by Hiresh Choudhary* and Surbhi Sharma**
“The credibility of the evidence is the evidence of the credibility of claim for loss of profit”.
Calcutta High Court held Arbitrator’s refusal to decide question of interest under the MSMED Act constitutes a “decision” and therefore, can be challenged under Section 34 of the Arbitration and Conciliation Act, 1996.
While cautioning the parties to the Arbitration proceedings, Calcutta High Court stated that parties should be vigilant in applying for extensions within the prescribed periods and dismissed the petitions seeking an extension of the arbitrator’s mandate.
Bombay High Court viewed that by considering delays prior to the new contract, there was a ‘patent perversity apparent on the face of the award’.
A party cannot simply raise an objection on the ground of patent illegality if the Award is against them. Patent illegality requires a distinct transgression of law, the clear lack of which makes the petition a pointless effort of objection towards an Award passed by a competent Arbitral Tribunal.
Section 34 of the Arbitration Act is a clear and unequivocal embodiment of the Legislature‘s intent to balance the competing facets of arbitration, I.e., on one hand, while courts are enjoined to follow the minimalist intervention route, it would clearly be a travesty of justice if they were to fail to intervene where circumstances warrant, and demand corrective measures being adopted.
“Dissenting opinion of arbitrators might provide useful clues during procedural issues, which forms a critical part when the hearings are challenged”.
The Supreme Court explained that the older Act enabled the Court to modify an award, a power which was consciously omitted by Parliament while enacting the 1996 Act, hinting towards exclusion of power to modify an award.
The Calcutta High Court held that failure to comply with procedural requirements under Section 19 of the MSMED Act renders application for stay of Arbitral Award as not maintainable.
“The consensus of the parties in proceeding with the arbitration case beyond twelve months without raising any objection to the continuation of proceeding does amount to consent. On the basis of such consent, the arbitral award if passed after six months would be a valid award.”
Indian Railway’s has failed to substantiate its grounds for setting aside the impugned Arbitral Award that the impugned award suffers from patent illegality and the findings therein are perverse and would shock the conscience of this Court.
Section 12(2) of the Arbitration and Conciliation Act, 1996 obligates the Arbitrator to remain neutral and to disclose to the parties any acts or omissions that are likely to fall foul of the mandate.
“The Tribunal provided reasons for the findings delivered, and there was no perversity apparent on the face of the record or which goes to the root of the matter. Therefore, the impugned Award could not be said to be patently illegal.”
“The irrationality of the quantum of the costs imposed will be considered at the time of determining whether the Award should be set aside under Section 34 of the 1996 Act.”
The present case is an example where substantial liability has sought to be fastened on one of the contracting parties based on specious paper calculations. It cannot be overemphasized that arbitral tribunals must exercise due care and caution while dealing with such claims.
Power of Indian Courts to modify an Arbitral Award: This article submits that the courts ought to have power to modify the
Calcutta High Court held that Court should not substitute its own view, replacing that of the arbitrator, unless it is manifestly evident that there existed no agreement.
Himachal Pradesh High Court set aside the impugned order and directed the District Court to decide the matter afresh.
The ineligibility of an Arbitrator goes to the root of his jurisdiction and the Arbitral Award cannot be considered as valid.