An arbitrator must enforce express contractual terms, including interest clauses; disregarding them violates Section 28(3) of the Arbitration Act and constitutes patent illegality warranting setting aside of the award.

JUDGEMENT (ORAL)

CHANDRASEKHARAN SUDHA, J.

1. The present appeal under Section 37(b) of the Arbitration and Conciliation Act, 1996 (the A&C Act) has been filed by the petitioner in Suit No. 134/2014 on the file of the Additional District and Session’s Judge-03, Tis Hazari Courts, Delhi (the trial court), aggrieved by the Order dated 31.03.2016, by which their petition under Section 34 of the A&C Act, assailing the Arbitration

Award dated 31.03.2014 (the Award), was dismissed.

2. The parties herein shall be referred to in the same rank and capacity as they were arrayed in Suit No. 134/2014.

3. Brief facts emerging from the record reads thus: The petitioner is a registered partnership firm engaged in the business of commission agency (Aadhatiya) in cloth and fabrics and is a bonafide member of the Delhi Hindustani Mercantile Association. The petitioner was carrying on business with the respondents for several years, during which period the latter purchased cloth and fabrics from the former on credit basis in the course of regular commercial transactions.

3.1. It is the case of the petitioner that a running account was maintained in its books in respect of the transactions with the respondents. According to the petitioner, an amount of ₹1,92,483.46 was outstanding against the respondents as on 01.04.2011. In support of the claim, the petitioner relied upon invoices/bijaks, statements of account and transport records. The

petitioner asserted that the terms and conditions governing the transactions, including the arbitration clause and the clause relating to levy of interest, were printed on the reverse of the bills issued to the respondents and were binding upon them. It was further pleaded that despite repeated oral demands, the respondents failed to clear the outstanding dues. The petitioner thereafter issued a letter dated 03.03.2012 followed by a legal notice dated 12.03.2012 calling upon the respondents to discharge their liability. Upon failure of the respondents to comply with the said demands, the petitioner invoked the arbitration clause under the rules of the Delhi Hindustani Mercantile Association seeking recovery of the outstanding amount along with interest and costs.

3.2. During the arbitral proceedings, the respondents did not enter appearance despite service of notice and hence were proceeded ex-parte.

3.3. The learned Arbitrator framed issues, inter alia, with respect to the existence of an arbitration agreement and the

entitlement of the petitioner to recover the claimed amount with interest. While holding that a valid arbitration agreement existed between the parties, the learned Arbitrator, upon examination of the statement of accounts and other documentary material produced by the petitioner, dismissed the claim vide Award dated 31.03.2014.

3.4. Aggrieved by the Award, the petitioner filed objections under Section 34 of the A&C Act contending that the Award was contrary to law and public policy and that the Arbitrator had failed to consider the contractual terms, usage of trade and documentary evidence on record, thereby acting in violation of Section 28(3) of the A&C Act.

3.5. The District Court, vide the impugned Order, dismissed the objections holding that the grounds urged by the petitioner essentially sought re-appreciation of evidence and re-examination of factual findings returned by the learned Arbitrator, which was impermissible within the limited scope of interference under

Section 34 of the A&C Act. The Court further held that an erroneous interpretation of contractual terms or an alleged incorrect appreciation of evidence did not constitute patent illegality or conflict with the public policy of India and that the Award represented a plausible view based on the materials on record, warranting no interference.

4. Aggrieved, the petitioner has come up in appeal.

5. This Court vide order dated 07.04.2025 directed the matter to be proceeded ex-parte as the Respondents failed to appear despite sufficient opportunities