Citation: O.M.P. (COMM) 162/2020 & I.A. 14331/2012, I.A. 10655/2022
Ruling:
Setting aside of arbitration awards on ground being that the learned Arbitrator did not proceed to on the basis of the evidence on record, that was available inter alia by way of the evidence tendered before him.
Facts:
The present petition, filed under Section 34 of the Arbitration and Conciliation Act 1996, seeks to set aside the arbitral award dated 07.03.2012. The dispute originated when the Petitioner breached a contract with the Respondent, with whom they had an MoU to construct ‘R-3 Mall’ in Ahmedabad, Gujarat. The Respondent alleged the Petitioner breached the MoU by contracting with a third party, leading to the Respondent’s contract termination and subsequent arbitration claim.
The Arbitrator directed the Petitioner to pay Rs. 24,54,458/- with 12% annual interest, covering Rs. 4,54,458/- for advertisement expenses and Rs. 20,00,000/- for ‘loss of profit.’ The Petitioner challenged the award, citing a judgment requiring proof of lost profit opportunities. The Respondent maintained that the loss calculation was based on market evaluations, with sufficient evidence supporting the award.
Issue:
Whether the Learned Arbitrator was justified in issuing an award of Rs. 20,00,000.00 by way of loss of profit?
Judgment and Legal Reasoning:
The arbitrator cannot award any remittance under the pretext of offering supplementary reasons or bridging gaps in the rationale, especially when the award lacks findings on contentious issues. In the absence of such findings or if findings are made disregarding crucial evidence, it becomes valid grounds for nullifying the award itself. Granting the arbitrator the authority to provide additional reasons or fill in gaps in reasoning cannot be allowed to supersede the court’s power. No amount of reasoning can rectify a defect in the absence of findings on contentious issues.
It was in the opinion of the Hon’ble High Court, the learned Arbitrator did not proceed even on the basis of the evidence on record, that was available inter alia by way of the evidence tendered before him. The Hon’ble High Court then held that it was persuaded to allow the present petition, holding that the award of Rs. 20 lacs to the respondent towards loss of profit was based on no evidence on record, and in fact, the learned Arbitrator has failed to even decide whether the respondent had incurred, or would have incurred, any loss of profit at all, and stated that the Arbitral Award dated 07.03.2012 is to be set aside.
K S&Co’s Comment:
The above case deals with the issue that if the arbitrator has failed to give proper reason and in the absence of any evidence the arbitrator still passes award which is illegal then the Court can interfere and rectify the award in the interest of justice and to give Rule of Law correct meaning i.e. Court can set aside such award.
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