Arbitrability of admitted liability and limited public policy review sustained an arbitral award with interest on a USD claim.
Non-payment of an admitted contractual liability can itself generate an arbitrable dispute, and the arbitral tribunal's jurisdiction is not defeated merely because the debt is admitted if payment is withheld and reasons for default are raised. In Section 34 review, the court will not revisit merits, and a challenge based on public policy succeeds only on the limited statutory grounds. An interest award of 8% per annum on a USD claim was not shown to be so perverse or unreasonable as to shock the conscience of the court, so no interference was warranted. The arbitral award was therefore upheld.
Issues: (i) Whether non-payment of an admitted liability could still constitute a dispute amenable to arbitration and whether the arbitral award suffered from lack of jurisdiction. (ii) Whether the award of interest at 8% per annum on a USD award was in conflict with the public policy of India.
Issue (i): Whether non-payment of an admitted liability could still constitute a dispute amenable to arbitration and whether the arbitral award suffered from lack of jurisdiction.
Analysis: The liability to make payment was admitted, but the appellant withheld payment and raised reasons for the default. That itself gave rise to a dispute. The arbitration agreement was not disputed, and the claim for non-payment of an admitted amount was an actionable claim capable of being pursued in arbitration. The reliance on the old law governing stay of suits was misplaced because the present matter arose under the Arbitration and Conciliation Act, 1996 and the reference was not at the stage of sending parties to arbitration but at the stage of testing an award under Section 34.
Conclusion: The arbitral tribunal had jurisdiction and the award was not liable to be set aside on the ground that no arbitrable dispute existed.
Issue (ii): Whether the award of interest at 8% per annum on a USD award was in conflict with the public policy of India.
Analysis: A challenge on public policy is limited to the statutory grounds and does not permit merits review. A rate of interest would warrant interference only if it were so perverse or unreasonable as to shock the conscience of the Court. The rate of 8% per annum on the award in US dollars was not shown to be such an exceptional case. The cited precedent was distinguishable on its facts and did not control the present case.
Conclusion: The award of interest did not offend the public policy of India and did not justify interference.
Final Conclusion: The challenge to the arbitral award failed on both grounds, and the award as upheld by the Single Judge was sustained.
Ratio Decidendi: Non-payment of an admitted contractual liability can itself constitute an arbitrable dispute, and arbitral interference on the ground of public policy is warranted only when the award is so unreasonable as to shock the conscience of the Court.
TaxTMI 
AI Drafter ✕
TaxTMI 
TaxTMI 
