Recently, the Delhi High Court restored an arbitral award that had been set aside by a District Judge, holding that courts cannot interfere with arbitral awards merely because the reasoning is brief or not elaborately worded. Emphasising the principle of minimal judicial interference under the Arbitration and Conciliation Act, 1996, the Court categorically observed that “an arbitral award cannot be invalidated simply because the reasons are concise, so long as they are intelligible and based on evidence.”
Brief Facts:
The dispute arose from a Property Management Agreement dated 01 December 2011 between Jones Lang Lasalle Building Operations Pvt. Ltd. and Techpark Maintenance Services Pvt. Ltd., initially valid from 01 January 2011 to 31 December 2012 and later extended for 2013. Services continued until June 2014, when the project site was handed over. The appellant claimed that it raised 12 invoices for services rendered during 2013–2014, several of which remained unpaid despite reminder letters and demand notices issued between January 2015 and March 2016. The respondent disputed liability, prompting the appellant to file a civil suit in 2016.
On 17 April 2018, the dispute was referred to arbitration under Section 8 of the Arbitration Act. After the respondent failed to appoint an arbitrator, the Delhi High Court appointed a sole arbitrator under Section 11(6) in January 2021. The arbitrator rejected the respondent’s limitation objection under Section 16 and, by an award dated 17 November 2022, granted the appellant approximately Rs.68.92 lakh with interest. This award was later set aside by the District Judge under Section 34 on the ground that it lacked proper reasoning, leading to the present appeal under Section 37.
Contentions of the Appellant:
Counsel for the Appellant contended that the District Judge had exceeded the narrow scope of interference permitted under Section 34 by re-appreciating the evidence and substituting the arbitrator’s reasoning with its own. Relying on Associate Builders v. DDA and Bharat Coking Coal Ltd. v. L.K. Ahuja, it was argued that even if an alternative view were possible, the award could not be set aside. Strong reliance was also placed on Dyna Technologies v. Crompton Greaves to submit that the law requires adequate and intelligible reasons, not lengthy or elaborate judgments.
Contentions of the Respondent:
Counsel for the Respondent, on the other hand, supported the District Judge’s decision and argued that the arbitral award violated Section 31(3) of the Arbitration Act as it failed to provide sufficient reasoning. It was further contended that the arbitrator erred in granting interest without proof of the contractual rate and ignored the respondent’s defence of full and final settlement, thereby rendering the award vulnerable to judicial interference.
Observations of the Court:
The Delhi High Court undertook a detailed analysis of the statutory scheme and reiterated that the power of courts under Section 34, and even more so under Section 37, is extremely limited. Relying on Punjab State Civil Supplies Corp. v. Sanman Rice Mills, MMTC Ltd. v. Vedanta Ltd., the Court underscored that courts “do not sit in appeal over arbitral awards and cannot re-examine evidence or correct errors of fact.” Interpreting Section 31(3), the Court clarified that reasons in an arbitral award need only be clear, cogent, and comprehensible, observing that “brevity of reasoning is not a ground to set aside an award; absence of reasons or completely unintelligible reasons alone would justify interference.”
On facts, the Court found that the arbitrator had examined invoices, evidence, limitation, and counterclaims, and had rightly rejected the respondent’s counterclaims as time-barred under Article 55 of the Limitation Act, 1963, read with Section 43 of the Arbitration Act. On interest, the Court held that the arbitrator had exercised discretion under Section 31(7) judiciously, noting that 12% interest is a reasonable rate in commercial disputes where the contractual rate is unproven. The plea of full and final settlement was also rejected, with the Court noting that it was already time-barred and procedurally untenable.
The decision of the Court:
Allowing the appeal under Section 37, the Court set aside the District Judge’s order and restored the arbitral award dated 17 November 2022, holding that it fully complied with Section 31(3) and was based on evidence. The appellant was held entitled to Rs.68,92,133.95 with 12% interest, along with Rs.5,00,000 as costs, with post-award interest to operate as directed by the arbitrator.
Case Title: Ones Lang Lasalle Building Operations Private Limited Vs. Techpark Maintenance Services Private Limited Anr,
Case No.: Fao (Comm) 201/2024 And CM APPL. 78046/2025
Coram: Hon'ble Mr. Justice Anil Kshetarpal, Hon'ble Mr. Justice Amit Mahaja,
Advocate for the Petitioner: Adv. Ankit Yadav, Adv. Gunjan Rathore, Adv. Shivangi Gulati Adv. Aastha Harshwal,
Advocate for the Respondent: Sr. Adv. Sanjoy Ghosh,Adv. Lokesh Bhola, Adv. Rohan Mandal, Adv. Mohit Garg, Adv. Abhishek Singh Chauhan,
Read Judgment @Latestlaws.com
Picture Source :
