The Delhi High Court has refused to set aside an arbitral award in a commercial dispute between Zreyah Semiconductors Pvt. Ltd. and OYO Hotels and Homes Private Limited, reiterating the limited scope of judicial interference under Section 34 of the Arbitration and Conciliation Act, 1996.

Hon’ble Justice Avneesh Jhingan observed that the arbitral tribunal’s interpretation of the contractual terms between the parties constituted a plausible view and therefore did not warrant interference by the Court.

The dispute arose from a purchase order issued by OYO for the electronic switches to Zreyah. Subsequently, the parties entered into a Vendor Agreement, under which the petitioner was required to procure certain components from vendors identified by OYO and assemble the switches for supply. However, the switches were not delivered within the stipulated timeline, which led to disputes between the parties. Arbitration proceedings were subsequently initiated in terms of the Vendor Agreement. The arbitral tribunal found that Zreyah had failed to comply with the purchase order and directed the petitioner to deliver switches that were ready and to pay the remaining amount to OYO along with interest.

Before the High Court, Zreyah contended that it was merely an assembler and not a manufacturer, and that procurement of components was contingent upon advance payments from OYO. It was argued that the arbitrator had erred in interpreting the contractual arrangement and had failed to appreciate that full advance payment was required for procuring the necessary components.

Rejecting these submissions, the Hon’ble Court observed that the Vendor Agreement did not stipulate any requirement for 100% advance payment for the procurement of components. Instead, the agreement provided that payment of invoices would be made after delivery and acceptance of the products. The Court further emphasized that interpretation of contractual terms primarily falls within the domain of the arbitral tribunal.

Reiterating the settled principles governing proceedings under Section 34 of the Act, the Court relied on the Supreme Court’s decisions in Prakash Atlanta (JV) v. National Highways Authority of India, Ramesh Kumar Jain v. Bharat Aluminium Company Limited, and Parsa Kente Collieries Limited v. Rajasthan Rajya Vidyut Utpadan Nigam Limited. The Court observed:

“It is trite law that upon re-appreciation of evidence, a possible second view cannot be a ground for interference under Section 34 of the Act unless the conclusion arrived at is perverse. The interpretation of the terms of the contract by the arbitrator, in the normal course, is not to be interfered with.”

The Court further noted that where an arbitrator adopts a plausible interpretation of a contract, courts exercising jurisdiction under Section 34 cannot substitute their own view merely because another interpretation may also be possible.

Finding no perversity, patent illegality, or conflict with public policy in the arbitral award, the Court dismissed the petition filed by Zreyah Semiconductors.

OYO was represented by a team from Desai & Diwanji led by Sumant Nayak, Senior Partner with assistance from Ankit Premchandani, Associate Partner and Smriti Shukla, Associate.

Case Details: Zreyah Semiconductors Private Limited v. OYO Hotels and Homes Pvt. Ltd., O.M.P. (COMM) 249/2023.