The Himachal Pradesh High Court has upheld an arbitral award challenged under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996.

The Division Bench of Justice Tarlok Singh Chauhan and Justice Satyen Vaidya ruled that "an award primarily based on consent cannot be deemed patently illegal or contrary to the public policy of India."

The appeal was filed by the appellant against a Single Judge’s order dated July 6, 2023, which had rejected their challenge to an arbitral award under Section 34 of the Arbitration Act. The award, issued on April 5, 2016, pertained to a contract awarded to the respondent for constructing the LWSS "Shri Naina Devi Ji."

The appellant had initially sought to forfeit the respondent’s performance bond due to non-execution of work. The dispute led to the appointment of an arbitrator, who ultimately awarded Rs. 57,45,832 to the respondent under the claim for escalation, rejecting other claims. The Single Judge had observed that the award was consent-based, as the appellant had admitted delays in handing over the site and acknowledged the escalation claim during arbitration proceedings.

The Bench discussed the limited scope of interference under Section 37 of the Arbitration Act, relying on the Supreme Court's ruling in Punjab State Civil Supplies Corporation Limited & Anr. vs. M/s Sanman Rice Mills & Ors. (2024). The apex court held, "The scope of court intervention in arbitral matters is virtually prohibited, confined only to grounds under Section 34. The appellate power under Section 37 is limited to examining whether the court under Section 34 acted within its jurisdiction."

The Court emphasized that Appellate Courts cannot reassess the merits of arbitral decisions or reappraise evidence, likening their role to supervisory jurisdiction akin to civil court revisionary powers.

Applying this principle, the Bench ruled that the award, being grounded in mutual consent and admissions, did not violate public policy or exhibit patent illegality. Consequently, the Appeal was dismissed. "Once, practically, there was no dispute whatsoever regarding the factual matrix, either before the arbitrator or before the learned Single Judge, then where was there an occasion for the State to even have filed an appeal, after all it was not a case, where interference is called for being absolutely necessary, or where it shocks the conscience of the Court or where the arbitral award is in contravention of any prevailing law and/or the provisions of the Act or in violation of the terms of the contract. The award being primarily based on consent cannot also be held to be patently illegal or in conflict with the public policy of India. Consequently, we find no merit in this appeal and the same is accordingly dismissed, so also, any pending miscellaneous application," the Court said.

Cause Title: The Executive Engineer, I & PH Division, Bilaspur v. Ramesh Khaneja [Neutral Citation No. 2024:HHC:16588]

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