Dyna Technologies Pvt. Ltd v Crompton Greeves Ltd (Civil Appeal NO. 2153 of 2010) – Case analysis - Synopsis
Lakshay Parmar 7 Jan 2020

Dyna Technologies Pvt. Ltd v Crompton Greeves Ltd (Civil Appeal NO. 2153 of 2010) – Case analysis

Difference between Inadequacy of reasons in an arbitral award and unintelligible awards

 

Issue- Whether courts can set aside an arbitral award in a “casual and cavalier” manner which can defeat the whole purpose of arbitration.

What is the legislative intent behind the enactment of the section 31 of the Arbitration and Conciliation Act, 1996.

 

Facts: Originally the award was first challenged before a single Madras judge bench who, while upholding the award, held that the view taken by the arbitrator on the fee to be paid to the respondent by the plaintiff therein was a view taken by the arbitrator on the contract that could not be replaced by a judgment in an appeal against the award.

 

There is a 25-year-old dispute appeal filed by Dyna Technologies against M/s Crompton Greaves over compensation for losses suffered because certain equipment has been misused. An appeal against a Madras High Court Decision of April 2007 setting aside the award of the Arbitral Tribunal.

The Supreme Court considered an appeal that had set aside an Arbitral Award against the decision of the High Court. The High Court observed that there are inadequate explanations for the award, and the claims included in the award do not provide any arguments, discussions or conclusions.

 

Observations made by the court:

·         The Supreme Court referred to the Section 31 of the Arbitration and Conciliation act 1996(hereinafter referred to as “the act”), which states that the arbitral award should state the reasons on which it is based, and the apex court told the purpose of the particular section which is to provide reasoning in an award which is intelligible and adequate and which can be implied by courts with a fair reading.

The Supreme Court said, when we consider the requirement of a reasoned order, three characteristics of the order should be fathomed:

1.       If the reasoning in the award is improper , it implies a flaw in the process of decision making. If the challenge is entirely based on impropriety then it can be challenged under section 34 of “the act” which states the grounds for setting aside an award.

2.       If the challenge is based on the unintelligibility of the award, the same would be equivalent to providing no reasons at all

3.       If it is concerned with the challenge on inadequacy of reasons, the court while exercising jurisdiction under section 34 of “the act” has to adjudicate such award’s validity based on the degree of particularity of the reasoning required with having the regard to the issues falling for consideration. The degree of particularity cannot be described as it would depend on the complexity of the issue.  

The court also needs to regard the documents submitted before the tribunal and the contentions made before the same so that the award cannot be set aside in a “casual and cavalier manner” .

The apex court cautioned the courts not to refuse an arbitral award solely on the ground that its rationale is inadequate. Courts should be careful to distinguish between arbitral awards that are insufficient and unintelligible awards.

 

The Court has distinguished between awards without intelligible reasoning and a legislative intention behind Article 34(4) of the Act. The Court has also investigated the legal intention. This provision empowers the High Court to refer the case to the Tribunal if there is no basis for an award or if there are any discrepancies that the Tribunal can address. That provision, the Court said, offers a path to prevent a challenge to an award that the Tribunal will restore and may not have to set aside.

 

Holding that the arbitral award was given in a "muddled and confusing manner," it was set aside by the apex court as "unintelligible" and ordered Dyna to be compensated within eight weeks as full and final settlement.

 

Therefore, though maintaining restraint and suggesting the same for other courts, the Supreme Court made a decision in which it laid down a conflict that spanned over two decades, and thus maintained that the Court would not find awards to be intelligible without reasons. The Court thus affirmed the legislative intent behind the enactment of Section 31 of “the act”.

 

 

 

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