Allahabad High Court Upholds Setting Aside Of Arbitral Award For Lack Of Findings On Contentious Issues

The Allahabad High Court has upheld the setting aside of an arbitral award in an insurance dispute after finding that the arbitrator failed to record findings on key disputed issues, including the validity of the survey report and the basis for awarding the claimed amount, and instead "jumped to the conclusion" that the insured was entitled to the amount sought.

A Division Bench of Chief Justice Arun Bhansali and Justice Kshitij Shailendra dismissed an appeal by Triveni Adhesive and Tapes against an order setting aside an arbitral award passed in its favour.

The court observed that the arbitral tribunal's determination "lacks any finding worth the name for discarding the survey report/arriving at the claim amount of Rs. 3,76,00,000/-."

The dispute arose from an insurance claim following a fire at the appellant's manufacturing unit. Against a claim of ₹3.76 crore, New India Assurance Company paid ₹2,00,51,502 after obtaining a consent letter. The arbitrator later awarded the insured an additional ₹1,56,68,498 with interest.

The Commercial Court set aside the award as patently illegal and contrary to public policy. Before the High Court, the appellants invoked Section 34(4) of the Arbitration and Conciliation Act, 1996, seeking to remit the matter to the arbitrator on the ground that the award already contained findings and only lacked supporting reasons, which could be supplied by the arbitrator.

Rejecting the plea, the High Court found that although the arbitrator had framed eight issues, including whether the surveyor's valuation and methodology were legal and justified, the award did not contain any meaningful finding on the validity of the survey report, the valuation of the stock, or why the insured was entitled to ₹3.76 crore instead of the ₹2,00,51,502 assessed and paid by the insurer.

The bench observed that the arbitrator merely held that the insured was not estopped from pursuing its claim despite signing the consent letter and accepted its explanation for maintaining higher stock levels without independently examining the surveyor's assessment.

It noted that the arbitrator further observed that the insured could have claimed ₹3.81 crore but had instead claimed ₹3.76 crore and, on that basis, "jumped to the conclusion" that the entire claim, less a 5% compulsory deduction, was payable.

Referring to the Supreme Court's decisions in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. and I Pay Clearing Services (P) Ltd. v. ICICI Bank Ltd., the High Court reiterated that Section 34(4) permits a court to remit an award to the arbitral tribunal where reasons supporting findings already recorded are absent or where there are curable gaps in the reasoning.

However, it emphasized that the provision cannot be invoked where the award itself fails to record findings on contentious issues.

The court concluded that the present case involved "lack of finding and not lack of reasons or gap in the reasoning."

Since the award lacked findings on the core dispute regarding the survey report and the basis for the claim amount, the defect could not be cured under Section 34(4). It therefore upheld the Commercial Court's decision setting aside the award and dismissed the appeal.

For Appellants: Alok Saxena and Aanya Verma for the appellants;

For Respondents: Rakesh Bahadur