2002 (3) TMI 883 - HC - Companies Law

Summary

Issues Involved:
1. Whether the arbitral award lacked stated reasons.
2. Whether the award was in conflict with the public policy of India.

Detailed Analysis:

Issue 1: Whether the arbitral award lacked stated reasons.

This petition under section 34 of the Arbitration and Conciliation Act, 1996, seeks to set aside an arbitral award dated 30-3-2000. The petitioner, a member of the National Stock Exchange Ltd. (NSE), purchased securities from ION Exchange Finance Ltd. (IEFL) and later sold them to respondent No. 2 through respondent No. 1. However, the transfer was contested due to a legal notice from Haileyburia Tea Estates Ltd., Employees Gratuity Fund, claiming prior purchase of the securities. Respondent Nos. 1 and 2 initiated arbitration, resulting in an award directing the petitioner to pay Rs. 24,97,602.75 with interest or deliver equivalent securities.

The petitioner challenged the award on the grounds that it did not state the reasons upon which it was based, as required by section 31(3) of the Act. The court agreed, noting that an arbitral award must be in writing, signed, and state the reasons unless otherwise agreed by the parties or if the award is on agreed terms under section 30. The court emphasized that giving reasons is a fundamental requirement, ensuring transparency and fairness in arbitration. The absence of reasons renders the award a "non-speaking award," which is not permissible under the Act.

The Supreme Court in T.N. Electricity Board v. Bridge Tunnel Construction and a learned Single Judge in G. Tech Stone Ltd. v. BFIL Finance Ltd. affirmed that an award must state reasons unless explicitly waived by the parties. The court concluded that the impugned award, lacking reasons, cannot be considered an arbitral award and therefore cannot be set aside under section 34.

Issue 2: Whether the award was in conflict with the public policy of India.

The petitioner also contended that the award was in conflict with the public policy of India. However, the court did not find it necessary to address this issue, as the award was already deemed invalid due to the lack of reasons.

Conclusion:

The court declared that the impugned award dated 30-3-2000 is not an arbitral award for the purpose of section 34 and disposed of the petition with no order as to costs. The court emphasized the mandatory nature of stating reasons in arbitral awards to ensure fairness and transparency in arbitration proceedings.