The court upheld the limited scope of interference under Section 34 of the Arbitration and Conciliation Act, affirming the arbitrator's findings on readiness and willingness, and the award of compensation for shares.

JUDGMENT :

M.S. SONAK, J.

1. Heard learned counsel for the parties.

2. Admit. At the request of and with the consent of the learned counsel for the parties, the Appeal is taken up for final disposal.

3. The Appellants impugned judgment and order dated 12 July 2024, dismissing the Appellants’ Petition under Section 34 of the Arbitration and Conciliation Act, 1996 (“ACA”) challenging the arbitral award dated 5 April 2016.

APPELLANTS CONTENTIONS

4. Dr. Tulzapurkar, learned Senior Advocate for the Appellants, at the outset submitted that the arbitral award conflicted with the policy of India, was contrary to the terms of the agreement, and had returned findings without any evidence to sustain the same. He submitted that the award was entirely unreasoned in some respects, particularly valuation. He submitted that the crucial findings on which the award was based were perverse, and the award suffered from patent illegality. He submitted that the arbitral award must be set aside for all these reasons given the provisions of Sections 34 read with Explanation I(ii) and (iii) of the ACA. He relied on South East Asia Marine Engineering & Construction Ltd. vs. Oil India Ltd. (2020) 5 SCC 164, Renusagar Power Co. Ltd. vs. General Electric Co. 1994 Supp. (1) SCC 644, Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49, Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, (2019) 15 SCC 131, M.R. Hitech Engineers Pvt. Ltd. vs. Union of India, 2020 SCC Online Madras 7127 and S. Pandi Meenakshi vs. Hinduja Leyland, 2019 SCC Online Madras 5415 regarding the scope of a judicial review under Section 34 of the ACA.

5. Dr. Tulzapurkar submitted that the arbitral award, to the extent it directed the Appellants to pay the value of 7,71,650 shares of E-square Leisure Pvt. Ltd. (1st Appellant) at the rate of Rs.94.43 per share is liable to be set aside because according to him, the same was contrary to law; based on no evidence, ignored the vital and relevant material on record; based on misreading of evidence; in excess of jurisdiction; violation of the terms of contract; and in any event the findings recorded on this aspect were ex-facie wrong, erroneous and contrary to the settled principles of law regards burden of proof.

6. Dr. Tulzapurkar, by referring to correspondence dated 8 July 2000 and 10 July 2000, submitted that the Respondents claimed a novation in the original contract. He submitted that this novation was not established by leading any cogent evidence. Based on this, the arbitrator should have concluded that the Respondents were never ready and willing to perform their part in the original agreement. He submitted that evidence established that the Respondents were neither willing nor in a position to pay the agreed price and thereby comply with their obligations. This crucial evidence was overlooked. The agreement, admittedly, was with respect to shares, i.e., movable property. Therefore, the time was of the essence. Despite all this, the Arbitral Tribunal has awarded compensation in lieu of specific performance, and such award is patently and manifestly illegal, thereby warranting interference under Section 34 of the ACA.

7. Dr. Tulzapurkar submitted that the Respondents, by the correspondence, claimed that the time for payment “stood extended” based upon an alleged novation that they would exit from the company by accepting compensation instead of actual shares. Based upon such alleged novation, which was never proved, Respondents failed to pay the agreed amount to the Appellant Nos. 2 to 4. In the cross-examination of the Respondent recorded on 13 July 2004, it was admitted that the documents produced in arbitration do not contain anything which will show that the said Respondent had, on or about 11 July 2000, available a sum of Rs.1,54,33,000/- towards the repurchase of the shares. Based upon all this, Dr. Tulzapurkar submitted that the only possible conclusion was that the Respondents were n