Case Note & Summary
The appeal arose from a judgment of a Learned Single Judge dismissing a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award dated 1 July 2011. The dispute involved a contract dated 27 December 2010 between M/s. Chemipex (Appellant) and M/s. Shlok Chemicals (Respondent) for supply of 210 Metric Tons of Hydrogen Peroxide originating in China, with shipment to be effected before 20 January 2011. The Appellant contended that shipment was effected on 20 January 2011, and thus it was not bound to take delivery. The dispute was referred to arbitration by the Chemical and Alkali Merchants' Association. The Arbitral Tribunal, by a majority, held that the deviation in shipment date was minor considering general market practice, and directed the Appellant to pay compensation of Rs.4 lacs if it did not take delivery. The Learned Single Judge rejected the challenge, holding that the Tribunal consisted of merchants aware of trade practice and the view was not perverse. In appeal, the Appellant argued that the Tribunal failed to consider Section 55 of the Contract Act, 1872, making the contract voidable, and that no evidence supported the damages. The Respondent argued that the Tribunal's decision was based on trade practice and the Appellant had not produced evidence of repudiation by its buyer. The Division Bench held that the scope under Section 34 is limited, and the Tribunal's view was a possible view on facts. The appeal was dismissed, upholding the award and the Single Judge's order.
Headnote
A) Arbitration - Challenge to Arbitral Award - Section 34 of Arbitration and Conciliation Act, 1996 - Scope of Interference - The court held that the view taken by the Arbitral Tribunal, consisting of trade experts, that the deviation in shipment date was minor based on general market practice, was a possible view and not perverse. Hence, no interference under Section 34 is warranted (Paras 4-8). B) Contract Act - Time of Essence - Section 55 of Contract Act, 1872 - Minor Deviation - The Arbitral Tribunal considered the general practice in the market and held that the deviation regarding the date of shipment was minor. The court upheld this finding, noting that the Tribunal was aware of trade practices (Paras 3-5). C) Arbitration - Damages - Award of Compensation - The Arbitral Tribunal awarded Rs.4 lacs as compensation. The court found that the award was based on the Tribunal's appreciation of facts and trade practice, and the Appellant failed to produce evidence of repudiation by its buyer. Hence, the award was not without foundation (Paras 5-6).
Issue of Consideration
Whether the arbitral award holding that a deviation in shipment date was minor and awarding compensation is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.
Final Decision
The appeal is dismissed. The order of the Learned Single Judge dated 9 April 2012 dismissing the Arbitration Petition under Section 34 of the Arbitration and Conciliation Act, 1996 is upheld. The arbitral award dated 1 July 2011 is sustained.
Law Points
- Arbitration
- Contract Act
- Section 55
- Section 34
- Minor Deviation
- Trade Practice
- Perversity
