2023 Supreme(Del) 1730

IN THE HIGH COURT OF DELHI AT NEW DELHI
Chandra Dhari Singh, J.
M/s Satish Chand Rajesh Kumar Pvt. Ltd. – Appellant
Versus
New Delhi Municipal Council & Anr. – Respondents
Arb. A. (COMM.) 42 of 2022
Decided On : 11-04-2023

The scope of the court's jurisdiction under Section 37(2) of the Arbitration and Conciliation Act, 1996, is limited and it cannot enter into the merits of the claim in an appeal under this provision. The arbitrator's decision cannot be set aside unless it is against the public policy of India, which includes the fundamental policy of Indian law and basic notions of justice or morality. The arbitrator's decision cannot be set aside on the ground of patent illegality unless it goes to the root of the matter and does not amount to a mere erroneous application of the law. The arbitrator's decision cannot be set aside on the ground of perversity unless it is based on no evidence, takes into account irrelevant factors, or ignores vital evidence.

Headnote:

ARBITRATION - APPEAL - SCOPE - JURISDICTION - INTERIM ORDERS - SECTION 37(2) OF THE ARBITRATION AND CONCILIATION ACT, 1996 - PUBLIC POLICY OF INDIA - FUNDAMENTAL POLICY OF INDIAN LAW - PATENT ILLEGALITY - PERVERSE DECISION - EXTENSION OF TIME - LIQUIDATED DAMAGES - ABANDONMENT OF WORK - BLACKLISTING - DELAY IN SEEKING INTERIM RELIEF - BALANCE OF CONVENIENCE - IRREPARABLE INJURY.

Fact of the Case:

The appellant, a company engaged in civil contracts, was awarded a contract by the respondent, Municipal Council of New Delhi, for the redevelopment of a community center. The contract was to be completed within 18 months from the date of acceptance of the letter of acceptance. However, the appellant faced several hindrances and delays, including the presence of a dispensary on the site, the removal of trees, and the revision of drawings. The appellant invoked the arbitration clause in the agreement and sought the appointment of an arbitrator. The arbitrator was appointed by the court, and the appellant also filed a writ petition challenging the order of the respondent debarring the appellant from participating in tenders for three years. The arbitrator dismissed the appellant's application under Section 17 of the Arbitration and Conciliation Act, 1996, seeking a stay of the order of debarment. The appellant filed an appeal against the arbitrator's order under Section 37(2) of the Act.

Finding of the Court:

The court held that the scope of its jurisdiction under Section 37(2) of the Act is limited and that it cannot enter into the merits of the claim in an appeal under this provision. The court also held that the arbitrator's decision cannot be set aside unless it is against the public policy of India, which includes the fundamental policy of Indian law and basic notions of justice or morality. The court further held that the arbitrator's decision cannot be set aside on the ground of patent illegality unless it goes to the root of the matter and does not amount to a mere erroneous application of the law. The court also held that the arbitrator's decision cannot be set aside on the ground of perversity unless it is based on no evidence, takes into account irrelevant factors, or ignores vital evidence.

Issues: 1. Whether the court has jurisdiction to entertain an appeal under Section 37(2) of the Arbitration and Conciliation Act, 1996, against an interim order passed by an arbitrator? 2. Whether the arbitrator's decision can be set aside on the ground that it is against the public policy of India? 3. Whether the arbitrator's decision can be set aside on the ground of patent illegality? 4. Whether the arbitrator's decision can be set aside on the ground of perversity?

Ratio Decidendi: 1. The court's jurisdiction under Section 37(2) of the Arbitration and Conciliation Act, 1996, is limited and it cannot enter into the merits of the claim in an appeal under this provision. 2. The arbitrator's decision cannot be set aside unless it is against the public policy of India, which includes the fundamental policy of Indian law and basic notions of justice or morality. 3. The arbitrator's decision cannot be set aside on the ground of patent illegality unless it goes to the root of the matter and does not amount to a mere erroneous application of the law. 4. The arbitrator's decision cannot be set aside on the ground of perversity unless it is based on no evidence, takes into account irrelevant factors, or ignores vital evidence.

Final Decision: The court dismissed the appellant's appeal, holding that the arbitrator's order was not perverse and that there was no reason to interfere with the arbitrator's decision.