Case Name: Technology Information Forecasting & Assessment Council (TIFAC) v. Strategic Engineering Pvt. Ltd & Anr
Case Number: O.M.P(COMM)548/2020 & O.M.P(COMM) 128/2021
Court: High of Delhi at New Delhi
Date of judgment: 20 December 2025
Quorum: Hon’ble Mr. Justice Jasmeet Singh
Facts
The dispute arose out of a technological development assistance agreement Dated 22 December 1999 between TIFAC Strategic Engineering PVT L.T.D.(SEPL) and madras institute of technology (MIT). TIFAC agreed to financially support a project aimed at developing composite CNG cylinders, contributing 2.80 crores out of the total project cost of 5.78 crores.
The agreement established an advisory and monitoring committee (AMC) comprising scientific experts to oversee progress. Clause 8 agreement provided that the project would be deemed successful once the AMC certificated the successful development of technology and such certificate was accepted by TIFAC. Clause 9 mandated Repayment of SEPL once such success was declared.
In the 5th AMC meeting on 24th August 2001 the project was declared successful. In the 6th AMC meeting on 21st October 2002 SEPL issued 12 postdated cheques acknowledging its repayment obligations. However, due to technical complications surrounding the import and functionality of the 3-axis filament winding machine, commercial production could not commence as envisaged.
Arbitration followed after prolonged litigation. The sole Arbitrator’s award dated 14 December 2019 partially relieved SEPL from repayment. Both parties challenged the award under section 34 of the Arbitration and Conciliation Act,1996.
Issues
1.Whether the project was successfully developed under the TDA?
2.Whether SEPLs repayment obligation depended upon commercial success?
3.Whether the Arbitrator exceeded jurisdiction by rewriting contractual terms?
4.Whether the award suffered from patent illegality?
Legal provisions Involved
Section 34&34(2A), Arbitration and conciliation Act,1996
Clauses 8 & 9, Technology development assistance agreement
Principles from associate Builder, Ssangyong engineering, PSA sical sepco Electric power.
Arguments of the petitioner (TIFAC)
TIFAC`s core submission was that the Arbitrator distorted the contract by treating commercial success as the trigger for repayment. Clause 8 made it explicit that successful development of technology was achieved when certified by the AMC. Clause 9 then imposed an unconditional obligation on SEPL to repay the assistance.
TIFAC emphasized the finality of AMCs certification, which was contractually binding and never challenged by SEPL. The conduct of SEPL-issuance of cheques, written admissions, and acknowledgment of liability in balance sheet unequivocally demonstrated acceptance of this obligation.
TIFAC contended that the Arbitrator committed patent illegality by ignoring binding clauses and judicially rewriting the contract, violating settled arbitration law.
Arguments of the Respondent (SEPL)
SEPL argued that the project’s success must be understood as commercial success, since the ultimate goal of the TDA was commercialization of CNG technology. The failure of the 3-axis filament winding machines prevented true completion of the project.
SEPL further argued that the AMCs declaration was internally contradictory, as further funds were released after declaring success. The cheques, SEPL claimed, were issued merely in good faith and never intended for enforcement.
SEPL maintained that the arbitrator had jurisdiction to examine the true success of the project and that enforcing repayment despite technical failure would cause injustice.
Analysis
The court reaffirmed the narrow scope of interference under section 34 but held that an award may be set aside for patent illegality if it violates the contract.
Justice Jasmeet Singh carefully interpreted clause 8 and 8 of the TDA, concluding that repayment was triggered solely by certification of technological success by the AMC, not by later commercial achievements. The court held that commercial viability was an objective of the project but a contractual preconditional for repayment.
By introducing “commercial success” as a requirement, the arbitrator exceeded jurisdiction and rewrote the contract as a clear case of patent illegality under settled law.
Judgment
The high court allowed TIFACs petition to set aside the arbitral award, and held SEPL liable to repay in accordance with the TDA.SEPLs petition consequently became infructuous.
Conclusion
The judgement powerfully reinforces the sanctity of contracts and the limited scope of arbitral discretion. It clarifies that arbitrators cannot impose their own notions of fairness or commercial logic when the contract speaks clearly. The decision is a significant precedent for technology development partnership and arbitration jurisprudence in India.
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WRITTEN BY: NISHTHA JAIN
