Court affirms limited scope of interference under Section 34, upholding nominal damages awarded to Hazel Mercantile Ltd.
In a significant ruling, the Delhi High Court has dismissed Hazel Mercantile Ltd.'s petition to set aside an arbitral award against Indian Oil Corporation Ltd. (IOCL). The court upheld the arbitrator's decision to award nominal damages, emphasizing the limited scope of judicial review under Section 34 of the Arbitration and Conciliation Act, 1996.
The case arose from a contract between Hazel Mercantile and IOCL for the supply of 13,000 MT of acetic acid. Following a breach of contract by IOCL, Hazel Mercantile sought damages amounting to over Rs. 8.58 crore. However, the arbitrator awarded nominal damages of Rs. 25,000 along with 9% interest per annum, citing the company's failure to prove actual loss or damages.
The court, presided by Justice Avneesh Jhingan, reinforced that the scope of interference under Section 34 is not as broad as under Articles 226/227 of the Constitution. "The court cannot interfere with a plausible view taken by an arbitrator nor re-appreciate evidence," the judgment stated, citing the need for actual loss to be proved under Section 73 of the Indian Contract Act, 1872.
Hazel Mercantile's claims for storage expenses and costs related to a performance bank guarantee were also rejected by the arbitrator, decisions that the court found no reason to overturn. The court noted that the arbitrator's conclusion regarding the lack of an exclusive stock pool for IOCL was grounded in evidence.
The judgment underscores the judiciary's respect for arbitral discretion and the stringent criteria for challenging arbitral awards, aligning with precedents such as the Supreme Court's rulings in Associate Builders v. Delhi Development Authority and ONGC Ltd. v. Western Geco International Ltd.
In dismissing the petition, the court also disposed of any pending applications, reinforcing the finality of the arbitration process in this commercial dispute.
Bottom line:-
Arbitration and Conciliation Act, 1996 - Scope of interference under Section 34 is limited; Court cannot re-appreciate evidence or sit in appeal over the arbitral award.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 34, Indian Contract Act, 1872 Section 73
Hazel Mercantile Ltd v. Indian Oil Corporation Ltd, (Delhi) : Law Finder Doc id # 2889208
