HC: Proceedings under Section 37 of the Arbitration Act are more limited in scope than under Section 34, Read Judgment

The Delhi High Court dismissed an appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Arbitration Act”) stating that the jurisdiction conferred by Section 37 is even more circumscribed than that under Section 34 of the Arbitration Act and should not be equated with the normal appellate jurisdiction of the court.

Facts of the Case:

The appellant had filed an appeal under Section 37 of the Arbitration Act challenging a judgment that dismissed the petition filed on behalf of the appellant under Section 34 of the Arbitration Act.

The dispute in question revolves around agreements executed between the parties pertaining to the acquisition, transfer, and sale of land in village Mangar on the Delhi-Haryana border and village Chakkarpur, district Gurgaon, Haryana. Disagreements between the parties led to the matter being referred to a sole Arbitrator for resolution, in accordance with the arbitration clause in the agreements. The Arbitrator's Award held that the respondent was liable to refund an amount of Rs. 8.05 crores to the appellant. However, it also determined that the appellant was not entitled to any interest as it had been waived through a letter that had been signed by the then Chairman and Managing Director of the appellant.

The appellant argued that the impugned Award contravened the express terms and conditions of the agreements, which explicitly provided for interest at the rate of 18% per annum if the respondent failed to fulfil its obligations.

The appellant argued that the letter was not on official letterhead, was written on a blank sheet, and was not supported by a Board Resolution.

The key issue in this case was whether the appellant had waived its claim for interest on the amount of Rs. 8.05 crores due from the respondent. The High Court noted that the Arbitrator found that the appellant had waived its interest based on evidence provided in the form of the letter. The Court stated that the Arbitrator had concluded that the appellant had not established that the letter was false, fabricated, or forged. The Arbitrator had also voluntarily established that the letter was duly signed indicating that Rs. 6.05 crores had been settled as part of a full and final agreement. The evidence also showed that the Rs. 6.05 crores had been refunded in multiple payments.

The Court refused to re-assess and re-examine the evidence again and held that "an appeal under Section 37 of the Arbitration Act. Proceedings under Section 37 of the Arbitration Act are even more limited in scope than those under Section 34 of the Arbitration Act and cannot be equated with the normal appellate jurisdiction of the court."

The High Court relied on the judgment in the case of Reliance Infrastructure Ltd. vs. State of Goa^[1], where the Supreme Court reiterated the limited scope of interference with arbitral awards under Sections 34 and 37 of the Arbitration Act. The Court affirmed that a court's interference under Section 34 is restricted to specific situations where an arbitral award may violate the public policy of India, which includes contravention to the fundamental policy of Indian law, justice, and morality, or involves patent illegality.

The Court also relied on UHL Power Company Ltd. vs. State of Himachal Pradesh^[2], to reinforce that courts should exercise restraint when reviewing arbitral awards under Section 34 of the Arbitration Act and refrain from re-evaluating findings made by arbitral tribunals.

The decision of the Court:

The High Court affirmed the Arbitrator's decision that the appellant had waived its claim for interest based on the letter since the appellant had not provided sufficient evidence to prove that the letter was false or fabricated.

As for an appeal under Section 37 of the Arbitration Act, the Court reiterated the limited scope of interference it could exercise. The Court ultimately upheld the impugned judgment passed by the Single Judge, dismissing the appeal and related applications.