Introduction
The Delhi High Court in National Council of Education Research and Training v. Murli Industries Ltd. (O.M.P. (COMM) 363/2020) recently rejected NCERT's Section 34 petition under the Arbitration and Conciliation Act, 1996, for setting aside an arbitral award issued for refunding the encashed performance security of ?2.04 crore with interest. Justice Jasmeet Singh restated the doctrine that judicial intervention in arbitral awards has to be minimal and within the narrow parameters of Section 34.
Background of the Dispute
The conflict arose from a tender invited by the petitioner, National Council of Education Research and Training (NCERT), in July 2010 for the supply of 16,845 metric tonnes of Maplitho paper utilized in the publication of school textbooks. Murli Industries Ltd. (MIL), a public limited company with a business involving manufacturing paper, was the successful bidder.
In accordance therewith, a contract was entered into on December 1, 2010, for the delivery of 10,000 MTs of Maplitho Paper of the approximate value of ?38.92 crores. According to the contract, MIL had to deliver 75% of the total quantity within 105 days of the signing of the contract and the balance 25% subsequently. For this purpose, MIL deposited a bank guarantee of ?2,04,33,368 as security for performance.
Termination of contract
Immediately thereafter, MIL requested an extension of 20 days for the initial lot, blaming watermarking processing delays and quality of raw material. NCERT, however, tested the samples of paper and found them to have failed the brightness test (less than 80%) and ordered MIL to improve the quality.
MIL conceded that because of technical flaws in its machinery imported from abroad, it could make 72% brightness paper only and sought relaxation of the requirement from NCERT. NCERT declined the request, sought assurance of conformity, and warned of forfeiture of the performance security for non-conformity. MIL requested three to four months' time to rectify the problems, but NCERT cancelled the contract on February 2, 2011, and afterwards encashed the bank guarantee.
Arbitration Proceedings
MIL invoked the arbitration clause, and a sole arbitrator was appointed by NCERT under the terms of the tender. On considering the evidence and correspondence, the arbitrator rendered an award on June 25, 2013, to the effect that NCERT would refund the encashed performance security of ?2.04 crore with 12% interest per annum.
The arbitrator ruled that NCERT had failed to prove any actual loss incurred as a result of the said breach and that the forfeiture of the full security amount was unfair. Aggrieved, NCERT approached the Delhi High Court by way of a Section 34 petition under the Arbitration and Conciliation Act, 1996, against the award.
Court's Analysis
The court noted that the ambit of interference under Section 34 is very limited. Courts cannot become appellate courts to reappreciate evidence or substitute their perception for that of the arbitrator, except in the case of the award being patently illegal or offending public policy.
The Court observed that the arbitrator had thoroughly analyzed the contractual terms, letters, and the plea, and his conclusions were reasoned and fact based. Significantly, NCERT had not brought any evidence of actual loss incurred on account of non-supply, a requirement under Section 74 of the Indian Contract Act.
Conclusion
The Delhi High Court rejected NCERT's Section 34 plea, upholding the arbitral award. The ruling reinforces the judiciary's uniform position that awards in arbitration need to be honoured except in cases of illegality or perversity.
Case Reference: National Council of Education Research & Training Versus Murli Industries Ltd. O.M.P. (COMM) 363/2020) Decided on October 10, 2025, [Judgment reserved on 15.07.2025]
Disclaimer
In Compliance with Indian Regulations, Kindly Review the User Acknowledgement and Disclaimer below and then Proceed.
User Acknowledgement
By proceeding further and clicking on the "ACCEPT" button herein below, I acknowledge that I of my own accord wish to know more about Law Senate (LS) for my own information and use. I further acknowledge that there has been no solicitation, invitation or inducement of any sort whatsoever from Law Senate (LS) or any of its members to create an Attorney-Client relationship through this website. I further acknowledge having read and understood the Disclaimer below
This website (www.lawsenate.com) is a resource for informational purposes only and is intended, but not promised or guaranteed, to be correct, complete, and up-to-date. Law Senate (LS) does not warrant that the information contained on this website is accurate or complete, and hereby disclaims any and all liability to any person for any loss or damage caused by errors or omissions, whether such errors or omissions result from negligence, accident or any other cause. Law Senate (LS) further assumes no liability for the interpretation and/or use of the information contained on this website, nor does it offer a warranty of any kind, either expressed or implied. The owner/Partners of this website do not intend links from this site to other internet websites to be referrals to, endorsements of, or affiliations with the linked entities. Law Senate (LS) is not responsible for, and makes no representations or warranties about, the contents of Web sites to which links may be provided from this Web site.
This website is not intended to be a source of advertising or solicitation and the contents of the website should not be construed as legal advice. The reader should not consider this information to be an invitation for a lawyer-client relationship and should not rely on information provided herein and should always seek the advice of competent counsel licensed to practice in the reader's country/state. Transmission, receipt or use of this website does not constitute or create a lawyer-client relationship. No recipients of content from this website should act, or refrain from acting, based upon any or all of the contents of this site.
Furthermore, the owner of this website does not wish to represent anyone desiring representation based solely upon viewing this Web site or in a country/state where this website fails to comply with all laws and ethical rules of that state. Finally, the reader is warned that the use of Internet e-mail for confidential or sensitive information is susceptible to risks of lack of confidentiality associated with sending email over the Internet.
As per the rules of the Bar Council of India, lawyers are not permitted to advertise themselves. The information about the Firm, its Key Practice Areas or its Key Team Members provided under this website is only for informational purposes and it should not be interpreted as soliciting or advertisement of any nature whatsoever.
The information provided on this website is for general information only. It is not intended to create or promote an attorney-client relationship and does not constitute and should not be relied upon or construed as legal advice.
Communications via this website also do not create an attorney-client relationship. Visitor should always seek appropriate professional advice before acting on the basis of any information contained herein.
