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2014 Supreme(Cal) 741
High Court of Judicature at Calcutta
DIPANKAR DATTA, J.
Vinod Kumar Dugar & Another
Versus
Bijoy Kumar Loyalka & Another
A.P.No. 395 of 2010 with A.P.No. 396 of 2010 (Original Side)
Decided on: 19-12-2014
For the Petitioners:Moloy Ghosh, Sumana Sinha, Sutapa Sanyal, S.N. Mukherjee, Ratnanko Banerjee, R.N. Ghose, Sayani Mondal, Advocates.
For the Respondents:Pratap Chatterjee, Ranjan Bachawat, Sabyasachi Chowdhuri, Advocates.
The scope of interference with an arbitral award is limited to the grounds specified in section 34 of the Arbitration and Conciliation Act, 1996.
Headnote:
ARBITRATION - SCOPE OF INTERFERENCE - PUBLIC POLICY OF INDIA - AWARD CAN BE SET ASIDE IF CONTRARY TO FUNDAMENTAL POLICY OF INDIAN LAW OR INTERESTS OF INDIA OR JUSTICE OR MORALITY OR IF PATENTLY ILLEGAL - COURT OUGHT NOT TO EMBARK ON REVIEW WITH MICROSCOPIC EYES - COURT SHOULD STAY AT A DISTANCE UNLESS IT IS A CASE OF OBTRUSIVE OMISSION ON THE PART OF ARBITRATOR TO ENSURE THAT AWARD IS IN CONSONANCE WITH PUBLIC POLICY OF INDIA.
Fact of the Case:
Petitioners (VKD and JSD) challenged the arbitral award dated April 26, 2010, which was made in relation to a settlement amount of Rs.33,00,000/- by a Memorandum of Understanding (MOU) dated April 01, 1997 between them and BKL (first respondent).
Finding of the Court:
The Court held that the impugned award was not susceptible to judicial interdiction and that the petitioners were not subjected to any gross injustice.
Issues: 1. Whether the arbitrator committed misconduct in failing to consider the counterclaim of the petitioners and/or their defence? 2. Were all the issues, which were settled, answered? 3. Did the arbitrator fail to give reason in support of his conclusion for rejecting the application that was filed on behalf of JSD that AKS’s evidence should not be admitted? 4. Should the arbitrator have held omission of BKL to stand in the witness box to support his claim and to face cross-examination fatal for the success of the claim petition filed by him? 5. Was VKD a party to the MOU? If not, was there a valid arbitration agreement between VKD and BKL? 6. If the answer to the aforesaid question be in the affirmative, what was the extent of VKD’s involvement? 7. Is the impugned award perverse and/or does it violate fundamental policy of Indian law or suffers from the vice of patent illegality or is it opposed to morality and justice, warranting interference? 8. Is the award embodying the relief to which BKL was found entitled disproportionate to his claim?
Ratio Decidendi: 1. The scope of interference with an arbitral award is limited to the grounds specified in section 34 of the Arbitration and Conciliation Act, 1996. 2. An award could be set aside if it is contrary to: (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. 3. While examining whether an award falls foul of the public policy of India, the Court ought not to embark on a review thereof with microscopic eyes. 4. If proceedings are conducted by the arbitrator within the bounds of his jurisdiction and upon giving fair and reasonable opportunity to the parties to place their respective versions, and then a decision is rendered by him within his limitations and based on his understanding of the facts vis-à-vis the applicable law, not amounting to a brazen subversion of the adjudicatory process envisaged in the Act, the Court ought to stay at a distance. 5. Unless it is a case of obtrusive omission on the part of the arbitrator to ensure that its award is in consonance with the public policy of India, for instance, overstepping his brief, or proceeding in breach of the audi alteram partem rule prejudicing a party, or demonstrating bias in his conduct of the proceedings, or not noticing a fraud attempted by a party to the dispute, or resting the decision on reasons which are wrong in law, or proceeding on obvious misinterpretation of relevant statutory provisions vitiating the award, or where the interests of justice patently attract interdiction, the Court may not be justified to interfere with errors of fact, howsoever grave it may appear to be. 6. An arbitrator’s award is also not susceptible to interdiction on grounds similar to insufficiency of evidence or wrong appreciation of evidence.
Final Decision: The petitions under consideration were dismissed with costs assessed at Rs. 5,00,000/-to be paid to BKL by VKD and JSD in equal shares.
1. Scope of interference with an arbitral award is permissible on grounds limited to those, which are found in section 34 of the Arbitration and Conciliation Act, 1996 (hereafter the Act). Section 34(2)(b)(ii) of the Act permits challenge to an arbitral award on the ground that it is in conflict with the public policy of India. The Supreme Court in its decision reported in (2003) 5 SCC 705 : ONGC Ltd. v. Saw Pipes Ltd. interpreted ‘public policy of India’ appearing in section 34 (2)(b)(ii) and held that an award could be set aside if it is contrary to : (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. Whenever an arbitral award is challenged under section 34(2)(b)(ii) of the Act as in the petitions under consideration, the Court while examining as to whether such award falls foul of the public policy of India ought not to embark on a review thereof with microscopic eyes. The parties to the dispute having agreed to resolution thereof by arbitration to the exclusion of judicial process, the decision of the arbitrator ordinarily ought to be accepted and honoured by them. If proceedings are conducted by the arbitrator within the bounds of his jurisdiction and upon giving fair and reasonable opportunity to the parties to place their respective versions, and then a decision is rendered by him within his limitations and based on his understanding of the facts vis-a-vis the applicable law, not amounting to a brazen subversion of the adjudicatory process envisaged in the Act, the Court ought to stay at a distance. Unless it is a case of obtrusive omission on the part of the arbitrator to ensure that its award is in consonance with the public policy of India, for instance, overstepping his brief, or proceeding in breach of the audi alteram partem rule prejudicing a party, or demonstrating bias in his conduct of the proceedings, or not noticing a fraud attempted by a party to the dispute, or resting the decision on reasons which are wrong in law, or proceeding on obvious misinterpretation of relevant statutory provisions vitiating the award, or where the interests of justice patently attract interdiction, the Court may not be justified to interfere with errors of fact, howsoever grave it may appear to be. An arbitrator’s award is also not susceptible to interdiction on grounds similar to insufficiency of evidence or wrong appreciation of evidence. This is my understanding of section 34(2)(b)(ii) of the Act and it is based on such understanding that I proceed to decide the petitions under section 34 that are before me at the instance of the award debtors.
2. A.P.No.395 of 2010 and A.P.No.396 of 2010 are the relevant petitions under section 34 of the Act presented by V.K. Dugar (hereafter VKD) and J.S. Dugar (hereafter JSD), respectively (hereafter the petitioners, wherever referred to jointly). They call in question the award dated April 26, 2010 of the arbitrator, which was made in relation to a settlement amount of Rs.33,00,000/-by a Memorandum of Understanding (hereafter the MOU) dated April 01, 1997 between them and B. K. Loyalka (hereafter BKL), being the first respondent in both the petitions, arising out of previous transactions. BKL contemporaneously presented a petition under section 9 of the Act, wherein he prayed for an interim injunction against the petitioners from alienating and/or selling off and/or encumbering and/or disposing of and/or parting with possession in any manner whatsoever its stock in trade, book debts and properties including certain premises. I propose to decide the said petition by a separate order, having regard to the fact that the report of the Special Officer appointed by a coordinate Bench by order dated July 28, 2010 is yet to be looked into.
3. The parties had prior history of business transactions while dealing with properties. It is noted that one of the properties with which they were familiar is ‘Sura East’.
