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The High Court of Delhi through its judgment dated 23.07.2026 in the matter of Spectrum Power Generation Limited v. GAIL India Limited 1 allowed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (“A&C Act”) challenging an arbitral award rejecting the petitioner’s claim for reimbursement of Goods and Services Tax (“GST”) paid on transmission charges under a Gas Sale Agreement (“GSA”). The Court held that the arbitral award suffered from patent illegality as it was founded on inadmissible evidence and an erroneous application of the doctrines of waiver and estoppel.
The issue before the Court was whether the Arbitral Tribunal had committed patent illegality by relying on inadmissible evidence to conclude that GST had been deposited, and by holding that the petitioner had waived its rights and was estopped disputing reimbursement of GST merely because it had made payments under the GSA. The Court also considered the scope of judicial interference under Section 34 of the A&C Act where findings of the Arbitral Tribunal are based on perversity and misapplication of settled legal principles.
The Court held that while interpretation of contractual clauses ordinarily falls within the exclusive domain of an Arbitral Tribunal, such findings cannot be sustained where they are founded upon inadmissible evidence or suffer from patent illegality. The Court observed that the Tribunal erred in relying upon GST deposit receipts without first deciding their admissibility and without any independent evidence establishing that GST had in fact been deposited. The Court further held that the essential ingredients of waiver and estoppel were absent, as there was no evidence of an intentional relinquishment of rights by the petitioner or any representation inducing the respondent to alter its position. Accordingly, the Court held that the findings on proof of GST payment, waiver and estoppel were perverse and consequently allowed the petition and set aside the arbitral award.
Footnote
1. O.M.P. (COMM) 64/2025
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