2023 Supreme(Del) 2529

IN THE HIGH COURT OF DELHI AT NEW DELHI
Neena Bansal Krishna, J.
Elecon Engineering Company Limited – Appellant
Versus
The Indure Private Limited – Respondent
O.M.P. (T) (COMM.) 7 of 2019 & I.A.5087 of 2019, O.M.P. (COMM.) 236 of 2019 & I.A. 8496 of 2019
Decided On : 22-02-2023

The scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996, is extremely limited and is confined to cases where an award is in conflict with the public policy of India, which includes cases of fraud, breach of fundamental policy of Indian Law, and breach of public morality, or is "patently illegal."

Headnote:

ARBITRATION - Appointment of Arbitrator - Sole Arbitrator - Consent of the parties - Jurisdiction - Challenge - Grounds - Patently illegal - In conflict with the public policy of India - Breach of fundamental policy of Indian Law - Breach of public morality - Limitation - Section 29A of the Arbitration & Conciliation Act, 1996 - Applicability - Amendment - Retrospective effect - Procedural law.

Fact of the Case:

The petitioner, a public limited company engaged in the business of manufacturing material handling equipment, entered into a contract with the respondent, a private limited company engaged in the business of supply of ash handling systems and engineering, procurement, and commissioning services for solar plants and material handling systems, for the supply, transportation, erection, and commissioning of a reversible stacker-cum-reclaimer with tools and tackles, mandatory spares, and commissioning spares for a thermal power project. Disputes arose between the parties, and the respondent initiated arbitration proceedings under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act, 1996), seeking the appointment of an arbitrator. The petitioner objected to the appointment of the arbitrator, claiming that he was self-proclaimed and had assumed jurisdiction without the petitioner's consent. The objection was dismissed, and the arbitrator was appointed. The respondent gave a notice of invocation of arbitration and raised a claim for unadjusted advances/excessive payments made by the respondent to the petitioner. The petitioner filed an application under Section 12 of the A&C Act, 1996, challenging the arbitrator's jurisdiction, which was dismissed. The petitioner did not appear before the arbitrator and was proceeded ex parte. The arbitrator allowed the respondent's claim and awarded damages. The petitioner challenged the award under Section 34 of the A&C Act, 1996, on various grounds, including the appointment of the arbitrator, the arbitrator's unilateral self-assumption of jurisdiction, denial of equal treatment to the petitioner, the award being beyond the statutory period as defined in Section 29A of the A&C Act, 1996, the award being perverse and suffering from patent illegality, and the interest being exorbitant.

Finding of the Court:

1. The court held that the appointment of the arbitrator was not violative of the General Terms and Conditions of the Contract and that the petitioner had consented to the appointment of the arbitrator. 2. The court held that the arbitrator did not unilaterally assume jurisdiction and that the petitioner had not established any ground for challenging the appointment of the arbitrator. 3. The court held that the petitioner was not denied equal treatment and that the dismissal of its application under Section 12 of the A&C Act, 1996, was not a ground for creating an apprehension about the independence of the arbitrator. 4. The court held that the award was not beyond the statutory period as defined in Section 29A of the A&C Act, 1996, as the amended Section 29A, which provides for reckoning the time of completion of arbitration proceedings from the date of completion of pleadings, was applicable to the award. 5. The court held that the award was not perverse or patently illegal and that the findings of the arbitrator were supported by evidence and reasons. 6. The court held that the interest awarded was in accordance with Section 31(7) (a) & (b) of the A&C Act, 1996, and was not exorbitant.

Issues: 1. Whether the appointment of the arbitrator was violative of the General Terms and Conditions of the Contract and whether the petitioner had consented to the appointment of the arbitrator. 2. Whether the arbitrator unilaterally assumed jurisdiction and whether the petitioner had established any ground for challenging the appointment of the arbitrator. 3. Whether the petitioner was denied equal treatment and whether the dismissal of its application under Section 12 of the A&C Act, 1996, was a ground for creating an apprehension about the independence of the arbitrator. 4. Whether the award was beyond the statutory period as defined in Section 29A of the A&C Act, 1996. 5. Whether the award was perverse or patently illegal and whether the findings of the arbitrator were supported by evidence and reasons. 6. Whether the interest awarded was exorbitant.

Ratio Decidendi: 1. The court held that the appointment of the arbitrator was not violative of the General Terms and Conditions of the Contract and that the petitioner had consented to the appointment of the arbitrator because the petitioner had agreed to the name of the arbitrator in the earlier arbitration proceedings between the parties and had not objected to the appointment of the arbitrator in the present proceedings. 2. The court held that the arbitrator did not unilaterally assume jurisdiction and that the petitioner had not established any ground for challenging the appointment of the arbitrator because the petitioner had consented to the appointment of the arbitrator and had not shown that the appointment was against the established procedure or without the consent of the petitioner. 3. The court held that the petitioner was not denied equal treatment and that the dismissal of its application under Section 12 of the A&C Act, 1996, was not a ground for creating an apprehension about the independence of the arbitrator because the petitioner had not shown any concrete facts to support its apprehension and had failed to appear before the arbitrator and participate in the proceedings. 4. The court held that the award was not beyond the statutory period as defined in Section 29A of the A&C Act, 1996, as the amended Section 29A, which provides for reckoning the time of completion of arbitration proceedings from the date of completion of pleadings, was applicable to the award because the amended Section 29A is a procedural law that is applicable retrospectively and the award was still under challenge under Section 34 of the A&C Act, 1996. 5. The court held that the award was not perverse or patently illegal and that the findings of the arbitrator were supported by evidence and reasons because the arbitrator had referred to the testimony of a witness and the relevant ledger accounts to establish the claim of the respondent and the petitioner had not shown that the findings were perverse or patently illegal. 6. The court held that the interest awarded was not exorbitant because the interest was awarded in accordance with Section 31(7) (a) & (b) of the A&C Act, 1996, which provides for interest at a rate 2% higher than the prevalent rate of interest.

Final Decision: The court dismissed the petition challenging the award under Section 34 of the A&C Act, 1996.