Judicial interference in arbitral awards should be minimal: Telangana High Court

The Telangana High Court has dismissed an appeal filed by M/s Goel Road Carriers Hyderabad challenging an arbitral award favoring M/s Tecumseh Products India Ltd. The bench, presided by Justice M.G. Priyadarsini, upheld the arbitral award and emphasized the limited grounds for judicial interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.

The appellant, M/s Goel Road Carriers, had entered into an agreement with M/s Tecumseh Products India Ltd. for transporting consignments, including compressors, from Hyderabad to various destinations. Several consignments were damaged during transit in 2001, leading to a dispute over incurred repair costs amounting to ₹29,01,021. Subsequently, M/s Tecumseh Products invoked the arbitration clause in their agreement, resulting in an award of ₹24,71,621 with interest at 18% per annum in their favor by the sole arbitrator on February 17, 2005.

Justice Priyadarsini upheld the arbitrator's jurisdiction, confirming that the arbitration clause was valid and properly invoked. "The learned Sole Arbitrator has given detailed reasons, and the decision arrived by him cannot be found fault as he considered all the aspects raised by both sides and justified all the claims with valid and cogent reasons," observed the court.

The court reiterated the principle of minimal judicial interference, stating, "The scope of interfering with the arbitration award is very limited until and unless there is error apparent on the face of the record and there is perversity in the award." The judgment underscored that reappraisal of evidence by courts is not permissible unless the award is found to be in violation of public policy or principles of natural justice.

The court referred to several Supreme Court judgments, including NTPC Limited v. Deconar Services Private Limited and Ssangyong Engineering and Construction Co. Limited v. National Highways Authority of India (NHAI), to emphasize that an arbitral award can only be set aside on grounds of patent illegality or if it is in conflict with the fundamental policy of Indian law. The court found no evidence of such illegality or misconduct in the present case.

Justice Priyadarsini remarked, "The expression ‘public policy of India’ is now constricted to mean that a domestic award is contrary to the fundamental policy of Indian law or against basic notions of justice or morality." The judgment further clarified that erroneous application of law or reappreciation of evidence does not constitute grounds for setting aside an arbitral award.

The dismissal of the appeal by the Telangana High Court reinforces the judiciary's commitment to upholding the integrity of the arbitration process and limiting judicial intervention. This decision serves as a crucial precedent for future arbitration cases, emphasizing the finality and binding nature of arbitral awards, except in cases of clear illegality or violation of fundamental policy.

Date of Decision: 05 July 2024