Case Note & Summary
The petitioner, Reliance Industries Limited, filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an arbitral award dated 3rd July, 2008. The award comprised a majority award dated 20th June, 2008 and a minority award dated 23rd June, 2008, both rejecting the petitioner's claims. The dispute arose from an agreement dated 21st October, 1994 between the petitioner and the respondent, Balasore Alloys Limited (formerly Ispat Alloys Limited), regarding the transfer of an advance licence for the import of furnace oil. The respondent held a duty-free advance licence for 30,000 kilo litres of furnace oil under the Export Import Policy 1992-1997, which was purportedly transferable under paragraph 67 of the policy. The petitioner claimed that the respondent breached a warranty that the licence was transferable, causing the petitioner to suffer losses when the oil marketing companies (IOC, BPC, HPC) allegedly failed to supply furnace oil at concessional rates. The arbitral tribunal rejected the claims, finding that the licence was indeed transferable under the policy and that the petitioner failed to prove any breach of warranty or resulting damages. The petitioner challenged the award on grounds of being contrary to public policy and patently illegal. The High Court, after considering the submissions, held that the arbitral tribunal's interpretation of the contract and the policy was plausible and not perverse. The court noted that the tribunal had considered the evidence and the policy provisions, and its findings were not open to interference under Section 34. The court dismissed the petition, upholding the arbitral award.
Headnote
A) Arbitration Law - Section 34 of Arbitration and Conciliation Act, 1996 - Challenge to Arbitral Award - Public Policy - The court considered whether the arbitral award rejecting claims for damages based on alleged breach of warranty regarding transferability of advance licence was contrary to public policy. The court held that the arbitral tribunal's interpretation of the contract and the Export Import Policy was plausible and not perverse, and thus the award did not warrant interference under Section 34. (Paras 1-10) B) Contract Law - Interpretation of Contract - Transferable Duty Free Licence - The dispute pertained to an agreement for transfer of an advance licence for furnace oil. The court examined whether the respondent warranted that the licence was transferable. The arbitral tribunal found that the licence was transferable under the policy and that the petitioner failed to prove breach. The court upheld this finding as a plausible interpretation. (Paras 2-8) C) Export Import Policy - Paragraph 67 of Export Import Policy 1992-1997 - Transferability of Advance Licence - The court considered the policy provision that value based advance licence may be freely transferable after export obligation is fulfilled and bank guarantee redeemed. The arbitral tribunal held that the licence was transferable and the petitioner's claim failed. The court affirmed that the tribunal's view was reasonable. (Paras 2-4)
Issue of Consideration
Whether the arbitral award dated 3rd July, 2008 rejecting the petitioner's claims is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 on the ground of being contrary to the public policy of India or patently illegal.
Final Decision
The High Court dismissed the Arbitration Petition No. 609 of 2008, upholding the arbitral award dated 3rd July, 2008.
Law Points
- Section 34 of Arbitration and Conciliation Act
- 1996
- Public Policy
- Interpretation of Contract
- Transferable Duty Free Licence
- Export Import Policy 1992-1997
