Rajasthan High Court: Ashok Kumar Gaur, J. found that the writ petition by the petitioner lacks merit and dismissed it stating that no award can be remitted back to the arbitrator where there are no findings on the contentious issues of the award.
The petitioner filed a writ petition challenging the order passed by the commercial court wherein the application filed under Section 34(4) of the Arbitration and Conciliation Act, 1996 (‘Act of 1996') was dismissed. The arbitral award of an earlier case was challenged by the respondent under Section 34 of the Act of 1996 in the commercial court. The petitioner moved an application under Section 34(4) of the Act of 1996 to adjourn the proceedings in the application filed by the respondent and asked to give an opportunity to the Arbitral Tribunal to resume the arbitral proceedings or to take such other action as in the opinion of the Arbitral Tribunal was required to eliminate the grounds for setting aside the arbitral award.
The main grounds raised by the petitioner in the application filed are as under:
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The award of the Arbitral Tribunal omitted the adjudication on every issue to give findings on the issue separately.
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Omitted to explain the words where “bare minimum principles of natural justice” and in “hyper technical ground” while setting aside the impugned termination.
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Omitted the reasons for providing INR Rs.4,80,00,000/- against loss of business, reputation & goodwill and omitted to assign explanation for setting aside the counter claim of the respondent-applicant in the appeal.
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The Arbitral Tribunal was required to be given an opportunity to eliminate the grounds for setting aside the award.
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The bare perusal of the award showed that findings do not discuss and give the reasoning as to why the principles of natural justice were not followed and why the termination of the order was termed as hyper technical ground.
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All the conditions as per the law laid down by Supreme Court in I-Pay Clearing Services Private Limited v. ICICI Bank Limited (2022) 3 SCC 121, were fulfilled by the petitioner by moving an application and as such the court below could not have dismissed the application on the reasons assigned in the impugned order.
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As per law laid down in ‘I-pay case', (2022) 3 SCC 121, the discretion vested with the Court for remitting the matter to the Arbitral Tribunal ought to have been exercised and on bare reading of the award if there is any inadequate reasoning or certain gaps in the reasoning are required to be filled, if such application is filed, then it needs to be allowed.
The points raised by the Respondent were as follows-
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The Court does not need to interfere by allowing a writ petition under Article 227 of the Constitution. If there is an inherent lack of jurisdiction, then only the Court under Article 227 of the Constitution of India can exercise the jurisdiction.
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The present writ petition filed by the petitioner is not maintainable and proper remedy for the petitioner was to either file an appeal under Section 37 of the Act of 1996 or to take recourse under Section 13 of the Commercial Courts Act, 2015.
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In view of the judgment passed by the Supreme Court in ‘I-pay case' (supra), the writ petition filed by the petitioner is liable to be dismissed.
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The reliance placed by counsel for the petitioner on the judgments have all been considered by the Supreme Court which has found that all these judgments were not of any assistance to explain the scope of Section 34 (4) of the Act of 1996.
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The scope of Section 34 (4), Act of 1996 has come to the conclusion that on application being filed under Section 34 (4), Act of 1996, it is always not obligatory for the Court to remit the matter to the Arbitral Tribunal and discretionary power under Section 34 (4), Act of 1996 is to be exercised where there is inadequate reasoning or to fill up the gaps in the reasoning in support of findings, which are already recorded in the award.
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Under the guise of additional reasons and filling up the gaps in the reasoning, no award can be remitted to the Arbitrator where there are no findings on the contentious issues in the award.
The Supreme Court considered the scope of Section 34 (4) of the Act of 1996 in the case of I-Pay Clearing Services Private Limited v. ICICI Bank Limited (2022) 3 SCC 121 wherein it was observed
“19. The quintessence for exercising power under Section 34(4) of the Act is to enable the Tribunal to take such measures which can eliminate the grounds for setting aside the arbitral award, by curing the defects in the award.”
“21. Further, Section 34(4) of the Act itself makes it clear that it is the discretion vested with the Court for remitting the matter to Arbitral Tribunal to give an opportunity to resume the proceedings or not. The words “where it is appropriate” itself indicate that it is the discretion to be exercised by the Court, to remit the matter when requested by a party.”
The Court therefore held that the application under Section 34(4) of the Act of 1996 is required to be decided by the court by exercising its discretionary powers and same powers cannot be exercised under the guise of additional reasons and filling up the gaps in the reasoning and as such award cannot be remitted to the arbitrator or arbitral tribunal and particularly if there are no findings on the contentious issues in the award.
Thus, the Court held that the writ petition lacks merit and the same was dismissed accordingly.
[Eptisa Servicios De Ingenieria SL v. Ajmer Smart City Limited, S.B. Civil Writ Petition No.13488 of 2019, decided on 23-05-2022]
Advocates who appeared in this case :
Mr Ajatshatru Mina, Advocate, for the Petitioner(s);
Mr Rajendra Prasad, Senior Advocate, for the Respondent(s).
*Arunima Bose, Editorial Assistant has reported this brief.