Award Passed On Consent Cannot Be Held To Be Patently Illegal Or Contrary To Public Policy: Himachal Pradesh HC

Brief Facts

The present appeal has been preferred by the appellant under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 (in short the “Act”), assailing the order passed by the learned Single Judge on 06.07.2023 in Arbitration Case No.69 of 2016, vide which, the learned Single Judge rejected the appellant's challenge to the arbitral award dated 05.04.2016 passed by the Arbitrator by way of petition under Section 34 of the Act.

The respondent was awarded work of construction of LWSS “Shri Naina Devi Ji”, including execution and supply of material vide award dated 30.07.2009. The work was required to be completed within one year, i.e. upto 13.08.2010.

As regards non-execution of the work, the appellant intended to forfeit the performance bond of the petitioner, restraining the respondent to approach this Court, leading to the appointment of an Arbitrator.

Upon conclusion of the arbitration proceedings, the Arbitrator awarded a sum of Rs.57,45,832/- under Claim No.1 for Escalation, whereas, he rejected the other claims put-forth by the respondent.

The learned Single Judge noted that the nature of the award was more or less, based on consent, wherein the facts have been admitted with respect to late handing over the complete site to the respondent/contractor, thereby leading to non-completion of work by him within the stipulated period and it was further admitted that the work was to be completed within one year of handing over the complete site to the contractor.

The Arbitrator had also recorded the admission and assent of the appellant with respect to the claim of escalation, which was not disputed before the learned Single Judge.

Observations:

The court at the outset discussed the scope of interference under section 37 of the Arbitration Act and referred to the Supreme Court judgment in Punjab State Civil Supplies Corporation Limited & Anr. vs. M/s Sanman Rice Mills & Ors., (2024) wherein it was held 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. 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. It is only where the court exercising power under Section 34 has failed to exercise its jurisdiction vested in it by Section 34 or has travelled beyond its jurisdiction that the appellate court can step in and set aside the order passed under Section 34 of the Act. Its power is more akin to that superintendence as is vested in civil courts while exercising revisionary powers.”

While applying the above ratio to the facts of the present case, the court concluded that the award being primarily based on consent cannot also be held to be patently illegal or in conflict with the public policy of India. Accordingly, the present appeal was dismissed.

Case Title: The Executive Engineer, I & PH Division, Bilaspur Versus Ramesh Khaneja

Citation: 2025 LiveLaw (HP) 1

Case Number: Arb. Appeal No.21 of 2024

Judgment Date: 30/12/2024

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