The disputes between National Highways Authority of India ("NHAI"), a public sector undertaking (PSU) and BSC-RBM-PATI JV ("JV") in relation to construction contract were adjudicated in arbitration before a three member Tribunal. The Tribunal, by a majority, partly awarded certain claims of NHAI and certain counter-claims of the JV.
NHAI challenged the Award under Section 34 of the Arbitration and Conciliation Act, 1996 ("Act") before the Delhi High Court. The said challenge was dismissed on 3 January 2017. NHAI preferred an appeal before the Division Bench of the Delhi High Court under Section 37 of the Act.
Whether the Single Judge of the High Court erred in upholding the arbitral Award, warranting interference under Section 37 of the Act.
The Division Bench of the High Court reiterated the principles of exercising jurisdiction under Section 37. The Court referred to its recent judgments1, wherein it was held that an appeal under Section 37 is like a Second Appeal, whereas the First Appeal is objection under Section 34.
While upholding the judgment of the Single Judge and Award, the Court held that it has limited arena of jurisdiction in the matter of interference under Sections 34 and 37. It reiterated that findings of facts and law of Tribunal are ordinarily not amenable to interference either under Section 34 or Section 37. It is only where finding is contrary to terms of contract or ex-facie perverse, the Court has to interfere.
As a final word, the Court deprecated the practice of parties successively challenging the factual findings in respect of which the tribunal is the final authority. While noting that the process of arbitration was introduced to reduce the lengthy procedure in a civil trial, the Court observed that any challenge under Sections 34 and 37 should only lie on questions of law much like First Appeals and Second Appeals under the Code of Civil Procedure, 1908.
The Court observed that despite precedents and disapproval voiced by the Supreme Court and High Courts, every award is being challenged first before Single Bench and then Division Bench because the "aggrieved party" possesses the financial wherewithal to do so.
The Court also raised a concern that majority of such challenges are by PSUs, which contributes to the menace of "docket explosion" which plagues Courts and consumes valuable time which could be used for settling more important disputes. The Court criticized such practice and imposed cost on NHAI of INR 1 lakh for attempting to reargue the entire dispute de novo in Section 37 proceedings.
The judgment delineates the scope of judicial interference and challenge under Sections 34 and 37 of the Act. It holds that any factual interference under Sections 34 and 37 of the Act would be a gross disservice to the very institution of arbitration.
The judgment sets an example which may be a guiding principle while deciding a challenge to an arbitral award by Indian Courts. The observations regarding challenge to only questions of law and not permit challenge to factual findings of an arbitral award definitely re-affirm the pro-arbitration approach of Indian judiciary.
* Authored by Tejas Karia, Partner & Head - Arbitration, Surjendu Sankar Das, Counsel and Amee Rana, Associate; NHAI v. M/s. BSC-RBM-PATI Joint Venture, FAO (OS) (COMM) No. 107 of 2017 & CM Nos. 18458-59 of 2017, Delhi High Court, judgment dated 24 January 2018.
1 MTNL v. Finolex Cables Ltd., 2017 SCC Online 10497 and MTNL v. Fujitshu India Pvt. Ltd., 2015 SCC Online 7437.
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