Arbitrator Is Final Arbiter On Facts And Law, Interference U/S 34 Of Arbitration Act Is Only Permissible When Findings Are Perverse: Delhi Court

The Arbitrator/Tribunal is the final arbiter on facts as well as in law, and even error, factual or legal, which stop short of perversity, do not merit interference under Section 34 of The Act.

Brief Facts

This petition under Section 34 of the Arbitration Act is directed against an Arbitral Award dated 05.12.2022.

An agreement was executed between M S North West Sales And Marketing Ltd, the petitioner and Sunita Arora, the respondent on February 9, 2013. Under the agreement, the respondent had to purchase a commercial shop in the Mall the ARSS Felix for a consideration of Rs. 48,94,117.28.

The respondent made further payment of Rs. 35,82,290. Now the remaining balance to be paid stood Rs. 13,06,327.38. The delivery of the shop had to be effected within 24 months from the agreement that is by February 8, 2015. However, the possession could not be handed over to the respondent due to delay in obtaining NOC from the lender (IFCI Limited).The petitioner proposed compensation amount of Rs. 6,29,500 for the delayed possession which was accepted by the respondent.

Contentions

The petitioner contended that it fulfilled its obligations by making compensation for the delayed possession. It was the fault of the respondent who did not take pay the remaining balance and register the shop in its own name despite reminding multiple times.

It was further argued that the demand of the respondent to seek the refund back along with interest was not justified as it was the defaulting party. It was further submitted that delay in handing over possession was due to the circumstances beyond its control therefore the respondent had no right to cancel the agreement. It was also argued that the mandate of the arbitrator had expired as per section 29A of the act.

Per contra, the respondent submitted that delay in delivering possession was unwarranted and violated the terms of the agreement. It was further contended that it was its right to claim the refund along with interest for the advanced payment made.

It was further argued that the arbitration proceedings were not time barred as the right to recover the advanced payment accrued in favour of the respondent when the petitioner refused to cancel the agreement and refund the amount in 2018.

Court's Analysis

The court first discussed the scope of interference under section 34 of the arbitration act. Section 34 provides that an award can be set aside if it is against the public policy of Indian law and suffering from a patent illegality.

The court referred to the Delhi High Court judgment in Angel Broking Pvt Ltd Vs. Urmil Modi decided (2022) wherein it was held that the scope of interference under section 34 of the act is limited and full respect to the findings of the arbitrator should be given.

The court further noted that the court under section 34 does not sit in appeal against the findings of the arbitral tribunal. The court is not empowered to reappreciate the evidence or review factual determinations under this provision unless the findings of the tribunal are perverse and patently illegal.

The court observed that the Arbitrator/Tribunal is the final arbiter on facts as well as in law, and even error, factual or legal, which stop short of perversity, do not merit interference under Section 34 of The Act.

The court next addressed the argument of the petitioner with respect to expiry of mandate of the tribunal as per section 29A of the arbitration act. The court referred to the Supreme Court judgment in SUO MOTU WRIT PETITION (C) No. 3/2020 in RE:COGNIZANCE FOR EXTENSION OF LIMITATION wherein it was held that the time period during Covid from March 15, 2020, to February 28, 2022 has to be excluded while calculating the time period for completing the arbitral proceedings.

Based on this the court held that the mandate of the tribunal did not expire and the proceedings were concluded within the time frame prescribed under the arbitration act.

The court rejected the argument of the petitioner pertaining to limitation. The court observed that the cause of action arose only June 25, 2018 when the petitioner refused to refund the amount. The civil suit was filed in July, 2018 which was within the limitation period.

The court further referred to clause 30 of the agreement which stipulated that dispute arising between the parties shall be resolved through arbitration. The court noted that the dispute arose when the respondent claimed its refund of the advanced payment which was rejected by the petitioner. Additionally, the petitioner was claiming the balance sale consideration. Therefore, the court held that a cause of action had arisen for which arbitration proceedings could be started.

The court concluded that argument of the petitioner in relation to expiry of arbitrator's mandate and the claim barred by limitation are without substance therefore liable to be rejected.

Accordingly, the present petition was dismissed.

Case Title: MS North West Sales And Marketing Ltd vs Sunita Arora

Case Reference: OMP (COMM)/12/2023

Court: Delhi Commercial Court

Judgment Date: 21/10/2024

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