Court finds award lacking adequate reasoning and failing to address core contractual breach issues.
The Delhi High Court has set aside an arbitral award in the case of M/S Traffic Media (India) v. Delhi Metro Rail Corporation (DMRC), highlighting significant deficiencies in the arbitral process. The judgment, delivered by Justice Jasmeet Singh, concluded that the award failed to provide proper reasoning and did not adequately address the core issues of breach of contract, rendering it perverse and arbitrary.
The case revolved around a contract for advertising rights within Delhi Metro trains, where Traffic Media was awarded the rights for certain metro lines. However, disputes arose when DMRC attempted to hand over additional trains for a line that was not operational at the time, leading to Traffic Media's inability to commercially utilize those trains.
The arbitrator's award, which was originally in favor of DMRC, was challenged by Traffic Media on the grounds that it lacked adequate reasoning and failed to address the fundamental issue of breach of contract by DMRC. The court found merit in these contentions, noting that the award did not contain sufficient reasons for its conclusions and failed to adjudicate on whether DMRC was in breach of contract by offering trains on a non-operational line.
Justice Singh emphasized that under the Arbitration and Conciliation Act, 1996, particularly Sections 31(3) and 34, an arbitral award must contain intelligible and adequate reasoning, and failure to do so warrants interference by the court. The judgment cited several precedents, including OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions (India) (P) Ltd., to underscore the importance of reasoning in arbitral awards.
The court concluded that the award was arbitrary and lacked the necessary reasoning to support its conclusions. As a result, the court set aside the award, allowing the petition by Traffic Media and disposing of any pending applications related to the case.
Bottom Line:
Arbitration - Award rendered by Arbitrator must contain proper, intelligible, and adequate reasons. Failure to address core issues and provide reasoning amounts to a violation of Section 31(3) of the Arbitration and Conciliation Act, 1996, warranting interference under Section 34.
Statutory provision(s): Section 34, Section 31(3) of the Arbitration and Conciliation Act, 1996.
M/S Traffic Media (India) v. Delhi Metro Rail Corporation, (Delhi) : Law Finder Doc Id # 2827165
