LI Network
Published on: November 13, 2023 at 17:38 IST
In a recent ruling, a Division Bench of the Delhi High Court restored an arbitral award, emphasizing that the interpretation of a contract is primarily the domain of the arbitrator.
The court, in reference to Section 34 of the Arbitration and Conciliation Act, 2015, asserted that it is not within the scope of the court, unless in exceptional circumstances, to re-interpret the contract and replace the arbitrator’s findings, even if plausible and well-reasoned.
Citing the Ssangyong Engineering and Construction Co. Ltd. v. NHAI case, the court highlighted the amendment brought in by the 2015 Act, stating that the construction of contract terms is primarily for the arbitrator to decide unless their view is so unreasonable that no fair-minded person would take it.
The case involved a dispute between parties over the revocation of a Special Power of Attorney (SPA) and General Power of Attorney (GPA) in a development agreement.
The arbitrator, in assessing the validity of the revocation, interpreted the contract terms, concluding that the revocation was valid. The Single Judge had set aside the award, prompting the appeal.
The Division Bench, comprising Justices Suresh Kumar Kait and Neena Bansal Krishna, emphasized that the scope of interference under Section 34 on grounds of ‘public policy’ should only apply if the arbitrator’s view is against public policy or shocks the conscience of the court.
Regarding the respondent’s contention that the Single Judge overstepped the scope of Section 34, the Bench reiterated that the court should refrain from reappreciating merits unless the arbitrator commits a jurisdictional error by going beyond the contract’s scope.
In conclusion, the Delhi High Court’s decision reaffirms the authority of arbitrators in interpreting contracts and discourages courts from reinterpreting contracts unless faced with extraordinary circumstances.
Case Title: Raghunath Builders Pvt. Ltd. v. Anant Raj Limited, FAO (OS) (COMM) 220/2017
