The Delhi High Court upheld an arbitral award arising from a Technology Development Assistance Agreement between TIFAC and Strategic Engineering Pvt. Ltd. The Court held that repayment obligations were linked to commercial viability of the project and that the Arbitrator’s balanced directions—ordering partial recovery and penalties on both parties—did not suffer from patent illegality. Reiterating the limited scope of interference under Section 34, the Court refused to re-appreciate evidence or substitute its own interpretation.

Legal Issue

Whether the arbitral award dated 14.12.2019, partly allowing claims of both parties under a Technology Development Assistance Agreement (TDA), was liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996, on grounds of patent illegality and misinterpretation of repayment obligations.

Brief Facts

TIFAC, under the Department of Science & Technology, entered into a tripartite TDA in 1999 with SEPL and MIT to develop composite CNG cylinders. Project cost was ?5.78 crores, with TIFAC contributing ?2.80 crores. An AMC declared the project successful in 2001, requiring SEPL to repay assistance. SEPL issued post-dated cheques, later dishonoured, though liability was admitted in correspondence and accounts.

SEPL argued the project was incomplete since only Type II cylinders were developed, while the objective was Type III cylinders requiring a 3-axis machine. The machine ordered from the US was seized and returned as a 2-axis machine, making commercialisation impossible. SEPL claimed repayment obligations arose only upon successful commercialisation, which never occurred.

The Sole Arbitrator held SEPL need not repay full assistance but directed partial recovery through sale/auction of machinery or payment of ?24 lakhs if retained, imposed penalties of ?5 lakhs each on SEPL and TIFAC for misuse of guarantor and poor project management, and directed SEPL to pay ?28 lakhs (10% of taxpayer money) for failing to utilise machinery productively. Both parties challenged the award.

Judgment 

The Court dismissed both petitions, upholding the award. It reiterated the narrow scope of Section 34: courts cannot re-appreciate evidence or substitute their view if the Arbitrator’s interpretation is plausible. Repayment was linked to commercial viability, consistent with the TDA’s recitals. AMC’s declaration of success was not conclusive; arbitration was meant to test such findings.

The Arbitrator’s balanced approach, rejecting full repayment yet directing partial recovery and penalties on both sides was sustained. The Court held no patent illegality was shown. This judgment reinforces judicial restraint under Section 34, affirms arbitral autonomy to assess project success, and highlights accountability of both funder and company in publicly funded technology projects.

 Access the official judgement/order here

Case Name

Technology Information Forecasting and Assessment Council (TIFAC) v. Strategic Engineering Pvt. Ltd. & Anr.

Neutral Citation

2025:DHC:11663

Date

20 December 2025 (Reserved on 17 September 2025)

Bench

Hon’ble Mr. Justice Jasmeet Singh