Section 37 Appeal: Delhi HC Refuses To Re-Appreciate Quantum Evidence In Arbitral Award

The Delhi High Court affirmed that appellate courts exercising jurisdiction under Section 37 of the Arbitration and Conciliation Act, 1996 cannot act as courts of appeal to re-evaluate factual findings or re-appreciate evidence already considered by an Arbitrator. In a significant ruling, the Court dismissed an appeal challenging an arbitral award, emphasizing that interference is only warranted in cases of patent illegality or jurisdictional error.

In a decision delivered by a division bench comprising Justice Anil Kshetarpal and Justice Amit Mahajan, the High Court scrutinized the limitations of judicial intervention in arbitration matters. The Court was hearing an appeal against a Single Judge's order that had previously refused to set aside an award concerning the wrongful encashment of a Performance Bank Guarantee (PBG) and the adjustment of mobilization advances.

Limited Scope of Judicial Interference Under the Arbitration Act

The Court emphasized that the jurisdiction under Section 37 is even more circumscribed than that under Section 34 of the Arbitration and Conciliation Act, 1996. Relying on the principles established in MMTC Ltd. v. Vedanta Ltd. ( "(2019) 4 SCC 163": 2019 CaseBase(SC) 3410) and UHL Power Co. Limited v. State of Himachal Pradesh ( "(2022) 4 SCC 116": 2022 CaseBase(SC) 1043), the Court noted that it must exercise restraint and cannot substitute its own view for that of the Arbitral Tribunal. The bench observed that the role of the Court is primarily supervisory, as highlighted in McDermott International Inc. v. Burn Standard Co. Ltd. & Ors. ( "(2006) 11 SCC 181": 2006 CaseBase(SC) 687), and is intended to ensure the integrity of the process rather than to perform a de novo review of the merits.

Rationale on Claims for Bank Guarantee and Mobilization Advance

The dispute primarily revolved around 'Claim No. 6', relating to the refund of an encashed PBG. The Appellant contended that the Arbitrator failed to account for a sum of Rs. 93,01,410/- already recovered towards mobilization advance. However, the Court found that the Arbitrator had already determined the termination of the contract to be wrongful due to a force majeure event (an earthquake in Nepal), making the PBG encashment illegal.

The Court, in its reasoning, observed: "...the jurisdiction of the appellate court under Section 37 is circumscribed and does not extend beyond the parameters laid down under Section 34... the appellate court, while exercising powers under Section 37, does not sit in Appeal over the arbitral award and cannot re-appreciate the evidence. The scope of interference is confined to examining whether the court under Section 34 has either exceeded its jurisdiction or failed to exercise jurisdiction vested in it."

The Court has following directions:

"The present Appeal is accordingly dismissed. The pending application stands closed."

Background:

The case originated from a 2012 contract between Ircon International Limited (Appellant) and M/s. Tantia Construction Limited (Respondent) for construction works. Following disputes, an Arbitrator was appointed who awarded approximately Rs. 4.80 Crores to the Respondent. The Appellant challenged this award before a Single Judge of the Delhi High Court under Section 34, primarily arguing computational errors in 'Claim No. 6'.

The Single Judge dismissed the petition, noting that the plea of adjustment of Rs. 93,01,410/- had not been raised before the Arbitrator in the original Statement of Defence. In the subsequent Section 37 appeal, the Division Bench reiterated that fresh factual pleas cannot be entertained for the first time at the appellate stage. The Court referred to Project Director, NHAI v. M. Hakeem & Anr. to underscore that courts cannot modify awards and must adhere to the strict grounds of the Arbitration and Conciliation Act, 1996. It was further observed that the findings in Punjab State Civil Supplies Corpn. Ltd. v. Sanman Rice Mills clarify that appellate courts should not interfere with plausible interpretations of contracts made by tribunals.

Case Details: Case No.: FAO(OS) (COMM) 212/2024 & CM APPL. 54328/2024 Case Title: IRCON INTERNATIONAL LIMITED v. M/S. TANTIA CONSTRUCTION LIMITED Appearances: For the Petitioner(s): Mr. Suman Doval & Mr. Lakshay Chaudhary, Advs. For the Respondent(s): Mr. Sanjoy Bhaumik, Adv.

Source: 2026 CaseBase(DEL) 342