{"id":328984,"date":"2024-08-20T12:30:24","date_gmt":"2024-08-20T07:00:24","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=328984"},"modified":"2024-08-23T16:49:29","modified_gmt":"2024-08-23T11:19:29","slug":"delhi-hc-partially-sets-aside-arbitral-award-sole-arbitrator-failing-to-appreciate-contractual-terms-subsisting-between-parties","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2024\/08\/20\/delhi-hc-partially-sets-aside-arbitral-award-sole-arbitrator-failing-to-appreciate-contractual-terms-subsisting-between-parties\/","title":{"rendered":"Delhi High Court partially sets aside Arbitral Award passed by Sole Arbitrator for failing to appreciate contractual terms subsisting between parties"},"content":{"rendered":"<div style=\"text-align: justify; line-height: 150%;\">\n<p style=\"margin-bottom: 3%;\"><span style=\"font-weight: bold;\">Delhi High Court:<\/span> In a petition filed under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544939\" target=\"_blank\" rel=\"noopener\">34<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726958\" target=\"_blank\" rel=\"noopener\">Arbitration and Conciliation Act, 1996<\/a> (&#8216;Act&#8217;) seeking to set aside the Arbitral Award dated 20-09-2023 passed by the Sole Arbitrator, a Single Judge Bench of Jasmeet Singh, J. set aside the finding made by the Sole Arbitrator regarding the pre-litigation interest in the impugned award, since the Arbitrator had failed to appreciate the contractual terms that were present between the parties.<\/p>\n<p style=\"font-weight: bold;\">Background<\/p>\n<p style=\"margin-bottom: 3%;\">The parties in the present matter had entered into an Agreement dated 13-09-2012, which stated that the petitioner would place indents, and that the respondent would place an order for the import of bullion as consignment stock and\/or letter of credit, standby letter of credit, and buyer&#8217;s credit. Thereafter, the parties entered into another Agreement dated 25-02-2014.<\/p>\n<p style=\"margin-bottom: 3%;\">The dispute arose between the parties because the respondent failed to pay the due amount of Rs. 2,44,50,849\/- along with interest as per Clause 6.6 of the Agreement dated 13-09-2012 and Clause 9.1 of the Agreement dated 25-02-2014, which required the petitioner to deposit amounts with the respondent, who was required to place these amounts in term deposits and credit the interest accruing on such deposits to the petitioner.<\/p>\n<p style=\"margin-bottom: 3%;\">After the dispute arose between the parties, the petitioner invoked Arbitration vide legal notice dated 23-08-2022 and filed an application under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544910\" target=\"_blank\" rel=\"noopener\">11<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726958\" target=\"_blank\" rel=\"noopener\">Act<\/a> after which a Sole Arbitrator was appointed by a co-ordinate bench of the Court.<\/p>\n<p>The contentions made by the petitioner before the Sole Arbitrator were that:<\/p>\n<ol style=\"list-style-type: lower-roman; margin-left: 12.7mm;\">\n<li>\n<p>The respondent had failed to maintain Fixed Deposit Receipts (FDRs) for the amounts that had been deposited with the petitioner;<\/p>\n<\/li>\n<li>\n<p>The respondent had illegally withheld the amounts as well as the interest that was to accrue on such deposited accounts that were owed to the petitioner; and<\/p>\n<\/li>\n<li>\n<p style=\"margin-bottom: 3%;\">The respondent had misappropriated the amounts deposited by the petitioner in breach of the terms of the Agreement.<\/p>\n<\/li>\n<\/ol>\n<p style=\"margin-bottom: 3%;\">Vide Arbitral Award dated 20-09-2023, the Sole Arbitrator allowed the petitioner&#8217;s claims amounting to Rs. 3,44,69,966\/- and Rs. 5,57,480\/- along with future interest and pendente lite at the rate of 9 per cent. Consequently, the respondent paid the entire awarded amount to the petitioner.<\/p>\n<p style=\"margin-bottom: 3%;\">Not having received the interest for the period 01-04-2015 to 31-03-2017, the petitioner moved an application under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544938\" target=\"_blank\" rel=\"noopener\">33<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726958\" target=\"_blank\" rel=\"noopener\">Act<\/a> to seek the same. The Sole Arbitrator rejected this application on 06-11-2023, and hence, the present petition was filed.<\/p>\n<p style=\"margin-bottom: 3%;\">The respondent submitted the letter dated 07-12-2023 whereby the petitioner had acknowledged that the respondent had duly complied with the Arbitral Award and mentioned that the respondent had also made a payment of Rs. 28 lakhs towards interest to put a closure to the dispute between the parties.<\/p>\n<p style=\"font-weight: bold;\">Analysis and Decision<\/p>\n<p style=\"margin-bottom: 3%;\">The Court, in reference to the objection pertaining to the limitation period, said that since the present petition was filed on 03-02-2024 i.e. within 90 days from the date of the disposal of the application filed under Section 33 as was prescribed by Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544939\" target=\"_blank\" rel=\"noopener\">34(3)<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726958\" target=\"_blank\" rel=\"noopener\">Act<\/a>, the present petition was within limitation.<\/p>\n<p style=\"margin-bottom: 3%;\">While dealing with the second objection raised by the respondent regarding non-payment of interest, the Court perused the Award passed by the Sole Arbitrator and said that the Sole Arbitrator had taken note of the fact that a sum of Rs. 2.44 crores were standing to the credit of the petitioner on 31-03-2015 which, after certain adjustments, became Rs. 2.47 crores at the end of the financial year on 31-03-2017. Thus, the Court stated that from 31-03-2015 to 31-03-2017, an amount of Rs. 2.44 crores were duly maintained towards the credit of the petitioner and the additional sum of Rs. 3,00,000\/- was not the interest but an internal adjustment made by the respondent.<\/p>\n<p style=\"margin-bottom: 3%;\">Further, the Court noted that Clause 8.4 of the Agreement categorically mandated that term deposits and the interest accrued on the term deposits were to be credited to the benefit of the petitioner.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court stated that the Sole Arbitrator had failed to deal with or consider Clause 8.4 of the Agreement while dealing with the application under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544938\" target=\"_blank\" rel=\"noopener\">33<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726958\" target=\"_blank\" rel=\"noopener\">Act<\/a> in the impugned Award dated 20-09-2023 and in the order dated 06-11-2023.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court said that the finding of the Sole Arbitrator in the order dated 06-11-2023 that the pre-litigation interest was payable from 01-04-2017 onwards because the amount lying with the respondent payable to the petitioner rose from Rs. 2.44 crores to Rs. 2.47 crores in the period from 31-03-2015 to 31-03-2017, did not have any basis. It was also said that the direction of the calculation of interest from 01-04-2017 and the exclusion of the period from 31-03-2015 to 31-03-2017 was contrary to the express terms in the agreement between the parties.<\/p>\n<p style=\"margin-bottom: 3%;\">Further, the Court stated that the finding by the Arbitrator was perverse since the Arbitrator had failed to appreciate contractual terms subsisting between the parties while rejecting interest under issue no. III and no reasons were given for non-application of Clause 8.4.<\/p>\n<p style=\"margin-bottom: 3%;\">Thus, the Court upheld the objection of the petitioner to the Award regarding issue no. III and set aside the finding in the Arbitral Award dated 20-09-2023 in reference to issue no. III.<\/p>\n<p style=\"margin-bottom: 3%;\">[<span style=\"font-weight: bold; color: #632423;\">Pulin Comtrade Ltd. v. Handicrafts and Handlooms Exports Corporation of India Ltd., <a href=\"http:\/\/www.scconline.com\/DocumentLink\/4VV9yLkR\" target=\"_blank\" rel=\"noopener\">2024 SCC OnLine Del 5630<\/a>, Decided on 24-07-2024<\/span>]<\/p>\n<hr\/>\n<p>Advocates who appeared in this case :<\/p>\n<p style=\"margin-left: 18pt;\"><span style=\"font-weight: bold;\">For Petitioner &#8212;<\/span> Advocate Aditya Srinivasan, Advocate Shreyas Jain, Advocate Rishabh Kanojiya<\/p>\n<p style=\"margin-left: 18pt;\"><span style=\"font-weight: bold;\">For Respondent &#8212;<\/span> Advocate Rishabh Rana, Advocate Akshay<\/p>\n<h3 style=\"color: #000080;\">Buy Arbitration and Conciliation Act, 1996 &nbsp; <a href=\"https:\/\/www.ebcwebstore.com\/product_info.php?products_id=382\" target=\"_blank\" rel=\"noopener\">HERE<\/a><\/h3>\n<p style=\"margin-bottom: 3%;\"><a href=\"https:\/\/www.ebcwebstore.com\/product_info.php?products_id=382\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/arbitration-and-conciliation-act-1996-191x300.png\" alt=\"arbitration and conciliation act, 1996\" width=\"191\" height=\"300\" class=\"aligncenter size-large wp-image-294803\" srcset=\"https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/arbitration-and-conciliation-act-1996-191x300.png 191w, https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/arbitration-and-conciliation-act-1996-38x60.png 38w, https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/06\/arbitration-and-conciliation-act-1996.png 620w\" sizes=\"auto, (max-width: 191px) 100vw, 191px\" \/><\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p style=\"font-style: italic;\">The direction given by the Sole Arbitrator to exclude the period from 31-03-2015 to 31-03-2017 for calculation of pre-litigation interest was contrary to the express terms in the Agreement made between the parties.<\/p>\n","protected":false},"author":67011,"featured_media":314886,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,10],"tags":[2633,3226,10131,2543,69917,72230,72229],"class_list":["post-328984","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-highcourts","tag-arbitral_award","tag-arbitration","tag-arbitration-and-conciliation-act","tag-Delhi_High_Court","tag-justice-jasmeet-singh","tag-non-adherence-to-contract","tag-subsisting-contractual-terms"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.4 (Yoast SEO v26.4) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Delhi HC partially sets aside Arbitral Award passed by Sole Arbitrator for failing to appreciate contractual terms subsisting between parties | SCC Times<\/title>\n<meta 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