The Supreme Court recently outlined the difference between an arbitral award where reasons are lacking, unintelligible or perverse, and one where reasons are there but appear inadequate or insufficient [OPG Power Generation Private Limited vs. Enexio Power Cooling Solutions India Private Limited and anr].
A Bench of Chief Justice of India (CJI) DY Chandrachud with Justices JB Pardiwala and Manoj Misra discussed the same while dealing with the question of when courts can interfere with arbitral awards.
The Bench observed that courts can only set aside arbitral awards if the reasons contained in them are perverse.
On the other hand, if the arbitral award contains discernible reasons but only requires some clarity, the court need not set aside the award and may only explain the reasons so provided for a better understanding.
"In a case where reasons appear insufficient or inadequate, if, on a careful reading of the entire award, coupled with documents recited/ relied therein, the underlying reason, factual or legal, that forms the basis of the award, is discernible/ intelligible, and the same exhibits no perversity, the Court need not set aside the award while exercising powers under Section 34 or Section 37 of the 1996 Act, rather it may explain the existence of that underlying reason while dealing with a challenge laid to the award. In doing so, the Court does not supplant the reasons of the arbitral tribunal but only explains it for a better and clearer understanding of the award," the Court said.
The Court made the observation while dismissing appeals against a September 2021 Madras High Court ruling that had restored a July 2020 arbitral award.
The case involved a contractual dispute between OPG Power Generation Private Ltd, a subsidiary of Gita Power and Infrastructure Private Limited, and Enexio Power Cooling Solutions.
Enexio had won the bid in a tender floated by OPG for the design, manufacture, supply, erection and commissioning of air-cooled condenser units at a Thermal Power Plant at Gummidipoondi, Tamil Nadu.
An arbitral tribunal that examined the dispute between the two parties had ruled in Enexio's favor.
A single-judge of the Madras High Court later set aside the arbitral award. However, this decision was later set aside by a Division Bench of the High Court which restored the arbitral award. The Division Bench ruling was challenged by OPG before the Supreme Court.
In a ruling dated September 20, the Supreme Court held that there was no palpable error to make the arbitral award patently illegal, perverse or in conflict with the public policy of India.
In doing so, it also dealt with a claim that the arbitral tribunal did not give sufficient reasons while finding Enexio's claim to be within the limitation period.
The Supreme Court opined that the Division Bench of the Madras High Court had sufficiently clarified this concern and that there is no need to further meddle in the matter.
"Omission on the part of the arbitral tribunal was trivial and did not travel to the root of the award, therefore, in our view, the appellate court (High Court) was well within its jurisdiction to explain the underlying legal principle which the arbitral tribunal had applied; and in doing so, it did not supplant the reasons provided in the award. In this view of the matter, the impugned order of the Division Bench does not suffer from any legal infirmity," the apex court held.
Senior Advocate Abhimanyu Bhandari with advocates Aman Gupta, Arjun Sayal, and Shreyan Das appeared for OPG Power Generation Private Limited.
Senior Advocates Gourab Banerji and Jayant Bhushan with advocates Mayank Mishra, Sarvesh Singh Baghel, Ayshwarya Chandra, Anukriti Kudesia, and Arun Pratap Singh Rajawat appeared for Enexio Power Cooling Solutions India Private Limited.
[Read Judgment]