‘Limitation’ Doesn’t Involve Any “Basic Notions Of Morality Or Justice”, For Setting Aside Award : Bombay High Court

The Court reckoned that the arbitral tribunal had concluded that the claims raised by the claimant were not barred by limitation, by recording a finding of fact that there was a running account between the parties. The bench of Justice G. S. Kulkarni ruled that the said finding of fact cannot be re-examined by appreciating evidence under Section 34 of the A&C Act.

The Court further observed that it was not a case where an ex facie and a brazenly time barred claim or a deadwood was awarded by the arbitral tribunal, of a nature which would shock the conscience of the Court.

The petitioner- Thomas Cook (India), is an India Company, whereas the respondent- Red Apple Chandrarat Travel (RACT), is a Company registered under the laws of Thailand. Both the companies are engaged in the business of providing travel, tourism and logistic services.

The parties entered into a Contract under which the respondent was to take care of the petitioner’s customers who were touring Thailand.

The respondent/claimant raised invoices from time to time for the services rendered to the petitioner. After the petitioner failed to make payments for the said amounts, the matter was referred to arbitration.

The petitioner, Thomas Cook (India), contended before the Arbitral Tribunal that the respondent’s claim was barred by the law of limitation considering the dates on which the invoices/bills were raised.

The respondent/claimant, Red Apple, pleaded that there was a running account between the parties and that the petitioner was making ad-hoc payments against the various invoices raised on it.

The petitioner disputed the respondent’s contention and argued that there was no running account between the parties and that the payments were made solely on the basis of the invoices raised.

The Arbitral Tribunal, after examining the evidence on record, concluded that there was a running account between the parties and thus, the Tribunal dismissed the petitioner’s contention that the respondent’s claim was barred by the law of limitation.

Referring to the correspondence exchanged between the parties, the Tribunal observed that in the emails addressed to the respondent, the petitioner had clearly acknowledged its liability to pay the amounts under the invoices.

Accordingly, concluding that the claims made by the respondent were within the limitation period prescribed under the Limitation Act, 1963, the Tribunal passed an award in favour of the respondent/claimant. Challenging the Arbitral Award, the petitioner filed a petition under Section 34 of the A&C Act before the Bombay High Court.

The petitioner, Thomas Cook (India), submitted before the High Court that the arbitral award shocks the conscience of the Court as there is no document on record to show that there was a running account. The Arbitral Tribunal has come to a perverse conclusion that there was a running account between the parties, it argued. Thus, it averred that the arbitral award is contrary to the fundamental policy of Indian law and the notions of justice.

Noting that the arbitration is an international commercial arbitration, domestically held under Part I of the A&C Act, the Court held that in view of Section 34 (2-A), the award cannot be challenged on the ground that it is vitiated by patent illegality. Further, the arbitral award cannot be set aside merely on the ground of erroneous application of law or re-appreciation of evidence, it noted.

The Court conceded that the arbitral tribunal is the master of the quantity and quality of evidence and the Court, under Section 34 of the A&C Act, cannot re-appreciate evidence and interfere with the findings of the arbitral tribunal.

The bench observed that the Supreme Court in Associate Builders versus Delhi Development Authority (2014) has ruled that an award would be against justice only when it shocks the conscience of the Court. Giving an illustration for the same, the Supreme Court had said that when the claimant is restricting his claim to Rs. 30 lakhs in a statement of claim, however, the arbitral tribunal awards him Rs.45 lakhs without any acceptable reason or justification, the same would shock the conscience of the Court. In this case, the arbitral award must be set aside on the ground that it is contrary to justice, the Apex Court had ruled.

Noting this, the High Court ruled, “Applying such parameters, I would be at a loss to understand as to how the petitioner can fit its case within the permissible parameters of interference under Section 34(2)(b)(iii) of the Act to label the award as against the basic notions of morality or justice.”

It further observed that, in view of the Bombay High Court’s decision in Aircon Beibars FZE versus Heligo Charters Pvt. Ltd. (2022), public policy exception must be narrowly viewed and only an award which shocks the conscience of the Court can be set aside.

The Court added: “….the ground of limitation, being a mixed question of law and fact, can never be a ground which would involve any basic notion of morality of justice for an arbitral award to be set aside. This would also entail a review of the award on the merits of the disputes.”

The Court thus concluded: “…the contention as urged on behalf of the petitioner that the impugned award needs to be interfered on the ground that the same is in conflict with the basic notions of morality and justice cannot be accepted, when the challenge is primarily on the ground that the claims as made by the respondent were barred by limitation.”

The bench stated that the arbitral tribunal had concluded that the respondent’s claims were not barred by limitation by recording a finding of fact that there was a running account between the parties, which stood established from the materials on record. The Court ruled that the said finding of fact cannot be re-examined by appreciating evidence under Section 34 of the A&C Act.

The Court added that this was not a case where an ex facie and a brazenly time barred claim or a deadwood was awarded by the arbitral tribunal, of a nature which would shock the conscience of the Court.

The Court thus dismissed the petition under Section 34.

Case Title: Thomas Cook (India) Limited versus Red Apple Chandrarat Travel

Citation - 2023 LiveLaw (Bom) 30

Dated: 13.01.2023

Counsel for the Petitioner: Ms. Alpana Ghone with Mr. Cyrus Bharucha, Ms. Sheetal Sabnis, Mr. Rushil Mathur and Mr. Keanan Nagporwala i/b. Kochhar & Co.

Counsel for the Respondent: Mr. Santosh Krishnan a/w. Mr. Rahul Totala, Mr. Ashwin Poojari and Rajat Malu

Click Here To Read/Download Order