Court Cannot, After Setting Aside Arbitration Award, Proceed To Grant Further Relief By Modifying Award : Supreme Court

The Supreme Court observed that, in arbitration cases, a Court cannot, after setting aside the award, proceed to grant further relief by modifying the award.

Indian Oil Corporation terminated dealership of M/s Sathyanarayana Service Station. The latter initiated arbitration proceedings and it culminated in an award upholding this termination. The District Court dismissed the petition filed challenging this award. The High Court allowing the appeal filed by the dealer and ordered restoration of the dealership.

In appeal before the Apex Court, the corporation contended that the view taken by the Arbitrator was a plausible view and that a construction of the contract by the Arbitrator is not open to interference on the score that the court finds the same incorrect. Agreeing with this contention, the bench of Justices K M Joseph and B V Nagarathna said:

"We are unable to find that the view taken by the arbitrator in the facts, can be characterised as being perverse. It is undoubtedly a plausible view. It closes the door for the court to intervene. The finding of the arbitrator cannot be described as one betraying “a patent illegality”.

While setting aside the High Court judgment, the bench, after referring to Project Director, National Highways No. 45 E and 220 National Highways Authority of India v. M. Hakeem and another (2021) 9 SCC 1], further observed:

"The High Court also erred in proceeding to order restoration of the dealership to the first respondent after setting aside the award and going further by leaving it open to the first respondent to claim damages. It is beyond the pale of any doubt that the Court cannot, after setting aside the award, proceed to grant further relief by modifying the award. It must leave the parties to work out their remedies in a given case even where it justifiably interferes with the award.."

Case details

Indian Oil Corporation vs Sathyanarayana Service Station | 2023 LiveLaw (SC) 415 | CA 3533 OF 2023 | 9 May 2023 | Justices K M Joseph and B V Nagarathna

Headnotes

Arbitration and Conciliation Act, 1996 ; Section 34, 37 - The Court cannot, after setting aside the award, proceed to grant further relief by modifying the award. It must leave the parties to work out their remedies in a given case even where it justifiably interferes with the award - Referred to Project Director, National Highways No. 45 E and 220 National Highways Authority of India v. M. Hakeem (2021) 9 SCC 1 (Para 27)

Arbitration and Conciliation Act, 1996 ; Section 34, 37 - View taken by the arbitrator in the facts, can be characterised as being perverse. It is undoubtedly a plausible view. It closes the door for the court to intervene. The finding of the arbitrator cannot be described as one betraying “a patent illegality". (Para 22)

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