Introduction:
In UCM Coal Company Ltd. v. Adani Enterprises Ltd., SLP (C) No. 2954 of 2026, the Supreme Court of India dismissed a challenge to an arbitral award of approximately Rs. 126 crores with 11% interest, thereby affirming the concurrent findings of the Arbitral Tribunal, the Commercial Court, and the Allahabad High Court. The petition was heard by a Bench comprising Justice J.K. Maheshwari and Justice Atul S. Chandurkar. The dispute arose out of a Mine Developer and Operator (MDO) contract, pursuant to which Adani Enterprises had undertaken preparatory and developmental activities for a coal block allotted to UCM Coal Company Ltd., a joint venture entity formed by public sector undertakings of Uttar Pradesh, Chhattisgarh, and Maharashtra for coal block development and mining operations. Subsequently, due to a public interest litigation before the Supreme Court relating to coal block allocations, the allotment in favor of UCM was cancelled, rendering performance of the contract impossible. Adani Enterprises initiated arbitration seeking reimbursement of expenses already incurred, including land acquisition, mine infrastructure development, mobilization of equipment, consultancy expenses, and capital commitments. The Arbitral Tribunal allowed the claims, holding that the expenses were genuine, contractually contemplated, and proved through oral and documentary evidence. UCM Coal challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, before the Commercial Court, Lucknow, which dismissed the challenge. The Allahabad High Court, in appeal, upheld the award, reiterating the narrow scope of judicial interference in arbitral matters. Aggrieved, UCM Coal approached the Supreme Court, contending that the Tribunal had misconstrued contractual terms and relied on impermissible evidence. The Supreme Court, however, declined to interfere, thereby reinforcing the principle that courts are not appellate authorities over arbitral awards and cannot reappreciate evidence or substitute their own interpretation where a plausible contractual view has been taken by the Tribunal.
Arguments of the Petitioners (UCM Coal Company Ltd.):
The petitioners, represented by the Solicitor General of India, advanced multiple grounds to assail the arbitral award and the High Court judgment affirming it. The principal contention was that the Arbitral Tribunal had misconstrued the contractual framework and had effectively rewritten the contract, which is impermissible in arbitral adjudication. According to the petitioners, the MDO agreement expressly prohibited the engagement of sub-contractors without prior written consent of UCM Coal, and the expenses claimed by Adani Enterprises were allegedly incurred through third-party agencies, which, in substance, were sub-contractors. It was argued that labeling such agencies as “consultants” could not change the real nature of the transaction, and hence the expenditure incurred through such agencies was not contractually permissible and ought not to have been reimbursed.
The petitioners further contended that the Tribunal had placed undue reliance on an arbitral award passed in a separate proceeding involving PMC Projects (India) Pvt. Ltd., wherein Adani Enterprises was directed to pay approximately Rs. 126 crores to PMC. According to UCM Coal, an award in a separate arbitration between different parties could not be treated as substantive proof of liability or expenditure in the present arbitration. It was argued that such reliance violated principles of evidence and fairness, as UCM Coal was not a party to that arbitration and had no opportunity to contest the findings therein.
Another significant argument was that the Tribunal had exceeded its jurisdiction by granting reimbursement for expenses that were allegedly speculative, future-oriented, or related to capital commitments rather than actual expenditure. The petitioners argued that compensation in arbitration must be confined to proven loss directly arising from breach, and not extend to notional or anticipated expenses. It was also contended that once the coal block allocation was cancelled by judicial order, the entire contract stood frustrated, and therefore no reimbursement could be claimed unless expressly provided for in the contract, which, according to the petitioners, was not the case.
Additionally, the petitioners submitted that the High Court failed to properly exercise its jurisdiction under Section 37 of the Arbitration Act, as it merely echoed the Tribunal’s findings without independently scrutinizing whether the award suffered from perversity, patent illegality, or contravention of public policy. It was argued that the Tribunal’s interpretation was not merely a plausible interpretation but a commercially unreasonable and legally unsustainable view, thereby warranting judicial interference.
The petitioners also emphasized that arbitral tribunals, although not bound by strict rules of evidence, are still required to adhere to basic principles of natural justice and rational evaluation of material. According to them, the Tribunal had relied excessively on oral testimony and internal documents of Adani Enterprises without sufficient independent corroboration, thereby rendering the award vulnerable to challenge under the ground of perversity.
Arguments of the Respondents (Adani Enterprises Ltd.):
The respondents, represented by senior counsel, defended the arbitral award and the concurrent findings of the courts below by emphasizing the limited scope of judicial interference under Sections 34 and 37 of the Arbitration and Conciliation Act. It was argued that the Tribunal had taken a reasonable and commercially sound interpretation of the contract, based on extensive oral and documentary evidence, and therefore the award could not be interfered with merely because another interpretation was possible.
On the issue of consultants versus sub-contractors, the respondents contended that the contractual embargo was strictly against sub-contracting of mining operations, and not against hiring professional consultants for preparatory and developmental activities such as land acquisition, environmental assessments, and infrastructure planning. It was submitted that witnesses, including those of UCM Coal, had admitted in cross-examination that the agencies engaged by Adani Enterprises were consultants and not sub-contractors. Moreover, at no point during the execution of the contract did UCM Coal raise any objection or issue any notice alleging violation of the subcontracting clause. This conduct, according to the respondents, clearly demonstrated that both parties understood and acted upon the contract in a manner that permitted engagement of consultants.
Regarding reliance on the PMC arbitration award, the respondents argued that the Tribunal had not treated that award as conclusive proof but as corroborative evidence to show that Adani Enterprises had in fact incurred liability of approximately Rs. 125–126 crores for work already executed. It was emphasized that arbitral tribunals are not bound by strict technical rules of evidence, and may rely on material that has probative value, including findings from other adjudicatory proceedings, subject to appropriate weight being assigned. The PMC award merely demonstrated that the expenditure claimed was not hypothetical but had already crystallized into a legal liability.
The respondents also submitted that the contract contained clauses contemplating reimbursement of expenses in the event of termination or impossibility arising from regulatory or judicial action. Since the coal block cancellation was due to a Supreme Court judgment in a PIL and not due to any fault of Adani Enterprises, principles of equity, restitution, and contractual risk allocation justified reimbursement of expenses legitimately incurred in performance of contractual obligations.
It was further argued that the Tribunal had meticulously examined invoices, agreements with consultants, land acquisition records, infrastructure development expenses, and mobilization costs, and had awarded only those amounts which were sufficiently proved. Therefore, the award could not be characterized as speculative or excessive. The respondents stressed that allowing judicial interference in such cases would undermine the finality and efficacy of arbitration, which is designed to provide speedy and binding resolution of commercial disputes.
Court’s Judgment:
The Supreme Court, after considering the submissions and examining the record, declined to interfere with the arbitral award and the High Court’s judgment, thereby reaffirming the doctrine of minimal judicial intervention in arbitral matters. The Court noted that the Arbitral Tribunal had relied on extensive oral and documentary evidence to conclude that the agencies engaged by Adani Enterprises were consultants and not sub-contractors, and that such engagement was not prohibited by the contract. The Court found no perversity or irrationality in this factual finding, especially in light of the conduct of UCM Coal, which had never objected to such engagement during the subsistence of the contract.
The Court endorsed the High Court’s reliance on precedents such as Batliboi Environmental Engineers Ltd. v. Hindustan Petroleum Corporation Ltd. and A.C. Chokshi Share Brokers Pvt. Ltd. v. Jatin Pratap Desai, which reiterate that where an arbitral tribunal adopts a plausible interpretation of contractual terms, courts cannot substitute their own view even if another interpretation is possible. The Supreme Court emphasized that arbitration is a creature of contract, and parties who choose arbitration must accept that the tribunal is the final judge of facts and contractual construction, subject only to very limited statutory grounds of challenge.
On the issue of reliance on the PMC arbitration award, the Court agreed with the High Court that an arbitral award in one proceeding can be used as evidence in another proceeding, though the weight to be attached to such evidence may vary depending on the facts of each case. In the present matter, the PMC award was relevant to demonstrate that Adani Enterprises’ liability for consultancy and infrastructure-related work had already crystallized, thereby lending credibility to the claim for reimbursement. The Tribunal had not blindly accepted that award but had considered it along with other documentary material and witness testimony.
The Court further observed that arbitral tribunals are not bound by the strict rigors of the Evidence Act or procedural technicalities, and are entitled to adopt a flexible approach so long as principles of natural justice are respected. There was no allegation that UCM Coal had been denied opportunity to contest the evidence or cross-examine witnesses. Hence, the procedural fairness of the arbitration was not in doubt.
Addressing the contention that the Tribunal had rewritten the contract, the Court held that the Tribunal had merely interpreted the contractual clauses in the context of the conduct of the parties and the commercial realities of mine development projects. The Tribunal did not introduce new obligations or rights but enforced what it found to be the true intention of the parties as reflected in both the contract and their subsequent conduct.
The Supreme Court also took note of the fact that the challenge had already been rejected by the Commercial Court under Section 34 and by the High Court under Section 37, and that interference at the SLP stage would be warranted only in cases of manifest injustice, patent illegality, or violation of fundamental legal principles, none of which were established in the present case. Consequently, the Special Leave Petition was dismissed, and the arbitral award in favor of Adani Enterprises stood affirmed.