The court found the award to be vitiated by patent illegality, affirming that the arbitrator overstepped by rewriting contract terms.
In a significant ruling, the Delhi High Court has set aside an arbitral award dated December 14, 2019, in the case between Technology Information Forecasting And Assessment Council (TIFAC) and Strategic Engineering Pvt. Ltd. (SEPL). The judgment was delivered by Justice Jasmeet Singh, who found that the arbitrator exceeded their mandate by altering the terms of the Tripartite Agreement (TDA) between the parties.
The dispute arose from a project under the TDA, which aimed at the development and commercialization of composite refill cylinders for Compressed Natural Gas. According to the TDA, the Advisory and Monitoring Committee (AMC) had declared the project a success, which triggered SEPL's repayment obligation to TIFAC. However, SEPL contended that the project had not achieved commercial viability and therefore, repayment was not due.
Justice Singh emphasized that under Section 34 of the Arbitration and Conciliation Act, 1996, the scope of interference is limited. The court does not act as an appellate body over the arbitral tribunal's decision but examines if the award is patently illegal or contrary to the terms of the contract. In this case, the court found that the arbitrator had overstepped by prioritizing commercial success over the successful development of technology as defined in the agreement, which was contrary to the contract's terms.
The court highlighted that the AMC, as per the contract, was the final authority to certify the successful development of technology, which SEPL did not contest during the AMC meetings. The arbitrator's decision to require commercial viability for repayment was deemed an unwarranted modification of the contract's provisions.
This ruling underscores the judiciary's role in ensuring that arbitral awards adhere strictly to contractual terms and statutory provisions, maintaining the sanctity of the arbitration process while protecting contractual obligations.
Bottom Line:
Arbitration - Scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996 is limited - Arbitrator cannot rewrite the terms of the contract - Declaration of "successful development of technology" by the Advisory and Monitoring Committee (AMC) as per the terms of the Tripartite Agreement (TDA) is binding - Repayment obligation arises upon such declaration, irrespective of commercial viability.
Statutory provision(s): Arbitration and Conciliation Act, 1996, Section 34
