[Arbitration Act] Court Can't Interfere Under Section 37 When Interpretation Is Plausible One, Section 37 Is Confined To Grounds Under Section 34: Allahabad High Court

Brief Facts:

The matter pertained to a tender floated by the Appellant on 15.07.1985 for executing the work of Provn of Water Borne Sanitation. Disputes arose, leading to arbitration. The arbitral tribunal, appointed on 07.01.1999, rendered its award in favor of the Respondent.

Challenging the arbitral award, the Appellant filed an application under Section 34 of the Arbitration Act before the Commercial Court, which rejected the application on 09.11.2023, upholding the arbitral award. Feeling aggrieved, the Appellant approached the Allahabad High Court (“High Court”).

The. The appellant argued that the Commercial Court's order and the arbitral award should be set aside due to patent illegality. It contended that the contract's Clause 6(A) precludes awarding claims for escalation in labor wages, which the arbitrator allegedly ignored. It argued that escalation in labor wages falls under the purview of the Accepting Officer.

The Respondent argued that neither the arbitral award nor the Commercial Court's order suffered from patent illegality. It argued that Clause-6(A) of the contract doesn't prohibit payments related to the escalation of wages. Additionally, it pointed out Clause 58 of the General Conditions of Contracts, which mandates fair wages for laborers, supporting the arbitrator's decision to award escalation costs.

Observations by the High Court:

The High Court noted that Clause-6(A) pertains to discrepancies and adjustments concerning various elements of the contract such as bills of quantities, particulars, specifications, drawings, and general conditions. The High Court held that this clause applies only in instances where there are variations or discrepancies within the contract documents, with the Accepting Officer designated as the sole authority for decision-making in such cases.

Further, the High Court noted that there was no evidence presented to indicate any discrepancies or conflicting provisions within the contract documents. The dispute centered on the payment of escalation of wages, not on any deficiencies in the work executed by the Respondent. Thus, Clause 6(A) of the General Conditions of Contract was held to be inapplicable to the issue at hand. Additionally, the High Court referenced Clause 58 of the General Conditions of Contracts, which deals with the payment of fair wages, emphasizing that there was no specific prohibition against arbitration regarding the escalation of wages.

Furthermore, the High Court noted the limited scope of interference in appellate proceedings under Section 37 of the Arbitration Act. The High Court clarified that an award should only be set aside if it is vitiated by "patent illegality" evident on the face of the record. Mere errors in the application of law or evidence appreciation do not warrant setting aside an award. The High Court held that the award did not suffer from any patent illegality justifying intervention in the proceedings.

Therefore, the High Court upheld the decision of the Commercial Court.

Case Title: Union Of India Through Garrison Engineer vs Ms. Satendra Nath Sanjeev Kumar Architect, Contractors/Builders, Civil Engineers, And Colonisers

Case Number: APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 No. - 182 of 2024

Advocate for the Appellant: Pranay Krishna

Advocate for the Respondent: Vikash Bhatnagar

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