Arbitration and Conciliation Act, 1996 – s.34(4) – Arbitral award passed by sole arbitrator pursuant to dispute between parties being referred to arbitration u/s.8 over claims made by appellant – Petition filed by respondent u/s.34(1) for setting aside the award – In the same petition, Notice of Motion moved by appellant for remitting the matter to Sole Arbitrator u/s.34(4) – The Arbitrator had framed five points for determination and point no.1 was, “Whether the contract was illegally and abruptly terminated by the respondent?” – High Court held that unless and until a finding was recorded on point no.1 first, the Arbitrator should not have proceeded to record findings on the claims made by appellant, as such, the Arbitrator committed jurisdictional error – High Court held that the defect in the award was not curable and accordingly dismissed the Notice of motion taken out by appellant u/s.34(4) – Propriety – Held: Proper – Merely because an application is filed u/s.34(4) by a party, it is not always obligatory on the part of the Court to remit the matter to Arbitral Tribunal – Discretionary power conferred u/s.34(4), is to be exercised where there is inadequate reasoning or to fill up the gaps in the reasoning, in support of the findings which are already recorded in the award – Under 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 – A harmonious reading of ss.31, 34(1), 34(2A) and 34(4), make it clear that in appropriate cases, on request made by a party, Court can give an opportunity to the arbitrator to resume the arbitral proceedings for giving reasons or to fill up the gaps in the reasoning in support of a finding, which is already rendered in the award – But at the same time, when it prima facie appears that there is a patent illegality in the award itself, by not recording a finding on a contentious issue, in such cases, Court may not accede to the request of a party for giving an opportunity to the Arbitral Tribunal to resume the arbitral proceedings. Judgment / Order – ‘finding’ and ‘reasons’ – Difference between – Held: Finding is a decision on an issue whereas reasons are the links between the materials on which certain conclusions are based and the actual conclusions.
Dismissing the appeal, the Court
HELD: 1. From a reading of Section 34(4) of the Arbitration and Conciliation Act, 1996, it is clear that on receipt of an application under sub section (1), in appropriate cases on a request by a party, Court may adjourn the proceedings for a period determined by it in the order to give the Arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of Arbitral Tribunal, will eliminate the grounds for setting aside the arbitral award. [Para 17][904B-D]
2. When it is the specific case of the respondent that there is no finding at all, on point no.1 viz. “whether the contract was illegally and abruptly terminated by the respondent?”, remission under Section 34(4) of the Act, is not permissible. Section 34(4) of the Act, can be resorted to record reasons on the finding already given in the award or to fill up the gaps in the reasoning of the award. There is a difference between ‘finding’ and ‘reasons’. Finding is a decision on an issue whereas reasons are the links between the materials on which certain conclusions are based and the actual conclusions. In absence of any finding on point no.1, as pleaded by the respondent and further, it is their case that relevant material produced before the Arbitrator to prove ‘accord and satisfaction’ between the parties, is not considered, and the same amounts to patent illegality, such aspects are to be considered by the Court itself. It cannot be said that it is a case where additional reasons are to be given or gaps in the reasoning, in absence of a finding on point no.1 viz. “whether the contract was illegally and abruptly terminated by the respondent?” [Para 20][905-H; 906-A-D]
3. 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. When application is filed under Section 34(4) of the Act, the same is to be considered keeping in mind the grounds raised in the application under Section 34(1) of the Act by the party, who has questioned the award of the Arbitral Tribunal and the grounds raised in the application filed under Section 34(4) of the Act and the reply thereto. Merely because an application is filed under Section 34(4) of the Act by a party, it is not always obligatory on the part of the Court to remit the matter to Arbitral Tribunal. The discretionary power conferred under Section 34(4) of the Act, is to be exercised where there is inadequate reasoning or to fill up the gaps in the reasoning, in support of the findings which are already recorded in the award. Under 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. If there are no findings on the contentious issues in the award or if any findings are recorded ignoring the material evidence on record, the same are acceptable grounds for setting aside the award itself. Under guise of either additional reasons or filling up the gaps in the reasoning, the power conferred on the Court cannot be relegated to the Arbitrator. In absence of any finding on contentious issue, no amount of reasons can cure the defect in the award. A harmonious reading of Section 31, 34(1), 34(2A) and 34(4) of the Arbitration and Conciliation Act, 1996, make it clear that in appropriate cases, on the request made by a party, Court can give an opportunity to the arbitrator to resume the arbitral proceedings for giving reasons or to fill up the gaps in the reasoning in support of a finding, which is already rendered in the award. But at the same time, when it prima facie appears that there is a patent illegality in the award itself, by not recording a finding on a contentious issue, in such cases, Court may not accede to the request of a party for giving an opportunity to the Arbitral Tribunal to resume the arbitral proceedings. Further, as rightly contended by the respondent, that on the plea of ‘accord and satisfaction’ on further consideration of evidence, which is ignored earlier, even if the arbitral tribunal wants to consciously hold that there was ‘accord and satisfaction’ between the parties, it cannot do so by altering the award itself, which he has already passed. [Para 21][906-E-H; 907-A-E]
Kinnari Mullick and Anr. v. Ghanshyam Das Damani (2018) 11 SCC 328; Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd. (2019) SCC ONLINE SC 1656 and Som Datt Builders Limited v. State of Kerala (2009)
10 SCC 259 : [2009] 14 SCR 611 – distinguished.
AKN & Anr. v. ALC & Ors. (2015) SGCA 63 [Decision of Supreme Court of Appeals] – distinguished.
Income Tax Officer, A Ward, Sitapur v. Murlidhar Bhagwan Das AIR 1965 SC 342 : [1964] SCR 411 and J. Ashoka v. University of Agricultural Sciences and Ors. (2017) 2 SCC 609 : [2016] 11 SCR 81 – relied on.
Permasteelisa Pacific Holdings Ltd. v. Hyundai
Engineering & Construction Co. Ltd. (2005) SGHC 33 [Decision of Supreme Court High Court] – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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