Findings Of Arbitrator U/S 34 Of Arbitration Act Cannot Be Scrutinised As If Court Is Sitting In Appeal: Chhattisgarh High Court

Brief Facts

The claimant is a partnership firm and registered contractor with South Eastern Coalfields Ltd. (SECL). The claimant was awarded a contract for constructing an approach road to the Kapildhara Project. Despite completing the work by the claimant, the dispute arose with respect to the payment and approval of revised estimates.

It was alleged by the claimant that the SECL committed delays in granting the final extension, approving deviation estimates and settlement of payments. On the other hand, the SECL alleged that the claim was barred by limitation on ground of providing mandatory documentation, obtain the final extension and sign the revised estimates. It was also argued that the work was not done to their satisfaction and submitted that the delay on the part of the claimant caused significant losses to the SECL. Thereafter, a Sole Arbitrator was appointed.

An award was passed by the Sole Arbitrator after considering the pleadings, evidence and material on record the Sole Arbitrator recorded a finding that the cause of action has arisen on 18-7-2006 and the arbitration commenced for limitation from 20-4-2008, and hence, the claim made by the claimant is not barred by limitation.

Being aggrieved by the award dated 20-3-2021 the respondent approached the learned Commercial Court which was allowed by order dated 8-8-2022 by setting the arbitral award. In the impugned order, it has been held by the learned Commercial Court that the award has been passed by ignoring the law of limitation and is vitiated by patent illegality appearing on the face of it and further held to be in conflict with the public policy of India. Thus, this appeal by the claimant.

The appellant submitted that the Commercial Court ought not to have interfered with the findings of the fact with respect to the occurring of cause of action recorded by the Sole Arbitrator and that Section 34 of the Act, 1996, provides limited scope of review of Arbitral Award by the Court and the Court cannot interfere on its merits.

On the other hand, the respondent submitted that the claim was submitted by the claimant after 11 years of expiry of limitation period and, as such, the claim was barred by limitation, but without appreciating the said fact the Arbitral Tribunal has erroneously decided that the claim was not barred by limitation.

Observations:

The court noted that in Punjab State Civil Supplies Corporation Limited and Another v Sanman Rice Mills and Others, 2024 the Supreme Court has held that “scope of appeal is naturally akin to and limited to the grounds enumerated under Section 34 of the Act. It further held that an arbitral award is not liable to be interfered with only on the ground that the award is illegal or is erroneous in law that too upon reappraisal of the evidence adduced before the arbitral trial.”

The court further observed that 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.

After pursuing the findings of the sole arbitrator and the impugned order, the court observed that while exercising the power under Section 34 of the Act, 1996 the learned Commercial Court has not tested the finding of the arbitral award properly on the point of limitation and reversed the finding of Sole Arbitrator without assigning proper reason.

The court further observed that “the act of the Commercial Court in scrutinizing the finding of fact by the Sole Arbitrator on evidence is contrary to the well settled proposition of law as laid down by the Supreme Court in the matter of Maharashtra State Electricity Distribution Company Limited v Datar Swithgear Limited and Others, 2018 wherein it has been held that the Arbitral Tribunal is the master of evidence and the findings of fact which are arrived at by the arbitrators on the basis of evidence on record are not to be scrutinized, as if the Court was sitting in appeal. Thus, the order impugned about the finding of limitation is perverse and contrary to Section 34 of the Act, 1996.”

It added that in the case at hand, the cause of action has arose on 18-7-2006 and arbitration commenced for limitation from 20-4-2008 and, as such, the claimant's claim is not barred by limitation.

“In Food Corporation of India v Ratanlal N. Gwalani, 2004, the Madhya Pradesh High Court has held that the delay in the preparation of the final bill for the work carried out by the plaintiff for the defendant Corporation, it would not permissible for the defendant thereafter to raise the point of limitation” the court noted.

Finally, the court observed that in the present case also the delay in preparation of final bill is attributable to the respondent and the same cannot be a ground to reject the claim of the appellant.

Accordingly, the impugned order was set aside and the award passed by the Arbitrator was maintained.

Case Title: M/s S.K. Minerals versus South Eastern Coalfields Ltd.

Case Number:ARBA No. 35 of 2022

Judgment Date: 12/12/2024

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