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BOMBAY HIGH COURT QUASHES ARBITRATION AWARD THAT RELIED ON UNVERIFIED EXPERT OPINION

Introduction 

The Bombay High Court in Aakash Packaging v. Arenel (P) Ltd. by Justice R.I. Chagla set aside an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, holding that the award was vitiated by perversity and violation of natural justice.

 

Background of the Dispute

The petitioner, Aakash Packaging, supplied packaging materials to the respondent, Arenel (P) Ltd., Zimbabwe, under two invoices in 2012–13. After the first shipment was received in January 2013, Arenel alleged that the packaging emitted a strong odour, rendering it unsuitable for use in food products. Both parties commissioned independent tests from SGS India, an international laboratory.

  • The SGS India reports (dated 25 March 2013 and 8 May 2013) concluded that the samples met safety and odour standards under EU regulations and the German code.
  • Arenel, however, later obtained a report from SGS Germany, which noted a strong plastic smell in biscuits packaged using the supplied material. Importantly, only the outer packaging and not the inner tray was supplied by Aakash Packaging.

When Arenel demanded a refund of USD 165,102, claiming defective goods, Aakash Packaging denied the allegations and sought payment of outstanding dues. The dispute proceeded to arbitration in 2014.

 

The Arbitral Award

On 2 December 2019, the sole arbitrator ruled in favour of Arenel, finding that the goods supplied were defective and substandard. The arbitrator directed Aakash Packaging to refund the amounts under the Foreign Exchange Management Act, 1999, while rejecting its counterclaims.

Aakash Packaging challenged the award before the Bombay High Court, arguing that:

  1. The arbitrator wrongly disregarded the SGS India reports, which were admitted documents supporting the petitioner’s case.
  2. The arbitrator relied on hearsay evidence from Arenel’s expert witness (CW-2), who had no personal knowledge of the events of 2013.
  3. The award violated Section 18 of the Arbitration Act (equality of parties) and was contrary to Section 34(2)(b)(ii) - conflicting with India’s public policy and “the most basic notions of justice.”

 

Findings of the Court

The court found multiple infirmities in the arbitral reasoning:

  • The arbitrator mischaracterised the SGS India reports as documents obtained by the petitioner when, in fact, one was procured by the respondent itself.
  • The SGS India reports were objective and contemporaneous, both concluding that the packaging met all regulatory standards and showed no odour issues. Ignoring such crucial evidence amounted to perversity.
  • The expert witness (CW-2) had deposed based on what staff members allegedly told him in 2016 about goods received in 2013 plainly hearsay and unsupported by any corroborative testimony.
  • The arbitrator rejected admitted evidence while simultaneously relying on unverified expert opinion, thereby violating principles of natural justice.

The Court held that such findings, “contrary to admitted facts and record,” were arbitrary and offended the most basic notions of justice under the explanation to Section 34(2)(b)(ii).

 

Conclusion

The Bombay High Court concluded that the arbitral award suffered from a grossly erroneous appreciation of evidence and a disregard for admitted documents. By rejecting reliable contemporaneous laboratory reports and relying on hearsay, the arbitrator had acted in a manner that “shocks the conscience of the Court.” Accordingly, the award was set aside.

 

Case Reference:- Aakash Packaging Vs. Arenel (Private) Limited  Commercial Arbitration Petition No. 349 of 2020 Decided on September 8, 2025, [Reserved on: 6th February, 2025]