Power of judiciary Sec 34 Arbitration and Conciliation Act, 1996 by Zainub@LEXCLIQ

An Arbitral Award passed under Section 31 of the Arbitration and Conciliation Act, 1996 is basically an arbitral tribunal’s declaration of ‘resolution of issues’ and no provision for appeal against the award is present in the 1996 Act based on the UNCITRAL Model Law as a matter of deliberate legal structure.

Section 34 of the 1996 Act, however, requires an aggrieved party to pray for the setting aside of the arbitral award. The supervisory court’s powers to set aside an arbitral award have been expressed in the narrow grounds provided for in Section 34 of the 1996 Act, as well as in the judicial pronouncements in this respect.

 

Supervising courts do not have the power to alter or modify or remand back the award for reconsideration to the arbitral tribunal.However, in certain cases the courts have altered or modified the Arbitral award before upholding or remanding it to the Arbitral Tribunal.

Section 34(4) of the 1996 Act which empowers the Court, where appropriate and so requested by a party, to adjourn the proceedings under Section 34(1) of the 1996 Act for setting aside the Arbitral Award, for a period of time determined by it, to give the arbitral tribunal an opportunity to take steps that in its opinion will eliminate the grounds available for setting aside an award.

Section 34(4) – “(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in 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.”

Section 34(4) of the Act, therefore, empowers the court to merely adjourn the proceedings challenging the arbitral award,  in order to eliminate the defects in the arbitral award, an appropriate court can either set aside the award under section 34(1) or adjourn the proceedings under section 34(4). The conditions  are –

  • an application under section 34 (1) of the Act to set aside the award;
  • subsequent determination by the court that the same is appropriate; and
  • request by a party in this regard.

The court cannot exercise its powers suo moto under this Provision.

 

In the case of MMTC v. Vicnivass Agency  the Madras High Court adjudicated upon the scope of section 34(4) of the Act and observed its departure from the provision of remand provided under section 16 of the 1940 Arbitration Act. The Court gave a wider interpretation to section 34(4) of the Act even though the said Section does not provide substantive grounds for remand in contrast to section 16 of the 1940 Act, which provided three grounds for remittal,

  • where the award has left undetermined any of the matters referred to arbitration or where it determines any matter not referred to arbitration and such matter cannot be separated without affecting the determination of the matters referred to; or
  • where the award is so indefinite as to be incapable of execution; or
  • where an objection to the legality of the award is apparent on the face of it.

 

The Supreme Court has interpreted Section 34 (4) of the Act in Kinnari Mullick and Another vs. Ghanshyam Das Damani wherein the Ld . Single Judge of the Hon’ble High Court had set aside the arbitral award due to lack of reason, which was also upheld by the Ld. Division Bench in appeal. However, the Division Bench suo moto decided to relegate the parties back to the arbitral tribunal with a direction to the arbitral tribunal to assign reasons in support of its award. Therefore, the substantial question of law before the Hon’ble Supreme Court was whether a court, under Section 34(4) of the Act, is empowered to remand the parties back before the arbitral tribunal with a direction to assign reasons in support of the arbitral award, especially when the arbitral award has been set aside by the Single Judge, and the Division Bench has concurred with that finding.

 

The judgement in Kinnari Mullick was relied upon by the Hon’ble Supreme Court in Radha Chemicals Vs. Union of India, wherein the Ld. Single Judge of the Hon’ble High Court while disposing the application under Section 34 of the 1996 Act had held that the point of limitation had not been decided correctly and directed to remand the matter to the sole arbitrator to decide the point of limitation afresh. The learned Single Judge had also held that a new arbitrator would have to be appointed in order to decide the matter afresh. The Ld. Division Bench upheld the judgment of the learned Single Judge in appeal.

 

Therefore, in view of aforesaid judicial pronouncements the position of law with respect to Section 34 (4) of 1996 Act can be summarized as follows:

  1. Upon a written request from one of the parties, the Court may adjourn proceedings pursuant to Section 34(4) of the Act to set aside the award in order to give the Arbitral Tribunal the opportunity to take any action which, in the opinion of the Tribunal, eliminates the grounds for setting aside the award.
  2. In order to exercise power under Section 34(4), it is necessary  that the arbitral award has not already been set aside.
  3. The Parliament in the Court has not been allowed to refer the matter to the arbitral tribunal, except to suspend the proceedings for the restricted reason referred to in Section 34. (4).
  4. Only upon a written request by a party until the arbitral award has been set aside will the restricted power available to the Court under this provision be exercised and such discretion cannot be exercised.
  5. There is no compulsion or requirement on the arbitral tribunal to do or refrain from doing a certain act in compliance with the instructions provided to it by the supervisory court under Section 34(4) of the Act. The tribunal may decide not to take any further action and enable the Court, pursuant to Section 34(2) of the Act, to decide the matter, because Section 34(4) is only an enabling provision and not a strict provision.An order of remand to cause something to be done by the arbitrator. On the other hand, it may also be the case that, following the resumption of the arbitral proceedings, the arbitral tribunal may hold additional evidence. All that is required is the arbitral tribunal’s subjective satisfaction that the venture pursued by it will eradicate the basis for setting aside the award.

 

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