Decreeing a claim while exercising jurisdiction under Section 37 of Arbitration and Conciliation Act 1996 impermissible: SC

Supreme Court: In a case where the Punjab and Haryana High Court not only set aside the judgment of the District Judge rejecting the petition under Section 34 of the Arbitration and Conciliation Act 1996, but also awarded the claim of the respondents, together with interest, the bench of Dr. DY Chandrachud* and AS Bopanna, JJ set aide the said judgment after holding that the High Court seems to have proceeded as if it was exercising jurisdiction in a regular first appeal from a decree in a civil suit.

It explained,

“The jurisdiction in a first appeal arising out of a decree in a civil suit is distinct from the jurisdiction of the High Court under Section 37 of the 1996 Act arising from the disposal of a petition challenging an arbitral award under Section 34 of the 1996 Act.”

The judgment of the District Judge, rejecting the petition under Section 34 of the 1996 Act, was challenged before the High Court under Section 37 of the 1996 Act. The High Court allowed the appeal, inter alia, on the ground that the award lacked reasons and the reasons which were assigned were arbitrary and erroneous. Having held that the award was liable to be set aside, the High Court decreed the claim of the respondents for the supply of 22,389 wooden batons, together with the security deposit of Rs 1,00,000 and awarded interest at the rate of 12% from the date from which the amount became due.

In the present case, the High Court was required to determine as to whether the District Judge had acted contrary to the provisions of Section 34 of the 1996 Act in rejecting the challenge to the arbitral award. The arbitrator was entitled to draw relevant findings of fact on the basis of the evidence which was adduced by the parties. This was exactly what was done in the arbitral award. The award of the arbitrator was challenged unsuccessfully by the respondents under Section 34 of the 1996 Act.

“While considering a petition under Section 34 of the 1996 Act, it is well-settled that the court does not act as an appellate forum. The grounds on which interference with an arbitral award is contemplated are structured by the provisions of Section 34.”

The Court noticed that the District Judge had correctly come to the conclusion that there was no warrant for interference with the arbitral award under Section 34. Hence, apart from its failure to do so, the High Court went one step further while reversing the judgment of the District Judge in decreeing the claim in its entirety. This exercise was clearly impermissible.

It was, hence, held that there was no legal basis for the High Court to interfere with the judgment of the District Judge and, as we have noted earlier, to even go a step further by decreeing the claim.

[Punjab State Civil Supplies Corporation Ltd. v. Ramesh Kumar and Company, 2021 SCC OnLine SC 1056, decided on 13. 11.2021]

*Judgment by: Justice Dr. DY Chandrachud

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