[Cites 27, Cited by 0]
Orissa High Court
M/S. National Aluminium Company vs J.P. Mishra & Company on 12 December, 2025
Author: Sanjeebk Panigrahi
Bench: Sanjeeb K Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Dec-2025 15:04:30
IN THE HIGH COURT OF ORISSA AT CUTTACK
ARBA No.10of 2013
(In the matter of an appeal under Section 37 of the Arbitration and
Conciliation Act, 1996)
M/s. National Aluminium Company .... Appellant(s)
Ltd., Bhubaneswar
-versus-
J.P. Mishra & Company, Kanti (MP) .... Respondent(s)
Advocates appeared in the case through Hybrid Mode:
For Appellant (s) : Mr. Manoj Kumar Mishra, Sr. Adv.
Along with
Mr. Tanmaya Mishra, Adv.
For Respondent (s) : Mr. Sanjeev Udgata, Adv.
CORAM:
DR. JUSTICE SANJEEB K PANIGRAHI
DATE OF HEARING:-17.10.2025
DATE OF JUDGMENT:-12.12.2025
Dr. SanjeebK Panigrahi, J.
1. ThisAppeal under Section 37 of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as "A&C Act") has been filed againstthe
judgment dated 15.12.2012 passed by the learned District Judge,
Khurda at Bhubaneswar in Arbitration Proceeding No.148 of 2011
wherein the learned District Judge has dismissed the petition filed
under Section 34 of the A&C Actthereby confirming the award dated
30.4.2011 passed by the learned Sole Arbitrator Justice B.A.Khan.
Location: ORISSA HIGH COURT, CUTTACK
I. FACTUAL MATRIX OF THE CASE:
2. The factual matrix traces its origin to the tender process initiated by
the appellant, National Aluminium Company Ltd. (NALCO), which
on 2.6.2009 floated tenders for supply of burnt quick lime for its
Damanjodi plant in Koraput district. The respondent, J.P. Mishra &
Company, participated in the process and emerged as one of the
successful bidders, along with four other suppliers. A formal
purchase order was issued on 9.10.2009, stipulating, inter alia, that
the lime supplied must conform to specifiedCaO content standards
and that sampling and analysis would be conducted at the
destination point, i.e., the NALCO laboratory at Damanjodi, whose
results would be final and binding.
3. Pursuant to the contract, the respondent supplied material
through three railway rakes. The rakes reached the site on 26.6.2010,
and unloading was completed by 27.6.2010. There was no dispute in
respect of the first two rakes; however, the third rake
containing 2733.774 MT of lime soon became the focal point of
controversy. The purchase order mandated that acceptance of
material be based solely on NALCO's laboratory analysis. According
to NALCO, the third rake's CaO content fell below the minimum
acceptable limit of 60%, resulting in rejection and forfeiture of the
consignment in accordance with Clause 8 of the purchase order.
Intimation of such rejection was communicated to the respondent
through letters referred to in the appeal papers.
Location: ORISSA HIGH COURT, CUTTACK
4. The respondent protested immediately upon receiving the rejection
communication and, by letters dated 29.6.2010 and 30.06.2010,
sought a second sampling of the material. Although the contract did
not expressly provide for re-sampling, further correspondence
ensued between the parties, culminating in a second sampling
exercise conducted on 28.7.2010 at Damanjodi. The respondent
alleges that both the original and subsequent samplings were
undertaken without proper notice and in its absence, thereby
violating principles of natural justice. NALCO, on the other hand,
maintains that notice was not contractually required, and even
otherwise, the respondent's representative had been present at the
plant premises during the unloading and sampling process, an
assertion said to be supported by the respondent's own pleadings.
5. Dissatisfied with the rejection and asserting financial loss, the
respondent invoked the arbitration clause on 19.10.2010. The dispute
was referred to a sole arbitrator Justice B.A. Khan (Retd.) who
entered reference and heard the parties. The respondent raised a
monetary claim of Rs. 1,49,93,961, premised on the assertion that the
material had been improperly rejected. NALCO defended the
rejection on the ground that the laboratory tests were conducted
strictly in accordance with contractual provisions, supported by
standard sampling methodologies. Evidence of NALCO officials
who conducted the tests was placed before the arbitrator. These
Location: ORISSA HIGH COURT, CUTTACK
competing narratives formed the basis upon which the arbitral
tribunal undertook its assessment.
6. The learned arbitrator delivered the award on 30.04.2011,
substantially allowing the respondent's claim and
granting Rs.1,19,66,698 in its favour. The award held, inter alia, that
sampling and testing had not been done in accordance with the
contract and that the respondent had been denied an opportunity to
be present during the critical testing process. The arbitrator found
procedural deficiencies serious enough to vitiate the rejection and
forfeiture. NALCO contended that such findings were beyond the
scope of the contract and contrary to the explicit acceptance criteria,
but these submissions did not find favour at the arbitral stage.
7. Aggrieved, NALCO filed a petition under Section 34 of the
Arbitration and Conciliation Act before the District Judge, Khurda,
on 29.7.2011, registered as ARBP No. 148 of 2011, challenging the
award on various grounds including excess of jurisdiction,
misinterpretation of contractual terms, and violation of Section 28(3)
of the Act. After conclusion of arguments on 11.11.2012, the learned
District Judge pronounced judgment on 15.12.2012, dismissing the
Section 34 petition and upholding the arbitral award. The court
accepted the arbitrator's view that proper notice and adherence to
sampling methodology were essential and that their absence had
caused prejudice to the respondent.
Location: ORISSA HIGH COURT, CUTTACK
8. NALCO thereafter preferred the present appeal under Section 37 of
the Act, challenging the judgment of the District Judge. Thus, the
dispute, which germinated in the aftermath of the third rake's
rejection in June 2010 and evolved through arbitration and
proceedings under Sections 34 and 37, now stands here before this
Court.
9. Now that the facts leading up to the instant Appeal has been laid
down, this Court shall endeavour to summarise the contentions of
the Parties and the broad grounds that have been raised to seek the
exercise of this Court's limited jurisdiction available under S. 37 of
the A&C Act.
II. APPELLANT'S SUBMISSIONS:
10.During the course of hearing, Learned Counsel for the Appellant
submitted that the rejection of the third rake of burnt quick lime was
strictly in accordance with the contractual framework governing the
supply. It was contended that the purchase order clearly stipulated
that sampling and analysis of CaO content would be conducted at
the destination point, and that the analysis of NALCO's laboratory
was final and binding on both parties (Clause 6). The third rake
delivered on 26.06.2010 was found to contain CaO below the
minimum acceptable limit of 60%, and therefore, in compliance
with Clause 8, the material was liable to be rejected and forfeited.
Counsel emphasized that the respondent had previously accepted a
penalty for sub-standard material in the first rake without objection,
Location: ORISSA HIGH COURT, CUTTACK
which demonstrated acquiescence to the contractual mechanism. It
was further submitted that the Learned Arbitrator erred in holding
that the sampling/testing was improper, even though there was no
contractual requirement to issue notice to the respondent, and the
respondent's own CEO was admittedly present at the plant premises
during the relevant period.
11.Learned Counsel further argued that the Learned Arbitrator
travelled beyond the four corners of the contract in holding that
natural justice was violated, despite the absence of any contractual
mandate requiring participation or prior notice to the supplier
during sampling. It was pointed out that the method of
sampling prescribed in the contract, read with Annexure-B and IS
1514:1990, had been duly followed by NALCO officials, whose
evidence remained unchallenged during arbitration. The District
Judge, while dismissing the Section 34 petition, was said to have
ignored this material evidence and failed to consider that the plea of
improper sampling was raised for the first time only during oral
arguments in the Section 34 proceedings. The Appellant contended
that both the Arbitrator and the District Judge misapplied Section
28(3) of the Act by disregarding the contractual terms, thereby
rendering the award patently illegal. On these grounds, the
Appellant urged that the award dated 30.4.2011 and the judgment
dated 15.12.2012 be set aside.
Location: ORISSA HIGH COURT, CUTTACK
III. RESPONDENT'S SUBMISSIONS:
12.On the contrary, Learned Counsel for the Respondent submitted that
both the Arbitral Award and the judgment of the Learned District
Judge were the product of a reasonable and equitable
interpretation of the governing contractual clauses, particularly
Clauses 6 and 8 of the purchase order. It was asserted that the
sampling and testing of the third rake were conducted in violation of
the method expressly prescribed in the contract, which incorporated
the Bureau of Indian Standards (IS 1514:1990) protocol for
determining CaO content. Counsel emphasized that the contract did
not permit unilateral sampling behind the back of the supplier and
that adherence to the prescribed scientific procedure was a
mandatory precondition to valid rejection. Since the rejection and
forfeiture were not preceded by proper sampling in accordance with
the agreed method, the appellant's action was arbitrary, and the
Learned Arbitrator rightly held that the deviation prejudiced the
respondent's rights. The District Judge, while exercising jurisdiction
under Section 34, was said to have correctly refrained from
substituting his own view for that of the Arbitrator.
13.It was further submitted that the appellant's principal contention--
that Clause 8 made NALCO's lab report final and binding regardless
of the manner of sampling--was misconceived, as the binding nature
of the report presupposed sampling conducted strictly as per
Annexure 'B' and the mandatory steps detailed therein. Any
Location: ORISSA HIGH COURT, CUTTACK
departure from the contractual procedure, including failure to
provide fair opportunity for presence at sampling, undermined the
integrity of the test itself. Counsel argued that the Arbitrator had
acted fully within the scope of Section 28(3) by interpreting the
contract in a manner consistent with commercial fairness and
established legal principles. Accordingly, the respondent urged that
the appeal under Section 37 be dismissed and the concurrent
findings of the Arbitrator and the District Judge be affirmed.
IV. ISSUE FOR CONSIDERATION:
14.Having heard the parties and perused the materials available on
record, this court here has identified the following solitary issue to be
determined:
A. Whether the order of the Ld. District Judge warrants
interferencekeeping in mind the limitations of this court's powers
under Section 37 of the A&C Act?
V. ISSUE A: WHETHER THE ORDER OF THE LD. DISTRICT
JUDGE WARRANTS ANY INTERFERENCE KEEPING IN MIND
THE LIMITATIONS OF THIS COURT'S POWERS UNDER
SECTION 37 OF THE A&C ACT?
15.Before going into the merits of the contentions, it is necessary to
outline the ambit and scope of Section 37(2)(b) of the 1996 Act. The
said section is extracted below:
"37. Appealable orders.--(1)[Notwithstanding
anything contained in any other law for the time being
in force, an appeal] shall lie from the following orders
(and from no others) to the court authorised by law to
Location: ORISSA HIGH COURT, CUTTACK
hear appeals from original decrees of the court passing
the order, namely:
∗∗∗
(2) Appeal shall also lie to a court from an order of the
Arbitral Tribunal--
(a) accepting the plea referred to in sub-section (2) or
sub-section (3) of Section 16; or
(b) granting or refusing to grant an interim measure
under Section 17."
16.The Supreme Court and this Court in catena of judgments have held
that the powers of appellate court while exercising jurisdiction under
Section 37(2)(b) of the 1996 Act against orders passed by the Arbitral
Tribunal is very restricted and narrow and the same should be
exercised when the orders seems to be perverse, arbitrary and
contrary to law. The judgment of Wander Ltd. v. Antox India (P)
Ltd.1 passed by the Apex Court, elaborates the ambit and scope of
the appeals. Although the aforesaid judgment is not dealing with the
arbitration proceedings but the same deals with the power of
appellate court in the Civil Procedure Code, 1908 (CPC). Operative
paragraphs of the aforesaid judgment are extracted below:
"13. On a consideration of the matter, we are afraid,
the Appellate Bench fell into error on two important
propositions. The first is a misdirection in regard to the
very scope and nature of the appeals before it and the
limitations on the powers of the appellate court to
substitute its own discretion in an appeal preferred
1990 Supp SCC 727
Location: ORISSA HIGH COURT, CUTTACK
against a discretionary order. The second pertains to
the infirmities in the ratiocination as to the quality of
antox's alleged user of the trade mark on which the
passing-off action is founded. We shall deal with these
two separately.
14. The appeals before the Division Bench were against
the exercise of discretion by the Single Judge. In such
appeals, the appellate court will not interfere with the
exercise of discretion of the court of first instance and
substitute its own discretion except where the
discretion has been shown to have been exercised
arbitrarily, or capriciously or perversely or where the
court had ignored the settled principles of law
regulating grant or refusal of interlocutory
injunctions. An appeal against exercise of discretion is
said to be an appeal on principle. Appellate court will
not reassess the material and seek to reach a conclusion
different from the one reached by the court below if the
one reached by that court was reasonably possible on
the material. The appellate court would normally not
be justified in interfering with the exercise of discretion
under appeal solely on the ground that if it had
considered the matter at the trial stage it would have
come to a contrary conclusion. If the discretion has
been exercised by the trial court reasonably and in a
judicial manner the fact that the appellate court would
have taken a different view may not justify interference
with the trial court's exercise of discretion. After
referring to these principles Gajendragadkar, J.
in Printers (Mysore) (P) Ltd. v. Pothan Joseph (SCC
OnLine SC para 9)
'9. ...These principles are well established, but as has
been observed by Viscount Simon in Charles
Osenton& Co. v. Johnston "the law as to the reversal
by a court of appeal of an order made by a Judge below
in the exercise of his discretion is well established and
Location: ORISSA HIGH COURT, CUTTACK
any difficulty that arises is due only to the application
of well-settled principles in an individual case."'
The appellate judgment does not seem to defer to this
principle."
17.The said judgment is consistently followed in adjudicating petitions
pertaining to the A&C Act by Courts across the Country in Green
Infra Wind Energy Ltd. v. Regen Powertech (P) Ltd.2; SonaCorpn.
India (P) Ltd. v. Ingram Micro India (P) Ltd.3; Manish Aggarwal
v. RCI Industries & Technologies Ltd.4; Tahal Consulting Engineers
India (P) Ltd. v. Promax Power Ltd.5 and Handicraft & Handlooms
Exports Co. of India v. SMC Comtrade Ltd.6.
18.In Reliance Infrastructure Ltd. v. State of Goa7, the Apex Court
noticing its previous decision in MMTC Ltd. v. Vedanta Ltd.8 has
noted the limited scope of interference under Section 34 and further
narrower scope of appeal under Section 37 of the Act particularly
when dealing with the concurrent findings of the arbitrator and that
of the Court. Relevant paragraph '14' of MMTC Ltd.(supra) as noted
in paragraph '26' in Reliance Infrastructure Ltd.(supra) is to be
extracted hereinunder:--
"14. As far as interference with an order made
under Section 34, as per Section 37, is concerned, it
cannot be disputed that such interference
2018 SCC OnLine Del 8273
2020 SCC OnLine Del 300
(2022) 3 HCC (Del) 289
2023 SCC OnLine Del 2069
2023 SCC OnLine Del 3981
(2024) 1 SCC 479
(2019) 4 SCC 163
Location: ORISSA HIGH COURT, CUTTACK
under Section 37 cannot travel beyond the restrictions
laid down under Section 34. In other words, the court
cannot undertake an independent assessment of the
merits of the award, and must only ascertain that the
exercise of power by the court under Section34 has not
exceeded the scope of the provision. Thus, it is evident
that in case an arbitral award has been confirmed by
the court under Section 34 and by the court in an
appeal under Section 37, this Court must be extremely
cautious and slow to disturb such concurrent
findings."
19.The same view has been expressed in UHL Power Company
Ltd. v. State of Himachal Pradesh9 in paragraph '16' while noticing
paragraph '11' in MMTC Ltd.(supra):--
"16. As it is, the jurisdiction conferred on courts
under Section 34 of the Arbitration Act is fairly
narrow, when it comes to the scope of an appeal
under Section 37 of the Arbitration Act, the
jurisdiction of an appellate court in examining
an order, setting aside or refusing to set aside an
award, is all the more circumscribed. In MMTC
Ltd. v. Vedanta Ltd. [MMTC Ltd. v. Vedanta
Ltd., (2019) 4 SCC 163 : (2019) 2 SCC (Civ) 293], the
reasons for vesting such a limited jurisdiction on the
High Court in exercise of powers under Section 34 of
the ArbitrationAct have been explained in the
following words : (SCC pp. 166-67, para 11)
"11. As far as Section 34 is concerned, the position is
well-settled by now that the Court does not sit in
appeal over the arbitral award and may interfere on
merits on the limited ground provided
under Section 34(2)(b)(ii) i.e. if the award is against
(2022) 4 SCC 116
Location: ORISSA HIGH COURT, CUTTACK
the public policy of India. As per the legal position
clarified through decisions of this Court prior to the
amendments to the 1996 Act in 2015, a violation of
Indian public policy, in turn, includes a violation of the
fundamental policy of Indian law, a violation of the
interest of India, conflict with justice or
morality, and the existence of patent illegality in the
arbitral award. Additionally, the concept of the
"fundamental policy of Indian law" would cover
compliance with statutes and judicial precedents,
adopting a judicial approach, compliance with the
principles of natural
justice, and Wednesbury [Associated Provincial
Picture Houses Ltd. v. WednesburyCorpn., [1948] 1
K.B. 223(CA)] reasonableness. Furthermore, "patent
illegality" itself has been held to mean contravention of
the substantive law of India, contravention of
the 1996 Act, and contravention of the terms of the
contract."
20.In Haryana Tourism Ltd. v. Kandhari Beverages Ltd.10 as noted in
paragraph '30' in Reliance Infrastructure Ltd.(supra), it was held on
the scope of interference under Sections 34 and 37 of the Act' 1996 as
under:--
"30. In Haryana Tourism [Haryana Tourism
Ltd. v. Kandhari Beverages Ltd., (2022) 3 SCC
237 : (2022) 2 SCC (Civ) 87], this Court yet again
pointed out the limited scope of interference
under Sections 34 and37 of the Act; and disapproved
interference by the High Court under Section 37 of
the Act while entering into merits of the claim in the
following words : (SCC p. 240, paras 8-9)
2022) 3 SCC 237
Location: ORISSA HIGH COURT, CUTTACK
"8. So far as the impugned
judgment and order [Kandhari Beverages
Ltd. v. Haryana Tourism Ltd., 2018 SCC OnLine
P&H 3233] passed by the High Court
quashing and setting aside the
award and the order passed by the Additional District
Judge under Section 34 of the Arbitration Act are
concerned, it is required to be noted that in an appeal
under Section 37 of the Arbitration Act, the High
Court has entered into the merits of the claim, which is
not permissible in exercise of powers
under Section 37 of the Arbitration Act.
9. As per settled position of law laid down by this
Court in a catena of decisions, an award can be set
aside only if the award is against the public policy of
India. The award can be set aside under Sections 34/37
of the Arbitration Act, if the award is found to be
contrary to : (a) fundamental policy of Indian Law; or
(b) the interest of India; or (c) justice or morality; or
(d) if it is patently illegal. None of the aforesaid
exceptions shall be applicable to the facts of the case on
hand. The High Court has entered into the merits of
the claim and has decided the appeal
under Section 37 of the Arbitration Act as if the High
Court was deciding the appeal against the
judgment and decree passed by the learned trial court.
Thus, the High Court has exercised the jurisdiction not
vested in it under Section 37 of the Arbitration Act.
The impugned judgment andorder [Kandhari
Beverages Ltd. v. Haryana Tourism Ltd., 2018 SCC
OnLine P&H 3233] passed by the High Court is hence
not sustainable."
21.It was, thus, observed in paragraph '33' of Reliance Infrastructure
Ltd.(supra) as under:--
Location: ORISSA HIGH COURT, CUTTACK
"33. Keeping in view the aforementioned principles
enunciated by this Court with regard to the limited
scope of interference in an arbitral award by a Court in
the exercise of its jurisdiction under Section34 of
the Act, which is all the more circumscribed in an
appeal under Section 37, we may examine the rival
submissions of the parties in relation to the matters
dealt with by the High Court."
22.It is observed in Punjab State Civil Supplies Corpn. Ltd. v. Sanman
Rice Mills11 that:
"9. The object of the Act is to provide for a speedy and
inexpensive alternative mode of settlement of dispute
with the minimum of intervention of the courts.
Section 5 of the Act is implicit in this regard and
prohibits interference by the judicial authority with the
arbitration proceedings except where so provided in
Part-I of the Act. The judicial interference, if any, is
provided inter-alia only by means of Sections 34 and
37 of the Act respectively.
10. Section 34 of the Act provides for getting an
arbitral award set aside by moving an application in
accordance with sub-Section (2) andsub-Section (3) of
Section 34 of the Act which inter-alia provide for the
grounds on which an arbitral award is liable to be set
aside. One of the main grounds for interference or
setting aside an award is where the arbitral award is in
conflict with the public policy of India i.e. if the award
is induced or affected by fraud or corruption or is in
contravention with the fundamental policy of Indian
law or it is in conflict with most basic notions of
2024 SCC OnLine SC 2632
Location: ORISSA HIGH COURT, CUTTACK
morality and justice. A plain reading of Section 34
reveals that the scope of interference by the court with
the arbitral award under Section 34 is very limited and
the court is not supposed to travel beyond the aforesaid
scope to find out if the award is good or bad.
11. Section 37 of the Act provides for a forum of appeal
inter-alia against the order setting aside or refusing to
set aside an arbitral award under Section 34 of the Act.
The scope of appeal is naturally akin to andlimited to
the grounds enumerated under Section 34 of the Act.
12. It is pertinent to note that an arbitral award is not
liable to be interfered with only on the ground that the
award is illegal or is erroneous in law that too upon
reappraisal of the evidence adduced before the arbitral
trial. Even an award which may not be reasonable or is
non-speaking to some extent cannot ordinarily be
interfered with by the courts. It is also well settled that
even if two views are possible there is no scope for the
court to reappraise the evidence and to take the
different view other than that has been taken by the
arbitrator. The view taken by the arbitrator is normally
acceptable and ought to be allowed to prevail.
xxxxxx
14. It is equally settled law that the appellate power
under Section 37of the Act is not akin to the normal
appellate jurisdiction vested in the civil courts for the
reason that the scope of interference of the courts with
arbitral proceedings or award is very limited, confined
to the ambit of Section 34 of the Act only and even that
power cannot be exercised in a casual and a cavalier
manner.
xxxxxx
Location: ORISSA HIGH COURT, CUTTACK
16. It is seen that the scope of interference in an appeal
under Section37 of the Act is restricted and subject to
the same grounds on which an award can be challenged
under Section 34 of the Act. In other words, the powers
under Section 37 vested in the court of appeal are not
beyond the scope of interference provided
under Section 34 of the Act."
Here, the Supreme Court has once again reiterated that even an
award which may not be reasonable or is nonspeaking to some
extent cannot ordinarily be interfered with by the courts. It is also
well settled that even if two views are possible there is no scope for
the court to reappraise the evidence and to take the different view
other than that has been taken by the arbitrator. The view taken by
the arbitrator is normally acceptable and ought to be allowed to
prevail.
23.In Konkan Railway Corpn. Ltd. v. Chenab Bridge Project12 referring
to MMTC Limited (supra) it has been held that:
"19....The scope of jurisdiction
under Section 34 and Section 37 of the Act is not akin
to normal appellate jurisdiction. It is well-settled that
courts ought not to interfere with the arbitral award in
a casual and cavalier manner. 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..."
24.In Dyna Technology Private Limited v. Crompton Greaves Limited13,
the Apex Court observed as under:
(2023) 9 SCC 85
Location: ORISSA HIGH COURT, CUTTACK
"24. There is no dispute that Section 34 of the
Arbitration Act limits a challenge to an award only on
the grounds provided therein or as interpreted by
various courts. We need to be cognizant of the fact that
arbitral awards should not be interfered with in a
casual and cavalier manner, unless the court comes to
a conclusion that the perversity of the award goes to
the root of the matter without there being a possibility
of alternative interpretation which may sustain the
arbitral award. Section 34 is different in its approach
and cannot be equated with a normal appellate
jurisdiction. The mandate under Section 34 is to
respect the finality of the arbitral award and the party
autonomy to get their dispute adjudicated by an
alternative forum as provided under the law. If the
courts were to interfere with the arbitral award in the
usual course on factual aspects, then the commercial
wisdom behind opting for alternate dispute resolution
would stand frustrated.
25. Moreover, umpteen number of judgments of this
Court have categorically held that the courts should
not interfere with an award merely because an
alternative view on facts and interpretation of contract
exists. The courts need to be cautious and should defer
to the view taken by the Arbitral Tribunal even if the
reasoning provided in the award is implied unless such
award portrays perversity unpardonable under Section
34 of the Arbitration Act."
25.Judicial scrutiny of arbitral awards is stringently limited under
Indian law. Section 34 of the Arbitration and Conciliation Act, 1996,
provides the exclusive grounds upon which an arbitral award can be
challenged. Courts, therefore, are not empowered to interfere merely
(2019) 20 SCC 1
Location: ORISSA HIGH COURT, CUTTACK
because another interpretation or outcome may seem more
reasonable. The jurisdiction under Section 34 is confined to
procedural and legal infirmities such as lack of jurisdiction, violation
of natural justice, or patent illegality. Consequently, appellate
jurisdiction under Section 37 is even narrower in its scope. Its
purpose is to evaluate whether the court adjudicating under Section
34 has remained within the permissible statutory boundaries. The
appeal court cannot re-evaluate evidence or reconsider the factual
matrix afresh. The statutory framework thus reflects an overarching
legislative intent to insulate arbitral decisions from excessive judicial
intervention. The entire architecture of Sections 34 and 37 reinforces
the finality and autonomy of arbitral proceedings. Arbitration is
designed to offer an efficient, expert-led, and expedited alternative to
litigation. Courts must therefore resist the temptation to intervene
unless the decision by the court under Section 34 itself amounts to a
significant transgression of legal boundaries.
26.It is now firmly established in law that appellate review under
Section 37 of the Act does not permit the court to act as a second
court of first instance. The appeal court's task is not to reassess the
arbitral tribunal's findings on merits or evidence, but only to
determine whether the court under Section 34 has exercised its
discretion legally and within its jurisdiction. This means the
appellate court must limit itself to checking if the Section 34 court has
adhered to the narrow scope prescribed by the Act. It is not sufficient
Location: ORISSA HIGH COURT, CUTTACK
for the appellate court to identify an alternative or even preferable
view--interference is justified only if the lower court has committed
a jurisdictional error, or has failed to apply the law correctly. The
design of the Act ensures that arbitration remains an autonomous
dispute resolution mechanism, minimally impacted by judicial
oversight. The court under Section 37 is not an appellate authority in
the conventional civil law sense; it cannot substitute its own
interpretation for that of the arbitrator unless a clear and grave legal
error is demonstrated. In essence, the appellate court serves as a
watchdog over the procedural fidelity of the Section 34 court--not
the substantive reasoning of the arbitrator.
27.When interpreting Section 37, it is imperative to contextualize it
alongside Section 5 of the Act, which serves as a foundational
provision reinforcing the minimal interference ethos. Section 5 makes
clear that courts shall not intervene in arbitral matters except as
expressly provided in the Act. This legislative mandate is not merely
procedural--it is a substantive limitation on judicial power. Appeals
under Section 37, especially those arising under Section 37(2)(b), are
therefore constrained by both the statutory scheme and overarching
judicial philosophy. Unlike appeals under other civil statutes, where
courts may dive deep into factual findings or discretionary decisions,
the Arbitration Act imposes a tight statutory leash. The objective is to
prevent the unraveling of arbitration outcomes through prolonged
court battles. Any order passed by an arbitral tribunal, particularly at
Location: ORISSA HIGH COURT, CUTTACK
interlocutory stages, must be accorded due deference unless it
reveals clear arbitrariness, irrationality, or breach of fundamental
legal principles. Courts must, therefore, resist the impulse to
interfere merely because a different view appears plausible or even
more just in hindsight. Arbitration is based on party autonomy, and
any judicial incursion must align strictly with the boundaries
demarcated by Sections 5, 34, and 37.
28.The judiciary's intervention in arbitral matters must be exercised
with utmost caution, especially where the arbitral tribunal's
decisions reflect reasonable interpretations of contractual terms or
factual matrices. The 1996 Act was introduced with the explicit
objective of limiting the role of courts, ensuring faster and more
efficient resolution of disputes outside traditional litigation.
Consequently, appellate courts under Section 37 must act with
deliberate restraint, only intervening when the arbitral process has
clearly deviated from established legal standards. This includes
instances of perversity, gross arbitrariness, or when settled legal
principles have been ignored or misapplied. Importantly, arbitral
decisions--even at interim stages--deserve judicial respect unless a
substantial illegality is apparent. The appellate court's function is
supervisory, not substitutive. It is not tasked with forming a fresh
opinion but must ensure that the arbitral tribunal's discretion has
been exercised within legal bounds. In other words, Section 37 does
not allow for wholesale re-litigation of disputes that have already
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been adjudicated by an arbitral forum. The credibility of the
arbitration system hinges on this judicial discipline. Allowing
appeals to turn into de facto retrials would defeat the very purpose
of choosing arbitration over courtroom adjudication.
29.The foundational framework of the Arbitration Act reflects an
express intent to exclude ordinary civil appellate practices in arbitral
matters. The powers conferred under Section 37(2)(b) are not akin to
those under civil appellate jurisdiction, where factual reappraisal
and discretionary judgments are routine. Rather, the Act envisions a
system where arbitral orders are largely immune from judicial
revisitation unless a serious and demonstrable breach of procedure
or law occurs. This philosophy is rooted in the recognition that
arbitration is a consensual mechanism designed to bypass the
complexities and delays of civil litigation. Courts, therefore, must
respect the principle of finality, stepping in only where an order of
the arbitral tribunal is tainted by evident perversity or gross
misapplication of law.
30.In view of the above position in law on the subject, the scope of the
intervention of the court in arbitral matters is virtually prohibited, if
not absolutely barred and that the interference is confined only to the
extent envisaged under Section 34 of the Act. The appellate power
of Section 37 of the Act is limited within the domain of Section 34 of
the Act. It is exercisable only to find out if the court, exercising power
under Section 34 of the Act, has acted within its limits as prescribed
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thereunder or has exceeded or failed to exercise the power so
conferred. The Appellate Court has no authority of law to consider
the matter in dispute before the arbitral tribunal on merits so as to
find out as to whether the decision of the arbitral tribunal is right or
wrong upon reappraisal of evidence as if it is sitting in an ordinary
court of appeal. It is only where the court exercising power
under Section 34 has failed to exercise its jurisdiction vested in it
by Section 34 or has travelled beyond its jurisdiction that the
appellate court can step in and set aside the order passed
under Section 34 of the Act. Its power is more akin to that
superintendence as is vested in civil courts while exercising
revisionary powers. The arbitral award is not liable to be interfered
unless a case for interference as set out in the earlier part of the
decision, is made out. It cannot be disturbed only for the reason that
instead of the view taken by the arbitral tribunal, the other view
which is also a possible view is a better view according to the
appellate court.
31.It must also be remembered that proceedings under Section 34 of
the Act are summary in nature and are not like a full-fledged regular
civil suit. Therefore, the scope of Section 37 of the Act is much more
summary in nature and not like an ordinary civil appeal. The award
as such cannot be touched unless it is contrary to the substantive
provision of law; any provision of the Act or the terms of the
agreement.
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32.It is within this statutory and jurisprudential framework that the
present appeal must be evaluated.The core issue for consideration
here is whether the Arbitral Award, as upheld by the Ld. District
Court, suffers from patent illegality warranting interference
under Section 37 of the Act.
33.The contractual relationship between the parties arose from the
tender floated on 2.6.2009, leading to issuance of a purchase order on
9.10.2009. The contract stipulated precise technical obligations,
particularly with respect to sampling and testing of burnt lime
supplied to the appellant's plant. The Arbitrator examined these
stipulations and interpreted Clauses 6 and 8 as incorporating the
sampling procedure found in Annexure 'B' and IS 1514:1990.
34.The Learned Arbitrator commenced his analysis by examining the
contractual provisions that governed the supply, sampling, and
acceptance of burnt quick lime. Clause 6 of the Purchase Order was
reproduced and emphasised, as was Clause 8 which stipulated that
acceptance, penalties, and rejection would flow strictly from
the analysed value obtained, including the provision that if CaO fell
below 60%, the material was to be forfeited. The Arbitrator held that
because the contract expressly incorporated standardised
procedures, compliance with them was mandatory, and any deviation
would undermine the validity of the rejection itself.
35.The Award records that Annexure 'B', read with IS 1514:1990
required that several samples be drawn from different parts of the rake
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and at varying depths, ensuring that the resulting composite sample
was representative of the bulk. The Arbitrator noted the mandatory
wording of the standard procedure which required that multiple
samples from the front, middle, and rear of each wagon be drawn and
thereafter combined into a composite sample before testing. The
appellant, however, failed to produce any contemporaneous
sampling sheets or logs demonstrating that the prescribed method
was followed. The Arbitrator considered this omission fatal because
the burden lay on the purchaser--who conducted sampling
unilaterally--to demonstrate compliance with the contractually
embedded scientific method. He therefore held that the appellant
had not satisfactorily established that the sampling was
representative.
36.The Award further records that the Arbitrator rejected the
appellant's argument that the laboratory analysis was contractually
"final," holding that such finality attaches only when the sampling
which forms the basis of all subsequent testing is validly performed.
The Arbitrator found that NALCO's officials neither documented the
sampling exercise nor provided corroborative evidence that the
method under Annexure 'B' had been adhered to. Because the
representative character of the sample was not established, the
Arbitrator concluded that the resulting CaO test value could not be
treated as a reliable basis for rejecting material worth several lakhs of
rupees. The Arbitrator therefore regarded the test report
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as procedurally vitiated, rather than chemically incorrect, rendering the
rejection unsustainable.
37.Moreover, the Purchase Order itself required, under Clause 6,
that "the supplier shall furnish a certificate confirming that the material
supplied is as per the specification." The record shows that such a
certificate did in fact accompany the rake in question, asserting
conformity with the guaranteed CaO content. The Learned
Arbitrator noted that the presence of this contractual certificate
created an initial presumption in favour of the vendor that the
material, at the point of dispatch, met the agreed technical
parameters. In the absence of demonstrable adherence to the
prescribed sampling methodology by the purchaser, this
presumption was not displaced; rather, it strengthened the
respondent's plea that the rejection was unsustainable.
38.Based on the above reasoning, the Arbitrator concluded that the
forfeiture under Clause 8 could not legally stand because
the foundation for invoking it the sampling was itself defective. He
held that once the sampling process was shown to be irregular, the
entire rejection decision collapsed, irrespective of what the
laboratory analysis indicated. The Award reasoned that contractual
rights of forfeiture must be exercised strictly in accordance with the
agreed procedure, particularly when severe financial consequences
such as complete non-payment and loss of freight attached to the
supplier. Accordingly, the Arbitrator allowed the respondent's claim,
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holding that the rejection was arbitrary, unsupported by proper
sampling, and therefore contrary to the contract.
39. The Learned District Judge, upon examining the arbitral record,
concurred that the contract required strict adherence to this
scientifically prescribed method. Given that the contract imposed a
duty to sample in a scientifically valid manner, the lack of such
documentation was considered a material procedural lapse. The
District Judge pointed out that the Arbitrator's conclusion was based
on gaps in the appellant's own evidence. In the absence of perversity,
such a finding cannot be revisited by this Court. The scrutiny under
Section 37 does not extend to filling evidentiary lacunae or rewriting
the factual narrative. This Court finds no reason to disturb such
concurrence, especially when the arbitrator's reading flows directly
from explicit contractual language rather than any subjective view.
40.The appellant has consistently argued that the contract does not
require prior notice to the supplier before sampling. While this
proposition may be textually correct, the Arbitrator's reasoning did
not hinge on a mandatory notice requirement. Although the contract
did not mandate prior notice to the supplier, the Arbitrator held that
where the purchaser conducts sampling at its own premises without
the supplier's participation, the obligation to strictly comply with the
prescribed method becomes even more stringent. The Award notes
that the respondent had been present at the plant premises for
unloading but was not informed that sampling was underway. The
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Arbitrator did not treat absence of notice as an independent breach
but as an aggravating factor: the lack of transparency combined with
the absence of documentary proof heightened doubts about whether
proper sampling occurred. He therefore held that principles of
procedural fairness is implicit in commercial contracts had not been
met. The focus was on compliance with the sampling methodology,
which envisioned representative extraction during unloading and
documentation of the sampling process. The Arbitrator concluded
that non-compliance with that method rendered the laboratory
report unreliable. The District Judge accepted this reasoning,
emphasizing that once the foundation of the test is compromised, the
consequential rejection cannot stand.
41.Central to the appellant's case is the argument that the NALCO
laboratory report was contractually final. Finality clauses, however,
are not absolute. They operate only when the underlying act here,
sampling, is carried out in accordance with the contract. If the
Arbitrator finds that the sampling deviated from the mandatory
protocol, the finality clause cannot cure the breach. The Arbitrator
interpreted the contract to mean that the binding force of the test
result is premised on proper sampling. This interpretation is neither
strained nor implausible. The District Judge, therefore, rightly
refrained from interfering.
42.This Court is guided by the principle that if two views are possible
and the Arbitrator adopts one that is not palpably unreasonable, the
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court must respect that choice. The Arbitrator's conclusion that
sampling must conform strictly to IS 1514:1990 flows from the
contract's express incorporation of that standard. The District Judge
correctly recognized that the Arbitrator's reading of the contract was
entirely plausible. Section 37 does not permit a court to substitute its
own understanding merely because another interpretation appears
equally plausible.
43.The appellant contended that the respondent had previously
accepted a penalty in respect of the first rake and had thereby
waived any objection to the process. The Arbitrator carefully
distinguished this circumstance, emphasizing that the earlier penalty
was minor and not disputed, whereas the later dispute involved
complete forfeiture. The District Judge affirmed that principles of
waiver cannot be mechanically applied when the contractual and
factual matrices differ fundamentally. This Court agrees that the
distinction is rational and that the Arbitrator's reasoning is not
vulnerable to the charge of perversity.
44.This Court recognises that the sampling issue forms the factual heart
of the dispute. However, under Section 37, the question is not
whether this Court would have reached the same factual conclusion,
but whether the conclusion reached is so irrational as to shock
judicial conscience. After reviewing the award and the judgment
under Section 34, this Court finds that both forums analysed the
evidence in a careful and structured manner. There is nothing
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arbitrary or capricious in their reasoning. The arbitral award is
anchored in a broad evaluation of the parties' conduct,
correspondence exchanged, and compliance with contractual
processes. The District Judge's judgment under Section 34 reveals
careful engagement with these aspects. That court appropriately
acknowledged that the Arbitrator's evaluation was a matter of fact,
not law. This Court, operating under the more restrictive framework
of Section 37, finds no jurisdictional error or perversity warranting
intervention.
45.The appellant's submissions before this Court essentially attempt to
re-argue facts as to whether samples were properly taken, whether
the respondent's representative was present, whether the laboratory
results could nonetheless stand. These matters have been squarely
addressed by both the Arbitrator and the District Judge. Section 37
does not permit a third round of factual analysis. Absent
demonstrable perversity, such findings are binding.
46.The Arbitration Act embodies a legislative commitment to party
autonomy and minimal judicial intervention. Awards cannot be
interfered with merely because a different view is possible. The
Arbitrator provided detailed reasons, interpreted contractual clauses
faithfully, and relied on established scientific standards. The District
Judge found no ground to invoke the limited exceptions under
Section 34. This Court, therefore, finds that the appellant has not met
the threshold required to invoke appellate interference.
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VI. CONCLUSION:
47.In the above context, it cannot be said the view taken in the
impugned award is not even a possible view, so as to warrant
interference in proceedings under Section 34 and/or 37 of
the A&C Act. On the contrary, the approach of the arbitrator appears
to be judicious taking into account the attendant
facts and circumstance.
48.Having examined the record, the pleadings, the award, and the
Section 34 judgment, this Court finds that (i) the Arbitrator adopted a
plausible and commercially sensible reading of the contract, (ii) the
District Judge correctly applied the narrow framework of Section 34,
and (iii) the appellant has failed to establish perversity, patent
illegality, or jurisdictional overreach. The concurrent findings
therefore warrant deference. As such, no grounds are made out for
interference under Section 37, and the appeal must fail.
49.ARBA No. 10 of 2013 is disposed on the abovementioned terms. No
order as to costs.
50.Interim order, if any, passed earlier stands vacated.
(Dr.SanjeebK Panigrahi)
Judge
Orissa High Court, Cuttack,
Dated the12th December, 2025/
