Under Section 34 of the Arbitration and Conciliation Act, courts should not interfere with arbitral awards absent clear perversity, upholding the tribunal's plausible assessment of contractual obligations and quality disputes.

Context and Factual Background:

1. This Petition is a challenge mounted under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) challenging an arbitral award dated March 28, 2023 (“Impugned Award”) on the premise that the findings in the Impugned Award are contrary to the terms of the contract; contrary to the fundamental principles of evidence; and contrary to fundamental principles of insurance law.

2. The Petitioner, ECGC Ltd. (“ECGC”) issued a shipment comprehensive risk policy (“SCR Policy”) to the Respondent, Baco Metallic Industries (“Baco”) for the period from October 14, 2016 to October 13, 2017 (“Policy Period”). In terms of the policy, Baco was to apply for a “credit limit” approval before making a shipment of leather footwear manufactured by Baco, to an Italian buyer PM Trade SRL (“Buyer”). Baco effected shipments during the Policy Period. The Buyer raised disputes over quality of the products supplied. Baco engaged with the Buyer and provided discounts on the amounts payable by the Buyer and agreed to pay for the leather that was supplied by an affiliate of the Buyer for Baco to make shoe products. A credit collection agency was engaged to pursue recovery of amounts from the Buyer.

3. Baco lodged an insurance claim on ECGC for Rs.75.77 lakhs, which was 90% of a loss of USD 127,904, valued at Rs.84.19 lakhs (value of goods exported and not paid for by the Buyer). ECGC approved a sum of Rs. 16.71 lakhs, which was 90% of the loss assessed by ECGC at Rs.18.57 lakhs (EUR 25,513.44) and stated that this was being paid as a special case condoning several lapses and deficiencies. Baco accepted this sum but represented repeatedly against this assessment. When the third representation for claim amount of Rs.45.43 lakhs was being considered, arbitration was invoked. ECGC offered a further sum of Rs.12.59 lakhs, which was also offered in the arbitration proceedings.

4. Arbitration proceedings were conducted for a claim amount of Rs.59.05 lakhs (the original claim amount reduced by the amount actually paid out by ECGC). This was allowed by the Impugned Award, with interest on the claim amount from the date of the cause of action until filing of the claim, and also pendente lite at 9.5% per annum. Post-award interest at the same rate was allowed. Costs in the sum of Rs. 9.95 lakhs were also allowed.

Contentions of the Parties:

5. I have heard Mr. Nirman Sharma, Learned Advocate on behalf of ECGC and Mr. Ankit Lohia, Learned Advocate on behalf of Baco. With their assistance in the form of verbal submissions and written notes on arguments, I have examined the record. It would be useful to summarise their contentions.

6. ECGC claimed before the Learned Arbitral Tribunal that the claim relates to an “excluded risk” because Baco had admitted to quality issues with the footwear it supplied; and had also pointed to a set-off. Since the Impugned Award has rejected these grounds, Mr. Sharma on behalf of ECGC would contend that the Impugned Award is liable to be set aside on the premise of being contrary to and beyond the scope of the contract i.e. the SCR Policy. The Learned Arbitral Tribunal has pronounced upon the merits of the quality issues, without hearing the Buyer, and was therefore vulnerable as contrary to the rules of evidence. The quality issues had been considered behind the back of the Buyer who was the one who raised the quality issues.

7. Mr. Sharma would rely on decisions of the National Consumer Dispute Redressal Commission (“NCDRC”) in proceedings where policy holders ha