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Ratnam Sudesh Iyer v. Jackie Kakubhai Shroff

Civil Appeal · 2021 INSC 712Decided 10 Nov 2021
Civil Appeal No. 6112 of 2021
Justice Sanjay Kishan Kaul · Justice M.M. Sundresh

Background

The appellant and respondent were co-shareholders in an Indian investment company holding shares in a media company. A dispute arose after the respondent accused the appellant of forging his signature on a document, and he filed a police complaint. The parties settled through a Deed of Settlement in 2011, under which the respondent agreed to withdraw his complaints and not make further allegations, in exchange for payments of US$1.5 million and US$2 million. After the respondent's wife sent emails criticising the appellant (including calling him a "forger"), the appellant claimed this breached the settlement and triggered arbitration, ultimately winning an arbitral award in his favour for US$1.5 million plus forfeiture of the respondent's further payment.

Decision Breakdown

The Bombay High Court had set aside the arbitral award, and the Supreme Court was asked to decide whether that interference was legally justified. The Court first determined that because the appellant was based in Singapore, this was an "international commercial arbitration," but since the Section 34 challenge had commenced before the 2015 amendments to the Arbitration Act took effect, the older, more liberal (pre-2015) standard for setting aside awards applied. Applying that standard, the Court agreed with the High Court that the arbitrator's award was contrary to the fundamental policy of Indian law and produced a result so one-sided and unjust that it could not stand: the respondent's wife's indiscreet but relatively mild emails did not justify stripping the respondent of the entire financial benefit of a settlement under which he had already given up his real claims. The Supreme Court dismissed the appeal, upholding the setting aside of the award.

Lesson Learnt

Courts will step in to undo an arbitration award, even though arbitration is meant to be largely final, if the outcome is so disproportionate or unfair that it violates basic principles of justice, especially when a settlement's benefits are stripped away over a minor or indirect breach.

Official source (sci.gov.in)View Judgment (PDF)

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