Commissioning-Centric “Delivery”: Delhi High Court Redefines the Rejection Clock under Clause 2102
Commentary on Hindustan Hydraulics Pvt. Ltd. v. Union of India (2025 DHC 4927)

1. Introduction

This commentary examines the Delhi High Court’s judgment dated 9 June 2025 in Hindustan Hydraulics Pvt. Ltd. v. Union of India. The Court, while deciding a challenge under Section 34 of the Arbitration & Conciliation Act, 1996 (“A&C Act”), upheld an arbitral award that rejected the seller’s claims and allowed the Government’s counter-claim arising out of the supply of a Double Column Guillotine Shearing Machine. The crux of the decision lies in two determinations:

1. “Delivery” for the purposes of the 45-day contractual rejection period begins only upon successful commissioning, not on the date of physical hand-over.
2. A single, admitted deviation from technical specifications (the substitution of a Roller Guiding System with a Flat Guiding System) is sufficient to justify outright rejection, irrespective of prolonged trials or partial use.

The petitioner (Hindustan Hydraulics) alleged that the arbitral tribunal (“AT”) rewrote the contract, ignored evidence, and returned perverse findings. Justice Manoj Kumar Ohri’s judgment re-affirms the narrow supervisory role of courts under Section 34 and crystallises a commissioning-centric approach to contractual “delivery”.

2. Summary of the Judgment

• Petition: Set-aside of arbitral award (dated 5 September 2016) under Section 34, mainly on grounds of non-application of mind, ignorance of evidence, and contract re-writing.
• Main findings:
  • The tribunal’s interpretation that “delivery” includes commissioning is a plausible reading; Courts cannot substitute their own interpretation under Section 34.
  • Though the award is “inarticulate and cryptic at places”, the essential reasoning—rejection owing to admitted design deviation—remains intact.
  • Errors that do not go to the root of the decision are “inconsequential” and cannot invite judicial interference.
• Outcome: Petition dismissed; award sustained.

3. Detailed Analysis

3.1 Precedents Cited / Relied Upon

The judgment references the “settled principles” governing Section 34 without naming cases. Nonetheless, the reasoning echoes the ratios of key Supreme Court authorities:

• Associate Builders v. DDA (2015) – limited grounds for interference; no review on merits.
• ONGC v. Western Geco (2014) – “judicial approach” requirement; but errors of fact are not enough.
• SSangyong Engg. v. NHAI (2019) – award can be set aside only if it violates India’s public policy or fundamental contractual clauses.

The High Court implicitly applies these precedents by: (1) refusing to re-appreciate evidence, and (2) treating contractual interpretation as falling within the tribunal’s exclusive domain unless “patently illegal”.

3.2 Legal Reasoning Adopted by the Court

1. Harmonious Construction of Clauses 2102 and 2.1

   The contract required (a) supply, and (b) commissioning. Reading the two clauses together, the Court held that “delivery” in Clause 2102 could not be divorced from successful commissioning because:

   • The inspection certificate itself made performance subject to commissioning.
   • Trials were indispensable to gauge the machine’s efficacy; mere physical hand-over would be commercially illogical.
   Consequently, the 45-day rejection window started only after commissioning, which in fact never occurred; hence the 2011 rejection was timely.

2. Material Deviation Justifies Rejection

   The seller conceded that it supplied a Flat Guiding System instead of the Roller Guiding System mandated by para 3.2.3.6. One substantial, unrectified deviation was enough to breach the “conformity” obligation. The Court accepted the tribunal’s view that it need not examine every alleged deviation once a core deviation is established.

3. Threshold for “Patent Illegality”

   The Court distinguished between:

   • Erroneous or superficial findings (which may exist), and
   • Findings so unreasonable that they shock the conscience (which did not).
   The former do not cross the “patent illegality” bar post-SSangyong.

3.3 Potential Impact on Future Cases

• Commissioning as Delivery: Contracts in capital-equipment procurement often separate “supply” from “commissioning”. This judgment indicates that where commissioning is an integral contractual milestone, courts may treat it as the trigger point for warranties, rejection rights, and limitation periods, unless the contract expressly says otherwise.
• Single Admitted Breach Principle: Parties cannot rely on partial acceptance or prolonged use to argue waiver once an admitted, fundamental deviation exists.
• Tolerance of Minor Errors in Awards: High Courts may overlook stylistic or clerical flaws if the award’s “core reasoning” survives. Arbitrators, however, are reminded to articulate findings to avoid protracted challenges.

4. Complex Concepts Simplified

• Section 34 Challenge: A limited judicial review mechanism. Courts cannot re-try facts; they examine whether the award violates fundamental legal principles, is perverse, or contravenes the contract.
• Commissioning vs. Delivery: “Delivery” traditionally means transfer of possession. Where equipment must be erected and proven through trials, “commissioning” (i.e., making it fully operational) can be contractually embedded within “delivery”.
• Patent Illegality: A ground for setting aside an award post-2015 amendment. It refers to blatant errors apparent on the face of the award, not mere incorrect appreciation of facts.
• Material Deviation: A departure from agreed specifications that goes to the root of the contract, entitling the buyer to reject goods.

5. Conclusion

The Delhi High Court’s decision reinforces judicial deference to arbitral tribunals and clarifies that, in technical-supply contracts, successful commissioning may define “delivery” for the purpose of buyer remedies. Even though the arbitral award contained factual oversights and sparse reasoning, the Court found its core intact: an admitted design deviation vitiated the tender, entitling the Government to a refund and justifying refusal to pay the balance price. Going forward, suppliers must ensure strict adherence to specifications and recognise that post-delivery trials do not foreclose the buyer’s rejection rights unless expressly waived. Conversely, procuring entities should draft clauses expressly specifying when rejection windows commence to avoid litigation.