The Delhi High Court has set aside a ₹336 crore arbitral award arising out of a technology development assistance dispute between a government-controlled scientific body and a private engineering company, holding that the arbitral tribunal rewrote the contract by linking repayment obligations to commercial success rather than contractual certification of technological development.
Case Details
- Case Title: Technology Information Forecasting and Assessment Council v. Strategic Engineering Pvt. Ltd. & Anr
- Court: Delhi High Court
- Bench: Justice Jasmeet Singh
- Judgment Reserved On: 17 September 2025
- Judgment Pronounced On: 20 December 2025
- Petitions: O.M.P. (COMM) 548/2020 and O.M.P. (COMM) 128/2021
- Statutory Provision: Section 34, Arbitration and Conciliation Act, 1996
Background of the Dispute
The Technology Information Forecasting and Assessment Council (TIFAC), a registered society under the Department of Science and Technology, Government of India, entered into a Tripartite Technology Development Assistance Agreement (TDA) dated 22 December 1999 with Strategic Engineering Pvt. Ltd. (SEPL) and the Madras Institute of Technology.
Under the agreement, TIFAC agreed to extend financial assistance of up to ₹2.80 crore for the development of composite refill cylinders for compressed natural gas (CNG), while SEPL was to contribute ₹2.98 crore towards the project.
The project was monitored by an Advisory and Monitoring Committee (AMC) comprising technical experts. Clause VIII of the TDA empowered the AMC to certify whether the “development of technology” was successful, while Clause IX mandated repayment by SEPL to TIFAC, up to ₹336 lakh in instalments, once such success was declared.
In its fifth meeting held on 24 August 2001, the AMC declared the project successful based on the development and testing of Type II composite CNG cylinders.
SEPL thereafter submitted post-dated cheques towards repayment, though several of these were dishonoured. Disputes subsequently arose, leading to arbitration pursuant to a consent order passed in a civil recovery suit.
Arbitral Award of 14 December 2019
The sole arbitrator partly accepted and partly rejected claims of both sides. Crucially, the arbitrator held that since the project had not reached “fruitful commercialisation,” SEPL was not required to repay the full financial assistance.
The arbitrator further directed that TIFAC could recover part of its investment by selling project machinery, or alternatively, SEPL could retain the machinery by paying ₹24 lakh.
Additional directions imposed penalties on both parties to be paid to the Prime Minister’s Relief Fund.
Challenge Before the High Court
Both parties approached the High Court under Section 34 of the Arbitration and Conciliation Act, 1996. TIFAC argued that repayment under Clause IX was triggered solely by the successful development of technology as certified by the AMC, not by commercial viability.
It contended that the arbitrator ignored express contractual terms and substituted them with extraneous considerations such as market acceptance.
SEPL, on the other hand, defended the award on the ground that the project never achieved commercial success, particularly due to the non-availability of a three-axis filament winding machine.
SEPL also challenged one specific finding, directing it to pay 10% of the public funds on the reasoning that the machinery could have been used for other commercial purposes.
Scope of Interference Under Section 34
Justice Jasmeet Singh reiterated that the scope of judicial interference under Section 34 is narrow and does not permit re-appreciation of evidence.
However, an arbitral award can be set aside if it suffers from “patent illegality,” including where it is contrary to the terms of the contract.
Relying on established precedent, the Court observed that while an arbitrator has the authority to interpret a contract, that power does not extend to rewriting or modifying contractual provisions.
Interpretation of the Technology Development Assistance Agreement
After examining the recitals, definitions, and clauses of the TDA, the Court noted that the project envisaged multiple stages, ranging from design and testing to eventual commercial production. However, the agreement clearly distinguished between “development of technology” and “commercialisation.”
Clause VIII provided that successful development of technology would be deemed complete upon certification by the AMC and acceptance by TIFAC. Clause IX unconditionally obligated SEPL to contribute funds once such certification was issued.
The Court emphasised that although commercial exploitation was an ultimate objective, it was not a condition precedent for repayment.
The AMC, being the designated authority under the contract, had declared the project successful in its fifth meeting, and SEPL had neither objected to this declaration nor sought its reconsideration.
Findings on the Arbitral Tribunal’s Reasoning
Justice Singh found that the arbitrator expressly acknowledged the AMC’s declaration of success but nonetheless disregarded it by holding that repayment was contingent on commercial viability.
This, according to the Court, amounted to substituting the contractual framework with the arbitrator’s own notions of fairness and logic.
The judgment noted:
“The Arbitrator, being the creature of the contract, does not have the power to substitute, supplement, alter or modify the terms of the contract.”
By linking repayment to market acceptance and large-scale commercial production, the arbitrator had travelled beyond the four corners of the agreement.
Patent Illegality and Setting Aside of the Award
The Court concluded that the arbitral award was vitiated by patent illegality as it was contrary to the express terms of the TDA.
Since all directions in the award were interconnected and founded on the erroneous premise that the project was unsuccessful, the award was held to be non-severable.
Accordingly, the High Court set aside the arbitral award dated 14 December 2019 in its entirety. As a result, SEPL’s separate challenge to one of the findings became infructuous.
Final Outcome
Both Section 34 petitions were allowed, and the arbitral award was quashed. All pending applications were disposed of.
Follow Mahamana News For More Recent Judgments
