Dissent Must Be an “Informed Decision,” Not “Post Facto”: Calcutta High Court Sets Aside Majority Arbitral Award

The Calcutta High Court has set aside an arbitral award in favour of Neo Metaliks Limited, holding that a dissenting arbitrator cannot be excluded from deliberations and given the majority award only after it has been finalised.

Justice Sabyasachi Bhattacharyya passed the ruling while allowing Kessels Engineering Works Pvt Ltd's challenge to the award and staying operation of the judgment for 30 days.

Justice Bhattacharyya observed, “Deliberation between the co-arbitrators in a multi-member Arbitral Tribunal is an essential ingredient of party autonomy, since the parties agree upon and submit to adjudication by all the members and not by any one or some of them. Such basic tenet goes for a toss if one of the Arbitrators is kept out of the loop by the others while preparing the award.”

The court added, “Although a dissenting Arbitrator has a right to dissent, such dissent has to be an informed decision and not a post facto adjudication after the majority award is finalized, delivered and only then handed over to him, without prior consultation.”

The dispute arose from a December 15, 2004 contract under which Kessels Engineering Works agreed to manufacture, supply and commission a steam turbine generator set for Neo Metaliks' captive power plant.

Neo Metaliks later alleged repeated defects and breakdowns in the TG set and, by a July 27, 2009 communication, rejected the machinery citing inherent defects and failure to achieve stable operation.

A majority arbitral award dated July 22, 2020 allowed Neo Metaliks' claims, while the dissenting arbitrator delivered a separate award on July 30, 2020.

The High Court also found the tribunal's interpretation of the guarantee clause to be “absurd and shocking to the conscience,” holding that it wrongly conflated the starting point of the guarantee with the guarantee period itself.

Justice Bhattacharyya held “The Tribunal, thus, got confused between the starting point of guarantee, which is the date of successful commissioning of the TG Set, with the guarantee period itself, which would be 18 months from such starting point.”

The Court also held that the tribunal committed patent illegality in awarding both extinction of price and damages towards electricity and diesel charges arising from the same breach-of-warranty finding, and found that it had overlooked the clause limiting the guarantee period to twenty-four months from the last dispatch of machinery.

Accordingly, the Court set aside the arbitral award dated July 22, 2020, as amended on February 22, 2021, as patently illegal.