Judgments and Awards

N Jayalaxmi Vs R Veeraswamy, Sole Arbitrator, GM (Finance), Airports Authority of India

The suo motu extension of time for filing pleadings was discussed here along with the issue of the power of the court and arbitrator as well as the question whether the same would be held contrary to any substantive law which would suffer invalidation in the hands of the court.

It was held that in the conduct of proceedings, the arbitral tribunal has to follow the procedure contemplated under the statute and it should also act having regard to the principles of fairness and natural justice. In every arbitration, there are implied rules of procedure. An arbitrator should be impartial and give a reasonable opportunity to each party to present his case. Even in the matter of imposing limits as to time, the arbitrator is competent to allow some laxity to the party having regard to the principles of fairness. If during the conduct of proceedings the arbitral tribunal extends time suo motu either for filing pleadings or for leading further evidence or for filing counter claim, the same cannot be held to be contrary to any substantive law which will suffer invalidation in the hands of the court.

Vinay Kumar Kohli Vs Union of India

There was a contract for running a cable TV Network in the ordinance factory area wherein the procedure for reference to the GM was provided in case of any dispute. A complaint arose regarding the unsatisfactory service by the plaintiff and hence reference was made to the GM who terminated the contract without giving any hearing to the plaintiff.

It was held that it is well settle d that any court, arbitrator, conciliator or adjudicator has t hear both the sides in deciding any dispute and if a decision has been arrived at by the arbitrator without hearing the other party, that decision would be a nullity in the eye of law. An arbitrator is required to observe the famous rule in the maxim 'audi alteram partem' which means that the other side should be heard. A party must be given a fair opportunity of being heard and should not suffer in person or in purse without an opportunity of being heard.

In this case, the GM was admittedly occupying the position of an arbitrator and acting judicially when the dispute was referred to him by the defendant. Therefore it was necessary for him to hear the plaintiff before giving any decision on the point whether the service rendered by the plaintiff was 'unsatisfactory'. No such hearing was given to the plaintiff therefore the order is a nullity.

Sulaikha Clay Mines Vs Alpha Clays & Ors

The parties were partnership firms engaged in mining. When a dispute arose between them, they decided to refer the dispute to a sole arbitrator, who entered into reference and made an award. The award was challenged by the respondent on several grounds u/s 34 and it was found that the procedure, as contemplated by the Act, had not been complied with and proceedings conducted by the arbitrator were in violation of sections 18 and 24 of the Act.

Held that Section 18 provides that the parties shall be treated with equality and each party shall be given a full opportunity to present his case. Section 24 (1) and (2) make it clear that in the absence of agreement, it is for the arbitrator to decide whether oral hearings should be conducted or not and once it is decided in the affirmative, the parties are to be given sufficient notice. Section 24(3) makes it compulsory that all statements and other information supplied to the arbitral tribunal by one party should be made available to the other party.

In this case, the rejoinder submitted by the appellant was not given to the respondent and the rejoinder by the respondent was not given to the appellant. Oral hearings were granted by the arbitrator at the premises of the parties without notice to the other and inspections were conducted without notices to both parties. The evidence collected at the inspection was not even disclosed at the hearing. This shows that equal opportunity and equal treatment was not given to the parties. This is clear violation of sections 18 and 24 and the award is liable to be set aside.

Vinay Bubna Vs Yogesh Mehta

This case explored the effect of denial of opportunity to examine the witness.

It was held that section 24(1) proviso is quite clear and if the parties before the arbitral tribunal want to lead oral evidence, it must be granted as the expression is 'shall hold hearings at the request of he parties'. It may be that even in the expression 'shall' in a limited number of cases wherein in fact no evidence is required to be led, the tribunal can reject such an application. In the instant case however, the petitioner had pointed out the need to examine the witness. The tribunal on the express language of the aforesaid section should not have denied that opportunity. On that count, the award is liable to be set aside.

Deepak Mitra Vs District Judge, Allahbad

While discussing the scope of interim award, it was held that the provision for making of an interim award is not controlled by or dependent upon any agreement between the parties. The matter is left at the discretion of the Tribunal. The tribunal is free to make an interim award on any matter on which it may make a final arbitral award. It was further held that an interim award should be made in the same way as an award after hearing the parties and on consideration of the evidence adduced.

Tamil Nadu Water Supply and Drainage Board, Chennai Vs Aban Constructions

This case clarified the definition of an interim award and held that an award must determine all the differences which the parties by their agreement referred to arbitration. An interim award must determine some part of the dispute and shall be made in the same manner as an award.

S.Kumar Vs Delhi Development Authority

This case discussed the issue whether the future interest was payable up to the date of payment or up to the date of the decree. According to the award that was passed, future interest was to be paid from 8.4.1998 to the date of payment or decree whichever is earlier.

It was held that in view of the fact that the award itself is a decree, the directions of the arbitrator that the pendent elite interest shall be paid from 8.4.1998 to the date of payment or date of decree, whichever is earlier, actually meant that the interest was payable up to the date of payment. Filing of objection by a party u/s 34 and refusal thereof is irrelevant where payment of future interest is concerned. The application u/s 34 is relevant only for the purpose of enforcement of the decree. The moment this application is refused, the decree becomes enforceable and the date of the decree remains the same as that of the award.

In view of this legal position, the respondent was obliged to make payment for future interest up to the date of payment and not up to the date when the objections were dismissed.

International Investor KCSC (Kuwait) Vs Sanghi Polysters Ltd, Sanghinagar

There was an award of interest on the sum directed to be paid by the arbitral award. The issues clarified in this matter pertained to the entitlement and rate of interest in foreign awards.

It was held that the interest payable on the sum directed to be paid in an arbitral award shall be @18% pa from the date of the award till the date of payment, unless the award itself expressly denies such interest. Therefore, section 31(7) becomes lex fori in the present case. Also, nothing was brought to the notice of the court by the respondent whereby the award in question directed otherwise. Therefore, it must be held that the petitioner is entitled for interest on the amount so directed to be paid by the respondent by the award @ 18% pa from the date of the award till the date of the actual payment.

Toepfer International Asia Pvt Ltd Vs Thapar Ispat Ltd

This case examined the power of the court to award interest from the date of the award till the payment and realization of the same. The petitioner had sought relief in terms of prayer (c) in the petition which is for payment of interest @21% on the principal sum from the date of the award ie. 30.9.1997 till payment and realization of the sum. The award itself had directed payment of interest @ 17% on the principal sum from 25.1.1996 till the date of the award.

It was held that the prayer could not be granted. Under the 1996 act, it was no longer open to the court to make such an order for interest. The court felt that this was a serious lacuna insofar as the arbitration award is concerned. If it does not award interest beyond the date of the award for any delay caused thereafter, the party who succeeded in the claim would be put to loss. It would put premium for dishonest objection to the award and delay in its execution, without risk of incurring interest charges.

It was further held that this lacuna could be cured either by legislation or by framing of appropriate rules by the High Court, in exercise of its powers under Rule 82.