In a significant ruling, the Delhi High Court dismissed Brajendra Khandelwal's appeal against the setting aside of an arbitral award concerning the alleged retirement from a partnership firm.
In a recent decision by the Delhi High Court, a Division Bench comprising Mr. Justice Navin Chawla and Ms. Justice Madhu Jain upheld a previous order by a Single Judge, which set aside an arbitral award involving a partnership dispute. The case revolved around the alleged retirement of Shri Brajendra Khandelwal from the partnership firm, M/s Rajendra Iron Mart.
The legal battle stemmed from a reconstitution of the firm following the retirement of certain partners and the subsequent inclusion of new ones. Central to the dispute was a Retirement Deed dated January 19, 2010, which Khandelwal claimed was fabricated. The arbitral tribunal had initially declared the Retirement Deed and a subsequent partnership reconstitution deed null and void, siding with Khandelwal.
However, the Single Judge, upon review under Section 34 of the Arbitration and Conciliation Act, 1996, found the tribunal's award to be vitiated by patent illegality. The Judge noted that there was no evidence to support Khandelwal's claim of having signed blank papers that were later misused to draft the Retirement Deed. The Judge further highlighted that Khandelwal had admitted to signing the Retirement Deed, which was not on blank paper but a printed stamp paper.
The Division Bench reaffirmed the Single Judge's conclusions, emphasizing that the arbitral award could not stand merely on suspicions or unproven claims. The High Court cited precedents, including the Supreme Court's rulings in "MMTC Ltd. v. Vedanta Ltd." and "Delhi Metro Rail Corporation Limited v. Delhi Airport Metro Express Pvt. Ltd.," to underline the limited scope of judicial intervention under Sections 34 and 37 of the Arbitration Act. The Bench reiterated that awards could only be set aside on grounds of patent illegality, perverse findings, or violation of public policy, none of which were substantiated in Khandelwal's case.
The Court concluded that the learned Arbitrator had misdirected himself by considering extraneous factors and not addressing the core issue of whether Khandelwal had indeed signed blank documents. This oversight led to the upholding of the Single Judge's order, dismissing the appeal filed by Khandelwal.
This ruling underscores the judiciary's commitment to ensuring that arbitral awards are not interfered with lightly and that only substantial grounds can justify setting aside such decisions.
Bottom Line:
Arbitration - Scope of Court's interference under Section 34 and Section 37 of the Arbitration and Conciliation Act, 1996 - Arbitral award cannot be set aside merely on the ground of erroneous application of law or re-appreciation of evidence - Courts must not act as appellate bodies and reappraise evidence under Section 34 or Section 37 - An award may be interfered with only if it is vitiated by patent illegality, perverse findings, or is in conflict with public policy of India.
Statutory provision(s): Arbitration and Conciliation Act, 1996 - Sections 34, 37
Shri Brajendra Khandelwal v. M/s Rajendra Iron Mart, (Delhi)(DB) : Law Finder Doc Id # 2825437
