Court U/S 34 Of Arbitration Act Cannot Re-Appreciate Evidence And Substitute Arbitrator's Conclusion: Delhi High Court

The Delhi High Court bench of Justice Subramonium Prasad affirmed that under Section 34 of the Arbitration Act the Court cannot re-appreciate evidence and substitute its own conclusion to the one arrived at by the Arbitrator even though a different conclusion can be arrived at on re-appreciating evidence Brief Facts The instant petition is one under Section 34 of the Arbitration & Conciliation Act, 1996 challenging an Award dated 01.06.2024 passed by the learned Sole Arbitrator. By virtue of the Award, the learned Sole Arbitrator has allowed the claim of the Respondent herein and has dismissed the counter claim of the Petitioner herein. Petitioner was approached by the Respondent for supply of fabrics. It is stated that the Petitioner placed four purchase orders for supply of fabrics on the Respondent. The claim of the Respondent is for the price of the goods delivered to the Petitioner. As per the statement of claim, the Respondent has made a claim of Rs.1,38,62,111.96/-, being the unpaid amount of the fabrics supplied to the Petitioner. The case of the Petitioner herein, i.e., the Respondent in the proceedings before the learned Arbitrator, was that the goods were not delivered on time by the Respondent/Claimant and due to the delay in supply of fabrics by the Respondent, the Petitioner herein failed to complete the onward orders placed by the purchaser, i.e. one M/s Trent Limited, which resulted in cancelling of the order. The Respondent being a Micro, Small and Medium Enterprise (MSME), approached the MSME Council. The MSME Council referred the dispute to Delhi International Arbitration Centre (DIAC) under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 ( in short 'MSMED Act'). Proceedings Before Arbitrator The Arbitrator after going through the material on record and after perusing the evidence held that the entire lot of goods covered by the four purchase orders were delivered by the Respondent to the Petitioner herein which was not always in accordance with the stipulated schedule. However, the learned Arbitrator observed that the goods were never sought to be returned by the Petitioner herein to the Respondent/Claimant. The learned Arbitrator held that it was for the Petitioner herein to establish by a cogent evidence that the Claimant was made aware prior to the purchase orders or simultaneously with the issuance of the first purchase order that the goods covered by the purchase orders placed by the Petitioner herein on the Respondent would be used for supplying garments to M/s Trent Limited And that there was a strict time schedule for the delivery of the garments by the Petitioner herein to M/s Trent Limited, failing which the orders placed by M/s Trent Limited on the Petitioner herein would stand canceled. The learned Arbitrator did not accept the argument raised by the Petitioner herein. The learned Arbitrator allowed the claim of Rs.1,36,65,867/- which was the amount which the Respondent/Claimant claimed as the balance due and payable for the supply of fabrics and rejected the counter-claim raised by the Petitioner herein. Contentions The petitioner submitted that the specific case of the Petitioner before the Arbitrator was that while placing purchase orders, RW2 had informed Ms. Shilpi Mathur, an employee of the Respondent/company, about the final shipment of M/s Trent Limited and its timeline That CW-1/ Mr. Harish Kumar has admitted in his crossexamination that Ms. Shilpi Mathur was the person who was dealing with the Petitioner herein for the purchase orders, invoices, supply etc., and was aware about the entire transaction. That despite the above acknowledgement, the learned Arbitrator has granted relief to the Respondent and denied relief to the Petitioner herein on the ground that at the relevant time, the Petitioner had not informed the Respondent that he had received the orders from M/s Trent Limited and that the final product was to be supplied to M/s Trent Limited. That while recording the finding, the learned Arbitrator has ignored the vital evidence which clearly stipulates that at the time when the purchase orders were placed, the Respondent herein was aware about the final shipment of M/s Trent Limited. That the learned Arbitrator has failed to appreciate that the Respondent was not entitled to claim benefits under the MSMED Act and that the argument of the Petitioner could not be rejected only on the basis of acquiescence as the Respondent was not statutorily entitled to claim any relief under the MSMED Act. Court's Analysis The court, at the outset, noted that in OPG Power Generation Private Limited v. Enexio Power Cooling Solutions India Private Limited & Anr., 2024 the Supreme Court has held that Interference with an arbitral award is only on limited grounds as set out in Section 34 of the 1996 Act. A possible view by the...

Court U/S 34 Of Arbitration Act Cannot Re-Appreciate Evidence And Substitute Arbitrator's Conclusion: Delhi High Court

Mohd Malik Chauhan

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