Case Note & Summary
The petitioner, M/s. Shah Jagshi Jethabhai, a construction firm, challenged an arbitral award dated 16 January 2009 passed by a sole arbitrator under Section 34 of the Arbitration and Conciliation Act, 1996. The respondent, J.N. Construction, a civil contractor, was engaged by the petitioner for construction of a building on terms recorded in a letter dated 15 May 2002. The work was not completed within the stipulated time and was finally completed on 30 April 2005. The final bills were paid, but the respondent demanded further amounts based on an alleged unpaid bill and compensation for delays. The petitioner resisted the demand by letter dated 7 June 2005. Consequently, the respondent filed a petition under Section 11 of the Act on 23 June 2005 for appointment of an arbitrator, and the arbitrator was appointed by the court on 25 August 2006. The statement of claim was filed on 17 November 2006, reply on 15 February 2007, and rejoinder on 13 March 2007. The respondent did not lead any oral evidence but claimed Rs. 4,56,136.80 towards the alleged outstanding bill and Rs. 1,32,22,900 as damages for delays and disruptions attributable to the petitioner. The petitioner led evidence. Arguments were concluded on 8 December 2008. Certain claims were not pressed by the respondent before the arbitrator. The arbitrator awarded Rs. 22,56,286.80 with interest at 12% per annum from 30 April 2005 till payment. The petitioner challenged the award on grounds that the arbitrator ignored the terms of the contract, the award was based on no evidence, and it was contrary to public policy. The court held that the scope of interference under Section 34 is limited and that the arbitrator's findings on facts and law are final unless perverse or contrary to public policy. The court found that the arbitrator had considered the documentary evidence and that the award was not based on no evidence. The court also held that the rate of interest was within the arbitrator's discretion. The petition was dismissed.
Headnote
A) Arbitration - Section 34 Petition - Scope of Interference - The court's jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996 is limited to grounds specified in Section 34(2). The court cannot reappreciate evidence or substitute its own view on merits. The arbitrator's findings on facts and law are final unless perverse or contrary to the public policy of India. (Paras 6-10) B) Arbitration - Evidence - Sufficiency of Documentary Evidence - The arbitrator can base his award on documentary evidence even if no oral evidence is led by the claimant. The requirement of proof is not necessarily oral evidence; documents can be sufficient. The arbitrator's appreciation of evidence is not open to challenge under Section 34 unless it shocks the conscience of the court. (Paras 11-15) C) Arbitration - Interest - Discretion of Arbitrator - The arbitrator has discretion to award interest at a reasonable rate from the date of cause of action until payment. The rate of 12% per annum from 30 April 2005 is not excessive or contrary to law. (Para 16) D) Arbitration - Public Policy - Award not contrary to public policy - An award is not contrary to public policy merely because the court disagrees with the arbitrator's findings. The test is whether the award is so unfair and unreasonable that it shocks the conscience of the court. The impugned award does not meet that threshold. (Paras 17-20)
Issue of Consideration
Whether the impugned arbitral award dated 16 January 2009 is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 on the grounds of being contrary to the terms of the contract, against public policy, and based on no evidence.
Final Decision
The High Court dismissed the Arbitration Petition No. 348 of 2009, upholding the arbitral award dated 16 January 2009. No order as to costs.
Law Points
- Section 34 of the Arbitration and Conciliation Act
- 1996
- scope of interference limited to grounds under Section 34(2)
- no reappreciation of evidence
- arbitrator's findings on facts and law are final unless perverse or contrary to public policy
- public policy of India
- interest rate discretion of arbitrator
- no oral evidence required if documentary evidence sufficient
