In Bharat Heavy Electricals Ltd. v. Sarr Freight Corporation (FAO (COMM) 249/2025, decided 5 November 2026), a Division Bench of the High Court of Delhi dismissed BHEL’s appeal under Section 37 of the Arbitration and Conciliation Act against the dismissal of its Section 34 objections to an award in favour of its transport contractor. BHEL’s case was that the contractor had subcontracted the work in breach of the general conditions of contract; the arbitrator found the arrangement was a limited engagement of vehicles, not subcontracting. That, the court held, was a plausible and reasoned view — and plausible views of arbitrators are not revisited in court.
The case in one view
| Case | BHEL v. Sarr Freight Corporation & Anr., FAO (COMM) 249/2025 |
|---|---|
| Bench | Avneesh Jhingan and Shail Jain, JJ., High Court of Delhi |
| Decided | 5 November 2026 (oral judgment) |
| Provisions | Sections 34 and 37, Arbitration and Conciliation Act, 1996 |
| Outcome | Appeal dismissed; award and Commercial Court judgment upheld |
The background
BHEL’s Trichy unit tendered in 2014 for transporting boiler components from the Sone Nagar railway siding to the Nabinagar project site, and awarded the work to Sarr Freight. When payment time came, BHEL resisted on the footing that the contractor had subcontracted the work to an individual in breach of the general conditions of contract. The arbitrator rejected the plea in an October 2022 award, granting the contractor about Rs 13.73 lakh in transport charges plus its security deposit, earnest money and bank guarantee amounts with 8 per cent interest, and dismissing BHEL’s counterclaims. The Commercial Court dismissed BHEL’s Section 34 objections in May 2025, and BHEL appealed.
Engagement of resources is not transfer of the contract
The factual heart of the case was characterisation. BHEL pressed a letter, emails, a letter from the project company and an incompletely filed work order to show the contract had been passed on. The arbitrator read the same documents as showing a limited engagement of vehicles — hired resources deployed by the contractor, which remained responsible for the work. No subcontract was proved. The Division Bench declined to re-enter that terrain:
From the judgment: “the Court cannot reappreciate the evidence or substitute its own view for the plausible view taken by the arbitrator.” And on the appellate tier, quoting the settled standard: “no independent evaluation is permitted on the merits of the award.”
The double filter of Sections 34 and 37
The judgment restates the architecture with economy. At Section 34, factual findings and the weighing of evidence belong to the arbitrator; an error of fact is not a public-policy violation. At Section 37, the court’s task narrows further still — it checks whether the Section 34 court remained within its bounds, following the line of authority in SEPCO Electric and AC Chokshi Share Broker. A challenger must therefore locate a defect of jurisdiction, natural justice, or patent illegality on the face of the award; disagreement with the arbitrator’s reading of correspondence is none of these.
What the decision means in practice
The wider frame
Section 37 dockets in the Delhi High Court are thick with appeals that are, in substance, second attempts at the evidence. The courts’ consistent answer — plausibility review, not merits review — is the price of arbitration’s promise of finality, and judgments like this one keep the standard visible. The subcontracting point adds a drafting lesson with wide application across transport, construction and supply contracts: the clause means what it says, and an arbitrator’s reasonable reading of what it says is, for all practical purposes, the last word.
Frequently Asked Questions
What was the underlying dispute?
BHEL's 2014 tender for transporting boiler components from a railway siding to the Nabinagar power project site went to Sarr Freight. BHEL resisted payment alleging the work was subcontracted to a third party in breach of the contract's subcontracting prohibition. The 2022 award rejected that plea and granted the contractor transport charges of about Rs 13.73 lakh plus security deposit, EMD and bank guarantee amounts with interest; BHEL's counterclaims failed, as did its Section 34 objections in 2025.
Why did the subcontracting argument fail?
The arbitrator examined the documents BHEL pressed — a letter, emails, a third party's letter and an incomplete work order filed only in part — and concluded they showed a limited hiring of vehicles, not a transfer of the contract. The court held this was a plausible view on the evidence, and the quality and weight of evidence are the arbitrator's domain.
Can factual errors by an arbitrator be corrected in court?
Ordinarily no. Errors of fact are not correctable under the public-policy head of Section 34, and under Section 37 the appellate court only verifies that the Section 34 court stayed within its own statutory bounds. As the judgment quotes, no independent evaluation is permitted on the merits of the award.
What does this mean for drafting subcontracting clauses?
If an employer wants to prohibit not only subcontracting but also the hiring of third-party equipment, labour or vehicles, the clause must say so expressly. A general prohibition on subletting the contract leaves room for exactly the finding made here — that engaging resources is not transferring the work.