Court holds that arbitral award based solely on pleadings without framing issues or recording evidence contravenes Indian law and is liable to be set aside under Section 34 of Arbitration and Conciliation Act
In a significant judgment dated August 25, 2026, the Rajasthan High Court (Division Bench) quashed an arbitral award passed in favour of M/s Trimurti Construction by holding that the award was in conflict with the public policy of India and violated the fundamental principles of natural justice. The court emphasized that an arbitral award must be based on proper framing of contested issues, recording of evidence, and fair adjudication, especially when serious disputed facts are involved.
The case arose from a contract awarded by the Executive Engineer, Public Work Department (PWD), Rajasthan, to M/s Trimurti Construction, valued at over Rs. 6.3 crores, for a public work project in May 2013. Due to resistance from local residents and villagers, the work progress was halted, and the PWD withdrew the work order. The contractor then filed a claim before an arbitral tribunal seeking compensation for losses, including idling of labour and machinery.
The arbitral tribunal passed an award in favor of the contractor without framing any issues or recording evidence, relying solely on pleadings and documentary submissions. The PWD challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, contending that the award violated public policy and principles of natural justice as no evidence was recorded, and contested factual issues were not adjudicated.
The Commercial Court at Ajmer dismissed the challenge, upholding the award. The PWD filed the present appeal before the Rajasthan High Court.
The Division Bench comprising Justice Dr. Pushpendra Singh Bhati and Justice Praveer Bhatnagar extensively analyzed the legal provisions under Section 34, particularly sub-section 2(b), which empowers courts to set aside arbitral awards that are in conflict with the public policy of India. Drawing upon Supreme Court precedents such as ONGC Ltd. v. Saw Pipes Ltd., Bharat Coking Coal Ltd. v. L.K. Ahuja, and Unibros v. All India Radio, the court reiterated that an award based solely on pleadings without proper adjudication on disputed facts and without recording evidence is patently illegal and violates fundamental policy and justice principles.
The court found that the arbitral tribunal failed to frame contested questions of fact or record oral or documentary evidence despite explicit denials and disputes raised by the appellant. The tribunal's acceptance of the claim without scrutinizing or verifying the evidence contravened the fundamental policy of Indian law and was liable to be set aside. Further, the Commercial Court erred in dismissing the Section 34 application on the ground that re-appreciation of evidence was not permissible, ignoring the fact that the challenge was based on lack of proper evidence and violation of natural justice.
Accordingly, the Rajasthan High Court allowed the appeal, set aside the Commercial Court's order, and quashed the arbitral award passed in favor of the contractor.
This landmark ruling underscores the judiciary's firm stance that arbitral awards must adhere to procedural fairness, including proper issue framing and evidence recording. Awards made in disregard of these principles, especially in cases involving serious disputed facts, will not be tolerated and will be struck down for violating public policy.
Bottom Line:
Arbitration - Arbitral award based solely on pleadings and without proper framing of issues, recording evidence, or adhering to principles of natural justice violates public policy and is liable to be set aside.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 Section 34
