In October 2008, the Corporation entered into an agreement with the Rice Mill to supply paddy for milling, with the expectation of receiving the resultant rice. Following the supply of over 70,000 quintals of paddy, a significant shortfall of 35,110.39 quintals of rice emerged, resulting in a financial dispute exceeding ?2.16 crore. The matter was referred to arbitration, leading to an award in favor of the Corporation for ?2.67 crore, plus interest. The Rice Mill’s subsequent petition to set aside this award under Section 34 was dismissed by the Additional District Judge in April 2015.

Dissatisfied with this outcome, the Rice Mill appealed to the High Court under Section 37, which ultimately set aside both the earlier order and the arbitral award. The Corporation then appealed to the Supreme Court.

The Arbitration and Conciliation Act aims to provide a cost-effective and expedient mechanism for dispute resolution with minimal court intervention. Sections 34 and 37 outline the limited circumstances under which awards can be contested.

Section 34: This section specifies the grounds for setting aside an arbitral award, emphasizing that interference is warranted only when the award conflicts with public policy, involves fraud, or breaches fundamental legal principles. The court’s role is not to reassess the merits of the award or the evidence presented.

Section 37: This section permits appeals against orders that either set aside or uphold arbitral awards. However, the appellate court’s authority is strictly confined to the grounds defined in Section 34. Judicial review should not extend to a detailed examination of the arbitral tribunal’s decision-making process.

The Supreme Court reaffirmed the principles governing arbitration and the limited scope of judicial intervention. It emphasized that an arbitral award, if reasonable and based on evidence, should generally not be disturbed unless it clearly violates public policy or the foundational legal standards.

Limited Judicial Review: The courts cannot interfere with awards simply because an alternative interpretation exists. The arbitral tribunal's decision must be respected as long as it falls within reasonable bounds.

Concurrence of Findings: When both the District Judge and the appellate court uphold an award, any interference must be carefully scrutinized. The Supreme Court noted that the High Court failed to demonstrate how the arbitral award suffered from any of the recognized grounds for setting aside under Section 34.

Presumption of Validity: The award in question had not been shown to conflict with public policy, nor did it exhibit any patent illegality, thus warranting its enforcement.

The Supreme Court's ruling reinstates the arbitral award and underscores the judiciary's role in respecting the autonomy of arbitral processes. The decision illustrates the clear boundaries set by the Arbitration and Conciliation Act regarding judicial intervention. It serves as a reminder that the fundamental objective of arbitration—expeditious and cost-effective dispute resolution—must be preserved. Consequently, the appellate court's decision was overturned, and the arbitral award was restored for implementation.

The case reiterates the importance of adhering to established legal standards in arbitration, ensuring that the integrity of the arbitral process remains intact and that courts do not overstep their designated roles. As a result, the appeal was allowed, reinforcing the notion that arbitral awards should be treated with deference unless compelling reasons necessitate otherwise.