Setting aside an arbitral award involving unconditional acknowledgment of liability exceeds jurisdiction under Section 34.

The respondent issued three purchase orders (CC-10/2000, CC-19/2001, and CC-19/2002) to the appellant for wooden cable drums.

Disputes arose regarding the contracts, leading to the appointment of a retired High Court judge as an Arbitrator via a court order dated July 20, 2017.

On January 28, 2020, the Arbitrator passed an award in favor of the appellant.

The respondent challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. On December 12, 2025, a Single Judge set aside the entirety of the award.

The appellant moved the Division Bench under Section 37, contending that the respondent had unconditionally acknowledged a liability of ₹15,67,936.34 through a letter dated October 7, 2010 (Exhibit C/47), which the Single Judge failed to uphold despite noting the admission.

Whether the learned Single Judge exceeded the jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996, by setting aside an arbitral award in its entirety despite an unconditional acknowledgment of liability by the respondent.

The Court primarily applied Section 34 of the Arbitration and Conciliation Act, 1996, which governs the grounds and scope for setting aside arbitral awards.

Section 37 of the same Act regarding the appellate jurisdiction of the High Court.

The Court also relied on the evidentiary principle that an unconditional acknowledgment of debt (admission of liability) constitutes a binding obligation that limits the court's power to set aside that specific portion of an award.

The Court observed that the respondent’s letter dated October 7, 2010, was an "unconditional acknowledgment of liability" for ₹15,67,936.34 (comprising dues for goods/services and security deposit).

The respondent argued the letter was merely an offer, but the Court rejected this, noting the letter explicitly stated that silence from the appellant would confirm the correctness of the sum.

The Court found that although the Single Judge’s order recognized this admission in paragraph 29, the Judge erred in setting aside the entire award.

The Division Bench reasoned that setting aside admitted liabilities exceeds the narrow jurisdiction provided under Section 34.

Regarding interest, the Court restored the Arbitrator’s initial finding of 9% compounded yearly from March 1, 2004, noting the Arbitrator had subsequently reduced it to 7% without providing reasons.

It held that the respondent is liable to pay the principal sum of ₹15,67,936.34 along with interest at the rate of 9% per annum, compounded yearly, calculated from March 1, 2004, until actual payment.

Additionally, the Court awarded the appellant ₹3,40,000/- as costs for the 34 arbitration sittings.

All pending applications were disposed of accordingly.