Section 34 of the Arbitration and Conciliation Act 1996 (the Act) provides for recourse to the court against an arbitral award by way of an application to set aside the award on the grounds specified in the section.

Section 20 of the Specific Relief Act 1963 states that the discretionary power of a court to decree specific performance is not arbitrary, but guided by sound and reasonable judicial principles and is capable of correction by a court of appeal.

The State of Maharashtra (the respondent) floated a tender to develop a super speciality hospital by the formation of a joint venture company (JV), in collaboration with a private sector partner. The respondent subsequently entered into a joint venture agreement (the agreement) with Carol Info Services Limited (the petitioner). The petitioner was to have a majority stake in the JV and was to make a contribution to the share capital of the company within a stipulated period. As per the agreement, the respondent was to be the owner of the hospital, building and land. The hospital, building and land were to be leased to the JV by way of a separate lease.

After the lease was executed, disputes arose between the parties as a result of which the respondent purported to terminate the contract. The agreement contained an arbitration clause and the disputes were referred to arbitration. The arbitrator made an award, rejecting the petitioner's claim for specific performance of the contract, on the ground that the petitioner had committed a breach of its obligation to contribute to the share capital within the stipulated time.

The petitioner, therefore, challenged the award under section 34 of the Act before the Bombay High Court.

The Bombay High Court noted that the arbitrator had made a detailed award and also observed that the finding of the arbitrator, that the petitioner had committed a breach of its obligation, was correct as the arbitrator had rightly interpreted the relevant clauses of the contract. The court also observed that the arbitrator had rightly considered the appropriate provisions of the Specific Relief Act 1963, in refusing to grant the specific performance of the agreement.

In dismissing the petition, the court held that "when an arbitrator interprets the terms in the contract and the court hearing petition under section 34 finds that the interpretation by the arbitrator is a possible interpretation, the findings of the arbitrator cannot be disturbed by the court."

The court in this case rightly dismissed the petition challenging an arbitral award and thus has followed the recent judicial tide in refusing to interfere with an arbitral award.

Carol Info Services Limited v. State of Maharashtra (Arbitration Petition No. 209 of 2008, decided on 16 June 2011, by the Bombay High Court).