S. 37 Arbitration Act | An Award Can't Be Set Aside Merely Because Appellate Court's View Is A Better View : Supreme Court

The Supreme Court today (Sep. 27) observed that unless the arbitral award suffers from the illegality mentioned under Section 34 of the Arbitration & Conciliation Act, 1996 (“Act”), no award can be interfered with or set aside by the Appellate Courts under Section 37 of the Act.

The bench comprising Justices PS Narasimha and Pankaj Mithal observed that the award cannot be set aside merely for the reason that the view of the Appellate Court is a better view than the one taken by the arbitral tribunal. The award as such cannot be touched unless it is contrary to the substantive provision of law; any provision of the Act or the terms of the agreement, the bench added.

“In the case at hand, the arbitral award dated 08.11.2012 is based upon evidence and is reasonable. It has not been found to be against public policy of India or the fundamental policy of Indian law or in conflict with the most basic notions of morality and justice. It is not held to be against any substantive provision of law or the Act. Therefore, the award was rightly upheld by the court exercising the powers under Section 34 of the Act. The Appellate Court, as such, could not have set aside the award without recording any finding that the award suffers from any illegality as contained in Section 34 of the Act or that the court had committed error in upholding the same. Merely for the reason that the view of the Appellate Court is a better view than the one taken by the arbitral tribunal, is no ground to set aside the award.”, the Court observed.

Behind the appellate court's limited power to interfere with the arbitral awards, the judgment authored by Justice Pankaj Mithal reasoned that “the appellate courts power under Section 37 of the Act is not akin to the normal appellate jurisdiction vested in the civil courts for the reason that the scope of interference of the courts with arbitral proceedings or award is very limited, confined to the ambit of Section 34 of the Act only and even that power cannot be exercised in a casual and a cavalier manner.”

The main grounds for interference or setting aside an award under Section 34 of the Act is where the arbitral award conflicts with the public policy of India i.e. if the award is induced or affected by fraud or corruption or is in contravention with the fundamental policy of Indian law or it is in conflict with most basic notions of morality and justice.

The court noted that "a plain reading of Section 34 reveals that the scope of interference by the court with the arbitral award under Section 34 is very limited and the court is not supposed to travel beyond the aforesaid scope to find out if the award is good or bad."

Upon placing reliance on the Judgment of Bharat Coking Coal Ltd. v. L.K. Ahuja (2001), the court observed that an arbitral award is not liable to be interfered with only on the ground that the award is illegal or is erroneous in law that too upon reappraisal of the evidence adduced before the arbitral trial.

The court added that the view taken by the Arbitrator needs to be accepted even if two views are possible, and there remains no scope of interference by the Appellate Court to take a different view for setting aside the award.

“It is also well settled that even if two views are possible there is no scope for the court to reappraise the evidence and to take the different view other than that has been taken by the arbitrator. The view taken by the arbitrator is normally acceptable and ought to be allowed to prevail.”, the court observed.

Reference was drawn to the case of Dyna Technology Private Limited v. Crompton Greaves Limited (2019), where it was held that "the (appellate) courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act court noted that the scope of interference in an appeal under Section 37 of the Act is restricted and subject to the same grounds on which an award can be challenged under Section 34 of the Act."

Appearance:

For Petitioner(s) Mr. Sanchar Anand, Adv. Dr. Ravinder Kumar Anand, Adv. Mrs. Diva Singh, Adv. Mr. Devendra Singh, AOR Mr. Shiv Kumar, Adv. Mr. Aman Kumar Thakur, Adv.

For Respondent(s) Mr. Abhimanyu Tewari, AOR Ms. Eliza Bar, Adv. Mr. Sidhant Awasthy, Adv. Mr. Siddhant Saroha, Adv. Mr. Manav Bhalla, Adv. Mr. Abhijeet Chaudhary, Adv. Mr. Praveer Singh, Adv.

Case Title: PUNJAB STATE CIVIL SUPPLIES CORPORATION LIMITED & ANR. VERSUS M/S SANMAN RICE MILLS & ORS.

Citation : 2024 LiveLaw (SC) 754

Click here to read/download the judgment