The Supreme Court of India has reiterated that an appellate court exercising jurisdiction under Section 37 of the Arbitration and Conciliation Act, 1996, has no authority to reappraise evidence or reassess the merits of an arbitral award, holding that such jurisdiction is even more constrained than that under Section 34 of the Act.

Setting aside a Division Bench judgment of the Madras High Court, the Court restored an arbitral award in favour of Jan De Nul Dredging India Pvt. Ltd., observing that the High Court had clearly exceeded its jurisdiction by interfering with a plausible interpretation of the contract already accepted by a Single Judge under Section 34.

The Bench of Justice Pamidighantam Sri Narasimha and Justice Pankaj Mithal emphatically held that once an arbitral award survives scrutiny under Section 34, an appellate court cannot take a fresh look at the merits or substitute its own interpretation of contractual clauses.

“The Appellate Court has no authority of law to consider the matter in dispute before the arbitral tribunal on merits so as to find out as to whether the decision of the arbitral tribunal is right or wrong upon reappraisal of evidence as if it is sitting in an ordinary court of appeal.”

The dispute arose from a major dredging project undertaken at Tuticorin Port, where Jan De Nul had completed the work well ahead of schedule. F

ollowing completion, disputes emerged over payment of dues, leading to arbitration.

One of the claims allowed by the arbitral tribunal related to idle time charges for a Backhoe Dredger (BHD), awarded due to delay in providing access to the site by the Port Trust.

While the arbitral award was upheld by a Single Judge of the Madras High Court under Section 34, the Division Bench, in appeal under Section 37, set aside the award insofar as it related to idle charges for the Backhoe Dredger, holding that such compensation was payable only for “major dredgers”.

Disagreeing with this approach, the Supreme Court held that the Division Bench had effectively acted as a court of appeal on merits, something that is squarely impermissible under the Arbitration Act.

The Court reiterated the legislative intent behind arbitration law, emphasising minimal judicial intervention:

“The primary object of the Act is to provide speedy and inexpensive mode of resolution of disputes through the process of arbitration with the minimum intervention of the law courts.”

Referring to Section 5 of the Act, the Bench underlined that judicial authorities must not intervene except where expressly permitted by the statute.

The Court carefully analysed the scope of Sections 34 and 37 and noted that challenges to arbitral awards are permissible only on limited grounds, such as incapacity, invalidity of the arbitration agreement, procedural unfairness, excess of jurisdiction, or conflict with public policy.

“Apart from the above grounds, the arbitral award is not open for challenge under Section 34 of the Act on any other ground.”

On appellate jurisdiction, the Court held that Section 37 does not confer a wider power than Section 34. On the contrary, it is narrower and supervisory in nature.

“It is settled in law that the appellate powers under Section 37 are limited to the scope of Section 34 and cannot exceed beyond it.”

The Bench relied extensively on precedent, including MMTC Limited v. Vedanta Limited, where it was held that an appellate court “cannot undertake an independent assessment of the merits of the award”.

Quoting Konkan Railway Corporation Ltd. v. Chenab Bridge Project, the Court observed:

“The mere possibility of an alternative view on facts or interpretation of the contract does not entitle courts to reverse the findings of the Arbitral Tribunal.”

The Court also cited Punjab State Civil Supplies Corporation Ltd. v. Sanman Rice Mills, reiterating that interference in arbitral matters is “virtually prohibited, if not absolutely barred”.

“The appellate power of Section 37 of the Act is limited within the domain of Section 34 of the Act.”

Turning to the facts of the case, the Court found that the arbitral tribunal had given a reasoned and plausible interpretation of Clauses 38, 41 and 51 of the Licence Agreement to justify idle time compensation for the Backhoe Dredger.

Rejecting the Port Trust’s argument that Clause 38 restricted idle charges only to major dredgers, the Court held:

“Clause 38 cannot be read so as to mean that since it provides for idle time charges for major dredgers, compensation in respect of other equipment or minor/special dredgers is not permissible.”

The Bench clarified that the contract did not prohibit compensation for other equipment and that the tribunal’s interpretation was well within the bounds of contractual construction.

Importantly, the Court stressed that interpretation of contractual terms lies squarely within the domain of the arbitral tribunal, not courts.

“There cannot be any dispute that as far as the construction of the terms of a contract is concerned, it is for the Arbitral Tribunal to adjudicate upon.”

Once such interpretation has been accepted by a court under Section 34, the appellate court is bound by it.

“Ordinarily, the interpretation given by the Arbitral Tribunal, as affirmed by the court in exercise of powers under Section 34 of the Act ought to have been accepted.”

The Court categorically rejected the notion that the High Court could reclassify equipment, reassess evidence, or draw fresh inferences in appeal.

“The Appellate Court exercising powers under Section 37 of the Act has no authority of law to consider the matter in dispute before the Arbitral Tribunal on merits.”

Addressing the argument of “patent illegality”, the Court held that the arbitral award was a speaking award with detailed reasons and did not violate any fundamental policy of Indian law or basic notions of morality or justice.

“No patent illegality on the face of the award stands established.”

The Bench warned that excessive judicial interference would defeat the very purpose of arbitration:

“If the courts are allowed to step in at every stage and the arbitral awards are subjected to challenge before the courts in hierarchy… it would obviate/frustrate and defeat the very purpose of the Act.”

Allowing the appeal, the Supreme Court set aside the Division Bench judgment and restored the arbitral award in full, holding that the High Court had “manifestly erred in law” by acting beyond the limits of Section 37 jurisdiction.

The ruling once again sends a clear message to courts across the country that arbitration is not another tier of civil litigation, and that appellate courts cannot sit in judgment over the merits of arbitral awards under the guise of statutory appeal.

Case Details:

• Court: Supreme Court of India
• Case Title: Jan De Nul Dredging India Pvt. Ltd. v. Tuticorin Port Trust
• Citation: 2026 INSC 34
• Date of Judgment: January 7, 2026
• Bench: Justice Pamidighantam Sri Narasimha and Justice Pankaj Mithal
• Jurisdiction: Civil Appellate Jurisdiction
• Appeal From: Judgment dated March 15, 2021 of the Madras High Court (Division Bench)

Follow The Legal QnA For More Updates…