2014 (9) TMI 60 - SC - Companies Law

Arbitration award - scope of court to interfere - Division Bench of the High Court affirmed the award of the Arbitrator - Held that - the scope of interference of the Court is very limited. Court would not be justified in reappraising the material on record and substituting its own view in place of the Arbitrator s view. Where there is an error apparent on the face of the record or the Arbitrator has not followed the statutory legal position, then and then only it would be justified in interfering with the award published by the Arbitrator. Once the Arbitrator has applied his mind to the matter before him, the Court cannot reappraise the matter as if it were an appeal and even if two views are possible, the view taken by the Arbitrator would prevail. - Decided against the appellants.

Issues:
1. Dispute over payment default under a business agreement.
2. Validity and enforceability of the agreement.
3. Interpretation of arbitration award and legal interference.

Issue 1: Dispute over Payment Default
The case involved a business agreement where the appellant offered a proposal to the first respondent to operate an amusement ride in an amusement park. The agreement included revenue sharing terms and a guaranteed minimum collection amount. However, the appellant defaulted on payments from 2000-2001 onwards, leading to a dispute. An arbitrator was appointed, and the first respondent claimed a sum with interest. The arbitrator allowed the claim but disallowed a portion of the guaranteed amount. Both parties challenged the award in the Madras High Court, which dismissed their applications. The Division Bench of the High Court upheld the arbitrator's award, emphasizing that the appellant's failure to make payments as agreed prevented them from denying the respondent's claim.

Issue 2: Validity and Enforceability of the Agreement
The appellant argued that the agreement was not legal, valid, or enforceable, claiming it was one-sided. They contended that the Division Bench overlooked a termination clause in the agreement. However, the court noted that these arguments were not raised earlier and that the dispute had already been settled through arbitration. The court highlighted that its role in interfering with arbitration awards is limited and would only occur in cases of apparent errors or non-compliance with legal positions. The court cited precedents to support the principle that the arbitrator's decision should prevail unless there is a clear legal error.

Issue 3: Interpretation of Arbitration Award and Legal Interference
The Supreme Court reviewed the clauses of the agreement and found that the Division Bench's reasoning was not unreasonable. The court emphasized that since the matter had been resolved through arbitration and the award had been affirmed by the High Court, it was not appropriate to intervene further. The court reiterated that it would not reassess the evidence or substitute its judgment for that of the arbitrator unless there were legal errors. Ultimately, the Supreme Court found no merit in the appeals and dismissed them, with each party bearing its own costs.

In conclusion, the Supreme Court upheld the decision of the Division Bench of the High Court, emphasizing the limited scope of court interference in arbitration awards and the importance of honoring contractual agreements.

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