Case Note & Summary
The petitioner, D.Virendra & Co. & Ors., filed a petition under Section 34 of the Arbitration & Conciliation Act, 1996 in the Bombay High Court challenging an arbitral award dated 30th June, 2011. The award was passed by a sole arbitrator appointed by the respondent, Kotak Mahindra Bank Ltd., in relation to disputes arising from a loan agreement. The petitioner raised three main grounds: (1) no notice was given before the appointment of the arbitrator; (2) the arbitrator failed to disclose circumstances likely to give rise to justifiable doubts as to his independence or impartiality under Section 12(1); and (3) the arbitrator awarded interest at 15.3% per annum despite the contract providing for 11% per annum. The court examined the arbitration clause (clause 10.7(h)) which vested exclusive power in the respondent to appoint a sole arbitrator. The award recorded that the respondent nominated the arbitrator by letter dated 14th December, 2009, and the arbitrator gave concurrence on 17th December, 2009, with copies forwarded to the petitioner. The court noted that in the written statement filed before the arbitrator, the petitioner did not raise any objection regarding the appointment procedure or the arbitrator's disclosure. On the interest issue, the court found that the arbitrator's interpretation of the contract was plausible and not perverse. The court held that the petitioner could not raise the appointment and disclosure objections for the first time in a Section 34 petition, and the interest rate awarded was within the arbitrator's discretion. Consequently, the petition was dismissed.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Waiver of Objection - Section 34, Arbitration & Conciliation Act, 1996 - Petitioner challenged award on ground that no notice was given before appointment of arbitrator - Court held that since no objection was raised before the arbitrator in the written statement, the issue cannot be raised for the first time in a Section 34 petition (Paras 3-4). B) Arbitration Law - Disclosure by Arbitrator - Section 12(1), Arbitration & Conciliation Act, 1996 - Petitioner contended that arbitrator failed to disclose circumstances likely to give rise to justifiable doubts as to independence or impartiality - Court held that on plain reading of Section 12(1), if no objection is raised under Section 13, the award cannot be challenged on that ground under Section 34 (Para 4). C) Arbitration Law - Interest Rate - Contractual Interpretation - Section 34, Arbitration & Conciliation Act, 1996 - Petitioner argued that arbitrator awarded interest at 15.3% p.a. contrary to contractual rate of 11% p.a. - Court held that the arbitrator's interpretation of the contract is plausible and not perverse, and the award of interest is not contrary to the terms of the contract (Para 5).
Issue of Consideration
Whether the arbitral award dated 30th June, 2011 is liable to be set aside under Section 34 of the Arbitration & Conciliation Act, 1996 on grounds of lack of notice before appointment of arbitrator, non-disclosure under Section 12(1), and award of interest at a rate higher than the contractual rate.
Final Decision
The petition is dismissed. No order as to costs.
Law Points
- Section 34 petition cannot raise new objections not raised before arbitrator
- Section 12(1) disclosure requirement not absolute if no objection raised
- Interest rate awarded by arbitrator within contractual discretion if not contrary to terms
