Court Finds Awards Non-Existent and Induced by Fraud, Upholds Petitioner’s Challenge
In a significant development, the Calcutta High Court has nullified two arbitral awards in the case between SREI Equipment Finance Limited and Roadwings International Private Limited. The court concluded that the awards were non-existent and induced by fraud, thus rendering them invalid and unenforceable. Justice Sabyasachi Bhattacharyya presided over the proceedings that scrutinized the legitimacy of the awards purportedly passed on September 17, 2020, and September 21, 2020, concerning two contracts between the parties.
SREI Equipment Finance challenged the awards under Section 34 of the Arbitration and Conciliation Act, 1996, arguing that no arbitral proceedings took place and the awards were products of fraud. The petitioner contended that they only learned of the awards through photocopies presented in an affidavit before the National Company Law Tribunal in 2024. The absence of signed copies of the awards, as mandated by Section 31(5) of the Act, was a crucial point of contention.
The court noted the absence of any signed copies of the awards delivered to either party, which is essential for an award's legal validity. It was revealed that the arbitrator claimed to have handed over all documents to the parties, yet retained the original awards, which were allegedly to be released upon the payment of arbitration costs.
The court also addressed the limitation issue, emphasizing that the limitation period for challenging an award under Section 34 begins only after the receipt of a signed copy of the award, which did not occur in this case.
Examining the allegations of fraud, the court highlighted that the purported awards were not supported by any documents or records of arbitral proceedings, raising serious doubts about their existence. The court further noted discrepancies and contradictions in the respondent's claims regarding the initiation and conduct of the arbitration process.
The judgment underscored the importance of minimizing judicial interference in arbitration, in line with the objectives of the Arbitration and Conciliation Act, 1996. By allowing challenges to awards on the ground of non-existence within the framework of Section 34, the court aimed to uphold the legislative intent of facilitating efficient and expeditious arbitration proceedings.
Ultimately, the court set aside the impugned awards, declaring them invalid and unenforceable, and disposed of related applications for stay under Section 36(2) of the Act. This ruling reinforces the standards of due process and integrity in arbitration, ensuring that awards must be legally valid and free from fraud to be enforceable.
Bottom Line:
Arbitration - An award cannot be deemed valid and enforceable unless signed copies are delivered to each party in compliance with Section 31(5) of the Arbitration and Conciliation Act, 1996. Courts can entertain challenges under Section 34 of the Act even on the ground of non-existence of a purported award.
Statutory provision(s):
Arbitration and Conciliation Act, 1996, Sections 31(5), 34(2)(b)(ii), 34(2-A), 36(2)
