CASE STUDY- Associate Builders v. Delhi Development Authority, 2014 by Zainub @LEXCLIQ

Introduction-

Arbitration is an alternative dispute settlement system. The system follows the mandate of “minimal judicial intervention” and courts can only intervene in the arbitration in the limited cases provided for in the Arbitration and Conciliation Act 1996. Section 34 (2) (b) (ii) states that one may void an arbitration award if it finds that the arbitration award is contrary to the public order of India. Explanation 1 to p.34 (b) sets out three criteria by which an award may be annulled on grounds of public policy: if the award was brought about through fraud, corruption or violation of S.75 or S.81; or it violates the fundamental policy of Indian law; or contrasted with the most basic notions of morality and justice. The second and third bases are vague and can be interpreted too broadly. As a result, a number of Supreme Court rulings have broadened the scope of the public policy interpretation.In 2015, Article 34 was amended to include the scope of the “Public Policy.

 

Facts-

The complainant in the case was Associate Builders, who had received a construction contract from the defendant from the Delhi Development Authority to build 168 houses for middle income groups and 56 houses for low income groups. 87.66.678 rupees.

But the work was only completed after 36 months. The complainant alleged that the delay occurred at the request of the defendant and that 15 complaints were filed as a result. The Delhi High Court appointed Shri K. Bali as sole arbitrator. The arbitrator found that the Delhi Development Authority was responsible for the delay in performance of the contract.

On April 3, 2006, the Delhi Development Authority referred the case to the Delhi High Court under Section 34 of the Arbitration and Conciliation Act 1996 to set aside the dismissed award. The Divisional Court of the Delhi High Court found the award to be incorrect and dismissed the applicant’s claims.

The complainant was not satisfied with the contested arbitration award and went to the Supreme Court to apply for special permission. In this case, the SC examined the scope of the “Public Policy” in order to set aside an arbitration award under Section 36. The SC also examined the extent to which the arbitral tribunal can overturn the arbitral award of the sole arbitrator through judicial intervention.

The Supreme Court also clarified the scope of the interpretation of the most basic concepts of morality and justice so that an arbitral award could be null and void on the grounds of justice if the “arbitral award” were to shake the court’s conscience. , it was of the opinion that a sentence that was against the morals violated the customs of the time and would shake the conscience of the court.

ISSUES

The main question before the Supreme Court was to rule on the veracity of the judgment under appeal. In the same decision, the Supreme Court examined the scope of “public order” as a ground for setting aside an arbitral award under Section 34 (2) (b). ) (ii) of the law The Supreme Court also examined the extent to which a court could replace the conclusion of the Ld arbitrator with its own conclusion through judicial interference.

CONTENTIONS

Appellant’s submissions:

The Division Chamber has lost sight of the Supreme Court’s Avoidance of Arbitral Awards under Article 34 of the Act, and the Division Chamber acted as a court of first instance, taking into account facts that neither the court improperly interfered in the award because no error of law can be derived from this.

In addition, it misunderstood the legal situation that the arbitrator alone decides on the quality and quantity of the evidence in order to reach a decision.

Respondent’s Submissions:

The arbitral award of the Ld arbitrator did not know the contractual provisions and this arbitral award constitutes a legal error by the arbitrator and therefore the divisional court legitimately intervened with the arbitral award.

JUDGEMENT

The Supreme Court found that grounds for prejudice to an award are limited to those set out in Section 34 of the Act and ruled that the merits of the award can only be examined under the broad concept of “public order”. landmark judgments such as Renusagar Saw Pipe and nod on the basis of “public order” as “basic policy of Indian law” would include factors such as a) ignoring orders from higher courts; b) judicial approach, which is the opposite of an arbitrary approach; c) principles of natural justice; d) The arbitrators’ decision must not be perverse and irrational in that no reasonable person would come to the same conclusion. The Supreme Court ruled that an arbitrator is the sole judge as to the quality and quantity of facts and therefore an arbitration award is not possible and does not act as an appeals court. and consequently “errors of fact” cannot be corrected unless the arbitrators’ approach is arbitrary

The Supreme Court ruled that the term “award against justice and morality” would include: In relation to justice, the judgment must not shake the conscience of the court; There can be no universal standard of morality. The Court found that the Divisional Court has lost sight of the fact that it is not a court of first instance and cannot intervene in factual errors. The Supreme Court overturned the divisional court, ruling that Section 34 does not normally allow the courts to review the results. by arbitrators for whom the award has been restored; However, the Supreme Court only clarified the public order law, not restricted it.

ANALYSIS

This ruling marks an important step in the line of rulings in favor of Supreme Court arbitration over the past few years and is a welcome decision in that “public policy” has been clarified to determine the extent of the intended interference. This is a rare opportunity that the Supreme Court spoke on “Morals” in a dispute under Section 34 of the Act. In addition, the Supreme Court at Western Geco International Ltd6 worked out the scope of the “Basic Policy” of Indian Law “for contesting the award and consequently the legal community was skeptical as this would open the doors to contesting the award Supreme Court at Western Geco International Ltd6 is skeptical about the scope of the “Fundamental Policy of Indian Law” in relation to the challenge of arbitral awards and thus also the legal world. Visually, because it was assumed that this would open the doors to challenge the arbitral awards Judgment provides much-needed assistance as it sets the narrow limits of contestation under Section 34 of the Act. The Supreme Court’s conclusion that an arbitral award cannot be overturned on the basis of “factual error” unless the arbitrators approach arbitrarily or is arbitrary, it is indeed commendable as it would limit judicial intervention. Another point to note is that the “public order” case law introduced in this case only applies to arbitral awards arising from arbitration proceedings established in India, since section 34 of the law would only be applicable in such a case.

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