Recently, the Supreme Court reaffirmed the limited scope of judicial interference under Section 37 of the Arbitration and Conciliation Act, 1996, dismissing an appeal on the waiver of contractual clauses and project completion time extension. The Court ruled that issues not raised under Section 34 could not be entertained in an appeal under Section 37 and rejected the appellant's claim that time extensions waived Clause 49.5 of the General Conditions of Contract (GCC).
Brief Facts:
The case arose from a contractual dispute wherein the appellant sought an extension of time for project completion under Clause 49 of the GCC. The respondent granted multiple extensions but stated in a letter dated October 14, 2013, that any additional financial burden due to the delay must be considered along with the extension request and could not be claimed separately. The appellant contended that by granting extensions without demanding contemporaneous claims, the respondent had waived Clause 49.5 of the GCC. The arbitral tribunal rejected the appellant’s claims, a decision upheld under Section 34 of the Arbitration Act. The appellant then approached the High Court under Section 37, challenging the findings.
Contentions of the petitioner:
The appellant argued that the respondent, by repeatedly granting extensions, had effectively waived Clause 49.5 of the GCC, which required specific procedures for claiming financial compensation due to delays. It was further contended that the letter dated October 14, 2013, acknowledged the appellant’s right to claim compensation separately, and thus, the rejection of the claim was erroneous. The appellant also submitted that the High Court erred in limiting its review under Section 37 and should have considered the alleged waiver of contractual provisions.
Observation of the Court:
The Supreme Court categorically held that the appellant’s contention regarding waiver of Clause 49.5 could not be entertained in an appeal under Section 37, as it had not been raised before the arbitral tribunal or under Section 34. The Court emphasized that “apart from the fact that said contention could not have been raised for the first time in appeal under Section 37 of the Arbitration Act, on the applications made by the appellant specifically invoking clause 49, the respondent granted an extension of time on more than one occasion.”
Addressing the appellant’s reliance on the letter dated October 14, 2013, the Court found no merit in the argument that the respondent had waived Clause 49.5. The Court noted, “By no stretch of imagination, after reading the said letter, it can be inferred that Clause 49.5 was waived by the respondent. In fact, the respondent stated that the claim for financial burden would have to be dealt with together with the proposal for an extension of time, and the said claim cannot be processed separately.” The Court further emphasised that despite this communication, the appellant failed to submit a detailed claim, which undermined its assertion that the respondent had waived contractual requirements.
Regarding the limited scope of interference under Section 37, the Court reiterated the principles laid down in Larsen Air Conditioning and Refrigeration Company v. Union of India and Konkan Railway Corporation v. Chenab Bridge Project Undertaking. The Court referred to its earlier pronouncements, stating that, “The limited and extremely circumscribed jurisdiction of the court under Section 34 of the Act, permits the court to interfere with an award, sans the grounds of patent illegality i.e. that ‘illegality must go to the root of the matter and cannot be of a trivial nature’; and that the Tribunal ‘must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground.’” The Court further clarified that an appeal under Section 37 does not expand the scope of judicial scrutiny beyond the parameters established under Section 34.
The Court also cited its decision in MMTC Ltd. v. Vedanta Ltd., reaffirming that an appellate court cannot conduct an independent assessment of the merits of the arbitral award but must confine itself to examining whether the Section 34 ruling exceeded its jurisdiction. The Court reiterated, “Scope of interference by a court in an appeal under Section 37 of the Act, 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 of the Act.”
The decision of the Court:
Considering the well-established jurisprudence on the restricted scope of interference under Section 37, the Supreme Court found no merit in the appellant’s claims. The Court concluded that the High Court had rightly dismissed the appeal, as the appellant’s contentions regarding waiver were not substantiated by the record. The Court, therefore, upheld the decisions of the lower courts and dismissed the appeal.
Case Title: M/s. C & C Constructions Ltd. vs. IRCON International Ltd.
Citation: 2025 Latest Caselaw 162 SC
Coram: Justice Abhay S. Oka, Justice Ujjal Bhuyan
Advocate for Appellant: Adv. Vikas Goel, Tarun Dua, Ritesh Sharma, Vivek Gupta, Harmanbir Singh Sandhu, Pragun Dua, Rahul Shyam Bhandari (AOR), G Priyadharshni, Satyam Pathak, Prabhakar Pahepuri, Harsh Vardhan
Advocate for Respondent: Adv. Gaurav Pachnanda (Sr. Adv.), Sidhant Goel, Mohit Goel, Shubham S Saxena, Karmanya D Sharma, Nikita Jaitly, Avni Sharma, Sahil Tagotra
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