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High Court of Delhi Reiterates Re-appreciation of evidence cannot be done by a Section 34 court

Overview

This case relates to a dispute arising from a commercial relationship between a supplier and a hospitality company concerning the supply of electric switches. It came before Delhi High Court as a challenge to an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996. It was required by the court to decide whether the arbitral award suffered from patent illegality or an incorrect interpretation of the terms of the contract, further requiring judicial interference. 

While doing so, the court concluded that the arbitral findings must be respected and re-examination of contractual interpretations must be refrained from unless the award is legally unsustainable. 

 

Facts

On 26 September 2019, OYO Hotels and Homes Pvt. Ltd. issued a purchase order to Zreyah Semiconductors Pvt. Ltd. for the supply of 52,360 electronic switches. The transaction involved a significant commercial value and was governed by a Vendor Agreement executed on 23 December 2019. Even though the purchase order was issued prior to the agreement, both parties proceeded on the basis that the agreement governed their contractual relationship.

In earlier business transactions, OYO used to provide all components, and Zreyah’s role was limited to assembling. However, under the present agreement, Zreyah agreed to obtain the required components on its own, including certain components from vendors specifically identified by OYO. 

Following the purchase order, OYO paid 50% of the invoice value as advance. However, the switches weren’t delivered within the given timeframe and disputes arose. OYO invoked arbitration under the Vendor Agreement alleging non-performance on the part of Zreyah, which further contended that it failed in obtaining the components because OYO did not pay the full amount in advance. It argued that the vendors identified by OYO required 100% advance payment to obtain the components while claiming that it was merely an assembler and not a manufacturer. 

The Arbitral Tribunal rejected these arguments and by an award dated 3 April 2023, directed Zreyah to supply a portion of the switches which they claimed to be ready and to pay INR 2.84 crores with interest at 9% per annum. Aggrieved, Zreyah filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 before the Delhi High Court.

 

Legal Issues

  1. Whether the Arbitral Tribunal acted within its jurisdiction in interpreting the Purchase Order and Vendor Agreement.
  2. Whether the finding that Zreyah failed to perform its contractual obligations perverse.
  3. Whether the arbitral award suffered from patent illegality requiring judicial interference under Section 34 of the Arbitration and Conciliation Act, 1996. 

 

Decision

The Delhi High Court held that the Vendor Agreement did not impose any obligation on OYO to make full advance payment. Hence, dismissed the petition. The terms provided for payment upon supply and acceptance, and the advance paid by OYO was merely a commercial gesture rather than an obligation. Clarifying the settled law, the court further held that it could not reappreciate evidence or bring in its own interpretation of the contract for that of the arbitrator. As the arbitral view was reasonable and based on the contract, no judicial interference was required, and the award was upheld as a whole.

Case Reference :- O.M.P (COMM) 249/2023 & I.A. 14284/2025 Zreyah Semiconductors Pvt. Ltd. Vs. OYO Hotels and Homes Pvt. Ltd.