[Gautam Narayan and Asmita Singh are advocates practicing at the Supreme Court of India]
In a departure from the principle that an arbitral tribunal becomes functus officio after having delivered the award, section 34(4) of the Indian Arbitration & Conciliation Act, 1996 (“Arbitration Act”) (which is based on article 34(4) of the UNCITRAL Model Law on International Commercial Arbitration, 1985 (“Model Law”)) enables a ‘party’ to request the court before which a challenge to the award has been instituted, to adjourn the proceedings so as to afford the tribunal to take such action which could eliminate grounds for setting aside of the award.
The Delhi High Court in ONGC Petro Additions Ltd. v Tecnimont SPA & Anr. (“ONGC”), concluded that an application under section 34(4) of the Arbitration Act can be preferred only by a counter party in a challenge to the award. In this post, it is argued that this judgment is based on an unduly restricted interpretation of the provision and can visit unintended hardship upon a claimant which has succeeded before the arbitrator on most claims and therefore prefers an appeal on limited portions of the award.
The judgment in ONGC has overlooked this possibility. A little over two years later, the view was reiterated in Canara Bank v The State Trading Corporation of India Ltd. & Anr. (“Canara Bank”). In Canara Bank, aggrieved by the lack of any finding given by the arbitral tribunal on one out of 25 issues, the Bank preferred an application seeking setting aside of the award to the extent of its finding on that singular issue. Relying on the judgment in ONGC and the order passed by the Supreme Court dismissing the special leave petition in limine, the section 34 Court as well as the Appellate Court in Canara Bank reiterated that an application under section 34(4) cannot be preferred by a party challenging the award (¶26).
The View in ONGC
The decision in ONGC suggests that the High Court was not entirely oblivious to a situation where a party challenging the award also sought remission to the tribunal on a certain aspect and observed that “ordinarily” the power under section 34(4) of the Arbitration Act will be invoked by the opposite party for eliminating grounds which could lead to setting aside of the award.
In Canara Bank, the Single Judge went beyond the dictum of ONGC and found it incomprehensible that a claimant who could succeed in getting an award set aside would prefer an application under section 34(4) of the Arbitration Act. The Single Judge’s view in Canara Bank was not disturbed by the Appellate Court relying on the judgment in ONGC against which a leave to appeal petition before the Supreme Court was dismissed in limine.
On occasion, courts render findings on issues not arising before them directly or which may not require a decision in the facts of the case. For instance, in ONGC, there was no need for the overbroad generalisation about the aims and intentions of a party challenging an award. The petitioner had challenged the order of the tribunal dismissing its application for placing additional documents and evidence before the tribunal on the basis that it constituted an “interim award” which is included within the meaning of “arbitral award” as defined under section 2(1)(c) of the Arbitration Act and open to challenge under section 34 of the same. Despite concluding that the order passed by the tribunal was not in the nature of an interim award as it did not dispose off any issue between the parties in the arbitral proceedings finally, the High Court went on discuss whether the order was susceptible to challenge under the grounds for setting aside an award under section 34(2) of the Arbitration Act. The authors argue that such an analysis was unnecessary once the High Court had concluded that the order was not an interim award and therefore the challenge to the order itself was not maintainable. It is in this context that the High Court also considered the contention raised by the petitioner that in case it was of the view that the order raised concerns about natural justice and fairness, it should be remitted to the tribunal for reconsideration under section 34(4) of the Arbitration Act. Once the issue of maintainability had been concluded against the petitioner, there was no question of entertaining this issue because an order for remission can only be passed where an application under section 34(1) of the Arbitration Act is maintainable.
Contrary to the Plain Language of the Provision
The history, ambit and scope of article 34(4) of the Model Law was discussed in detail by the Singapore Court of Appeals in the decision in AKN & Ors. v ALC & Ors. (“AKN”). The Singapore Court explained that the provision is a curative one which enabled it to forestall the award from being set aside for some defect. Additionally, it negated the contention that remission is possible even after setting aside of the award, relying on the recommendation of the Report of the Working Group on International Contract Practices on the Work of its Sixth Session (“Working Group”) that such a provision allows a procedural defect in the award to be cured without setting it aside. It held that the power to remit could only be exercised as an alternative to setting aside of the award in certain circumstances where it was possible to avoid the latter. There is no plausible reason to preclude a party which owing to partial success before the tribunal is constrained to challenge the award, from invoking article 34(4) of the Model Law if the grounds of challenge are such that can be cured by the arbitral tribunal.
The Case of Canara Bank
The position in India is more or less consistent with the view taken by the Singapore Court in AKN. Both the Supreme Court as well as the Delhi High Court have held that power under section 34(4) of the Arbitration Act should be exercised to allow the tribunal to cure defects to avoid setting aside of the award. India is, however, bound to face overlaps between the two categories of curable and non-curable defects as the test to decide what is curable has not been crystallised yet. The Supreme Court in Dyna Technologies Pvt. Ltd. v Crompton Greaves Ltd. has laid down that the power under section 34(4) of the Arbitration Act can be exercised in respect of defects which can be cured such as where the award does not give reasons or where there are gaps in the reasoning of the Tribunal. More recently, in I-Pay Clearing Services Pvt. Ltd. v ICICI Bank Ltd. (“I-Pay”), the Supreme Court has clarified that an award which does not record findings on contentious issues or records findings which are contrary to the material on record cannot be remitted under the pretext of supplying reasons or filling gaps in the reasoning. These would constitute grounds for setting aside of the award. The Delhi High Court in DMRC v J Kumar-Crtg JV, following I-Pay, has held that the power under section 34(4) of the Arbitration Act cannot be exercised to allow the Tribunal to review a finding/s returned after appreciation of evidence. Therefore, it would appeal to reason to hold that a party which is challenging an award on the basis of a defect which is not curable or does not lie within the scope of the power under section 34(4) of the Arbitration Act cannot at the same time prefer an application for remission for such issues; however, this should not apply to defects which are curable. Such an interpretation would defeat the object and purpose of Section 34(4) of the Arbitration Act apart from being contrary to its plain language.
In this light, it is pertinent to revisit Canara Bank. At the outset, it may be noted that in Canara Bank, the High Court ultimately held that the defect was not a curable one. The award in question was a detailed one, on twenty four out of twenty-five issues that were framed. However, it was silent on one issue, namely: whether the parties were entitled to interest, and at what rate? Canara Bank, had challenged the award only to that limited extent. The Single Judge dismissed the application under section 34(4) of the Arbitration Act and set aside the award to this extent. The Appellate Court held that an appeal against dismissal of an application under section 34(4) of the Arbitration Act was not maintainable and yet, proceeded to hold that a party in appeal against an award cannot prefer an application under section 34(4) of the Arbitration Act relying on the decision in ONGC and the fact that the Supreme Court had dismissed a challenge to that decision. Applying I-Pay, the High Court further held that not returning a finding on a contentious issue could only constitute a ground for setting aside. The authors argue that since a finding on interest may not involve a re-appreciation of evidence, remitting in such a case should be sanctioned. This analysis is, however, only in addition to the authors’ principal argument that a party which challenges an award should also have recourse to the remedy under section 34(4) of the Arbitration Act for defects in the award which may be curable.
Minimal Curial Intervention and Quick Resolution
The guiding principle of arbitration law is minimal curial intervention in the arbitral process, and in awards. To hold that a party which has challenged an award cannot avail recourse to section 34(4) of the Arbitration Act will compel judicial intervention by way of upholding or setting aside an award. The award will be reduced to a pyrrhic victory where a party may have succeeded on some / most of its claims, and lost on a few. Relegating it to undertake proceedings de novo in respect of claims which it may have lost instead of allowing recourse to the tribunal, will obviate a more cost and time efficient solution thereby militating against a speedy resolution of the dispute. Therefore, the principle that a party which mounts a challenge to an award is estopped from availing the remedy under section 34(4) of the Arbitration Act should be reconsidered by Indian courts.
– Gautam Narayan and Asmita Singh
