Case Note & Summary
The petitioner, Agarsons Container Terminals, filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award dated 23rd December, 2011. The dispute arose from a leave and licence agreement dated 1st November, 2003, between the petitioner and the respondent, National Agricultural Co-operative Marketing Federation of India Limited (NAFED). Under the agreement, the respondent granted the petitioner a licence to use a plot of land in Navi Mumbai for operating an empty container yard on a Build, Operate, and Transfer (BOT) basis for a period of five years. The petitioner was required to pay licence fees and other charges. The petitioner claimed that the respondent had breached the agreement by failing to provide necessary facilities and by interfering with its operations. The respondent denied the allegations and filed a counterclaim for unpaid licence fees, damages, and interest. The arbitrator rejected most of the petitioner's claims and allowed the respondent's counterclaim in part, awarding damages and interest. The petitioner challenged the award on grounds of patent illegality and being against public policy. The court examined the arbitrator's findings and held that the findings on breach and quantum were based on evidence and not perverse. However, the court found that the rate of interest at 18% per annum was excessive and reduced it to 12% per annum. The petition was partly allowed to the extent of reducing the interest rate, and the rest of the award was upheld.
Headnote
A) Arbitration - Section 34 of the Arbitration and Conciliation Act, 1996 - Challenge to Arbitral Award - Patent Illegality - The court considered whether the arbitral award suffered from patent illegality or was against public policy. The court held that the arbitrator's findings on breach of contract and quantum of damages were based on evidence and not perverse, and thus not open to interference under Section 34. (Paras 1-25) B) Contract Law - Breach of Contract - Leave and Licence Agreement - BOT Contract - The dispute arose from a leave and licence agreement for operating an empty container yard on BOT basis. The arbitrator found that the petitioner had breached the agreement by failing to pay licence fees and other charges. The court upheld the finding of breach as it was supported by evidence. (Paras 3-10) C) Damages - Quantum of Damages - Counterclaim - The arbitrator awarded damages to the respondent for loss of licence fees and other expenses. The court held that the computation of damages was not patently illegal and was within the arbitrator's jurisdiction. (Paras 11-20) D) Interest - Award of Interest - The arbitrator awarded interest at 18% per annum on the awarded amount. The court reduced the rate of interest to 12% per annum, finding 18% to be excessive and not in line with commercial rates. (Paras 21-25)
Issue of Consideration
Whether the arbitral award dated 23rd December, 2011 is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 on the grounds of patent illegality and/or being against the public policy of India.
Final Decision
The petition is partly allowed. The rate of interest awarded by the arbitrator is reduced from 18% per annum to 12% per annum. The rest of the award is upheld. No order as to costs.
Law Points
- Section 34 of the Arbitration and Conciliation Act
- 1996
- Public policy
- Patent illegality
- Breach of contract
- Damages
- Interest
- Counterclaim
- Leave and licence agreement
- BOT contract
