2024 (4) TMI 1007 - HC - Indian Laws

Arbitral award requiring repayment of advances for rejected testing kits upheld under Section 34

Matrix Labs Versus Aark Pharmaceuticals

The HC dismissed the petitioner's challenge to an arbitral award requiring repayment of advances for rejected testing kits with interest and costs. The ... Validity of Arbitral Award - Ordering the petitioner to repay advances for rejected testing kits with interest and legal costs - Grievance of the petitioner is that the petitioner could not reexport the testing kits as the seals of the testing kits had been tampered/broken - HELD THAT:- Scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996 is very limited. This Court can neither sit as a Court of appeal or re-appreciate the evidence placed before the Arbitral Tribunal or substitute the finding of the Arbitral Tribunal with its own conclusion on facts or evidence. In this connection, the decision of the Honourable Supreme Court in PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E AND 220 NATIONAL HIGHWAYS AUTHORITY OF INDIA VERSUS M. HAKEEM & ANR. [2021 (7) TMI 1343 - SUPREME COURT] is invited wherein, it was held that the power to set aside an Arbitral Award under Section 34 of the Arbitration And Conciliation Act, 1996 does not include the authority to modify the award. It further held that an award can be 'set aside' only on limited grounds as specified in Section 34 of the Act and it is not an appellate provision. It further held that an application under Section 34 for setting aside an award does not entail any challenge on merits to an award. The Honourable Supreme Court in Ssangyong Engineering and Construction Co Ltd versus National Highway Authority of India [2019 (5) TMI 1879 - SUPREME COURT] has held that an award can be set aside on the ground of patent illegality under Section 34 (2-A) of the Arbitration And Conciliation Act, 1996 only where the illegality in the award goes to the root of the matter. It further held that erroneous application of law by an Arbitral Tribunal or the re-appreciation of evidence by the Court under Section 34 (2-A) of the Arbitration and Conciliation Act, 1996 is not available - The Court held that the above ground is available only where the view taken by the Arbitral Tribunal is an impossible view while construing the contract between the parties or where the award of the Tribunal lacks any reasons. The records also indicate that the petitioner had been promised to return the balance as and when payment were received from the buyer on the export made by the petitioner. Therefore, even on this count, theory put forward before this Court that the Impugned Award suffers from patent illegality is not acceptable. Therefore, the impugned Award does not call for any interference - There is nothing on record to show that there is a patent illegality in the impugned award or to infer a conclusion that the impugned award is in conflict with the public policy of India. The impugned award indicates that the evidence was examined and there was an admission by the petitioner to refund the amount on the returned 1,48,800 test kits. The interpretation placed by the arbitral tribunal in so far as proviso to Section 16 (1) of the Sale of Goods Act, 1930, also does not call for any interference. This original petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 has to fail - Therefore, this original petition is liable to be dismissed and is accordingly dismissed. Issues Involved:1. Breach of Contract2. Interpretation of Law (Sale of Goods Act, 1930)3. Public Policy of Indian Law4. Award exceeding the claimed amount5. Non-speaking Order6. Grant of Interest and Rate of Interest7. Bias of the ArbitratorSummary:Breach of Contract:The petitioner argued that the breach occurred due to the non-payment of 100% advance, leading to an interest burden. However, the respondent contended that the advance payment was made, and the petitioner had no basis to deny the refund for the rejected test kits. The Arbitral Tribunal found that the petitioner accepted ICMR's decision on the rejected test kits and did not challenge it.Interpretation of Law (Sale of Goods Act, 1930):The petitioner claimed that the Arbitral Tribunal misinterpreted Section 16(1) of the Sale of Goods Act, 1930. The Tribunal, however, held that Clause 6.2 of the Agreement provided an express warranty that the test kits would conform to specifications. Therefore, Section 16(1) concerning implied warranty was not applicable.Public Policy of Indian Law:The petitioner argued that the award was against the public policy of Indian law due to non-compliance with judicial precedents. The Court, referring to various Supreme Court judgments, reiterated that the scope of interference u/s 34 of the Arbitration and Conciliation Act, 1996 is limited, and the award can only be set aside if it is patently illegal or against public policy. The Court found no such illegality or conflict with public policy in the award.Award Exceeding the Claimed Amount:The petitioner contended that the award was for a higher amount than claimed by the respondent. The Court, however, found that the Tribunal had thoroughly examined the facts and evidence, and the award was based on the submissions and admissions made by the petitioner.Non-speaking Order:The petitioner claimed that the award lacked reasoning and application of mind. The Court found that the Tribunal had provided detailed reasons and analysis for its conclusions, addressing the issues raised by both parties.Grant of Interest and Rate of Interest:The petitioner argued that the grant of interest was illegal as the respondent breached the contract. The Tribunal, however, justified the interest rate based on the terms of the Agreement and the circumstances of the case.Bias of the Arbitrator:The petitioner alleged bias and lack of independent evaluation by the Arbitrator. The Court found no evidence of bias and held that the Arbitrator had considered all relevant evidence and submissions before making the award.Conclusion:The Court dismissed the petition u/s 34 of the Arbitration and Conciliation Act, 1996, finding no grounds to set aside the arbitral award. The award was upheld as it did not suffer from patent illegality or conflict with public policy. Consequently, the application was dismissed with no costs.