The limits of judicial interference with arbitral awards are settled in principle and contested in practice: award-debtors continue to bring challenges that are, in substance, appeals on facts. The judgment of the Delhi High Court in Union of India v. Sterlite Technologies Limited, O.M.P. (COMM) 395/2023, decided on 12 August 2026 by Justice Avneesh Jhingan, is a current illustration of how such challenges fare under Section 34 of the Arbitration and Conciliation Act, 1996.
The dispute
Sterlite Technologies Limited held an Infrastructure Provider Category-I (IP-I) registration from the Department of Telecommunications, permitting it to provide passive telecom infrastructure — dark fibre, ducts, towers and the like — to licensed telecom service providers. Its subsidiary executed master service agreements with telecom service providers on a revenue-sharing basis. Following an inspection in 2015 which found active equipment installed at premises connected with the arrangements, the Department took the view that the company had crossed the line from passive infrastructure into providing end-to-end bandwidth — an activity requiring a licence — and in 2020 raised a demand of Rs. 8,55,75,236.
The award
The dispute went to arbitration. The sole arbitrator held the demand notice and the Department’s associated rejection letter to be illegal, arbitrary, irrational and unjustified. The findings were factual and cumulative: the active equipment belonged to the telecom service providers, not to the infrastructure provider; what the company supplied was passive infrastructure within its IP-I registration; a pan-India demand extrapolated from a single-site inspection was unjustified; and there was no statutory basis for the damages claimed.
The Section 34 challenge
Before the High Court, the Union of India argued that the arbitrator had misread the billing structure of the master service agreements, overlooked an admission regarding ownership of equipment, treated the company and its subsidiary inconsistently, and erred on the recoverability of the amounts demanded. Each ground, on analysis, invited the court to re-examine the material before the arbitrator and reach different conclusions of fact.
The Court declined. Reaffirming that proceedings under Section 34 are not akin to a first appeal, it applied the settled standard: if the arbitral tribunal’s view is a possible and plausible one, it cannot be substituted merely because an alternate view is possible. Interference demands contravention of fundamental principles of Indian law or patent illegality on the face of the award — not disagreement, however earnest, with findings of fact. The petition was dismissed.
The framework at a glance
| Stage | Provision | Scope |
|---|---|---|
| Challenge to award | Section 34, Arbitration and Conciliation Act, 1996 | Limited grounds; for domestic awards, patent illegality on the face of the award; no reappraisal of evidence. |
| Appeal | Section 37 | Appeal against an order setting aside or refusing to set aside an award; grounds remain equally narrow. |
| Enforcement | Section 36 | Once objections fail, the award is enforceable as a decree of the court. |
What award-debtors should take from it
Frame grounds, not grievances
A Section 34 petition drafted as a catalogue of factual disagreements invites dismissal. The petition must identify a recognised ground — patent illegality, perversity, breach of natural justice — and tie it to the face of the award.
Contract interpretation belongs to the arbitrator
Construction of the agreement is primarily the arbitrator’s domain. Only an interpretation no reasonable person could adopt crosses into perversity.
Government parties enjoy no wider review
Public sector award-debtors face the same narrow standard as private parties. A demand quashed in arbitration is not revived by rearguing the inspection record before the court.
The judgment does not change the law; its value lies in its application. For commercial parties in Delhi, it is a current statement — from the court that hears a large share of the country’s arbitration objections — that the plausible-view standard is applied with rigour, and that a Section 34 petition built on the merits will fail on the threshold.
Parties assessing whether to challenge an award are therefore best advised to have the award examined for genuine Section 34 grounds before filing, keeping in mind the three-month limitation period under Section 34(3), extendable by no more than thirty days on sufficient cause.
The converse advice applies to award-holders. An award that rests on findings of fact reached after considering the material — as the award in this case did — is structurally difficult to dislodge, and the pendency of a Section 34 petition does not by itself stay enforcement: since the 2015 amendment, a stay of the award requires a specific order, which in money awards is ordinarily conditioned on deposit or security. An award-holder faced with a merits-based challenge should press that distinction at the first hearing rather than allow the objection petition to drift alongside enforcement.
Frequently Asked Questions
What can a court examine under Section 34 of the Arbitration Act?
A court may set aside an award only on the limited grounds in Section 34 — including incapacity, invalid agreement, lack of notice, matters beyond the reference, and conflict with the public policy of India, which for domestic awards includes patent illegality appearing on the face of the award. It does not reappraise evidence or substitute its own view for a plausible view taken by the arbitrator.
What is the "plausible view" standard?
If the arbitral tribunal's interpretation of the contract and assessment of the evidence is one that a reasonable person could arrive at, the award stands even if the court might itself have decided differently. Interference requires the view to be impossible, perverse, or vitiated by patent illegality — not merely debatable.
Was any deposit or security involved while the challenge was pending?
This article does not address interim arrangements in the case. The judgment discussed here concerns the final disposal of the Section 34 petition, which was dismissed, leaving the arbitral award in favour of the infrastructure provider undisturbed.
Does dismissal of a Section 34 petition end the matter?
Not necessarily. An appeal lies under Section 37 of the Act against an order refusing to set aside an award, though the grounds remain equally narrow. What a losing party cannot obtain at either stage is a fresh hearing on the merits of the dispute.