The Hindu Business Line : Kirloskar Computer Services' plea dismissed

A plea to set aside an arbitration award reached on the basis of an agreement between two parties could not assail it under Section 34 of the Arbitration and Contract Act, 1996, the Madras High Court has held.

Dismissing a petition by Kirloskar Computer Services Ltd, Bangalore, challenging the award, Justice S Rajeswaran rejected the contention that the entire proceedings before the arbitrator (second respondent) was without jurisdiction and ought to be set aside.

The petitioner-company entered into a lease agreement with the first respondent (Lakshmi General Finance Ltd, Chennai) for purchase of telecom equipment. They had been regular in making lease rent payments, but due to recession, they could not meet the commitment since February, 2002.

The first respondent finance company sent notice to the petitioner. As disputes arose between petitioner and the first respondent, it was referred to second respondent for arbitration as per the agreement. Meanwhile, first respondent filed Section 9 application in this court, and the court appointed an advocate commissioner to seize the equipment.

Challenging the award, the petitioner, inter alia, submitted that the petitioner was only a bailee and the hire charges were payable only for such period during which equipment was in possession of petitioner-bailee. The first respondent ought to have terminated all agreement as equipment was repossessed and, hence, claim made by first respondent was untenable in law. The award granting liquidated damages was clearly against Section 74 of the Contract Act.

The counsel for the first respondent, Mrs Radhika Krishnan, argued that a reading of the agreement would clearly prove that there was no merit in the contention of the petitioner and the award was to be upheld.

The Judge said that the arbitration award was passed by the second respondent on the basis of the agreement between both the parties, and the same could not be assailed by the petitioner under Section 34 of the Act. Taking advantage of the wrong mentioning of the old Act in the agreement, the petitioner submitted that the entire proceedings initiated under the new Act was without jurisdiction.

Referring to the petitioner's contention that 1940 Act shall apply in relation to arbitration proceedings, which had commenced before coming into force of the new Act, the Judge held that the agreement itself was entered into well before the new Act came into force, and hence this argument was misconceived. The petition was therefore dismissed.

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