Allahabad High Court: In an appeal filed by the State under Section 37 of the Arbitration and Conciliation Act, 1996 (‘the Act’) against the order passed by the Commercial Court, whereby, the Commercial Court rejected the application made by the State under Section 34 of the Act, seeking to set aside the arbitration award issued by the sole arbitrator , the Division Bench comprising of Arun Bhansali, C.J. and Vikas Budhwar, J., dismissed the appeal on the grounds of lack of merit as State failed to demonstrate any clear legal error or substantiate their allegations. Further, the Bench held that the extent of intervention in appellate proceedings according to Section 37 of the Arbitration and Conciliation Act, 1996 is confined to the grounds permissible under Section 34 for contesting the award, and the awards are not required to be set aside on the ground of erroneous application of law or by reappreciation of the evidence until and unless it suffers from patent illegality.
Background:
The State, represented by the Executive Engineer, Madhya Ganga Canal Construction Division-15, Moradabad, issued a tender on 14-12-2010 to construct the Left Side Officer’s Camp Office at Tubewell Colony, Moradabad. The claimant, Nath Constructions, was awarded the contract as their bid was the lowest. An agreement was signed between the State and Nath Constructions on 14-03-2011, wherein Nath Constructions was required to provide a security deposit and earnest money.
The State alleges that Nath Constructions failed to complete the work within the stipulated time frame of 9 months, finishing it only on 15-10-2014 after extensions were granted. Disputes arose between the parties, leading to the appointment of a sole arbitrator as per the agreement terms. Nath Constructions filed a claim petition seeking payment along with interest.
The sole arbitrator awarded Nath Constructions Rs.17,37,261/- along with interest, which the State challenged through an application under Section 34 of the Act. However, the application was rejected on 20-07-2022 by the Commercial Court in Moradabad.
Consequently, the State has filed this appeal against the court’s decision dated 20-07-2022.
Analysis and Decision:
The Court saidthat the apple of discord was whether the arbitrator acted unlawfully by awarding a specific amount without adequately considering the objections raised by the State.
The Court said thatthe objections raised lacked specificity and detail. Furthermore, the grounds presented in the application under Section 34 of the Act were general and unsupported by factual basis.
The Court noted that despite the appellant’s argument that the award lacked reasoning, the arbitrator addressed 14 issues in detail and provided reasons for the decision.
Bearing in mind the contours of the appellate proceeding under Section 37, and its limited scope and ambit of challenge under Section 34 of the Act, the Court said that the awards are not required to be set aside on the ground of erroneous application of law or by reappreciation of the evidence until and unless it suffers from patent illegality.
The Court opined while acknowledging the requirement for arbitral awards to contain reasons, that such reasons depend on the pleadings and evidence presented. Given that the Statefailed to substantiate its case adequately, the Court viewedthat the award was reasoned and not vitiated.
The Court referred tothe principles laid down in Som Datt Builders Ltd. v. State of Kerala, [(2009) 10 SCC 259], Dyna Technologies Pvt. Ltd.v.. Crompton Greaves Ltd., [(2019) 20 SCC 1], and Delhi Airport Metro Express Private Limitedv.. Delhi Metro Rail Corporation Limited, [2022 (1) SCC 131], andaffirmed that the awards made by technical experts, such as engineers, are not scrutinized in the same manner as those prepared by legally trained individuals. It noted that the arbitrator, being a Superintending Engineer of the U.P. Irrigation Department, falls under this category of technical experts.
The Court opinedthat the Statefailed to demonstrate any patent illegality warranting appellate intervention. Mere allegations without substantiation from pleadings and records were deemed insufficient to justify interference. Therefore, the Court dismissed the appeal for lacking merit.
[State of U.P. v. Nath Construction., 2024 SCC OnLine All 1525, Order dated 06-05-2024]
Advocates who appeared in this case :
Counsel of Petitioner: Advocate Siddharth Singh Shrinet
Counsel of Respondents: Advocate Jagat Narayan Mishra
Buy Arbitration and Conciliation Act, 1996 HERE
