Arbitrators cannot supplant evidence with personal knowledge or discard expert reports without rational justification.

The appellant (ITD) was awarded a contract for underground metro tunneling in Kolkata.

On August 31, 2019, a major water ingress incident occurred during tunneling, causing extensive surface property damage and subsequent litigation.

The appellant initiated arbitration regarding liability for the accident.

The Arbitral Tribunal (AT) passed an award on August 6, 2023, largely exonerating the appellant.

The respondent (Kolkata Metro) challenged this under Section 34 of the Arbitration and Conciliation Act, 1996.

A Single Judge of the High Court set aside the award, finding it patently illegal and perverse.

The appellant then filed this appeal under Section 37 of the Act.

The court applied Section 34 (Setting aside an award) and Section 37 (Appeals) of the Arbitration and Conciliation Act, 1996.

It relied on the "patent illegality" and "public policy" grounds established in Ssangyong Engineering & Construction Co. Ltd. v. NHAI, Associate Builders v. DDA, and Ramesh Kumar Jain v. Bharat Aluminum Co. Ltd.

The court followed the principle that while an arbitrator can use technical expertise to interpret evidence, they cannot use personal knowledge of facts not on record to supplant evidence (P.R. Shah Shares & Stock Brokers Pvt. Ltd. v. B.H.H. Securities).

The court also applied Section 18 of the Act, which mandates equal treatment of parties.

The Court found that the AT members improperly used their personal backgrounds (e.g., being an IIT Delhi alumnus) to discard the respondent's Soil Penetration Test (SPT) data without scientific counter-evidence.

The AT was found to have violated Section 18 by rejecting the respondent's expert reports—submitted 900 days late due to the time required to retrieve the damaged Tunnel Boring Machine (TBM)—as "litigation-driven," while accepting the appellant's reports despite both being prepared for the proceedings.

Furthermore, the AT ignored vital contractual terms in the General Conditions of Contract (GCC), specifically Clause 4.23, which required written reporting of unforeseen conditions, and Clause 4.1, which placed the risk of third-party damage on the contractor regardless of the Engineer's approval.

By shifting liability to the respondent against the express terms of the contract without assigning reasons, the AT’s view was deemed not a "plausible" interpretation but a perverse one.

It held that the AT exceeded its mandate by ignoring the contract and treating parties unequally.

The Court concluded that the scope of Section 37 is limited to ensuring the Section 34 court acted within its jurisdiction; here, the Single Judge rightly identified patent illegality and perversity in the award.

The appeal was dismissed without costs.