Appellate court's review under Section 37 of the Arbitration Act is limited if the arbitral award is upheld under Section 34 : Supreme Court
The Supreme Court reaffirmed that in an appeal under Section 37 of the Arbitration and Conciliation Act, the appellate court has a narrower scope of review if the arbitral award has already been upheld under Section 34. The Court relied on Larsen Air Conditioning and Refrigeration Company vs. Union of India, emphasizing that interference under Section 34 is limited to patent illegality going to the root of the matter or denial of natural justice. If an arbitrator interprets a contract term reasonably, the award cannot be set aside on that ground. Section 37 further restricts appellate review to ensuring Section 34’s scope was not exceeded.
The dispute arose from a contract for constructing five Road Over Bridges. The appellant claimed delays were caused by the respondent and initially sought an extension without penalty. Later, monetary claims for delay were rejected. The appellant was then required to sign an undertaking barring further claims before obtaining another extension but still invoked arbitration, which was dismissed. The High Court rejected the appellant’s challenge under Section 34, and the Division Bench dismissed the subsequent appeal under Section 37, leading to the present Supreme Court case.
Justices Abhay S. Oka and Ujjal Bhuyan noted that the appellant’s challenge to clause 49.5 of the contract was raised for the first time at this stage, which was impermissible as it had not been argued before the High Court. Similarly, the contention that the respondent waived clause 49.5 was raised only at the Section 37 stage. Citing Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking, the Court reiterated that Section 37 does not allow reassessment of the merits beyond Section 34’s limited grounds. Consequently, the appeal was dismissed.