Arbitration Award Not To Be Set Aside On Grounds Of Erroneous Application Of Law Unless It Is Patently Illegal: Allahabad HC
The Allahabad High Court observed that Arbitration award cannot be set aside on the ground of erroneous application of law or by reappreciation of the evidence until and unless it suffers from patent illegality.
The Court was hearing an appeal under Section 37 of the 1996 Act against the order passed by the Commercial Court whereby the application preferred under Section 34 of the Act for setting aside the award of the arbitrator was rejected.
The bench of Chief Justice Arun Bhansali and Justice Vikas Budhwar observed, “This Court has to bear in mind the contours of the appellate proceeding under Section 37 since it is also limited to the scope and ambit of the challenge under Section 34 of the Act. To put it otherwise, the awards are not required to be set aside .”
Standing Counsel Ankit Gaur appeared for the Appellant and Jagat Narayan Mishra appeared for the Respondent.
Brief Facts-
The state invited bids for construction work through a tender. The claimant, Nath Construction whose bid was the lowest, entered into an agreement with the appellant. The claimant was supposed to complete the work within 9 months but finished it in 3 years after extensions. A dispute arose, leading to arbitration, and the claimant sought approximately ₹ 32L with interest. The arbitrator awarded around ₹ 17L with interest, which the appellant challenged under Section 34 of the Act but was rejected by the lower Court.
According to the Court, the bone of contention between the rival parties was whether the Arbitrator had committed illegality while awarding the said amount without considering the objections of the appellant-objector or not.
The Court noted that the objections raised by the appellant were not specific and sans details and in the application under Section 34 of the Act, filed before the Commercial Court only this much has been said that the award is non-speaking and unreasonable.
The Court further stated that even in the present proceedings neither any material has been placed on record, nor any argument has been advanced as to what is the factual basis and foundation, which renders the award to be suffering from patent illegality.
The Court agreed with the argument that the arbitral award shall contain reasons as per the mandate of Section 31 (3) of the Act. However, according to the Court, the same depends upon the pleadings and the documents available on record.
The Court stated that once the appellant-objector had neither specifically pleaded and denied the claim of the claimant-respondent, nor substantiated its case in a correct perspective, then obviously the award cannot be said to be vitiated.
The Court relying on the Supreme Court decision in Delhi Airport Metro Express Private Limited Vs. Delhi Metro Rail Corporation Limited 2022 (1) SCC 131 quoted, “The members of the Arbitral Tribunal, nominated in accordance with the agreed procedure between the parties are Engineers and their award is not meant to be scrutinized in the same manner, as one prepared by legally trained minds."
“Mere allegation would not suffice until and unless it stands substantiated from the pleading and the records.”, the Court stated.
Accordingly, the Court dismissed the appeal.
Cause Title: State of U.P. v. Nath Construction (Neutral Citation: 2024:AHC:80342-DB)
Appearance:
Appellant: SC Ankit Gaur
Respondent: Adv. Jagat Narayan Mishra
