BFIL FINANCE LIMITED Vs. G TECH STONE LIMITED

JUDGEMENT

(1.) THIS appeal seeks to challenge the order dated 27th and 28th November, 2001 passed by a learned Single Judge allowing the arbitration petition filed by the respondents thereby setting aside the majority Award dated 14th June, 2001 given by an Arbitral Tribunal of 3 Judges.

(2.) THE facts leading to this appeal are as follows:---The respondents are a public limited company of Chennai engaged in the business of export of stones, granite slabs, etc. The appellates are engaged in the business of finance and investments. The respondents and the appellants entered into an agreement on 2nd February, 1995 by virtue of which the respondents placed with the appellants 5,40,000 Secured Optionally Fully Convertible Debentures (OFCDs) and the appellants paid a sum of Rs. 5,13,00,000 (Rupees Five Crores Thirteen Lacs) to the respondents. Later on 21st September, 1995 the appellants invoked Article II Clause 2. 7 of the agreement and asked the respondents to redeem the OFCDs and sought the redemption proceeds along with the interest. The respondents refused to comply and wrote on 1st November, 1995 that the offer of redemption was not acceptable and asked the appellants to return the debenture certificates in exchange for shares of the respondents since they had converted the OFCDs into their equity shares. Thereafter controversies started between the parties and the appellants terminated the agreement by sending an Advocates notice. Thereafter in terms of Clause 8. 2 of Article 8 of the agreement, the appellants appointed their arbitrator but since the respondents did not appoint their arbitrator, an application was made under section 11 (4) of the Arbitration and Conciliation Act, 1996 and the then Honble Chief Justice by his order dated 6th August, 1997 appointed a co-arbitrator and a presiding arbitrator. Thus the Arbitral Tribunal consisted of three Judges. Two of the Judges (i. e. Presiding Arbitrator Honble C. J. I. (Retd.) Kania, J. , and Honble C. J. (Retd.) Pendse, J.) gave the majority Award on 14th June, 2001 which is annexed at Exhibit V to the appeal compilation. The minority Award (per Honble Pratap, J. , (Retd. C. J.) was also given on the same day which is annexed at Exhibit W to the appeal compilation. Thereafter in view of differences in the Arbitral Tribunal, all the three learned Judges signed the following final operative Award on 14th June, 2001:---

(3.) IT is material to note that in the arbitration petition, it is the majority Award (Exhibit V) which is challenged as per its prayers and not the final operative Award (Exhibit X) signed by all the arbitrators. Before the learned Single Judge, it was canvassed that the majority Award was against public policy and that is how section 34 (b) (ii) of the Arbitration and Conciliation Act was attracted. It was submitted that there was a non-application of mind to the facts and the law and thereby there was violation of principles of natural justice which form a part of the public policy and that is how the Award was bad. This submission was on the footing that the issue of limitation raised by the respondents was ignored. As far as the appellants are concerned, it was submitted on their behalf that what was challenged before the Single Judge was only the majority Award and not the final Award signed by all the three Judges. It was also submitted that the concept of public policy cannot be extended and that the scope of section 34 was a limited one.