2018 (8) TMI 1762 - HC - Indian Laws

Arbitral Award - proceedings under Section 34 of the 1996 Act - Held that - It is elementary that in receiving a challenge to an arbitral award the Court does not exercise appellate authority or take up the burden to reappraise the evidence to ascertain whether the award in respect of a particular head was justified. The arbitrator is regarded as a final arbiter on facts and unless the award under a particular head is barred by the agreement between the parties or is patently absurd to the meanest mind the Court would scarcely interfere therewith. It is evident that the appropriate tests were applied by the Single Bench while assessing the award made under claim no.10 and the Court came to the correct conclusion that such aspect of the award could not be interfered with. The award of pendente lite interest under claim nos. 12 and 13 in the award impugned before the Single Bench was liable to be set aside in its entirety - the award of post-award interest is not interfered with since that is within the exclusive domain of the arbitrator.

Issues: Challenge to Arbitral Award under Section 34 of the Arbitration and Conciliation Act, 1996; Authority of the Arbitrator; Grounds of Challenge Abandoned; Power of the Court to Interfere with Arbitral Awards; Award of Pendente Lite Interest; Applicability of Legal Precedents.

Challenge to Arbitral Award under Section 34 of the Arbitration and Conciliation Act, 1996:
The appellant challenged an order passed on their petition under Section 34 of the Arbitration and Conciliation Act, 1996. The appellant argued that the Single Bench did not address the entirety of the challenge to the arbitral award, specifically regarding the authority of the arbitrator. The appellant contended that the Single Bench only considered four heads of challenge, neglecting other grounds raised in the petition.

Authority of the Arbitrator:
The appellant raised concerns about the authority of the arbitrator to take up the reference, highlighting that the original order preserved the right of the appellant to challenge the arbitrator's authority. However, the appellant failed to file an application under Section 16 of the Act before the arbitrator, leading to the conclusion that the grounds of challenge were abandoned during the proceedings under Section 34.

Grounds of Challenge Abandoned:
The Court noted that the appellant's counsel had the implied authority to choose which grounds to argue and which to abandon on behalf of the client. The Court emphasized that once an advocate is engaged by a litigant, they have the authority to limit the challenge to certain aspects. Therefore, the Court accepted the limited challenge presented by the appellant and did not entertain arguments beyond the four grounds initially raised.

Power of the Court to Interfere with Arbitral Awards:
The Court reiterated that it does not act as an appellate authority over arbitral awards and will only interfere if the award is barred by the parties' agreement or is patently absurd. The Court upheld the arbitrator's decision under claim no.10, emphasizing the arbitrator's final authority on facts unless expressly prohibited by the contract.

Award of Pendente Lite Interest:
The Court analyzed the award of pendente lite interest under claim nos. 12 and 13, considering relevant legal precedents. The Court discussed the applicability of clauses governing interest payments and the distinction between the 1940 Act and the 1996 Act. It was concluded that under the 1996 Act, an arbitrator cannot grant pendente lite interest if prohibited by the parties' agreement, overturning the arbitrator's decision in this case.

Applicability of Legal Precedents:
The Court clarified the hierarchy of legal precedents and the binding nature of interpretations made by higher benches. In light of the ruling in a subsequent Supreme Court judgment, the Court set aside the award of pendente lite interest under claim nos. 12 and 13 but upheld the post-award interest decision within the arbitrator's domain.

In conclusion, the judgment modified the award by setting aside the pendente lite interest but maintained the post-award interest, disposing of the case accordingly with no order as to costs.

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