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Browse Law School Education ADR: Arbitration Important Arbitration Cases

READ FULL CASE

Now let’s discuss Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd. case.

BRIEF FACTS: 

The brief facts of this case are:

A contract was entered into between DCM Shriram Aqua Foods Limited and M/s. Crompton Greaves Limited (CGL) for an aquaculture unit to be set-up by DCM.

CGL invited tenders for carrying out certain works for construction of ponds, channels, drain and associated works. The Appellant (M/s. Dyna Technologies Pvt. Ltd.) gave its proposal, estimate and quotation for carrying out the work. Thereafter, the Respondent (CGL) paced a letter of intent dated 25 July 1994 and CGL issued a work order on 15 November 1994, setting out the terms and conditions of the work. 

After commencement of the work, the Respondent (CGL) on 5 January 1995 instructed the employees of the appellant company to stop their work. The appellant company claimed compensation for such premature termination of the contract and ultimately the dispute was referred to the Arbitral Tribunal comprising three arbitrators. The Arbitral Tribunal passed an award in favour of the appellant-claimant for a sum of Rs 27,78,125 with interest at the rate of 18 percent p.a. through this award.

Aggrieved by the award passed by the Tribunal, the respondent filed an original petition before the High Court of Madras. A single judge of the High Court upheld the award of the Tribunal. However, aggrieved by this decision, the respondent further appealed before the Division Bench of the High Court in Madras. The High Court vide impugned order, partly allowed the appeal and set-aside the award of the Tribunal, stating that the award does not contain sufficient reasons or causes. The appellant further challenged the decision of the Division Bench of the High Court. Hence, this appeal was made. 

ISSUE:

Now the issues in this case were:

The requirement of reasoned award and the cautionary tale for the parties and arbitrators to have a clear award, rather than to have an award which is muddled in form and implied in its content, which inevitably leads to wastage of time and resources of the parties to get clarity, and in some cases, frustrate the very reason for going for an arbitration proceeding.

HELD: 

The Supreme Court in this case observed certain pointers on the jurisdiction of the Court under Section 34 of the Arbitration and Conciliation (Amendment) Act, 2015 and held that there is no dispute that Section 34 of the Actlimits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. The Courts are to be cognizant of the fact that arbitral awards should not be interfered with in a casual manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. The SC also observed that Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law.

At the same time, the Supreme Court pointed to Section 31 of the Act, which makes it clear that the arbitral award must be based on reasons. The Court also observed that though the aforesaid provision does not require an elaborate judgement to be passed by the arbitrator, nevertheless the arbitral award should have reasoning which is intelligible and adequate. The Supreme Court also referred to the case of Som Datt Builders Ltd. v. State of Kerala, (2009) 4 ARBLR 13 SC—which is a 2009 case, where a Division Bench had indicated that passing of a reasoned award is not an empty formulation under the Arbitration Laws.

The Court held that if the challenge to an award is based on impropriety or perversity in the reasoning, then it can be challenged on the grounds provided under Section 34 of the Arbitration Act. 

In the present case the arbitral award was held to be rendered without any reasoning. The Supreme Court repeated that the muddled and confused form of the award had invited the High Court to state that the arbitrator had merely restated the contentions of both parties. Hence the award was held to be unintelligible and therefore not sustainable. 

RATIO:

The ratio of this case is that

Arbitral award should have reasoning, which is proper, intelligible and adequate. 

Courts are required to be careful while distinguishing between inadequacy of reasons and unintelligible reasons.

In my next video, we will discuss another very famous case which is that of Simplex Infrastructure Ltd. v. Union of India.

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