Supreme Court Reiterates Narrow Scope Of Interference Under Section 37 Arbitration Act

The Supreme Court reiterated that in appeal under Section 37 of the Arbitration and Conciliation Act, the Court has a narrower scope to review the arbitral award if the award has already been upheld under Section 34 (application for setting aside arbitral awards). Reliance was placed on the recent decision in Larsen Air Conditioning and Refrigeration Company vs Union of India, wherein the Court had said:“The limited and extremely circumscribed jurisdiction of the court under Section 34 of the Act, permits the court to interfere with an award, sans the grounds of patent illegality i.e. that “illegality must go to the root of the matter and cannot be of a trivial nature”; and that the Tribunal “must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground” The other ground would be denial of natural justice. In appeal, Section 37 of the Act grants narrower scope to the appellate court to review the findings in an award, if it has been upheld, or substantially upheld under Section 34.”The genesis of the present dispute was an agreement entered into between the appellant and the respondent for constructing five Road Over Bridges. The appellant argued that the work was delayed for the reasons attributable to the respondent. Initially, the appellant applied for a grant of extension of time without penalty. Pursuant to this, the appellant raised monetary claims on the ground of delay caused by the respondent. However, the same was not accepted by the respondent.Thereafter, when the appellant requested for further extension, they were made to sign an undertaking to not make any other claim because of the delay. Notwithstanding, the appellant made a claim against the respondent on account of the delay and invoked arbitration for the same. However, the claims were rejected by the tribunal.Challenging this, the appellant approached the High Court under Section 34 of the Arbitration Act. The single-judge bench dismissed the same. Following this, the appellant filed an appeal before the Division Bench under Section 37 of the Act. The same having been dismissed again, the case reached the Supreme Court.At the outset, the Bench of Justices Abhay S. Oka and Ujjal Bhuyan pointed out that the appellants have challenged the validity of clause 49.5 of the Contract that barred the appellant's present claim. However, given that this issue was not raised before the High Court, the appellant could not have raised this in the present appeal for the first time.“Careful perusal of the judgment of the learned Single Judge shows that the contention that the validity of clause 49.5 ought to be decided in the light of Sections 23 and 28 of the Contract Act was not raised before the learned Single Judge in a petition under Section 34. The said contention was not raised even before the Division Bench in appeal under Section 37. Therefore, it is not open to the appellant to raise the said contention in this appeal for the first time.”The Court also pointed out that the argument of waiving this clause by the respondent was raised for the first time at the Section 37 stage. Taking a cue from this, though the court affirmed that clause 49.5 was not waived, it reiterated that the scope of interference under Section 37 is restricted to the grounds mentioned under Section 34 of the Act. To support this, the Court cited Konkan Railway Corporation Limited v. Chenab Bridge Project Undertaking, wherein it held:“As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision.”In view of these facts and circumstances, the Court dismissed the present appeal.Appearances:Appellants: Mr. Vikas Goel, Adv. Mr. Tarun Dua, Adv. Mr. Ritesh Sharma, Adv. Mr. Vivek Gupta, Adv. Mr. Harmanbir Singh Sandhu, Adv. Mr. Pragun Dua, Adv. Mr. Rahul Shyam Bhandari, AOR Ms. G Priyadharshni, Adv. Mr. Satyam Pathak, Adv. Mr. Prabhakar Pahepuri, Adv. Mr. Harsh Vardhan, Adv.Respondents: Mr. Gaurav Pachnanda, Sr. Adv. Mr. Sidhant Goel, Adv. Mr. Mohit Goel, Adv. Mr. Shubham S Saxena, Adv. Mr. Karmanya D Sharma, Adv. Ms. Nikita Jaitly, Adv. Ms. Avni Sharma, Adv. Mr. Sahil Tagotra, AORCase Name: M/s. C & C Constructions Ltd. vs. IRCON International Ltd., CIVIL APPEAL NO. 6657 OF 2023Citation : 2025 LiveLaw (SC) 148Click here to read/ download the judgment

Supreme Court Reiterates Narrow Scope Of Interference Under Section 37 Arbitration Act

Gyanvi Khanna

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