Case Note & Summary
The petitioner, Hindustan Petroleum Corporation Ltd., filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award dated 4 November 2009. The dispute arose from a purchase order dated 1 June 2005 for supply of reactors with SS cladding for a Green Fuel Project. The respondent, ISGEC, supplied the reactors but failed to import materials worth the agreed CIF amount of Rs. 8,16,00,000, instead procuring some materials indigenously. The petitioner withheld Rs. 2,18,46,130 on the balance amount. The arbitrator directed release of Rs. 60,93,323 with interest at 8% p.a. from the date of his appointment (15 May 2008) till payment. The petitioner challenged only the interest part, arguing that interest should run from the date of cause of action, not from the arbitrator's appointment. The court held that under Section 31(7)(a) of the Act, the arbitrator has discretion to award interest from such date as he deems fit. The award was not patently illegal or against public policy. The petition was dismissed.
Headnote
A) Arbitration Law - Section 34 Petition - Scope of Interference - Patent Illegality - Public Policy - The court examined whether the arbitral award granting interest from the date of appointment of the arbitrator instead of the date of cause of action was contrary to law. Held that the award of interest is within the discretion of the arbitrator under Section 31(7)(a) of the Act and does not amount to patent illegality or violation of public policy. The court declined to interfere with the award. (Paras 1-10)
B) Arbitration Law - Interest - Section 31(7)(a) - Date of Appointment of Arbitrator - The arbitrator awarded interest at 8% p.a. from the date of his appointment (15 May 2008) till payment. The petitioner argued that interest should run from the date of cause of action. Held that the arbitrator has discretion to award interest from such date as he deems fit, and the award is not contrary to the terms of the contract or the Act. (Paras 4-10)
Issue of Consideration
Whether the arbitral award granting interest from the date of appointment of the arbitrator instead of the date of cause of action is contrary to law and liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.
Final Decision
The petition is dismissed. The arbitral award is upheld. No order as to costs.
Law Points
- Section 34 of Arbitration and Conciliation Act
- 1996
- scope of interference
- patent illegality
- public policy
- interest from date of appointment of arbitrator
- Section 31(7)(a) of Arbitration and Conciliation Act
Case Details
2012 LawText (BOM) (04) 39
Arbitration Petition No. 455 of 2010
Mr. M.D. Siodia a/w Mr. Kaushik N. Singh i/by M/s. Rustamji & Ginwala for the Petitioner, Mr. Ram Kakkar i/by M/s. Duttmenon Dunmorrsett for Respondent No.1
Hindustan Petroleum Corporation Ltd.
M/s. ISGEC and Mr. T. Sita Ramaiah
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Nature of Litigation
Petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an arbitral award.
Remedy Sought
The petitioner sought to set aside the arbitral award to the extent it granted interest from the date of appointment of the arbitrator instead of from the date of cause of action.
Filing Reason
The petitioner contended that the arbitrator erred in awarding interest from the date of his appointment rather than from the date when the amount became due.
Previous Decisions
The arbitral award dated 4 November 2009 directed release of Rs. 60,93,323 with interest at 8% p.a. from 15 May 2008 till payment.
Issues
Whether the arbitral award granting interest from the date of appointment of the arbitrator instead of the date of cause of action is contrary to law and liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.
Submissions/Arguments
The petitioner argued that interest should run from the date of cause of action, not from the date of appointment of the arbitrator, and that the award is patently illegal and against public policy.
The respondent argued that the arbitrator has discretion under Section 31(7)(a) to award interest from such date as he deems fit, and the award is not liable to be interfered with.
Ratio Decidendi
Under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996, an arbitrator has discretion to award interest from such date as he deems fit, including from the date of his appointment. Such an award does not amount to patent illegality or violation of public policy and is not liable to be set aside under Section 34 of the Act.
Judgment Excerpts
The present Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 against the award dated 4 November 2009.
I direct the Respondent to release and pay to the Claimant the amount of Rs.60,93,323/ withheld by the Respondent with respect to Claim 1.
I direct the Respondent to pay to the Claimant interest at the rate of 8% p.a. from the date of 'my appointment as Arbitrator' i.e. 15th May, 2008 till the date of payment of the awarded amount.
Procedural History
The arbitral award was passed on 4 November 2009. The petitioner filed Arbitration Petition No. 455 of 2010 under Section 34 of the Arbitration and Conciliation Act, 1996 before the Bombay High Court. The petition was reserved on 6 March 2012 and pronounced on 4 April 2012.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 34, Section 31(7)(a)
