2024 (9) TMI 1586 - SC - Indian Laws

Scope of powers of the Appellate Court under Section 37 of Arbitration and Conciliation Act 1996 - whether the Appellate Court was justified in setting aside the award dated 08.11.2012 which had already been confirmed under Section 34 of the Act? - HELD THAT - Recently a three-Judge Bench in Konkan Railway Corporation Limited v. Chenab Bridge Project Undertaking 2023 (8) TMI 1227 - SUPREME COURT referring to MMTC Limited 2019 (2) TMI 1085 - SUPREME COURT held that the scope of jurisdiction under Section 34 and Section 37 of the Act is not like a normal appellate jurisdiction and the courts should not interfere with the arbitral award lightly in a casual and a cavalier manner. The mere possibility of an alternative view on facts or interpretation of the contract does not entitle the courts to reverse the findings of the arbitral tribunal. The scope of the intervention of the court in arbitral matters is virtually prohibited if not absolutely barred and that the interference is confined only to the extent envisaged under Section 34 of the Act. The appellate power of Section 37 of the Act is limited within the domain of Section 34 of the Act. It is exercisable only to find out if the court exercising power under Section 34 of the Act has acted within its limits as prescribed thereunder or has exceeded or failed to exercise the power so conferred. The Appellate Court has no authority of law to consider the matter in dispute before the arbitral tribunal on merits so as to find out as to whether the decision of the arbitral tribunal is right or wrong upon reappraisal of evidence as if it is sitting in an ordinary court of appeal - The arbitral award is not liable to be interfered unless a case for interference as set out in the earlier part of the decision is made out. It cannot be disturbed only for the reason that instead of the view taken by the arbitral tribunal the other view which is also a possible view is a better view according to the appellate court. In the case at hand the arbitral award dated 08.11.2012 is based upon evidence and is reasonable. It has not been found to be against public policy of India or the fundamental policy of Indian law or in conflict with the most basic notions of morality and justice. It is not held to be against any substantive provision of law or the Act. Therefore the award was rightly upheld by the court exercising the powers under Section 34 of the Act. The Appellate Court as such could not have set aside the award without recording any finding that the award suffers from any illegality as contained in Section 34 of the Act or that the court had committed error in upholding the same. Merely for the reason that the view of the Appellate Court is a better view than the one taken by the arbitral tribunal is no ground to set aside the award. The Appellate Court committed manifest error of law in setting aside the order passed under Section 34 of the Act and consequently the arbitral award dated 08.11.2012 - the impugned judgment and order dated 10.01.2017 passed under Section 37 is hereby set aside and the arbitral award dated 08.11.2012 is restored to be implemented in accordance with law - Appeal allowed.

Summary

Issues Involved:
1. Scope of powers of the Appellate Court under Section 37 of the Arbitration and Conciliation Act, 1996.
2. Justification of the Appellate Court in setting aside the arbitral award dated 08.11.2012, which had been confirmed under Section 34 of the Act.

Issue-Wise Detailed Analysis:

1. Scope of Powers of the Appellate Court under Section 37 of the Arbitration and Conciliation Act, 1996:

The judgment emphasizes that the Arbitration and Conciliation Act, 1996 aims to provide a speedy and inexpensive alternative mode of dispute resolution with minimal court intervention. Section 5 of the Act restricts judicial interference, allowing it only through Sections 34 and 37. Section 34 allows for setting aside an arbitral award on limited grounds, such as conflict with public policy, fraud, corruption, or fundamental policy violations. The scope of interference under Section 34 is very limited, and courts are not to reappraise the evidence or substitute their views for the arbitrator's.

Section 37 provides for appeals against orders setting aside or refusing to set aside an arbitral award under Section 34. The appellate court's scope is limited to the grounds enumerated under Section 34. The judgment cites several precedents, including Bharat Coking Coal Ltd. v. L.K. Ahuja and Dyna Technology Private Limited v. Crompton Greaves Limited, which reinforce that arbitral awards should not be interfered with casually or cavalierly. The appellate power under Section 37 is not akin to normal appellate jurisdiction and is confined to ensuring that the court under Section 34 has not exceeded its jurisdiction.

2. Justification of the Appellate Court in Setting Aside the Arbitral Award Dated 08.11.2012:

The judgment scrutinizes whether the Appellate Court was justified in setting aside the arbitral award dated 08.11.2012, which had been confirmed under Section 34. It is noted that the arbitral award was based on evidence and was reasonable. It was not found to be against public policy, fundamental policy of Indian law, or in conflict with basic notions of morality and justice. The award was not contrary to any substantive provision of law or the Act.

The judgment highlights that the Appellate Court should not have set aside the award without finding any illegality as per Section 34. The Appellate Court's decision to set aside the award merely because it had a different view was deemed erroneous. The judgment reiterates that the appellate court's power under Section 37 is limited to ensuring that the court under Section 34 has not exceeded its jurisdiction or failed to exercise it.

Conclusion:

The judgment concludes that the Appellate Court committed a manifest error of law in setting aside the order passed under Section 34 and the arbitral award dated 08.11.2012. The impugned judgment and order dated 10.01.2017 passed under Section 37 is set aside, and the arbitral award dated 08.11.2012 is restored for implementation. The appeal is allowed with no order as to costs, and any pending applications are disposed of.

Separate Judgments:

There is no indication of separate judgments delivered by different judges in this case. The judgment is delivered by Pankaj Mithal, J., with concurrence from the bench.