2015 (2) TMI 485 - HC - Indian Laws

Court upholds appellate award under Permanent Machinery of Arbitrators, clarifies Arbitration Act application. Two-tier procedure compliant.

M/s STEEL AUTHORITY OF INDIA LTD. Versus ENGINEERS PROJECT INDIA LTD.

The court dismissed the petition challenging an appellate award under the Permanent Machinery of Arbitrators (PMA). It held that the appellate award ... Validity of a two tiered arbitration agreement - whether a writ petition would be maintainable against an appellate award made under the PMA - Held that:- SAIL has not challenged the PMA and/or the provision of a two tier arbitration procedure in its petition. Secondly, this is contrary to SAIL’s conduct in other proceedings. In another case - [2015 (2) TMI 482 - DELHI HIGH COURT], which also relates to arbitration proceedings under the PMA in respect of disputes with EPIL, SAIL had preferred an appeal against an award made by an arbitrator before the Appellate Authority and has pressed for its right to the appellate remedy provided under the PMA, before this court. A two tier arbitration procedure does not fall foul of the A&C Act. An arbitration agreement providing for an appellate procedure was permissible under the Indian Arbitration Act, 1899 as well as Arbitration Act, 1940. The Single Jugde in previous case set aside the award of the Committee on the ground that the award of the committee did not conform to the scheme of the Indian Arbitration Act, 1899. Principle is equally applicable to the A&C Act and there is no provision in A&C Act that proscribes a two tier arbitration procedure. - However, it is not necessary to delve into this issue any further as it is not determinative of the fate of this petition. As noted earlier, SAIL has not impugned the PMA or the two tier procedure; on the contrary SAIL had voluntarily accepted the same. Thus, the validity of a two tiered arbitration agreement need not be considered in this petition. - Decided against Petitioner. Issues:1. Maintainability of a writ petition against an appellate award made under the Permanent Machinery of Arbitrators (PMA).2. Validity of the appellate award reducing the amount awarded to SAIL and increasing the amount awarded to EPIL.3. Interpretation of the arbitration agreement under the PMA and its exclusion of the Arbitration and Conciliation Act, 1996 (A&C Act).4. Challenge to the clause in the Office Memorandum (OM) dated 22.01.2004 which binds parties to the decision of the Law Secretary/Special Secretary/Additional Secretary.5. Applicability of a two-tier arbitration procedure under the PMA and its compliance with the A&C Act.Analysis:1. The primary issue in this case was the maintainability of a writ petition against an appellate award under the PMA. SAIL contended that the appellate award was arbitrary and illegal, while EPIL argued that no further appeal was permissible as per the OM dated 22.01.2004. EPIL further highlighted that High Court interference with factual findings is limited unless they are perverse, not based on material, or lack cogent reasons.2. The second issue revolved around the validity of the appellate award that reduced the amount awarded to SAIL and increased the amount awarded to EPIL. SAIL challenged the award as ignoring pleadings, evidence, and findings of the Sole Arbitrator. EPIL argued that the Appellate Authority's decision was reasoned and detailed, emphasizing that re-agitation of factual issues through a writ petition was impermissible.3. Interpretation of the arbitration agreement under the PMA and its exclusion of the A&C Act was another crucial issue. SAIL argued that the agreement's exclusion of judicial review was void, citing a previous court decision. However, the court held that the A&C Act would apply to arbitration proceedings under the PMA, allowing limited recourse to courts.4. A challenge was raised regarding the clause in the OM binding parties to the decision of the Law Secretary/Special Secretary/Additional Secretary. SAIL contended that this clause violated the Indian Contract Act by restraining legal proceedings. The court considered the clause's validity in light of the Act and the parties' acceptance of the two-tier arbitration procedure.5. The final issue addressed the compliance of a two-tier arbitration procedure under the PMA with the A&C Act. The court cited precedents to support the permissibility of such procedures, emphasizing that parties can agree on the resolution of disputes. However, the court dismissed the petition as SAIL had not challenged the PMA or the two-tier procedure, indicating voluntary acceptance.In conclusion, the court dismissed the petition and application, emphasizing that the validity of the two-tiered arbitration agreement was not crucial to the case's outcome. The judgment provided a detailed analysis of the issues, including the maintainability of writ petitions against appellate awards, interpretation of arbitration agreements, and compliance with relevant legal provisions.