Himachal Pradesh High Court
Decided On: 7Th April vs Surinder Singh on 7 April, 2025
Author: Jyotsna Rewal Dua
Bench: Jyotsna Rewal Dua
2025:HHC:9451 IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Arb. Appeal No.46 of 2023 Decided on: 7th April, 2025
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H.P. Housing and Urban Development
Authority and another .....Appellants
Versus
Surinder Singh .....Respondent
------------------------------------------------------------------------------------- Coram Ms. Justice Jyotsna Rewal Dua Whether approved for reporting? 1 For the Appellants: Mr. Kush Sharma, Advocate. For the Respondent: Mr. Sunil Mohan Goel, Senior Advocate with Mr. Paras Dhaulta and Mr. Abhinav M. Goel, Advocates.
------------------------------------------------------------------------------------ Jyotsna Rewal Dua, Judge Claim preferred by the respondent was allowed by the learned Arbitrator on 18.06.2022. The claimant was held entitled to an additional amount of Rs.19,68,552/-, being the cost of wood work as approved by the appellants for Ivory Coast Wood with interest @ 11% per annum w.e.f. 01.11.2019 till 18.06.2022 with future interest at the same rate till the date of actual payment.
The aforesaid award was affirmed by the learned District Judge on 08.08.2023. Objections preferred under 1 Whether reporters of print and electronic media may be allowed to see the order? Yes. 2
2025:HHC:9451 Section 34 of the Arbitration and Conciliation Act, 1996 (in short 'the Act') by the appellants were dismissed. The appellants have now taken recourse to Section 37 of the Act for assailing the award dated 18.06.2022, as affirmed by the learned District Judge on 08.08.2023.
2. Facts:-
2(i). The appellants awarded construction work of Partially Financing Scheme at Bindraban, Phase-I (Palampur), District Kangra in favour of the respondent vide award letter dated 22.10.2018. Cost of the work was Rs.2,19,26,948.56/-.
2(ii). Work was to be executed in accordance with H.P. Public Works Department specifications and applicable BIS & IRC codes. Time period for completion of the work was 18 months to be reckoned from 15th day of the issuance of award letter.
2(iii). The respondent completed the construction work within the timelines stipulated in the award letter.
Against item No.21, he submitted his bill for Rs.19,68,552/- as costs of Ivory Coast Wood. This bill was not cleared by the appellants. The dispute finally went before the learned Arbitrator. The respondent besides claiming Rs.19,68,552/-, also prayed for Rs.7,67,735.28/-3
2025:HHC:9451 as interest @ 18% per annum w.e.f. 01.11.2019 till 11.01.2022 with further claim for interest pendente lite, future interest, GST and litigation as well as arbitration cost.
2(iv). The appellants disputed the claim. Learned Arbitrator, as noticed above, allowed the claim on 18.06.2022. The award was affirmed by the learned District Judge on 08.08.2023. Feeling aggrieved, the appellants have now instituted this appeal under Section 37 of the Act.
3. Submissions:-
3(i). Learned counsel for the appellants has not disputed that:-
(a). The award work was to be completed by the respondent within 18 months and the period was to be reckoned from the 15th day of the issuance of award letter, i.e. work was to be completed by 04.05.2020.
(b). As per item No.21 of the Schedule of Quantity, the wood work was to be carried out by the respondent using 2nd class deodar wood.
(c). After award of the work, Drawing bearing No.188, was supplied by the Architect of the appellants to the respondent-Contractor. In the drawing, for item No.21, 4 2025:HHC:9451 type of the wood to be used in the construction was changed from 2nd class deodar wood to Ivory Coast Wood.
(d). The respondent started staking Ivory Coast Wood in order to complete the wood work as per the Drawing bearing No.188.
(e). Since, in terms of the drawing provided by the office of Chief Executive Officer-cum-Secretary of the appellants to the Executive Engineer, HIMUDA Dharamshala Division, item No.21 was to be executed using Ivory Coast Wood instead of 2 nd class deodar wood, the Executive Engineer called for quotations of Ivory Coast Wood from different timber traders of District Kangra.
(f). The work was completed by the respondent-
Contractor by 01.10.2019 and in accordance with the drawing against item No.21, i.e. by using Ivory Coast Wood.
(g). Performance certificate was issued to the respondent-Contractor on 16.12.2019, certifying that the work had been completed by him in all respects. The performance certificate issued by the appellants assessed the capability of the contractor as 'very good'. 3(ii). Learned counsel for the appellants submits that the contract provided use of 2nd class deodar wood and not Ivory Coast Wood, therefore, even though the drawing had 5 2025:HHC:9451 been supplied by the appellants to the respondent- Contractor for using Ivory Coast Wood instead of 2nd class deodar wood, the respondent-Contractor was required to wait for the approval of the rates for Ivory Coast Wood. Instead of waiting for the approval of the rates for use of Ivory Coast Wood, the respondent-Contractor mischievously carried out the work using the Ivory Coast Wood and raised exorbitant bill against item No.21.
3(iii). Learned counsel for the appellants further submitted that the respondent had been advised by the appellants to wait for the formal approval of the competent authority before using the Ivory Coast Wood. The use of Ivory Coast Wood instead of 2nd class deodar wood, as provided under the agreement, amounts to re-writing the contract, specifically Clause 12 thereof. Learned Arbitrator has not looked into this aspect. The award suffers from patent illegality. Learned District Judge has also not considered this facet in its proper perspective. 3(iv). Learned counsel also raised the plea that the respondent by using Ivory Coast Wood against item No.21 had actually committed fraud upon the appellants. 6
2025:HHC:9451 Prayer was accordingly made for setting aside the award dated 18.06.2022 and the judgment passed by the learned District Judge on 08.08.2023. 3(v). Learned Senior Counsel for the respondent- Contractor defended the award as also the judgment passed by the learned District Judge. It was also submitted that plea of fraud, as is being sought to be raised now, was neither urged before the learned Arbitrator nor before the learned District Judge. It has also not been taken as a ground in the present appeal. Placing reliance upon several decisions of the Hon'ble Apex Court and this Court, it was contended that the view taken by the learned Arbitrator is a plausible view, which has been affirmed by the learned District Judge and as per settled legal position, no interference with the same is called for.
4. Consideration:-
Heard learned counsel for the parties and considered the case file.
4(i). Patent illegality in the Award/re-appreciation of evidence/jurisdiction.
4(i)(a). It is by now well-settled that the scope of Appellate Court exercising jurisdiction under Section 37 of the Act to review the findings in an award, is 7 2025:HHC:9451 narrow/limited, if the award has been upheld or substantially upheld under Section 34. [Ref. Larsen Air Conditioning and Refrigeration Company vs. Union of India2] In Konkan Railway Corporation Ltd. Vs. Chenab Bridge Project Undertaking3, it was held that jurisdiction of the Court under Section 37 of the Act is akin to that under Section 34 of the Act. The Courts ought not to interfere with arbitral award in a casual and cavalier manner. Mere possibility of an alternative view on facts or interpretation of contract does not entitle Courts to reverse findings of the Arbitral Tribunal. Relevant paragraphs from the decision are as follows:-
"19. Therefore, the scope of jurisdiction under Section 34 and Section 37 of the Act is not akin to normal appellate jurisdiction.4 It is well-settled that courts ought not to interfere with the arbitral award in a casual and cavalier manner. The mere possibility of an alternative view on facts or interpretation of the contract does not entitle courts to reverse the findings of the Arbitral Tribunal.5 In Dyna Technologies Private Limited v. Crompton Greaves Limited6, this Court held: "24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted 2 Civil Appeal No.3798 of 2023, decided on 11.08.2023 3 2023(9) SCC 85 4 UHL Power Company Ltd. v. State of Himachal Pradesh (2022) 2 SCC (Civ) 401, para 15. See also: Dyna Technologies Pvt Ltd v. Crompton Greaves Limited (2019) 20 SCC 1, para 24,
25. 5 ibid; Ssangyong Engineering. & Construction Company Ltd. v. National Highways Authority of India (NHAI) (2019) 15 SCC 131; Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd., (2019) 7 SCC 236, para 11.1.6
(2019) 20 SCC 1 8 2025:HHC:9451 by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.
25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act."
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25. The principle of interpretation of contracts adopted by the Division Bench of the High Court that when two constructions are possible, then courts must prefer the one which gives effect and voice to all clauses, does not have absolute application. The said interpretation is subject to the jurisdiction which a court is called upon to exercise. While exercising jurisdiction under Section 37 of the Act, the Court is concerned about the jurisdiction that the Section 34 Court exercised while considering the challenge to the Arbitral Award. The jurisdiction under Section 34 of the Act is exercised only to see if the Arbitral Tribunal's view is perverse or manifestly arbitrary. Accordingly, the question of reinterpreting the contract on an alternative view does not arise. If this is the principle applicable to exercise of jurisdiction under Section 34 of the 9 2025:HHC:9451 Act, a Division Bench exercising jurisdiction under Section 37 of the Act cannot reverse an Award, much less the decision of a Single Judge, on the ground that they have not given effect and voice to all clauses of the contract. This is where the Division Bench of the High Court committed an error, in re-interpreting a contractual clause while exercising jurisdiction under Section 37 of the Act. In any event, the decision in Radha Sundar Dutta (supra), relied on by the High Court was decided in 1959, and it pertains to proceedings arising under the Village Chaukidari Act, 1870 and Bengal Patni Taluks Regulation of 1819. Reliance on this judgment particularly for interfering with the concurrent interpretations of the contractual clause by the Arbitral Tribunal and Single Judge under Section 34 of the Act is not justified."
In Bombay Slum Redevelopment Corporation Pvt. Ltd. Vs. Samir Barain Bhojwani 7, the Hon'ble Apex Court emphasized that supervisory role of Courts is very restricted in dealing with appeals under Section 37 of the Act. Scope of interference in a petition under Section 34 of the Act is very narrow. Jurisdiction under Section 37 of the Act is narrower. By their own volition, the parties choose to go before the Arbitral Tribunal instead of availing remedy before the traditional Civil Courts. Therefore, Courts must be very conservative while dealing with arbitral awards and confine themselves to the grounds strictly available under Section 34 of the Act.
7 (2024) 7 SCC 218 10 2025:HHC:9451 4(i)(b). In Reliance Infrastructure Ltd. vs. State of Goa8, Hon'le Apex Court held that 'patent illegality' in the award calls for interference but a mere illegality is not patent illegality. It ought to be apparent on the face of the award and not the one which is culled out by way of a long drawn analysis of pleadings and evidence. Relevant paragraphs of the decision relevant to the context are under:-
"57. As noticed, arbitral award is not an ordinary adjudicatory order so as to be lightly interfered with by the Courts under Sections 34 or 37 of the Act of 1996 as if dealing with an appeal or revision against a decision of any subordinate Court. The expression "patent illegality" has been exposited by this Court in the cases referred hereinbefore. The significant aspect to be reiterated is that it is not a mere illegality which would call for interference, but it has to be "a patent illegality", which obviously signifies that it ought to be apparent on the face of the award and not the one which is culled out by way of a long-drawn analysis of the pleadings and evidence.
58. Of course, when the terms and conditions of the agreement governing the parties are completely ignored, the matter would be different and an award carrying such a shortcoming shall be directly hit by Section 28(3) of the Act, which enjoins upon an Arbitral Tribunal to decide in accordance with the terms of contract while taking into account the usage of trade applicable to the transaction. As said by this Court in Associate Builders vs. DDA9, if an Arbitrator construes the term of contract in a reasonable manner, the award cannot be set aside with reference to the deduction drawn from construction. The possibility of interference would arise only if the construction of the Arbitrator is such which 8 (2024) 1 SCC 479 9 (2015) 3 SCC 49 11 2025:HHC:9451 could not be made by any fair-minded and reasonable person.
95. The narrow scope of "patent illegality" cannot be breached by mere use of different expressions which nevertheless refer only to "error" and not to "patent illegality". We are impelled to reiterate what has been stated and underscored by this Court in Delhi Airport Metro Express (P) Ltd. Vs. DMRC10 that restraint is required to be shown while examining the validity of arbitral award by the Courts, else interference with the award after reassessing the factual aspects would be defeating the object of the Act of 1996. This is apart from the fact that such an approach would render several judicial pronouncements of this Court redundant if the arbitral awards are set aside by categorizing them as "perverse" or "patently illegal" without appreciating the contours of these expressions."
In Larsen Air Conditioning and Refrigeration Company's2 case, Hon'ble Apex Court held that Section 34 of the Act, permits the Court to interfere with an award, sans the grounds of patent illegality, i.e., that illegality must go to the root of the matter and cannot be of a trivial nature. Relevant paragraphs from the decision reads as under:-
"15. The limited and extremely circumscribed jurisdiction of the court under Section 34 of the Act, permits the court to interfere with an award, sans the grounds of patent illegality, i.e., that "illegality must go to the root of the matter and cannot be of a trivial nature"; and that the tribunal "must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground" [ref:
Associate Builders (supra)]. The other ground would be denial of natural justice. In appeal, Section 37 of the Act grants narrower scope to the appellate court to review 10 (2022) 1 SCC 131 12 2025:HHC:9451 the findings in an award, if it has been upheld, or substantially upheld under Section 34. It is important to notice that the old Act contained a provision11 which enabled the court to modify an award. However, that power has been consciously omitted by Parliament, while enacting the Act of 1996. This means that the Parliamentary intent was to exclude power to modify an award, in any manner, to the court. This position has been iterated decisively by this Court in Project Director, National Highways No. 45E and 220 National Highways Authority of India v M. Hakeem12:
"42. It can therefore be said that this question has now been settled finally by at least 3 decisions [McDermott International Inc. v. Burn Standard Co. Ltd.13], [Kinnari Mullick v. Ghanshyam Das Damani14], [Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies (P) Ltd.15] of this Court. Even otherwise, to state that the judicial trend appears to favour an interpretation that would read into Section 34 a power to modify, revise or vary the award would be to ignore the previous law contained in the 1940 Act; as also to ignore the fact that the 1996 Act was enacted based on the Uncitral Model Law on International Commercial Arbitration, 1985 which, as has been pointed out in Redfern and Hunter on International Arbitration, makes it clear that, given the limited judicial interference on extremely limited grounds not dealing with the merits of an award, the "limited remedy" under Section 34 is coterminous with the "limited right", namely, either to set aside an award or remand the matter under the circumstances mentioned in Section 34 of the Arbitration Act, 1996."
In S.V. Samudram vs. State of Karnataka16, the Hon'ble Apex Court held that jurisdiction of Court 11 "15. Power of court to modify award.--The court may by order modify or correct an award--
(a) where it appears that a part of the award is upon a matter not referred to arbitration and such part can be separated from the other part and does not affect the decision on the matter referred; or
(b) where the award is imperfect in form, or contains any obvious error which can be amended without affecting such decision; or
(c) where the award contains a clerical mistake or an error arising from an accidental slip or omission." 12 (2021) 5 SCR 368 13 (2006) 11 SCC 181 14 (2018) 11 SCC 328 : (2018) 5 SCC (Civ) 106 15 (2021) 7 SCC 657 16 (2024) 3 SCC 623 13 2025:HHC:9451 under Section 34 is fairly narrow and moreover, when it comes to jurisdiction under Section 37 it is all the more circumscribed. The relevant paragraphs from the decision reads as under:-
"46. It has been observed by this Court in MMTC Ltd. v.
Vedanta Ltd.17 "14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings."
(Emphasis Supplied)
47. This view has been referred to with approval by a bench of three learned Judges in UHL Power Company Ltd v. State of Himachal Pradesh18. In respect of Section 37, this court observed:-
"16. As it is, the jurisdiction conferred on courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an appellate court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed."
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49. We may also notice that the circumscribed nature of the exercise of power under Sections 34 and 37 i.e., interference with an arbitral award, is clearly demonstrated by legislative intent. The Arbitration Act of 1940 had a provision (Section 15) which allowed for a 17 (2019) 4 SCC 163 18 (2022) 4 SCC 116 14 2025:HHC:9451 court to interfere in awards, however, under the current legislation, that provision has been omitted.19
50. The learned Single Judge, similar to the learned Civil Judge under Section 34, appears to have not concerned themselves with the contours of Section 37 of the A&C Act. The impugned judgment20 reads like a judgment rendered by an appellate court, for whom re-
examination of merits is open to be taken as the course of action."
4(ii). In the backdrop of above legal position, the award passed by the learned Arbitrator cannot be said to be suffering from any patent illegality, necessitating interference by the Court in exercise of jurisdiction under Section 37 of the Act.
It has not been disputed by learned counsel for the appellants that Drawing No.188 against item No.21 for use of Ivory Coast Wood instead of 2nd class deodar wood was supplied by the appellants to the respondent- Contractor. The appellants have also not disputed that the respondent-Contractor executed the work in accordance with the drawing supplied to it. It is also an admitted position that quotations for Ivory Coast Wood from different traders of District Kangra were invited by the appellants themselves. Learned Arbitrator as well as learned District Judge have referred to the evidence adduced by the parties. 19 Larsen Air Conditioning and Refrigeration Company v. Union of India and Others 2023 SCC OnLine 982 (2-Judge Bench) 20 S.V. Samudram v. State of Karnataka, 2017 SCC OnLine Kar 6559 15 2025:HHC:9451 It is borne out from the record that official of the appellants while appearing in the evidence as Objector No.2 stated that as per the final drawing supplied to the respondent- Contractor, type of the wood to be used in the construction work was changed from 2nd class Deodar to Ivory Coast. That an Assistant Engineer of the appellants remained at the site throughout and monitored the construction work including the use of Ivory Coast Wood.
4(iii). The appellants cannot blame the respondent- Contractor for completing the work using Ivory Coast Wood against item No.21 prior to the scheduled date of completion of the work and on that ground, find fault with him for not waiting for the approval of rates of Ivory Coast Wood by the competent authority. Learned Arbitrator has referred to the evidence adduced by the parties and concluded that the appellants had even failed to prove their projected stand that they had ever advised the respondent to wait for formal approval of the rates of Ivory Coast Wood before commencing the work. Nature of work being time bound has also not been denied.
4(iv). The plea of fraud being urged now by the appellants was admittedly not raised before the learned Arbitrator. The same was neither pleaded before the learned 16 2025:HHC:9451 District Judge nor in the present appeal before this Court. Therefore, it is not open to the appellants to raise the said contention in this appeal for the first time. (Reference: C&C Constructions Ltd. Versus IRCON International Ltd.21) "An arbitral award is not liable to be interfered with only on the ground that the award is illegal or is erroneous in law that too upon reappraisal of the evidence adduced before the arbitral trial. Even an award which may not be reasonable or is non-speaking to some extent cannot ordinarily be interfered with by the courts. It is also well settled that even if two views are possible there is no scope for the court to reappraise the evidence and to take the different view other than that has been taken by the arbitrator. The view taken by the arbitrator is normally acceptable and ought to be allowed to prevail". (Reference:
Punjab State Civil Supplies Corporation Limited and another Versus Sanman Rice Mills and others 22) The award does not suffer from any patent illegality. The view taken by the learned Arbitrator is reasoned, justified and plausible. Learned counsel for the appellants has not been able to dispute and disprove the findings of the learned Arbitrator, as affirmed by the 21 Civil Appeal No.6657 of 2023, decided on 31.01.2025 22 SLP(C) No.27699 of 2018, decided on 27.09.2024 17 2025:HHC:9451 learned District Judge. Learned District Judge has examined the award in accordance with law vis-à-vis the contentions urged by the appellants and did not find any ground in exercise of jurisdiction under Section 34 of the Act for interfering with it. Having considered the impugned judgment, the award and the contentions now urged, I do not find it a case to interfere in exercise of limited jurisdiction under Section 37 of the Act.
5. In view of above discussion, no case is made out for interference with the impugned judgment dated 08.08.2023, whereby application moved by the appellant under Section 34 of the Act was dismissed and the award passed by the learned Arbitrator was affirmed. Accordingly, the present appeal under Section 37 of the Act is dismissed.
Pending miscellaneous application(s), if any, also stand disposed of.
Jyotsna Rewal Dua
April 07, 2025 Judge
Mukesh