Judgments and Awards

Deepak Mitra Vs District Judge, Allahbad

The scope of objections to the award was discussed in this case. It was held that the arbitral tribunal has been given a free hand to deal with the disputes between the parties and to arrive at its resolution. A finality has been attached to an arbitral award u/s 35 and the law has turned a full circle as an award by itself has become enforceable as a decree of the court.

The award is not open to challenge on the ground that the arbitrator has reached a wrong conclusion or has failed to appreciate the facts. On the other hand, u/s 34 or u/s 9, if the court is called upon to decide the objection raised by a party against an award or to make interim measure of protection, the jurisdiction of the court is limited to what is expressly provided in the said provisions. It has no jurisdiction to sit in appeal and examine the correctness of the award on merits with reference to the materials produced before the tribunal or to issue an order of injunction, which may result in obstructing the proceedings before the tribunal.

Indian Commercial Co Ltd Vs Amrish Kilachand

The petitioner challenged the award on the ground of legal misconduct of the arbitrator, viz. denial of an opportunity to the defendants to defend themselves. The issue that arose was whether it is permissible to challenge the award on grounds that are not provided by the Act.

It was held that legal misconduct of the arbitrator cannot be decided by the court in execution, since it is not a question relating to the execution, discharge or satisfaction of the decree but involves the determination of the manner in which the arbitrator conducted the proceedings.

It was further held that section 34 does not provide legal misconduct as one of the grounds for setting aside the award. Having regard to the legal policy of making an award immune from challenge on this ground, it would not be open to the court to entertain a challenge on grounds not provided in the Act, barring something in the nature of fraud or nullity which goes to the foundation of the award or decree. The alleged misconduct would have to be of a nature which appears on the face of the record and does not require in depth examination of the issues which could have been raised in the arbitral proceedings or in the petition for setting aside the award. A fortiori, if the question of legal misconduct must be gone into, it must be of the kind which is obvious from the award.

TPI Ltd Vs Union of India

The petitioner, in a writ petition, contended that there should be a right to challenge the award on merits and in the absence of such a provision, section 34 would be unconstitutional.

The court, while dismissing the writ petition, held that the matter in question does not relate to judicial review of an administrative action or of a tribunal decision created under any statute. The arbitration, which is an alternate forum for redressal of disputes, is selected by the parties of their own free will and they agree to the arbitrator's decision by means of a mutual agreement or contract, which gives a go by to the normal judicial forum otherwise available to the parties. There is no compulsion or imposition by any statute compelling the parties to resort to arbitration if a dispute arises.

When the parties have chosen the forum of arbitration and the arbitrator of their choice, it is not necessary to make a provision for appeal against the award rendered by the arbitrator. The legislature has the power to specify the grounds on which an award can be challenged and it would be permissible for the party to challenge the award only on those grounds. If it were permissible for the court to re-examine the correctness of the award, the entire proceedings would amount to a futile exercise.

Board of Trustees for the Port of Calcutta Vs Mahalakshmi Constructions

This case clarified the meaning of error apparent on the face of the award. In the present case, an award was passed whereby escalation was awarded by the arbitrator in spite of the contract prohibiting grant of escalation.

It was held that the prohibition clause was not apparent on the face of the award and that the commercial contract clause cannot be looked into to conclude that the arbitrator had erred in law. It was further explained that there is a great problem in the arbitration court when faced with an application for setting aside of the award, even to look at the commercial contract between the parties, which is separate from the arbitration contract. The arbitration contract can always be looked into as it is the root of the arbitrator's jurisdiction. But for the court to look into the commercial contract, it must form part of the award. And the part of award must appear along with some proposition of law, also a part of the award, which is wrong and at the root of the award so that without such proposition the award is not sustainable.

Thus, one cannot even look at the commercial contractual clause prohibiting the grant of escalation and thereby come to the conclusion that the arbitrator has erred in law, unless that prohibition clause is apparent on the face of the award itself.

Force Shipping Limited Vs Ashapura Minechem Limited

There was opposition on the part of the respondent on the ground that challenge to the foreign award would have to be u/s 34.

Rejecting the respondent's contention, the court held that there are special provisions for enforcement of foreign awards therefore the general provisions, including the provision relating to challenge of awards, would be excluded. This means that once the Part II of the Act applies, Part I would be excluded. Under Part I, a decree can be executed only if the challenge u/s 34, if made, fails. Under section 48, the foreign awards become enforceable and is to be executed as a decree.

Nirma Ltd Vs Lurgi Energie Und Entsorgung GmBH

The question whether the award in the instant case was foreign or domestic arose at the time of setting aside the award. There was an agreement between an Indian company and a foreign company which stated that the agreement as well as the arbitration thereunder was to be governed as per the law of India. The award was passed in London in accordance with the ICC Rules.

The court held that it can be said that the arbitral award has been made under Part I of the Act. Therefore the award made would be a domestic award though made on foreign soil in accordance with ICC Rules, and section 34 would be applicable. The decisive factor for an award to be considered a 'domestic award' is not the place where it is made but rather the fact of it being made under Part I of the Act. The parties in the instant case having agreed that the agreement (including the arbitration thereunder) shall be governed according to the laws of India, the arbitral award has to be held to be made under Part I and has to be considered as a domestic award, though made on foreign soil according to ICC rules - which can only displace derogable provisions of Part I. Therefore, recourse to a court u/s 34 not being a derogable provision, cannot be waived by subscribing to the ICC Rules of Arbitration.

Union of India Vs Bharat Builders

There was a dispute pertaining to clearance of a bill and the question arose whether the petitioner made the payment within 6 months from the date of the bill. The petitioner contended that the bill was cleared within the time limit but this fact was not appreciated by the arbitrator because he did not provide any proper opportunity to the petitioner, which is in violation of the principle of natural justice.

It was held that unless a party succeeds in establishing any of the ingredients of section 34, it is not entitled to subvert the award. In the instant case, the arbitrator had returned findings after discussing all relevant documents/materials hence the allegation is dismissed.

It was further held that even if an erroneous view has been taken by the arbitrator in respect of the finding of fact of interpretation of terms and clauses of the agreement, the court should be reluctant to interfere unless perversity or non application of mind or error is writ large on the face of the award.

Nirma Ltd Vs Lurgi Energie Und Entsorgung GmBH

A Know How and Supervision agreement was entered into between an Indian Company and a foreign company and the arbitration in question was an international commercial arbitration. The proper law governing the arbitration was the law of India. The question was whether the court of competent jurisdiction in India has jurisdiction to entertain the application.

While answering in the affirmative, the court held that not only do the provisions of the 1996 Act apply to this arbitration, but the court of competent jurisdiction in India also has jurisdiction to entertain applications in accordance with law.

It was further held that the Model Law did not state to which individual arbitrations of international commercial nature it would apply. Although the prevailing view of the Working Group was in favour of strict territorial criterion, the decision was not taken to expressly deal with the issue in Art. 1. The question was also left undecided in the context of Art. 34.

M. Anasuya Devi Vs M Manik Reddy

There was a petition for setting aside an award on the ground that the award was inadmissible and unenforceable in law for want of proper stamp duty and registration. The High Court held that since the award was not stamped and registered, it was invalid and without jurisdiction.

The High Court decision was rejected and it was held that the question whether the award is required to be stamped would be relevant only when the parties file the award for its enforcement u/s 36. It is at this stage the parties can raise objections regarding its admissibility on account of non registration and non stamping u/s 17 of the Registration Act. An application u/s 34 shall not lie on any ground other than enumerated therein.