JUDICIAL INTERFERENCE IN ARBITRAL AWARDS IS IMPERMISSIBLE WHERE FINDINGS ARE BASED ON UNREBUTTED EXPERT TESTIMONY

The Petitioner (Railway) and Respondent (Sara International) entered into a Wagon Investment Scheme (WIS) Agreement on 26.12.2006, where the Respondent purchased two rakes for ~Rs. 28.33 Crores

The Petitioner was obligated to provide 6 guaranteed rakes and 2 bonus rakes monthly for 10 years, with the Respondent receiving a 10% freight rebate

Shortfalls in rake supply led to disputes. The Petitioner unilaterally issued circulars (2010–2011) restricting indents for third-party goods and imposing specific payment conditions (Demand Drafts)

An Arbitral Tribunal (AT) was constituted via the High Court of Orissa

During proceedings, the Petitioner failed to pay its share of AT fees, leading to its Counter-Claim being struck off under Section 38(2)

The AT passed an Award on 09.06.2021, granting the Respondent damages of ~Rs. 130 Crores for loss of profits and freight rebates

1. Whether the Arbitral Tribunal was justified in striking off the Petitioner's Counter-Claim due to non-payment of fees.

2. Whether the Award was patently illegal for relying on unrebutted expert evidence without "independent analysis."

3. Whether the Petitioner was denied a reasonable opportunity to present its case (natural justice).

4. Whether unilateral circulars issued by the Petitioner could override the express terms of the WIS Agreement.

The Court applied Section 34 of the Arbitration and Conciliation Act, 1996, which limits judicial interference to grounds of patent illegality or contravention of the fundamental policy of Indian law

The Court relied on Consolidated Construction Consortium Ltd. v. STPI regarding the narrow scope of Section 34

Morgan Securities & Credits (P) Ltd. v. Videocon Industries Ltd. regarding the arbitrator’s discretion to award interest

Section 38(2) of the 1996 Act was applied, permitting the termination of proceedings/counter-claims for non-payment of deposits

The Court also applied the principle of waiver/acquiescence from Srishti Infrastructure Development v. Scorpio Engineering, holding that factual objections not raised before the AT cannot be raised for the first time in a Section 34 petition

The Court found that the Petitioner’s conduct throughout the arbitration was dilatory, having sought multiple adjournments and failed to cross-examine witnesses despite the AT granting "more than adequate opportunity"

Under Section 38(2), the AT’s decision to strike off the Counter-Claim was held legally sound as the Petitioner refused to pay the mandatory fees

Regarding the Expert Report (CW-2), the Court determined the AT did not "mechanically" accept it; the AT reduced claim amounts after scrutiny and the findings remained unrebutted since the Petitioner bypassed cross-examination

On the merits, the Court held that Clause 15 of the WIS Agreement required mutual consent for changes; therefore, the Petitioner’s unilateral circulars (restricting third-party indents) and new payment conditions were breaches of contract

The Court refused to re-appreciate evidence or factual calculations (such as the Rs. 100/MT premium) since the Petitioner had waived its right to contest these facts before the AT

the striking off of the Counter-Claim was valid under Section 38(2)

the Petitioner was afforded sufficient opportunity to be heard but waived it through negligence

the damages for Period I (2007-2010) and Period II (2010-2017) were based on plausible interpretations and unrebutted evidence

the 8% interest rate was a reasonable exercise of the AT's discretion. The petition and pending applications were disposed of with no interference to the findings of the AT