The Bombay High Court has dismissed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award directing a cooperative bank to refund amounts secured through fixed deposits and LIC policies, holding that the plea of res judicata cannot be entertained in the absence of specific pleadings and production of prior proceedings.
Justice Sandeep V. Marne upheld the arbitral tribunal’s finding that a handwritten letter relied upon by the bank to assert security interest was procured by coercion and misrepresentation, and found no perversity or patent illegality warranting interference under Section 34.
The dispute arose after TJSB Sahakari Bank Ltd. asserted rights over the respondent’s fixed deposits and LIC policies based on a handwritten letter dated April 7, 1998, which the respondent alleged was obtained through coercion. The arbitral tribunal accepted the respondent’s case, holding that the letter was procured by misrepresentation and that earlier proceedings before the Co-operative Court, which dealt only with the discharge of guarantee, did not bar the claim.
Challenging this finding, the bank approached the Bombay High Court under Section 34 of the Arbitration Act. The Court dismissed the petition, holding that the bank relied on earlier proceedings before the Cooperative Court, where the issue of coercion was neither pleaded nor framed as an issue in those proceedings, and mere observations made while deciding other issues could not operate as res judicata. It reiterated that res judicata is a rule of estoppel requiring foundational pleadings and proof of identity of issues, which were absent in the present case.
While upholding the arbitral award on merits, the Court partly set aside the award only on the issue of interest, holding that the error did not warrant setting aside the entire award. Referring to the Constitution Bench decision in Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (2025) 7 SCC 1, the Court exercised its power under Section 34 of the Arbitration Act to modify the award and substituted the rate of interest with 13.5% per annum, payable at quarterly rests, in place of 17.5% per annum.
Accordingly, the petition was dismissed.
Appearances
Mr. Shadab Jan with Mr. Nikhil Rajani and Mr. Ajay Deshmane i/b M/s. V. Deshpande & Co.for the Petitioner.
Mr. Sharad Bansal i/b Mr. Laxman I. Jain for the Respondent
