Legal Updates

Case Note

Case Title: SEPCO Electric Power Construction Corporation v. GMR Kamalanga Energy Ltd.
Citation: 2025 INSC 1171 (Supreme Court of India)
Bench: Justice Augustine George Masih
Date: 2025

Headnote

The Supreme Court clarified the limits of judicial intervention in arbitral awards under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. While reaffirming that arbitral awards must ordinarily be respected, the Court stressed that tribunals cannot rewrite contractual terms, disregard explicit clauses such as “No Waiver” and “No Oral Modification,” or base findings on mistaken facts. Such conduct constitutes violation of fundamental policy and natural justice, warranting judicial interference.

Facts

• In 2008, SEPCO contracted with GMR Kamalanga Energy (GKEL) to build three 350 MW coal-based power units in Odisha. A fourth unit was added in 2010.
• Disputes arose over delays, site access, suspension of Unit 4, and technical performance. SEPCO demobilised in 2015 and initiated arbitration.
• In 2020, the arbitral tribunal awarded SEPCO a net recovery of about ₹995 crore, holding GKEL responsible for several breaches while also granting limited counterclaims to GKEL.

Procedural History

1. Single Judge, Orissa High Court (2022): Upheld the arbitral award, holding that no interference was justified under Section 34.
2. Division Bench, Orissa High Court (2023): Set aside the award, finding errors of fact and law, including reliance on waiver despite contractual prohibition and rewriting of termination provisions.
3. Supreme Court (2025): SEPCO appealed against the Division Bench’s ruling.

Issues

1. What is the scope of interference with arbitral awards under Sections 34 and 37 of the 1996 Act?
2. Can an arbitral tribunal override express “No Waiver” and “No Oral Modification” clauses by invoking equitable estoppel?
3. Does reliance on mistaken facts or unequal treatment of parties vitiate an arbitral award?

Held

• Limited Judicial Review: Courts cannot re-examine merits but may intervene where arbitral tribunals exceed jurisdiction, ignore explicit contractual provisions, or base decisions on erroneous facts.
• Contractual Sanctity: Waiver and estoppel cannot be presumed against express “No Waiver/No Oral Modification” clauses unless unequivocal conduct demonstrates otherwise.
• Natural Justice: Unequal treatment of parties or exclusion of counterclaims undermines fairness and violates Section 18 of the 1996 Act.
• Accordingly, the Division Bench was justified in setting aside the arbitral award as contrary to the fundamental policy of Indian law.

Significance

The judgment reinforces India’s arbitration jurisprudence:

• Courts maintain a hands-off approach but act where arbitral tribunals stray beyond contract and law.
• Parties to commercial contracts must adhere strictly to notice requirements and procedural clauses.
• The decision aligns Indian law with international standards recognising limited but necessary judicial supervision of arbitration.

Endnotes (Cases Cited)

1. Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644.
2. ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705.
3. Associated Builders v. DDA, (2015) 3 SCC 49.
4. Ssangyong Engineering & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131.
5. Delhi Metro Rail Corporation Ltd. v. Delhi Airport Metro Express Pvt. Ltd., (2024) 6 SCC 357.
6. MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163.
7. UHL Power Co. Ltd. v. State of Himachal Pradesh, (2022) 4 SCC 116.
8. Project Director, NHAI v. M. Hakeem, (2021) 9 SCC 1.
9. Rock Advertising Ltd. v. MWB Business Exchange Centres Ltd., [2018] UKSC 24.
10. Charles Lim Teng Siang v. Hong Choon Hau, [2021] SGCA 43.

Download PDF of SEPCO Electric Power Construction Corporation v. GMR Kamalanga Energy Ltd 2025 INSC 1171 (Supreme Court of India) SEPCO ELECTRIC POWER VERSUS GMR KAMALANGA ENERGY (SUPREME COURT )