Scope of interference in arbitral Award is quite limited as per Sec. 34 of Arbitration Act: Delhi HC

Read Judgment: Kanodia Infratech Limited vs. Dalmia Cement Limited

Pankaj Bajpai

New Delhi, November 9, 2021: While rejecting the case of Kanodia Infratech Limited (petitioner) challenging the mandate of Arbitral Tribunal, the Delhi High Court opined that unilateral appointment of Arbitrator by Dalmia cements (respondent) which was never objected to by the petitioner by being actively participating in the arbitration proceedings, cannot be challenged later on. 

The Bench of Justice Suresh Kumar Kait therefore relying upon the decision of the Supreme Court in Delhi Airport Metro Express Pvt. Ltd. Vs. Delhi Metro Rail Corporation Ltd. observed that as per the provisions of Section 34 of the Arbitration & Conciliation Act, 1996, scope of interference in arbitral Award is quite limited and can be gone into only when the Arbitral Tribunal has gone beyond the scope of contracts/agreements and exceeded its jurisdiction. 

The observation came pursuant to a petition challenging an arbitral award passed by a retired judge of the Punjab and Haryana High Court in favour of Dalmia cements.

It was claimed by Petitioner that the arbitrator had granted reliefs of refund of Rs.25 crore along with an interest of 18% per annum, Rs.20.83 crores as principal cost of supply plus 18% interest and a token compensation of Rs.4 crore with 18% interest, to the Respondent, even though the arbitrator was unilaterally appointed and hence lacked inherent jurisdiction to entertain the dispute. 

The Petitioner therefore sought for setting aside of the arbitral award in favour of respondents. 

After considering the arguments, the Delhi HC said that the Arbitrator himself is a retired Judge of Punjab and Haryana High Court and his integrity cannot be doubted. 

The High Court found that the foremost challenge to the arbitral Award is based on the premise that the sole Arbitrator lacked inherent jurisdiction to entertain and try the disputes raised before him in the arbitral proceedings on the fundamental ground that his unilateral appointment by the Respondent is contrary to settled law. 

“In the case in hand, the respondent vide Notice dated 10.10.2018 had invoked arbitration and appointed a former Judge of Punjab and Haryana High Court for adjudication of disputes between the parties. It is not disputed that petitioner had filed an application under Section 9 of the Act being OMP(I)(Comm) No. 402/2018 before this Court on 09.10.2018, which was dismissed as withdrawn by the petitioner on 23.10.2018 with liberty to file application under Section 17 of the Act before the learned sole Arbitrator”, observed the HC.

Therefore, the contention of counsel appearing on behalf of petitioner recorded in the order October 23, 2018 in OMP(I)(Comm) No. 402/2018 clearly shows that petitioner had given its intention to file an application u/s 17 of the Act before the Arbitrator, added the HC.

Justice Kait noted that the petitioner had filed an application u/s 17 of the Act praying for interim relief and thereafter, had also preferred an application u/s 16 of the Act before the Arbitrator, where under it had challenged the composite reference of the disputes to arbitration arising out of 4 separate agreements but not the appointment of Arbitrator. 

It is not disputed that in its application u/s 9 of the Act filed before this Court, petitioner had admitted that the subject agreements constitute a single composite transaction and therefore, the disputes arising under the same should be consolidated and heard together. Also, by filing applications u/s 16 & 17 of the Act and as well as counter claims before the Arbitrator, petitioner had in fact submitted to the jurisdiction of Arbitrator, added Justice Kait. 

Justice Kait also noted that only after the arbitral Award so pronounced by the Arbitrator does not favour the petitioner, it had approached this Court challenging jurisdiction of Arbitral Tribunal itself. 

Accordingly, the Delhi High Court modified the Arbitral Award by setting aside the compensation of Rs.4 crores awarded against the petitioner, since it was not pressed.