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Bombay High Court on Arbitration Disputes: “Court Will Not Interfere When Arbitrator Has Correctly Applied the Contract and Law”

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Court’s Decision

The Bombay High Court dismissed the petition challenging the arbitral award in a commercial dispute, holding that the arbitrator had correctly interpreted the terms of the contract, applied relevant law, and reached a conclusion that was neither perverse nor in conflict with public policy. The Court reaffirmed the limited scope of judicial interference under Section 34 of the Arbitration and Conciliation Act, 1996, and held that re-appreciation of evidence is impermissible. The award was therefore upheld.


Facts

The dispute arose from a contractual arrangement between the petitioner company and the respondent involving supply obligations and performance guarantees. The respondent alleged that the petitioner had failed to fulfill certain contractual commitments, leading to losses. Arbitration was invoked under the dispute resolution clause, and the sole arbitrator rendered an award partly in favour of the respondent, directing the petitioner to pay a quantified sum with interest.

The petitioner approached the High Court under Section 34 of the Arbitration and Conciliation Act, challenging the award on grounds of erroneous interpretation of contractual clauses, misapplication of legal principles, and perverse findings unsupported by evidence.


Issues

  1. Whether the arbitral award suffered from patent illegality on the face of the record under Section 34(2A) of the Arbitration and Conciliation Act.
  2. Whether the arbitrator had misinterpreted the contractual terms, thereby causing a miscarriage of justice.
  3. Whether the High Court could interfere with the factual findings and contractual interpretation undertaken by the arbitrator.

Petitioner’s Arguments

The petitioner contended that:


Respondent’s Arguments

The respondent argued that:


Analysis of the Law

The Court reiterated that under Section 34 of the Arbitration and Conciliation Act, interference with arbitral awards is permissible only on narrowly defined grounds such as patent illegality, contravention of public policy, or violation of natural justice. The Court emphasised:


Precedent Analysis

The Court referred to and relied upon:

  1. Associate Builders v. DDA (2015) 3 SCC 49 — on the scope of interference under Section 34 and the meaning of “public policy of India.”
  2. Ssangyong Engineering v. NHAI (2019) 15 SCC 131 — restricting interference to cases of patent illegality and excluding review on merits.
  3. ONGC Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705 — on public policy and patent illegality in arbitral awards.

These precedents reinforced the principle that an arbitrator’s interpretation, if plausible, must be accepted even if another view is possible.


Court’s Reasoning

The Court held that:


Conclusion

The Court concluded that there was no ground for interference with the arbitral award under Section 34. The petition was dismissed, and the award stood confirmed.


Implications


Brief on Cited Cases


FAQs

Q1. When can a High Court interfere with an arbitral award?
Only when there is patent illegality, conflict with public policy, violation of natural justice, or jurisdictional error.

Q2. Can a court re-evaluate evidence in a Section 34 petition?
No. Courts cannot re-appreciate evidence; they only examine whether the award is legally sustainable.

Q3. Does a different possible interpretation of a contract allow interference?
No. If the arbitrator’s interpretation is plausible, courts will not substitute their own view.

Also Read: Calcutta High Court on Quashing of Proceedings Under the Narcotic Drugs and Psychotropic Substances Act: “Non-Compliance with Mandatory Safeguards Cannot Be Brushed Aside”

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