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Punjab State Civil Supplies Corporation Ltd. & Anr. vs. M/S Sanman Rice Mills & Ors.

Not available · 2024 INSC 742Decided 27 Sept 2024
Not available
Justice Pamidighantam Sri Narasimha · Justice Pankaj Mithal

Background

The Punjab State Civil Supplies Corporation had an agreement with Sanman Rice Mills under which the Corporation supplied paddy for milling and the Mill was to return the processed rice. After a shortfall worth over Rs. 7 crore in the rice returned, and partial recovery through cheques, the dispute went to arbitration. The Arbitrator awarded about Rs. 2.67 crore to the Corporation with 12% interest. The Mill's challenge to this award under Section 34 of the Arbitration Act was dismissed, but the Punjab & Haryana High Court, in a further appeal under Section 37, set aside both the Section 34 order and the underlying arbitral award itself.

Decision Breakdown

The Supreme Court held that an appeal under Section 37 of the Arbitration Act is not an ordinary appeal: its scope is confined to the same narrow grounds available under Section 34 (such as fraud, conflict with public policy, or patent illegality), and courts cannot reappraise evidence or substitute their own view for that of the arbitrator merely because a different view seems better. Since the arbitral award here was reasoned and not shown to be perverse or against public policy, the High Court had no basis to overturn it. The Court restored the arbitral award and allowed the Corporation's appeal with no order as to costs.

Lesson Learnt

Once parties choose arbitration, courts have very limited power to second-guess the arbitrator's decision: an award can only be disturbed on narrow legal grounds (like fraud or perversity), never simply because a court thinks it could have decided the dispute differently.

Official source (sci.gov.in)View Judgment (PDF)

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