The expression “justice” when it comes to setting aside an award under the public policy ground can only mean that an award shocks the conscience of the court
The expression “justice” when it comes to setting aside an award under the public policy ground can only mean that an award shocks the conscience of the court. It cannot possibly include what the court thinks is unjust on the facts of a case for which it then seeks to substitute its view for the Arbitrator’s view and does what it considers to be “justice”.
In the instant matter award passed by the arbitrator was affirmed by the Single Judge of the High Court, which subsequently was dismissed by the Division Bench. The Appellant contended that the Division Bench while exercising jurisdiction under Section 37 of the Arbitration and Conciliation Act, 1996 (Act) acted in the manner as if the present was the first appeal from the award by taking into account facts which were neither pleaded nor proved before the Arbitrator. It was further contended that an Arbitrator is the sole judge of the quality and quantity of evidence before him and in the instant matter the award was wrongly set aside.
It was observed that Section 34 in conjunction with Section 5 of the Act makes it clear that an arbitration award is governed by part I of the Act which can be set aside only on grounds mentioned under Section 34 (2) and (3), and not otherwise. It is only when award comes into conflict with the public policy of India that the merits of an arbitral award are to be looked into under certain specified circumstances.
An award which is contrary to the fundamental policy of Indian law; interest of India; Justice or morality, would be set aside on the ground of it being contrary to the public policy of India. Similarly, contravention of the provisions of the Foreign Exchange Regulation Act would also mean to be contrary to the public policy of India as that statute is enacted for the national economic interest to ensure that the nation does not lose foreign exchange which is essential for the economic survival of the nation and equally important, the binding effect of the judgment of a superior court being disregarded would be equally violative of the fundamental policy of Indian law.
The juristic principle of a “judicial approach” demands that a decision be fair, reasonable and objective. Anything arbitrary and whimsical would obviously not be a determination which would either be fair, reasonable or objective. All parties are given equal treatment/ status is the fundamental juristic principle in Indian law which is also contained in Sections 18 and 34 (2) (a) (iii) of the Act. Then, a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where a finding is based on no evidence, or an arbitral tribunal takes into account something irrelevant to the decision which it arrives at; or ignores vital evidence in arriving at its decision, such decision would necessarily be perverse. When a court is applying the “public policy” test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators approach is not arbitrary or capricious then he is the last word on facts.
An award can be said to be against justice only when it shocks the conscience of the court and further it is also said to be in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption.
In the instant case it was held that the Division Bench interfered wrongly with the arbitral award on several counts and the appeal was accordingly allowed.
[Associate Builders vs. Delhi Development Authority]