Honest Mistake Or Erroneous Appreciation Of Law Cannot Be An Act Of Corruption By Arbitrator: Calcutta High Court

The Calcutta High Court held that an honest mistake or erroneous appreciation of law cannot be an act of corruption on the part of the Arbitrator.

The Court held thus in an Application preferred under Section 36(2) of the Arbitration and Conciliation Act, 1996 (A&C Act) seeking an unconditional stay of an Award passed by a Sole Arbitrator.

A Single Bench of Justice Shampa Sarkar observed, “Corruption by an Arbitrator will mean a moral obliquity. An honest mistake or erroneous appreciation of law may not appear to be reasonable to the court, but such defects in the award, cannot be an act of corruption on the part of the arbitrator.”

The Bench added that corruption of the Arbitrator should be such, that it would be, prima facie, evident from the award itself that the learned Arbitrator had tried to curb or prevent the course of justice.

ASG Asok Kumar Chakraborty and Senior Advocate Souvik Nandi represented the Petitioners while Senior Advocate Krishnaraj Thaker represented the Respondent.

Facts of the Case

Sometime in 2016, the Railways floated a tender for leasing of parcel cargo express train (PCET) from Chitpur to Kalyan on round-trip basis, for a period of six years. The Respondent participated in the tender process and was the highest bidder. In January 2017, the Chief Commercial Manager/FM issued a letter, inter alia, stating that the offer of the Respondent for taking lease of the PCET for two round trips had been accepted. Thereafter, an agreement was executed between the Petitioners and the Respondent and the security deposit was submitted by the Respondent. The Petitioners alleged against the Respondent that frivolous issues were raised, almost forcing them to come up with a timetable for departure and arrival of the trains and to ensure stoppage at the enroute station.

The Respondent started operation but continued to pressurize the Petitioners to come up with a revised time schedule. The Respondent started negotiating with the Petitioners and insisted that the Kalyan bound trips should be suspended and instead, Chitpur bound trips should be allowed. Such request was contrary to the terms of the agreement as per the Petitioners and the Respondent stopped making payments of the lease rentals. The Petitioners raised their contractual demand and the Respondent terminated the agreement and invoked the arbitration clause. An Arbitrator was appointed by the Apex Court who allowed the claims beyond the scope of the agreement as per the Petitioners. Challenging the arbitral award, the Petitioners approached the High Court.

Reasoning

The High Court in the above regard, noted, “The burden of proof is rather high. The petitioners were required to discharge the burden by at least bringing to the notice of this court from the records and from the award that, either the respondent had concealed relevant materials or had made false statements, which led the arbitrator to pass the award in their favour. The petitioners would have to show, prima facie, that the learned Arbitrator deliberately passed the award in abuse of the process of law and had illegally obstructed the course of justice.”

The Court said that without the contractor knowing the time and the date as to when the trains would be available for loading, the Respondent could not be expected to wait till eternity for the trains to arrive.

“Under such circumstances, this court does not find any reason to grant unconditional stay of the award”, it added.

Accordingly, the High Court directed that the award shall remain stayed until the disposal of the Application.

Cause Title- Union of India and Ors. v. Rahul Kumar Thakur (Case Number: AP-COM/657/2024)

Appearance:

Petitioners: ASG Asok Kumar Chakraborty, Senior Advocate Souvik Nandi, and Advocate Amrita Pandey.

Respondent: Senior Advocate Krishnaraj Thaker, Advocates Debrup Bhattacharjee, and Rohan Kumar Thakur.

Click here to read/download the Judgment