Whether Supreme Court Can Set Aside An Award On The Basis That Contractual Interpretation By The Arbitral Tribunal Is Perverse?

Supreme Court- Arbitration is the process of submission by two or parties, of their dispute, to the third person called “arbitrator”. An arbitral tribunal is defined in Section 2 (d)[1] of the act it defines “arbitral tribunal as a sole arbitrator or panel of arbitrators. The primary role of an arbitral tribunal is to apply the law and make a dispute decision

by administering a so-called “arbitral award”. The award grant by the tribunal is treat in the same manner as decree in case of civil suit.

As a matter of fact, a case may be interpret in different manners by different authorities, merely because of the fact that an arbitral tribunal has interpreted a case in alternative manner as to the courts it does not given the court any ground to interfere with

the award given by the arbitral tribunal.

The general rule is that, the courts should not interfere with the awards granted by an arbitral tribunal and

the power of the court to interfere in the same is limit in nature. Courts can set aside an arbitral award only according to the provisions of Section 34[2] of the Act of 1996 which deals with application for setting aside an order.

The meaning of the term ‘perverse’ and when exactly can an award be set aside on the basis of

‘perversity’ has been examine in the case of Aruvelu v. State[3], (2009) 10 SCC 206, the Court opined that “perversity or perverse finding is a finding which is not only against the weight of evidence but is altogether against it and is so unreliable that no reasonable person would act on it”.

Contents  hide 

1 Analysis of Court’s views

1.1 a perverse decision is one which-

2 Conclusion

2.1 Related

Analysis of Court’s views

In the case of M/S Dyna Technologies Pvt Ltd v. M/S Crompton Greaves Ltd[4] (“Dyna Technologies”), it was for the very first time held that the Courts cannot interfere with an award, solely based on the possibility of an alternative interpretation of the facts in a contract by the Supreme Court. However, in instances when a contract cannot be look at from an alternate view, and the reasoning give by the arbitrators suffers from the vice of unpardonable irrationality, the award can be set aside

under the ground of perversity under Section 34(4) of the Act.

In MMTC v. Anglo American Metallurgical (“MMTC”)[5], the Delhi High Court stated that in case of any inference by the arbitrators which is based on imaginary evidence then the existing evidence shall be considered as perverse.

In Associate Builders v. Delhi Development Authority[6], the honourable Supreme Court held that the arbitrator should and must have judicial approach and he/she must not act perversely. It was find that

a perverse decision is one which-

1. Whose findings are based on no evidences
2. Tribunal takes some irrelevant decision
3. Ignores vital evidences and provides awards

Hence, under the situation where a decision by the tribunal has been take perversely and the award has been grante, under such circumstance the Supreme Court possess the right to set aside

such award on the ground of it being perverse.

In the case of Ssangyong Engg. & Construction Co. Ltd. v. NHAI[7] 2019 SCC SC 677, it was again held by the Supreme Court that, if the finding was based on no evidence at all or award was granted ignoring the vital evidence then such award will be considered to be perverse and are subjected to set aside.  In the instant case, the term was define with regard to the findings or

decisions which was based on lack of evidences.

The Explanation part under Section 34 of the Act, clearly and expressly mention that if an award is find violating the public policy or

It is in conflict with the public policy of India then, such award are entitle to be sets aside by the Supreme Court.

In South East Asia Marine Engineering and Construction LTD v. Oil India Limited[8], arbitration was conducted and thereafter Oil India challenged the award under Section 34 of the Act and the same was upheld by the District Court as it was found to be violative of public policy of India by the High Court. Thereafter, the appeal was make in the Supreme Court. The SC while adjudicating on the matter had applied wider test of reasonableness and reinterpreted the contract in question. The SC finally held that the interpretation made by the tribunal was unreasonable and was perverse.

Conclusion

At last, we can state that, where the nature of award grant by arbitral tribunal is such that it cannot meet the ends of justice and is perverse, unreasonable and irrational such as award could be set aside by the Supreme Court. Furthermore, we can say that where arbitral tribunal has not satisfied the muster provided in

Section 34 of the Act of 1996, the court may exercise its power by using the provisions of Section 34

where the parties to the arbitration seeks recourse upon the award granted, the court may set aside the same.

Under all the situations, where arbitral tribunal fails to grant an award and

the making of the award is not based on just, fair and

sound principles of wrong it becomes the duty of the court to set the award aside.

 

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[1] THE ARBITRATION AND CONCILIATION ACT Sec 2(d)

[2] THE ARBITRATION AND CONCILIATION ACT Sec 34

[3] Aruvelu v. State, AIR (2009) 10 SCC 206

[4] M/S Dyna Technologies Pvt Ltd v. M/S Crompton Greaves Ltd

[5] MMTC v. Anglo American Metallurgical

[6] Associates Builders v. Delhi Development Authority AIR 2015 3 SCC 49

[7] Ssangyong Engg. & Construction Co. Ltd. v. NHAI AIR 2019 SCC SC 677

[8] South East Asia Marine Engineering and Construction LTD v. Oil India Limited