M/S Dyan Technologies Private Limited v. M/S Crompton Greaves Limited

By Aastha Singh ~ Law College Dehradun

Civil Appeal No. 2153 of 2010

Fact of the Case

The agreement entered on 25^th July 1994 between M/S Dyna Technology Private Ltd (appellant) and the M/S Crompton Greaves Ltd (respondent) for some aquaculture work like the establishment of ponds, channels, drains associated works. When Crompton Greaves Limited found that there is some issue in the initiation of work, hence, terminated the contract. Dyna technologies sought reimbursement for untimely ending and after this controversy was referred to arbitration. The arbitration tribunal granted reimbursement but failed to mention any specific reason for reaching any particular conclusion. Under section 34(4) of the Arbitration and Conciliation Act 1996,  it mentions that it is not necessary for tribunal arbitration to resume the award because already the reimbursement was granted on account of the untimely ending of the contract. Crompton Greaves Limited had approached the Madras High Court and court abjure to abrogate the award. Later, the matter was referred to the division bench, and the bench set aside the award granted by the arbitration tribunal due to lack of reason for granting compensation in April 2007. Dyna Technologies Limited appealed to the Supreme Court on the factor of the logbook of Dyna Technologies which shows the actual loss suffered due to termination of the contract. Under section 37 of the Arbitration and Conciliation Act, it is far off the power of the court to alter or deny the verdict of the arbitration tribunal on the fact that there was no specific reason to grant award. On the other hand, Crompton Greaves argued the decision of award should be set aside because it is violating the express terms of the contract.

Main issues

• Whether the present case is of breach of contract or not?
• Whether M/S Dyna Technology Private Limited has the right to lodge a complaint against M/S Crompton Greaves Limited?
• Whether reimbursement granted by M/S Crompton Greaves Limited after the untimely ending of the contract is pertinent?
• Whether the court has the authority to abrogate an arbitral award?
• What is the legislative intent behind ratifying section 31 of the Arbitration and Conciliation Act, 1996?

Relevant cases

1. Tamil Nadu Civil Supplies Corporation Limited v Albert and Company (2000(III) CTC 83)-In this case, the court held that as per section 34 of the Arbitration and Conciliation Act, the award of the arbitrator can be abrogated only on the slight grounds and the award cannot be interfered with simply because another view is possible on the available materials.
2. Harcharan Singh v Union of India, (1990)4 SCC 647 – in this case court reiterated its earlier view that the arbitrator’s adjudication is generally considered binding between the parties for he or she tribunal selected by the parties and the power of the court to abrogate award is restricted to cases set out in Section 30 of the Arbitration Act, 1940.
3. Som Dutt Builders Ltd v State of Kerala, (2009) 4 ARB LR 13 SC – in this case, the court indicated that passing of a reasoned award is not an empty formulation under the Arbitration Act. Courts have ruled that the award must have proper logic that reveals the thought process leading to the conclusion.
4. Indian Oil Corporation Limited v Indian Carbon Limited -the Supreme Court had held that the requirement for the reason to be stated in the award would be satisfied if the arbitrator made his mind known based on which he or she acted.
5. The Victoria case of Oil Basins Limited v BHP Billiton Limited – in this case, the court held that it could be an error on the face of the record if the arbitrators reached their conclusions through failure to consider some part of the evidence or as a result of rejecting or discounting it on an irrational or otherwise unlawful basis.

Relating Provision

• Section 73 of the Indian Contract Act, 1872 –  this section furnishes that when a contract has been broken, the party who suffers by the beach is entitled to receive from the party who terminated the contract.
• Section 34 of Arbitration and Conciliation Act 1996  – this section comes up with the authority of the court to abrogate the arbitration award with certain clauses and conditions.
• Section 31 of Arbitration and Conciliation Act 1996 – mandate under section 31 of this act is to have proper logic which is understandable and sufficient enough which can in suitable cases be even implicit by the courts from an equitable perusal of the award and charter referred to thereunder.
• Section 37 of Arbitration and Conciliation Act 1996 – this section furnishes a period of limitation for filing of an appeal, a period of 90 days is provided for filing of the appeal.

Judgement

After 25 years of dispute, on 19^th December 2019, the Supreme Court gave its verdict that arbitration awards should be understandable, rational, and requisite to avoid wastage of time for the parties concerned in the dispute. In the conclusion of the matter, we consider it suitable to direct the respondents to pay a sum of Rs. 30,00,000  to the claimant in the full and final resolution. Respondents must give the amount within 8 weeks, failure to which the claimant will be entitled to interest at 12% per annum until full remission.

Author’s Analysis

Owing to the facts and provisions mentioned above, it can be deduced that the case at hand is not dealing with breach of contract. I agree with the decision of the court. The verdict seems to be a step forward in enhancing the calibre of arbitral awards in India. The decision has helped to bring greater legitimacy and public trust in the arbitration procedure. From the facts, we can only state that from a perusal of the award, in the facts and situation of the case, it has been rendered without a specific reason. Accordingly, the award is understandable and cannot be endured. While handling such cases, courts should be more precarious to differentiate between arbitral awards that are insufficient and unintelligible. The corporate and commercial legal regimes have undergone sweeping changes in the past few years.