Madras High Court | Courts will not interfere or set aside an arbitral award, merely because an alternative view is possible; Adopt a hands-off approach

Madras High Court

   

Madras High Court: In an intra-Court appeal filed against the order of the single judge, whereby, the judge allowed the original petition filed by the respondents under Section 34 of the Arbitration and Conciliation Act, 1996 (‘the Act’) and set aside the award, passed by the Arbitral Tribunal in favour of the appellant, which was in the nature of specific performance of the contract being the sale of plots and instead, awarded a sum of Rs. 50,00,000/- to the appellant, Paresh Upadhyay and D. Bharatha Chakravarthy, JJ setting aside the order of the single judge, held that the single judge was not right in modifying the award and ordering a sum of Rs. 50,00,000/- to the appellant, as the same was beyond the scope of powers under Section 34 of the Act, 1996. Further, ground as to the nature of agreement, taken into account by the single judge, is firstly not taken by the parties before the Arbitrators or before the single judge; and secondly, even if taken, cannot be a possible ground for interference under Section 34 of the Act, 1996 in the facts of the present case.

Issues:

There were two issues in the present case:

(i) Whether the single judge was right in ordering a sum of Rs.50,00,000/- in lieu of specific performance?

The Court placed reliance on the decision in NHAI v. M. Hakeem, (2021) 9 SCC 1, wherein it was held that “Section 34 of the Arbitration Act, 1996 cannot be held to include within it a power to modify an award”, and observed that the interference or variance or modification of the award and grant of an new /additional/modified reliefs are Section 34 of the Arbitration Act, 1996 cannot be held to include within it a power to modify an award out of the question while considering the application under Section 34 of the Arbitration Act, and this position is no longer res integra.

Therefore, the Court observed that the single judge was not right in modifying the award and ordering a sum of Rs. 50,00,000/- to the appellant, as the same was beyond the scope of powers under Section 34 of the Arbitration and Conciliation Act, 1996.

(ii) On what grounds arbitral award can be interfered with in the present proceedings and if so, whether the grounds on which the judge had interfered are within the ambit of the power of this Court to set aside the arbitral award?

The Court noted that the appellant has placed strong reliance on the amended Section 34(2)(a) of the Act and its proviso and the decision of the in Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC. However, in Ratnam Sudesh Iyer v. Jackie Kakubhai Shroff, (2022) 4 SCC 206 has categorically held that “the amendment is prospective in nature and will not be applicable to the application for setting aside, which is prior to the amendment”.

The Court observed that as in the present case, the original petition is of the year 2008, that is prior to the amendment. Therefore, the law as it remained prior to the amendment of the Arbitration and Conciliation Act will apply.

The Court took note of the ruling in Associate Builders v. DDA, (2015) 3 SCC 49, wherein the Court delineated and explained the grounds for challenge of the arbitral award prior to the amendment, the first ground, on which, the arbitral award is interfered is that the Tribunal did not go into the nature of agreement as to whether it is an agreement of sale or an agreement of agency/brokerage.

In this regard, the Court cited Khedut Sahakari Ginning & Pressing Society Ltd. v. State of Gujarat, (1971) 3 SCC 480 wherein it was held that “the true nature of a transaction evidenced by a written agreement has to be ascertained from the covenants and not merely from what the parties choose to call it”.

The Court observed that according to the appellant, the agreement is for development and sale of land to the appellant or to its nominees and if the respondents want to plead that the agreement is not an agreement of sale, they have to take specific stand to that effect that the property was not projected in any manner as that of the appellant.

It was also observed that the agreement in question clearly reads that it is an agreement of sale, therefore, the ground, considered by the single judge, relates to construction of agreement and appreciation of the evidence on record, and cannot be said to be relating to Public Policy of India under any of the heads and that in the absence of any pleading or framing of issue, the award of the Tribunal cannot be termed as any patent or blatant illegality.

Further, the respondents themselves did not take any such stand in their reply statement and the only plea which is taken is the escalation of price and equity. Therefore, the Court held that the ground as to the nature of agreement, taken into account by the single judge, is firstly not taken by the parties before the Arbitrators or before the single judge; and secondly, even if taken, cannot be a possible ground for interference under Section 34 of the Arbitration and Conciliation Act, 1996 in the facts of the present case.

Moreover, as regards to the second ground of interference it was observed that, as per Section 14 of the Specific Relief Act, the relief granted by the Arbitrators is to sell the land to the appellant or its nominees. Therefore, prima facie, there is not anything for the Court to continuously monitor the specific performance of the parties. Therefore, the disagreed with the findings of the single judge in this regard.

Further, it was viewed that there are rival contentions between the parties which require appreciation of the evidence; and taking into account the conduct of the parties during the transaction and when the Arbitral Tribunal had appraised the evidence and rendered its findings upon consideration of the facts, that it is a case of specific performance and interference on the ground of inequitable nature or unfair advantage would only be to sit on appeal over the arbitral award and therefore, was not possibly a ground available for the single judge to interfere with the award.

The Court also observed that when the parties have chosen the arbitration as their forum by a valid arbitration clause, the autonomy of the parties has to be upheld and the award of the Arbitral Tribunal shall be final, unless it can be set aside under any one of the specific grounds available under Section 34 of the Act; and the Courts will not interfere or set aside the award, merely because an alternative view is possible and have to adopt an hands-off approach.

[Macro Marvel Projects Ltd. v. J. Vengatesh, 2022 SCC OnLine Mad 4702, decided on 28.09.2022]


Advocates who appeared in this case :

For Appellant: Advocate S.R. Raghunathan

Advocate .Vigneshwar Elango

Advocate .P. Elango

For Respondents: Advocate .V. Raghavachari

Advocate R. Veeramani

Advocate .P.L. Narayanan

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