The recent judgment of the Bombay High Court in Arbitration Petition No. 785 of 2016 once again reinforces a foundational principle of the Indian arbitration law that courts exercising jurisdiction under Section 34 cannot sit in appeal over an arbitral award.
The arbitration petition [1] before the Court was filed under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”), challenging an arbitral award dated 10th October, 2015.
The dispute arose from a Memorandum of Understanding dated 7th December, 2006 (“MOU”) executed for the surrender and transfer of land by the Respondents in favour of the Petitioner company. Subsequently, the Respondents issued a termination notice to the Petitioner. The resulting disputes and differences led to the invocation of arbitration proceedings and the constitution of an Arbitral Tribunal.
The Petitioner, who was the claimant in the arbitral proceedings sought a declaration that MOU is subsisting and that the termination notice was illegal along with other reliefs, and in the alternative, sought damages and refund of amounts.
Arbitral Tribunal rejected Petitioner’s claim for specific performance as well as damages. Aggrieved by the award, the Petitioner challenged the findings of the Tribunal, contending that the MOU was capable of specific performance. Accordingly, the Petitioner invoked Section 34 of the Act seeking to set aside the arbitral award.
In its judgment delivered by Hon’ble Shri Justice Somasekhar Sundaresan, the Hon’ble Bombay High Court dismissed the challenge under Section 34, reiterating well-settled principles governing judicial review of arbitral awards.
The Court emphasized several critical aspects:
- Limited scope of review under Section 34: While dealing with a challenge under Section 34, the Court must remain conscious of the limited scope of its jurisdiction. A court exercising powers under Section 34 does not act as an appellate forum and cannot re-appreciate evidence or reassess the merits of the dispute.
- Interpretation of a contract lies primarily with the Tribunal: The Court reiterated that interpretation of contractual documents, including the MOU in question, falls squarely within the domain of the Arbitral Tribunal. Unless the interpretation adopted by the Tribunal is perverse or completely unsupported by the record, judicial interference is impermissible. The Court further held that weighing of evidence and interpretation of contractual terms lies within the domain of the Arbitral Tribunal, and the Court must not lightly interfere by substituting a plausible view taken by the Tribunal with another potentially plausible view canvassed before it.
In this regard, reliance was placed on the decision of the Supreme Court of India in Dyna Technologies Private Limited v. Crompton Greaves Limited (2019) 20 SCC, where the Court observed that there are numerous judgments holding that courts should not interfere with an arbitral award merely because an alternative view on facts or interpretation of the contract is possible. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal, even where the reasoning may be implicit, unless the award demonstrates perversity falling within the grounds under Section 34 of the Act.
This judgment of the Bombay High Court underscores the legislative objective behind the Act which is to ensure finality of arbitral awards, and to minimize judicial intervention in arbitral proceedings.
Applying these principles, the Court found no grounds under Section 34 to interfere with the arbitral award and accordingly dismissed the arbitration petition.
Bridgehead Law Partners represented Respondent No. 1B through Mr. Ranit Basu, Maitri Malde, Dua Shaikh and Harshada Nirmal.
For more information about the aforesaid order or its implications you may write to us at: solutions@bridgeheadlaw.com.
Ranit Basu | Partner
Maitri Malde | Associate
Views expressed are personal to the authors and do not constitute as legal advice.
[1] Bombay High Court: Arbitration Petition no. 785 of 2016: Jolly Brothers Private Limited vs. Surendra Nath Jolly and Others