Well Reasoned Award Cannot Be Interfered With Under Section 37 Of Arbitration Act: Delhi High Court

The Delhi High Court bench of Justices Vibhu Bakhru and Tara Vitasta Ganju affirmed that Courts should not customarily interfere with Arbitral Awards that are well reasoned, and contain a plausible view.Judges, by nature, may incline towards using a corrective lens, however, under Section 34 of the Arbitration Act, this corrective lens is inappropriate especially under Section 37 of the Arbitration Act. It was held that the error in interpreting a Contract is considered an error within jurisdiction of the tribunal. Therefore, judicial interference should be avoided unless absolutely necessary. Brief Facts This Appeal has been filed by Aktivortho Private Limited earlier known as M/s International Orthopedic Rehabilitation and Prevention (India) Private Limited [hereinafter referred to as the “Appellant/Lessee”] under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 [hereinafter referred to as the “Arbitration Act”] impugning a judgment passed by the learned District Judge Commercial Court-03, West, Tis Hazari, Delhi dated 29.01.2024 in O.M.P. (COMM.) 19/2023 [hereinafter referred to as “Impugned Order”]. Under and by virtue of a registered Lease Deed dated 18.03.2015 [hereinafter referred to as the “Lease Deed”], the Appellant/Lessee took on lease the Premises from the Respondents/Lessors.The tenancy commenced and the Appellant/Lessee carried out its fit out in the Premises and commenced its business from the Premises. The Appellant/Lessee made rental payments until February, 2017 after which the rental payments were stopped. Disputes arose between the parties and on 07.04.2017, the Appellant/Lessee issued a legal notice terminating the lease owing to defaults of Lease Deed by the Respondents/Lessors. The Appellant/Lessee contended that the Respondents/Lessors failed to honour the terms of the Lease Deed and on the ground of non-performance, terminated the Lease Deed between the parties. A suit for recovery was filed by the Respondents/Lessors against the Appellant/Lessee in the Court of learned District Judge at Tis Hazari Courts, Delhi. By an order dated 20.12.2018, pursuant to an Application filed under Section 8 of the Arbitration Act by the Appellant/Lessee and with the consent of both the parties, the Court appointed the Sole Arbitrator to adjudicate disputes between the parties. The Sole Arbitrator passed an Arbitral Award on 08.08.2022, whereby it directed the Appellant/Lessee to make payment of rent for the months of March, 2017 to May, 2017 and additionally directed the payment of six months rent in lieu of the lock-in period with interest at the rate of 9% per annum from 01.06.2017 onwards, along with costs of litigation at the rate of Rs. 75,000/-. An amended award was passed by the Sole Arbitrator on 17.03.2023 whereby the security deposit amount of Rs. 21,30,000/- was directed to be adjusted in the amounts due to the Respondents/Lessors. By the Impugned Order, the learned Commercial Court dismissed the Petition under Section 34 of the Arbitration Act filed by the Appellant/Lessee and held that vide the said Petition, the Appellant/Lessee had sought nothing but re-appreciation of the evidence. Contentions The appellant/lessee submitted that Clause 1.5 of the Lease Deed which provided for a six month notice of termination, at the end of the lock-in period was misconstrued by the Sole Arbitrator and was only applicable on the completion of the lock-in period. Since, the Lease Deed was terminated during its tenure, the applicability of Clause 1.5 of the Lease Deed did not arise. That the Sole Arbitrator has failed to distinguish between “default” and “breach” and has completely overlooked that the Respondents/Lessors had committed defaults by failing to insure the Premises, pay annual maintenance charges for the lift despite promising the same. That the security deposit was interest free only till the time the Appellant/Lessee was in possession of the Premises and thereafter, holding on to the same would accrue interest which was not awarded by the Sole Arbitrator. Per contra, the respondents/lessor submitted the Appellant/Lessee stopped paying rental in March, 2017 and thereafter vacated the Premises on 31.05.2017 in complete contravention of the terms of the Lease Deed. No communication of any kind whatsoever was issued by the Appellant/Lessee prior to its legal notice dated 07.04.2017. That the issues raised by the Appellant/Lessee were only raised to avoid their obligation to make rental payments and payment of other dues during the tenure of the Lease Deed including payment with respect to the lock-in period. Court's Analysis The court noted that Clause 7.1 of the Lease Deed set out that the Appellant/Lessee shall be at liberty to terminate the Lease Deed, at any time, after the expiry of 36 months with a written notice of 6 months. It also provided that the...

Well Reasoned Award Cannot Be Interfered With Under Section 37 Of Arbitration Act: Delhi High Court

Mohd Malik Chauhan

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