Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 02.11.2026
Himachal Pradesh High Court: Pending CBI or Vigilance Inquiry Cannot Justify Interference with Arbitral Award Under Section 37
This Short Article has been prepared & written by Arbitrator Shobhit Malik. The views expressed are based on his interpretation of the law. He can be reached at his mob no- +91 9712924188 and email id shobhit.Ica23@gmail.com.
The Himachal Pradesh High Court has dismissed the Union of Indiaβs appeal against an arbitral award in favour of contractor Pramod Sood, reaffirming that courts have only a narrowly limited role in reviewing arbitration decisions under the Arbitration and Conciliation Act, 1996.
Background of the dispute
The dispute arose from work relating to the trenching and laying of optical fibre cable (OFC). Pramod Sood, the claimant, pursued arbitration following directions of the High Court. The sole arbitrator, V.K. Khurana, issued an award on 21 July 2006.
The Union of India and another party challenged that award before the District Judge, Shimla, under Section 34 of the Arbitration and Conciliation Act, 1996. Their objections were dismissed on 1 September 2011. They then appealed to the High Court under Section 37(1)(b) of the Act.
Grounds raised by the Union of India
The appellants argued that the award was founded on surmises and conjectures. They also relied on the fact that records connected with the work had been seized by the Central Bureau of Investigation in 1997 and that a vigilance inquiry had earlier been underway.
According to the Union of India, requiring payment while those inquiries remained pending could undermine the purpose of examining alleged irregularities. It further challenged the award of interest at 14% per annum from 1 November 1996, contending that Clause 16.2 of the contract barred interest on earnest money, security deposits, or sums payable to the contractor.
High Courtβs reasoning: Section 37 review is highly restricted
Justice Virender Singh held that an appeal under Section 37 is not a routine appeal on facts or contractual interpretation. Where an arbitral award has already survived a challenge under Section 34, the appellate courtβs scope is even narrower.
The Court relied on Supreme Court guidance in Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking and Bombay Slum Redevelopment Corporation Pvt. Ltd. v. Samir Barain Bhojwani. These decisions establish that courts should not set aside an award merely because another interpretation of the evidence or contract is possible.
Interference is justified only where the award is perverse, manifestly arbitrary, or otherwise falls within the limited statutory grounds under Section 34. Under Section 37, the court primarily examines whether the Section 34 court exercised that limited jurisdiction correctly.
CBI seizure and vigilance inquiry did not invalidate the award
The High Court found that the CBI seizure of records and the vigilance inquiry did not affect the merits of the arbitral determination. The arbitrator had decided the dispute after providing both sides an opportunity to present their case.
The District Judge had also considered this issue. The High Court noted that the appropriate stage to raise such objections was when the application under Section 18 of the Act was being considered. Crucially, the appellants did not show how the award violated public policy.
Decision
The High Court found no basis to interfere with the District Judgeβs well-reasoned order dismissing the Section 34 objections. The appeal under Section 37 was therefore dismissed, along with any pending applications.
Key legal takeaway
The decision reinforces the finality of arbitration in India. A party challenging an arbitral award cannot succeed under Section 37 simply by offering a different reading of the facts or contract. It must demonstrate a serious legal defect, such as perversity or manifest arbitrariness, within the narrow limits set by the Arbitration and Conciliation Act, 1996.
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Source: Himachal Pradesh High Court
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