The abject lack of reasons in an arbitral award and an order passed by an arbitration court to confirm such an award recently drew the ire of the Madras High Court (Hindustan Petroleum Corporation Ltd v. Banu Constructions).
“This is a classic example of what cannot be done by an Arbitration Court,” the High Court said, referring to the order which confirmed the challenged arbitral award.
The arbitration court’s exercise of rewriting the arbitration award by ascribing reasons in support of the claims allowed or quantum awarded is not the business of the Arbitration Court, it added.
The Bench of Chief Justice Sanjib Banerjee and Justice Senthilkumar Ramamoorthy did not mince any words when it came to the arbitral award itself, observing,
“While it is not necessary for an arbitral award to justify every paisa or a rupee awarded to the claimant, the broad premise on which the quantum is founded has to be discernible from award itself for the award to be meaningful or even intelligible in legal terms. In short, the award impugned before the Arbitration Court in this case was the classical example of what an arbitral award could never be.“
The Court noted that the last few pages of the arbitral award, which records its operative portion, only mentions by 6-7 lines of “an excuse for reasons” while dealing one of three claim-heads.
“It is tempting to set out what appears at pages 119 and 120 of the appeal papers except that it may not be worth the paper it is printed on for its abject lack of reasons…There is not an alphabet expended by way of reasons in respect of the first and second heads of claim.”
The Court emphasised that there is a statutory mandate to pass reasoned orders in civil litigation as well as under the Arbitration Act, 1996.
“It is imperative – as has been statutorily mandated by the Act of 1996 – that reasons be furnished in support of an award unless the parties dispense therewith by agreement,” the Court emphasised.
Exception was also taken to the Arbitration Court having resorted to substantially reproducing the arbitral award.
“The award has been described in its entirety in this order. No page thereof has been left out or ignored, lest it does injustice to the Arbitrator and the party which was the beneficiary of the award.”
Referring to the arbitration court’s observation that the arbitral award does contain some reasons for its passage, the Bench added,
“In the light of what appears clearly from the face of the award, the above observation of the Arbitration Court is exceptionable and not acceptable. The complete lack of reasons cannot be glossed over in the manner it has been in the judgment and order impugned.”
The High Court went on to opine that the both the arbitral award and the affirming judgment “go against the most rudimentary tenets of the governing law and the jurisprudential philosophy established in this branch over the years.”
Therefore, both were set aside and, with the consent of both parties, retired District Judge C Manickam was appointed to conduct the arbitration afresh.