Arbitral Award Cannot Be Disallowed Because It Is Based on Insufficient Evidence: Orissa High Court

In the case of GMR Kamalanga Energy Ltd. versus SEPCO Electric Power Construction Corporation (Dated: 17.06.2022), the Orissa High Court has stated once more that if the arbitral tribunal’s conclusions do not shock the court’s conscience, it cannot be held that the arbitral decision violated fundamental principles of justice. The award cannot be revoked only on the basis that the evidence before the arbitral tribunal was insufficient to support its finding, according to the Single Bench of Justice K.R. Mohapatra.

Facts: A contract for the construction of a thermal power plant in Odisha was entered into between the petitioner GMR Kamalanga Energy Limited and the respondent SEPCO Electric Power Construction Corporation, a Chinese company. The respondent used the arbitration clause and started an arbitration case against the petitioner after a few disagreements between the parties occurred. The petitioner was ordered to pay the respondent Rs.995 Crores according to an award made by the arbitral tribunal. The petitioner brought an action before the Orissa High Court according to Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) challenging the arbitral verdict.

Before the High Court, the petitioner GMR Kamalanga Energy argued that the respondent was required to send a notice prior to asserting a claim under the contract. The petitioner claimed that the Arbitral Tribunal had incorrectly determined that the parties had waived the necessity to serve contractual notifications and that the petitioner was barred from pursuing compliance with the abovementioned prerequisite. So, the petitioner argued, the arbitration tribunal had actually changed the parties’ contract.

Judgement: According to the court’s decision, an award cannot be declared illegal because it is supported by insufficient or poor-quality evidence, in accordance with the precedent set by the Supreme Court in Associate Builders v. DDA (2014). The Court concluded that, unless the Arbitral Tribunal’s conclusions shock the Court’s conscience, it cannot again evaluate the evidence the Tribunal relied upon or remark on its amount and quality. The Court ruled that even while the evidence before the Tribunal may not have been adequate to support the petitioner’s claim that the requirement of serving a notice had been waived, the award could not be overturned on this basis. The Court stated that with regard to the matters brought up by the petitioner before the Arbitral Tribunal, the requirement of serving a notice was not waived. The Court noted that this was due to the counterclaims made by the petitioner not being similar in character to those made by the respondent before the Arbitral Tribunal. As a result, the Court determined that the parties had waived the necessity of providing a contractual notice, rejecting the petitioner’s claims that the arbitral tribunal had changed the terms of the agreement between them.

The charge of “bias” against the Arbitral Tribunal, according to the Court, is a serious one that should be treated with caution. The Court further stated that the A&C Act is a full code in and of itself and offers a procedure for bringing bias claims before the Arbitral Tribunal. The petitioner had a chance to object to the arbitral tribunal’s bias, according to Section 13 of the A&C Act, the court ruled, but he or she chose not to do so. The Court further stated that any claims of “bias” against the arbitrator must be shown beyond a reasonable doubt and must be accompanied by relevant details. The petitioner had failed, according to the court, to provide evidence that the arbitral tribunal had treated the parties unfairly in breach of Section 18 of the A&C Act. The Court concluded that the parties to the arbitration were not handled inequitably or in violation of the norms of natural justice. The arbitral decision is not in conflict with Indian public policy, the court decided, because the arbitral tribunal’s conclusions did not shock the court’s conscience. As a result, the Court determined that under Section 34 of the A&C Act, the arbitral judgement could not be challenged on the grounds that it violated basic principles of fairness. Therefore, the Court dismissed the petition under Section 34 of the A&C Act.

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