Bom HC | Finding of fact recorded by Arbitrator which is patently illegal is open to challenge under S. 34 of A&C Act

Bombay High Court: C.V. Bhadang, J. allowed an appeal filed against the decision of the District Judge whereby he had dismissed appellant’s petition under Section 34 of the Arbitration and Conciliation Act, 1996.

The appellant had filed the said petition under Section 34 against the award of the Arbitrator made in the subject arbitration proceedings between the appellant and the respondent. The Arbitrator had rejected the counter claim filed by the appellant. The District Magistrate refused to consider some of the aspects challenged by the appellant on the ground that those were only findings of facts recorded by the Arbitrator and in the result dismissed his petition. Aggrieved thereby, the appellant filed the present appeal under Section 37.

S.D. Padiyar, Advocate representing for the appellant contended that the findings recorded by the Arbitrator were perverse and liable to set aside. Per contra, A.D. Bhobe, representing the respondent supported the impugned decision.

Relying on Mahendra Kumar v. State of M.P., (1987) 3 SCC 265, the High Court observed that Order 8 Rule 6-A CPC does not bar the filing of the counter claim by the defendants after filing of the written statement and the counter claim can be filed after delivery of defence provided that the cause of action for the same has accrued prior to such delivery of defence. Therefore, the Court held that it could not be disputed that the cause of action for the counter claim by the appellant seeking compensation in respect of the LPG cylinders and the pressure regulators which were found missing had arisen prior to the delivery of defence and, thus, on this ground, the counter claim could not have been dismissed.

Regarding the issue of consideration of finding of facts, the Judge relied on Associates Builders v. DDA, (2015) 3 SCC 49, observed: “I am conscious of the legal position that a finding of fact properly recorded by the Arbitrator is not open to challenge in the limited supervisory role attributed to the Court under Section 34 of the Act and much less in a further appeal under Section 37 of the Act. However, if the finding recorded is patently illegal and perverse where the Arbitrator has refused to acknowledge the material on record, the same, in my considered view, would be open to challenge as held by the Supreme Court in the case of Associate Builders.”

In the present case, it was found that one of the issues, the Arbitrator failed to take note of the documents produced even though he had acted upon the same in the earlier part of the award. Relying further on Mc Dermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181 for the proposition that the Court in the exercise of the jurisdiction under Section 34 cannot substitute or modify the award, the High Court quashed the award passed by the arbitrator while allowing the appeal. [Bharat Petroleum Corporation Ltd. v. Anuradha Ajit Malgaonkar, 2019 SCC OnLine Bom 1244, decided on 04-07-2019]

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