High Court comes down heavily on Arbitration Court for unreasonable award

High Court comes down heavily on Arbitration Court for unreasonable award

Madras High Court terms the arbitration award as not worth the paper it was printed on, terms it the classical example of what an arbitral award could never be

Madras High Court came down heavily on an Arbitration Court, slamming it for an unreasonable award while setting aside the awards announced by it.

"The award impugned before the Arbitration Court in this case was the classical example of what an arbitral award could never be," the Court said while denouncing it in clear terms.

What irked the bench of Chief Justice Sanjib Banerjee and Justice Senthilkumar Ramamoorthy was the lack of reasons to confirm such an award in the Hindustan Petroleum Corporation Ltd v. Banu Constructions case, passed on 10 September 2014.

"This is a classic example of what cannot be done by an Arbitration Court when in receipt of a petition for setting aside an arbitral award. The primary ground of challenge before the Arbitration Court was that the award was unreasoned. As if in agreement with such principal contention, some 30 pages have been expended in constructing an order that seeks to give reasons and legal crutches to a completely unreasoned award," the bench observed.

"While it is not necessary for an arbitral award to justify every paisa or a rupee awarded to the claimant, the broad premise on which the quantum is founded has to be discernible from award itself for the award to be meaningful or even intelligible in legal terms," the bench said.

The Court noted that the last few pages of the arbitral award, which records its operative portion, only mentions by six-seven lines of "an excuse for reasons" while dealing one of three claim-heads.

"It is tempting to set out what appears at pages 119 and 120 of the appeal papers except that it may not be worth the paper it is printed on for its abject lack of reasons.

"There is not an alphabet expended by way of reasons in respect of the first and second heads of claim. The quantums awarded are Rs.3,13,819.32 and Rs.4,18,981.44, respectively. While these may appear to be meagre amounts, the complete lack of reasons robs the figures and the heads in respect of such figures of any value," the Court observed.

The Court underlined the statutory mandate to pass reasoned orders in civil litigation as well as under the Arbitration Act, 1996.

"The award has been described in its entirety in this order. No page thereof has been left out or ignored, lest it does injustice to the Arbitrator and the party which was the beneficiary of the award," the bench noted in its order passed on 9 February 2021.

Referring to the arbitration court's observation that the arbitral award does contain some reasons for its passage, the bench added, "In the light of what appears clearly from the face of the award, the above observation of the Arbitration Court is exceptionable and not acceptable. The complete lack of reasons cannot be glossed over in the manner it has been in the judgment and order impugned."

The High Court further gave its opinion that both the arbitral award and the affirming judgment were against the most rudimentary tenets of the governing law and the jurisprudential philosophy.

The bench announced its judgement to set aside both the awards and said that with the consent of both parties, retired District Judge C Manickam was appointed to conduct the arbitration afresh.