Case Note & Summary
The Monitoring Committee, constituted by the Supreme Court of India, filed a Commercial Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 read with Section 13(1A) of the Commercial Courts Act, 2015, against the judgment dated 09/12/2021 in Com. A.S.No.129/2019 passed by the LXXXV Additional City Civil and Sessions Judge, Bengaluru. The respondent was M/s R B Seth Shreeram Narsingdas Partnership Firm. The appeal arose from an arbitral award dated 20/05/2019 passed by the Arbitral Tribunal. The Commercial Court had set aside the award on the ground that it was in conflict with the public policy of India, specifically regarding the rate of interest and costs awarded. The High Court heard the appeal and reserved judgment on 21.10.2022. The court analyzed the scope of interference under Section 34 of the Act and held that the arbitral tribunal's discretion on interest and costs does not ordinarily warrant interference unless it shocks the conscience or is patently illegal. The court found that the award was not in conflict with public policy and allowed the appeal, setting aside the impugned judgment and restoring the arbitral award.
Headnote
A) Arbitration Law - Appeal under Section 37 - Setting Aside of Award - Public Policy - The appeal challenged the judgment of the Commercial Court setting aside the arbitral award on the ground that the award was in conflict with the public policy of India. The High Court held that the award granting interest and costs did not violate public policy and set aside the impugned judgment, restoring the award. (Paras 1-3) B) Arbitration Law - Interest and Costs - Arbitral Tribunal's Discretion - The arbitral tribunal awarded interest at 18% per annum and costs. The Commercial Court set aside the award holding that the interest rate was excessive and contrary to public policy. The High Court reversed, holding that the tribunal's discretion on interest and costs is not ordinarily interfered with under Section 34 unless it shocks the conscience. (Paras 4-6)
Issue of Consideration
Whether the impugned judgment setting aside the arbitral award on the ground of conflict with public policy of India is sustainable under Section 37 of the Arbitration and Conciliation Act, 1996.
Final Decision
The High Court allowed the appeal, set aside the impugned judgment dated 09/12/2021, and confirmed the arbitral award dated 20/05/2019.
Law Points
- Section 37 of Arbitration and Conciliation Act
- 1996
- Section 13(1A) of Commercial Courts Act
- 2015
- Public Policy of India
- Interest on delayed payment
- Costs in arbitration
