Bombay High Court Sets Aside Arbitral Award Due to Non-Executed Agreement

Mumbai, July 11 (KNN) In a significant ruling, the Bombay High Court has set aside an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, citing the arbitrator's reliance on a non-executed agreement as grounds for annulment.

Remarking that the Arbitrator did not follow a judicial approach to arrive at the conclusion, the Bombay HC said that the Single Bench was correct in quashing the arbitral award passed by the Arbitrator.

The Court noted that it can interfere with an arbitral award if the interpretation of the agreement/contract by the arbitrator in unreasonable and not based on any evidence.

However, the High Court found that the Supplemental Agreement was merely a draft and was not executed by the parties. It highlighted significant gaps in the document, including missing specifics crucial to the agreement's enforcement, such as property sizes and floor numbers.

A Division Bench comprising Justices B.P. Colabawalla and Somasekhar Sundaresa upheld a previous decision by a Single Judge Bench, which had initially set aside the arbitral award.

Justice Colabawalla, delivering the Court's opinion, noted that the Sole Arbitrator had failed to adopt a judicial approach in assessing the evidence, thus deviating from fundamental principles of adjudication and justice.

The Court observed that the arbitrator's interpretation of the agreement was unreasonable and not supported by evidence, which justified setting aside the award on grounds of manifest arbitrariness and non-judicial approach.

In upholding the Single Judge's order, the Bombay High Court directed the appellant to pay Rs. 20,00,000 to each of the respondents, underscoring the repercussions of non-executed agreements in arbitration proceedings.

The dispute arose from a development agreement between Ivory Properties & Hotels Private Limited, a prominent developer, and Vasantben Ramniklal Bhuta & Ors. regarding immovable property.

The appeal was filed by Ivory Properties & Hotels Private Limited, challenging the lower court's decision on the grounds that the Sole Arbitrator's findings should not be interfered with under Section 34, which allows challenges only under specific circumstances.

The appellant argued that a 'Draft Supplemental Agreement,' which was never executed, reflected an oral understanding among the parties.

The Sole Arbitrator had concluded that this draft amended the original agreements, thereby granting specific performance rights to the respondents.

The Court emphasised that these deficiencies indicated a lack of mutual agreement between the parties, rendering the arbitral award unjustifiable.

(KNN Bureau)