Court U/S 37 Of The A&C Act Can’t Undertake An Independent Assessment Of Arbitral Award,: Bombay High Court

The bench of Chief Justice Devendra Kumar Upadhyaya and Justice Arif. S. Doctor held that the Court while exercising powers under Section 37 of the A&C Act cannot take an independent assessment of the arbitral award, therefore, the challenge must be premised on the errors in the impugned order under Section 34. It held that it is not permissible for a party to challenge an arbitral award de hors any challenge to the impugned order.

Facts

The Appellant, a marine salvage company, and the Respondent, involved in offshore logistics and dredging, entered into a Salvage Agreement around October/November 2009 for the recovery of the dredging vessel "Sical Portofino." This agreement operated on a "no cure no pay" basis.

Issues arose when the Respondent, despite an initial payment, did not provide the required security as outlined in the contract. Despite reminders from the Appellant, the security was not furnished, leading to the termination of the contract in December 2009. Subsequent communication efforts eventually resulted in the Respondent providing the necessary security.

Following the successful completion of the salvage work, the Appellant issued an invoice for salvage charges, which was duly paid. In January 2010, the Appellant invoiced the Respondent for idle time charges during a specific period in November and December 2009.

Disputes led to the filing of an Admiralty suit, subsequently referred to arbitration. The Arbitral Tribunal addressed various issues, including claims, jurisdiction, waiver, and the interpretation of contract terms. The Tribunal ultimately dismissed both the Appellant's claim and the Respondent's counterclaim in an award dated April 18, 2015.

Following the Arbitral Tribunal's decision, the Appellant challenged the award under Section 34 of the Arbitration Act. However, the challenge was dismissed in the Impugned Order. Aggrieved thereby, the appellant filed the appeal under Section 37 of the Act.

Grounds of Appeal

The appellant made the following submissions:

• That the tribunal erred in applying Section 55 of the Indian Contract Act when the parties expressly agreed that the said Section would not apply. It pointed out that in the respondent’s pleading it was asserted that time is not the essence of the contract, therefore, it was admitted that Section 55 of ICA would have no application to the contract.
• The tribunal went beyond the pleading of the respondent by making a finding that by agreeing to continue the contract, the appellant waived its right to claim compensation. However, there was no finding as such.
• The tribunal erred in rejecting the claim of the appellant merely on the ground of lack of computation despite observing that the claim was alive.
• The tribunal also erred in not appreciating that the claimed amount was genuine pre-estimate of the loss provided under the agreement which required no quantification.

Analysis by the Court

The Court observed that the appellant's challenge focused solely on the Arbitral Award, not addressing the Impugned Order. It held that under Section 37 of the A&C Act, the challenge must be related to the impugned order passed under Section 34 of the Act and not merely to the arbitral award. It held that it is incumbent upon a party to point out errors in the order under Section 34 to make out a case in appeal under Section 37.

The Court held that held that the Court while exercising powers under Section 37 of the A&C Act cannot take an independent assessment of the arbitral award, therefore, the challenge must be premised on the errors in the impugned order under Section 34. It held that it is not permissible for a party to challenge an arbitral award de hors any challenge to the impugned order.

The court emphasized the narrow scope of such appeals, especially when dealing with orders refusing to set aside an Arbitral Award. Additionally, it acknowledged the Arbitral Tribunal's proper constitution under the contract, with members possessing the requisite knowledge of maritime matters. Both the detailed and well-reasoned Arbitral Award and the Impugned Order were considered, and the court affirmed the dismissal of the appellant's petition under Section 34 of the Arbitration Act.

On the merits, the court rejected contentions regarding the inapplicability of Section 55 of the Contract Act, waiver, and inconsistent findings. It noted that the Respondent had pleaded waiver in the Statement of Defence, rendering the cited Supreme Court judgment inapplicable.

The court also found the rejection of liquidated damages justified, as it was based on the substantive issue of entitlement to idle time charges rather than a mere computation error. Ultimately, finding no infirmity in the Impugned Order, the Court dismissed the appeal.

Case Title: Madgavkar Salvage v. Bergen Offshore Logistics Pvt Ltd, Comm. Arbitration Petitioner No. 13 of 2015.

Date: 30.11.2023

Counsel for the Appellant: Mr. Ashwin Shanker a/w Mr. Bimal Rajshekhar & Ms. Ridhi Nyati

Counsel for the Respondent: None.

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