IN O.M.P. (COMM) 488 OF 2020- DEL HC- Arbitration Act -- Scope of interference with Arbitral Award under Sec 34 is fairly limited and narrow; Courts shall not sit in an appeal while adjudicating challenge to Award passed by Arbitrator, the master of evidence, after due consideration of facts, circumstances, evidence and material before him: Delhi High Court
Justice Chandra Dhari Singh [12-06-2023]

Read Order: Delhi Development Authority v K.R. Anand

Simran Singh

New Delhi, June 20, 2023: The Delhi High Court dismissed petitions under Section 34 of the Arbitration and Conciliation Act, 1996 praying for setting aside the impugned award passed by the Arbitral Tribunal by rejecting the argument put forth by the petitioner that the impugned Award was patently illegal.

The Single Judge Bench of Justice Chandra Dhari Singh held that it was essential that there be illegalities or deficiencies at the face of the Award and/or shock the conscience of the Court in order for it to qualify to be set aside by an act of this Court. “The Award is well-reasoned and is not in contravention of the fundamental policy of Indian law, and thus there is no reason for interference in the impugned Award. The petitioner has failed to show that any grounds that are stipulated under Section 34 of the Arbitration Act are being met.”

It was further stated that the petitioner had failed to corroborate with evidence, as how, the  Arbitrator had erred in adjudicating the dispute. “The law which has been settled by the Hon‟ble Supreme Court is, that the scope of interference with an Arbitral Award under Section 34 of the Act, 1996 is fairly limited and narrow. The Courts shall not sit in an appeal while adjudicating a challenge to an Award which is passed by an Arbitrator, the master of evidence, after due consideration of facts, circumstances, evidence, and material before him.”

In the matter at hand, the petitioner had raised objections against the impugned Award on the ground of patent illegality and because the impugned Award was alleged to be contrary to the fundamental policy of India and public policy.

The Bench reiterated that the intention of the legislature while enacting the Act of 1996 was the expeditious and effective disposal of matters which had been set forth with the intention to limit the interference of the Courts in the Arbitral Proceedings.

“In order to facilitate this process and to maintain a check on it, a provision to set aside the Award was included. But even then, the Award may only be set aside if it fulfils certain criteria to qualify as being bad in law… An unfettered scope of intervention in his functioning would defeat the spirit and purpose of the Arbitration Act. Therefore, the Hon'ble Supreme Court has time and again reiterated that the scope of intervention of the Courts is limited in the cases of challenge under Section 34.”

The Bench referred to UHL Power Co. Ltd. v. State of H.P which reiterated the narrow scope under Section 34 of the Act of 1996 and further referred to Ssangyong Engg. & Construction Co. Ltd. v. NHAI which had held that re-appreciation of evidence could not be permitted under the ground of patent illegality in a Section 34 petition under the Act of 1996. Thus it was of the view that while exercising its jurisdiction under Section 34 of the Act of 1996 would not sit in appeal and/or re-examine the facts and evidence of the case.

However, the Court stated that Arbitrator had to adopt a judicial approach and the principles of natural justice had to be upheld, and further that the decision should not have been egregious, or rather, perverse.

“It is to be understood that Sub-section (2-A) to Section 34 of the Act, 1996 states that the Arbitral Award may be set aside by the Court if the Court finds the impugned Award is vitiated by patent illegality appearing on the face of the Award. The proviso stipulates that the Award shall not be set aside merely on the ground of erroneous application of law or by misappreciation of evidence. An Award can also be set aside under sub-clause (ii) to Clause (b) of Section 34(2) on the ground that it is in conflict with the public policy of India, which expression has been explained in the Explanation(s) to the said section.”

The Bench upon perusing the Award stated that the Arbitrator had considered the evidence placed on record and thus did not call for any interference. “Following the triple test of perversity, it is evident that the Arbitrator, being a creature of the contract, has rightfully stayed between the lines of the Contract to adjudicate the dispute. The facts of the matter have been harmoniously applied with the parallel reading of the Contractual Clauses.”

The Bench was of the view that the Arbitral Tribunal had adopted a judicial approach and adjudicated the dispute whilst keeping the principles of jurisprudence and natural justice alive. Further that the Arbitrator was the ultimate master of the Arbitration which could adjudicate the Claims in a manner that was on the lines of basic tenants of Law and the Principles of Natural Justice and Jurisprudence. “As long as the Award did not shock the conscience of the Court, there warranted no interference of the Court.”

The Bench took note of the fact that the Arbitrator had passed an extremely elaborate and comprehensive Award after dealing with each claim raised on behalf of the parties, the facts of the case, the material on record, including documents referred to, the precedents cited on behalf of the parties.

Further the Bench noted that the a key ground raised by the petitioner was that the claims were barred by limitation and ergo, thus the Arbitrator had exceeded his mandate while admitting these claims. It was stated that since the plea of limitation was not raised before the Arbitrator, it was to be understood that this plea could not be admitted by this Court. “Since the plea of limitation was not taken, by virtue of the express provision of Section 4 of the Act, 1996, the petitioner has waived the said defence and cannot agitate the same.”

The Bench inferred from the simultaneous reading of the facts and evidence on record along with the impugned Award, that the Arbitral Tribunal had not erred in a patently illegal manner, and thus had not rendered an Award which had perversity on the face of it. Thus held that the Arbitral Tribunal had not exceeded its jurisdiction or mandate and had duly considered all the evidence placed before it and rendered a well-reasoned Award.  “Therefore, following the principles of natural justice and equity, it is apparent that the learned Arbitrator has acted well within his power to adjudicate the dispute effectively, by working within his mandate and giving due consideration to the “Birth-giver” Contract and the evidence placed on record, and thus, it does not warrant the interference of the Court under Section 34 of the Act, 1996.”