Sunday, 25 March 2018

When arbitral award is not liable to be set aside?

As far as the last contention is concerned, namely that the Arbitrator has not considered and/or ignored the evidence adduced by the Appellant, the same need not detain us any further. We have carefully gone through the arbitral award. The arbitral award is from pages 49 to 203 of the paper-book. On perusal of the impugned award, the learned Arbitrator has passed a detailed reasoned award, taking into consideration all the facts of the case and after going through and analyzing the evidence of the witnesses examined by both parties. We find this grievance to be totally without any merit. It is now well settled that under Section 34 of the said Act, the grounds for interference are limited. The Court is not supposed to interfere with pure questions of fact and appreciation of evidence. The Act makes a provision for a supervisory role of the Courts and for review of the arbitral award only to ensure fairness. This supervisory role is to be kept at a minimum level and interference is only in case of fraud and violation of natural justice etc. In this regard, the observations of the Supreme Court in the case of McDermott International Inc. v. Burn Standard Co. Ltd. MANU/SC/8177/2006 : (2006) 11 SCC 181 are apposite and read thus:-

"Challenge to award: Legal scope of

45. Section 2(1)(b) of the 1996 Act reads as under:

"2. (1)(b) 'arbitration agreement' means an agreement referred to in Section 7;"
46. In terms of the 1996 Act, a departure was made so far as the jurisdiction of the court to set aside an arbitral award is concerned vis-à-vis the earlier Act. Whereas under Sections 30 and 33 of the 1940 Act, the power of the court was wide, Section 34 of the 1996 Act brings about certain changes envisaged thereunder.

47. Section 30 of the 1940 Act reads, thus:

"30. Grounds for setting aside award.-An award shall not be set aside except on one or more of the following grounds, namely-

(a) that an arbitrator or umpire has misconducted himself or the proceedings;

(b) that an award has been made after the issue of an order by the court superseding the arbitration or after arbitration proceedings have become invalid under Section 35;

(c) that an award has been improperly procured or is otherwise invalid."

48. The section did not contain the expression "error of law....". The same was added by judicial interpretation. While interpreting Section 30 of the 1940 Act, a question has been raised before the courts as to whether the principle of law applied by the arbitrator was (a) erroneous or otherwise, or (b) wrong principle was applied. If, however, no dispute existed as on the date of invocation, the question could not have been gone into by the arbitrator.

Changes under the new Act

49. The 1996 Act makes a radical departure from the 1940 Act. It has embodied the relevant rules of the modern law but does not contain all the provisions thereof. The 1996 Act, however, is not as extensive as the English Arbitration Act.

50. Different statutes operated in the field in respect of a domestic award and a foreign award prior to coming into force of the 1996 Act, namely, the 1940 Act, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. All the aforementioned statutes have been repealed by the 1996 Act and make provisions in two different parts, namely, matters relating to domestic award and foreign award respectively.

Vis-à-vis grounds for setting aside the award

51. After the 1996 Act came into force, under Section 16 of the Act the party questioning the jurisdiction of the arbitrator has an obligation to raise the said question before the arbitrator. Such a question of jurisdiction could be raised if it is beyond the scope of his authority. It was required to be raised during arbitration proceedings or soon after initiation thereof. The jurisdictional question is required to be determined as a preliminary ground. A decision taken thereupon by the arbitrator would be the subject-matter of challenge under Section 34 of the Act. In the event the arbitrator opined that he had no jurisdiction in relation thereto an appeal there against was provided for under Section 37 of the Act.

52. The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it."

18. In view of the foregoing discussion, we find no merit in this Appeal. 

Commercial Appeal (Lodg.) No. 16 of 2017 in Chamber Summons No. 320 of 2017 in Arbitration Petition No. 1698 of 2015

Decided On: 07.04.2017

 Zee Sports Ltd. Vs. Nimbus Media Pte. Ltd.

Hon'ble Judges/Coram:
S.C. Dharmadhikari and B.P. Colabawalla, JJ.

Citation: 2018(1) MHLJ 349.
Read full judgment here :Click here

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