Background
The Delhi High Court has upheld an arbitration award directing Bajaj Finance to pay ₹28 crore in a dispute related to the sale of security. The ruling came after Bajaj Finance challenged the arbitral tribunal’s decision, arguing that the award was erroneous and contrary to contractual terms.
Court’s Rationale
- Limited Scope of Judicial Review
- The court reiterated that under Section 34 of the Arbitration and Conciliation Act, 1996, judicial intervention in arbitral awards is limited.
- It found no grounds to set aside the award as there was no evident illegality or violation of public policy.
- Validity of the Arbitrator’s Findings
- The arbitral tribunal had ruled that Bajaj Finance’s actions in the sale of security were not in compliance with contractual obligations.
- The court noted that arbitration findings, unless patently illegal, should not be interfered with.
- Fairness in Commercial Transactions
- The judgment emphasized that financial institutions must adhere to fair practices when liquidating securities to recover dues.
- It underscored that failure to follow due process could result in financial liability, as seen in this case.
Existing Measures
- Arbitration and Conciliation Act, 1996: Limits judicial interference in arbitration matters.
- SEBI and RBI Guidelines on Security Sales: Regulate financial institutions’ conduct in handling securities.
- Contract Law Principles: Ensure adherence to terms agreed upon in financial transactions.
Conclusion
By upholding the ₹28 crore award, the Delhi High Court reaffirmed the binding nature of arbitration in commercial disputes. The ruling serves as a cautionary precedent for financial institutions, reinforcing the importance of compliance with contractual and regulatory obligations.