India: Court Cannot Remand The Matter Under Section 34 Of The Arbitration & Conciliation Act, 1996

Under Section 34, the court does not have the jurisdiction to remand the matter to the arbitrator for fresh decision

IN THE SUPREME COURT OF INDIA

Radha Chemicals v. Union of India
Civil Appeal No. 10386 of 3018 (Arising out of SLP (C) No. 2334/218)
Decided On 10.10.2018

FACTS

The Appellant-Respondent used to supply goods to Union of India (the Respondent-Petitioner, the "UOI") under contracts from November from 1987 to 1991.

Consequently, when the issues and differences arose between the parties, the Appellant-Respondent sent a notice for the matter to be referred to arbitration in 2004.

Subsequent to which on 28.02.2007 the arbitrator made and published the award in favor of the Appellant-Respondent for a sum of Rs. 21,60,440/- (Rupees twenty-one lakh sixty thousand four hundred and forty only) along with 12% interest per annum.

At the Appeal stage before the Ld. Single Judge, it was contended by the UOI (the Petitioner in the appeal) that the award should be remitted back to the arbitration as it is barred by Section 14 of the Limitation Act, 1963.

To this the Appellant-Respondent contented that due to lodging of purchase bill as per the standard and the writ application in 1993 against the UOI to make payment which was eventually disposed of in 2002, the Appellant-Respondent is entitled for exclusion of the time period during which the writ was pending and thus, their award was not barred by the Limitation Act, 1963.

However the Ld. Single Judge remitted the award to be decided on the point of limitation to a newly appointed arbitrator.

From this an Appeal was preferred to the Division Bench which was dismissed on 06.11.2017.

Thus, the present Special Leave Petition arose before the Honorable Supreme Court.

ISSUES BEFORE SC

Whether the Court under Section 34 of the Arbitration and Conciliation Act, 1996 has jurisdiction to remand the matter to the arbitrator for fresh decision.

OBSERVATION

The Supreme Court while setting aside the decision of the Ld., Single Bench and the Division Bench observed the following:

"... that the court while deciding a Section 34 petition has no jurisdiction to remand the matter to the Arbitrator for a fresh decision. It is, therefore, clear that the learned Single Judge's judgment is contrary to this judgment as a result of which both the judgments if the Single Judge as well as the Division Bench have to be set aside."

Thus, the Court while relying upon Kinnari Mullick and Another v. Ghanshyam Das Damani (2018) 11 SCC 328, a Calcutta High Court decision, held that while deciding a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (the 1996 Act), the Court has no jurisdiction to remand the matter.

CONCLUDING VIEW

The Supreme Court took a holistic view and relegated the matter to the stage of original Section 34 petition and remanded the matter to the Single Ld. Judge to decide on limitation as per the provisions of the Arbitration & Conciliation Act, 1996 and the Limitation Act, 1963.

REASON OF JURISPRUDENCE

The Court contained itself to Section 34 of the 1993 Act, which lays down the parameters and procedure upon which an award passed by the arbitrator can be set aside.

Sub-section (4) of Section 34, stated to give the arbitral tribunal time to resume the proceedings and eliminates the grounds, as such, for setting aside the arbitral award and that such an application should be made within three (3) months from the date of a party receiving arbitral awards, unless otherwise in the opinion of the Court.

In the present scenario the award was made and published almost ten (10) years ago from the date of the appeal, and the grounds on which the award was challenged was the limitation period, which prima facie, was not raised until the Appeal in 2017.

And, while the interference of the Court is expected to be kept minimal therefore, the remedy to set aside arbitral award and the discretion exercised by the Court is limited.

Further, as observed by the Court in the Kinnari Mullick's supra, the Court stick to same view that it has no jurisdiction to send the matter for fresh decision.

AMLEGALS REMARKS

The present order of the Supreme Court has further clarified the stand of jurisdiction and discretion which the Court needs to exercise while remitting a matter for arbitration in lieu of Section 34 in its entirety and not in isolation.

This content is purely an academic analysis under "Legal intelligence series".

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