Orders Of Arbitral Tribunal Not Signed By All Arbitrators And Absence Of An Arbitrator During Certain Proceedings, Cannot Be A Ground To Set Aside Award: Delhi High Court

The Delhi High Court has reiterated that procedural irregularity cannot be a ground to set aside the Arbitral Award unless such irregularity goes to the root of the matter and shocks the conscience of the Court, thus making the Award illegal.

The bench of Justice Chandra Dhari Singh made the observation while dismissing a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), challenging the majority Arbitral Award passed against the petitioner, MMTC Ltd.

The bench remarked that procedural irregularities like some of the Orders of the Arbitral Tribunal not being signed by all the Arbitrators and one of the Arbitrators not being present during certain Arbitral Proceedings, do not affect the rights of the parties. They also do not cause denial of justice to any of the parties, the court said. The bench held that these irregularities are not such which may affect the decision of the Arbitrators; thus, the award cannot be set aside on the said grounds.

The court also dismissed the challenge raised against the award on the ground that the majority and minority Awards were passed by the Tribunal separately on separate dates.

While observing that the arbitral proceedings were conducted under the aegis of the Indian Council of Arbitration (ICA), the court noted that the majority and the dissenting Awards were signed by the concerned Arbitrators on different dates. However, the bench took note that as per the mandate of the ‘ICA Rules of Arbitration’, the signed copy of both the majority and the dissenting Award was delivered together, on the same day, to both the parties by the Registrar of ICA. Thus, the same did not suffer from any irregularity, the court concluded.

The respondent, Aust Grain Exports Pty. Ltd., was awarded a tender for supply/ import of certain goods by the petitioner, MMTC Ltd. After certain disputes arose under the Contract, the parties invoked arbitration. The Arbitral Tribunal, vide a majority Award, rejected the claims of the petitioner/ claimant and allowed the counter claims of the respondent. Against this, the petitioner filed a petition under Section 34 of the A&C Act before the Delhi High Court, challenging the arbitral award.

The petitioner, MMTC, submitted before the High Court that there were certain irregularities during the Arbitral Proceedings since some of the Orders passed by the Tribunal were not signed by all the Arbitrators. It also contended that one of the Arbitrators was not present during some of the Arbitral Proceedings. MMTC pleaded that the absence of one of the members of the Tribunal on the date of hearings amounts to improper constitution of the Tribunal; thus, the Award is liable to be set aside on the said ground itself.

MMTC further contended that the A&C Act does not provide for passing of majority and minority Awards separately, that too on separate dates.

While challenging the award on merits, MMTC argued that the Arbitral Tribunal had erred in rejecting its claim of liquidated damages under the Contract for the delay caused by the respondent in shipment of goods.

The court referred to the observations made by the Bombay High Court in the case of Palmview Investments Overseas Limited vs Ravi Arya and Ors., 2023 SCC OnLine Bom 966, while dealing with aspect of procedural irregularity. It reckoned that the Arbitral Award can suffer from irregularity. But the irregularity cannot be a ground to set aside the Award unless such irregularity goes to the root of the matter and shocks the conscience of the court, thus making the Award illegal, the court said.

“In the present facts, the procedural irregularities like some of the Orders not been signed by the Arbitrator and one of the Arbitrators not being present during certain Arbitral Proceeding are such which do not affect the rights of the parties or cause denial of justice to any of the parties. These irregularities are not such which may affect the decision of the Arbitrators,” the bench remarked.

The court noted that the majority Award was signed by the majority Arbitrators on 5^th March 2021 and the dissenting Award was signed by the dissenting Arbitrator on 16^th June 2021. The bench added, “As per the mandate of ICA the signed copy of the Award was delivered to the parties 5th July 2021 on the same by the Registrar of ICA. Hence, the same does not suffer from any irregularity.”

While dealing with the award on merits, the court remarked that the Arbitral Tribunal’s interpretation and construction of the contract were based on evidence and the contractual provisions. “The Tribunal's findings on issues in Claim No. 1 regarding the extension of time for performance, the applicability of liquidated damages and the invocation of the force majeure clause were within its jurisdiction and not manifestly erroneous,” the bench said.

The court thus upheld the award and dismissed the petition.

Case Title: MMTC Limited vs Aust Grain Exports Pty. Ltd

Citation: 2023 LiveLaw (Del) 521

Counsel for the Petitioner: Mr. Chetan Sharma, ASG with Mr. Praveen K. Jain, Ms. Rashmi Kumari, Ms. Shalini Jha, Ms. Anamika Agrawal, Mr. Amit Gupta, Mr. Vinay Yadav and Mr. Saurabh Tripathi, Advocates alongwith Mr. Ashutosh Kumar, Sr. Manager-Law, Mr. Achal Meena, Sr. Manager and Mr. Dinesh Dangi, Sr. Manager

Counsel for the Respondent: Mr. Sanjay Bansal, Ms. Swati Bansal, Ms. Vaishali Gupta and Ms. Ayushi Bansal, Advocates

Click Here To Read/Download Judgment