India: Relevance Of Consent By Parties For Fresh Award Under Section 34 Of The Arbitration Act: Mutha Construction vs. Strategic Band Solutions (I) Pvt. Ltd

INTRODUCTION

Whenever the Court sets aside an award and remits the dispute back to the learned Arbitrator for deciding afresh in accordance with the law, it means that the whole award has been set aside and that the arbitrator is required to consider all the disputes between the parties afresh. Usually, in the cases where the award leaves some of the matters undetermined or there is uncertainty in the award, the Court in such circumstances can remit the matter back to the Arbitrator to decide the same. Under the ambit of SubSection 34(4) of the Arbitration and Conciliation Act, 1996 (“the Act”) request and consent of the parties to remit the matter to the Arbitrator and start the Arbitration afresh plays a vital role. Section 34 (4) provides that the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period 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 the arbitral tribunal will eliminate the grounds for setting aside the arbitral award. The Division Bench of the Hon'ble Supreme Court consisting of Justice M.R Shah and Justice B.V Nagarathna in the matter of Mutha Construction (“the Petitioner”) vs. Strategic Brand Solutions (I) Pvt. Ltd.(“Respondent”), Special Leave Petition (Civil) No. 1105 of 2022 dated 04.02.2022 observed and emphasized that when both the parties have agreed to set aside the award and to remit the matter to the learned Sole Arbitrator for fresh reasoned Award, it is not open to contend that the matter may not be and/or ought not to have been remanded to the same sole arbitrator.

BRIEF FACTS

In the present case, the parties were in arbitration before the learned Sole Arbitrator, and eventually an award dated 17.01.2018 was passed. The Petitioner preferred the Commercial Arbitration Petition No.511 of 2018 under Section 34 of the Act and vide Order dated 30.04.2019, the learned Single Judge by consent set aside the award and remanded the matter to the learned Sole Arbitrator to pass a fresh reasoned award. The Petition under Section 34 of the Act, therefore, was disposed of accordingly. 

The Petitioner thereafter sought modification of the Order dated 30.04.2019 submitting that the consent had not been accorded for the matter being sent to the same learned Sole Arbitrator. The said request for modification was rejected by the learned Single Judge. Thereafter, the Petitioner filed a Commercial Arbitration Appeal No.466 of 2019 challenging the Order dated 30.04.2019, on the limited aspect of consent to have the matter heard by the same sole arbitrator. The same was heard by the Division Bench on 17.07.2019 and the appeal came to be dismissed as not pressed, reserving liberty to the petitioner to seek review of the order dated 30.04.2019.

The Petitioner subsequently filed a Review Petition No. 39 of 2019 before the Ld. Single Judge. The Ld. Single Judge by order dated 22.11.2019 rejected the review petition observing that the order dated 30.04.2019 was passed by consent. Aggrieved by the said order of rejection of the review petition, the Petitioner preferred the present I.A. No.2146 of 2019 in Commercial Appeal No.466 of 2019 seeking restoration of the said appeal. The Hon'ble High Court by the impugned order dated 12.01.2022 dismissed the said I.A. and refused to restore the appeal specifically observing that as the order passed by the learned Single Judge dated 30.04.2019 was a consent order, therefore, even if the appeal would have been restored no useful purpose would be served and that the court was not inclined to allow the appeal on merits if the same be restored.

Aggrieved and dissatisfied with the impugned order dated 12.01.2022 passed by the Division Bench of the Hon'ble Bombay High Court by which the Court had dismissed the said I.A. for restoration of the appeal, the original applicant before the Hon'ble High Court preferred Special Leave Petition before the Apex Court.

SUBMISSIONS BY THE PETITIONER QUA SETTING ASIDE THE AWARD AND REMANDING THE MATTER BACK TO THE SAME SOLE ARBITRATOR

The Petitioner in the instant case, relied upon Kinnari Mullick and Anr. vs. Ghanshyam Das Damani¹ , Dyna Technologies Private Limited vs. Crompton Greaves Limited, 2019² ; IPay Clearing Services Private Limited Versus ICICI Bank Limited³ , wherein the Court had held that in the exercise of powers under Section 34 of the Act the Appellate Court cannot set aside the award on the ground that no reasons have been assigned and the matter cannot be remanded to the same Arbitrator to give reasons. Further, it was emphasized that Section 5 of the Act provides that there shall be no judicial intervention except where so provided in the Act. It was also submitted that the Arbitration Act under Section 34 of the Act does not provide that the Appellate Court can set aside the award and remand the matter to the same sole Arbitrator to provide the reasons.

OBSERVATIONS OF THE HON'BLE SUPREME COURT

The Hon'ble Supreme Court did not accept that it was not a consent order to remand the matter to the same learned sole Arbitrator to pass a fresh reasoned Award. The Hon'ble Apex Court duly observed that the very learned Single Judge who passed the order dated 30.04.2019 has given the finding that the order dated 30.04.2019 was a consent order. The Court noted that in the order dated 30.04.2019 the learned Single has specifically observed that “the parties intend to approach the learned sole arbitrator for a fresh reasoned award”. It was further also observed that “the parties intend to request the learned sole Arbitrator to publish a fresh award as expeditiously as possible”. The Court from the wordings mentioned in the Order of the Ld. Single Judge thus denoted that the intention of the parties was very much clear

The Hon'ble Supreme Court referring to abovementioned judicial decisions relied upon by the Petitioner, observed that the principle of law laid down by this Court would be applicable where the Appellate Court decides the application under Section 34 of the Act on merits and thus held that the judicial decisions cited were inapplicable in the present case as the order dated 30.04.2019 was a consent order and the parties had themselves agreed to set aside the award and remand the matter to the Sole Arbitrator for a fresh reasoned award.

The Hon'ble Court held that the award even if it is set aside under Section 34 of the Act on whatever grounds available under Section 34 of the Act, in that case, the parties can still agree for the fresh arbitration by the same arbitrator. The Hon'ble Court emphasized that “In the present case both the parties agreed to set aside the award and to remit the matter to the learned Sole Arbitrator for fresh reasoned Award. Therefore, once the order was passed by the learned Single Judge on consent, thereafter it was not open for the petitioner to contend that the matter may not be and/or ought not to have been remanded to the same sole arbitrator.”, and dismissed the Special Leave Petition.

CONCLUSION

The Hon'ble Supreme Court in the instant matter has thus made it clear that a Court while deciding an application under Section 34 of the Arbitration and Conciliation Act has no jurisdiction to remand the matter to the same Arbitrator for a fresh decision is applicable only when the said petition is decided on merits. However, this principle is inapplicable in cases where both the parties have agreed to set aside the award and to remit the matter to the same Arbitrator for a fresh reasoned Award.

Footnotes

1. (2018) 11 SCC 328

2. SCC Online SC 1656

3. 2022 SCC Online SC 4

Originally published February 2022

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