In Proceedings U/S. 34 A&C Act, Reduction Of Awarded Interest Not Permissible As It Amounts To Modification Of Arbitration Award: Delhi HC

The Court was hearing a Petition seeking to set aside the Arbitral Award passed in favour of Respondent no. 1.

The bench of Justice Jasmeet Singh observed, “…in proceedings under section 34 of Arbitration and Conciliation Act, 1996, it is impermissible to reduce interest awarded since the same amounts to modification of the Award.”

Advocate Ranjan Kumar appeared for the Appellant and Advocate Rajesh Banati appeared for the Respondent.

Brief Facts-

In the present case, Respondent No. 1 initially invested in shares through M/s. Gupta Associates however, after its merger with the Petitioner company, the security deposit was transferred to the Petitioner’s accounts. Respondent No. 1 was not provided with any shares or any sale proceeds. Following complaints to the NSE, arbitration began, and an initial award rejected Respondent No. 1's claims as time-barred. Respondent No. 1 filed subsequent Petitions under Section 34 and the final award partially granted Respondent No. 1’s claim. Both parties challenged the award where the Petitioner raised jurisdictional issues and Respondent No. 1 appealed the partial claim rejection. The award was also challenged before NSE’s Appellate Tribunal which dismissed the Appeal. Hence, the present Petition.

The Court observed, “The jurisdiction of this Court under Section 34 of the Arbitration and Conciliation Act, 1996 is narrow and limited. It does not sit as a Court of Appeal, if there is any other possible view based upon the documents/evidence available as taken by the Arbitrator, the Court should refrain from interfering in the findings of the Arbitral Tribunal.”

The Court mentioned the Supreme Court decision in M/s Dyna Technologies Pvt. Ltd. vs. M/s Crompton Greaves Ltd. (2019) and quoted, “…arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction…If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.”

The Court observed, “the arbitral tribunal has the discretion to grant pre-award interest and/or post-award interest, on either whole or part of the principal amount…”

The Court said that the Arbitral Tribunal has awarded interest reasonably and the same does not warrant any interference.

Accordingly, the Court dismissed the Petition.