An Arbitral Award Cannot Be Challenged In Appeal On Entirely New Grounds Which Were Not Taken Under Section 34 Of The A&C Act: Bombay High Court

The High Court of Bombay has held that an appeal to challenge an arbitral award cannot be on entirely new grounds. It held that grounds which were not taken before the Court under Section 34 of the A&C Act cannot be taken in appeal. The bench of Chief Justice Devendra Kumar Upadhyaya and Justice Arif S. Doctor held that an arbitration award cannot be challenged on afresh grounds that were never taken before. It held that such a course would not just be in teeth of the settled position of law but would also disturb the entire scheme of the arbitration act. The Court also held that under Section 37(1)(c) of the A&C Act, it is only the order of the Court under Section 34 against which the appeal is maintainable, therefore, the challenge must be to the order of the Court and not to mere award. Facts The Appellants, who are the sons of Gulam Rasool Jamal Sheru, along with Yusuf Miyaji and Gulam Rasool Suleman, were partners in the Firm, which operated a restaurant at 10 Musafirkhana Road, off Carnac Road, Mumbai, 400 001. The Firm's formation was initially documented in the First Deed of Partnership in 1960, and over time, the partners periodically revised their shares. On March 15, 1975, the partners executed the Fourth Deed of Partnership, reducing Sheru's share in the Firm to 12%. They also entered into a Conducting Agreement where Sheru agreed to manage the business for a year, paying a royalty/hire charge to Miyaji and Suleman. Sheru continued to manage the Firm until April 1, 1992, at which point the Firm resumed autonomous operation as before the Conducting Agreement. In July 1992, the Fifth Deed of Partnership was executed, maintaining Sheru's 12% share. It stipulated that in the event of a partner's death, the surviving partners could continue the business with or without inducting the heirs of the deceased partner. In August 2002, Sheru passed away, and a disagreement emerged between the surviving partners and Sheru's sons (the Appellants). The parties disagreed on the events following Sheru's demise, business conduct, and possession of the Restaurant Premises. The Appellants claimed they continued the business, while the Firm asserted it was shut down on May 2, 2003, and an FIR was filed against the surviving partners. In response, the Firm filed a lawsuit in June 2003 against the Appellants and Abdul Wahid, seeking an injunction and alleging unauthorized entry and damage to the Restaurant Premises. The Court dismissed the Firm's case in August 2005 due to a lack of evidence of their possession. The Firm subsequently filed a second lawsuit in 2006, seeking to regain possession of the Restaurant Premises and mesne profits. In September 2006, the disputes were referred to arbitration with the consent of the parties. The Arbitral Tribunal issued an award directing the Appellants to provide vacant and peaceful possession of the Restaurant Premises to the Firm and pay compensation for wrongful use and occupation. The Appellants contested the Arbitral Award through a Commercial Arbitration Petition, which was dismissed in the Impugned Order. Grounds of Appeal The appellant made the following submissions: The tribunal framed one-sided issues and the issues framed did not reflect the contentions raised by the appellants during the arbitral proceedings. There is no reference to any of the Deeds of Partnership and/or Conducting Agreement in the Arbitral Award, which reflects a complete nonapplication of mind on the part of the Arbitral Tribunal amounting to legal misconduct, is equally devoid of merit.The award has been passed in absence of any evidence qua proof of the said Deeds of Partnership.That none of the Deeds of Partnership (except the Second Deed) were registered and the deed out of which the arbitral reference arose was not stamped. Analysis by the Court The Court observed that the grounds taken by the appellants in appeal are entirely new as none of those contentions were ever raised before the tribunal or the Court under Section 34 challenge. The Court held that an appeal to challenge an arbitral award cannot be on entirely new grounds. It held that grounds which were not taken before the Court under Section 34 of the A&C Act cannot be taken in appeal. The Court held that an arbitration award cannot be challenged on afresh grounds that were never taken before. It held that such a course would not just be in teeth of the settled position of law but would also disturb the entire scheme of the arbitration act. Also, the Court observed that the appellant has not raised any challenge against the decision of the single judge, but only challenged the impugned award. It held that in Section 37 appeal against an order under Section 34, the appellant hast to challenge the impugned order or the reasoning therein and not merely the arbitral award. The Court held...

An Arbitral Award Cannot Be Challenged In Appeal On Entirely New Grounds Which Were Not Taken Under Section 34 Of The A&C Act: Bombay High Court

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