The Bombay High Court has partly allowed a petition filed by Eicher Motors Limited, setting aside an arbitral award that directed the company to pay compensation and legal costs to a shareholder for delay in issuing replacement share certificates. However, the Court upheld the direction requiring the company to issue the shares.
Justice Sharmila U. Deshmukh was hearing a challenge under Section 34 of the Arbitration and Conciliation Act against an award that had declared the respondent-shareholder’s ownership over Eicher Motors shares and directed issuance of 1,000 shares, along with ₹4.83 lakh as compensation calculated through interest and ₹2 lakh towards legal costs.
The dispute arose after the respondent, an 81-year-old shareholder, surrendered an original share certificate for 100 shares in March 2024 seeking issuance of replacement certificates reflecting a stock split. Despite scrutiny being completed by the company’s registrar and transfer agent, the new shares were not issued for several months. The shareholder thereafter initiated proceedings through the CADRE ODR platform and subsequently arbitration.
Before the arbitrator, the shareholder claimed that the delay had caused financial hardship, including inability to liquidate the shares and the need to borrow funds for urgent medical expenses. The arbitral tribunal accepted the claim and awarded compensation by applying 12% interest on the market value of the shares.
Challenging the award, Eicher Motors argued that while it had complied with the direction to issue the shares, there was no evidence supporting the award of compensation or legal costs. The company contended that the tribunal had relied on share price data sourced from Yahoo Finance without placing the material on record or granting an opportunity to respond.
Accepting the contention, the High Court held that there was no oral or documentary evidence establishing either loss of profits or financial loss suffered by the shareholder. The Court observed that claims relating to missed investment opportunities or borrowing for medical needs required proof, which was absent in the record.
The Court further found fault with the tribunal’s reliance on information obtained from Yahoo Finance after the hearing had concluded. It held that using material sourced by the tribunal itself, without furnishing it to the parties or providing an opportunity to address it, amounted to a violation of the Arbitration Act and constituted patent illegality.
On the issue of costs, the Court noted that the respondent had appeared in person throughout the arbitration proceedings and had not produced any material demonstrating expenditure of ₹2 lakh towards legal costs. The award did not explain how such costs were calculated or why they were considered reasonable.
Holding that both the compensation component and the award of legal costs were unsustainable, the Court severed those portions from the award while preserving the direction requiring issuance of shares. Accordingly, it quashed the award of ₹4.83 lakh compensation and ₹2 lakh legal costs, while leaving intact the relief relating to issuance of the share certificates.
