2019 (2) TMI 1085 - SC - Indian Laws

Arbitral award under Sections 34 and 37 upheld; appellant liable for copper supplies, commission claim and negligence rejected

SC upheld the majority arbitral award and dismissed the appeal. It held that the supplies of copper rods to a third-party buyer were governed by the ... Arbitrability of dispute - construction of contract and conduct of parties - interference with arbitral award under Section 34 and Section 37 - scope of interference for contravention of Indian public policy and patent illegality - concurrent findings of fact and law by arbitral tribunal and courtsArbitrability of dispute - construction of contract and conduct of parties - Whether the dispute concerning supplies to HTPL fell within the scope of the arbitration clause in the agreement dated 14.12.1993 and thereby was arbitrable - HELD THAT: - The Majority Award and the High Court found, after construing the agreement dated 14.12.1993 and examining correspondence and oral evidence, that no distinction was made by the parties as to types of customers and that the supplies to HTPL were governed by and benefited the Appellant under the terms of the agreement. The Appellant received full commission, engaged in communications about the transaction, acknowledged the HTPL sales as being in terms of the agreement, and accepted duties (such as verifying letters of credit and recovering dues) which the correspondence and actions demonstrate. The arbitral tribunal's construction-that the HTPL transactions were covered by the 14.12.1993 agreement-was a possible view based on the material on record and the parties' conduct; the Courts rightly applied that construction and rejected the contention that the HTPL agreement was independent and outside the arbitration clause. [Paras 18, 19, 20, 21, 22]The dispute was covered by the agreement dated 14.12.1993 and therefore fell within the arbitration clause; the subject matter was arbitrable and the Majority Award did not exceed the submission to arbitration.Interference with arbitral award under Section 34 and Section 37 - scope of interference for contravention of Indian public policy and patent illegality - concurrent findings of fact and law by arbitral tribunal and courts - Whether the award could be set aside by the Courts under Sections 34 and 37 of the 1996 Act on merits or for patent illegality/public policy - HELD THAT: - The Court reiterated that interference under Section 34 is limited to specified grounds (including contravention of public policy and patent illegality) and that appellate interference under Section 37 cannot exceed those restrictions. Applying these principles, the Supreme Court held that the Majority Award represented a possible view grounded in a reasonable construction of the contract and material on record; the High Court's confirmation of the award involved concurrent findings which ought not to be lightly disturbed. There was no demonstrable arbitrariness, patent illegality going to the root, or breach of the recognised contours of public policy warranting interference with the award. [Paras 10, 11, 12, 13, 24]No interference was warranted under Sections 34 or 37; the concurrent confirmation of the Majority Award by the High Court was to be affirmed.Final Conclusion: The appeal is dismissed; the Majority Award dated 27.06.2001 and the orders of the High Court confirming it are affirmed. Issues Involved:1. Arbitrability of the dispute under the arbitration clause of the agreement dated 14.12.1993.2. Scope of interference with an arbitral award under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.3. Interpretation of the agreement and the role of the Appellant in transactions with HTPL.Issue-wise Detailed Analysis:1. Arbitrability of the Dispute:The main contention raised by the Appellant was regarding the arbitrability of the dispute under the arbitration clause of the agreement dated 14.12.1993. The Appellant argued that the transactions with HTPL were independent of the agreement dated 14.12.1993 and thus could not be subjected to arbitration. However, the Respondent contended that there was no such distinction within the nature of transactions undertaken by the Appellant on behalf of the Respondent. Upon examining the material on record, the Majority Award, and the decisions of the learned Single Judge and the Division Bench, it was found that the agreement did not differentiate between types of customers and that the supplies to HTPL were governed by the agreement dated 14.12.1993.2. Scope of Interference with an Arbitral Award:The Court revisited the existing position of law regarding interference with an arbitral award under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. It was highlighted that interference under Section 34 is limited to specific grounds such as violation of public policy of India, which includes fundamental policy of Indian law, interest of India, justice or morality, and patent illegality. The Court emphasized that it does not sit in appeal over the arbitral award and interference is limited to situations where the findings are arbitrary, capricious, or perverse. Similarly, interference under Section 37 is restricted to ensuring that the exercise of power under Section 34 has not exceeded its scope.3. Interpretation of the Agreement and Role of the Appellant:The Court examined the terms of the agreement dated 14.12.1993, the conduct of the parties, and the correspondences exchanged. It was noted that the Appellant received its commission for the HTPL transaction, indicating its involvement and benefit from the agreement between the Respondent and HTPL. The Appellant's role was not limited to storage services but included active participation in the transaction. Various communications among the Appellant, the Respondent, and HTPL demonstrated that the Appellant was responsible for ensuring the bona fides of letters of credit and negotiating them in case of non-payment. The Court concluded that the Appellant could not argue that the agreement with HTPL was independent of the agreement dated 14.12.1993.Conclusion:The Court found that the Majority Award, as confirmed by the High Court, was based on a reasonable construction of the agreement dated 14.12.1993 and the material on record. The dispute was covered under the agreement and governed by the arbitration clause. Consequently, the appeal was dismissed, and the order of the High Court in Appeal No. 949 of 2002 was affirmed.