Arbitral awards can be challenged only in cases of perversity, public policy violation, or patent illegality: Supreme Court
The Supreme Court, in Somdatt Builders-NCC-NEC (JV) v. NHAI & Ors., reaffirmed that arbitral awards can only be interfered with in cases of perversity, violation of public policy, or patent illegality. It emphasized that appellate courts cannot reassess the merits of an award and must limit their inquiry to whether it breaches Section 34(2)(b)(ii) of the Arbitration Act.
The case involved a dispute over increased geogrid quantities for a reinforced earth wall in a road project. NHAI argued that exceeding the Bill of Quantities (BOQ) warranted rate renegotiation, while the contractor, Somdatt Builders-NCC-NEC (JV), contended that such an increase did not constitute a "variation" under Clause 51.1 of the contract. The Arbitral Tribunal ruled in the contractor’s favor.
The Delhi High Court's Single Judge upheld the award, but the Division Bench overturned it. The Supreme Court, setting aside the Division Bench's decision, held that the increased geogrid quantities were within the contract’s scope and did not warrant renegotiation. Citing MMTC Ltd. v. Vedanta Ltd. (2019), the Court reiterated that interference under Section 34 is limited to cases where an award is arbitrary, capricious, or perverse.
The Court criticized the Division Bench for unjustified interference, emphasizing that courts must exercise restraint under Section 37 and avoid disrupting well-reasoned arbitral awards. Accordingly, the appeal was allowed, and the award was restored.