Arbitrator's Finding Based On Proper Appreciation And Interpretation Of Prevalent Conditions: Gujarat High Court Dismisses Section 37 Appeal

Brief Facts:

The Appellant, who awarded a contract to the Respondent No.1 - contractor, had disputes over the final bill for the contract executed by the Respondent No.1. Following the Appellant's request for the final bill, the Respondent No.1 disputed its contents, stating Clause-25 of the Tender document. Consequently, a sole Arbitrator was appointed to resolve the dispute, resulting in an award, directing payment of Rs.11,10,000/- plus interest to the Respondent No.1.

Aggrieved by the award, the Appellant filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”( challenging the arbitration award. The Additional District Judge, Gandhidham, dismissed the challenge of the arbitral award through a judgment. Thereafter, the Appellant approached the Gujarat High Court (“High Court) and filed an appeal under Section 37 of the Arbitration Act.

The Appellant contended that the Respondent No.1's claimed lacked merit, as evidenced by the Appellant's detailed response, which refuted the claims and provided relevant documentation. While the Arbitrator allowed only three claims, the Appellant argued that the reasoning behind the decision contradicted the contract's terms and specifications, and thus contravened Sections 28(3) and 31(3) of the Arbitration Act. It further argued that the Arbitrator's failure to provide independent reasons for allowing the claims undermined the legality of the award.

In contrast, the Respondent No.1, argued that the Arbitrator's decision was well-founded, with cogent reasons provided for allowing the three claims. It argued that the Arbitrator stayed within the agreement's scope and terms, basing decisions on site visits and proper interpretation of conditions. It emphasized the limited scope of interference under Section 34 of the Arbitration Act and asserted that the Appellant's challenge primarily addressed the merits of the award, rather than meeting the grounds required for challenge under the Act.

Observations by the High Court:

The High Court held that the Court's role does not extend to re-evaluating the merits of the award or reassessing the evidence presented. It highlighted that interference under Sections 34 and 37 of the Arbitration Act is severely restricted, as consistently affirmed by numerous decisions of the Supreme Court. The High Court emphasized that unless there is a clear contravention of public policy, public interest, or patent illegality, the arbitral award cannot be overturned.

The High Court observed that the Appellant failed to establish any grounds warranting the reversal of the arbitral award. The Appellant's argument predominantly centered on seeking a reassessment of evidence, which the High Court noted is impermissible under the provisions of the Arbitration Act. The High Court found no evidence of illegality, irrationality, or perversity in the arbitral award.

Addressing the Appellant's claim that the arbitrator exceeded the scope of the agreement or terms of the contract, the High Court found no evidence supporting this assertion. It noted that the arbitrator's findings were based on a proper interpretation of prevailing conditions, site inspections, and the available documentation. Furthermore, the Appellant failed to identify any errors in the judgment and order under review.

Consequently, the First Appeal was dismissed, and no costs were awarded.

Case Title: Board Of Trustees Of Deendayal Port Through Executive Engineer (H) Vs M/S. Shantilal B. Patel & Anr

LL Citation: 2024 Livelaw (Guj) 37

Case Number: R/FIRST APPEAL NO. 4628 of 2023 With CIVIL APPLICATION (FOR STAY) NO. 1 of 2023 In R/FIRST APPEAL NO. 4628 of 2023

Advocate for the Appellant: Aishvarya

Advocate for the Respondent: Paras K Sukhwani

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