The Delhi High Court dismissed a petition filed under section 34 of the Arbitration & Conciliation Act, 1996 and held that the scope of interference is well defined and the challenge to an award is confined to it being patently illegal and/or against the public policy.

The High Court was considering a petition filed under Section 34 of the Arbitration & Conciliation Act, 1996 (A&C Act) for setting aside the impugned award passed by the Arbitral Tribunal (AT).

The Single Bench of Justice Manoj Kumar Ohri asserted, “AT rightly held that no documentary evidence was filed in support of the counterclaims.”

Senior Advocate Anil K. Airi represented the Petitioner.

Factual Background

The petitioner claims to be running a Five-Star Hotel under the name and style of ‘The Grand’ at Vasant Kunj, New Delhi. The respondent is stated to be in the business of trading various types of chemicals for industrial use. The petitioner used to place orders from time to time for the supply of different chemicals to be used for cleaning appliances/machinery used by the petitioner.

Disputes having arisen, the respondent/claimant claimed itself to come under the Micro and Small Entrepreneur Facilitation Council (MSEFC), Delhi under Section 18 of the MSMED ACT. The conciliation proceedings under the MSMED ACT having failed, the disputes were subsequently referred to Delhi Arbitration Centre (DIAC) under Section 18(3) of the MSMED ACT for statutory arbitration. In its statement of claim, the respondent/claimant claimed that the supply of material was made by it against which bills were raised from time to time. The respondent/claimant further claimed that on account of supply of material, a sum of Rs.99,56,397.41 was payable by the petitioner to it towards various outstanding bills raised by it.

During the pendency of the arbitral proceedings, the present petitioner preferred an application under Section 16 of the A&C Act and against its rejection filed a writ petition. The said writ petition came to be disposed of, thereby holding that the respondent was entitled to claim benefit under the MSMED ACT. In pursuance of the aforesaid order, the respondent filed the amended statement of claim thereby raising a claim of Rs.20,06,492. The AT awarded a sum of Rs 17,06,492 to the respondent/claimant towards the outstanding principal amount payable and termed the petitioner’s counterclaim being devoid of merit. It was the Petitioner’s case that the AT erred in awarding the amount.

Reasoning

The Bench, at the outset, said, “The scope of interference under Section 34 of the A&C Act being well defined and the challenge to an award being confined to it being patently illegal and/or against the public policy, this Court sets out to deal with the contentions raised on behalf of the petitioner.”

One of the arguments raised by the Petitioner related to the provisions of the Sale of Goods Act and how the respondent committed a breach of warranty. On this aspect, the Bench said, “...the AT after taking of the aforesaid provisions, observed that the petitioner ought to have aired its objections with regards to the quality of the goods within 15 days of receipt of the same.”

The Bench affirmed the view of AT that the petitioner ought to have aired its objections with regards to the quality of the goods within 15 days of receipt of the same. To claim that the goods supplied by the respondent were substandard, the petitioner had relied upon the complaint received by it from its customers/guests, the test report from Shriram Institute as well as invoices showing replacement of goods.

As per the Bench, the report from the Shriram Institute was also rightly disregarded by the AT for the sample not being collected by the Institute, rather having been supplied by the petitioner itself. The goods were last supplied by it to the petitioner in the year 2019 whereas the invoices relied upon by the petitioner in support of its counterclaims while seeking damages are for the year 2022. “AT rightly held that no documentary evidence was filed in support of the counterclaims”, the Bench added.

Thus, finding no ground to interfere with the impugned order, the Bench dismissed the Petition.

Cause Title: Unison Hotels Pvt Ltd v. KNM Chemicals Pvt Ltd (Cause Title: O.M.P. (COMM) 53/2025)

Appearance:

Petitioners: Senior Advocate Anil K. Airi, Advocates Gaurav Bahl, Mudit Ruhella, Vishal, Sadhna and Bindiya

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Justice Manoj Kumar Ohri

Tulip Kanth

Assistant Editor

Tulip Kanth is an Assistant Editor at Verdictum having over 5 years of experience in the field of legal journalism and editing. She extensively covers judgments of the Supreme Court, High Courts as well as Tribunals. She has previously worked with a legal publishing website where she oversaw the work of other editors and has also created updates on notifications of different Government Ministries. She holds an English Honours Degree from SGTB Khalsa College, Delhi University and has completed her LLB course with specialisation in Corporate Law from Amity University.