-settled legal frameworks:

Affirmation of the Narrow Scope of Section 34: The judgment strongly reinforces the principle that a court exercising jurisdiction under Section 34 of the Arbitration Act is not a court of appeal. It cannot re-appreciate evidence or substitute its own interpretation of a contract merely because another view is possible.
Binding Nature of Inter-Party Precedents: The court emphasized that when a legal issue between the same parties has been conclusively decided by a competent court and has attained finality, that decision is binding on them in subsequent related proceedings. This upholds the principle of finality in litigation.
Cause of Action in Continuing Wrongs/Conciliations: The judgment clarifies that the cause of action for limitation purposes is not always the date of a transactional event (like invoice submission). It can be a later date when a right is actually denied (deduction of money) or when pre-arbitral mechanisms like conciliation fail.

7. Examination and Analysis by the Court

The court's analysis was methodical and adhered strictly to the permissible scope of Section 34:

Deferential Review: The court did not act as a fact-finding body. It accepted the factual findings of the Arbitral Tribunal on the dates when the cause of action accrued, as these were based on evidence.
Deference to Contract Interpretation: The court acknowledged that interpreting a contract is primarily the domain of the Arbitral Tribunal. It only intervened to the extent of checking for perversity or patent illegality. It found the tribunal's interpretation to be not only reasonable but also perfectly aligned with the plain language of the contract's note and a binding precedent.
Reliance on Precedent: The court heavily leaned on the Primetals (2020) judgment, using it as a tool to test the validity of the arbitral award. This demonstrated that the tribunal's view was consistent with the judicial interpretation of the same contract, thereby eliminating any scope for a claim of patent illegality.
Use of Illustrations: To clarify the contractual interpretation, the court used a simple numerical example. This practical demonstration helped solidify why the petitioner's interpretation was flawed and the tribunal's view was correct, without overstepping into re-appreciating the contract.

8. Critical Analysis and Final Outcome

Critical Analysis:

The judgment is a textbook example of a non-interventionist approach by a court in arbitration matters. It correctly identifies the limited grounds for setting aside an award under Section 34 and applies them strictly.

Strength: The judgment's primary strength is its unwavering focus on the boundaries of its own jurisdiction. It correctly refused to re-enter the factual disputes regarding limitation, respecting the tribunal's assessment. Its reliance on a prior, binding judgment between the same parties is legally sound and promotes judicial consistency.
Correctness: The interpretation of the contract appears legally correct. The note in Appendix-I is clear, and the example provided by the court convincingly demonstrates the commercial logic behind deducting the shortfall from the gross value.
Potential Criticism: One could argue that the issue of limitation for Claim No. 2 (excise duty) is more complex, as the invoices were very old. However, the court's finding that the limitation period was saved by ongoing conciliation proceedings is a legally valid point, provided there was evidence to support the active consideration by the petitioner until 2022. The court accepted the tribunal's finding on this factual matter.

Final Outcome:

The petition filed by the Steel Authority of India Limited under Section 34 of the Arbitration and Conciliation Act, 1996, was dismissed. The High Court upheld the arbitral award dated 28.08.2024 and its addendum, finding no ground for interference. The pending application was also dismissed.