International commercial arbitral awards set aside under Section 34 for shocking conscience via hearsay reliance, ignoring contemporaneous lab reports, burden reversal; courts may sever and uphold distinct valid claims like non-supply refunds. (28 words)

JUDGMENT :

SHREE CHANDRASHEKHAR, CJ.

1. The Arenel (Private) Limited which made a claim before the Arbitrator for refund of USD 165,102.10 with interest, costs etc. is aggrieved by the judgment dated 8^th September 2025 rendered in the Commercial Arbitration Petition No.349 of 2020 filed by M/s Aakash Packaging under section 34 of the Arbitration and Conciliation Act, 1996. By this judgment, the Award made on 2^nd December 2019 in favor of the claimant-company has been set aside by the learned Single Judge of this Court. The claimant-company seeks to challenge the said judgment on the ground that the findings of fact recorded by the Arbitrator are not open to challenge and the materials laid before the Arbitrator cannot be re-appreciated in a petition under section 34 of the Arbitration and Conciliation Act. This is also a specific stand taken by the claimant-company that a post-amendment arbitral Award can be challenged on a very limited ground as indicated in Ssangyong Engineering and Construction Co. Ltd. v. National Highways Authority of India , (2019) 15 SCC 131 and no such ground is available in the present case.

2. The claimant-company is a foreign company engaged in the manufacture of biscuits and sweets in Zimbabwe. It entered into an understanding with M/s Aakash Packaging which is a partnership- Firm (in short, respondent-Firm) for supply of the packaging materials. There were five invoices altogether raised for supply of the packaging materials vide (i) AP/A002/2011-12 dated 5^th March 2012 (ii) AP/A001/2012-13 dated 12^th April 2012 (iii) AP/A002/2012-13 dated 10^th September 2012 (iv) AP/A003/2012- 13 dated 20^th December 2012, and (v) AP/A004/2012-13. The claimant-company states that the packaging materials supplied in the first two instances vide invoices dated 5^th March 2012 and 12^th April 2012 were without any defect and as per the agreement and specifications required by it. However, the packaging materials supplied by the respondent-Firm for the invoices dated 10^th September 2012 and 20^th December 2012 were emitting odour and not upto the contractual specifications. Furthermore, the respondent-Firm did not supply the packaging materials qua 5^th invoice vide AP/A004/2012-13 for which USD 43,500.25 was paid to it. The claimant-company raised an issue on 12^th February 2013 with the respondent-Firm regarding the odour from the packaging materials. There was exchange of emails between the parties and the respondent-Firm agreed on 20^th March 2013 to visit Zimbabwe for inspecting the packaging materials. However, anyone from the respondent-Firm did not make a visit for inspecting the packing material supplied by it. Therefore, the claimant-company provided samples to the respondent-Firm for testing and it was sent to the SGS India. On 25^th March 2013, a report from the SGS India was received with a finding that; “when tested as specified, the submitted samples comply with the permissible safety limit as specified as stated in the German food, Articles of Daily Use & Feed Code of September 1, 2005 (LFGB), section 31. Hence the submitted sample complies with the limit as stated in the general requirements (Article 3) in EU regulation (EC) no.1935/2004 on materials and articles i