Well reasoned Arbitral Award backed by evidence cannot be challenged under section 34 [Read Order]

Kolkatta: The Calcutta High Court has delivered a significant ruling, affirming that a well-reasoned arbitral award, supported by substantial evidence, cannot be challenged under Section 34 of the Arbitration and Conciliation Act, 1996.

Justice Sabyasachi Bhattacharyya passed the order while dismissing a challenge to an arbitral award filed by Damodar Valley Corporation (DVC) against BLA Projects Pvt. Ltd.

The case arose from a contract between DVC and BLA Projects for the transportation of coal. DVC terminated the contract, alleging corrupt and fraudulent practices by BLA Projects. The arbitrator ruled in favor of BLA Projects on several claims, including unpaid bills and loss of profit, while rejecting DVC’s counterclaims.

The court noted that the arbitrator provided elaborate reasons and conducted a detailed factual appreciation of the entire evidence on record before arriving at his findings. Justice Bhattacharyya observed, “This Court, as is well-settled by the Supreme Court in several judgments, cannot enter into a reappreciation of evidence like a regular first appellate court, sitting in a challenge under Section 34 of the 1996 Act.”

Referring to the limited scope of patent illegality as a ground for challenge under Section 34(2A), the court highlighted, “Such patent illegality has to appear on the face of the award. Also, the proviso to the sub-section stipulates that an award shall not be set aside on the said score merely on the ground of an erroneous application of law or by reappreciation of evidence.”

The court found that the arbitrator had correctly interpreted the termination clause and considered extensive evidence regarding unpaid bills, loss of profit, and other claims. It stated, “The judgment of the Arbitrator is perfectly well-reasoned and supported by cogent evidence and, as such, none of the grounds of challenge under Section 34 of the 1996 Act are established.”

Emphasizing the limited scope of interference with arbitral awards, the court observed, “There is nothing in the award to attract the grounds of contravention of the fundamental policy of Indian law or to hold that it is in conflict with the basic notions of morality or justice.”

The court dismissed DVC’s challenge, thereby affirming the arbitral award dated August 14, 2021.

In conclusion, while dismissing the challenge to the arbitral award, the court reaffirmed the well-settled principle that courts cannot reappreciate evidence or interfere with well-reasoned arbitral awards under Section 34 of the Arbitration Act, except on very limited grounds.

[Read Order]