Judgment Name: Jayaram Panda v. Project Director, M/s. National Highway Authority of India and others.

Citation: Civil Appeal ARBA No. 58 of 2018.

Court: High Court of Orissa, Cuttack

Coram: Arindam Sinha, J.

Date: 9th May 2022.

Keywords: Content of Arbitral Award, Quantum of Compensation, Public Policy, Section 31, Section 34, Arbitration & Conciliation Act.

Overview

A Single-Judge Bench of the High Court of Orissa stated that a challenge against an Arbitral Award is to be guided according to Section 34 of the Arbitration & Conciliation Act, 1996 (“Act”). The Award in question was challenged on the grounds of a lack of basis for awarding lesser compensation to the Appellant. Consequently, the Court set it aside due to the lack of a proper reason required under Section 31, along with a violation of public policy under Section 34 of the Act.

Facts

The Appellant (Mr. Jayaram Panda) challenged an arbitral Award granted by way of an order dated 13th June 2016. The impugned Award determined the quantum of compensation to be paid to him upon acquisition by the National Highway Authority of India (“NHAI”). Such compensation, to be awarded for the industrial loss accrued, was to be determined through two technical evaluations. The second assessment provided for higher compensation of Rs. 92,38,627/- to be paid, as compared to the first evaluation awarding Rs. 55,69,904/-. The Appellant’s main contention lay in the Arbitrator’s unreasoned rejection of the second assessment, which awarded him lesser compensation. Furthermore, he contended that the General Manager of the Technical Committee (Respondent no. 4) had dissented against the Arbitrator’s decision stating that the Appellant’s loss of interest of Rs. 31,49,513/- had not been incorporated in the fixed capital investment amount while calculating compensation. However, the Arbitral Tribunal declined the same.

On the other hand, the Respondent rejected the contention, claiming the General Manager’s dissonance to be his personal opinion and not subject to any approval by the State Government. Therefore, the arbitral Award was concurrent with the approved Technical Committee report and could not be interfered with. Thus, this matter, involving a challenge to the Arbitral Award, lay before the High Court of Orissa as a continuation of a suit instead of a first appeal.

Issue

Whether the impugned Arbitral Award can be set aside in the absence of adequate reasoning given by the Arbitral Tribunal?

Decision

The Court, at the outset, recognized that the comments made by the General Manager were in his “personal capacity” and that the Tribunal had, in fact, considered the recommendation of the Technical Committee while deciding the compensation. However, it also highlighted that the matter in concern was not whether the Tribunal had accepted the recommendation but a disagreement between the Appellant and the NHAI vis-à-vis higher compensation.

The Court first sought to examine the challenge based on Section 31 of the Act. It reiterated the requisites mentioned under Section 31(3), viz, the Arbitral Award is mandatorily required to state its raison d’être, unless it is made according to clauses (a) or (b) of the section. However, in the given scenario, these two clauses did not apply to the Award as they were neither based on (a) agreed terms nor (b) decided by the parties to be without reason. Thus, it was devoid of any reasoning required under Section 31.

The High Court further reasoned that since the matter at hand involved a challenge to an Arbitral Award, it should be deciphered according to Section 34 of the Act. Therefore, it held that the impugned Award was not only bereft of any reason but also went against public policy under Section 34(2)(b). Consequently, the Award was set aside.

Conclusion

The Court found merit in the Appellant’s arguments and set the Award aside upon the Arbitrator’s failure to give any reasons for reaching the said conclusion. It further directed the matter to be disposed of expeditiously by the new person holding the office as Collector. While the Court evidently relied on the public policy argument for setting aside the Award, what is noteworthy is the lack of any explanation behind interpreting the impugned Award to be violative of ‘public policy’ under Section 34.

[This case note has been authored by Ishita Agrawal, who is a Junior Editor at Mapping ADR.]