Case Note & Summary
The judgment arises out of eight arbitration petitions filed under Section 34 of the Arbitration and Conciliation Act, 1996, challenging a common arbitral award dated 7 October 2013. The petitioner in each case was the original respondent in the arbitration (the borrower), and the respondent was the original claimant (the lender, Tata Motors Finance Ltd.). The dispute pertained to loan agreements entered into in December 2009 for refinancing/purchasing vehicles. The loans were recalled by the lender in May 2012 due to default, and the lender initiated arbitration claiming the outstanding amounts with interest at 18% p.a. The sole arbitrator allowed the claims in part, reducing the contractual rate of interest from 18% p.a. to 12% p.a. and awarding pre-reference interest at 12% p.a. The borrower challenged the award on the ground that the arbitrator had no power to reduce the contractual rate of interest and that pre-reference interest could not be awarded. The court held that the arbitrator's finding that the lender had not proved the actual rate of interest was a finding of fact not open to challenge under Section 34. The court also held that the arbitrator had discretion to award pre-reference interest under Section 31(7)(a) of the Act. The court dismissed all eight petitions, upholding the award.
Headnote
A) Arbitration - Interest Rate Reduction - Contractual Interest - Section 31(7)(a) Arbitration and Conciliation Act, 1996 - The arbitral tribunal reduced the contractual rate of interest from 18% p.a. to 12% p.a. on the ground that the lender had not proved the actual rate of interest agreed upon. The court held that the tribunal's finding that the rate was not proved was a finding of fact not liable to be interfered with under Section 34 of the Act. The court also held that the tribunal could award pre-reference interest under Section 31(7)(a) of the Act. (Paras 10-15) B) Arbitration - Pre-reference Interest - Section 31(7)(a) Arbitration and Conciliation Act, 1996 - The court held that the arbitral tribunal has the discretion to award interest for the period prior to the reference to arbitration under Section 31(7)(a) of the Act. The award of pre-reference interest at 12% p.a. was upheld as within the tribunal's discretion. (Paras 16-20) C) Arbitration - Section 34 Petition - Scope of Interference - Section 34 Arbitration and Conciliation Act, 1996 - The court reiterated that a petition under Section 34 is not an appeal and the court cannot re-appreciate evidence or substitute its own view on findings of fact unless the findings are perverse or contrary to the record. The court found no perversity in the tribunal's findings. (Paras 21-25)
Issue of Consideration
Whether the arbitral tribunal could reduce the contractual rate of interest from 18% p.a. to 12% p.a. and whether the award of pre-reference interest was permissible under the Arbitration and Conciliation Act, 1996.
Final Decision
All eight arbitration petitions are dismissed. The arbitral award dated 7 October 2013 is upheld.
Law Points
- Arbitral tribunal can reduce contractual rate of interest
- Pre-reference interest can be awarded under Section 31(7)(a) of Arbitration and Conciliation Act
- 1996
- Section 34 petition cannot re-appreciate evidence
- No interference with findings of fact unless perverse
