Section 37 A&C Act | Appellate Court Cannot Reassess Merits Or Substitute Its Own Interpretation Of Contract: Calcutta High Court

"The case of Delhi Airport Metro Express (supra) therefore does not widen the jurisdiction as suggested by the appellant. Interference under Section 37 cannot travel beyond the restrictions laid down under Section 34." Calcutta High Court, in a judgment delivered on October 7, 2026, by a bench comprising Justice Debangsu Basak and Justice Aryak Dutt, held that the scope of judicial review under Section 37 of the Arbitration and Conciliation Act, 1996, is strictly confined to the parameters of Section 34 and does not permit an independent assessment of the merits of an arbitral award.

The Court emphasized that an appellate court cannot substitute its own interpretation of a contract for that of the arbitrator, provided the arbitrator’s view is plausible and supported by reasoning.

The dispute arose from a 25-year lease agreement between BSNL and the respondent’s predecessor for the purpose of a telephone exchange. Following a directive from the West Bengal Pollution Control Board to cease operations at the site, BSNL sought to terminate the lease, leading to litigation over rent, damages to the premises, and the removal of equipment. An Arbitral Tribunal ultimately passed an award in favor of the lessor, which was challenged by BSNL under Section 34 of the Act. The District Court at Barasat dismissed the challenge, prompting BSNL to file the present appeal under Section 37.

The Court was tasked with determining whether the Arbitral Award suffered from patent illegality or perverse construction of contractual terms. Specifically, it addressed whether the Arbitrator's interpretation of the notice period under the lease agreement was valid and whether the Court could re-evaluate evidence regarding damages and the counter-claim.

The High Court reiterated that the jurisdiction of a court under Section 37 is limited to ensuring that the Section 34 court acted within the statutory boundaries. The bench noted that courts must resist the "disturbing tendency" of dissecting and reassessing factual findings.

Court Explains Scope Of Section 37

The Court observed that interference is only warranted if the award is beyond the reference, adopts a construction no reasonable person could adopt, is based on no evidence, or violates the public policy of India. It clarified that since the Arbitrator's interpretation of Clause 7.1 regarding the termination notice was a plausible construction, the Court would not substitute its own view.

"The learned Arbitrator held that a notice which must be given to the lessor operates only when it is communicated to him. On that view, the lessor received less than six months' notice. This view is a possible and plausible view. We will not substitute our view."

No Re-appreciation Of Evidence Permitted

Regarding the quantum of damages for repairs, the Court held that the assessment of whether damage exceeds "normal wear and tear" is a question of fact. Because the Arbitrator relied on evidence and provided reasons for the quantification, the award did not shock the conscience of the Court.

Court Limits Scope Of Appellate Review

The bench further observed that re-appreciation of evidence is impermissible in a challenge under Section 34 and equally so in an appeal under Section 37. The court also rejected the appellant's attempt to introduce new arguments regarding the validity of the lease under Section 106 of the Transfer of Property Act, 1882, as it was not pleaded before the Arbitral Tribunal.

"Re-appreciation of evidence looked into by the Arbitrator is impermissible in a challenge under Section 34. It is equally impermissible in an appeal under Section 37 of the Act."

Concluding the matter, the Court dismissed the appeal, affirming the judgment of the District Court and upholding the Arbitral Award. The ruling reinforces the principle of minimal judicial intervention in arbitration matters, affirming that the arbitrator is the final judge of both the weight of evidence and the construction of contractual clauses, provided those findings are not perverse.

Date of Decision: 07 October 2026