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CS Professional · Arbitration, Mediation and Conciliation · Commercial Transactions

In a domestic arbitration between Bharat Steels Pvt Ltd and Deccan Fabricators, the tribunal feels that strict application of the contract would be harsh on Deccan and proposes to decide the case on what it considers just and fair. The arbitration agreement is silent on this and no party has said anything about it. Is the tribunal entitled to proceed so?

The tribunal cannot decide on what it thinks just and fair. It may decide ex aequo et bono or as amiable compositeur only where the parties have expressly authorised it, and here the agreement and parties are silent, so it must apply the law and the contract terms.

  1. AYes, because a tribunal always has inherent power to decide as amiable compositeur
  2. BYes, if the presiding arbitrator alone considers the result fairer
  3. CNo, because it may decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorised itCorrect
  4. DNo, because equity can be applied only by a civil court and never by agreement of parties

Explanation

The Act permits the tribunal to decide ex aequo et bono or as amiable compositeur only when the parties have expressly authorised it. Here there is no express authorisation, so the tribunal must decide per the law and the contract. Option four is wrong because parties can expressly authorise equity-based decision.

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