A two-judge Bench of Justice Dr. DY Chandrachud and Justice AS Bopanna has held that that the jurisdiction in a first appeal arising out of a decree in a civil suit is distinct from the jurisdiction of the High Court under Section 37 of the Arbitration and Conciliation Act, 1996 arising from the disposal of a petition challenging an arbitral award under Section 34 of the Act.
Advocate Mr. Himanshu Upadhyay appeared for the Appellants during the proceedings before the Court, while there was no appearance for the Respondents.
An appeal was preferred assailing the judgment of the Punjab and Haryana High Court which had allowed the appeal of the Respondent and set aside the Arbitral Award. Further, the Court also decreed the claim of the Respondents for the supply of 22, 389 batons together with a security deposit of Rs. 1,00,000 along with interest at 12% from the date from which the amount became due.
The Apex Court had earlier stayed the operation of the impugned judgment of the High Court.
A dispute arose between the Appellants and the Respondents which was referred to Arbitration. The Respondents had raised a claim of Rs. 4, 88,437 besides raising a grievance in regard to the forfeiture of the security deposit of Rs. 1, 00,000. The Appellants had contended that the supply effected by the Respondents was sub-standard and not in accordance with the specifications of the tender.
The Tribunal had rejected the claim of the Respondents based on the finding that the material supplied was defective and that the forfeiture of the security deposit was valid.
The Apex Court observed, "While considering a petition under Section 34 of the 1996 Act, it is well-settled that the court does not act as an appellate forum."
Further, the Bench opined that the District Judge had correctly come to the conclusion that there was no warrant for interference with the Arbitral Award under Section 34.
"The High Court seems to have proceeded as if it was exercising jurisdiction in a regular first appeal from a decree in a civil suit," the Court noted.
Additionally, the Court held, "The High Court was required to determine as to whether the District Judge had acted contrary to the provisions of Section 34 of the 1996 Act in rejecting the challenge to the arbitral award. Apart from its failure to do so, the High Court went one step further while reversing the judgment of the District Judge in decreeing the claim in its entirety. This exercise was clearly impermissible."
"There was no basis in law for the High Court to interfere with the judgment of the District Judge and, as we have noted earlier, to even go a step further by decreeing the claim," the Bench observed.
In the light of these observations, the Court allowed the appeal and set aside the impugned judgment of the High Court and dismissed the appeal of the Respondents under Section 37 of the 1996 Act.