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The Delhi High Court on Wednesday dismissed the petition challenging an Arbitral Award, observing that it can only allow appeals under section 34 of the Arbitration and Conciliation Act, 1996 in terms of grounds stipulated therein.

A Single Bench of Justice V Kameswar Rao while pronouncing the judgment relied on what was held by  Supreme Court in Associate Builders v. Delhi Development Authority (2015) 3 SCC and observed that,

“A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or re-appreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at.”

According, to the facts of the present case the respondent is the manufacturer and the petitioner is the distributor of Ferrites and it is the admitted case of the parties that petitioner and respondent entered into a non-exclusive Distributorship Agreement dated April 01, 2005. Subsequently, the parties entered into annual agreements for the years 2007, 2008 and 2009. In terms of the Distributorship Agreement, the petitioner placed purchase orders on the respondent for supply of goods, which in turn were sold by the petitioner to its customers.

Further, the brief facts that led to the invocation of arbitration and the adjudication of disputes by the Arbitrator were as follows –

• It is respondent/claimant’s case that it supplied goods to the petitioner against various purchase orders and raised invoices accordingly.
• The respondent claimed that the petitioner had failed and neglected to make payments against the invoices for sums aggregating ₹54,14,934/-, which became due and payable.
• The petitioner thereafter had issued nine cheques, however, the said cheques were dishonoured on presentation.
• The respondent claimed that the said cheques were issued by petitioner in discharge of its liability, the petitioner had disputed the same.
• However, according to the petitioner, the said cheques were issued at the instance of respondent only as a security for any payment that may become due.

It is noted that after the completion of the pleadings the Arbitrator framed in as much as 23 issues. The Arbitrator found that petitioner had placed purchase orders for the goods in question. After considering the evidence and material on record, the learned Arbitrator concluded that a sum of ₹54,14,934/- was recoverable by the respondent/claimant from the petitioner against its outstanding dues.

In the present petition the counsel for petitioner Advocate Rohit Goel challenged award given by Arbitrator and contended that,

“the impugned Award is liable to be set aside as the Award does not bear the signature of the Arbitrator on each and every page and even the Award has been typed in three different fonts on three different types of sheets. In this regard he stated that the impugned Award was in total violation of Chapter XI of the CPC which refer to Judgments and Decrees.”

He further argued that, “as per the Distribution Agreement, no conciliation of accounts has been claimed by the respondent/claimant and that the cheques were taken on June 29, 2009 in advance with an understanding not to present them for encashment without prior intimation to the petitioner.”

However, on the contrary the Counsel for respondent Advocate Bharat Chugh relied upon six legal issues in the matter and contended the following -

1. It is only when the award is in conflict with the public policy of India that the merits of an arbitral award are to be looked into under specified circumstances (Explanation 2, Section 34, Arbitration Act, Associate Builders v. Delhi Development Authority, 2015)

2. A Court u/s 34 is not a court of appeal and errors of fact, if at all present, cannot be corrected by it. An arbitrator is the final judge of facts and it is not open to challenge that the Arbitrator had reached a wrong conclusion or has failed to appreciate facts ( Swan Gold Mining Ltd v, Hindustan Copper Ltd., (2015) 5 SCC 739).

3. A Court u/s 34 ought not to re-appreciate and set aside a finding of facts, unless perverse. A finding of fact is only perverse if it outrageously defies logic as to suffer from the vice of irrationality or is arrived at on no evidence The findings of the Ld. Arbitrator in the Award wherein he has allowed the Respondent's claim is based on uncontroverted evidence and admissions of liability.

4. Though in this case the contract is unambiguously clear, even assuming that a question of interpretation arises - Interpretation of a contract is a matter for the Arbitrator on which a court ought not to substitute its own decision (Sudarshan Trading Co. v, Govt. of Kerala, AIR 1989 SC 890). The Petitioner cannot challenge the Award on the basis of the Ld. Arbitrator's application of Articles 3, 4, 7, and 13 of the Annual Agreement or Clauses 7.2 and 8 of the Agreement to the dispute.

5. Even otherwise, assessing a contravention of fundamental policy of Indian law will not entail a review on merits of the dispute or re-appreciation of evidence (MMTC v. Vedanta).

6.  Even assuming there are any minor clerical errors, the same do not make any difference to the merits of the case and also the Petitioner ought to have requested the Ld. Arbitrator, in terms of Section 33 of the Arbitration Act, for correction. Not having done so within the period specified u/s 33(2), disallows the Petitioner from raising this at this stage.

Taking into account the factual matrix of the present case the Bench stated that,

“the reliance placed on the Judgment in the case of Board of Trustees for the Port of Calcutta (supra), to contend that the learned Arbitrator is required to make award in accordance with the general law of the land subject to the agreement, provided, the agreement is valid and legal, is concerned, no such submission was made by Mr. Goel that the award is contrary to the general law and contrary to the contract, i.e., the distribution agreement and yearly agreement executed between the parties. Rather, I find Mr. Chugh is justified in relying upon the Judgment of the Supreme Court in Associate Builders (supra).

The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where:

1. a finding is based on no evidence, or
2. an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at; or
3. ignores vital evidence in arriving at its decision, such decision would necessarily be perverse”

 

The Bench therefore, dismissed the petition and stated that, “no injustice has been caused to the petitioner to lay a challenge against the arbitration award”

 

[Case Title - M/S PRAGYA ELECTRONICS PVT.LTD v. M/S COSMO FERRITES LTD. & ANR]

 [Law Point – Section 34 of Arbitration & Conciliation Act,1996]