High Court Cannot Enter Into Merits Of The Claim In An Appeal Under Section 37 Arbitration Act: Supreme Court

The Supreme Court observed that a High Court cannot enter into the merits of the claim in an appeal under Section 37 of the Arbitration and Conciliation Act, 1996.

In this case, the arbitrator directed a party to pay a sum of Rs. 9.5 lakhs.The other party filed objection petition before Additional District Judge, Chandigarh under Section 34 of the Arbitration Act against the award passed by the arbitrator. The said petition was dismissed. Thereafter, a further appeal before the High Court under Section 37 of the Arbitration Act was filed. The said appeal was allowed by the High Court which considered the merits of the claim and has quashed and set aside the award passed by the arbitrator as well as the order passed by Additional District Judge, Chandigarh.

Before the Apex Court, the appellant contended that while quashing and setting aside the award passed by the arbitrator, the High Court exceeded its jurisdiction under Section 37 of the Arbitration Act.

Agreeing with this contention, the bench comprising Justices MR Shah and BV Nagarathna observed thus:

8. As per settled position of law laid down by this Court in a catena of decisions, an award can be set aside only if the award is against the public policy of India. The award can be set aside under Sections 34/37 of the Arbitration Act, if the award is found to be contrary to, (a) fundamental policy of Indian Law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. None of the aforesaid exceptions shall be applicable to the facts of the case on hand. The High Court has entered into the merits of the claim and has decided the appeal under Section 37 of the Arbitration Act as if the High Court was deciding the appeal against the judgment and decree passed by the learned trial Court. Thus, the High Court has exercised the jurisdiction not vested in it under Section 37 of the Arbitration Act. The impugned judgment and order passed by the High Court is hence not sustainable\

Holding thus, the bench restored award passed by the arbitrator.

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