In India, the concept of limited judicial intervention in arbitration is a fundamental aspect of the country’s arbitration law. This principle aims to strike a balance between maintaining the sanctity of arbitration agreements and ensuring that the parties have access to justice when necessary. Whilst the Legislature, with the enactment of the Arbitration and Conciliation Act, 1996 (“the Act”), inter-alia, aimed at limiting judicial intervention in disputes arising out of agreements, it also envisaged the need for recourse to courts in exceptional situations, striking the balance as aforesaid. Alas, with the passage of time, the primary objective of limiting judicial intervention has watered down with parties approaching the court in the face of discord for intervention in disputes arising out of the agreement, especially post conclusion of proceedings and passing of the award (under Section 34 of the Act) in the (name of) interests of justice.

Recently, the Hon’ble Supreme Court of India was faced with a similar situation in Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking, (2023 SCC OnLine SC 1020), where the scope of interpretation of Section 34 (i.e., setting aside of an award) and Section 37 (i.e., appealable orders) of the Act had been delved into.

The Appellant and Respondent therein entered into an agreement for construction of a bridge, where after, during the course of execution of the said agreement, disputes arose between the said parties, leading to the constitution of a Standing Arbitral Tribunal (“SAT” or “the Tribunal”). Before the SAT, the Respondent therein raised thirty-five claims, which were later clubbed and classified into twelve disputes by the SAT, and out of the said twelve disputes, the SAT considered three disputes and rejected all the claims. The Respondent impugned the said award under Section 34 of the Act before the High Court, which, whilst upholding the award of the SAT, dismissed the said application of the Respondent, holding thereby that the jurisdiction under Section 34 of the Act cannot be invoked to interfere with findings of the tribunal merely on the ground that there were two possible views with respect to construction of contract and the tribunal chose one considering it to be a reasonable construction. The said decision was appealed under Section 37 of the Act before a Division Bench (i.e., a Two-Judge Bench) of the High Court, which thereon reinterpreted the contractual clauses and reached a distinct conclusion, whilst holding that where two interpretations are possible of a contract, than the court must adopt the interpretation which gives the voice to all clauses rather than the one which renders any of the clause as otiose or nugatory, as it held that the Tribunal failed to interpret the contractual clauses harmoniously; therefore, the award is subject to perversity and found it necessary to set aside the award, partly allowing the claims pertaining to certain disputes. The Appellant approached the Hon’ble Apex Court, impugning the judgment of the Division Bench of the Bombay High Court, and contended, inter-alia, that the Division Bench of the High Court exceeded its limited jurisdiction under Section 37 of the Act, assuming the role of a court of appeal.

The Hon’ble Apex Court succinctly summed up various judgments dealing with the grounds and test of perversity and elucidated that the court exercising jurisdiction under Section 37 of the Act can only interfere with the concurrent findings of the tribunal, whilst holding that the jurisdiction of the court under Section 37 is akin to jurisdiction of the court under Section 34 of the Act, as the scope of interference by a court in an appeal under Section 37, in examining an order, setting aside or refusing to set aside an award, is restricted and subject to the same grounds as the challenge under Section 34. It further held that the mere possibility of an alternative view on facts or interpretation of the contract does not entitle courts to reverse the findings of the Arbitral Tribunal, especially as the court under Section 37 could not re-interpret a contractual clause. The court held that there exists no scope for re-interpretation of contract under Section 37 by the court if different interpretations to the contract are available, and the Tribunal chose one of the possible interpretations.

To conclude, the judgment of the Apex Court correctly interprets the law whilst holding that the jurisdiction of a court under Section 37 of the Act is different to that of an appellate court, and a Section 37 court ought not go beyond the grounds of challenge pressed under the Section 34 application.

By - Vaibhav Mehra and Kresha Jain