Party Not Barred From Raising New Grounds To Set Aside Award In An Appeal Under Section 37: SC

Key Takeaways

• A party is not barred from raising an additional ground for setting aside an arbitration award in arbitration appeal under Section 37 of the Arbitration and Conciliation Act,1996, merely because the said ground was not raised in the petition under Section 34 to set aside.
• The Bench rejected the contention raised by the company that since the State did not raise such an objection in the grounds spelt out in the Section 34 petition, it is therefore, estopped from taking the same in the appeal preferred under Section 37 or before this Court.

Background

• An Arbitration award was passed in a matter between the State of Chhattisgarh and M/s. Sal Udyog Private Limited. The said award was challenged before the District Judge (by filing Section 34 petition).
• The Judge declined to interfere with the Award except for modifying the same to the extent of the interest awarded in favour of the Company. In the appeal filed under Section 37, the State raised a new ground on the aspect of refund of 'supervision charges'.
• The issue before the Apex Court essentially was whether the High Court was correct in declining to exercise its jurisdiction to set aside the award merely because the said ground was not raised before the District Judge.

Observations

• The court noticed that the grounds raised would meet the requirement of patent illegality that is manifest on the face of the Arbitral Award. The Bench rejected the contention raised by the company that since the State did not raise such an objection in the grounds spelt out in the Section 34 petition and is, therefore, estopped from taking the same in the appeal preferred under Section 37 or before this Court.
• The court said that the reliance placed by the Company on the ruling in the case of Hindustan Construction Company Limited (Supra) is misplaced.
• Allowing the appeal, the bench observed:
• “25. …We are, therefore, of the view that failure on the part of the learned Sole Arbitrator to decide in accordance with the terms of the contract governing the parties, would certainly attract the "patent illegality ground", as the said oversight amounts to gross contravention of Section 28(3) of 1996 Act, that enjoins the Arbitral Tribunal to consider the terms of the contract while making an Award.

Questions

• What is your opinion on this judgement?
• What does Section 37 of the Arbitration Conciliation Act,1996 state?

Share your views in the comments section below.