Section 34 courts cannot reappreciate evidence where the arbitral tribunal adopts a plausible view.

The Petitioner and Respondent, both members of the Cotton Association of India, entered into a contract dated 11 August 2010 for the supply of 600 bales of cotton during 28 November–5 December 2010.

The Respondent alleged non-delivery despite repeated reminders and warned that it would invoice back the cotton under the Association’s Byelaws.

On 31 May 2011, the Respondent informed the Petitioner that it was applying for fixation of the invoice-back rate as on 13 May 2011; the Association thereafter fixed the rate at Rs. 44,800 per candy, resulting in a debit claim of Rs. 41,58,948.

The Sole Arbitrator initially awarded Rs. 32,69,783 with interest, calculating the rate as on 6 December 2010.

On appeals by both parties under Byelaw 38(E), the Board modified the award and awarded Rs. 41,58,948 with interest at 15% per annum and costs, based on the invoice-back rate as on 13 May 2011.

The Petitioner challenged the appellate award under Section 34 of the Arbitration and Conciliation Act, 1996.

Whether the impugned arbitral award was liable to be set aside for breach of natural justice and contravention of the public policy of India, because the Petitioner was not supplied the documents or report underlying the invoice-back rate.

Whether the invoice-back procedure under Byelaw 34A was not followed, including whether the Sole Arbitrator could refer the matter to the Committee for fixation of the rate and whether the Petitioner’s right of appeal under Byelaw 34A(1)(e) was denied.

Whether the Board erred in fixing the invoice-back date as 13 May 2011, rather than 6 December 2010, in the absence of a valid extension of the contractual delivery period.

Whether the Respondent was required to invoke Byelaw 74, instead of Byelaw 34A, for invoice-back and fixation of the applicable rate.

Whether the Board’s findings on the description of the contracted cotton, non-delivery, extension of time and quantum disclosed patent illegality, perversity or another ground warranting interference under Section 34.

The Court applied Section 34 of the Arbitration and Conciliation Act, 1996, under which interference with a domestic arbitral award is limited and does not permit appellate reappreciation of evidence.

Under Section 34(2)(b)(ii), an award may be set aside for conflict with the public policy of India, including violation of the fundamental policy of Indian law or the most basic notions of justice or morality, while Section 34(2-A) permits interference for patent illegality appearing on the face of a domestic award, subject to the bar against setting aside merely for erroneous legal application or reappreciation of evidence.

The Court relied on Associate Builders v. DDA, (2015) 3 SCC 49, and Ssangyong Engineering & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131, for the restricted public-policy and natural-justice review.

It also relied on Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1, and MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163, for the principles that courts must respect arbitral finality, defer to a possible view of the tribunal and avoid appellate scrutiny of factual findings.

Byelaw 34A created a mechanism for the Committee to fix special invoice-back rates, prescribed the factors relevant to price fixation and provided a time-bound appeal to the Board against the rate.

Byelaw 74 distinguished between delivery contracts covered by the Daily Rates Committee and other delivery contracts for which the rate was to be fixed under Byelaw 34A.

The Court held that Byelaw 34A constituted a self-contained contractual mechanism for fixing invoice-back rates and did not require the Committee to provide a prior hearing, report or underlying price-fixation material to the parties.

The Petitioner had been repeatedly informed through the Respondent’s correspondence that non-delivery would result in invoice-back under the Byelaws, but it neither delivered the cotton nor objected contemporaneously to the proposed invoice-back.

Its contractual right to challenge the rate under Byelaw 34A(1)(e) had not been extinguished; the failure to exercise that right could not be converted into a natural-justice objection under Section 34.

The Board’s conclusion that the delivery period had effectively been extended to 13 May 2011 and that the rate should be fixed on that date was based on the parties’ correspondence and was at least a possible view; reconsidering whether 6 December 2010 or 13 May 2011 was the proper date would amount to impermissible reappreciation of evidence.

The Court further found that Byelaw 74 did not invalidate reliance on Byelaw 34A, particularly since the applicable rates under both provisions were identical in the circumstances.

No perversity, patent illegality, breach of natural justice or violation of the fundamental policy of Indian law was established.

It held that the award did not breach natural justice, contravene the public policy of India, or suffer from patent illegality warranting interference under Section 34.

The petition was dismissed, with the award of Rs. 41,58,948, interest at 15% per annum from 2 August 2012 until payment or realisation, and costs of Rs. 85,000 left undisturbed.

Any amount deposited in Court was directed to be released within one month from uploading of the judgment; interim applications, if any, were disposed of, with no order as to costs.