The Supreme Court of India has ruled that a High Court, while exercising appellate jurisdiction under Section 37 of the Arbitration and Conciliation Act, 1996, cannot substitute its own interpretation of a contract for that of an Arbitral Tribunal, especially when the award has already been upheld under Section 34.
In a judgment delivered on January 7, 2026, the Bench comprising Justice Pamidighantam Sri Narasimha and Justice Pankaj Mithal set aside a decision by the Madras High Court’s Division Bench. The Court restored an arbitral award in favor of Jan De Nul Dredging India Pvt. Ltd., reinforcing the principle that appellate interference is impermissible unless the lower court’s affirmation of the award was patently illegal.
Case Background
The legal battle stemmed from a dredging contract awarded by the Tuticorin Port Trust to Jan De Nul Dredging India Pvt. Ltd. The project, titled “Deepening of the Channel and Basin to Cater to 12.80 meter Draught Vessels at Tuticorin Port,” commenced with a work order issued on October 28, 2010.
Although the contractor completed the work on August 30, 2011—eight months ahead of the scheduled deadline—disputes arose regarding the final bill payment. The matter was referred to an Arbitral Tribunal, which adjudicated eleven different claims.
The central point of contention was “Claim No. 7,” where the Tribunal awarded Rs. 14,66,04,216/- to the contractor as “idling charges” for a “Backhoe Dredger (BHD).” The contractor claimed this amount because the Port Trust allegedly failed to provide timely possession of and access to the site, forcing the equipment to sit idle.
The Tuticorin Port Trust first challenged this award under Section 34 of the Act. A Single Judge of the Madras High Court dismissed this challenge on September 10, 2019, finding the Tribunal’s reasoning sound. However, the Port Trust appealed to a Division Bench under Section 37. On March 15, 2021, the Division Bench overturned the specific award for Claim No. 7, ruling that under Clause 38 of the agreement, idle time compensation was restricted to “major dredgers,” and the Backhoe Dredger did not qualify.
Arguments Before the Supreme Court
Jan De Nul Dredging India Pvt. Ltd. appealed to the Supreme Court, contending that the Division Bench had overstepped its jurisdiction. Senior Advocate Chander U. Singh argued that the scope of Section 37 is “very limited” and strictly confined to the grounds available under Section 34. He asserted that since the Arbitral Tribunal had provided a definite interpretation of the contract clauses, the appellate court had “no jurisdiction to interpret those clauses in a different manner.”
In response, Senior Advocate S. Nagamuthu, representing the Tuticorin Port Trust, argued that the award was “patently illegal.” He maintained that the contract strictly limited idle time charges to major dredgers, and awarding such charges for a minor dredger (the Backhoe Dredger) violated the express terms of the agreement.
The Court’s Analysis
The Supreme Court rejected the Division Bench’s approach, holding that it had essentially acted as a court of first appeal by re-interpreting the contract terms.
Justice Pankaj Mithal, writing for the Bench, clarified the hierarchy of judicial intervention:
“The appellate power under Section 37 of the Act is exercisable only to find out if the court exercising power under Section 34 of the Act, has acted within its limits… 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.”
On the specific issue of contract interpretation, the Court examined the interplay between Clause 38 (stoppage of works) and Clause 51.1 (interruptions to work). The Court observed:
“Clause 38… nowhere prohibits the appellant-Dredging India to claim compensation in respect of any other equipment… if it remains idle.”
The Court found that the Tribunal’s reliance on Clause 51.1—which covers interruptions due to various reasons including site delays—was a “plausible view.” The judgment stated:
“If the interpretation given by the Arbitral Tribunal cannot be disturbed under Section 34 of the Act, the same cannot also be disturbed by exercising powers under Section 37 of the Act.”
Decision
The Supreme Court allowed the appeal, setting aside the Division Bench’s judgment and restoring the Single Judge’s order that upheld the arbitral award.
The Court concluded with a stern observation on the purpose of the Arbitration Act:
“In the event, the courts are allowed to step in at every stage… it would obviate/frustrate and defeat the very purpose of the Act… It is therefore, necessary to accept the arbitral award if it is not patently illegal.”
Case Details
- Case Title: Jan De Nul Dredging India Pvt. Ltd. v. Tuticorin Port Trust
- Appeal Number: Civil Appeal arising out of S.L.P. (C) No. 8803 of 2021
- Coram: Justice Pamidighantam Sri Narasimha and Justice Pankaj Mithal
