Bombay High Court: Under Section 37 of A&C Act, Court Cannot Accept Independent Assessment Of Arbitral Award

Bombay High Court: Under Section 37 of A&C Act, Court Cannot Accept Independent Assessment Of Arbitral Award

The challenge must be premised on the errors in the impugned order under Section 34

The Bombay High Court has held that under Section 37 of the Arbitration and Conciliation (A&C) Act, 1996, the challenge must be related to the impugned order passed under Section 34 and not merely to the arbitral award.

The bench of Chief Justice Devendra Kumar Upadhyaya and Justice Arif S Doctor stated that it was incumbent upon a party to point out errors in the order under Section 34 to make out a case in the appeal under Section 37.

It added that while exercising powers under Section 37 of the A&C Act, the court could not take an independent assessment of the arbitral award. Therefore, the challenge must be premised on the errors in the impugned order under Section 34. It was not permissible for a party to challenge an arbitral award de hors any challenge to the impugned order.

The case pertained to the appellant, a marine salvage company, and the respondent, involved in offshore logistics and dredging. They entered a Salvage Agreement in 2019 October-November for the recovery of the dredging vessel ‘Sical Portofino.’ The agreement operated based on ‘no cure no pay.’

However, issues arose when the respondent, despite an initial payment, did not provide the required security as outlined in the contract. Despite the appellant’s reminders, the security was not furnished, leading to the termination of the contract in December 2009. However, the respondent provided the necessary security after subsequent communication.

After completion of the work, the appellant issued an invoice for salvage charges, which was duly paid. In January 2010, the appellant sent an invoice to the respondent for idle-time charges during a specific period in November-December 2009.

Thereafter, disputes arose, leading to the filing of an admiralty suit, subsequently referred to arbitration.

The arbitral tribunal addressed various issues, including claims, jurisdiction, waiver, and the interpretation of the contract terms. In its 18 April 2015 award, the tribunal dismissed both the appellant's claim and the respondent's counter-claim.

The appellant challenged the award under Section 34 of the Arbitration Act. However, it was dismissed in the impugned order. Aggrieved by it, the appellant filed the appeal under Section 37.

The appellant made the submissions:

• The tribunal erred in applying Section 55 of the Indian Contract Act (ICA) when the parties expressly agreed that the Section would not apply. In the respondent’s pleading, it was asserted that the time was not the essence of the contract; therefore, it was admitted that Section 55 of the ICA could not be applied.

• The tribunal went beyond the pleading of the respondent by making a finding that by agreeing to continue the contract, the appellant waived its right to claim compensation. However, there was no such finding.

• The tribunal erred in rejecting the claim of the appellant merely on the grounds of lack of computation despite observing that the claim was alive.

• The tribunal also erred in not appreciating that the claimed amount was a genuine pre-estimate of the loss provided under the agreement, which required no quantification.

The court observed that the appellant's challenge focused solely on the arbitral award and did not address the impugned order. It held that under Section 37 of the A&C Act, the challenge must be related to the impugned order passed under Section 34, and not merely to the arbitral award. It was incumbent on the party to point out errors in the order under Section 34 to be able to appeal under Section 37.

The judges emphasized the narrow scope of such appeals, especially when dealing with orders refusing to set aside an arbitral award. They acknowledged the tribunal's proper constitution under the contract, with members possessing the requisite knowledge of maritime matters. Thus, under Section 34 of the Arbitration Act, the dismissal of the appellant's petition was affirmed.

The bench rejected the contentions regarding the inapplicability of Section 55 of the Contract Act, waiver, and inconsistent findings. While citing the judgment of the Supreme Court in a previous case, it noted the inapplicability that the respondent had pleaded waiver in the Statement of Defence.

The court also found the rejection of liquidated damages justified, as it was based on the substantive issue of entitlement to idle time charges rather than a mere computation error.

Thus, finding no infirmity in the impugned order, the appeal was dismissed.