Arbitration award review stays narrow, while material misrepresentation can make contracts voidable and affect recovery rights.

Section 34 interference with an arbitral award remains limited to public policy or patent illegality affecting the root of the matter, so findings based on evidence and contractual interpretation are not lightly disturbed. The Letter of Comfort requirement was treated as a substantive contractual condition; no clear waiver was proved, and non-furnishing constituted breach. A representation that the units had operated at 120 MW was found to be a material misrepresentation on the record, making the contracts voidable at the claimant's option. Recovery was allowed for proved work expenditures and the performance guarantee, but not for the advance-payment guarantees.

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Issues: (i) Whether the arbitral award could be interfered with under Section 34 of the Arbitration and Conciliation Act, 1996 on the grounds of public policy or patent illegality. (ii) Whether the requirement of furnishing a Letter of Comfort by the Power Finance Corporation was waived and whether its non-furnishing amounted to breach. (iii) Whether the representation regarding the 120 MW capacity of the units amounted to misrepresentation rendering the contracts voidable. (iv) Whether the claimant was entitled to refund of the bank guarantee amounts and the amounts claimed for work performed.

Issue (i): Whether the arbitral award could be interfered with under Section 34 of the Arbitration and Conciliation Act, 1996 on the grounds of public policy or patent illegality.

Analysis: Interference under Section 34 is limited. An award may be set aside only when it is contrary to fundamental policy of Indian law, the interest of India, justice or morality, or where patent illegality goes to the root of the matter. The Court cannot reappreciate evidence or substitute its view for a possible view taken by the arbitral tribunal. Findings based on appreciation of evidence and contractual interpretation are not open to routine appellate correction.

Conclusion: No interference with the award was warranted on this ground.

Issue (ii): Whether the requirement of furnishing a Letter of Comfort by the Power Finance Corporation was waived and whether its non-furnishing amounted to breach.

Analysis: The contractual clauses made the Letter of Comfort a substantive requirement of the arrangement. The alleged waiver was not established by reliable material. The correspondence and evidence did not show a clear relinquishment of the contractual requirement, and the absence of the Letter of Comfort materially affected the claimant's ability to perform. The tribunal's finding that the clause was fundamental and that there was no waiver was based on evidence.

Conclusion: The requirement was not waived, and non-furnishing of the Letter of Comfort amounted to breach by the Board.

Issue (iii): Whether the representation regarding the 120 MW capacity of the units amounted to misrepresentation rendering the contracts voidable.

Analysis: The representation that the units had in fact operated at 120 MW in accordance with good industry practice was treated as a material assertion inducing the contracts. The record, including the available log sheets and absence of a performance test, did not support the assertion. The evidence showed that the claimant could not ascertain the true position despite efforts to obtain the relevant records. On those facts, the statement fell within the concept of misrepresentation and attracted the rule of voidability under the Contract Act.

Conclusion: The representation amounted to misrepresentation, and the contracts were voidable at the option of the claimant.

Issue (iv): Whether the claimant was entitled to refund of the bank guarantee amounts and the amounts claimed for work performed.

Analysis: The claim for amounts spent on the RLA study and related works was supported by evidence and was properly allowed. As to the bank guarantees, the performance guarantee stood on a different footing from the two guarantees furnished against advance payments. The performance guarantee amount was recoverable, but the two advance-payment guarantees represented sums already advanced by the Board and were not recoverable by the claimant as refund. The tribunal's award required modification to that extent only.

Conclusion: The claimant was entitled to the amount relating to the performance guarantee and the proved work expenditures, but not to the amounts covered by the two advance-payment guarantees.

Final Conclusion: The award was upheld substantially, with a limited modification restricting recovery in respect of the two advance-payment bank guarantees, and the appeals failed accordingly.

Ratio Decidendi: In proceedings under Section 34 of the Arbitration and Conciliation Act, 1996, an award based on evidence and possible contractual interpretation cannot be interfered with unless the error is fundamental and goes to the root of the matter; a material false contractual representation inducing consent renders the agreement voidable under Sections 18 and 19 of the Indian Contract Act, 1872.

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