Court U/S 37 of Arbitration Act only three options: Confirming the award; Setting aside the award; and Rejecting the application: Supreme Court

In a significant judgment, the Supreme Court of India, comprising Justices Abhay S. Oka and Sanjay Karol, has restored the original arbitral award in the case of S.V. Samudram vs State of Karnataka & Anr, while underscoring the limited scope of judicial intervention in matters of arbitration. The decision dated 4th January 2024 has set a precedent for future arbitration-related cases, particularly highlighting the sanctity of arbitration as an alternative dispute resolution mechanism.

The apex court's ruling came in response to a civil appeal challenging the High Court of Karnataka's judgment, which had confirmed the Senior Civil Judge's decision to modify the arbitral award under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. The contractor, S.V. Samudram, had raised claims for financial losses incurred due to delays in construction work, attributing these delays to lapses by the State authorities.

In their observation, the Supreme Court noted, "The Court under Section 37 had only three options: Confirming the award of the Arbitrator; Setting aside the award as modified under Section 34; and Rejecting the application(s) under Section 34 and 37." This critical observation highlights the court's stance on the limited judicial review of arbitral awards.

The judgment meticulously discussed the role of the judiciary in arbitration cases, emphasizing that courts should refrain from re-appreciating the merits of arbitral awards. The bench restored the original award passed by the Arbitrator on 18th February 2003, ruling that the lower courts' intervention in modifying the award was inappropriate and beyond the permissible scope under the Arbitration and Conciliation Act.

Date of Decision: 4th January 2024

S.V. SAMUDRAM vs STATE OF KARNATAKA & ANR