If Arbitration Award Not Challenged Under Section 34, Can't Be Challenged At Execution: Madras High Court

The bench of Justice G. Ilangovan held that an arbitration award can only be challenged under Section 34 of the A&C Act and party failing to challenge the award therein cannot raise contentious issues on merit of the award before the executing court.

Facts

The parties entered into a hypothecation agreement wherein the petitioner availed a loan from the respondent. The agreement contained an arbitration clause.

A dispute arose between the parties regarding non-payment of loan amount. Resultantly, the respondent issued a notice of demand dated 18.05.2020.

The petitioner did not participate in the arbitral proceedings and the tribunal proceeded ex-parte. The arbitrator passed an award dated 03.10.2020 against the petitioner directing it to pay Rs.62,32,808/-

The arbitral award was not challenged by the petitioner under Section 34 of the A&C Act. Upon the expiry of the time period to challenge the award, respondent put it for execution under Section 36 of the Act.

Before the Executing Court, the petitioner challenged the rate of interest awarded as exorbitant. It also challenged the award on the ground that the payments made by the petitioner were not considered by the arbitral tribunal.

The Executing Court rejected the challenge by observing that such objections can only be decided under Section 34 and not otherwise. Aggrieved thereby, the Petitioner field a revision petition.

Submissions

The petitioner made the following submissions:

• The arbitrator has awarded an exorbitant rate of interest. Moreover, the payments that were already made by the petitioner has not been deducted.
• The award is not challenged, therefore, the petitioner can only challenge it at the execution stage.

Analysis by the Court

The Court observed that petitioner did not participate in the arbitral proceedings and the tribunal proceeded ex-parte. Further, the award was not challenged by the petitioner under Section 34 of the A&C Act. Upon the expiry of the time period to challenge the award, respondent put it for execution under Section 36 of the Act.

The Court held that an Executing Court cannot go behind an arbitration award and decides issues on merit of the award. It held that Executing Court rightly refused to entertain those objections.

The Court held that an arbitration award can only be challenged under Section 34 of the A&C Act and party failing to challenge the award therein cannot raise contentious issues on merit of the award before the executing court.

Case Title: Sahayaraj V. M/s Shriram Transport Finance Company Ltd, CRP(MD) No. 576 of 2024

Citation: 2024 LiveLaw (Mad) 166

Date: 04.03.2024

Counsel for the Petitioner: Mr. P. Prithvirraj

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