Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-015037-015037 – 2025 |
| Diary Number | 24603/2023 |
| Judge Name | HON’BLE MR. JUSTICE ARAVIND KUMAR |
| Bench | HON’BLE MR. JUSTICE ARAVIND KUMAR; HON’BLE MR. JUSTICE N.V. ANJARIA |
| Precedent Value | Binding precedent |
| Overrules / Affirms |
|
| Type of Law | Arbitration and Conciliation Act, 1996 |
| Questions of Law | Whether interference with an arbitral award by a High Court under Section 37 on ground of patent illegality is sustainable once the award has been affirmed under Section 34 of the A&C Act. |
| Ratio Decidendi |
|
| Judgments Relied Upon |
|
| Logic / Jurisprudence / Authorities Relied Upon by the Court |
|
| Facts as Summarised by the Court | Appellant won a tender to mine/transport bauxite at Rs. 634.20/MT; supplied extra 195,000 MT at respondent’s request without an agreed rate for extra work. Arbitration awarded ₹3.71 crore + interest on various heads (extra work, transport cost, idle machinery/manpower). Civil and commercial courts upheld; High Court set aside award. Appeal to SC. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts and commercial courts |
| Persuasive For | High Courts and tribunals debating Section 34/37 appellate scope |
| Overrules | High Court of Chhattisgarh judgment in ARBA No. 05/2017 (03.05.2023) |
| Follows |
|
What’s New / What Lawyers Should Note
- Reinforces that Section 37 appeal cannot re-appraise evidence or substitute judicial views for arbitrator’s findings.
- Clarifies “patent illegality” demands a glaring, root-going error—mere misinterpretation or “guesswork” is insufficient.
- Confirms tribunals may award quantum meruit under Section 70 of the Contract Act when contracts are silent on price for extra work, without “rewriting” the agreement.
- Emphasizes respect for arbitrator as master of evidence; courts must discern a rational path in the award, not impose their own corrections.
Summary of Legal Reasoning
- Minimal Judicial Intervention: Section 5 bars court interference save Section 34/37 grounds; awards stand unless they offend public policy or suffer patent illegality.
- Narrow Scope of Review: Section 37 appeals are co-extensive with Section 34; neither permits merits review or fact re-appraisal (ONGC; MMTC; LAC).
- Patent Illegality Defined: Post-2015 amendment, patent illegality means a manifest, root-going violation—award on no evidence or in direct conflict with express contract or statute (SsangYong).
- Contractual Autonomy: Arbitrators must follow express terms; yet, where contract is silent on price for extra work, Section 70 remedy (quantum meruit) may fill the gap without breaching contract terms.
- Evidence & Reasoning: Tribunal’s award drawn from oral testimony, documentary correspondence and a reasoned application of equity suffices; High Court impermissibly substituted its own view.
Arguments by the Parties
Petitioner
- High Court exceeded Section 37 jurisdiction by re-appreciating evidence and rewriting contract.
- Arbitral award contains detailed, reasoned findings on each claim; HC’s view on “patent illegality” misconstrues narrow remedy.
- Quantum meruit was permissible: extra work ordered by respondent, price was left open; Section 70 Contract Act applied properly.
Respondent
- Contract lacked any clause to vary the rate; existing rate and diesel-variation clause covered transport cost.
- Arbitrator relied on guesses and self-served schedules without documentary proof; no route or penalty records.
- Award rewrote express contract terms and granted compensation on no evidence—HC rightly set it aside.
Factual Background
Appellant secured a tender to mine/transport 222,000 MT bauxite at Rs. 634.20/MT and completed it by September 2001. Respondent requested continuation of work; the parties did not agree fresh rates. Appellant supplied an additional 195,000 MT to March 2002. Dispute arose over payment for extra work, leading to arbitration. The sole arbitrator awarded ≈₹3.72 crore plus interest. The Commercial Court dismissed challenges under Section 34; the High Court under Section 37 set aside the award for “patent illegality.” The appellant appealed.
Statutory Analysis
- Section 5 A&C Act: minimal judicial interference.
- Section 31(7): equity and reasons requirement.
- Section 34(2)/(2A): narrow grounds for setting aside, including patent illegality, but not factual reappraisal.
- Section 37: appellate remedy co-extensive with Section 34.
- Section 70 Contract Act: obligation to pay for non-gratuitous work when contract silent on price.
Alert Indicators
- ✔ Precedent Followed – Affirms narrow review under Sections 34/37
- 🔄 Conflicting Decisions – Disagrees with High Court’s broader approach to “patent illegality”