The court upholds findings of coercion but reduces the awarded interest rate from 17.5% to 13.5% due to patent illegality
In a significant judgment, the Bombay High Court has modified the interest rate awarded by an arbitral tribunal in the case of TJSB Sahakari Bank Ltd. v. Amritlal P Shah. The court upheld the arbitrator's findings regarding coercion but reduced the awarded interest rate from 17.5% to 13.5%, citing patent illegality.
The dispute arose between TJSB Sahakari Bank Ltd., a multi-state cooperative bank, and Amritlal P Shah, concerning the recovery of amounts related to fixed deposit receipts and LIC policies. The arbitral tribunal had earlier ruled that Shah was entitled to recover substantial sums with an interest rate of 17.5%. However, this rate was higher than the 13.5% claimed by the respondent, leading to the current appeal.
Justice Sandeep V. Marne, presiding over the case, observed that awarding a higher interest rate than claimed constituted a clear error. The court exercised its powers under Section 34 of the Arbitration and Conciliation Act, 1996, to modify the award while severing the invalid part from the valid portions.
The court also addressed the petitioner's argument that the arbitration award was contrary to the fundamental policy of India due to the re-adjudication of coercion, which was allegedly settled by previous cooperative court proceedings. However, Justice Marne noted that the principle of res judicata could not apply as the issue of coercion was not directly and substantially in issue in the previous proceedings.
Mr. Shadab Jan, representing the petitioner bank, contended that the arbitral tribunal's findings on coercion were flawed and based on the bank's failure to respond to allegations promptly. In response, Mr. Sharad Bansal, representing the respondent, highlighted that the bank did not deny receiving letters from Shah's advocate, which detailed the coercion claims.
Ultimately, the court upheld the arbitrator's findings on coercion, emphasizing that the tribunal had considered the evidence thoroughly and that the findings were not perverse.
This judgment underscores the court's role in ensuring arbitral awards comply with statutory provisions while respecting the tribunal's factual findings. It also highlights the importance of pleading necessary defenses timely and substantiating claims with appropriate evidence.
Bottom Line:
Arbitration - Arbitrator's findings on coercion upheld; however, interest rate awarded by the Arbitrator modified from 17.5% to 13.5% due to patent illegality in awarding higher rate of interest than claimed.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 34
TJSB Sahakari Bank Ltd. v. Amritlal P Shah, (Bombay) : Law Finder Doc Id # 2824440
