'Complete Abuse Of Process': Madras HC Imposes Rs 1 Lakh Costs For 'Worthless' Appeal, Cautions Against Impleading Arbitrators

The Madras High Court on Wednesday imposed Rs 1 lakh costs on an appellant while dismissing a challenge to an arbitral award by terming it to be an abuse of the process of law. 

The appellant was directed to pay Rs 50,000 to the respondent and a further Rs 50,000 to the Tamil Nadu Legal Services Authority (TNSLA) within a month.

A Bench comprising Chief Justice Sanjib Banerjee and Justice PD Audikesavalu was adjudicating upon an appeal against a February 23, 2021 order passed by an arbitration court which had declined to set aside a September 2017 arbitral award challenged under Section 34 of the Arbitration and Conciliation Act.

"This appeal is in complete abuse of the process and a dishonest attempt by the appellant to wriggle out of its obligation", the Court remarked at the outset. 

The Court further observed that both the challenge to the arbitral award and the challenge to the arbitration court's dismissal of the Section 34 application were 'worthless' and a 'complete waste of time'.

Furthermore, the Court expressed strong reservations against the unnecessary impleading of arbitrators. It was opined that in proceedings under Section 34 of the Arbitration and Conciliation Act, 1996, the arbitrator or the members of the arbitral tribunal are utterly unnecessary parties unless specific personal allegations are levelled against them that would require such persons to answer the allegations.

"It is a pernicious practice in this court to implead arbitrators or arbitral tribunals when there is no need to do so. Often, arbitrators are embarrassed upon receipt of notice. It is only in a rare case when a personal allegation is made against an arbitrator may such arbitrator be impleaded." the Court remarked. 

Opining on the 'limited scope' of interference under Section 34 of the Act, it was noted that while deciding on an appeal to an award, the Court is barred from re-appreciating evidence and that it is judicially accepted that the arbitrator is the final authority as to both the quality and the quantity of the evidence. 

"Litigants appear to be taking a chance by not accepting the finality of an award and questioning the same on specious grounds by invoking Section 34 of the Act and, even thereafter, pursuing worthless challenges in appeal from the order of dismissal of the petition under Section 34 of the said Act. One of the principal ways how litigants are encouraged to adopt this procedure and clog up courts with undeserving matters is the reluctance on the part of the courts to award appropriate costs", the Court further observed. 

Thus, the Court remarked that the contention of the appellant that the arbitrator did not look into the matter properly 'flies in the face of at least twenty pages of discussion in the award'.

In the instant case, the Court noted that the arbitration court had found that the arbitrator had applied his mind and dealt with all three issues raised by the appellant on maintainability, limitation and merits.

Accordingly, the Bench ruled that the February 2021 judgment of the arbitration court did not call for any interference. The September 2019 arbitral award was found to be perfectly justified and in accordance with law.

Therefore, the Court dismissed the appeal by directing the appellant to pay costs to the tune of Rs 1 lakh with a month for the appellant's "inglorious efforts". 

Case Title: Kothari Industrial Corporation Ltd. v. M/S Southern Petrochemicals Industries and Anr

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