‘Scope of interference in arbitration award passed u/s 34, 37 of A&C Act is limited unless error appears on face of record’; Telangana HC dismisses appeal

telangana high court

Telangana High Court: An appeal was filed against the order passed by the II Additional District Judge, Rangareddy, (‘the ADJ’) wherein, the application to set aside the award passed by the Sole Arbitrator, Respondent 1, was dismissed. M. G. Priyadarsini, J.*, dismissed the appeal and opined that the scope of interfering with the arbitration award was very limited until and unless there was an error apparent on the face of the record and there was perversity in the award.


Appellant submitted that Respondent 2 had placed an order for supply of lead antimony alloy wire in coiled form for Rs 82,55,257 with appellant and the same was supplied during August-September 2004 along with the pre-inspection reports. Appellant raised bills dated 04-09-2004 and dated 17-09-2004 to Respondent 2. The amount was not paid even after the bill was produced and thus, a reminder was sent, and then Respondent 2 sent a fax stating that the material sent was not found suitable for ‘end use’ and further stated that in view of the discrepancy, total consignment was not acceptable and thus, stood rejected. Respondent 2 sent a letter to appellant and asked to collect the rejected material and appellant was forced to lift the same. Appellant submitted that the material was supplied as per the specifications mentioned in the work order and thus, the rejection of material by Respondent 2 was wrongful. Therefore, appellant initiated arbitration proceedings for realization of claim of Rs 19,26,868.

Respondent 1, after conducting the arbitration proceedings passed an award wherein part of the claim of appellant of Rs 2,48,289 pertaining to the material used by Respondent 2 was allowed but the balance amount of Rs. 16,78,599 was rejected on the grounds that appellant had collected back the rejected material as per the general terms and conditions of supply order and appellant could not claim for loss due to quantity rejected.

Respondent 2 filed a counter claim contending that the application itself was not maintainable. It was contented that the total alleged amount of Rs 82,55,257 was false for quantity of 141207 Kgs, supplied during August-September 2004. After considering the rival contentions, Respondent 1 awarded Rs 2,78,083.68.

Aggrieved by the award, appellant filed Arbitration Original Petition before the ADJ, however, the same was dismissed. Aggrieved by the same, appellant had filed the present appeal to set aside the order of the ADJ and appellant submitted that the ADJ and Sole Arbitrator had failed to consider the claim of appellant.

Analysis, Law, and Decision

The Court noted that the material supplied by appellant to Respondent 2 was for preparation of war material and the same must be to the specifications as required by Respondent 2 and any small deviation in the standard of material sent could not be ignored. The defects in the material were exposed after a practical trial made in presence of representative of appellant and was then rejected.

The Court opined that the scope of interference with the arbitration award was limited until and unless there was error apparent on the face of the record and there was perversity in the award. The Court opined that in the present case there was no material to show that there was an error apparent on the face of the record or that there was perversity in award. The Court further opined that in the present case the grounds raised were based on question of law involved but were based on question of fact. Thus, relying on NTPC Ltd. v. Deconar Services (P) Ltd., 2021 SCC OnLine SC 498, the Court opined that even if any questions of law were involved, when two views were possible, there was no justification on the part of the Court to interfere with the award.

The Court relied on Delhi Airport Metro Express (P) Ltd. v. DMRC, (2022) 9 SCC 286, wherein, Arbitration and Conciliation (Amendment) Act, 2015 with regard to the expressions ‘patent illegality’ and ‘public policy’ was referred and an interpretation was made out that an award would be in conflict with public policy of India only when it was induced or affected by fraud or corruption or was in violation of Sections 75 or 81 of the Arbitration and Conciliation Act, 1996 (‘the Act’), if it was in contravention with fundamental policy of Indian Law or if it was in conflict with the most basic notions or morality or justice.

Further, the Court opined that in the instant case, Respondent 2 had not brought to the notice of the Court about any fraud or corrupt practice adopted by appellant during transaction between the parties in violation of Sections 75 or 81 of the Act. The Court further opined that appellant had failed to bring to the notice of the Court that there was any patent illegality on the face of the record or that Respondent 2 had committed illegality or irregularity while passing the impugned arbitral award. Thus, the Court opined that Respondent 1 after adjudicating all the aspects had rightly passed the impugned award and the interference of the Court in the impugned award was unwarranted, particularly, when the scope of interference in the arbitral awards passed under Sections 34 and 37 of the Act was very minimum. The Court further observed that Respondent 1 had assigned reason for granting Rs 2,48,289 and rejecting the balance amount of Rs 16,78,599.

The Court opined that Respondent 1 after considering all the aspects had passed the impugned award which had been confirmed by the ADJ. Thus, the Court dismissed the appeal and held that appellant had failed to make out any of the grounds to set aside the impugned award.

[Nile Ltd. v. Gurdip Singh, 2024 SCC OnLine TS 11, decided on: 25-01-2024]

*Judgement Authored by: Justice M. G. Priyadarsini

Advocates who appeared in this case:

Advocate for the Appellant: I V Radhakrishna Murthy, Advocate

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