LI Network
Published on: November 11, 2023 at 16:35 IST
The Delhi High Court has clarified that when exercising powers under Section 34 of the A&C Act, a court cannot entertain claims that were rejected by the arbitral tribunal.
The bench comprising Justices Suresh Kumar Kait and Neena Bansal Krishna emphasized that Section 34 does not grant the court the authority to amend an arbitral award; it can only either set aside or uphold the award.
The court further observed that, while the court may partially set aside an arbitral award on a severable issue, it lacks the competence to modify the award by allowing a claim rejected by the arbitral tribunal.
Recognizing such a power under Section 34(4) would equate the court’s role to that of an appellate court, contrary to the legislative intent of the Act.
The case in question involves a License Agreement between Bharti Airtel Ltd. (referred to as the appellant) and Jamshed Khan (referred to as respondent No. 1). The agreement, dated 22.01.2015, granted the appellant rooftop space in Delhi for nine years, starting with a monthly fee of Rs.15,000/- and a 10% increase every three years.
Disputes arose when the respondent claimed the appellant abandoned the agreement by not paying the license fee from 29.01.2015, leading to arbitral proceedings initiated by the respondent. The claim included Rs.4,12,000/- for arrears of license fee and Rs.57,000/- as interest until 12.05.2017.
The appellant argued hindrances from neighbors and the respondent’s failure to provide rooftop access prevented tower installation. The agreement was terminated on 23.03.2015, as indicated in a notice.
The arbitrator found the termination notice served on 02.12.2015 and granted the respondent one year’s license fee till termination. However, the claim was denied due to misinformation about available rooftop space. The arbitral award faced challenge under Section 34 of the Act, resulting in partial set-aside by the District Judge, allowing payment of Rs.1,80,000/- as license fee along with interest.
Aggrieved, the appellant challenged it under Section 37 of the Act.
The appellant contended that the District Judge overstepped by rewriting the contract, citing legal precedents to support limited judicial interference under Section 34.
The respondent argued that the arbitrator’s findings were severable, justifying partial setting aside of the award. They claimed the arbitrator’s conclusions were not evidence-based, supporting the District Judge’s decision under Section 34.
The Court observed that the subject premises were already leased out when the license agreement was executed. It held that the arbitrator rightly rejected the respondent’s claim, dependent on the license agreement’s validity, not space availability.
The Court noted the District Court set aside the tribunal’s finding and allowed the respondent’s claim, effectively rewriting the award.
In conclusion, the Court emphasized the limitations under Section 34 and criticized the District Judge’s failure to order fresh arbitration proceedings instead of rewriting the award.
Accordingly, the Court set aside the impugned order and upheld the arbitral award in the case of Bharti Airtel v. Jamshed Khan.
