Recently, the High Court of Andhra Pradesh decided a significant international commercial arbitration appeal involving a dispute between a foreign supplier and an Indian buyer over contractual deductions relating to delayed deliveries and exchange rate fluctuations. The dispute escalated from contract performance issues to a legal challenge on whether the arbitral majority award was valid under the Arbitration and Conciliation Act, 1996.
Brief Facts:
The Appellant, a Chinese manufacturer of refractory materials, entered into a contract with the Respondent, an Indian steel company, for the supply of 260 Sets of ladles. The Respondent deducted USD 159,638.50 and Rs 15,72,960.52 as liquidated damages for delayed delivery. Additionally, Rs 12,75,651.13 was deducted on account of exchange rate differences, and a further Rs 4,18,00,355.13 was withheld as a penalty for alleged underperformance. The Appellant disputed these deductions and attempted an amicable resolution, which failed. Thereafter, arbitration was invoked as per the contract.
Contentions of the Appellant:
The counsel for Appellant challenged the majority arbitral award, claiming that not all arbitrators signed it and the reasons for the omitted signatures were not provided, violating Section 31(1) and (2) of the Arbitration and Conciliation Act, 1996. Reliance was placed on precedent judgments to contend that non-compliance with these signing requirements rendered the award legally invalid.
Contentions of the Respondents:
The counsel for the Respondent contended that the award complied with the statute since the Presiding Arbitrator and one co-arbitrator signed the majority award, while the dissenting arbitrator issued a signed separate dissenting opinion. This, the Respondent argued, satisfied the requirement for the majority award under Section 31, supported by rules of international arbitration and relevant case law.
Observations of the Court:
The Court observed the provisions of Section 31 of the Arbitration and Conciliation Act, 1996, which clearly state that an arbitral award must be in writing and signed by all members of the arbitral tribunal. It further clarified that “Section 31(1) of the Act 1996 clearly provides that the arbitral award shall be made in writing and shall be signed by the Members of the Arbitral Tribunal. Sub-Section (2) further provides that in arbitral proceedings consisting of more than one arbitrator, signatures of the majority of all the Members of the Arbitral Tribunal shall be sufficient so long as the reason for any omitted signatures is stated.”
The Court applied these provisions to the facts of the case and observed that “In the present case, the arbitral award was made by the Presiding Arbitrator... The Presiding Arbitrator signed his award, and the arbitrator concurring with that award, signed his award in which he agreed with the award of the Presiding Arbitrator. The third arbitrator... gave a separate opinion. He also signed his separate award/opinion.”
The Bench also commented on the Appellant’s submissions regarding signatures, stating that “The argument to the contrary with reference to the issue of signatures is misconceived and contrary to record.”
Thus, the Court reaffirmed the principle that “in the case of Arbitral Tribunal consisting of number of Arbitrators, the Award, if not signed by all, will still be valid, if it is signed by majority of Arbitrators and for the Arbitrator not signing the award, for such omission, the reasons have been assigned... the award signed by majority or consented to or agreed upon by the majority and there being a separate opinion signed by other Co-Arbitrators, would comply with the statutory provisions.”
The Decision of the Court:
The appeal was dismissed by the High Court with costs. The court upheld the majority arbitral award as valid and enforceable, imposing a cost of Rs 1,00,000 on the Appellant, payable to the Andhra Pradesh High Court Legal Services Committee. The court clarified that minor procedural objections about signatures could not nullify a reasoned arbitral award signed by the majority of arbitrators.
Case Title: Ms. Orind Special Refractories Ltd. v. Ms. Rashtriya Ispat Nigam Ltd.
Case No.: International Commercial Arbitration Appeal No. 1 of 2025
Coram: Hon’ble Mr Justice Ravi Nath Tilhari and Hon’ble Mr Justice Maheswara Rao Kuncheam
Counsel for the Appellant: Adv. S. Ram Babu
Counsel for the Respondents: Adv. S. Vivek Chandrasekhar
Read Judgment @LatestLaws.com
