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Punjab State Civil Supplies Corporation Ltd. and Ors. vs. Ramesh Kumar and Company and Ors. - (Supreme Court) (13 Nov 2021)

While considering a petition under Section 34 of the Arbitration Act, the Court cannot act as an appellate forum

MANU/SC/1066/2021

Arbitration

The appeal arises from a judgment of a Single Judge of the High Court. 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 (1996 Act), but also awarded the claim of the Respondents, together with interest.

The Appellants, submits that the High Court, while exercising its jurisdiction under Section 37 of the 1996 Act, arising from the rejection of an arbitration petition under Section 34 of 1996 Act, has transgressed the limits of the jurisdiction. The High Court was not exercising its jurisdiction as a first appellate court in a civil suit and could not have awarded the claim.

The Single Judge of the High Court was exercising jurisdiction under Section 37 of the 1996 Act. The award of the sole arbitrator contains an analysis of the evidence. Both the Respondents as well as the Appellants adduced evidence before the arbitral tribunal. It was on the basis of the evidence that, the sole arbitrator upheld the defence of the Appellants on the ground that, right from the inception the Respondents had been mixing sub-standard material with goods in accordance with the tender specifications. As a consequence of this, the loss and damage which has been caused to the Appellants was duly quantified and in this backdrop, the sole arbitrator held that, the Respondents were not entitled to the payment of the balance of the principal or to recover the security deposit.

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 of 1996 Act. The District Judge had correctly come to the conclusion that, there was no warrant for interference with the arbitral award under Section 34 of 1996 Act 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. 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.

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. 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. There was no basis in law for the High Court to interfere with the judgment of the District Judge and, to even go a step further by decreeing the claim. The judgment of the High Court is unsustainable. Appeal allowed.

Tags : AWARD   JURISDICTION   VALIDITY  

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