2022 (1) TMI 558 - SC - Indian Laws

Arbitration award - Validity of appointment of sole arbitrator - Termination of contract - Jurisdiction of High Court while deciding the appeal under Section 37 of the Arbitration Act - HELD THAT - As per settled position of law laid down by this Court in a catena of decisions an award can be set aside only if the award is against the public policy of India. The award can be set aside under Sections 34/37 of the Arbitration Act if the award is found to be contrary to (a) fundamental policy of Indian Law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. None of the aforesaid exceptions shall be applicable to the facts of the case on hand. The High Court has entered into the merits of the claim and has decided the appeal under Section 37 of the Arbitration Act as if the High Court was deciding the appeal against the judgment and decree passed by the learned trial Court. The High Court has exercised the jurisdiction not vested in it under Section 37 of the Arbitration Act. The impugned judgment and order passed by the High Court is hence not sustainable. The impugned judgment and order passed by the High Court is hereby quashed and set aside - Appeal allowed.

Summary

Issues:
Appeal against High Court's order setting aside arbitration award under Section 37 of the Arbitration and Conciliation Act, 1996.

Analysis:
1. Background and Facts:
The dispute arose between the parties regarding a contract for the supply of Aerated Cold Drinks at Tourist Complexes. The arbitrator awarded the respondent to pay a sum, which was challenged by the appellant. The High Court set aside the award, leading to the present appeal.

2. Jurisdiction of the High Court:
The appellant argued that the High Court exceeded its jurisdiction under Section 37 of the Arbitration Act by delving into the merits of the claim awarded by the arbitrator. The High Court's role in such appeals is limited, and it cannot act as a trial court.

3. Grounds for Setting Aside an Award:
The Supreme Court clarified that an award can only be set aside if it violates public policy, fundamental Indian law, national interest, justice, morality, or is patently illegal. None of these exceptions applied in this case. The High Court erred by entering into the merits of the claim, akin to a trial court's function.

4. Challenging Arbitrator's Jurisdiction:
The respondent's objection to the arbitrator's jurisdiction was overruled by the High Court, and no appeal was made against it. Therefore, the respondent could not challenge the arbitrator's jurisdiction in the present appeal.

5. Decision and Outcome:
The Supreme Court allowed the appeal, quashing the High Court's order and restoring the arbitrator's award and the Additional District Judge's order. The High Court's interference in the merits of the claim was deemed unsustainable, and the appeal was allowed without costs.