Arbitration: No Benefit from Own Wrong: Arbitral Award Restricting Recovery of Tax Penalties from Supplier Upheld

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In this case, the petitioners (HPSEBL) challenged an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, which had partially ruled in favor of the respondent-supplier. The Arbitral Tribunal had concluded that while the respondent was liable for the entry tax itself, HPSEBL could not recover the heavy interest and penalties—accumulated due to HPSEBL’s own prolonged default, inaction, and failure to make timely deductions from the supplier’s invoices despite having the necessary details—from the respondent. The High Court of Himachal Pradesh dismissed the petition, reiterating that the scope of interference under Section 34 is narrow and that a party cannot take advantage of its own wrong or pass its own statutory default burdens onto the other party.

  • Narrow Scope of Interference under Section 34: The jurisdiction of the Court under Section 34 of the Arbitration and Conciliation Act is circumscribed and does not equate to an appellate jurisdiction; arbitral awards cannot be interfered with casually unless a perversity goes to the root of the matter.
  • Liability for Own Default and Inaction: Even though the contract authorized the Purchaser (HPSEBL) to deduct statutory entry taxes from supplier invoices and remit them, HPSEBL failed to do so in a timely manner despite possessing the necessary details. A party cannot transfer the burden of interest and penalties—levied by tax authorities due to its own negligence—onto the supplier.
  • Principle of Equity: The legal maxim that a party cannot take benefit of its own wrong applies squarely to arbitral proceedings. The arbitrator rightly noted that the power of deduction granted under the contract was for lawful deductions, not for amounts bloated by the petitioner’s own avoidable inaction.
  • Competence of Corporate Representation: An arbitrator’s finding on the authority of a representative to institute legal proceedings is a finding of fact. Where a General Power of Attorney is placed on record and remains unrebutted, the arbitrator’s conclusion regarding the representative’s competence is unassailable under Section 34.

STPL (Web) 2026 HP 496

Himachal Pradesh State Electricity Board Ltd. and Another v. HCL Infotech Limited (D.O.J. 29.12.2025)

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Arbitration: Nullity of Unilateral Appointments: High Court Sets Aside Arbitral Award

August 8, 2026 No Comments

The petitioner and the respondent-Department cross-challenged an arbitral award dated 24.09.2022 passed in a dispute arising from a public works contract. The sole arbitrator had been unilaterally appointed by a serving Chief Engineer of the HPPWD, who is an employee of one of the contesting parties. The High Court of Himachal Pradesh set aside the arbitral award, holding that under Section 12(5) of the Arbitration and Conciliation Act, 1996, an official who is an employee of a contesting party is statutorily ineligible to act as an arbitrator, and consequently lacks the legal competence to appoint or nominate any other person as a sole arbitrator. The Court ruled that an award rendered by an arbitrator so appointed is void ab initio, non est in the eyes of the law, and in direct conflict with public policy.

  • Ineligibility of Appointing Authorities and Nominees:
    • Under Section 12(5) and the Seventh Schedule of the Arbitration and Conciliation Act, 1996, an employee, consultant, or person having a business relationship with a contesting party is statutorily ineligible to act as an arbitrator.
    • As settled in Perkins Eastman Architects DPC v. HSCC (India) Limited, an authority that is itself disqualified from acting as an arbitrator is equally disqualified from appointing or nominating any other person as a sole arbitrator.
  • Strict Requirement for Waiver under Proviso to Section 12(5):
    • The statutory bar under Section 12(5) can only be waived pursuant to the proviso if there is an express agreement in writing executed after the disputes have arisen.
    • Conduct, oral consent, or mere participation in proceedings (such as a ‘no objection’ recorded in a procedural order) cannot substitute the mandatory requirement of an express written agreement, and is inconsequential.

STPL (Web) 2026 HP 550

Balbir Singh Versus Executive Engineer, B & R Division, HPPWD, Sarkaghat, District Mandi, HP. (D.O.J. 13.07.2026)

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Absence of Holograms: High Court Quashes FIR Under Section 39 and Directs Compounding

August 8, 2026 No Comments

The petitioner, proprietor of a liquor bottling plant, sought the quashing of an FIR registered under Sections 39(1) and 39(2) of the Himachal Pradesh Excise Act after search operations revealed that certain liquor bottles in his possession lacked requisite holograms. The High Court of Himachal Pradesh allowed the petition under Section 482 of the CrPC, holding that the failure to affix holograms does not constitute unlawful production, manufacture, possession, transport, or sale under Section 39 of the Act, but rather constitutes a breach of license conditions punishable under Section 43, which is compoundable. Ruling that continuing criminal proceedings under Section 39 was an abuse of process, the Court quashed the FIR and, to bring finality to the matter, imposed a composite penalty of ₹1.00 lakh in lieu of pending Section 43 proceedings.

  • Distinction Between Section 39 and Section 43 of the Himachal Pradesh Excise Act:
    • The omission or failure on the part of a licensee or manufacturer to affix requisite holograms on liquor bottles does not attract penal consequences under Sections 39(1) and 39(2) of the Himachal Pradesh Excise Act, which target unlawful production, manufacture, possession, import, export, transport, or sale.
    • Such a statutory or license omission falls squarely under Section 43 of the Act, which deals with breaches of license conditions by a licensee and is compoundable under the statute.
  • Quashing of Criminal Proceedings:
    • Prosecuting a licensee under Section 39 for missing holograms is legally unsustainable and constitutes an abuse of the process of the court.
    • Noting that co-accused individuals similarly situated had already obtained relief from the High Court, the criminal proceedings against the petitioner were ordered to be quashed.
  • Settlement and Imposition of Penalty:
    • To put a quietus to the litigation and bypass protracted departmental proceedings, the High Court exercised its authority to impose a penalty of ₹1.00 lakh upon the petitioner under Section 43 of the Act, directing payment to the Excise Department within four weeks to conclude all pending proceedings.

STPL (Web) 2026 HP 549

Manik Kumar Versus State of Himachal Pradesh and Anr. (D.O.J. 14.07.2026)

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Misinterpretation of Disability Rights: High Court Denies Mandamus for Supernumerary Post Creation

August 8, 2026 No Comments

The petitioner, a 100% visually impaired employee serving as a District Inspector/District Audit Officer, sought a writ of mandamus directing the respondents to create a supernumerary post at Rampur under Section 20(4) of the Rights of Persons with Disabilities Act, 2016, and to adjust him at that station. The High Court of Himachal Pradesh dismissed the writ petition, holding that Section 20(4) and its provisos regarding supernumerary posts apply strictly to employees who acquire a disability during their service and do not apply to individuals who were initially appointed directly under the quota reserved for persons with benchmark disabilities. The Court ruled that the statute does not mandate or provide for the creation of supernumerary posts for persons with disabilities appointed as such ab initio.

  • Scope and Applicability of Section 20(4) of the RPwD Act, 2016:
    • Sub-section (4) of Section 20 of the Rights of Persons with Disabilities Act, 2016, and its provisos (including the provision for supernumerary posts) apply strictly to employees who acquire a disability during their service.
    • These provisions are entirely inapplicable to an employee who was initially appointed to service against the quota reserved for persons with benchmark disabilities.
  • Absence of Statutory Mandate for Supernumerary Posts in Initial Appointments:
    • The statutory framework of the RPwD Act, 2016, does not contemplate or provide for the creation of supernumerary posts to accommodate a person with a disability who entered service as such.
    • A mandamus cannot be issued to compel authorities to create a supernumerary post or to post an officer at a station where the sanctioned post does not exist.

STPL (Web) 2026 HP 548

Shishu Pal Mehta Versus State of Himachal Pradesh and Another (D.O.J. 14.07.2026)

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Service Law: High Court Quashes Premature Transfer of Employee Posted via Judicial Order

August 8, 2026 No Comments

The petitioner, who had been posted to PHC Pragpur only a few months earlier pursuant to a judicial order, challenged a subsequent transfer order issued via a triangular arrangement that moved her to PHC Dhaliara. The High Court of Himachal Pradesh allowed the writ petition and quashed the premature transfer order, holding that the displacement was arbitrary and lacked administrative logic since the private respondent could have been adjusted directly at the alternative station located merely 10 kilometers away without disturbing the petitioner’s normal tenure.

  • Protection of Normal Tenure against Arbitrary Displacement:
    • Where an employee is posted to a station pursuant to an earlier judicial order and has completed only a few months of service, a subsequent transfer effected via a triangular arrangement without valid administrative justification is arbitrary and unsustainable in law.
    • The State cannot disrupt an employee’s normal tenure when simpler, direct administrative alternatives are available.
  • Absence of Administrative Logic in Triangular Transfers:
    • When a private respondent can be adjusted directly at a nearby alternative station (such as 10 kilometers away) and a simple two-way transfer between other parties is feasible, roping in a recently-placed employee through a complex triangular arrangement is unjustified.
  • Final Relief and Directions:
    • The impugned transfer order moving the petitioner from Pragpur to Dhaliara was quashed and set aside.
    • The respondent-authorities were directed to allow the petitioner to complete her normal tenure at Pragpur, while leaving the Department at liberty to post the private respondent directly at Dhaliara.

STPL (Web) 2026 HP 547

Smt. Anjana Kumari Versus State of Himachal Pradesh and Others (D.O.J. 14.07.2026)

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