Allahabad High Court: Amendments Or New Grounds In Section 37 Appeal Barred By Section 34(3) Limitation In Arbitration Act

Allahabad High Court: Amendments or New Grounds in Section 37 Appeal Barred by Section 34(3) Limitation in Arbitration Act

The Allahabad High Court Bench, comprising Justices Mahesh Chandra Tripathi and Prashant Kumar, has clarified that amendments or the introduction of fresh grounds in an appeal under the Arbitration and Conciliation Act, 1996, effectively constitute the filing of a new appeal and are therefore subject to the limitations outlined in Section 34(3) of the Act.

The court emphasized that appellants cannot present new grounds or submit fresh evidence in appeals under Section 37 of the Act.

The appeal in question was filed under Section 37 of the Act, seeking to quash a judgment and order from the Commercial Court, Jhansi, dated February 14, 2023. This judgment stemmed from an arbitration case resolved by a sole arbitrator on May 3, 2022. The dispute arose from a tender issued on August 1, 2008, for the construction of a head regulator aimed at flood protection for Banda City. The contractor's bid was accepted, with a commencement date set for November 22, 2008, and a completion period of nine months.

Due to various suspensions and delays, the contractor's team faced significant downtime, which the contractor claimed caused substantial financial losses. The matter was subsequently referred to arbitration.

Following extensive proceedings, the sole arbitrator issued an award on May 3, 2022. The state appellant challenged this award in the Commercial Court, which ultimately upheld the award, prompting the current appeal.

The appellants argued that the sole arbitrator failed to review the contract agreement dated November 22, 2008, which included the arbitration clause. They claimed this oversight rendered the award patently illegal. The appellants further contended that the Commercial Court erred by not recognizing that the contractor had not commenced work in a timely manner and accused the contractor of malpractices.

The court reiterated the limited scope for interference in arbitration matters, citing the Supreme Court's judgment in Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd. (2019).

It underscored that awards should only be interfered with when they are contrary to the contractual terms or are ex facie perverse. The court emphasized that the arbitrator is the final authority on both facts and law, and errors not amounting to perversity do not warrant judicial interference. Additionally, the court referenced the Supreme Court’s ruling in Delhi Airport Metro Express

Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd., which stated that contraventions of law not tied to public policy are outside the definition of "patent illegality." The court reiterated that it cannot re-assess evidence to conclude that an award is flawed.

The court firmly rejected the appellants' arguments regarding fresh evidence, referencing the Supreme Court case State of Maharashtra v. Hindustan Construction Co. Ltd. (2010), which ruled that amendments in pleadings after the limitation period expire under Section 34(3) are not permissible.

Ultimately, the court concluded that the appellants failed to demonstrate a case warranting interference under Section 37. The arbitrator had issued a comprehensive award addressing all aspects of the claim, which had been validated by the Commercial Court. Consequently, the court found no merit in the appeals, leading to their rejection.