Award passed by Arbitral Tribunal can be interfered with only where the finding is perverse and/or against public policy: SC

A Supreme Court bench of Justices Arun Mishra and M.R. Shah reiterated that the award passed by the Arbitral Tribunal can be interfered with in the proceedings under Sections 34 and 37 of Arbitration and Conciliation Act, 1996 (Arbitration Act) only in a case where the finding is perverse and/or contrary to the evidence and/or the same is against the public policy.

There was a contractual dispute between the State of Jharkand (Petitioner) and the HSS Integrated SDN (Respondents) in relation to a consultancy agreement over construction of six-lane Divided Carriage Way of certain parts of Ranchi Ring Road. The dispute arose with respect to non-performance of the contract and unsatisfactory work performed by the Respondents. The respondents were granted extension of contract twice.

A communication between the parties stated that if the deficiencies are not removed and/or complied with, in that case, there shall be suspension of payment under Clause 2.8 of the General Conditions of Contract (GCC). Later, the said contract was terminated. The respondents requested the petitioners to re-consider the matter.

An Arbitral Tribunal was constituted where the respondents-original claimants claimed an amount of Rs. 5.17 crores and the State of Jharkand also filed a counterclaim of roughly Rs. 6 crores.

The learned Arbitral Tribunal gave a specific finding that the termination of the contract was illegal and the procedures were not followed as required under the contract and in view of allowing the claims of the claimants partly, the Arbitral Tribunal dismissed the counter claims submitted by the petitioners (State of Jharkand).

The First Appellate Court confirmed the award. It was further confirmed by the High Court in an appeal under Section 37 of the Arbitration Act.

Aggrieved with the impugned judgment and order passed by the High Court dismissing the appeal under Section 37 of the Arbitration Act, and consequently confirming the award passed by the learned Arbitral Tribunal, the original respondents-State and others preferred the a Special Leave Petition with the Supreme Court of India.

The Apex Court after considering a catena of decisions held that “on the scope and ambit of the proceedings under Section 34 of the Arbitration Act, even when the view taken by the arbitrator is a plausible view, and/or when two views are possible, a particular view taken by the Arbitral Tribunal which is also reasonable should not be interfered with in a proceeding under Section 34 of the Arbitration Act.”

The Court relied on the case of Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd. and ruled that the Arbitral Tribunal is the master of evidence and the findings of fact which are arrived at by the arbitrators on the basis of the evidence on record are not to be scrutinized as if the Court was sitting in appeal.

The Supreme Court refused to interfere in the matter and stated that, “The findings are on appreciation of evidence considering the relevant provisions and material on record as well as on interpretation of the relevant provisions of the contract, which are neither perverse nor contrary to the evidence in record. Therefore, as such, the First Appellate Court and the High Court have rightly not interfered with such findings of fact recorded by the learned Arbitral Tribunal.”

The Supreme Court further observed that the Arbitral Tribunal’s decision was that the termination was illegal and the claims were considered on merits with respect to the unpaid amount in respect of the work executed under the contract and loss of profit. Also cogent reasons have been given by the learned Arbitral Tribunal while allowing/partly allowing the respective claims. In such cases, the Supreme Court shall not interfere particularly, when the petitioners have failed in the proceedings under sections 34 and 37 of the Arbitration Act.

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