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Friday, 16 July 2021

HC: Arbitral award on being confirmed in an application under Section 34 the courts must be cautious in disturbing such findings as they are not ordinarily amenable to inference

 Arbitration Award, pic by: 

On 7th July, a bench of Delhi High Court consisting of Justice Mnmohan and Justice Naveen Chawla while hearing an appeal from an arbitral award held that once an arbitral award has been confirmed in an application filed under Section 34 of the Arbitration and Conciliation Act, 1996, the Appellate Court must be extremely cautious in disturbing concurrent findings of the fact and law as they are ordinarily not amenable to interference under Section 37 of the Act. The court further stated that the Appellate Court should generally not interfere unless it is apparent that the perversity of the arbitral award goes to the root of the case, without a possibility of alternative interpretation that might sustain the award.

Facts of the case:

The present appeal was filed under Section 37 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) challenging the order dated 4th March, 2021 passed by the learned District Judge (Commercial Court – 02), Patiala House Court, New Delhi whereby the Appellant’s petition under Section 34 of the Act was dismissed.

The appellant, M/S Mangalwar Filling Stationwas appointed as the authorised dealer of the respondent, Indian Oil Corporation Limited. On a surprise inspection by the respondent in the appellant’s gas pump, it was found that the wire connecting the Mechanical Totaliser to the Computer Processing Unit [CPU] of one of the Dispensing Units was found broken with a black coloured tape put on it to join the two broken ends of the wire. It was further alleged that the Mechanical Totaliser was found to be non-functional. Subsequently, a Show Cause Notice dated 6th February, 2015 was issued by the respondent to the Appellant regarding cancellation of the dealership, which was challenged before the Rajasthan Courts and eventually, the matter reached the Apex Court where the parties were referred to Arbitration.  The Learned Arbitrator vide impugned award dated 21st July 2018, dismissed all the claims preferred by the Appellant and upheld the Show Cause Notice dated 06th February 2015 issued by the respondent. The said arbitral award was challenged before the learned District Judge who again dismissed the claims of the appellant. Thus the present appeal before the Delhi High Court was preferred.

Contention of the appellant:


Mr. Anil Airi, learned senior counsel for the Appellant contended the following:

  1. It was contended that the burden of proof was upon the respondent to conclusively show that the Appellant was guilty of tampering with Dispensing Unit. He also pointed out that Dispensing Unit had been inspected numerous times earlier and no irregularity had been found.
  2. It was contended that due to the said mishandling by the respondent, the wires connecting the Mechanical Totaliser to the CPU snapped. It was urged that  the wire snapping was attributable to the depreciated quality of Dispensing Unit and respondent’s mishandling the Dispensing Unit during the inspection.
  3. It was submitted that even if the Mechanical Totaliser was faulty, the Electronic Totaliser was working properly and therefore, there was no irregularity in the dispensing of product from the Dispensing Unit.
  4. It was also argued that the readings of the mechanical totaliser were irrelevant and could be disregarded as the readings of the Electronic Totaliser were available.

Contention of the respondent:

Ms. Mala Narayan, learned counsel for the respondent stated that the present appeal ought to be rejected on the following grounds:


  1. It was submitted that submitted that as the arbitrator was the sole judge of the quality and quantity of the evidence and once it was found that the arbitrator’s approach was neither arbitrary nor capricious, no interference was called for.
  2. It was contended that the automation system installed at the Retail Outlet of the Appellant was admittedly of the first phase/stage, which was full of glitches and was often non-functional.
  3. Consequently, it was urged that no cognizance could be taken of any documents at this stage as the documents were never produced either before the learned Arbitrator or before the learned District Judge stating that the learned District Judge had rightfully dismissed the Section 34 petition of the Appellant.

Observation and Judgement of the Court:

The Hon’ble bench of the court made the following observation:

  1. It was observed that while exercising appellate jurisdiction under Section 37 of the Act, this Court has similar restrictions as prescribed under Section 34 of the Act i.e. this Court can only ascertain whether the exercise of power by the learned District Judge under Section 34 of the Act was lawful or not.
  2. The evidence put on record by the respondent proves that there was no mishandling of the panel of the Dispensing Unit by the respondent.
  3. The court was in agreement with the finding of the learned District judge that the learned Arbitrator had rightly considered the evidence on record to conclude that the tampering of Dispensing Unit, as evident from the black tape, would amount to ‘critical irregularity’.
  4. It was also stated that reliance placed upon the readings of the automated/electronic totaliser is misplaced for the simple reason that the automation system at Petitioner’s Retail Outlet was admittedly among the first few automation systems and was full of glitches.

Keeping in view the aforesaid, the court dismissed the appeal and held that the Appellant has failed to demonstrate that the findings of the learned Arbitrator as well as the learned District Judge are ex-facie perverse.

 Read Judgment ;





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