Grave procedural lapses and misjudgment in fraud assessment lead to quashing of the award
In a significant ruling, the Bombay High Court has quashed an arbitral award against ABB India Limited, citing serious procedural lapses and misjudgments regarding fraud and limitation issues. The arbitral award, which directed ABB to reinstate the shareholding of Sunil Hariram Jaisingh or compensate him monetarily, was found to be untenable due to numerous legal and procedural flaws.
The case stems from a dispute over 1,550 shares of ABB and 310 shares of Hitachi Energy India Ltd., which Jaisingh claimed were rightfully his following a series of corporate actions and share transfers dating back to 1992. The arbitral tribunal's decision was challenged under Section 34 of the Arbitration and Conciliation Act, 1996, by ABB, which argued that the tribunal had failed to conduct proper hearings, assess fraud judiciously, and adhere to principles of natural justice.
Justice Somasekhar Sundaresan, presiding over the case, highlighted that the tribunal had adopted a summary adjudication approach inappropriate for the complexity of the case. The court noted that the tribunal did not hold hearings after the completion of pleadings, failed to frame issues, and ignored critical evidence and arguments presented by ABB.
The judgment underscored that the dispute involved allegations of fraud with significant implications beyond the parties involved, making it non-arbitrable. The tribunal's finding that the fraud was merely inter-party and arbitrable was deemed perverse and irrational. Additionally, the court criticized the tribunal's handling of damages, which were awarded based solely on the market value of shares at the time of the award, neglecting principles of mitigation, contributory negligence, and proportionality.
The Bombay High Court's decision to quash the award restores the amounts already released to Jaisingh by the BSE, following his undertaking to return the funds should the petition succeed. The court's ruling emphasizes the necessity for arbitral tribunals to adhere strictly to procedural norms and judicial principles, particularly in complex cases involving allegations of fraud.
Bottom line:-
Arbitration Award - The arbitral award is quashed and set aside due to grave procedural lapses, failure to assess fraud and limitation issues judiciously, and perverse findings contrary to principles of law and natural justice.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 34
ABB India Limited v. Sunil Hariram Jaisingh, (Bombay) : Law Finder Doc id # 2919444
