December 19, 2019 3:35:02 am
Courts should entertain a challenge to an arbitral award only if there is “complete perversity in the reasoning” and not merely absence of reasoning which can be cured under the Arbitration Act by the Tribunal itself, the Supreme Court said Wednesday.
“The power vested under Section 34 (4) of the Arbitration Act to cure defects can be utilized in cases where the arbitral award does not provide any reasoning or if the award has some gap in the reasoning or otherwise …” a Bench of Justices NV Ramana, Mohan M Shantanagoudar and Ajay Rastogi ruled.
The Bench sought to remind that courts must not lose sight of the fact that the “legislative intention of providing Section 34 (4) in the Arbitration Act was to make the award enforceable, after giving an opportunity to the Tribunal to undo the curable defects” and that the provision cannot be brushed aside.
It added that courts “need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award”.
“The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated,” it said.
A reasoned order, it added, would be proper, intelligible and adequate.
The courts will have to take into account the degree of “particularity of reasoning required having regard to the nature of issues falling for consideration” the Bench noted, adding this will depend on the facts of the case.
“Even if the Court comes to a conclusion that there were gaps in the reasoning …, the Court needs to have regard to the documents submitted by the parties and the contentions raised before the Tribunal so that awards with inadequate reasons are not set aside in casual and cavalier manner. On the other hand, ordinarily unintelligible awards are to be set aside, subject to party autonomy to do away with the reasoned award” the Bench said, and asked courts “to be careful while distinguishing between inadequacy of reasons in an award and unintelligible awards”.
The apex court was hearing an appeal against a Madras High Court decision setting aside a tribunal order on payment of compensation to a party for losses suffered due to unproductive use of machineries.
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