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Arbitral Award Cannot Be Set Aside On The Ground That It Is Based On Insufficient Material : Orissa High Court

In the case of GMR Kamalanga Energy Ltd. versus SEPCO Electric Power Construction Corporation (ARBP (ICA) No.1 of 2021), the Orissa High Court has reiterated that an arbitral award cannot be set aside on the ground of breach of fundamental principles of justice, if the findings of the Arbitral Tribunal do not shock the conscience of the Court. The Single Bench of Justice K.R. Mohapatra held that even if the material available before the Arbitral Tribunal is not sufficient to come to the conclusion arrived at by the Tribunal, the award cannot be set aside on this ground alone.

Brief Facts Of The Case: The petitioner GMR Kamalanga Energy Limited entered into an agreement with the respondent SEPCO Electric Power Construction Corporation, a Chinese Company, for construction of a Thermal Power Plant in Odisha. After certain disputes arose between the parties, the respondent invoked the arbitration clause and initiated arbitration proceedings against the petitioner. The Arbitral Tribunal passed an award whereby the petitioner was directed to pay Rs. 995 Crores to the respondent. Against the arbitral award, the petitioner filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) before the Orissa High Court. The petitioner GMR Kamalanga Energy submitted before the High Court that the respondent was required to issue a notice before raising a claim under the contract. The petitioner averred that the Arbitral Tribunal had erroneously held that the parties had waived the requirement to issue contractual notices and that the petitioner was estopped from seeking compliance with the said precondition of serving a contractual notice. Thus, the petitioner contended that the Arbitral Tribunal had effectively modified the contract between the parties.

Judgement: The Court observed that an arbitral award can be challenged under Section 34 of the A&C Act only in accordance with Section 34 (2) and Section 34 (3). The Court noted that Section 34(2A) provides that an international commercial arbitral award cannot be challenged on the ground of ‘patent illegality appearing on the face of the award’. The Court added that in view of Section 34 (2A), an arbitral award cannot be set aside merely on the ground of erroneous application of law or by re-appreciation of evidence. The Court noted that the Supreme Court in the case of Ssangyong Engg. & Construction Co. Ltd. versus NHAI (2019) had held that an arbitral award can be set aside on the ground that it is in conflict with justice or morality under Section 34 (2)(b)(ii) of the A&C Act only if it shocks the conscience of the Court. Thus, the Court dismissed the contentions of the petitioner that the Arbitral Tribunal had modified the contract between the parties by holding that the requirement of issuing a contractual notice was waived by the parties. The Court ruled that allegation of ‘bias’ against the Arbitral Tribunal is a serious allegation which has to be viewed with circumspection. The Court added that the A&C Act is a complete Code in itself which provides the mechanism to raise the issues regarding bias before the Arbitral Tribunal. The Court held that the petitioner had an opportunity to raise the issue of bias before the Arbitral Tribunal under Section 13 of the A&C Act, however, no such objection was raised by the petitioner. The Court added that allegation of ‘bias’ against the Arbitrator must be proved beyond any reasonable doubt and that it must be supported with material particulars. The Court held that the petitioner had failed to prove that the Arbitral Tribunal had treated the parties unequally in violation of the provisions of Section 18 of the A&C Act. Thus, the Court ruled that it could not be said that the principles of natural justice were violated or that the parties to the arbitration were treated unequally. The Court ruled that the findings of the Arbitral Tribunal did not shock the conscience of the Court, therefore, it cannot be said that the arbitral award is contrary to the public policy of India. Thus, the Court held that the arbitral award could not be interfered with under Section 34 of the A&C Act, on the plea of breach of fundamental principles of justice. Hence, the Court dismissed the petition under Section 34 of the A&C Act.

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JUDGEMENT REVIEWED BY- PRAKIRTI JENA

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