Court reiterates narrow appellate jurisdiction under Section 37, affirms arbitrator's factual findings, and rules 2015 Amendment's Section 29A inapplicable to pre-amendment proceedings
In a significant judgment delivered on September 30, 2026, the Division Bench of the Delhi High Court, comprising Justices Avneesh Jhingan and Shail Jain, dismissed an appeal filed by M.K. Construction challenging an arbitral award in a construction contract dispute with Maj. Gen. Hoshiar Singh (Retd) and another. The judgment underscores the limited scope of interference permissible under Section 37 of the Arbitration and Conciliation Act, 1996, particularly when the arbitral award has already been upheld by a Section 34 court.
Background:
The dispute arose from an agreement dated April 8, 2008, wherein M.K. Construction (appellant) undertook construction of a residential house for respondent no.1 at Greater Noida, Uttar Pradesh. The contract envisaged two phases: structural/civil work, and finishing work, with a total completion timeline of eleven months from commencement. Although the construction was completed in approximately six months, a completion certificate was issued on May 22, 2009. Following payment of most dues, the respondent alleged defects, deficiencies, and delay, leading to arbitration initiated in 2012.
Arbitral Proceedings and Awards:
The initial arbitral award dated February 6, 2014, rejected the respondent's claims and allowed a counterclaim by the appellant. However, the award was set aside by this Court on October 5, 2016, due to the need for fresh inspection and measurement by a government-approved architect acting as Local Commissioner (LC). After fresh proceedings, a subsequent award was passed on September 6, 2018, granting respondent compensation including damages for delayed possession, mental harassment, and costs.
The Commercial Court dismissed the appellant's objections under Section 34 on December 7, 2022, albeit reducing the awarded future interest from 18% to 10% per annum. The appellant then filed the present appeal under Section 37.
Key Legal Issues and Court's Analysis:
1. Scope of Interference under Section 37:
The Court reiterated that the appellate jurisdiction under Section 37 is "extremely limited" and cannot extend beyond the grounds permitted under Section 34. It cannot involve re-appreciation of evidence or substitution of factual findings by the arbitrator. Only patent illegality or jurisdictional errors going to the root of the matter warrant interference. The Court relied on Supreme Court precedents including Bombay Slum Redevelopment Corpn. v. Samir Narain Bhojwani (2024), MMTC Ltd. v. Vedanta Ltd. (2019), and Punjab State Civil Supplies Corpn. Ltd. v. Sanman Rice Mills (2024), which consistently emphasize judicial restraint in appeals against arbitral awards.
2. Completion Certificate and Quality of Work:
The issuance of the completion certificate by statutory authorities was held to confirm compliance with statutory requirements but not to guarantee contractually agreed quality or defect-free execution. The respondent's delay of approximately seven months in raising objections was not deemed fatal to his claims.
3. Award of Damages Beyond Claim:
The appellant contended that damages for delayed possession (Rs. 22,500/-) were awarded without a specific claim. The Court pointed out that this plea was never raised in the Section 34 petition and thus could not be entertained for the first time in the Section 37 appeal. Moreover, not every legal or factual error justifies interference.
4. Adjustment of Cost of Wood and Iron Gate:
The arbitrator's factual finding that the respondent supplied the wood and thus its value was liable to be adjusted against the contractor's bill was affirmed. The Court held that appellate courts cannot disturb such factual findings unless perverse.
5. Award for Mental Harassment:
The award included Rs. 1,00,000/- for mental agony, which was challenged as contrary to the first award. The Court observed that the earlier award had been set aside, and the arbitrator on remand was entitled to reconsider claims afresh, including compensation for mental harassment. Reliance on a Madras High Court decision on contradictory findings was rejected as inapplicable.
6. Time Limit under Section 29A (2015 Amendment):
The arbitrator was appointed in 2012, before the 2015 Amendment introducing Section 29A, which limits the arbitrator's mandate to six months. The Court held that the remanded proceedings were a continuation of the original arbitration, and Section 29A does not apply unless parties agree otherwise. The direction to conclude the arbitration within six months was not an inflexible deadline rendering the award void.
Conclusion:
The Delhi High Court dismissed the appeal, affirming the arbitral award and emphasizing that appellate courts must exercise great caution and restrict themselves to examining the legality of the Section 34 court's exercise of jurisdiction, without delving into merits or re-assessing evidence.
This judgment reinforces the pro-arbitration stance under Indian law, highlighting judicial deference to arbitral tribunals and the limited role of courts in appellate proceedings under the Arbitration and Conciliation Act, 1996.
Bottom Line:
Arbitration and Conciliation Act, 1996 - Scope of interference under Section 37 is narrower than Section 34 - Appellate Court cannot re-appreciate evidence or sit in appeal over factual findings of arbitrator - In arbitral proceedings commenced prior to 2015 Amendment, Section 29A is not applicable merely because fresh award was passed after remand.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 - Sections 29A, 34, 37
M. K. Construction v. Maj. Gen. Hoshiar Singh (Retd), (Delhi)(DB) : Law Finder Doc Id # 2989244
