Case Note & Summary
The appellant, Mahanagar Gas Limited, awarded a work order to the respondent, M/s. Babulal Uttamchand & Co., for project management and construction of a pipeline network for domestic supply of natural gas in Santacruz, valued at Rs. 3.87 crores, to be completed within three years. The respondent mobilised resources and completed the pipeline work, but the appellant failed to supply gas to customers for about 18 months, causing non-payment by customers and consequent non-payment to the respondent. The respondent raised claims before the arbitrator, and the appellant filed counterclaims. After pleadings and examination of one witness each, the arbitrator passed an award allowing certain claims of the respondent and dismissing the counterclaims. The appellant challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before the learned Single Judge, who dismissed the petition with the modification of reducing the future rate of interest from 18% to 12% per annum from the date of the award till realisation. The appellant appealed against this order. The Division Bench held that the findings of fact recorded by the arbitrator are not open to challenge under Section 34 unless they are perverse or contrary to the public policy of India. The court found no perversity in the arbitrator's findings regarding breach of contract and quantification of claims. The court also upheld the modification of the interest rate, finding the original rate of 18% to be excessive. The appeal was dismissed, and the judgment of the learned Single Judge was confirmed.
Headnote
A) Arbitration - Section 34 of the Arbitration and Conciliation Act, 1996 - Scope of Interference - The court held that findings of fact recorded by the arbitrator are not open to challenge under Section 34 unless they are perverse or contrary to the public policy of India. The court found no perversity in the arbitrator's findings regarding breach of contract and quantification of claims. (Paras 4-6)
B) Arbitration - Interest Rate - Section 31(7)(b) of the Arbitration and Conciliation Act, 1996 - The court modified the future rate of interest from 18% to 12% per annum from the date of the award till realisation, as the original rate was considered excessive. (Para 7)
Issue of Consideration
Whether the learned Single Judge erred in dismissing the arbitration petition under Section 34 of the Arbitration and Conciliation Act, 1996, and whether the arbitral award suffers from perversity or is contrary to the public policy of India.
Final Decision
The appeal is dismissed. The judgment and order of the learned Single Judge dated 9 March 2012 is confirmed.
Law Points
- Arbitration
- Section 34 of the Arbitration and Conciliation Act
- 1996
- Scope of interference
- Findings of fact
- Perversity
- Public policy
- Interest rate
- Section 31(7)(b) of the Arbitration and Conciliation Act
Case Details
2012 LawText (BOM) (08) 52
Appeal (Lodging) No.349 of 2012 in Arbitration Petition No. 958 of 2010
Mohit S. Shah, C.J., N.M. Jamdar, J.
Mr. Pradeep Sancheti, Senior Advocate with Mr. S.A.Bhalwal i/by M/s. Vyas & Bhalwal for the appellant. Mr.Chidanand Kapil i/by Ms.shilpa Kapil for the respondent.
M/s. Babulal Uttamchand & Co.
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Nature of Litigation
Appeal against dismissal of arbitration petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an arbitral award.
Remedy Sought
The appellant sought to set aside the arbitral award and the judgment of the learned Single Judge dismissing the arbitration petition.
Filing Reason
The appellant challenged the arbitral award on grounds of perversity and being contrary to public policy.
Previous Decisions
The learned Single Judge dismissed the arbitration petition with modification of reducing future interest from 18% to 12% per annum.
Issues
Whether the findings of fact recorded by the arbitrator are perverse or contrary to the public policy of India.
Whether the rate of interest awarded by the arbitrator is excessive and requires modification.
Submissions/Arguments
The appellant argued that the arbitrator's findings were perverse and contrary to the public policy of India.
The respondent supported the award and the judgment of the learned Single Judge.
Ratio Decidendi
Findings of fact recorded by the arbitrator are not open to challenge under Section 34 of the Arbitration and Conciliation Act, 1996 unless they are perverse or contrary to the public policy of India. The court found no perversity in the arbitrator's findings. The rate of future interest was modified from 18% to 12% per annum as the original rate was considered excessive.
Judgment Excerpts
This appeal is directed against the judgment and order dated 9 March 2012 of the learned Single Judge dismissing the arbitration petition of the appellant herein under section 34 of the Arbitration and Conciliation Act, 1996 with the only modification of reducing the future rate of interest from 18% to 12% from the date of the award (5 March 2010) till realisation on the claim as well as the counterclaim.
The findings of fact recorded by the arbitrator are not open to challenge under Section 34 of the Arbitration and Conciliation Act, 1996 unless they are perverse or contrary to the public policy of India.
Procedural History
The respondent filed claims before the arbitrator. The appellant filed counterclaims. The arbitrator passed an award on 5 March 2010. The appellant filed Arbitration Petition No. 958 of 2010 under Section 34 of the Arbitration and Conciliation Act, 1996 before the learned Single Judge, who dismissed the petition on 9 March 2012 with modification of interest. The appellant filed the present appeal against that order.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 34, Section 31(7)(b)
