Case Note & Summary
The appeal arose from a commercial dispute between Zee Entertainment Enterprises Limited (appellant) and Klassic Studios & Films Private Limited (respondent) concerning a Hindi television serial production agreement dated 15th November 2006. The respondent commissioned the production at Rs.4,70,000 per episode, telecast by the appellant. Disputes arose over a request for an increase in per-episode consideration, leading to the appellant terminating the agreement on 19th June 2008. The Association of Motion Pictures and TV Programme Producers attempted resolution but failed. The parties proceeded to arbitration, where the respondent claimed Rs.4,62,45,364 with interest. The arbitral tribunal awarded Rs.1,34,57,574 with interest at 18% per annum from termination till payment, rejecting other claims. The appellant challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before a Single Judge, who dismissed the petition. The only point pressed in appeal was the rate of interest. The appellant argued that the arbitrator should have called for evidence and given reasons for awarding 18% interest, as Section 31(7)(a) leaves it to the arbitrator's discretion. The Division Bench held that the arbitrator's discretion under Section 31(7)(a) does not require calling for evidence or giving detailed reasons for the rate of interest, and 18% per annum is not per se excessive in commercial matters. The court found no patent illegality or perversity in the award, and upheld the Single Judge's order dismissing the petition. The appeal was dismissed with no order as to costs.
Headnote
A) Arbitration Law - Interest Award - Section 31(7)(a) Arbitration and Conciliation Act, 1996 - Discretion of Arbitrator - The arbitrator has discretion to award interest at such rate as he deems reasonable, and is not required to call for evidence or give detailed reasons for the rate of interest, especially when the rate is not per se excessive. The court held that 18% per annum interest in a commercial dispute is not per se excessive and does not warrant interference under Section 34. (Paras 5-8)
B) Arbitration Law - Challenge to Award - Section 34 Arbitration and Conciliation Act, 1996 - Limited Grounds - The court's interference under Section 34 is limited to grounds of patent illegality or perversity. The award of interest at 18% per annum was not found to be patently illegal or perverse, and the Single Judge's dismissal of the petition was upheld. (Paras 2, 8)
Issue of Consideration
Whether the arbitral tribunal's award of interest at 18% per annum from the date of termination till payment is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996, on the ground that the tribunal did not call for evidence or give reasons for the rate of interest.
Final Decision
The appeal is dismissed. The order and judgment dated 8th January 2013 passed by the learned Single Judge is upheld. No order as to costs.
Law Points
- Arbitral tribunal's discretion to award interest under Section 31(7)(a) of the Arbitration and Conciliation Act
- 1996
- does not require calling for evidence or giving detailed reasons for the rate of interest
- 18% per annum interest is not per se excessive in commercial disputes
- Court's interference under Section 34 is limited to grounds of patent illegality or perversity
Case Details
2013 LawText (BOM) (12) 69
Appeal (L) No. 351 of 2013 in Arbitration Petition No. 556 of 2012 in Award dated 21st October 2011
S.J. Vazifdar, G.S. Patel
Mr. Sumit Raghani i/by PDS & Associates (for appellant), Mr. Mayur Khandeparkar i/by Kanga & Co., Advocates & Solicitors (for respondent)
Zee Entertainment Enterprises Limited
Klassic Studios & Films Private Limited
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Nature of Litigation
Appeal against order of Single Judge dismissing petition under Section 34 of Arbitration and Conciliation Act, 1996 challenging arbitral award.
Remedy Sought
Appellant sought to set aside the arbitral award to the extent it granted interest at 18% per annum.
Filing Reason
Appellant challenged the rate of interest awarded by the arbitral tribunal, arguing that the arbitrator should have called for evidence and given reasons for awarding 18% interest.
Previous Decisions
The learned Single Judge dismissed the appellant's petition under Section 34 of the Arbitration and Conciliation Act, 1996 on 8th January 2013.
Issues
Whether the arbitral tribunal's award of interest at 18% per annum from the date of termination till payment is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996, on the ground that the tribunal did not call for evidence or give reasons for the rate of interest.
Submissions/Arguments
Appellant argued that since Section 31(7)(a) leaves it to the discretion of the arbitrator to award interest at such rate as he deems reasonable, the arbitrator is required to give reasons for the rate of interest awarded, particularly when there is no contractual specified rate, and the arbitrator ought to have called for evidence.
Respondent argued that the arbitrator's discretion under Section 31(7)(a) does not require calling for evidence or giving detailed reasons, and 18% per annum is not per se excessive in commercial matters.
Ratio Decidendi
The arbitral tribunal's discretion under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 to award interest at such rate as it deems reasonable does not require calling for evidence or giving detailed reasons for the rate of interest. The rate of 18% per annum is not per se excessive in commercial disputes, and the award is not patently illegal or perverse, hence not liable to be interfered with under Section 34.
Judgment Excerpts
The only point canvassed before us in appeal is that the learned Single Judge was in error in upholding the arbitral tribunal’s grant of interest at the rate of 18% per annum.
The arbitrator has discretion to award interest at such rate as he deems reasonable, and is not required to call for evidence or give detailed reasons for the rate of interest, especially when the rate is not per se excessive.
18% per annum interest in a commercial dispute is not per se excessive and does not warrant interference under Section 34.
Procedural History
The respondent filed a claim in arbitration arising out of a production agreement dated 15th November 2006. The arbitral tribunal passed an award on 21st October 2011 granting Rs.1,34,57,574 with interest at 18% per annum from termination till payment. The appellant challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before a Single Judge of the Bombay High Court, who dismissed the petition on 8th January 2013. The appellant then filed the present appeal before the Division Bench.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 31(7)(a), Section 34
