A court under Section 34(2) of the Arbitration Act does not sit in appeal over the award of an Arbitral Tribunal by re-assessing or re-appreciating the evidence: Kerala High Court

Arbitral Award can be set aside under Section 34(2)(a)(v) of the Act on the ground that the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties. If a plea of jurisdiction is not taken before the Arbitrator as provided in Section 16 of the Act, such a plea cannot be permitted to be raised in proceedings under Section 34 of the Act for setting aside the award, unless good reasons are shown. This remarkable judgment was passed by the Kerala High Court in the matter of KASIM V.K V M.ASHRAF [Arb.A.No.37 OF 2020] by Honourable Justice C.T.Ravikumar and Justice K.Haripal.

In this appeal, the jurisdiction of a District Court to entertain a petition touching the matters falling under the Arbitration and Conciliation Act will be deliberated upon. The HC will also answer the question if a party to an arbitration dispute can challenge the jurisdiction of the Arbitrator for the first time before the court in a petition filed under Section 34 of the Act. This appeal was preferred under Section 37 of the Arbitration and Conciliation Act, 1996, challenging the correctness of the order of the III Additional District Judge, Kozhikode, and the appellant prays to set aside the award of the Arbitrator.

The appellant and the respondent were partners in M/s.Shalimar Jewellery and a partnership agreement were executed on 28.10.2013. However, later they dissolved the agreement mutually but could not reach a consensus for settlement of accounts appointed by two Arbitrators. The appellant nominated Sri. K. Aravindakshan as Arbitrator who dismissed the claim of the respondent and Sri. Abdulla Manapurath nominated by the respondent as Arbitrator found that at the time of dissolution of the partnership, 6481.580 grams of gold was the stocking trade, the respondent is entitled to half of the said amount. In the light of the divergent findings of the respective Arbitrators, both the Arbitrators jointly nominated Adv. Sri. A.K. Rajeev as the third Arbitrator, who, after taking evidence, passed an award to the effect that the respondent is entitled to claim Rs.1,13,77,405/- with interest at the rate of 11% on Rs.87,03,427/-. Aggrieved by the arbitral award the appellant moved the District Court under Section 34 of the Act, however, the petition was dismissed.

It is to be noted that the power of the Arbitrator to consider the arbitrability or otherwise is controlled by the terms of the agreement. If there is a clause for arbitration in the partnership deed, necessarily it will guide the proceedings. The HC observed that “Here, as noticed earlier, clause 17 of the partnership agreement dated 28.10.2013 clearly envisages the appointment of an Arbitrator or Arbitrators, as the case may be, if any matter relating to the firm cannot be mutually discussed and settled. Before the third umpire also the parties appeared and presented their case; after having co-operated with the third umpire also with open eyes, without raising the slightest objection regarding the jurisdiction of the Arbitrator, now the appellant cannot be heard to say that the Arbitrator lacked jurisdiction to resolve any matter in controversy.” Thus, he is estopped from raising such a belated plea in a petition filed under Section 34 of the Act.

It was also stated that, “Hon’ble Apex Court in V.H.Patel & Company, that the power of dissolution of the partnership firm under Section 44(g) of the Indian Partnership Act on just and equitable grounds also is an action in personam and not in rem. Additionally, for all practical purposes, if there are more than one district court in a district, the Principal District Judge can only be considered first among equals and the Additional District Judge is in no way considered to be inferior to the Principal District Judge.”

Under Section 34 of the Act, the District Court has only supervisory jurisdiction. The jurisdiction of this Court under Section 37, at the tapering end of the proceedings, is still narrow and thin. Thus the Court asserted that “Court cannot undertake an independent assessment of the merits of the award and must only ascertain that the exercise of power under Section 34 has not exceeded the scope of the provisions; in case an arbitral award has been confirmed by the court under Section 34, in an appeal under Section 37 the appellate court must be extremely cautious and slow in disturbing such concurrent findings.

Thus, the appeal was dismissed.

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