High Court of Bombay Examines Section 34 Challenge to Arbitral Award in Cotton Supply Contract Dispute. Petition Challenges Arbitral Award Modifying Invoicing Back Rate and Granting Rs. 41,58,948 with Interest and Costs Under Cotton Association Byelaws.

Petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging arbitral award dated 26 June 2015 passed by Board of Directors of Cotton Association of India in appeal and cross-appeal.

Petitioner seeking to set aside the impugned arbitral award dated 26 June 2015 which awarded Rs. 41,58,948 with interest at 15% p.a. from 2 August 2012 till payment or realisation and costs of Rs. 85,000 to Respondent.

Petitioner alleged breach of natural justice, non-compliance with Byelaw No. 34A invoicing back procedure, denial of right to appeal against invoicing back rate, lack of evidence/documentary proof, and unilateral referral by Sole Arbitrator to Committee.

Learned Sole Arbitrator passed award dated 2 August 2012 directing Petitioner to pay Rs. 32,69,783 with 15% p.a. interest based on invoice back rate of 6 December 2010; Petitioner filed appeal on 18 August 2012 and Respondent cross-appeal on 6 October 2012; Board modified award by impugned arbitral award dated 26 June 2015 allowing invoicing back as on 13 May 2011 and awarding Rs. 41,58,948 with interest and costs.

Whether the impugned arbitral award was passed in total breach of principles of natural justice. Whether the invoicing back procedure as laid down in Byelaw No. 34A of the Association was followed. Whether the Respondent had adduced sufficient evidence to prove the invoicing back rate fixed by the Association. Whether the Petitioner was denied its right to appeal against the invoicing back rate under Byelaw No. 34A(1)(e). Whether the Sole Arbitrator had authority under the Byelaws to suo moto refer the issue of invoicing back to the Committee. Whether adverse inference should be drawn against the Respondent for not producing any document/report showing fixing of invoicing back rate.

Learned counsel for Petitioner contended that the impugned arbitral award was passed in total breach of principles of natural justice. Petitioner argued that the invoicing back procedure as laid down in Byelaw No. 34A was not followed and the Board failed to consider this. Petitioner submitted that the Respondent had not annexed any document/report along with the Statement of Claim in support of the claim of Rs. 41,58,948 being the rate fixed by the Association. Petitioner contended that the Respondent's claim was a counter-blast to the dispute regarding refusal to handover the 'H' forms. Petitioner argued that there was no oral or documentary proof to show that the contract period was extended beyond the period stipulated in the contract. Petitioner submitted that if the Board relied on any material other than what was produced by the parties, such course of action ought to have been placed before the parties. Petitioner contended that the Sole Arbitrator had no authority under the Byelaws to suo moto refer the issue of invoicing back to the Committee. Petitioner argued that adverse inference should be drawn against the Respondent for not filing any document/report to show alleged fixing of rates as per Byelaw No. 34A.

The core challenge to the impugned arbitral award, as sought to be contended by learned counsel on behalf of the Petitioner is on the following counts: ... The Petitioner was rendered fait accompli by the impugned arbitral award, thereby taking away their right to appeal. The burden of proof to show that the invoicing back rate was fixed by the Committee of the Association was solely on the Respondent (Original Claimant).

On 11 August 2010, parties entered into purchase contract for 600 bales of cotton with delivery period 28 November 2010 to 5 December 2010. Respondent sent reminder letters on 1 December 2010, 6 December 2010 and 6 May 2011 calling upon Petitioner to deliver cotton. On 31 May 2011, Respondent informed Petitioner it was applying to Association to fix invoice back rate under Byelaw No. 34A(1)(a). On 16 August 2011, Respondent informed Petitioner that Association fixed invoice back rate at Rs. 44,800 per candy as on 13 May 2011 and sent debit note dated 21 July 2011 for Rs. 41,58,948. On 23 January 2012, Respondent filed Statement of Claim before Sole Arbitrator appointed by Association. On 2 August 2012, Sole Arbitrator passed award directing Petitioner to pay Rs. 32,69,783 with 15% p.a. interest based on invoice back rate of 6 December 2010. On 18 August 2012, Petitioner filed appeal before Board under Byelaw No. 38(E); Respondent filed cross-appeal on 6 October 2012. On 26 June 2015, Board passed impugned arbitral award modifying earlier award, allowing invoicing back as on 13 May 2011 and awarding Rs. 41,58,948 with interest and costs. Present petition under Section 34 of the Arbitration and Conciliation Act, 1996 was filed challenging the impugned award. Court reserved judgment on 13 August 2026 and pronounced on 27 August 2026.

• Arbitration and Conciliation Act, 1996: Section 34
• Cotton Association of India (Association) Byelaws: Byelaw No. 38(E), Byelaw No. 34A, Byelaw No. 34A(1)(a), Byelaw No. 34A(1)(e)
• Arbitration Rules of the Cotton Association of India: Rule 12