Case Note & Summary
The Bombay High Court dismissed an arbitration petition filed by The Bombay Dyeing And Manufacturing Co. Ltd. challenging an arbitral award passed by a Sole Arbitrator in a dispute arising from a Memorandum of Understanding (MoU) executed between the petitioner and Accord Holding Pvt Ltd, the predecessor-in-interest of the respondent, Shaan Realtors Private Limited. The MoU pertained to the sale of flats in a proposed residential building on the petitioner's land known as 'Spring Mill Land' in Dadar, Mumbai. Under the MoU, Accord agreed to purchase, and the petitioner agreed to sell, flats admeasuring an aggregate area of 1 lac sq. ft. at a rate of Rs.11,500 per sq. ft. Subsequently, the petitioner issued letters for sale of flats totaling about 59,756 sq. ft. to Accord and its nominees. When Accord claimed the balance area of about 40,244 sq. ft., the petitioner refused, leading to disputes. The arbitrator was appointed under Section 9 of the Arbitration and Conciliation Act, 1996, and the matter was referred to arbitration. The arbitrator passed an award directing the petitioner to sell the balance area to the respondent. The petitioner challenged the award under Section 34 of the Act, arguing that the MoU did not create a binding obligation to sell 1 lac sq. ft. and that the award was contrary to the terms of the contract and public policy. The court held that the arbitrator's interpretation of the MoU was plausible and not perverse, and that the award did not conflict with public policy. The petition was dismissed.
Headnote
A) Arbitration Law - Challenge to Arbitral Award - Section 34 of Arbitration and Conciliation Act, 1996 - Interpretation of Contract - The court considered whether the arbitrator's interpretation of the MoU as requiring sale of 1 lac sq. ft. of carpet area was perverse or contrary to the terms. Held that the arbitrator's view was a plausible interpretation and not open to interference under Section 34, as the court does not sit in appeal over the arbitrator's findings (Paras 1-10). B) Arbitration Law - Public Policy - Section 34(2)(b)(ii) of Arbitration and Conciliation Act, 1996 - The court examined whether the award was in conflict with the public policy of India. Held that mere erroneous interpretation does not shock the conscience or violate fundamental policy of Indian law, and thus does not warrant setting aside on public policy grounds (Paras 11-15).
Issue of Consideration
Whether the arbitral award, which interpreted the MoU as obligating the petitioner to sell 1 lac sq. ft. of carpet area to the respondent, is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 on grounds of being contrary to the terms of the contract and public policy.
Final Decision
The court dismissed the arbitration petition, upholding the arbitral award.
Law Points
- Arbitration
- Interpretation of contracts
- Public policy
- Section 34 of Arbitration and Conciliation Act
- 1996
- Perversity
- Plausible interpretation
