Bombay High Court: Section 34 of the Arbitration Act lets a court touch an award's interest, not re-decide its merits

The Kolhapur Municipal Corporation challenged a 2019 arbitral award of about Rs. 24.06 crore plus 18% interest and Rs. 1.5 crore in costs, made in favour of Fairdeal Construction, the agent the Corporation had appointed in 1995 to collect octroi duty and later terminated, alleging non-payment of the agreed fee. Ruling on the Corporation's petition under Section 34 of the Arbitration and Conciliation Act, 1996, Justice Aarti Sathe reiterated that a court exercising this jurisdiction cannot reappreciate the evidence or substitute its own view for the arbitrator's where a possible view was reasonably reached on the material on record. Interference is confined to 'patent illegality' as explained in Ssangyong Engineering & Construction v. NHAI -- illegality apparent on the face of the award, such as a complete absence of reasons, perversity, or a finding that shocks the conscience of the court.

Finding none of this in the arbitrator's detailed, evidence-based findings on the principal sum and costs, which were also supported by an independent chartered-accountant's assessment, the Court declined to disturb those parts of the award. It did, however, set aside the pendente lite interest awarded and modified the rate of post-award interest, invoking the limited power recognised under Section 34 to modify rather than merely annul an award. The petition was disposed of accordingly, with a three-week stay on the judgment's operation.