Jurisdiction Of High Court Hearing An Arbitration Appeal Is Distinct From That Of First Appellate Court In A Civil Suit: Supreme Court

The Supreme Court observed that the jurisdiction in a first appeal arising out of a decree in a civil suit is distinct from the jurisdiction of the High Court under Section 37 of the Arbitration and Conciliation Act arising from the disposal of a petition challenging an arbitral award.

In this case, the arbitrator rejected the claims made by a party. This award was challenged under Section 34 before the District Judge who dismissed the petition. The High Court reversed the judgment of the District Judge and allowed Arbitration appeal under Section 37 decreeing the claim in its entirety.

In appeal, the contention taken by the appellant was that the High Court was not exercising its jurisdiction as a first appellate court in a civil suit and could not have awarded the claim.

The court noted that it was on the basis of the evidence that the sole arbitrator upheld the defence of the appellants. It observed: 

11. While considering a petition under Section 34 of the 1996 Act, it is well-settled that the court does not act as an appellate forum. The grounds on which interference with an arbitral award is contemplated are structured by the provisions of Section 34. The District Judge had correctly come to the conclusion that there was no warrant for interference with the arbitral award under Section 34. The High Court seems to have proceeded as if it was exercising jurisdiction in a regular first appeal from a decree in a civil suit. The jurisdiction in a first appeal arising out of a decree in a civil suit is distinct from the jurisdiction of the High Court under Section 37 of the 1996 Act arising from the disposal of a petition challenging an arbitral award under Section 34 of the 1996 Act.

The court observed that the High Court, under Section 37, was only required to determine as to whether the District Judge had acted contrary to the provisions of Section 34 of the 1996 Act in rejecting the challenge to the arbitral award.

"Apart from its failure to do so, the High Court went one step further while reversing the judgment of the District Judge in decreeing the claim in its entirety. This exercise was clearly impermissible. The arbitrator was entitled to draw relevant findings of fact on the basis of the evidence which was adduced by the parties. This was exactly what was done in the arbitral award. The award of the arbitrator was challenged unsuccessfully by the respondents under Section 34 of the 1996 Act. In this backdrop, there was no basis in law for the High Court to interfere with the judgment of the District Judge and, as we have noted earlier, to even go a step further by decreeing the claim.", the bench observed while restoring the Arbitration award and setting aside the High Court judgment.

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