Scope of Appeal Under S.37 of Arbitration Act is Limited to Grounds in S.34; No Re-Appraisal of Evidence: Delhi High Court - 2025-08-17

Delhi High Court Rejects Appeal Against Aakash Institute Franchisee, Reinforces Limited Scope of Judicial Review in Arbitration

New Delhi: The Delhi High Court has dismissed an appeal challenging an arbitral award in a dispute between Aakash Educational Service Limited and its former franchisee, Sahib Sital Singh Bajwa. The Division Bench of Justice Anil Kshetarpal and Justice Harish Vaidyanathan Shankar held that the scope of judicial interference in arbitral awards under Section 37 of the Arbitration and Conciliation Act, 1996, is extremely narrow and confined to the grounds available under Section 34.

The court reinforced the principle that it cannot act as an appellate body to re-examine evidence or substitute its own view for that of the arbitrator, thereby upholding the finality of the arbitral process.

Case Background

The dispute originated from a franchise agreement dated June 30, 2016, under which Sahib Sital Singh Bajwa and others (the Appellants) operated an "Aakash Institute" coaching center in Pathankot, Punjab. Following disagreements over outstanding payments and other contractual obligations, Aakash Educational Service Limited (the Respondent) terminated the agreement on May 11, 2020.

The matter was referred to a sole arbitrator, who, in an award dated February 9, 2023, directed the appellants to pay ₹66,31,787 towards outstanding dues and ₹6,89,272 for non-deposited TDS to Aakash. The award was subsequently upheld by the District Judge (Commercial Court) in an order dated April 19, 2024. The appellants then approached the High Court under Section 37 of the Arbitration Act, challenging both the award and the Commercial Court's order.

Appellants' Main Arguments

The appellants primarily challenged the award on four grounds:

1. Delay in Award: The award was pronounced nearly two and a half years after the tribunal was constituted, allegedly violating the one-year timeline stipulated under Section 29A of the Arbitration Act.

2. Unenforceable Contract: The underlying franchise agreement was one-sided and imposed an undue burden on them.

3. Evidence Ignored: The arbitrator and the Commercial Court failed to consider the evidence presented by the appellants.

4. Force Majeure: No consideration was given to the financial hardships caused by the COVID-19 pandemic, which should have been treated as a force majeure event.

Court's Analysis and Legal Principles

The High Court systematically addressed and dismissed each of the appellants' contentions, heavily relying on established Supreme Court precedents that advocate for minimal judicial intervention in arbitral awards.

On Delay (Section 29A Challenge): The Bench swiftly dismissed the primary argument regarding delay. It pointed to the Supreme Court's order in Cognizance for Extension of Limitation, In re , which explicitly excluded the period from March 15, 2020, to February 28, 2022, from limitation periods, including the timeline under Section 29A of the Arbitration Act. Once this period was excluded, the award was found to be well within the statutory timeline.

On Scope of Interference under Section 37: The judgment extensively quoted recent Supreme Court rulings, including Punjab State Civil Supplies Corpn. Ltd. v. Sanman Rice Mills (2024) and Dyna Technology Private Limited v. Crompton Greaves Limited , to underscore the limited jurisdiction of courts in such matters. The court reiterated that:

“The scope of interference in an appeal under Section 37 of the Act is restricted and subject to the same grounds on which an award can be challenged under Section 34 of the Act... the court cannot undertake an independent assessment of the merits of the award.”

The court emphasized that its role is not to re-appraise evidence or interfere merely because an alternative view is possible. Interference is warranted only in cases of patent illegality that goes to the root of the matter, not for mere errors of fact or law.

On Merits of the Case: The High Court found that the arbitrator had conducted a thorough and well-reasoned analysis of the dispute. It noted that the arbitrator meticulously examined the correspondence between the parties to determine that it was Aakash who terminated the contract due to the franchisee's breaches, including non-payment of dues. The arbitrator had also rejected the franchisee's counter-claims for infrastructure costs and damages, finding them unsupported by the agreement and evidence.

Final Decision

The High Court concluded that neither the arbitral award nor the Commercial Court's order suffered from any infirmity, perversity, or patent illegality. It held that the arbitrator had judiciously considered all factual and legal aspects of the case.

The court also took note of an application for condonation of a 360-day delay in re-filing the appeal, stating that while such an "inordinate delay" would ordinarily not be condoned, it was not examining the application since the appeal was found to be meritless.

Accordingly, the appeal was dismissed, solidifying the arbitral award in favour of Aakash Educational Service Limited.