Arbitration award cannot be set aside on erroneous application of law unless it is patently illegal: Allahabad High Court reiterates

Allahabad High Court

Allahabad High Court: In an appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 (‘the Act’) for setting aside the order passed by the Commercial Court, wherein the Court upheld the arbitrator’s award, Arun Bhansali, J. and Vikas Budhwar, CJ., while upholding the decision of the Commercial Court, observed that an award is not ‘patently illegal’ for mere erroneous application of law or appreciation of evidence.


The underlying dispute originated from a contractual agreement for Water Borne Sanitation work in Meerut. Despite the initial completion period of 12 months, which was extended, disputes emerged between the parties regarding various aspects of the contract, prompting arbitration. The arbitrator, appointed in accordance with the agreement, rendered a decision in favour of the respondent.

The said award passed by the sole arbitrator was challenged under Section 34 of Act by the respondent before the Commercial Court, which was rejected, upholding the award passed by the sole arbitrator. The dispute between parties was on the point of whether the issue of escalation of wages, amongst other issues, was arbitrable.

Analysis and Decision

Upon examination, the Court delved into the provisions of Clause 6(A) of the General Conditions of Contract (GCC) and determined that it primarily pertained to discrepancies and adjustments related to contractual documents, rather than a wage escalation dispute. The Court noted the absence of evidence demonstrating variations or conflicting provisions in the contract that would preclude arbitration of wage escalation issues. Additionally, the Court dismissed the relevance of post-contract correspondence, deeming it temporally disconnected from the execution of the contract.

In assessing the scope of intervention under Section 37 of the Act, the Court emphasized the requirement for an award to exhibit patent illegality warranting intervention and noted that mere errors in the application of law or appreciation of evidence are insufficient grounds for setting aside an award. The Court referred to precedents, such as MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163; Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131, to reaffirm this principle.

The Court, therefore, held that the arbitrator’s award does not manifest patent illegality that warranted intervention. Consequently, the Court upheld the decision of the Commercial Court and dismisses the appellant’s appeal.

[Union Of India Through Garrison Engineer v. Satendra Nath Sanjeev Kumar, 2024 SCC OnLine All 1548, Order dated 23-04-2024]

Advocates who appeared in this case :

Advocate for Appellant:-Advocate Pranay Krishna

Advocate for Respondent:- Advocate Vikash Bhatnagar

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One comment

  • If the law has been erroneously applied, then surely it follows that the Judgement though not mala fide is nonetheless defective. The right path would be a retrial.

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