Case Note & Summary
The petitioner, Mithalal B. Gurjar, sole proprietor of M/s. Maya Construction Co., was awarded a contract by the Union of India (respondent no.1) on 3rd October 2002 for earth work and construction of an electrical sub-station building and approach road at Karjat, with a total cost of Rs.62,15,000/- and a stipulated completion date of 3rd July 2003. The petitioner completed three out of four parts of the contract, but the work of the approach road remained incomplete. Disputes arose, and the matter was referred to arbitration. The arbitral tribunal, consisting of respondent nos.2 to 4, passed an award on 26th February 2007, rejecting 10 out of 11 claims made by the petitioner and allowing 2 out of 4 counterclaims made by the respondent no.1. The petitioner challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before the Bombay High Court. The court found that the arbitral tribunal had failed to consider vital evidence, including site inspection reports and letters from the respondent, which were crucial to the petitioner's claims. The award also lacked reasons for rejecting the claims and allowing counterclaims. The court held that such non-consideration of evidence and lack of reasons rendered the award patently illegal and against public policy. Consequently, the court set aside the award and remanded the matter to the same arbitral tribunal for fresh consideration, directing the tribunal to consider all evidence and pass a reasoned award within four months from the date of the order.
Headnote
A) Arbitration Law - Section 34 of Arbitration and Conciliation Act, 1996 - Patent Illegality - Non-consideration of vital evidence - The arbitral tribunal rejected 10 out of 11 claims of the claimant without considering crucial documents such as site inspection reports and letters from the respondent - Held that failure to consider material evidence amounts to patent illegality and the award is liable to be set aside (Paras 10-15). B) Arbitration Law - Section 34 of Arbitration and Conciliation Act, 1996 - Lack of Reasons - The arbitral award did not provide any reasons for rejecting the claimant's claims and allowing counterclaims - Held that an unreasoned award on material issues is patently illegal and against public policy (Paras 16-20). C) Arbitration Law - Section 34 of Arbitration and Conciliation Act, 1996 - Remand - After setting aside the award, the court remanded the matter to the same arbitral tribunal for fresh consideration, directing the tribunal to consider all evidence and pass a reasoned award within four months (Para 21).
Issue of Consideration
Whether the arbitral award dated 26th February 2007 is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 on the ground of patent illegality and failure to consider vital evidence.
Final Decision
The court allowed the arbitration petition in part, set aside the arbitral award dated 26th February 2007, and remanded the matter to the same arbitral tribunal for fresh consideration. The tribunal was directed to consider all evidence and pass a reasoned award within four months from the date of the order.
Law Points
- Arbitration award patently illegal if fails to consider vital evidence
- Arbitrator must give reasons for rejecting claims
- Section 34 of Arbitration and Conciliation Act
- 1996
- Public policy includes patent illegality
- Non-consideration of documents amounts to misconduct
