Preserving Arbitral Finality: The Supreme Court Curbs Judicial Overreach in Contract Interpretation

Introduction 

The Arbitration and Conciliation Act¹, despite being enacted with the legislative intent of promoting arbitral autonomy, has long been burdened by a systemic tendency toward excessive judicial intervention. This tendency is most evident under Sections 34 and 37, where courts, under the pretext of correcting procedural infirmities, often re-enter the merits of contractual interpretation. Such approaches dilute the principle of arbitral finality and risks reducing arbitration to a preliminary step in prolonged litigation rather than being a mechanism for definitive dispute resolution.

In a significant reaffirmation of India’s pro-arbitration stance, the Supreme Court of India, in the case of Jan De Nul Dredging India Pvt. Ltd. v. Tuticorin Port Trust², has reinforced the principle of minimal judicial intervention. The judgment, delivered by a Bench comprising Justice P.S. Narasimha and Justice Pankaj Mithal, clarifies that Courts cannot interfere with an arbitral award simply because an alternative interpretation of a contract is possible. This decision serves as a deterrent against the tendency of appellate courts to reopen commercial arbitral disputes on their merits, thereby protecting the finality and efficiency of the arbitration process.

The dispute in this case arose from a large-scale maritime infrastructure project involving dredging (underwater sediment removal) and basin deepening. Following a formal tender process, the parties entered into a contract that mandated the deployment of specific dredging equipment. While the work was completed significantly ahead of the original schedule, a dispute emerged during the final billing process. The central legal issue pertained to idling charges claimed by the Claimants, which were incurred due to the Respondent’s failure to provide timely access to the construction site, preventing the effective utilization of the specialized machinery. 

The Hierarchical Relationship between Section 34 and  37

The dispute was referred to a three-member Arbitral Tribunal where the main issue concerned whether the backhoe dredger, commonly regarded as a minor dredger, was entitled to idle time compensation. The Respondent contended that such compensation was intended to apply only to major dredgers and therefore excluded the equipment in question. 

The Claimant asserted that the dredger had remained idle not by choice or operational inefficiency, but because the respondent failed to provide timely and unhindered access to the work site, which prevented the commencement and  execution of operations. As a consequence, the claimant was compelled to keep the equipment and associated manpower on standby, resulting in substantial financial losses. They also contended that the contractual scheme provisioned compensation wherever equipment was rendered idle due to delays caused by the employer, irrespective of how the equipment was categorised.

The Tribunal, while undertaking a conjoint reading of various terms of the contract, sided with the Claimant, ruling that while one provision might be narrow, other fundamental sections of the contract clearly obligated the Respondent to provide site access. 

While undertaking an exhaustive analysis of the hierarchical relationship between Section 34 and Section 37 of the Act, the Court noted that Section 34 allows for setting aside an award only on specific, narrow grounds such as incapacity of parties, lack of notice, or conflict with public policy, and does not permit a review on merits. Most Importantly, the Court clarified that the jurisdiction under Section 37 is even more circumscribed. An appellate court under Section 37 cannot undertake an independent assessment of the award; its sole purpose is to ensure that while exercising jurisdiction u/s. 34, the court acts within its prescribed limits. If the Tribunal’s interpretation of a contract is a “plausible view,” it must be accepted, even if the appellate court believes a “better view” exists.

To solidify this stance, the Court relied on several key precedents dealing with the relation between the sections in question. In MMTC Limited v. Vedanta Limited³ The Court established that Section 37 interference cannot travel beyond the restrictions of Section 34. This was further bolstered by Konkan Railway Corpn. Ltd. v. Chenab Bridge Project⁴, which held that the mere possibility of an alternative view on facts or contract interpretation does not entitle a court to reverse a tribunal’s findings. Additionally, the Court cited Punjab State Civil Supplies Corpn. Ltd. v. Sanman Rice Mills⁵, asserting that Section 37 powers are more akin to “superintendence” rather than a full-fledged civil appeal. In UHL Power Company Limited v. State of Himachal Pradesh⁶ and Larsen Air Conditioning and Refrigeration Company v. Union of India⁷The judiciary was cautioned to be “extremely circumscribed” and to avoid setting aside awards merely because an arbitrator construed a term in a specific manner.

Conclusion

In conclusion, by anchoring its ruling in the “minimal judicial interference” principle provisioned under Section 5 of the Act, the Supreme Court has clarified that; unless 

a ground for interference under Section 34 is evident on the face of the arbitral award, courts possess no authority to rewrite or substitute the arbitrator’s logic. This reinforces the notion that a Tribunal’s plausible interpretation of a contract is final and remains “untouchable” by appellate courts. By defining Section 37 jurisdiction as a narrow supervisory power rather than a fresh merits-based appeal tool, the ruling effectively closes a major loophole used to delay the execution of awards. 

Viewed in a broader institutional context, the decision also contributes to restoring commercial confidence in India’s arbitral framework. By clearly demarcating the limits of appellate scrutiny, the Court reinforces predictability in enforcement and discourages strategic litigation aimed at prolonging compliance. Such judicial discipline is essential if arbitration is to remain a credible alternative to court adjudication, particularly in complex infrastructure and public procurement disputes where time and certainty play a commercially decisive role. 

Thus, this judgment plays the role of a deterrent against “judicial second-guessing” of commercial wisdom, ensuring that arbitration does not become merely the first stage of a prolonged litigation cycle. The Supreme Court, by affirming that the interpretation of a contract is primarily the domain of the Arbitral Tribunal, has effectively closed a common loophole used to delay the execution of awards. This judgment serves as a stern reminder that the Arbitration Act is a special enactment designed to resolve commercial disputes with speed and certainty, and excessive judicial interference only serves to frustrate the purpose of its very existence.

Citations

1. The Arbitration and Conciliation Act, 1996 ↩︎
2. Jan De Nul Dredging India Pvt. Ltd. v. Tuticorin Port Trust, 2026 INSC 34 ↩︎
3. MMTC Limited v. Vedanta Limited, (2019) 4 SCC 163 ↩︎
4. Konkan Railway Corpn. Ltd. v. Chenab Bridge Project, (2023) 9 SCC 85 ↩︎
5. Punjab State Civil Supplies Corpn. Ltd. v. Sanman Rice Mills, 2024 SCC OnLine SC 2632 ↩︎
6. UHL Power Company Limited v. State of Himachal Pradesh, (2022) 4 SCC 116 ↩︎
7. Larsen Air Conditioning and Refrigeration Company v. Union of India, (2023) 15 SCC 472 ↩︎

Expositor(s): Adv. Shreya Mishra, Suprana Chakraborty (Intern)