Appellate court cannot re-appreciate evidence to ascertain correctness of arbitral award: SC

PTI, Sep 27, 2024, 7:05 PM IST

New Delhi: The Supreme Court on Friday said the appellate court cannot re-appreciate the evidence of dispute to ascertain the correctness of the award of arbitral tribunal.

The top court, however, said the appellate court can interfere with the award only if it is in conflict with the public policy of India or is induced or affected by fraud or corruption.

A bench of Justices PS Narasimha and Pankaj Mithal said that the object of the Arbitration and Conciliation Act of 1996 was to provide for a speedy and inexpensive alternative mode of settlement of dispute with the minimum of intervention of the courts.

It said Section 5 of the Act is implicit in this regard and prohibits interference by the judicial authority with the arbitration proceedings except where so provided in the law.

“The appellate court has no authority of law to consider the matter in dispute before the arbitral tribunal on merits so as to find out as to whether the decision of the arbitral tribunal is right or wrong upon reappraisal of evidence as if it is sitting in an ordinary court of appeal. It is only where the court exercising power under section 34 has failed to exercise its jurisdiction vested in it by section 34 or has travelled beyond its jurisdiction that the appellate court can step in and set aside the order passed under Section 34 of the Act,” it said.

The bench allowed the appeal of Punjab State Civil Supplies Corporation Limited challenging the January 10, 2017 order of the Punjab and Haryana High Court by which it set aside the arbitral award in a dispute with a rice mill over supply of rice.

Dealing with the provisions, the bench said Section 34 of the Act provides for grounds for getting an arbitral award set aside.

“One of the main grounds for interference or setting aside an award is where the arbitral award is in conflict with the public policy of India i.e. if the award is induced or affected by fraud or corruption or is in contravention with the fundamental policy of Indian law or it is in conflict with most basic notions of morality and justice,” it said.

The bench said that a plain reading of Section 34 of the Act reveals that the scope of interference by the court with the arbitral award under Section 34 is very limited and the court is not supposed to travel beyond the said scope to find out if the award is good or bad.

“It is pertinent to note that an arbitral award is not liable to be interfered with only on the ground that the award is illegal or is erroneous in law that too upon reappraisal of the evidence adduced before the arbitral trial. Even an award which may not be reasonable or is non-speaking to some extent cannot ordinarily be interfered with by the courts,” it said.

Highlighting that the view taken by the arbitrator is normally acceptable and ought to be allowed to prevail, the bench said even if two views are possible there is no scope for the court to reappraise the evidence and to take the different view other than that has been taken by the arbitrator.

“It is equally well settled that the appellate power under Section 37 of the Act is not akin to the normal appellate jurisdiction vested in the civil courts for the reason that the scope of interference of the courts with arbitral proceedings or award is very limited, confined to the ambit of Section 34 of the Act only and even that power cannot be exercised in a casual and a cavalier manner,” it said.

The bench said the position in law that emerges on the subject is that the scope of the intervention of the court in arbitral matters is “virtually prohibited” if not absolutely barred and that the interference is confined only to the extent envisaged under Section 34 of the Act.

“It must also be remembered that proceedings under Section 34 of the Act are summary in nature and are not like a full-fledged regular civil suit. Therefore, the scope of Section 37 of the Act is much more summary in nature and not like an ordinary civil appeal. The award as such cannot be touched unless it is contrary to the substantive provision of law; any provision of the Act or the terms of the agreement,” it emphasised.

The bench said that the arbitral award dated November 8, 2012 awarding a sum of over Rs 2.67 crore in favour of the Corporation as against the Rice Mill with 12 interest per annum was based upon evidence and is reasonable.

“It has not been found to be against public policy of India or the fundamental policy of Indian law or in conflict with the most basic notions of morality and justice. It is not held to be against any substantive provision of law or the Act. Therefore, the award was rightly upheld by the court exercising the powers under Section 34 of the Act,” it said.

The bench said the appellate court (the high court), as such, could not have set aside the award without recording any finding that the award suffers from any illegality as contained in Section 34 of the Act or that the court had committed error in upholding the same.

“Merely for the reason that the view of the appellate court is a better view than the one taken by the arbitral tribunal, is no ground to set aside the award,” it said and set aside the order of January 10, 2017, while restoring the arbitral award dated November 8, 2012.