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Remittal of Arbitral Award: An Analysis of Section 34(4) of the Arbitration Act

September 29, 2018

[Tanya Varshney is a fourth-year student at Jindal Global Law School.]

 

In Kinnari Mullick v. Ghanshyam Das Damani, the Supreme Court of India opined that courts have the power to defer the hearing of an application made under section 34 of the Arbitration and Conciliation Act, 1996, as amended (Act), for setting aside an award on a written request made by a party to the arbitration proceedings to facilitate the arbitral tribunal to resume the proceedings or to take such other action as, in the opinion of tribunal, will eliminate the grounds for setting aside the arbitral award. The option to adjourn the proceedings and remand the award back to the tribunal is available to the parties so that, instead of opting for the tedious process of setting aside the award through court-enforced mechanism, the tribunal can remove the defects in the award when the court remands the award for reconsideration. The Supreme Court also highlighted that the statute does not expressly empower the court to remit the arbitral award to the tribunal but allows it to adjourn the proceedings under section 34(4) of the Act. Moreover, in McDermott International Inc. v. Burn Standard Ltd., the Supreme Court had similarly elucidated that the object of section 34(4) of the Act is to give an opportunity to the tribunal to resume the arbitral proceedings or to enable it to take such other action which will eliminate the grounds for setting aside the arbitral award.

 

In MMTC v. Vicnivass Agency, the Madras High Court adjudicated upon the scope of section 34(4) of the Act and the departure from the provision of remand under section 16 of the Arbitration Act, 1940 (1940 Act). The Court gave a wider interpretation to section 34(4) of the Act which does not provide substantive grounds for remand in contrast to section 16 of the 1940 Act which provided three grounds for remittal, namely, (i) 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 (ii) where the award is so indefinite as to be incapable of execution; or (iii) where an objection to the legality of the award is apparent on the face of it. On the other hand, section 34(4) of the Act empowers the court to merely adjourn the proceedings challenging the arbitral award. In order to eliminate the defects in the arbitral award, the court could either set aside the award under section 34(1) or adjourn the proceedings under section 34(4). The conditions pre-requisite for the court to adjourn the proceedings under section 34(4) are – (i) an application under section 34 (1) of the Act to set aside the award; (ii) determination by the court that the same is appropriate; and (iii) request by a party in this regard.

 

While section 16 of the 1940 Act empowered the court to send the award back to the tribunal for reconsideration in order to remove the defects, section 34(4) does not expressly grant such power of remission to the courts to which application for setting aside the award is made. The MMTC ruling (supra) also provided that the power under section 34(4) of the Act is inextricably intertwined with the grounds for setting aside the award under section 34(2), since the very object of section 34 (4) of the Act is to eliminate the grounds for setting aside the award. Since the amended Act seeks to limit the role of judiciary in arbitral proceedings, the Madras High Court aptly highlights, “the scope of the enquiry under section 34 (4) of the 1996 Act is left to the discretion of the arbitral tribunal and is not to be dictated by the Court which considers the application under section 34(1)”.

 

In Puri Construction v. Larsen and Toubro, the Delhi High Court highlighted the divergence in judicial decisions on this issue. On one hand, there are cases ruling along the lines of Gayatri Balaswamy v. ISG Novasoft Technologies Ltd., wherein the court supported modification, variation or remittance of the award and was of the view that "the expression ‘recourse to a Court against an arbitral award’ appearing in section 34(1) cannot be construed to mean only a right to seek the setting aside of an award. In other words, the right to have recourse to a court is a substantial right and that right is not liable to be curtailed by the form in which the right has to be enforced or exercised. Hence...the power under section 34(1) includes, within its ambit, the power to modify, vary or revise." On the other hand, there are cases such as Cybernetics Network Pvt. Ltd. v. Bisquare Technologies Pvt. Ltd., wherein it was held that the court cannot correct the arbitrator's errors or remand the matter to the arbitrator and that the power of remanding the award to the arbitrator under section 34(4) is of a limited extent, there being no express provision in this regard.

 

The Act of 1996 seeks to limit judicial intervention in arbitration proceedings. Therefore, the court in Puri Constructions observed that “if the power to remit the matter to the arbitrator is read into Section 34, it would render inexplicable the deliberate omission by Parliament of a provision analogous to Section 16 of the Arbitration Act, 1940 in the present Act.” The court accordingly concluded that the power to modify, vary or remit the award does not exist under section 34 of the Act.

 

The intent behind section 34(4) is to remove defects in the award to eliminate the grounds for setting aside the award. It is unclear whether the court can remit the award to the tribunal for reconsideration and, if yes, the grounds on which it can do so, for the apex court has not expressly ruled that the courts cannot remit the award to the tribunal if the court adjourns the proceedings under section 34(4). Further, there is ambiguity as regards the grounds on which the court can remit the award instead of setting aside the same.

 

 

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