Arbitration Award Cannot Be Set Aside On Mere Possibility Of An Alternative View Of Facts Of Interpretation Of Contract : Supreme Court

The Supreme Court observed that Arbitration awards cannot be set aside on mere possibility of an alternative view on facts or interpretation of the contract.

The jurisdiction under Section 34 of the Arbitration and Conciliation Act is exercised only to see if the Arbitral Tribunal’s view is perverse or manifestly arbitrary, the bench of CJI DY Chandrachud, Justices PS Narasimha and JB Pardiwala observed.

In this case, the Arbitral Tribunal rejected all the claims of Chenab Bridge Project Undertaking against Konkan Railway Corporation Limited. The Single Judge of the Bombay High Court confirmed the Award and dismissed the challenge under Section 34 of the Act. In appeal under Section 37 of the Act, the Division Bench of the High Court, partly allowed the appeal. 

In appeal, the Apex Court bench noted that the scope of interference by a court in an appeal under Section 37 of the Act, in examining an order, setting aside or refusing to set aside an award, is restricted and subject to the same grounds as the challenge under Section 34 of the Act. The court added that the scope of this jurisdiction is not akin to normal appellate jurisdiction. While allowing the appeal, the bench observed:

"While exercising jurisdiction under Section 37 of the Act, the Court is concerned about the jurisdiction that the Section 34 Court exercised while considering the challenge to the Arbitral Award. The jurisdiction under Section 34 of the Act is exercised only to see if the Arbitral Tribunal’s view is perverse or manifestly arbitrary. Accordingly, the question of reinterpreting the contract on an alternative view does not arise. If this is the principle applicable to exercise of jurisdiction under Section 34 of the Act, a Division Bench exercising jurisdiction under Section 37 of the Act cannot reverse an Award, much less the 17 decision of a Single Judge, on the ground that they have not given effect and voice to all clauses of the contract. This is where the Division Bench of the High Court committed an error, in re-interpreting a contractual clause while exercising jurisdiction under Section 37 of the Act."

Konkan Railway Corporation Limited vs Chenab Bridge Project Undertaking | 2023 LiveLaw (SC) 668 | 2023 INSC 742

Arbitration and Conciliation Act, 1996; Section 34, 37- The scope of interference by a court in an appeal under Section 37 of the Act, in examining an order, setting aside or refusing to set aside an award, is restricted and subject to the same grounds as the challenge under Section 34 of the Act - This jurisdiction is not akin to normal appellate jurisdiction - The jurisdiction under Section 34 of the Act is exercised only to see if the Arbitral Tribunal’s view is perverse or manifestly arbitrary. Accordingly, the question of reinterpreting the contract on an alternative view does not arise. (Para 14,15,20)

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