Case Note & Summary
The petitioners, Deccan Chronicle Holdings Limited and Mr. T. Venkatram Reddy, filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an interim award dated 16th April 2014 passed by the learned arbitrator. The respondent, Tata Capital Financial Services Ltd., had sanctioned a working capital term loan of Rs.100 crores to petitioner no.1 on 13th April 2011, which was disbursed in full. The loan was secured by a registered deed of simple mortgage. The respondent alleged that the petitioners breached the loan agreement and issued notices demanding payment. The respondent filed a Section 9 petition for interim measures, and the court granted relief on 21st February 2013. Subsequently, the arbitrator passed an interim award directing the petitioners to pay Rs.100 crores to the respondent, with the balance claim and interest to be considered at the final award. The petitioners challenged this interim award under Section 34. The court considered the submissions of both sides. The petitioners argued that the interim award was premature and that the arbitrator could not pass an interim award on a claim that was disputed. The respondent contended that the loan amount was admitted and the interim award was valid. The court held that the arbitrator had the power to pass an interim award under Section 31(6) of the Act on admitted liability. The court found that the petitioners had not disputed the receipt of the loan amount and that the interim award was based on clear admission. The court also held that the interim award did not violate public policy and was not patently illegal. The court dismissed the petition, upholding the interim award.
Headnote
A) Arbitration Law - Interim Award - Section 31(6) of Arbitration and Conciliation Act, 1996 - Power to pass interim award - The arbitrator has power to pass an interim award on admitted liability even before final adjudication of all claims. The court held that the interim award directing payment of Rs.100 crores was valid as the loan amount was admitted and not disputed. (Paras 1-16) B) Arbitration Law - Challenge to Interim Award - Section 34 of Arbitration and Conciliation Act, 1996 - Maintainability - A petition under Section 34 is maintainable against an interim award. The court examined the challenge on merits and found no ground to interfere. (Paras 1-16) C) Arbitration Law - Public Policy - Section 34(2)(b)(ii) of Arbitration and Conciliation Act, 1996 - Interim award not contrary to public policy - The court held that the interim award did not violate public policy as it was based on admitted liability and was not patently illegal. (Paras 14-16)
Issue of Consideration
Whether the interim award directing payment of Rs.100 crores by the arbitrator is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996
Final Decision
The court dismissed the petition and upheld the interim award dated 16th April 2014.
Law Points
- Interim award under Section 31(6) of Arbitration and Conciliation Act
- 1996 can be passed for admitted liability
- Section 34 petition against interim award maintainable
- Arbitrator's discretion in granting interim relief not to be interfered with unless perverse
