Case Law
Subject : Arbitration Law - Setting Aside of Arbitral Award
Mumbai, India
– The High Court of Bombay, in a significant ruling, has partially set aside an arbitral award in a dispute between Hindustan Petroleum Corporation Ltd. (
The judgment, pronounced on June 18, 2025, allows
The dispute originated from a contract awarded by
An arbitral tribunal, in its award dated May 2, 2018, had ruled largely in favour of GRE, directing
The High Court dismissed these challenges, affirming the tribunal’s findings. Justice
Sundaresan
noted: *
This was the core of
The arbitral tribunal had rejected
Justice
Sundaresan
found the tribunal's reasoning on this count critically deficient: > "The absence of reasons is what manifest arbitrariness is about.
The Court observed that the tribunal failed to analyze
The Court concluded that this part of the award was "perverse and manifestly arbitrary for want of reasoning, and also being contrary to the fundamental policy of the law of India in relation to liquidated damages."
The Court upheld the arbitral tribunal's decisions regarding claims for under-insurance, service tax, and customs duty variations.
*
Insurance:
The tribunal rightly found the dispute arbitrable and noted the contract didn't specify the insurance value, which was determined through consultation.
* Service Tax: The tribunal’s reliance on the Supreme Court's ruling in Commissioner, Central Excise and Customs, Kerala vs. L&T Ltd. regarding tax on indivisible works contracts was deemed a "plausible reasonable view."
* Customs Duty: The tribunal's interpretation that the contract didn't require offsetting CENVAT credit against financial implications of new duties was found plausible. The method for computing financial implications was also held to be intelligible.
The Court stated, "On an overall analysis of the Impugned Award, one cannot find fault with the approach to the subject by the Learned Arbitral Tribunal in this regard. There is nothing perverse in this component of the Impugned Award, which is a well-reasoned articulation of an eminently plausible view."
Citing the Supreme Court's constitution bench decision in Gayatri Balasamy vs. M/s ISG Novasoft Technologies Limited , Justice Sundaresan affirmed the power of the Court under Section 34 to partially set aside an arbitral award if the flawed portion is severable.
The Court directed: * The arbitral award is upheld except for the findings on liquidated damages, which are quashed. * The arbitration agreement subsists for the liquidated damages claim, and parties are free to re-arbitrate this specific issue. * Any amounts deposited by
No costs were imposed, as each side prevailed on some aspects. The Court concluded by appreciating the concise arguments of the counsel for both parties.
#ArbitrationLaw #Section34 #LiquidatedDamages
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