Bombay HC sets aside arbitral award only against the guarantor over unexamined surety defence

A guarantor who had stood surety for a hire-purchase loan challenged, under Section 34 of the Arbitration and Conciliation Act, 1996, an arbitral award of 2012 that enforced the guarantee more than four and a half years after arguments had closed. The Bombay High Court held that delay alone does not void an award, following the Supreme Court's ruling in M/s. Lancor Holdings Limited v. Prem Kumar Menon that each case must be examined on its own facts to see whether the delay affected the arbitrator's grasp of the material.

Here it had: the Arbitrator's award did not deal at all with the guarantor's specific defence that he stood discharged under Sections 133 and 139 of the Indian Contract Act, 1872, because the creditor had varied the loan's delivery schedule and failed to act on an offered one-time settlement, without the guarantor's knowledge or consent. Since this plea of inadequate reasoning was raised only by the guarantor and not by the principal borrower or the other respondents, the Court applied the Supreme Court's recent ruling in Gayatri Balasamy v. ISG Novasoft Technologies Limited that an award may be severed and partly modified or set aside, and accordingly set the award aside only to the extent it bound the guarantor, leaving it undisturbed against the borrower and the other respondent. The Arbitration Petition was disposed of accordingly.