Case Note & Summary
The case involves an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, against a judgment dated 29th July 2015, whereby the learned Single Judge allowed a petition under Section 34 of the Act and set aside an arbitral award dated 9th May 2011. The appellant, Nitin Harjivandas Rajyagor, was the original respondent in the arbitration, and the respondent, Rajesh Pravinchand Rajyagor, was the original petitioner. The parties, who are family members, had entered into an arbitration agreement referring their disputes to a sole arbitrator, Shri Chandrakant N. Shah, a chartered accountant. The arbitrator passed an award on 9th May 2011, which was challenged by the respondent under Section 34. The Single Judge set aside the award, holding that the arbitrator had acted beyond the scope of the agreement and that the award was perverse. The appellant appealed against this order. The Division Bench of the Bombay High Court, consisting of Justices Anoop V. Mohta and G.S. Kulkarni, heard the appeal by consent at the admission stage. The court examined the arbitration agreement and the award. It noted that the arbitrator was appointed by consent to resolve all disputes, including claims and counterclaims, and that the arbitrator had the power to hear parties, relatives, and witnesses, and to look into documents. The court found that the Single Judge had exceeded the limited scope of Section 34 by reappreciating the evidence and substituting his own view for that of the arbitrator. The court emphasized that under Section 34, interference is permissible only on grounds of public policy, fraud, or jurisdictional error, and not on merits. The court held that the arbitrator had acted within the terms of the agreement and that the award was not perverse or contrary to public policy. Accordingly, the appeal was allowed, the judgment of the Single Judge was set aside, and the arbitral award was restored.
Headnote
A) Arbitration Law - Section 34 of the Arbitration and Conciliation Act, 1996 - Scope of Challenge - The court held that the scope of interference under Section 34 is limited to grounds such as public policy, fraud, or jurisdictional error, and does not permit reappreciation of evidence or substitution of the arbitrator's view. The Single Judge erred by setting aside the award on merits, exceeding the limited jurisdiction under Section 34. (Paras 1-10) B) Arbitration Law - Arbitral Award - Family Dispute - The court held that an arbitrator appointed by consent of parties to resolve family disputes, including claims and counterclaims, acts within the terms of the arbitration agreement. The award cannot be set aside merely because the court disagrees with the arbitrator's findings, as long as the arbitrator has acted within the scope of the agreement and not violated principles of natural justice. (Paras 2-8)
Issue of Consideration
Whether the learned Single Judge exceeded the scope of Section 34 of the Arbitration and Conciliation Act, 1996, by setting aside the arbitral award on merits, thereby reappreciating evidence and substituting his own view for that of the arbitrator.
Final Decision
The appeal is allowed. The judgment dated 29th July 2015 passed by the learned Single Judge is set aside. The arbitral award dated 9th May 2011 is restored.
Law Points
- Scope of Section 34 of the Arbitration and Conciliation Act
- 1996
- is limited to grounds of public policy
- fraud
- or jurisdictional error
- court cannot reappreciate evidence
- arbitrator's interpretation of agreement is final if plausible
- family disputes can be resolved by arbitration if parties consent.
