Case Note & Summary
The dispute arose between Appellant, a foreign company manufacturing biscuits in Zimbabwe, and Respondent, an Indian partnership firm, regarding the supply of packaging materials. Appellant claimed that materials supplied under invoices dated 10 September 2012 and 20 December 2012 were defective due to odour issues, and payment for a fifth invoice was made without supply. After unresolved disputes, a sole arbitrator was appointed under Section 11 of the Arbitration and Conciliation Act, 1996. The arbitrator found in favor of Arenel, awarding refunds and costs, and rejecting counter-claims by Respondent. Respondent successfully challenged this award under Section 34 before a Single Judge, who set it aside on grounds that the arbitrator's findings on SGS India reports were erroneous, burden of proof was reversed, inadmissible evidence was relied upon, and the award shocked the conscience and conflicted with public policy. Arenel appealed, arguing that factual findings by an arbitrator are not challengeable under Section 34 and materials cannot be re-appreciated, citing limited grounds post-amendment as per Ssangyong Engineering. The court considered whether the Single Judge's re-evaluation of evidence exceeded the narrow scope of Section 34 review. It analyzed that perversity alone is insufficient to set aside an award unless it shocks conscience or conflicts with public policy. The court found that the Single Judge erred by re-assessing evidence and setting aside the award without establishing a clear conflict with public policy, thus restoring the arbitral award.
Headnote
A) Arbitration Law - Judicial Review of Arbitral Awards - Scope of Section 34 Challenge - Arbitration and Conciliation Act, 1996, Section 34 - Appellant challenged judgment setting aside arbitral award, arguing findings of fact by arbitrator are not open to challenge and materials cannot be re-appreciated under Section 34 - Court considered limited grounds for challenge post-amendment as per Ssangyong Engineering, noting perversity alone is insufficient unless award shocks conscience or conflicts with public policy - Held that Single Judge erred in re-appreciating evidence and setting aside award on grounds of perversity without establishing conflict with public policy (Paras 1-7). B) Arbitration Law - Arbitral Award Setting Aside - Public Policy and Conscience of Court - Arbitration and Conciliation Act, 1996, Section 34 - Single Judge set aside award dated 2 December 2019, holding arbitrator recorded illegal finding on SGS India reports, reversed burden of proof, relied on inadmissible evidence, and award shocks conscience and conflicts with public policy - Court analyzed whether award's findings on defective materials and breach of contract were perverse or contrary to basic justice - Held that re-evaluation of evidence by Single Judge exceeded limited scope under Section 34, requiring restoration of arbitral award (Paras 6-7).
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Issue of Consideration: Whether the findings of fact recorded by the Arbitrator are open to challenge and whether materials laid before the Arbitrator can be re-appreciated in a petition under Section 34 of the Arbitration and Conciliation Act, 1996, and whether the award shocks the conscience of the Court or is in conflict with public policy
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Final Decision
Court allowed appeal, restoring arbitral award set aside by Single Judge, holding that Single Judge erred in re-appreciating evidence and setting aside award without establishing conflict with public policy
