2004 (8) TMI 383 - SC - Companies Law

Arbitration without intervention of Court - Held that - The arbitrator has given a very well-reasoned and detailed award. It could not be shown as to in what way the fundamental terms of the contract were disregarded. The arbitrator has referred to various clauses of the contract and the effect thereof. The findings are in no way perverse or unreasonable. No substance in the plea of the claimant that the award suffered from any infirmity. So far as applicability of the Interest On Delayed Payments Act is concerned, it appears that before the arbitrator no claim in that regard was made. Thus find substance in the plea relating to computation of the amounts receivable by the claimant. As rightly submitted, there was nothing on record to show that the claimant had withdrawn the amount which was deposited with the Subordinate Court, Trivandrum. Similarly, a sum of Rs. 47,000 has been adjusted more than once. Necessary adjustment in this regard has to be made. So far as the plea relating to 15 per cent rate of interest is concerned, it has to be noted that this Court directed that in case appeal is allowed, State would be entitled to interest at the rate of 15 per cent. That situation has not come. It would, therefore, be proper to apply 9 per cent rate of interest on the sum of Rs. 5,75,000.

Summary

Issues:
1. Correctness of the decision directing deposit in court.
2. Validity of the judgment setting aside the decree.
3. Dispute over the arbitration award and subsequent legal proceedings.

Issue 1: Correctness of the decision directing deposit in court
The State of Kerala challenged the decision directing a deposit of Rs. 5,75,500 in court, which was upheld by the learned Single Judge of the Kerala High Court. The dispute arose from an agreement for supply and erection of a plant, leading to arbitration proceedings and subsequent cancellation of the contract by the State. The arbitrator awarded Rs. 22,72,500 to the claimant, which was contested by the State. The Division Bench of the High Court set aside the award, leading to further legal proceedings. Eventually, an arbitrator appointed by the Supreme Court directed the State to deposit Rs. 5,75,500, which was contested by the claimant. The arbitrator's detailed award calculated various amounts payable by the claimant, leading to a final decision to apply a 9% interest rate on the sum deposited by the State.

Issue 2: Validity of the judgment setting aside the decree
M/s. Arya Refrigeration and Air Conditioning Co. Ltd. filed an appeal questioning the judgment of the Division Bench of the Kerala High Court that set aside the decree based on the arbitration award. The claimant argued that the arbitrator disregarded fundamental contract terms, misdirected in law, and failed to apply the correct interest rate as per the relevant Act. The claimant contended that the award was a result of misconduct. However, the State defended the arbitrator's reasoned award, stating that there was no patent illegality or oversight of material facts. The Supreme Court found the arbitrator's award well-reasoned and detailed, dismissing the claimant's arguments of infirmity in the award. The Court modified the computation of amounts receivable by the claimant, adjusting for certain discrepancies and applying a 9% interest rate instead of the initially directed 15%.

Issue 3: Dispute over the arbitration award and subsequent legal proceedings
The arbitration proceedings stemmed from a contract dispute between the claimant and the State of Kerala. The arbitrator's award, subsequent challenges, and the final resolution by the Supreme Court highlighted the complexity of the case. The arbitrator's detailed calculations of amounts payable, adjustments for previous payments, and the application of interest rates were crucial aspects of the dispute. The Court's thorough analysis of the arbitrator's award, including modifications to ensure fairness and accuracy in the computation of amounts, demonstrated the meticulous legal scrutiny applied to resolve the dispute effectively. Ultimately, the appeals were disposed of with modifications to the award, emphasizing the importance of upholding legal principles and ensuring equitable outcomes in arbitration disputes.