Arbitral Award Cannot Be Set Aside By Taking A Different View On Interpretation Of Contractual Clauses: Supreme Court
The Supreme Court reiterated that proceedings under Section 34 of the Arbitration and Conciliation Act are summary in nature and not like a full-fledged civil suit or a civil appeal.
Justice Abhay S. Oka, Justice Ujjal Bhuyan, Supreme Court
The Supreme Court has upheld the restoration of an arbitral award while remarking that there was no justification by the High Court for setting aside the award simply by taking a different view from the Arbitral Tribunal’s view.
The Court upheld the decision of the Division Bench of the Madras High Court, which had restored an arbitral award by allowing an Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (the Act). The Single Bench had earlier set aside the Award under Section 34 of the Act in a dispute arising from a contract between Consolidated Construction Consortium Limited (Appellant) and Software Technology Parks of India (Respondent).
A Bench of Justice Abhay S Oka and Justice Ujjal Bhuyan held, “We are afraid learned Single Judge had clearly gone beyond the grounds provided in Section 34 of the 1996 Act to set aside the arbitral award. Learned Single Judge exceeded the jurisdiction under Section 34 of the 1996 Act. There was no justification for setting aside the arbitral award by taking a different view. View taken by the arbitral tribunal is certainly a possible and plausible view. A different interpretation of clause 26 other than the one taken by the arbitral tribunal is possible but that will not bring the challenge to the arbitral award within the four corners of Section 34.”
Advocate S. S. Rajesh appeared for the Appellant, while Advocate Vinay Mohan Sharma represented the Respondent.
Brief Facts
Consolidated Construction Consortium Limited was awarded a contract by the Software Technology Parks of India for the construction of an office building and incubation center. However, the construction was completed with a delay of about 10 months.
The Respondent also deducted liquidated damages due to the delay. The Appellant, in turn, invoked the arbitration clause, challenging the deduction of liquidated damages. The Arbitrator upheld the deduction of liquidated damages and dismissed all claims and counterclaims.
A Single Bench of the High Court set aside the arbitral award, stating that the deduction of liquidated damages was not justified because there was an extension of the work period and the Appellant had completed the work within this extended time. However, the Division Bench set aside this decision, stating that the Single Bench was not justified in setting aside the award, as it was based on assumptions and surmises and beyond the scope of Section 34 of the Act.
Court’s Reasoning
The Supreme Court noted, “The court exercising powers under Section 34 has perforce to limit its jurisdiction within the four corners of Section 34. It cannot travel beyond Section 34. Thus, proceedings under Section 34 are summary in nature and not like a full-fledged civil suit or a civil appeal. The award as such cannot be touched unless it is contrary to the substantive provisions of law or Section 34 of the 1996 Act or the terms of the agreement.”
“Section 34 is not in the nature of an appellate provision. It provides for setting aside an arbitral award that too only on very limited grounds i.e. as those contained in sub-sections (2) and (2A) of Section 34. It is the only remedy for setting aside an arbitral award. An arbitral award is not liable to be interfered with only on the ground that the award is illegal or is erroneous in law which would require re-appraisal of the evidence adduced before the arbitral tribunal. If two views are possible, there is no scope for the court to re-appraise the evidence and to take the view other than the one taken by the arbitrator,” the Bench remarked.
The Court explained that “the role of the court under Section 34 of the 1996 Act is clearly demarcated. It is a restrictive jurisdiction and has to be invoked in a conservative manner. The reason is that arbitral autonomy must be respected and judicial interference should remain minimal otherwise it will defeat the very object of the 1996 Act.”
“In any view of the matter, mere setting aside of the arbitral award did not confer any benefit to the appellant. In the circumstances, the Division Bench was justified in reversing the order of the learned Single Judge under Section 37 of the 1996 Act,” the Bench held.
Consequently, the Court ordered, “That being the position, we do not find any merit in this appeal. Consequently, the appeal is dismissed. However, there shall be no order as to cost.”
Accordingly, the Supreme Court dismissed the Appeal.
Cause Title: Consolidated Construction Consortium Limited v. Software Technology Parks Of India (Neutral Citation: 2025 INSC 574)
Appearance:
Appellant: AOR Rajesh Kumar; Advocates S. S. Rajesh, K.S. Mahadevan, Swati Bansal, R. Rangarajan and Aravind Gopinathan
Respondent: AOR Ravinder Kumar Yadav; Advocates Vinay Mohan Sharma, Arti Anupriya, Kartikey, Paras Juneja, Kritika Yadav, Arnav Singh, Vineet Yadav and Manisha