Kiran Raj

The Supreme Court Division Bench of Chief Justice B.R. Gavai and Justice Augustine George Masih upheld the Orissa High Court’s decision setting aside an arbitral award of about ₹995 crore in favour of SEPCO Electric Power Construction Corporation, dismissing SEPCO’s civil appeal. The Court held that the tribunal impermissibly reinterpreted EPC contract terms—especially on waiver of contractual notice—and departed from agreed stipulations, contravening Section 28(3) of the Arbitration and Conciliation Act, 1996. The dispute concerned delay, testing, and performance obligations in a thermal power project between SEPCO (petitioner) and GMR Kamalanga Energy Ltd. (respondent). The Supreme Court therefore affirmed the High Court’s annulment of the award.

The dispute arose from Engineering, Procurement and Construction (EPC) arrangements between SEPCO Electric Power Construction Corporation (contractor) and GMR Kamalanga Energy Ltd. (owner) for three 350 MW coal-fired thermal power units at Kamalanga, Odisha, recorded through multiple agreements dated 28.08.2008 and subsequent amendments; a proposed fourth unit was later suspended by the owner in August 2011.

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According to the judgment’s recital of SEPCO’s case, delays occurred; the parties executed a “Jinan Agreement” in November 2012, further disputes followed, and SEPCO demobilized in January 2015, issuing a Notice of Dispute and a Notice of Arbitration in 2015. An arbitral tribunal framed 27 issues and made findings on delay, access to site, coal and fuel oil supply, testing, and Unit 4 suspension, ultimately producing a net direction that the owner was liable to pay about INR 995 crores to SEPCO, while also deciding several counterclaims on defects and liquidated damages.

The respondent (GMRKE Limited) challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 (the 1996 Act), arguing among other things that the tribunal wrongly treated contractual notice requirements as waived, relied on an email to infer estoppel despite “No Oral Modification”/“No Waiver” clauses, misrecorded coal-moisture figures affecting delay/liquidated damages analysis, and accepted damages without underlying ledgers for certain prolongation claims and Unit 4-related costs.

The Single Judge dismissed the Section 34 petition at admission, but on Section 37 appeal the Division Bench set aside both the Section 34 judgment and the arbitral award, inter alia holding that the tribunal’s reading on waiver/estoppel conflicted with the contract, that factual errors (including coal-moisture range) distorted liability computations, and that certain damages were granted without the contractually required documentation.

In the Supreme Court, SEPCO’s appeal assailed the High Court’s interference standards, invoked authorities on limited judicial review under Sections 34 and 37, and defended estoppel against “No Oral Modification” clauses. The Supreme Court considered Sections 18 (equal treatment) and 28(3) (contract-governed adjudication) of the 1996 Act, and specific contractual provisions including the notice requirement in Section 7.3.2 of the amended CWEETC Agreement.

The Court recorded that “Both the Arbitral Tribunal as well as the Single Judge of the High Court were mistaken to grant relief to SEPCO, upholding the assumed waiver of the mandate of notice despite explicit provisions of the Amended CWEETC Agreement to the otherwise effect.”

It stated that “Section 7.3.2 of the Amended CWEETC Agreement explicitly mandates the notice” and then reproduced the clause requiring detailed notice within defined timelines upon learning of a cause of delay or disruption.

The Court recorded that “the 1996 Act, through the mandate of Section 28 Sub-Section 3, casts an explicit duty on a tribunal to resolve disputes in accordance with the terms of the contract and accepted business practices.”

Quoting precedent, it stated: “It is to be reiterated that it is the primary duty of the arbitrators to enforce a promise which the parties have made and to uphold the sanctity of the contract… [and] is, therefore, violative of Section 28(3) of the Act.”

Further, on permissible interference, the Court recorded: “We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter…” while reaffirming that Section 34 is not an appellate jurisdiction.

In applying those standards to the record, the Court stated there was “no form of reasonability [that] would allow for such a discrimination between the parties by an Arbitral Tribunal.”

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Summarising, the Court recorded: “despite the limited scope of interference, the Division Bench was obligated to have interfered with the Arbitral Award owing to fulfilment of conditions mandating a re-appreciation of the merits of the award under Section 34 of the 1996 Act… [and] it is apt to set aside the whole Arbitral Award.”

The Court directed: “Resultantly, the Impugned Judgment is upheld and the Arbitral Award along with Section 34 Judgment are observed to have been rightly set aside by the Division Bench of the High Court.”

“Consequently, being devoid of merits, the instant Civil Appeal is dismissed. There shall be no order as to costs. Pending applications, if any, shall be disposed of.”

Advocates Representing the Parties

For Petitioner(s): Mr. Neeraj Kishan Kaul, Sr. Adv. Mr. Jayant Mehta, Sr. Adv. Mr. Sumeet Kachwaha, Adv. Mr. Samar Singh Kachwaha, Adv. Ms. Ankit Khushu, Adv. Ms. Garima Bajaj, AOR Ms. Bhavana Chandak, Adv. Mr. Aakshat Khetarpal, Adv. Mr. Vikramaditya Sanghi, Adv. Mr. Dhruv Sharma, Adv. Ms. Dhanya Krishnan, Adv. Mr. Udit Sidhra, Adv.

For Respondent(s): Dr. A.M. Singhvi, Sr. Adv. Mr. Ashok Parija, Sr. Adv. Mr. Ciccu Mukhopadhaya, Sr. Adv. Mr. Mahesh Agarwal, Adv. Mr. Prashant Pakhidey, Adv. Mr. Manu Krishnan, Adv Ms. Aanchal Mullick, Adv. Mr. Manav Gill, Adv. Mr. Daksh Arora, Adv. Mr. Avishkar Singhvi, Adv. Ms. Swastika Parija, Adv. Mr. Nidhiram Sharma, Adv. Mr. E. C. Agrawala, AOR

Case Title: SEPCO Electric Power Construction Corporation v. GMR Kamalanga Energy Ltd.
Neutral Citation: 2025 INSC 1171
Case Number: SLP (C) No. 2706 of 2024; Civil Appeal (of 2025)
Bench: Chief Justice B. R. Gavai; Justice Augustine George Masih