Case laws on the point of setting aside of an award under section 34 of the Arbitration and Conciliation Act, 1996 on the ground of non-consideration of the pleadings and material placed before the arbitrator.

By LE Staff

CASE LAWS:

It comprises legal misconduct which is completed if the Arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring very material document which throw abundant light on the controversy to help a just and fair decision. It is in this sense that the Arbitrator has misconducted the proceedings in this case. The court, therefore, says it has no hesitation in setting aside such an award. 

In the result the judgment of the High Court is set aside and that of the Subordinate Judge is restored. The award of the Arbitrator thus stands quashed. The Arbitrator will complete the proceedings after considering all the relevant documents including Ext. P. 11 and Ext. P. 16 after giving opportunity to the parties. The appeal is allowed with costs.

https://www.legitquest.com/ep-poulose-vs-state-of-kerala-and-another

2. HAI v. M/S. BSC-RBM-PATI Joint Venture  — Delhi High Court, January 24, 2018

“Perversity”, as a ground for setting aside an arbitral award, has to be examined on the touchstone of the Wednesbury principle of reasonableness. 

It would include a case in which:

(a) the findings, in the award, are based on no evidence, or

(b) the Arbitral Tribunal takes into account something irrelevant to the decision arrived at, or

(c) the Arbitral Tribunal ignores vital evidence in arriving at its decision.

https://www.legitquest.com/nhai-vs-ms-bsc-rbm-pati-joint-venture

3. S.K.S. Logistic Ltd., Mumbai v. Oil & Natural Gas Corporation Ltd., Chennai & Others — Madras High Court, September 15, 2016 

In Excise and Taxation Officer-cum-Assessing Authority v. Gopi Nath & Sons (1992 Supp (2) SCC 312), it was held: (SCC p. 317, para 7) “7. … It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law.”

Thus, the learned Arbitrators gave not only inconsistent findings but also ignored vital evidence… For the aforementioned reasons, the learned single Judge has rightly interfered with the Award under Section 34 of the Arbitration and Conciliation Act, 1996, as the award of the learned Arbitrators suffers from patent illegality and contrary to Fundamental policy of Indian law due to perversity.

https://www.legitquest.com/case/sks-logistic-ltd-mumbai-v-oil–natural-gas-corporation-ltd-chennai–others/9DA92

4. Delhi Metro Rail Corporation Ltd v. Delhi Airport Metro Express Private Ltd — Delhi High Court, January 15, 2019

Most importantly, the Arbitral Tribunal had ignored and did not consider vital evidence of certification for commercial operations accorded by CMRS while deciding the question of civil structure faults and in holding that no effective steps to cure the defects were taken…. Another juristic principle is that the decision/award should not be perverse or irrational, i.e. findings based on no evidence, or the arbitral tribunal takes into account something irrelevant to the decision or ignores the vital evidence in arriving at the decision…The appeal is accordingly partly allowed setting aside the award in the terms indicated above with liberty to the parties to invoke arbitration clause for fresh adjudication on their claims and counter claims…

https://www.legitquest.com/case/delhi-metro-rail-corporation-ltd-v-delhi-airport-metro-express-private-limited/10BF50

5. M/S DYNA Technologies Pvt Ltd v. M/S Crompton Greaves Ltd — Supreme Court, December 18, 2019

When there is complete perversity in the reasoning then only it can be challenged under the provisions of Section 34 of the Arbitration Act. The power vested under Section 34 (4) of the Arbitration Act to cure defects can be utilized in cases where the arbitral award does not provide any reasoning or if the award has some gap in the reasoning or otherwise and that can be cured so as to avoid a challenge based on the aforesaid curable defects under Section 34 of the Arbitration Act… Although the Arbitral Tribunal has dealt with the claims separately under different sub-headings, the award is confusing and has jumbled the contentions, facts and reasoning, without appropriate distinction… From a perusal of the award, the inadequate reasoning and basing the award on the approval of the respondent herein cannot be stated to be appropriate considering the complexity of the issue involved herein, and accordingly the award is unintelligible and cannot be sustained.

https://www.legitquest.com/case/ms-dyna-technologies-pvtltd-v-ms-crompton-greaves-ltd/184C7A

CONCLUSION

An analysis of the above mentioned judgements can be summed up as:

• It comprises legal misconduct which is completed if the Arbitrator on the face of the award arrives at a decision by ignoring very material document which throws abundant light on the controversy to help a just and fair decision.

• Perversity, as a ground for setting aside an arbitral award includes a case in which the findings, in the award, are based on no evidence, or the Arbitral Tribunal ignores vital evidence in arriving at its decision.

• It has also been decided in one of the cases that the learned single Judge had rightly interfered with the Award under Section 34 of the Arbitration and Conciliation Act, 1996, as the award of the learned Arbitrators suffered  from patent illegality. The learned Arbitrators had given not only inconsistent findings but also ignored vital evidence.

• It has also been held that decision/award should not be perverse or irrational, i.e. findings based on no evidence, or the arbitral tribunal takes into account something irrelevant to the decision or ignores the vital evidence in arriving at the decision.

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