Bombay HC Revives Arbitral Award against TMC and Restricts Section 34 Court Interference
Judgment dated 3.11.2025 of the High Court of Bombay in Arbitration Appeal No.46 of 2015 of M/s. Leaf Bio-Tech Pvt Ltd Vs. Thane Municipal Corporation and others
The dispute arose out of the MoU dated 20.12.1995 by which TMC agreed to provide solid waste to the petitioner for waste treatment and manufacture bio-organic manure. By the lease deed dated 29.3.1996, the area of 36,500 sq.meters was given to the petitioner for 29 years.
In 1998, the petitioner commissioned the plant after taking loans from SICOm and other lenders.
However, TMC stopped garbage supply after May 1999 on the ground that there was public outcry about odour from the plaint, etc. However, in the writ petitions filed against the plant, it was found that there was no basis to implicate the plant.
TMC did not supply garbage even after judgment in PIL writ petitions and findings of the Committee.
This led to the arbitral award for Rs.12.67 crores as compensation payable by the TMC including Rs.8 crores for loss of profit between May 1998 and March 2004, penal interest of Rs.4.40 crores due to the lenders and Rs.23 lakhs as the net present value of future net profits.
However, the District Court set-aside the award on one of the grounds that the interest at 18% is arbitrary and against the public policy.
Section 24(3) of the Arbitration Act – The Arbitral Tribunal wrote to the Chartered Accountant for clarification of “discounting future earnings @33%”.
The letter from the Learned Arbitral Tribunal to the Chartered Accountant is essentially a question from a judicial person who is not proficient with financial literacy, seeking clarification about the method adopted for discounting future profits; and how net profit without finance charges is computed. Ideally, this could have been asked by the Learned Arbitral Tribunal, keeping both sides copied on the correspondence. One has to see if not doing so, in the specific fact situation at hand, vitiates the Arbitral Award and makes it perverse to the point of having to set it aside.
When one sees the reply of the Chartered Accountant it becomes clear that he provided no new evidence to the Learned Arbitral Tribunal. I have carefully compared his reply with the original affidavit filed by him in August 2004. He has set out the very same data that he had already given in evidence, and set out the manner of computation made by him.
