Summary Awards Without Reasons Cannot Survive Judicial Scrutiny: Bombay High Court Quashes Government Arbitration Award Passed Without Evidence or Fair Hearing

“Even a Court Martial Follows Natural Justice – A Civil Arbitrator Must Do No Less” – In a powerful reaffirmation of procedural fairness and the judicial character of arbitration, the Bombay High Court set aside an arbitral award passed against Iqbal Trading Company in a government supply dispute, finding that the arbitrator’s decision was rendered “in violation of natural justice, devoid of reasons, and in conflict with public policy.”

Justice Somasekhar Sundaresan, delivering the reportable judgment in Iqbal Trading Company v. Union of India & Ors., held that the arbitration award passed under the repealed Arbitration Act, 1940, was not only governed by the wrong law, but was also unsustainable on merits due to the arbitrator’s refusal to share key documents, complete absence of reasoning, and an “entirely summary adjudication” of a ₹35.42 lakh damages claim without evidence.

“The arbitral award reads like a summary judgment without any analysis whatsoever,” the Court observed. “It was obligatory as a matter of contract, and as a matter of law, for the arbitral award to be reasoned. That obligation has been wholly abdicated.”

“When Arbitrators Deny Inspection of Evidence, They Deny Justice Itself” – Court Slams Refusal to Share Procurement Data With Supplier

The genesis of the dispute lay in a 1995 meat supply tender awarded by the Government of India to Iqbal Trading Company. After the supplier withdrew mid-contract due to market shortages and rising prices, the Government appointed a Lieutenant Colonel as arbitrator, claiming ₹35.42 lakhs as damages for procuring meat from alternate sources. On 16 January 1998, the arbitrator awarded the entire claim to the Government without examining evidence or disclosing key documents to Iqbal.

Iqbal challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, but the District Court dismissed it on grounds of limitation and jurisdiction, incorrectly applying the 1940 Act instead of the 1996 Act.

The High Court categorically rejected this:

“The 1996 Act came into force on 25 January 1996. The Government appointed the arbitrator on 4 April 1996 and initiated arbitration on 8 April 1996. Therefore, the 1996 Act clearly governs the proceedings under Section 21.”

The Court also noted that an earlier Liberty Order dated 29 August 2005 had already returned Iqbal’s Section 34 petition under the wrong statute and granted liberty to refile within 30 days, which Iqbal did. Yet, the District Court disregarded this and reverted to the 1940 Act, leading to the impugned dismissal.

“This conduct is not only legally untenable,” said Justice Sundaresan, “but it entirely ignores a binding judicial order which had attained finality.”

“An Arbitrator Is Not a Scribe – Reasons Are the Soul of Any Judicial Determination” – Award Held Invalid for Want of Reasoning under Clause 21(g)

Critically, the contract between the parties explicitly required that any award for a claim exceeding ₹30,000 must be reasoned, under Clause 21(g). Yet, the arbitrator failed to provide any analysis of the following:

– the price at which the Government actually procured meat after Iqbal’s default
– whether the Government made efforts to mitigate losses
– whether market conditions justified the supplier’s withdrawal
– whether damages claimed were in fact incurred or inflated

Despite repeated requests, Iqbal was denied access to quotations, purchase orders, market rates, and even supply vouchers. The arbitrator rejected requests for inspection, stating that such data was irrelevant — an approach the Court called “untenable and violative of fundamental due process.”

“Even a court martial for military personnel entails following principles of natural justice,” wrote Justice Sundaresan. “In arbitral proceedings conducted over a commercial contract with a third party... it is shocking that the arbitrator refused to provide even the basic documents necessary for a fair defence.”

The Court found that the arbitrator “summarily awarded everything the Government claimed” without analysis or reasoning. “This is antithetical to a judicial approach,” it held.

“An Award That Denies Opportunity to Present a Defence Offends the Fundamental Policy of Indian Law” – Court Declares Award Void Under Section 34

Invoking the landmark rulings in Associate Builders v. DDA, Malluru Mallappa, and ONGC v. Discovery Enterprises, the Court held that the award was liable to be set aside under Section 34(2)(a)(iii) and Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996, on two counts:

1. Iqbal was unable to present its case due to denial of material evidence.
2. The award conflicted with the public policy of India as it violated natural justice and lacked judicial reasoning.

“There is a complete absence of a judicial approach,” observed the Court. “The arbitrator acted arbitrarily and mechanically, with no engagement with facts or law, and in breach of contractual terms mandating a reasoned award.”

The Court emphasised that arbitral autonomy cannot become arbitral impunity. Even limited judicial review must invalidate an award that is perverse or rendered in breach of natural justice.

Impugned Order and Arbitral Award Quashed, Appeal Allowed

The Bombay High Court allowed the appeal filed under Section 37, set aside the District Court’s order dated 21 October 2011, and quashed the arbitral award dated 16 January 1998 in its entirety.

The Court, however, refrained from awarding costs, noting the protracted litigation and the conduct of both parties over the years.

“The Arbitral Award is unsustainable and deserves to be set aside,” concluded Justice Sundaresan. “Iqbal was clearly denied an opportunity to present its case, and the arbitrator acted without adopting a judicial approach.”

A Landmark Reaffirmation: Even Arbitrators Must Be Bound by Fairness, Reasoning, and Law

This ruling marks a significant checkpoint in arbitration jurisprudence, reminding tribunals that fair procedure is not a formality, and that reasoned awards are not optional when contractually or statutorily required.

Justice Sundaresan’s words leave no doubt:

“Summary adjudication cannot replace reasoned justice. Arbitrators may not act as unquestioned grantors of relief — especially when the burden of proof, reasoning, and fair disclosure are cast squarely upon them.”

Date of Decision: 10 November 2025