Court Exercising Section 34 Jurisdiction Cannot Re-Appreciate Evidence or Substitute Plausible Arbitral Interpretations of Contractual Clauses

The Appellant (a joint venture) entered into a Coal Mining and Delivery Agreement (CMDA) in 2008 with the Respondent (a Rajasthan Government undertaking) for coal block development and supply

Following the Supreme Court’s 2014 cancellation of coal block allotments, the parties entered a Supplementary Agreement in 2016 to continue the CMDA terms

Disputes arose regarding non-reimbursement of costs, leading to an arbitral award (15.01.2021) and an additional award (05.07.2021) in favor of the Appellant

The Respondent challenged these under Section 34 of the Arbitration and Conciliation Act, 1996. The Commercial Court set aside both awards in their entirety on 20.05.2023, primarily on the grounds of "patent illegality" in the Arbitrator’s interpretation of Force Majeure and limitation, and the belief that an award cannot be partially set aside

The Appellant moved the High Court under Section 37

1. Whether the Commercial Court exceeded its jurisdiction under Section 34 by re-appreciating evidence and re-interpreting contractual terms

2. Whether an arbitral award can be partially severed/set aside under the doctrine of severability

3. Whether the Arbitrator's interpretation of "Force Majeure" and "Change in Law" constituted patent illegality

The court applied Section 34 and Section 37 of the Arbitration and Conciliation Act, 1996, which restrict judicial interference to specific grounds like "patent illegality" or conflict with "public policy"

It relied on Jan De Nul Dredging India Pvt. Ltd. v. Tuticorin Port Trust, establishing that Section 37 courts cannot act as courts of appeal

Regarding severability, it applied the doctrine from Gayatri Balasamy v. ISG Novasoft Technologies Ltd., which permits partial setting aside of awards

For "patent illegality," it applied Ssangyong Engineering & Construction Co. Ltd. v. NHAI and Associate Builders v. DDA, holding that a "possible view" taken by an arbitrator cannot be interfered with, even if an alternative interpretation exists

The High Court found that the Commercial Court essentially conducted a de novo trial by re-evaluating witness testimony (e.g., Sh. Hemraj RW1 and Sh. Dalip Kumar Jha CW1) and substituting its own interpretation of the CMDA for that of the Arbitrator

The Court observed that the Arbitrator’s finding—that the 2014 Supreme Court cancellation was an unforeseen "Force Majeure" event altering the contract's fundamentals—was a "plausible view" and not "patently illegal" just because the Commercial Court disagreed with the emphasis on the word "directly"

Furthermore, the Commercial Court's refusal to sever the award and its decision to set it aside in its entirety was found to be contrary to the prevailing law in Gayatri Balasamy, which encourages severing valid portions from invalid ones

The Court concluded that the lower court ignored the "minimal judicial interference" mandate of the Act

The Court held that the Commercial Court exceeded its jurisdiction under Section 34 by re-appreciating evidence and incorrectly holding that it lacked the power to partially set aside an award

The original arbitral award dated 15.01.2021 and the additional award dated 05.07.2021 are effectively restored and consistent with the objective of the 1996 Act, the court reaffirmed that the Arbitrator is the sole judge of the quality and quantity of evidence