The Supreme Court has clarified that, under section 34 of the Arbitration and Conciliation Act 1996, a court can set aside an arbitral award and remand the matter to the same arbitrator for a fresh reasoned award if both parties give their consent.(1)
Mutha Construction (the petitioner) and Strategic Brand Solutions (I) Pvt Ltd (the respondent) entered into arbitration after a dispute. The parties appointed a sole arbitrator, who adjudicated the dispute and passed an award dated 17 January 2018. The petitioner challenged the award before the single judge of the Bombay High Court. On 30 April 2019, the judge set aside the award and remanded the matter to the sole arbitrator for a fresh reasoned award based on the consent of both the parties.
The petitioner brought an application before the judge, seeking modification to the extent that it had not given consent to remand the matter to the same arbitrator. The judge rejected this request and therefore the petitioner further filed an appeal before the Division Bench of the Bombay High Court with regard to the limited aspect of the consent not being accorded for the appointment of the same arbitrator.
The matter was listed before the Division Bench on 17 July 2019. The appeal was dismissed as not pressed, reserving the liberty of the petitioner to seek review of the order dated 30 April 2019. Thereafter, a review petition was filed before the single judge of the High Court. The petition was dismissed on the ground that the order dated 30 April 2019 had been passed with the consent of both the parties. Aggrieved by the orders passed by the High Court, the petitioner filed a special leave petition before the Supreme Court.
The counsel for the petitioner – on the basis of judgments passed in Kinnari Mullick and Anr v Ghanshyam Das Damani,(2) Dyna Technologies Private Limited v Crompton Greaves Limited,(3) and I-Pay Clearing Services Private Limited v ICICI Bank Limited(4) – submitted that in exercise of the powers under section 34 of the Act, the Supreme Court could not set aside the award on the ground that no reasons had been assigned and the matter could not be remanded to the same arbitrator to provide reasons. The counsel also argued that, under section 5 of the Act, there shall be no judicial intervention except where so provided in the Act. Section 34 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.
The Supreme Court, considering the submissions of the petitioner on the aspect of the consent order, held that once the judge had rejected the application of the petitioner on the ground that the order in question was a consent order, the matter ended there. The Court further observed that even considering the order dated 30 April 2019, there did not appear to be any intention on the part of the party to set aside the award and remand the matter to another arbitrator. The Court also observed that since the parties had made no specific request to remand the matter to a new arbitrator for fresh consideration, such intention could not be interpreted in the present case.
The Court therefore held that once the consent order had been passed and the parties had agreed to set aside the award and remand the matter to the arbitrator for a fresh reasoned award, the judgments relied upon by the counsel for the petitioner would not help. It was noted by the Court that even where an award is set aside under section 34 of the Act, the parties can still agree that a fresh arbitration may be made by the same arbitrator. The Court observed that, in the present case, both the parties had agreed to set aside the award and remit the matter to the sole arbitrator for fresh reasoned award. Therefore, the Court was of the view that once the order had been passed by the single judge on the basis of the parties' consent, it was not open to the petitioner to contend that the matter could not be remanded back to the same arbitrator.
Accordingly, the Supreme Court upheld the order passed by the single judge of the High Court and dismissed the special leave petition.
For further information on this topic please contact Shwetabh Sinha or Rohan Kaushal at Clasis Law by telephone (+91 11 4213 0000) or email ([email protected] or [email protected]). The Clasis Law website can be accessed at www.clasislaw.com.
(1) Mutha Construction v Strategic Brand Solutions (I) Pvt Ltd, SLP (C) No. 1105 of 2022, 4 February 2022.