HARYANA TOURISM LIMITED versus M/S KANDHARI BEVERAGES LIMITED
[2022] 2 S.C.R. 316, Supreme Court of India, 2022
Outcome: Appeal(s) allowed (Granted)
Segment: Facts
A
B
C
D
E
F
G
H
316
SUPREME COURT REPORTS
[2022] 2 S.C.R.
[2022] 2 S.C.R. 316
316
HARYANA TOURISM LIMITED
v.
M/S KANDHARI BEVERAGES LIMITED
(Civil Appeal No. 266 of 2022)
JANUARY 11, 2022
[M. R. SHAH AND B. V. NAGARATHNA, JJ.]
Arbitration and Conciliation Act, 1996 – ss.34 and 37 –
Exercise of powers u/s.37 – Scope of – High Court in appeal u/s.37
set aside the award passed by the arbitrator as well as the order
passed by the first appellate Court-Additional District Judge–On
appeal, held: An award can be set aside only if it is against the
public policy of India –The award can be set aside u/ss.34/37, if it
is found to be contrary to fundamental policy of Indian Law; or the
interest of India; or justice or morality; or if it is patently illegal –
None of the aforesaid exceptions are applicable to the facts of the
present case –In appeal u/s.37, the High Court entered into the
merits of the claim which is not permissible– It decided the appeal
u/s.37 as if it was deciding the appeal against the judgment and
decree passed by the trial Court – High Court exercised the
jurisdiction not vested in it u/s.37– Impugned judgment of High
Court set aside – Award passed by the arbitrator and the order
passed by the Additional District Judge u/s.34 overruling the
objections are restored.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 266 of
2022.
From the Judgment and Order dated 17.07.2018 of the High Court
of Punjab and Haryana at Chandigarh in FAO No.1399 of 2015 (O&M).
B. K. Satija,
Himanshu Satija, Ms. Neha Mehta , Advs. for the
Appellant.
Kanwal Chaudhary, Bimlesh Kumar Singh, Rajeev Kumar Gupta,
Joginder Mann, Hardik Ahluwalia, Ms. Urvi Kashiwal, Advs. for the
Respondent.
A
B
C
D
E
F
G
H
317
The Judgment of the Court was delivered by
M. R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 17.07.2018 passed by the High Court of Punjab and
Haryana at Chandigarh in F.A.O. No. 1399 of 2015 (O&M), by which
the High Court has allowed the said appeal preferred under Section 37
of the Arbitration and Conciliation Act, 1996 (for short, ‘the Arbitration
Act’) and has set aside the award dated 17.11.2005 passed by the
arbitrator as well as the order dated 25.09.2014 passed by the first
appellate Court – Additional District Judge, Chandigarh, the original
claimant – respondent before the High Court has preferred the present
appeal.
2. The facts leading to the present appeal in a nutshell are as
under:
 That the appellant herein – Haryana Tourism Limited (for short,
‘Corporation’) invited tenders/quotations for the supply of Aerated Cold
Drinks at its Tourist Complexes for the period 15.05.2001 to 14.05.2002.
The tender submitted by the respondent herein was accepted by the
Corporation. As per the agreement, the respondent-company was
supposed to pay a sum of Rs. 20 lakhs on account of Brand Promotion
which was required to be spent as per mutual agreement between the
parties.
2.1 That the Corporation organised a Mango Mela on 07/08th July,
2001. The Corporation spent a sum of Rs. 1 lakh. Both the parties agreed
to hold musical nights. According to the respondent herein, it spent a
sum of Rs.13.92 lakhs. However, the
appellant-Corporation asked the
respondent vide letter dated 20.09.2001 to deposit a sum of Rs. 19 lakhs
as sponsorship money. The appellant vide letter dated 17.01.2002
terminated the contract. Dispute arose between the parties. The matter
was referred to the sole arbitrator.
2.2 Vide award dated17.11.2005, the arbitrator directed the
respondent to pay a sum of Rs. 9.5 lakhs. The counter claim lodged by
the respondent claiming Rs. 13.92 lakhs was dismissed by the arbitrator.
The respondent thereafter filed objection petition before Additional District
Judge, Chandigarh under Section 34 of the Arbitration Act against the
award passed by the arbitrator. Vide order dated 25.09.2014, the
Additional District Judge dismissed the appeal/objection petition.
HARYANA TOURISM LTD. v. M/S KANDHARI BEVERAGES LTD.
A
B
C
D
E
F
G
H
318
SUPREME COURT REPORTS
[2022] 2 S.C.R.
2.3 Feeling aggrieved and dissatisfied with the order passed by
Additional District Judge, Chandigarh dismissing the appeal/objection
petition under Section 34 of the Arbitration Act, the respondent herein
preferred a further appeal before the High Court under Section 37 of
the Arbitration Act. By the impugned judgment and order, the High Court
has allowed the said appeal by entering into the merits of the claim and
has quashed and set aside the award passed by the arbitrator as well as
the order passed by Additional District Judge, Chandigarh.
2.4 Feeling aggrieved and dissatisfied with the impugned judgment
and order passed by the High Court, the original claimant – Corporation
has preferred the present appeal.
3. Shri B.K. Satija, learned Advocate has appeared on behalf of
the appellant herein and Shri Kanwal Chaudhary, learned Advocate has
appeared on behalf of the respondent herein.
3.1 Shri B.K. Satija, learned Advocate appearing on behalf of the
appellant – Corporation has vehemently submitted that the High Court
has materially erred in quashing and setting aside the award in exercise
of its powers under Section 37 of the Arbitration Act. It is submitted that
while quashing and setting aside the award passed by the arbitrator, the
High Court has exceeded its jurisdiction under Section 37 of the
Arbitration Act.
3.2 It is submitted that the High Court had a very limited scope
and/or jurisdiction while deciding
the appeal under Section 37 of the
Arbitration Act.
3.3 It is submitted that in an appeal under Section 37 of the
Arbitration Act, the High Court has no jurisdiction to enter into the merits
of the claim awarded by the arbitrator, confirmed by the first appellate
Court under Section 34 of the Arbitration Act.
3.4 It is submitted that in the present case, the High Court has
decided the appeal as if the High Court was deciding the first appeal
against the judgment and decree passed by the learned trial Court which
as such is not permissible while exercising the power under Section 37
of the Arbitration Act.
3.5 Making the above submissions, it is prayed to allow the present
appeal and quash and set aside the impugned judgment and order passed
by the High Court.
A
B
C
D
E
F
G
H
319
4. The present appeal is vehemently opposed by Shri Kanwal
Chaudhary, learned Advocate appearing on behalf of the respondent.
4.1 It is submitted that as such the learned arbitrator had no
jurisdiction at all to pass the award as no amount was due and payable
as nothing was spent on marketing activities by the appellant –
Corporation.
4.2 It is submitted that the composition of Arbitral Tribunal as well
as the appointment of the sole arbitrator was not in accordance with
clause 13 of the Contract. It is submitted that the appointment of the
sole arbitrator and his competence was challenged by the respondent,
which was summarily rejected.
4.3 It is submitted that the question of jurisdiction can be raised
under Section 16 of the Arbitration Act which can also be raised after
the award is passed.
4.4 It is submitted that even otherwise as no amount was spent by
the appellant – Corporation, there was no question of any payment to
the appellant-Corporation. It is submitted that on the contrary, the
respondent filed a counter claim claiming Rs. 13.92 lakhs which
unfortunately came to be rejected by the arbitrator.
4.5 Making the above submissions, it is prayed to dismiss the
present appeal.
5. We have heard the learned counsel for the respective parties
at length. We have also gone through the impugned judgment and order
passed by the High Court.
6. So far as the question of jurisdiction of the arbitrator raised by
the respondent is concerned, the same has
been dealt with by the High
Court also and the said objection has been overruled by the High Court
against which no appeal is preferred by the respondent. In that view of
the matter, now it is not open for the respondent to challenge the
jurisdiction of the arbitrator, that too in an appeal preferred by the original
claimant – Corporation – appellant herein.
7. So far as the impugned judgment and order passed by the High
Court quashing and setting aside the award and the order passed by the
Additional District Judge under Section 34 of the Arbitration Act are
concerned, it is required to be noted that in an appeal under Section 37
of the Arbitration Act, the High Court has entered into the merits of the
HARYANA TOURISM LTD. v. M/S KANDHARI BEVERAGES LTD.
[M. R. SHAH, J.]
A
B
C
D
E
F
G
H
320
SUPREME COURT REPORTS
[2022] 2 S.C.R.
claim, which is not permissible in exercise of powers under Section 37
of the Arbitration Act.
8. As per settled position of law laid down by this Court in a
catena of decisions, an award can be set aside only if the award is
against the public policy of India. The award can be set aside under
Sections 34/37 of the Arbitration Act, if the award is found to be contrary
to, (a) fundamental policy of Indian Law; or (b) the interest of India; or
(c) justice or morality; or (d) if it is patently illegal. None of the aforesaid
exceptions shall be applicable to the facts of the case on hand. The High
Court has entered into the merits of the claim and has decided the appeal
under Section 37 of the Arbitration Act as if the High Court was deciding
the appeal against the judgment and decree passed by the learned trial
Court. Thus, the High Court has exercised the jurisdiction not vested in
it under Section 37 of the Arbitration Act. The impugned judgment and
order passed by the High Court is hence not sustainable.
9. In view of the above and for the reasons stated above, the
present appeal succeeds. The impugned judgment and order passed by
the High Court is hereby quashed and set aside. The award passed by
the arbitrator and the order passed by the Additional District Judge under
Section 34 of the Arbitration Act overruling the objections are hereby
restored.
10. The present appeal is accordingly allowed to the aforesaid
extent. No costs.
Divya Pandey
Appeal allowed.
(Assisted by : Roopanshi Virang, LCRA)