Acts and Sections Discussed:

• Arbitration and Conciliation Act, 1996
  • Section 34: Application for setting aside an arbitral award.
  • Section 37: Appeal against orders related to arbitral awards.
  • Section 5: Limits judicial intervention in arbitration.

The appeal arose from the judgment of the High Court of Punjab & Haryana, which had set aside an arbitral award under Section 37 of the Arbitration and Conciliation Act, 1996. The Supreme Court of India held that the High Court had overstepped its jurisdiction, as the scope of interference under Sections 34 and 37 is limited. The Court restored the arbitral award, emphasizing minimal judicial interference in arbitration matters.

1. Challenge to High Court Judgment (Paras 1-2):
   The appellant, Punjab State Civil Supplies Corporation, challenged the High Court's order that set aside an arbitral award confirmed under Section 34 of the Arbitration Act.

2. Facts of the Case (Paras 3-5):
   The Corporation entered into a contract with Sanman Rice Mills to mill paddy and supply the resultant rice. A shortfall of 35,110.39 quintals of rice worth ₹7,16,15,716 led to a dispute. The rice mill paid ₹5 crore but left a balance of ₹2,16,15,716, resulting in arbitration. The arbitrator awarded ₹2,67,66,804 to the Corporation with 12% interest. The Rice Mill’s challenge under Section 34 was dismissed, but the High Court set aside both the arbitral award and the Section 34 decision.

3. Scope of Section 37 (Paras 9-11):
   The Court discussed the limited powers under Section 37 of the Act, which are akin to those under Section 34. Section 37 does not allow the Appellate Court to reassess evidence or reappraise the arbitral award on merits unless it falls under specific grounds.

4. Legal Position on Court Interference (Paras 12-14):
   Judicial interference in arbitral awards is limited to cases involving violations of public policy, fraud, corruption, or basic principles of morality and justice. The courts are not permitted to reexamine evidence or substitute the arbitrator's findings unless the award is found to be perverse.

5. Precedents Cited (Paras 15-19):
   Several judgments were cited, including:

   • Bharat Coking Coal Ltd. v. L.K. Ahuja (2001): Limits interference in arbitral awards.
   • Dyna Technology Pvt. Ltd. v. Crompton Greaves Ltd. (2019): Courts should not interfere casually with arbitral awards.
   • MMTC Ltd. v. Vedanta Ltd. (2019): Emphasizes respecting the arbitral tribunal's findings.
   • Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking (2023): Reaffirms narrow scope of Sections 34 and 37.

6. Scope of Appellate Powers (Paras 20-21):
   The appellate power under Section 37 is not the same as the standard civil appellate jurisdiction. The Appellate Court cannot reassess facts or evidence, and its power is limited to determining whether the lower court exercised its authority under Section 34 correctly.

7. Conclusion (Paras 22-24):
   The Supreme Court found that the arbitral award was reasonable and did not violate public policy. The High Court's intervention was erroneous. Therefore, the Court set aside the High Court’s judgment and restored the arbitral award dated 08.11.2012.

Ratio Decidendi:

The scope of judicial interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, is narrow. Courts should not act as appellate forums to review the merits of the arbitral award or reassess evidence unless the award violates public policy, statutory provisions, or is patently illegal. The autonomy of arbitration proceedings should be respected to ensure minimal court interference.

Subjects:

• Arbitration, Judicial Intervention, Arbitral Awards
• Arbitration and Conciliation Act, 1996, Section 34, Section 37, Public Policy, Arbitration, Court Powers, Arbitral Tribunal, Judicial Review