Case Note & Summary
The matter involved two arbitration petitions filed under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an interim award dated 10 April 2017 and a final award dated 29 October 2018 that allowed interest on the principal amount. The dispute arose from the supply of paper cups by the respondent to the petitioner, with the respondent claiming outstanding payments against 120 invoices totaling Rs.47,56,389. The petitioner, a proprietary concern, contended that the respondent owed a larger sum due to a complex business relationship involving a joint venture, directorships, and eventual takeover by an Italian entity. The petitioner had resigned from directorships and alleged inflated claims. In the arbitration, the respondent filed a statement of claim and an application for interim award under Section 31(6). The petitioner filed a statement of defence acknowledging a lesser amount and a counter claim for over Rs.9 crore, which the Arbitral Tribunal rejected on jurisdictional grounds under Section 16. The Arbitral Tribunal passed an interim award in favor of the respondent for the principal amount. The petitioner challenged this award in Arbitration Petition No. 393 of 2017, and the final interest award in Arbitration Petition No. 315 of 2019. During the hearing, the High Court observed prima facie that the interim award was passed on a solitary paragraph in the written statement without considering the entire pleadings and without allowing the petitioner to explain the alleged admission. The Court noted that the arbitrator ought to have given both parties an opportunity to lead evidence. Consequently, the Court admitted the petition and granted an unconditional stay of the interim award. The judgment text does not include a final decision on the merits of the challenge.
Headnote
A) Arbitration - Interim Award - Challenge under Section 34, Arbitration and Conciliation Act, 1996 - Section 31(6) - Arbitral Tribunal passed interim award relying on a solitary paragraph in the written statement without considering the entire pleadings or giving opportunity to explain the alleged admission; Court observed prima facie that the arbitrator ought to have rendered the award after giving both parties opportunity to lead evidence; unconditional stay of the award granted (Paras 14-15).
Issue of Consideration
ARBITRATION PETITION NO. 393 OF 2017
Case Details
2019 LawText (BOM) (08) 76
Arbitration Petition No. 393 of 2017 with Arbitration Petition No. 315 of 2019
Mr. Premlal Krishnan, Mr. Sankalp Anantwar, Mr. Dinesh Bhatia for Petitioner; Mr. Aseem Naphade, Mr. A.P. Singh for Respondent
Sphere International a proprietorship concern through its proprietor Mr. Rakesh Jalan
Ecopack India Paper Cup Pvt. Ltd.
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Nature of Litigation
Challenge to arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996.
Remedy Sought
Petitioner (original respondent in arbitration) sought setting aside of interim award dated 10 April 2017 and final award dated 29 October 2018.
Filing Reason
Petitioner alleged that the interim award was passed without considering the entire pleadings and without opportunity to lead evidence; the final award on interest was also contested.
Previous Decisions
Arbitral Tribunal passed interim award on 10 April 2017 under Section 31(6); final award dated 29 October 2018 allowed interest on principal; counter claim rejected on 5 January 2019 under Section 16; Commercial Arbitration Petition No. 159 of 2017 filed and later withdrawn; Commercial Suit No. 484 of 2018 filed by petitioner for recovery.
Issues
Whether the interim award dated 10 April 2017 and final award dated 29 October 2018 are liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.
Submissions/Arguments
Petitioner contended that the interim award was passed on a solitary paragraph in the written statement without considering the entire pleadings and without opportunity to lead evidence; that the respondent's claim was inflated; and that the counter claim was wrongly rejected.
Respondent contended that the petitioner had admitted liability in the written statement and that the amounts were due and payable.
Judgment Excerpts
This Court also observed that the arbitral award primafacie shows that the said award under Section 31(6) of the Arbitration Act was passed on a solitary paragraph in the written statement and has not considered the entire case/pleadings of the petitioner in the written statement. The petitioner is entitled to explain the alleged admission made in the statement of defence. This Court primafacie observed that the learned Arbitrator ought to have rendered the award after giving an opportunity to both the parties to lead evidence.
this Court allowed the Notice of Motion No. 2059 of 2017 filed by the petitioner seeking stay of the impugned award dated 10th April, 2019 in Arbitration Petition No. 393 of 2017 and granted unconditional stay.
Procedural History
Arbitration invoked by respondent on 7 November 2015. Statement of claim filed 17 February 2016. Statement of defence and counter claim filed by petitioner. Application under Section 16 for rejection of counter claim and application under Section 31(6) for interim award filed on 1 September 2016. Arbitral Tribunal allowed Section 16 application on 5 January 2019 and rejected counter claim. Interim award passed on 10 April 2017. Commercial Arbitration Petition No. 159 of 2017 filed 1 March 2019 and withdrawn on 24 November 2019. Commercial Suit No. 484 of 2018 filed 15 December 2019. Arbitration Petition No. 244 of 2018 filed under Section 29A for extension; new Arbitrator appointed on 23 February 2018. Application for oral evidence allowed on 5 June 2018; witness examined and cross-examined. Final award on interest passed 29 October 2018. Arbitration Petition No. 393 of 2017 filed challenging interim award; admitted on 13 December 2019; Notice of Motion for stay allowed on 21 December 2019. Arbitration Petition No. 315 of 2019 filed challenging interest award. Both petitions heard together on 12 July 2019 and reserved for order.
Acts & Sections
- Arbitration and Conciliation Act, 1996: 34, 31(6), 16, 29A
