If Arbitrator Takes A Particular View On Interpretation Of Contract, Court U/S 34 A & C Act Cannot Sit In Appeal Over It: SC
The Supreme Court stated the Courts under Section 34 of the Arbitration and Conciliation Act, 1996 cannot sit in appeal over the findings of the arbitrator, when he took a particular view on the interpretation of contract.
The Bench reiterated the law regarding the scope of interference in an arbitral award under the Arbitration and Conciliation Act, 1996 (the Act) relying on the decision in UHL Power Company Ltd. v. State of Himachal Pradesh, (2022) 4 SCC 116 where it was held that the jurisdiction of a Court under Section 34 of the Act was relatively narrow and the jurisdiction of the Appellate Court under Section 37 of the Arbitration Act was “more circumscribed.”
Justice Abhay S. Oka and Justice Pankaj Mithal observed, “We may note here that two expert members of the Arbitral Tribunal held in favour of the respondent on this point, whereas the third member dissented. There cannot be any dispute that as far as the construction of the terms of a contract is concerned, it is for the Arbitral Tribunal to adjudicate upon. If, after considering the material on record, the Arbitral Tribunal takes a particular view on the interpretation of the contract, the Court under Section 34 does not sit in appeal over the findings of the arbitrator.”
Sr. Advocate Pinky Anand represented the appellant, while Sr. Advocate Anil K Airi appeared for the respondent.
National Highways Authority of India (NHAI) awarded a contract to the Hindustan Construction Company Ltd. (HCC) for the construction of a road segment within the Allahabad Bypass Project. The Arbitral Tribunal (Tribunal) granted an award for the settlement of a dispute between the parties regarding the additional costs incurred by HCC, reimbursing them for royalty rates, sales tax, and forest transit fee rates.
NHAI challenged the Tribunal's award before the Delhi High Court under Section 34 of the Act, arguing that the increase in costs was not covered by the terms of the contract. However, both the Single Judge and the Division Bench of the High Court upheld the Tribunal's decision.
The Supreme Court explained that the Division Bench of the High Court had relied upon the decision in the case of the National Highways Authority of India v. M/s. ITD Cementation India Limited [2008 (100) DRJ 431] to hold that the “imposition of a tax or upward revision of an already existing tax or levy through subsequent legislation is admittedly akin to the levy of additional royalty.”
“The Division Bench was right in holding that the majority opinion of technical persons need not be subjected to a relook, especially when the learned Single Judge had also agreed with the view taken by the Arbitral Tribunal,” the Court held.
Consequently, the Court held that the High Court had examined the challenge to the award “within four corners of limitation” imposed by Sections 34 and 37 of the Act.
Accordingly, the Supreme Court dismissed the appeal.
Cause Title: National Highways Authority of India v. M/s Hindustan Construction Company Ltd. (Neutral Citation: 2024 INSC 388)
Appearance:
Appellant: Sr. Advocate Pinky Anand; Advocates A.P.Singh, Shrinkhla Tiwari, Tavinder Sidhu, Sawamini Sharma and Shantanu Raj
Respondent: Sr. Advocate Anil K Airi; AOR Devendra Singh, R. Sathish and Vineet Dwivedi; Advocates Sameer Parekh, Sumit Goel, Sreeparna Basak, Prateek Khandelwal, Jayant Bajaj, Ravi Krishan Chandna, Bindiya Logawney, Mudit Ruhella, Malyaj Sehgal, Karan Chhibber, Aman Dahiya, Bindiya Logawney, Sarojanand Jha, Priya Pachouri, Rajreeta Ghose, Rahul Kumar, Mohan Das Kk, Rajesh Kumar, Mathen Joseph and S. Geetha