Arbitral Award Cannot Be Set Aside Merely On The Ground Of Erroneous Application Of Law Or Misappreciation Of Evidence : Supreme Court

A Bench comprising Justices Ajay Rastogi and Sanjiv Khanna allowed an appeal assailing the order of the Punjab and Haryana High Court, which had affirmed the order of the District Judge that the application under Section 34 of the Arbitration and the Conciliation Act, 1996 was, inter alia, barred by limitation. Observing that the Courts below had not fully appreciated the objections raised, the Bench remitted it to the District Judge for fresh consideration.

Factual Background

Haryana Urban Development Authority, Karnal (appellant) and M/s. Mehta Construction Company And Anr. (respondent) entered into agreement on 06.07.1988. As per the terms of the same, the respondent was to carry out some construction work related to the town park in Sector 8 and 9 (Phase-II), Karnal. The appellant claimed that there was a delay in completing the work whereas the respondent had attributed such delay to the appellant. In April, 2012, the respondent filed an application under Section 11(6) of the Arbitration and Conciliation Act ('Act") before the Punjab and Haryana High Court for appointment of an arbitrator. The High Court disposed of the application in terms of the agreement and directed the parties to approach the Arbitrator-cum-Superintending Engineer, HUDA Circle, Karnal. On 20.12.2013, the sole arbitration passed an award in favour of the respondent. On 28.03.2014, the appellant objected to the award, before the District Court, under Section 34 of the Act. To condone the delay an application was filed along with it. On 08.01.2018, the District Court dismissed the objection on the ground of delay and for not providing any reason for the same. It further held that the award suffered from no perversity and the respondents had addressed the issues by adducing cogent evidence. On appeal, under Section 37 of the Act, the Single Judge of the Punjab and Haryana High Court refused to interfere with the order of the District Court.

Analysis by the Supreme Court

The Court noted that under Section 34(3) of the Act, arbitral award is to be challenged within three months from the date when the arbitral award was received. The proviso, however, culls out that a delay upto thirty days can be condoned by the court if it is satisfied that there were sufficient reasons for the same. It observed, in the present case, there were eight days' delay and the explanation provided was that, inter alia, seeking sanctions from higher-ups/competent authorities took some time. In the light of the same, the Apex Court was of the view that the Courts below ought to have condoned the delay. The rejection on merit was also not acceptable, it stated, as the findings recorded are cryptic and perfunctory. It was of the opinion that the specific issues ought to have been dealt with, especially when the date of invocation of the arbitration clause was assailed by the appellant and issue pertaining to delay in filing application under Section 11(6) of the Act was raised. The Court was of the view that as per Section 34(2)(a) an arbitral award can be set aside only when it is vitiated by patent illegality and if it satisfies the grounds enumerated under Section 34(2)(b), but not merely on ground of erroneous application of law or by misappreciation of evidence. Considering that the objection was dismissed without proper consideration and application of mind and on the basis that the application was barred by limitation, the Court remitted the matter to the District Court with the direction to decide the objections afresh on merit.

Case Name: Haryana Urban Development Authority, Karnal v. M/s. Mehta Construction Company And Anr.

Citation: 2022 LiveLaw(SC) 348

Case No. and Date: Civil Appeal No. 2693 of 2022 | 30 March 2022

Corum: Justices Ajay Rastogi and Sanjiv Khanna

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Headnotes

Section 34(3) of the Arbitration and Conciliation Act, 1996 - An application for setting aside an award is to be made within three months from the date on which a party filing objections under sub-section (1) to Section 34 has received the arbitral award - proviso - court may condone delay of a period up to thirty days in filing of the objections if it is satisfied that the applicant is prevented by sufficient cause from making an application under Section 34(1) of the Act - there were only eight days' delay - reason was provided - inter alia, it took time to get sanction from the concerned authorities - Courts below ought to have condoned delay(Para 10-12).

Section 34(2)(a) of the Arbitration and Conciliation Act 1996 -Arbitral award can be set aside by the court if the court finds the award is vitiated by patent illegality appearing on the face of the award - proviso - the award shall not be set aside merely on the ground of erroneous application of law or by misappreciation of evidence(Para 15).