The High Court of Judicature at Bombay has set aside a ₹2.16 crore arbitral award against M/s. Forech India Limited, ruling that the presiding Arbitral Tribunal engaged in a one-sided appreciation of evidence and committed patent illegalities during the proceedings. Presiding over the challenge filed under Section 34 of the Arbitration and Conciliation Act, 1996, Justice Arun R. Pedneker held that the tribunal’s decision to disqualify the petitioner’s technical witnesses while relying on similarly placed witnesses from the respondent, JSW Jaigarh Port Limited, violated the fundamental requirement of equal treatment.

The dispute originated in 2011 when JSW Jaigarh Port Limited issued a request for the manufacture and supply of EP conveyor belts for its coal-handling system at Jaigarh Port. Following negotiations, two purchase orders were finalized in July and August 2011. Shortly after the installation of the belts, the respondent reported technical issues, specifically citing surface waviness and the emergence of air pockets within the belt structure. While representatives for the petitioner visited the site and insisted these defects were minor and superficial—noting that such features often manifest in high-width conveyor systems without compromising overall utility—the respondent insisted the belting was defective and ultimately initiated a claim for the full contract value.

The matter reached the Arbitral Tribunal, which in August 2015 directed the petitioner to pay approximately ₹2.16 crore, along with 12% interest, and dismissed the petitioner's counter-claim concerning the unauthorized encashment of performance bank guarantees. In challenging this decision, Forech India Limited argued that the tribunal had ignored critical documentary evidence, including joint inspection reports and technical certificates that validated the quality of the belts supplied.

Justice Pedneker’s judgment emphasized that the tribunal failed to engage with the technical evidence provided by the petitioner. The court specifically criticized the tribunal’s approach to the evidentiary testimony , observing that the witnesses for the petitioner—who were qualified industrial engineers involved in manufacturing—were arbitrarily dismissed merely on the basis of their employment status. The court noted: "The wholesome rejection of one party's evidence, while accepting evidence the claimant, whose witnesses were also in-house, without composite scrutiny shows one sided appreciation."

Furthermore, the High Court identified a significant discrepancy in the tribunal’s application of contract law. While the claimant alleged the entire belt system was unusable, the factual record indicated that only specific, small portions of the total supply were replaced. The evidence showed that the respondent continued to operate the conveyor system throughout the warranty period by substituting only those sections that failed. Consequently, the court held that the dispute could not be categorized as a complete rejection of goods. Instead, the scenario fell under the ambit of a breach of warranty, which, according to the Sale of Goods Act, 1930, requires the assessment of specific damages rather than the wholesale recovery of the purchase price.

The court also pointed to the tribunal's oversight regarding operational parameters. The technical specifications for the conveyor system were intended to operate under specific conditions, including a speed limit of 3 meters per second. However, evidence revealed that the respondent’s system was operating at 4.5 meters per second, a factor the tribunal failed to investigate as a potential contributor to the failure of the conveyor belts. Justice Pedneker asserted that the tribunal’s failure to examine whether these operating conditions contributed to the defects, while simultaneously ignoring the petitioner’s expert testimony, constituted a failure of the judicial approach.

Citing established legal principles, the judgment reaffirmed the limitations on the scope of an arbitrator ’s power . Referring to judicial precedents , the court noted: "The arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract. His sole function is to arbitrate in terms of the contract. He has no power apart from what the parties have given him under the contract." By granting the full cost of the contract despite the absence of evidence for total system replacement, the tribunal effectively traveled outside the bounds of the specific warranty clause contained in the purchase agreement, which explicitly stipulated that the petitioner’s liability was limited to the free repair or replacement of defective parts.

The court underscored that "patent illegality" arises not only from the contravention of substantive Indian law but also from a disregard for the specific terms of a contract or a failure to maintain a judicial approach during the arbitral process. In this instance, the unequal scrutiny of witness credibility and the disregard for evidence regarding the partial usage of the belts were deemed significant enough to void the award.

As a result of these findings, the High Court set aside the August 2015 arbitral award in its entirety, including the dismissal of the petitioner’s counter-claim. The order provides that the parties remain at liberty to seek a fresh appointment of an arbitrator, should they choose to resolve the dispute through alternative resolution methods. The court further directed that any evidence presented in the current proceedings may be utilized in any future arbitration, alongside any additional evidence the new tribunal may deem necessary to ensure a fair and equitable adjudication of the matter. The ruling clarifies that the petitioner’s obligations were governed strictly by the warranty terms, and the respondent’s claim for the full purchase price lacked a basis in either the contract or the factual evidence provided during the arbitration.