It is mercifully unnecessary to repeat and quote the profusion of judicial authority on the issue that Section 34 jurisdiction is neither appellate nor supervisory; it is to ensure that awards are expressions of decisions of
agreed private judges, are broadly in conformity with law and are not preceded by an approach that betrays unreasonableness in procedure or outcome of the kind that would shock a court of law, or disclose patently erroneous understanding of law: [Ref Saw Pipes (supra) and Mc Dermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181]. The decision in Associate Builders v Delhi Development Authority [2015 (3) SCC 49] cautioned courts from intervening with findings in Arbitral Tribunal awards, on public policy grounds unless there was a patent error of law or a manifestly unreasonable finding (which have now become precepts for the approach under Section 34) thus: “33. It must clearly be understood that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his Arbitral Tribunal award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts.”
19. The second facet which Courts must be conscious of is that if the arbitrator commits an error in contract interpretation, that is an error within her jurisdiction (Ref MSK Projects (I) (JV) Ltd v State of Rajasthan and Anr. 2011 (10) SCC 53; G. Ramachandra Reddy v Union of India and Anr. 2009 (6) SCC 414; McDermott International Inc. v. Burn Standard Co. Ltd. and Ors., (2006) 11 SCC 181 and Renusagar Power Co. Ltd. v. General Electric Co. and Anr. 1984 (4) SCC 679). In McDermott International (supra), the
Supreme Court clarified the Court’s inherent limitation by reason of Section 34 in such matters:
“112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. (See Pure Helium India (P) Ltd. v. ONGC [(2003) 8 SCC 593] and D.D. Sharma v. Union of India [(2004) 5 SCC 325]). 113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award.” 20. Likewise, in Steel Authority of India v. Gupta Brothers 2009 (10) SCC 63, the Court held that Section 34 would be attracted in cases where an arbitrator “travels beyond the contract”, or makes an award “contrary to the terms of the contract”. Section 34, however, the Court stated, cannot be used to set aside awards in which there was an “error relatable to interpretation of the contract”, or if it was based on a “possible view of the matter”, or if it was based on a finding of law in a case where a “specific question of law [had been] submitted to the arbitrator.” In short, it is not the courts’ primary responsibility to examine the award as though they were sitting in appeal over it.
IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 16.10.2018
FAO (OS) 458/2012
POWER GRID CORPORATION OF INDIA Vs L.S. CABLE
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE A.K. CHAWLA
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