2026 (3) TMI 1440 - HC - Indian Laws

Section 34 interference stays narrow: arbitral findings on input tax credit were upheld as plausible and evidence-based.

A Section 34 challenge to an arbitral award involving CENVAT and input tax credit failed because the court found no patent illegality, perversity, or ... Scope of interference with an arbitral award - Patent illegality and perversity in arbitral award - Input tax credit obligations under contract - Challenged the award on the footing that the respondent had not furnished sufficient documents to enable availment of CENVAT/input tax credit did not disclose any ground for interference under Section 34. Limited scope of interference under Section 34 - HELD THAT: - The Court held that in proceedings under Section 34 it does not sit in appeal over the arbitral award, and interference is confined to the statutorily limited grounds of patent illegality, perversity, or conflict with public policy. On the record, the Majority Arbitral Tribunal had returned a categorical finding that the petitioner had not taken any steps to avail the input tax credit, including by approaching the concerned authorities, and had also failed to establish what documents were not supplied by the respondent. The Tribunal had further noticed that the petitioner had reimbursed the respondent towards the taxes paid, supporting the conclusion that the documents furnished had been acted upon. In that view, the objection regarding insufficiency of documents was rendered inconsequential, and the award represented a plausible and reasonable view based on the material before the Tribunal, not open to reappreciation in a Section 34 challenge. [Paras 7, 8, 9, 10, 11] No perversity or patent illegality was found in the impugned award, and the petition was dismissed. Final Conclusion: The Court declined to interfere with the arbitral award, holding that the petition sought a reappreciation of factual findings which was impermissible under Section 34. The dismissal of the petition was followed by a direction for release of the bank guarantee in favour of the respondent. Issues: Whether the arbitral award, insofar as it related to CENVAT and input tax credit, suffered from patent illegality, perversity, or conflict with public policy so as to warrant interference under Section 34 of the Arbitration and Conciliation Act, 1996.Analysis: The challenge was examined within the confined scope of Section 34, where interference is permissible only on limited grounds and not by acting as an appellate court. The Tribunal had recorded a categorical finding that the petitioner had not taken steps to avail the input tax credit and had not shown which documents were withheld or how any alleged deficiency prevented availment of credit. The award also noted that the respondent had furnished documents and that reimbursement had been made on the basis of the taxes paid. On that factual foundation, the Court found the Tribunal's view to be plausible, reasonable, and supported by the material on record. No case was made out to show that the award was perverse, based on no evidence, or otherwise hit by patent illegality.Conclusion: The award did not warrant interference under Section 34 and the petition failed on merits.Final Conclusion: The arbitral award was sustained and the challenge to it was rejected, with consequential relief granted in relation to release of the bank guarantee.Ratio Decidendi: In a Section 34 challenge, an arbitral award cannot be set aside on a mere disagreement with factual findings or appreciation of evidence; interference is justified only when the award is perverse, patently illegal, or otherwise falls within the narrow statutory grounds for intervention.