Interference With Arbitration Awards Should Be Limited Unless There’s An Error Apparent On The Face Of The Record – Ms Nile v. Gurdip Singh

Summary:

The Telangana High Court held that interference with the arbitration awards should be limited unless there’s an error apparent on the face of the record. The Telangana High Court bench comprising Justice M.G Priyadarsini considered the arguments and upheld the arbitrator’s decision, stating that interference with arbitration awards should be limited unless there’s an error apparent on the face of the record. The court found no grounds to set aside the award, as the arbitrator had considered all aspects and provided detailed reasons for the decision. The court concluded that the rejection of the remaining material was justified, and the appeal was dismissed. The appellant failed to demonstrate any legal error or irregularity in the arbitrator’s award, and there was no basis for setting it aside.

Facts Of The Case:

The case involves a dispute between the appellant (referred to as the petitioner in the judgement) and the respondent (referred to as respondent No.2) over a supply contract for Lead Antimony Alloy Wire. Respondent No.2 had placed an order with the appellant for the supply of a specific quantity and quality of wire. The appellant delivered the material, but a disagreement arose when respondent No.2 claimed that the supplied wire did not meet the required specifications, causing issues in the manufacturing process. Allegedly, after receiving bills from the appellant, respondent No.2 did not make the payment, stating that the material was unsuitable for their intended use. This led to a series of communications between the parties, with the appellant insisting that the material was supplied as per the specifications and rejecting the claim of unsuitability.

Eventually, respondent No. 2 rejected a significant portion of the delivered material and requested the appellant to collect the rejected material from their stores. The appellant initiated arbitration proceedings, seeking payment for the material supplied. The sole arbitrator, after conducting proceedings, partially allowed the claim, awarding a specific amount to the appellant but rejecting the balance based on the argument that the appellant had collected back the rejected material, and any loss incurred should be borne by the appellant. Aggrieved by the arbitrator’s decision, the appellant filed an appeal before the II Additional District Judge, Rangareddy District, which was ultimately dismissed. The judgement discusses the arguments presented by both parties and concludes that the arbitrator’s decision was valid, leading to the dismissal of the appellant’s appeal.

Issue:

Whether the order dated 25^th January 2024, mentioning that interference with arbitration award should be limited unless there is an error apparent on the face of the record Arbitrator and taking a different view is not ground to set aside the award, carried out by the Telangana High Court, was in consonance with principles set in law?

Judgement:

The judgement in the case of Civil Miscellaneous Appeal No. 345 of 2011, before the Honorable Smt. Justice M.G. Priyadarsini is, the appeal arises from an Order dated 23.12.2010 in A.O.P.No.674 of 2006 by the II Additional District Judge, Rangareddy District. The appellant, aggrieved by the dismissal of its application to set aside an Arbitration Award, filed the present appeal. The claimant contended that it supplied a specific material as per the order, but the respondent rejected a part of it. The Arbitrator allowed a partial claim, but the appellant sought the entire claimed amount. The respondent argued that the rejection was valid due to material not meeting specifications. The Arbitrator allowed a portion of the claim, considering the material used by the respondent. However, the remaining amount was rejected, stating that the claimant collected back the rejected material, and thus cannot claim further costs. The appellant contended that the Court and the Arbitrator failed to consider its claims properly, urging the Court to grant the entire claimed amount.

The Court underscored the restricted scope of interference with arbitration awards, relying on Supreme Court precedents. It pointed out that the rejection was grounded in the material not satisfying the necessary requirements. The judgement drew upon legal principles from NTPC Limited v. Deconar Services Private Limited, emphasizing that interference is limited unless there is an error of law or perversity in the award. The Court referred to Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation Limited, elucidating that public policy and patent illegality are constrained terms under the 2015 Amendment Act.

The Court found no error apparent on the face of the record, no perversity in the award, and no violation of public policy. It dismissed the appeal, emphasizing the Arbitrator’s detailed consideration of the case. The Civil Miscellaneous Appeal was dismissed, with no order as to costs. The judgement was pronounced on 25-JAN-2024 by Justice M.G. Priyadarsini.

Analysis:

The analysis of the presented judgement delves into that interference with arbitration award should be limited unless there is an error apparent on the face of the record Arbitrator and taking a different view is not a ground to set aside award. The appellant, M/s NILE LTD, sought to challenge the order of the II Additional District Judge, Rangareddy District, dismissing their application to set aside an arbitration award the dispute arose from a supply order placed by Respondent No.2 (OFK) for Lead Antimony Alloy Wire, where a conflict emerged over the quality of the supplied material.

The Sole Arbitrator partially allowed the petitioner’s claim, awarding Rs.2,48,289, but rejecting the balance amount based on the petitioner collecting back the allegedly substandard material. The appellant contested the decision, filing an appeal that argued the lower court’s failure to consider the claim properly. However, the Court, in its judgement on January 25, 2024, dismissed the appeal, upholding the Arbitrator’s decision and stressing the limited scope of interference with arbitration awards.

The Court highlighted the absence of evidence supporting the appellant’s claims and reiterated the principle that interference is warranted only in cases of apparent error, perversity, or violation of public policy, a concept construed narrowly in this context. This case reaffirms the judiciary’s reluctance to set aside arbitration awards and underscores the need for compelling reasons to justify such intervention.

[1] https://ksandk.com/wp-content/uploads/2024/02/ms-nile-ltd-vs-sri-gurdip-singh-and-another-520308.pdf

CIVIL MISCELLANEOUS APPEAL NO. 345 OF 2011

DECIDED ON 25TH JANUARY, 2024