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Judgment
V. Ramasubramanian, J.—The first respondent herein was appointed as Cargo Handling Agent by the petitioner viz., Minerals and Metals
Trading Corporation Ltd., in the year 2000, for handling Wheat in the Port of Tuticorin. Disputes arose between the petitioner and the first
respondent with regard to the payment of storage rent. Since the agreement between the petitioner and the first respondent contained an arbitration
clause, the first respondent invoked the same and the second respondent herein was appointed as Arbitrator.
The Arbitrator conducted an enquiry and passed an award on 16.3.2006, dismissing the claim made by the first respondent. Aggrieved by the
said award, the first respondent filed a petition in O.P. No. 127 of 2006 u/s 34 of the Arbitration and Conciliation Act, 1996, on the file of the
District Court, Tuticorin. When the same was pending, the first respondent filed an Interlocutory Application in I.A. No. 206 of 2007 u/s 34(4) of
the Act, seeking to remit the award back to the Arbitrator so as to eliminate the grounds for setting aside the award.
By an order dated 3.2.2008, the District Court, Tuticorin, allowed the application I.A. No. 206 of 2007 and remitted the matter back to the
Arbitrator for fresh consideration after sufficient opportunities to both sides and further directed the award already passed to be kept in abeyance
for a period of six months in terms of Section 34(4) of the Act. Aggrieved by the said order passed by the District Court, Tuticorin in I.A. No. 206
of 2007, the petitioner has come up with the present Civil Revision Petition.
Heard Mr. M. Vallinayagam, learned Counsel for the petitioner and Mr. N. Dilipkumar, learned Counsel for the first respondent. The second
respondent is the Arbitrator and hence is only a formal party.
Mr. M. Vallinayagam, learned Counsel for the petitioner assailed the order of the Court below on the following grounds viz.:
(a) that the affidavit in support of I.A. No. 206 of 2007 does not contain any averment that necessitates an order of remand by the Court below
u/s 34(4) of the Act;
(b) that the first respondent already made an attempt to canvas the same issues before the Arbitrator himself by filing an application u/s 33 of the
Act, after the passing of the award, but the same was dismissed on 1.5.2006; and
(c) that in utter disregard to the scope of Section 34(4) of the Act, the Court below remitted the matter back to the Arbitrator, throwing open for
reconsideration, all the issues and thereby making it incumbent upon the Arbitrator to conduct proceedings afresh.
Mr. N. Dilipkumar, learned Counsel for the first respondent contended that there were two issues, on which the Court below was convinced to
remit the matter back to the Arbitrator. They are as follows:
(i) In his claim petition, before the Arbitrator, the first respondent claimed that storage rent was paid to them by the very same petitioner under an
identical contract entered into with the Bangalore Office of the petitioner and that therefore a departure made by the Chennai Office was
unjustified. While dealing with the said issue, in paragraph-22 of the arbitration award, the Arbitrator recorded that after the conclusion of the
proceedings before the Arbitrator, on 10.2.2006, a letter of clarification was obtained from the Bangalore Office to the effect that the payments
made by the Bangalore Office of the petitioner were erroneously made. An affidavit to the same effect along with a document was filed before the
Arbitrator, after the conclusion of the proceedings and the Arbitrator decided the issue on the basis of the affidavit and the document, without
furnishing copies of the same and affording an opportunity to the first respondent. Therefore the remand of the matter became inevitable, so as to
give an opportunity to challenge the affidavit and the document produced after the conclusion of the proceedings.
(ii) Before the Arbitrator, the first respondent took a stand that during the period from 8.2.2001 to 7.4.2001, the petitioner paid storage rent, even
from Chennai Office. But the petitioner took a stand before the Arbitrator that those payments were made when Cargo was diverted to Chennai
Port on account of Kandla Port becoming inoperative due to earthquake and that such payments were not made in terms of the contract. The
stand taken by the petitioner was accepted by the Arbitrator. However when the first respondent sent a query under the Right to Information Act,
on 8.6.2007, he received a reply dated 4.7.2007 from the Chief General Manager of the petitioner-Company to the effect that MMTC did not
divert any Wheat Cargo from Kandla Port to Tuticorin Port during the relevant time. Therefore, according to the 1st respondent, the petitioner has
obviously played a fraud upon the Arbitrator by giving false information deliberately and that therefore the District Court, Tuticorin was convinced
to remit the matter back for a fresh consideration by the Arbitrator.
I have carefully considered the rival submissions. As seen from the contentions of the learned Counsel for the first respondent, the first
respondent primarily wants two issues to be gone into by the Arbitrator, in pursuance of the order of remand. The first issue relates to the payment
of storage rent made by the Bangalore Office to the first respondent, in respect of which an affidavit was filed by the petitioner before the
Arbitrator after the conclusion of the proceedings and about which the first respondent had no opportunity of hearing. The second issue relates to
the alleged diversion of Cargo from Kandla Port to Tuticorin Port during the period from February to April 2001, on account of which the
petitioner allegedly made special payments.
The first issue relating to the payments made by the Bangalore Office of the petitioner, does not pose serious problems. Paragraph-22 of the
arbitration award dated 16.3.2006 shows that the Arbitrator issued a direction on 1.3.2006 to the petitioner to explain the action of their office at
Bangalore in making payment under the same circumstances. In response to the said direction, one Mr. U.E. Rao, Manager (Law) filed an affidavit
before the Arbitrator on 7.3.2006 (wrongly typed as 7.3.2000 in the award). In the affidavit, the affiant had referred to a letter dated 14.2.2006
written by him to the DGM and a reply dated 3.3.2006 received from the DGM, Bangalore. In the letter dated 3.3.2006, it was claimed that the
payment in Bangalore was wrongly made and that the Chennai Office had already been directed to recover the amount from the first respondent,
from the pending bills. On the basis of the said affidavit dated 7.3.2006 and the reference therein to the letter dated 3.3.2006, the Arbitrator
accepted the contention of the petitioner and rejected the claim of the first respondent, in his award passed on 16.3.2006. Between 7.3.2006 (the
date on which an affidavit was filed on behalf of the petitioner) and 16.3.2006 (the date on which the award was passed), no hearings took place.
There is no reference in the award either in paragraph-22 or thereafter as to whether the copy of the affidavit dated 7.3.2006 was furnished to the
first respondent and whether any opportunity was given to him. In the arbitration O.P. No. 127 of 2006, the first respondent has taken exception
to the procedure adopted by the Arbitrator in receiving an affidavit and an additional document after the conclusion of proceedings. In paragraph-
24 of the arbitration O.P., the first respondent has stated that he did not have any opportunity to make any submissions on the affidavit dated
7.3.2006 and the letters dated 14.2.2006 and 3.3.2006 referred to in the affidavit. The first respondent has also stated in paragraph-25 of the
O.P., that he took up the matter with the Indian Council of Arbitration who nominated the second respondent about the failure of the Arbitrator to
furnish copy of the affidavit dated 7.3.2006 and the correspondence referred to therein. Thus it is clear that the first respondent did not have an
opportunity to challenge the affidavit filed on behalf of the petitioner on 7.3.2006 and the documents referred to therein. Therefore, there is no
doubt that the first respondent has at least prima facie made out one ground for setting aside the arbitration award in terms of Section 34(2) of the
Act. Since the first respondent has made out at least one ground for setting aside the arbitral award in terms of Section 34(2) of the Act and also
since the ground so made out by the first respondent is capable of being eliminated by the Arbitrator, I cannot find fault with the District Court,
Tuticorin, in invoking Section 34(4) of the Act.
That the first issue raised by the petitioner is certainly a ground for setting aside the award in terms of Section 34(2) of the Act and that therefore
Section 34(4) of the Act, could be invoked in the present case, can be appreciated even by a bare reading of Section 34 of the Act. Section 34 of
The Arbitration and Conciliation Act, 1996 reads as follows:
Application for setting aside arbitral award. - (1) Recourse to a Court against an arbitral award may be made only by an application for setting
aside such award in accordance with Sub-section (2) and Sub-section (3).
(2) An arbitral award may be set aside by the Court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the
time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise
unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains
decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award
which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement
was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part;
or
(b) the Court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation. - Without prejudice to the generality of Sub-clause (ii) of Clause (b), it is hereby declared, for the avoidance of any doubt, that an
award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of
Section 75 or Section 81.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had
received the arbitral award or, if a request had been made u/s 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of
three months it may entertain the application within a further period of thirty days, but not thereafter.
(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.
It is seen from Sub-clause (i) and Sub-clause (iii) of Clause (a) of Sub-section (2) of Section 34 that an arbitral award can be set aside if the
party seeking it to be set aside furnishes proof that he was under some incapacity or that he was otherwise unable to present his case. The
arbitration proceedings in the present case concluded on 1.3.2006. On the same date, the Arbitrator directed the petitioner to clarify the issue
relating to payments made under same circumstances by the Bangalore Office. Thereafter, the petitioner filed an affidavit referring to certain
documents on 7.3.2006 and the Arbitrator pronounced the award on 16.3.2006. The Arbitrator rejected the contention of the first respondent
relating to the payments made by the Bangalore Office, on the basis of the very same affidavit dated 7.3.2006 and the correspondence referred to
therein. Therefore, the first respondent was obviously under incapacity to challenge the affidavit and documents. Even otherwise, the first
respondent was certainly unable to present his case on the affidavit so filed by the petitioner. Hence the occasion to invoke Section 34(4) of the
Act, so as to remove the incapacity or inability on the part of the first respondent to present his case in terms of Section 34(4) of the Act, had
arisen.
On the validity of the Arbitral Tribunal receiving fresh evidence after the conclusion of the proceedings but before the passing of the award,
Russel on Arbitration, Twenty-First Edition (1997) has the following to say (in chapter 8 Paragraph 38):
There would be an irregularity if the tribunal receives and acts on fresh evidence obtained after the proceedings have closed, but prior to the
award, without giving the parties an opportunity to be heard on it. (Eastcheap Dried Fruit Co. v. N.V. Gebroeders Catz'' Handelsvereenigung
[1962]1 L Rep. 283; Sociedad Iberica de Molturacion S.A. v. Nidera Handelscompagnie BV [1962] 2 L Rep. 240. These decisions are based
on the previous legislation, Section 22 of the Arbitration Act, 1950 in particular, but the facts in each case disclose an irregularity. The Arbitration
Act, 1996 also requires the court to decide if the irregularity has caused or will cause substantial injustice to the applicant; See Para. 8-047)
But, Mr. M. Vallinayagam, learned Counsel for the petitioner has a more serious objection to the order of the Court below and that is, that the
District court has now remitted the matter back to the Arbitrator for a fresh consideration on all issues including the one relating to the alleged
diversion of goods from Kandla Port to Tuticorin Port. According to the learned Counsel for the petitioner, the Arbitrator came to the conclusion
that during the period from February to April 2001, payments were made on account of diversion of goods intended for Kandla Port to Tuticorin
Port, on the basis of the material adduced before the Arbitrator by both parties. The Arbitrator passed the award on 16.3.2006. Thereafter the
first respondent claims to have sent an application under the Right to Information Act, on 8.6.2007 and got a reply on 4.7.2007. On the basis of
the said correspondence, entered into after nearly 15 months of the passing of the award, the first respondent is not, according to the learned
Counsel for the petitioner entitled to a re-enquiry u/s 34(4) of the Act. In other words, the contention of the learned Counsel for the petitioner is
that taking advantage of the order of remand passed u/s 34(4) of the Act, the first respondent cannot lead fresh evidence in the form of the letters
dated 8.6.2007 and 4.7.2007, obtained post award. The learned Counsel for the petitioner submitted that the scope of an order u/s 34(4) of the
Act, is much restricted than an order of remand passed by the Civil Court. The purpose of an order of remand u/s 34(4) of the Act, is not to
enable the parties to have a re-hearing nor to enable the parties to adduce fresh and additional evidence. The object of Section 34(4) of the Act, is
only to eliminate the grounds for setting aside an award.
As a matter of fact, the question as to whether fresh evidence obtained after the passing of the award can be made use of at all, has always
been a nagging one. An Arbitrator is not a civil court and hence would become functus officio after the award. He can resume the proceedings only
by virtue of an order passed by a court. The proceedings arising out of a challenge to an arbitration award before a court, cannot also be equated
to an appeal under Order XLI of the CPC so as to invoke Rule 27 of Order XLI. Therefore under normal circumstances, it is not possible to
allow a party to rely upon an evidence which he caught hold of after the conclusion of the arbitral proceedings.
In Russell on Arbitration, Twenty-First Edition (1997), the learned authors say in Chapter 8, Paragraph 79 as follows:
Fresh Evidence. If fresh evidence comes to light subsequent to the making of a final award, the tribunal may be unable to take account of it
because the tribunal''s duties will have been completed. In view of the terms of the (English) Arbitration Act 1996, it is doubtful whether the court
now has power to overcome the difficulty by remitting the award to the tribunal for reconsideration in the light of the fresh evidence.
Assuming that the court still has power to remit in these circumstances, the party seeking to challenge the award, must at least show that (i) he did
not have the evidence at the time of the arbitration; (ii) he could not have got it at the time of the arbitration by the exercise of due diligence; (iii)
had he had it, it would be likely to have had a substantial effect upon the result of the arbitration; and (iv) where appropriate, that he had no
opportunity for asking the tribunal to delay issuing the award while he considered whether it was possible to get evidence of the type which he now
seeks to introduce. He would also probably have to show fault on the part of the tribunal or one of the other parties to the arbitration.
In the light of the above, the contention of the learned Counsel for the petitioner with regard to the scope of Section 34(4) of the Act, merits a
more elaborate consideration, at least for two reasons viz.,
(i) that the 1996 Arbitration Act, has made a complete departure from the provision for remand contained in Section 16 of the Arbitration Act,
1940; and
(ii) that the scope of Section 34(4) of the 1996 Act, does not appear to have come up for consideration in great detail, so far by the Courts.
Therefore, I shall now take up the issue relating to the scope of an order that can be passed u/s 34(4) of the Act.
Section 34(4) of the Arbitration and Conciliation Act, 1996, has already been extracted in paragraph-9 above. Section 16 of the Arbitration
Act, 1940 reads as follows:
Power to remit award. - (1) The Court may, from time to time, remit the award of any matter referred to arbitration to the arbitrators or
umpire for reconsideration upon such terms at it thinks fit-
(a) 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; or
(b) where the award is so indefinite as to be incapable of execution; or
(c) where an objection to the legality of the award is apparent upon the face of it.
(2) Where an award is remitted under Sub-section (1), the Court shall fix the time within which the arbitrator or umpire shall submit his decision to
the Court:
Provided that any time so fixed may be extended by subsequent order of the Court.
(3) An award remitted under Sub-section (1) shall become void on the failure of the arbitrator or umpire to reconsider it and submit his decision
within the time fixed.
Section 16 of the 1940 Act, empowers the Court to remit the award to the Arbitrator for reconsideration, on such terms as the Court thinks
fit, under three circumstances viz.,:
(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.
In contrast, Section 34(4) merely empowers the Court, where it is appropriate and if so requested by a party, to adjourn the proceedings
challenging the arbitral award, in order to give the arbitral tribunal an opportunity to resume the 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. Thus Section 34 of the Act, has created a dichotomy
between what the Court could do while dealing with an application for setting aside the award u/s 34(1) of the Act and what the arbitral tribunal
could do u/s 34(4) of the Act. What the Court is empowered to do u/s 34(4) of the Act, is only to adjourn the proceedings in order to give the
arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as will eliminate the grounds for setting aside the
arbitral award. Three conditions are to be satisfied for the Court to adjourn the proceedings u/s 34(4) of the Act, viz.,:
(i) that an application u/s 34(1) of the Act, to set aside the award should have been received by the Court;
(ii) that the Court considers it appropriate; and
(iii) that it is so requested by a party.
If the above conditions are satisfied, the Court would adjourn the proceedings. While doing so, the Court would leave it to the discretion of the
arbitral tribunal (i) to resume the arbitral proceedings or (ii) to take such other action as in the opinion of the arbitral tribunal will eliminate the
grounds for setting aside the arbitral award.
While u/s 16(1) of the old Act, the Court is empowered to remit the award for reconsideration, Section 34(4) of the Act, does not speak of
such remission and reconsideration. The words ""remit the award"" and ""for reconsideration"" appearing in Section 16(1), clearly signify that what the
Court was expected to do under the 1940 Act, was something similar to what a Civil Court could do u/s 107(1)(b) of the Code of Civil
Procedure. But the circumstances under which the power u/s 16(1) was to be invoked, were circumscribed by three conditions imposed under
Clauses (a), (b) and (c) of Section 16(1), unlike the provisions of Order XLI, Rules 23 to 25 CPC.
Interestingly, the power of remand u/s 16(1) of the 1940 Act, was not linked to the grounds for setting aside the award u/s 30 of the 1940
Act. But the power u/s 34(4) of the 1996 Act, is inextricably intertwined with the grounds for setting aside the award u/s 34(2), since the very
object of Section 34(4) of the 1996 Act, is to eliminate the grounds for setting aside the award.
Moreover, since Section 16(1) of the 1940 Act, empowered the Court to remit the award for reconsideration ""upon such terms as it thinks fit"",
the scope of an enquiry after remand, by the arbitral tribunal was limited to the terms upon which the award was remitted by the Court itself. In
other words, the arbitral tribunal, under the old Act, was required to reconsider such of the issues upon which the matter was remitted, in the
manner stipulated by the Court remitting the Award and the arbitral Tribunal cannot travel beyond the terms of such remission. But Section 34(4)
of the 1996 Act, leaves it to the wisdom of the arbitral tribunal ""either to resume the proceedings or to take such other action as in the opinion of
the arbitral tribunal will eliminate the grounds for setting aside the award"". Thus the scope of the enquiry u/s 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 u/s 34(1). In simple terms, the focus has
now shifted from the discretion of the Court as given in Section 16(1) of the old Act, to the discretion of the arbitral tribunal u/s 34(4) of the 1996
Act.
To summarise, there are at least six distinguishing features between Section 16(1) of the 1940 Act and Section 34(4) of the 1996 Act, which
are as follows:
(a) While Section 16(1) of the 1940 Act, empowered the Court ""to remit the matter for reconsideration to the Arbitrator"", Section 34(4) of the
1996 Act, empowers the court just to adjourn the proceedings to enable the arbitral tribunal to do what in his opinion would eliminate the grounds
for setting aside the arbitral award. Thus there is an essential difference in the power conferred upon the court.
(b) u/s 16(1) of the old Act, the remand by the Court is ""upon such terms as the Court may think fit"". On the contrary, Section 34(4) of the New
Act, leaves it to the discretion of the arbitral tribunal to do what in the opinion of the arbitral tribunal was required to eliminate the grounds for
setting aside the award. In other words, the Court used to fix the terms of reference while remitting the matter for reconsideration to the Arbitrator
u/s 16(1) of the old Act. But under the new Act, the arbitral tribunal itself determines the scope of the enquiry, so as to eliminate the grounds of
objection.
(c) Section 16(1) of the old Act, enumerated three pre-conditions on the very substance of the matter, under Clauses (a), (b) and (c), without
satisfying which, the Court cannot remit the matter for reconsideration. On the other hand, Section 34(4) of the new Act, does not prescribe any
condition precedent on the substance of the matter but prescribes three procedural conditions namely that there should be an application u/s 34(1)
of the new Act and that a request should emanate from a party and the Court considers it appropriate to invoke the power u/s 34(4) of the new
Act.
(d) While the purpose of an enquiry u/s 16(1) of the old Act, was to have a fresh award upon reconsideration of the previous award, the purpose
of the enquiry u/s 34(4) of the new Act, is to eliminate the grounds for setting aside the arbitral award. This is why Section 16(1) of the old Act,
was not linked to the provisions of Section 30 of the old Act, under which an award can be set aside on specified grounds. In contrast, the power
u/s 34(4) of the new Act, is linked to the grounds for setting aside the award u/s 34(2) of the new Act.
(e) Since there was a provision u/s 14 of the 1940 Act, to file the arbitration award into Court, the Court was empowered under the 1940 Act, to
do any of the following, namely:
(i) to modify or correct the award u/s 15
(ii) to remit the award for reconsideration u/s 16
(iii) to pass a judgment in terms of the award u/s 17 or
(iv) to set aside the award u/s 30.
But under the 1996 Act, the Court has only two sets of powers after the award is pronounced viz.,
(i) to set aside the award u/s 34(2); or
(ii) to adjourn the proceedings to enable the arbitral tribunal to resume the proceedings or to take such other action as in the opinion of the tribunal
will eliminate the grounds for setting aside the arbitral award.
The power to correct or modify an award u/s 15 of the old Act, has also been taken away though a power is now conferred upon the arbitral
tribunal itself to correct any computation errors or clerical or typographical or similar errors u/s 33 of the new Act.
(f) It appears from a combined reading of Sections 14, 16 and 17 of the old Act that the power to remit an award for reconsideration could be
exercised even suo moto by the court. Section 14(2) of the 1940 Act speaks of the filing of the award into court either on a request made by a
party to the arbitration agreement or when so directed by the court. Section 17 mandates the court to pronounce a judgment in terms of the award
only if it sees no cause to remit or set aside the award. Neither Section 16 nor Section 17 speaks of an application by a party. This is why, in
Union of India and Others Vs. Manager, M/s. Jain and Associates, , the Supreme Court held in paragraphs-11 and 14, as follows:
In view of the aforequoted sections, it can be stated that-
(a) after receipt of an award, the Court can suo motu refuse to make award rule of the Court on the ground that (i) part of the award is upon a
matter not referred to arbitration; and (ii) the award is imperfect in form or contains any obvious error. The Court can also remit the award to
arbitrator in case (i) where the award has left undetermined any matter referred to arbitration; or (ii) where it has determined any matter not
referred to arbitration; or (iii) the award is so indefinite as to be incapable of execution; or (iv) is on the face of it illegal. This is also provided under
parenthesis Clause of Section 17 which provides ""where the Court sees no cause to remit the award or any of the matters referred to arbitration
for reconsideration or to set aside the award, the Court shall...proceed to pronounce judgment...."" Therefore, it cannot be stated that in case where
objections u/s 30 or 33 are not filed, the Court is bound to pass decree in terms of the award.
Similarly, when the Court is required to proceed without objection application u/s 30 or 33 of the Act, it cannot pronounce the judgment
without considering the provisions of Sections 15 and 16 of the old Act, which provide, as stated above, for modification or correction of any
award or for remitting it to the arbitrator for reconsideration on the ground that (i) there is any error of law apparent on the face of the award, (ii)
the award is incapable of being executed, (iii) the award has left undetermined any of the matters referred to arbitration, (iv) that a part of the
award is upon a matter not referred to arbitration and (v) the award contains any obvious error. Jurisdiction of the Court to pronounce judgment
depends on exercise of its power to modify or remit the award.
Thus Section 16 of the old Act, does not specifically prescribe the filing of an application by any party as a pre condition for ordering a remand.
But in contrast, Section 34(4) of the 1996 Act enables a court to act only upon receipt of an application u/s 34(1) and in addition, a request by a
party. No suo moto power exists u/s 34(4) of the new Act.
Apart from keeping in mind the above distinguishing features between Section 16 of the old Act and Section 34(4) of the new Act, we may
also have to look at the UNCITRAL Model Law to see what is the scope of Section 34(4) of the new Act. The Arbitration and Conciliation Act,
1996 is scripted on the basis of UNCITRAL Model Law, as is clear from the Preamble as well as the Statement of Objects and Reasons. While
the Model Law was adopted as such for International Commercial Arbitration, it was adopted with some modifications in respect of domestic
arbitration. Therefore a useful reference to the Model Law may throw light upon the scope of Section 34 of the Act. Article 34 of the UNCITRAL
Model Law reads as follows:
Article 34. Application for setting aside as exclusive recourse against arbitral award.
(1) Recourse to a court against an arbitral award maybe made only by an application for setting aside in accordance with paragraph (2) and (3) of
this article.
(2) An arbitral award may be set aside by the court specified in Article 6 only if:
(a) the party making the application furnishes proof that: (i) A party to the arbitration agreement referred to in Article 7 was under some incapacity;
or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State;
or
(ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise
unable to present his case; or
(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on
matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from
those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration maybe set aside; or
(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such
agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance
with this Law; or
(b) the court finds that:
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or
(ii) the award is in conflict with the public policy of this State.
(3) An application for setting aside may not be made after three months have elapsed from the date of which the party making that application had
received the award or, if a request had been made under Article 33, from the date on which that request had been disposed of by the arbitral
tribunal.
(4) The court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside 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 arbitral tribunal''s opinion will eliminate the grounds for setting aside.
A reading of Article 34 of the UNCITRAL Model Law would show that Section 34 of 1996 Act is almost in pari materia with the same
except to the extent that an explanation relating to what constitutes public policy is added u/s 34(2)(b)(ii) and a Proviso enabling condonation of
delay is added u/s 34(3). Section 34(4) of the 1996 Act is a faithful adaptation of Article 34(4) except that the former uses the expression ""adjourn
the proceedings"", while the latter uses the expression ""suspend the proceedings"". Thus the power to remit the award conferred in Section 16 of the
old Act has deliberately been omitted in the 1996 Act.
In view of the above, I hold that when an application to set aside the arbitration award is filed u/s 34(1), the Court to which such an application
is presented, if so requested by a party and if the Court thinks it appropriate that any one or more of the grounds for setting aside the award as
prescribed u/s 34(2) exists and that it is also capable of being eliminated, may pass an order simply adjourning the proceedings, with an indication
as to the grounds that exist for setting aside the award. It will then be open to the arbitral tribunal to resume the arbitral proceedings and to take
such other action which in its opinion, befits the situation. It may be open to the arbitral tribunal to do all that is necessary to eliminate the grounds
for setting aside the award. The terms ""to take such other action"" and ""in the opinion of the arbitral tribunal"" appearing in Section 34(4) give a clear
indication that sufficient elbow space is available to the arbitral tribunal to do whatever is necessary in its opinion to eliminate the grounds. There is
no restriction placed by the Act upon the arbitral tribunal as to what it should do u/s 34(4). The arbitral tribunal can have a free play, for after all,
the purpose of such an exercise is to eliminate the grounds for setting aside the award. It appears from the language employed that the arbitral
tribunal may even refuse to do anything further and leave it to the Court to decide the matter on its own merits u/s 34(2), since Section 34(4) is
only an enabling provision and not strictly an order of remand, so as to compel the Arbitrator to do something. This is why Section 34(4) uses the
expression ""to give the arbitral tribunal an opportunity"". The opportunity may or may not be made use of. If the tribunal chooses not to make use of
the opportunity so afforded, then the Court will have to consider the application u/s 34(1), in tune with the parameters laid down u/s 34(2). If
Section 34(4) is understood in such a perspective, there is no difficulty in coming to the conclusion that the arbitral tribunal may also entertain
additional evidence after resumption of the proceedings, since there are no fetters u/s 34(4). All that is required u/s 34(4) is the subjective
satisfaction of the arbitral tribunal that the venture undertaken by it would eliminate the grounds for setting aside the award.
In the light of what is stated above, the order of the Court below remitting the award back to the Arbitrator (second respondent) for a fresh
consideration on all issues, may not strictly be in tune with Section 34(4) of the Arbitration and Conciliation Act, 1996, since the power u/s 34(4)
is not akin to the power u/s 16 of the Arbitration Act, 1940. However to the extent that the District Court has found that there are grounds for
setting aside the award, the order of the District Court cannot be interfered with. The District Court, in such circumstances, ought to have just
highlighted the prima facie existence of the grounds for setting aside the award and adjourned the proceedings to enable the arbitral tribunal to
resume the proceedings or to take such other action as in the opinion of the arbitral tribunal would eliminate the grounds for setting aside the
award. It was then open to the arbitral tribunal to do what in his opinion is necessary to eliminate the grounds for setting aside the award.
Therefore, the Civil Revision Petition is allowed to a limited extent, modifying the order of the Principal District Court, Tuticorin, dated
4.2.2008 in I.A. No. 206 of 2007 in Arbitration O.P. No. 127 of 2006, to the following effect:
(a) The Arbitration O.P. No. 127 of 2006 shall stand adjourned for a period of 3 months with effect from the date of receipt of a copy of this
order.
(b) It is now open to the Arbitrator (second respondent) either to resume the proceedings or to take such other action, as in his considered opinion
would eliminate the grounds raised for setting aside the award. Since the discretion is entirely left to the second respondent, it is open to him to
form an opinion as to whether such an exercise would be undertaken by him at all and if so, the extent to which and the manner in which the
exercise would be undertaken by him. In case, the Arbitrator chooses to resume the proceedings, he shall issue notice to both parties, fix a date for
hearing and proceed further.
(c) The Arbitrator is requested to communicate his decision, within a period of 3 months to the Principal District Court, Tuticorin as well as to the
parties, to enable the Court below to proceed further with Arbitration O.P. No. 127 of 2006, if necessary.
(d) It is made clear that the finding recorded both by the District Court and by this Court that there exist grounds for setting aside the award, is
only a prima facie finding and not a conclusive finding. Therefore the Arbitrator and the District Court (while resuming the proceedings in the main
O.P.) shall consider the matter, uninfluenced by any finding recorded here or in the District Court.
The Civil Revision Petition is allowed on the above terms. No costs. Consequently, connected miscellaneous petition is closed.