The Bombay High Court recently reiterated that the doctrine of severability can be applied to arbitral awards, so long as the objectionable part can be segregated.
The Arbitral Tribunal cannot decide an issue in violation of the terms of the agreement between parties, by applying the principles of equity.
This is especially true when parties have not expressly authorized the arbitrator to decide the matter ex aequo et bono or as amiable compositeur under Section 28(2) of the A&C Act, the court added.
In a recent case pertaining to the agreement between John Peter Fernandes and Saraswati Ramchandra Ghanate, the court held that after a dispute arose between the parties regarding the amount of consideration paid by Fernandes, the Arbitral Tribunal rejected Fernandes’s claim for specific performance of the agreement. However, the tribunal directed Ghanate to refund the amount paid under the agreement, along with interest, to Fernandes but deducted an amount alleged to have been paid by cash to Ghanate because it was not proved by cogent evidence.
Both Fernandes and Ghanate challenged the award before the Bombay High Court.
The Court upheld the award rejecting specific performance of the agreement but set aside the award to the extent it directed a refund of money to Fernandes, finding that the Arbitrator had transgressed his jurisdiction.