Scope of interference by courts in regard to arbitral awards limited: Supreme Court

The Supreme Court has held that an arbitral award can be challenged only if it is perverse or erroneous in law. An award based on an alternative and reasonable interpretation of the law does not make it perverse.

“In order to succeed in a challenge against an arbitral award, it must be shown that the award of the arbitrator suffered from perversity or an error of law or that the arbitrator has otherwise misconducted himself. Merely showing that there is another reasonable interpretation or possible view on the basis of the material on the record is insufficient to allow for the interference by the court,” a three-judge Bench led by Chief Justice of India N.V. Ramana held in a recent judgment.

‘Settled proposition of law’

The court need not interfere with an arbitral award under challenge if the arbitrator had taken a different but possible view on the same evidence. This was a settled proposition of law, Chief Justice Ramana, who authored the judgment, said.

At the outset, the scope of interference by courts in regard to arbitral awards was limited, the judgment said.

A court does not sit in appeal over the findings and decision of the arbitrator. Nor can it reassess or reappreciate evidence or examine the sufficiency or otherwise of the evidence unless the award meets the grounds for setting it aside under Section 30 of the Arbitration Act.

“By reason of a long catena of cases, it is now a well-settled principle of law that reappraisal of evidence by the court is not permissible and, as a matter of fact, exercise of power by the court to reappraise the evidence is unknown to proceedings under Section 30 of the Arbitration Act,” the judgment noted.

The apex court held that a challenge to an arbitral award should either show an error apparent on the face of the award or prove the arbitrator had misconducted himself or the proceedings.

The award under challenge in the case concerned a National Thermal Power Corporation project tender to construct residential quarters.