Whether the court can set aside arbitration award partly following the principle of severability?

 The conundrum which now arises is whether there can be partial setting aside of the Award or would it amount to modification of Award and has to be necessarily set aside in toto leaving the parties for a fresh round of arbitration, if so advised. {Para 61}

  It was further observed that such an interpretation that the Award has to be set aside in its entirety is bound to cause greater hardship, inconvenience and even injustice to some extent to the parties. To compel the parties, particularly a party who had succeeded to undergo the arbitral process all over again does not appear to be in conformity with the scheme of the Act. The provisions of Section 34 are quite pari materia to the provisions of Article 34 of the Model Law except that the proviso and explanation have been added to Section 34(2)(iv). The attempt under the Model Law and the Indian Law appears to circumscribe the jurisdiction of the court to set aside an award. There is nothing in the provisions of the Act and for that matter absolutely nothing in the Model Law which can debar the court from applying the principle of severability provided it is otherwise called for in the facts and circumstances of the case and in accordance with law. The courts will not get into the merits of the dispute. Thus, the interpretation which should be accepted by the court should be the one which will tilt in favour of the Model Laws, scheme of the Act and the objects sought to be achieved by the Act of 1996. {Para 63}

64. In the case of R.S. Jiwani (supra), it was held that it is difficult to prescribe legal panacea which, with regard to the applicability of the principle of severability can be applied uniformly to all cases. The judicial discretion vested in the court in terms of the provisions of Section 34 of the A&C Act, 1996 was held to take within its ambit, power to set aside an award partly or wholly depending on the facts and circumstances of the given case and it was held that the same is not intended to be whittled down or to divest the court of competent jurisdiction to apply the principle of severability to the award of the Arbitral Tribunal, legality of which is questioned before the court. Moreso, the proviso to section 34(2)(a)(iv) has to be read ejusdem generis to the main section, as in cases falling in that category, there would be an absolute duty on the court to invoke the principle of severability where the matter submitted to arbitration can clearly be separated from the matters not referred to arbitration and decision thereupon by the Arbitral Tribunal.

65. In R.S. Jiwani (M/S.) (supra) a reference was made to the decision of the Apex Court of India in NHAI v. M. Hakeem, (2021) 9 SCC 1 wherein it was observed as under:

“Quite obviously if one were to include the power to modify an award in Section 34, one would be crossing the Lakshman Rekha and doing what according to the justice of a case, ought to be done. In interpreting a statutory provision, a Judge must put himself in the shoes of Parliament and then ask whether Parliament intended this result. Parliament very clearly intended that no power of modification of an award exists in Section 34 of the Arbitration Act, 1996. It is only for Parliament to amend the aforesaid provision in the light of the experience of the courts in the working of the Arbitration Act, 1996, and bring it in line with other legislations the world over.”

66. It thus settled the law and held that the court does not possess the power to modify an arbitral award while hearing a challenge under Section 34 of the Act.

67. However, in R.S. Jiwani (M/S.) (supra) it was observed that the observations were in regard to modification and not to the partial setting aside of the Award. It was thus, concluded that the Court, while exercising power under Section 34 of the A&C Act, 1996, can set aside an Award partly, depending upon the facts and circumstances of the case.

68. In this context, reference was made to the judgment of the Supreme Court in the case of J.G. Engineers Pvt. Ltd. v. Union of India, (2011) 5 SCC 758. (23) wherein the doctrine of severability was invoked and it was held that when the Award deals with several claims that can be said to be separate and distinct, the Court can segregate the Award on items that do not suffer from any infirmity and uphold the Award to that extent.

69. The Bombay High Court in the recent judgment of National Highway Authority of India v. The Additional Commissioner, Nagpur, 2022 SCC OnLine Bom 1688 noted the aspect of grave inconvenience highlighted in the aforesaid Full Bench judgment of Bombay High Court in the case of R.S. Jiwani (M/S.) (supra) and observed that if parties are required to go for arbitration afresh in its entirety on every occasion, even when the arbitral award is only partly set aside, that the arbitral award is found liable to be set aside on some issues, it would lead to multiple rounds of litigation, going against the very purpose of alternative dispute redressal mechanisms like arbitration. The claimants would be forced to pursue numerous rounds of proceedings before the arbitrator and Courts, which cannot be countenanced, thereby indicating that the contention raised in this regard on behalf of the appellants is unsustainable. Thus, following the principle of severability of claims it was held that the Award may be set aside partially.

70. In the present case, the respondent has not contested the matter before the ld. Arbitrator and has also not challenged the impugned Award. So much so there is an admission of liability by the respondent. In these circumstances, to drive the parties to Arbitrate the entire dispute afresh despite admissions would indeed be extreme harshness which is not in accordance with the ethos of arbitration.

In the High Court of Delhi at New Delhi

(Before Neena Bansal Krishna, J.)

Amazing Research Laboratories Ltd. Vs  Krishna Pharma 

O.M.P. (COMM) 376/2020

Decided on March 13, 2023

Citation: 2023 SCC OnLine Del 1498.

Read full Judgment here : Click here

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When court should not reject application for setting aside Arbitration Award on ground of limitation?

 True, there is no specific averment in the application filed under Section 34(1) of the Act that copy of the award was not received by the appellant or that it was not served or not delivered on him. However, the District Court should have considered the averments in the application under Section 34(1) of the Act as a whole and entered a finding whether copy of the arbitral award was delivered to the appellant or not. The finding of the learned District Judge that the application was hopelessly barred by limitation is merely based on the ground that it was filed nearly three years after the passing of the award. The question whether the appellant had received copy of the award was not considered by the District Court. 

IN THE HIGH COURT OF KERALA AT ERNAKULAM

Arb. A. No. 8 of 2007

Decided On: 08.02.2019

S. Balu  Vs. ICDS Ltd. and Ors.

Hon'ble Judges/Coram:

V. Chitambaresh and R. Narayana Pisharadi, JJ.

Citation: AIR 2019 Kerala 94

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Whether arbitration can be initiated again if arbitration award is set aside?

A plain reading of the aforesaid passage also clearly indicates that once an award has been set aside, the parties would be free to begin the arbitration once again. Thus, in my view, the contention that GE Shipping could not initiate the arbitration after the decision of this Court under Section 34 of the Act, cannot be accepted. Mr. Ganguli sought to suggest that the observation made by Supreme Court in Mcdermott International Inc. (supra) was a “stray observation” and was not determinative of the issue at hand. This contention is also unacceptable. First and foremost, the observations of the Supreme Court are relevant to the decision rendered by it; secondly, in Puri Construction Pvt. Ltd. (supra) a division bench of this Court followed the principles laid down by the Supreme Court in Mcdermott International Inc. (supra) while interpreting the provisions of section 34 of the Act.

DELHI HIGH COURT

(Before Vibhu Bakhru, J.)

Steel Authority of India Limited. v. Indian Council of Arbitration & Anr.

W.P.(C) 3013/2013

Decided on November 16, 2015

Citation:2015 SCC OnLine Del 13394 : (2015) 225 DLT 348

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Whether court can suo motu remand case to arbitral tribunal after setting aside arbitral award?

On the aspect of remand of the proceedings as ordered by the learned Principal District Judge, it is found that said direction is contrary to the provisions of Section 34(4) of the said Act as well as the law as laid down in Kinnari Mullik and another (supra). It has been held in the aforesaid decision that the limited discretion available to the Court under Section 34(4) of the said Act can be exercised only if a written application is made by a party to the arbitration proceedings before passing of the award. Said power cannot be exercised suo-motu by the Court after the award has been set aside. By the impugned order, the award has been set aside and the proceedings have been remanded to the Arbitrator for fresh adjudication. Such course is not permissible in view of the aforesaid law as laid down. That direction issued by the learned Principal District Judge to that effect is thus liable to be set aside.

IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)

Arbitration Appeal No. 3 of 2017

Decided On: 07.09.2018

 Chandrashekar Vs. Yogi Construction and Ors.

Hon'ble Judges/Coram:

A.S. Chandurkar, J.

Citation: 2019(1) MHLJ 628

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Whether illegal arbitration award is against public policy of India?

It was also held by the District Judge that the arbitral award was not even against the public policy of India and merely because some illegality has been pointed out it cannot be held that the award is against the public policy.

13. We are in agreement with the findings of the District Judge and since no ground exists under Section 34 of the Act for setting aside the arbitral award without re-appreciation of evidence, we are of the opinion that the judgment and order passed by the District Judge is not illegal rather perfectly valid. 

IN THE HIGH COURT OF ALLAHABAD

F.A.F.O. No. 2188 of 2018

Decided On: 02.05.2018

 Nathu Ram Sahu Vs. Arbitrator/Collector and Ors.

Hon'ble Judges/Coram:

Pankaj Mithal and Rajiv Joshi, JJ.

Citation: AIR 2018(NOC) 880 ALL

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Whether it is necessary to adduce evidence while deciding application for setting aside arbitral award u/s 34 of Arbitration Act?

 It will thus be seen that speedy resolution of arbitral disputes has
been the reason for enacting the 1996 Act, and continues to be the reason
for adding amendments to the said Act to strengthen the aforesaid object.
Quite obviously, if issues are to be framed and oral evidence taken in a

summary proceeding under Section 34, this object will be defeated. It is also
on the cards that if Bill No.100 of 2018 is passed, then evidence at the stage
of a Section 34 application will be dispensed with altogether. Given the
current state of the law, we are of the view that the two early Delhi High
Court judgments, cited by us hereinabove, correctly reflect the position in
law as to furnishing proof under Section 34(2)(a). So does the Calcutta High
Court judgment (supra). We may hasten to add that if the procedure
followed by the Punjab and Haryana High Court judgment (supra) is to be
adhered to, the time limit of one year would only be observed in most cases
in the breach. We therefore overrule the said decision. We are constrained
to observe that Fiza Developers (supra) was a step in the right direction as
its ultimate ratio is that issues need not be struck at the stage of hearing a
Section 34 application, which is a summary procedure. However, this
judgment must now be read in the light of the amendment made in Section
34(5) and 34(6). So read, we clarify the legal position by stating that an
application for setting aside an arbitral award will not ordinarily require
anything beyond the record that was before the Arbitrator. However, if there
are matters not contained in such record, and are relevant to the
determination of issues arising under Section 34(2)(a), they may be brought
to the notice of the Court by way of affidavits filed by both parties. Crossexamination
of persons swearing to the affidavits should not be allowed
unless absolutely necessary, as the truth will emerge on a reading of the

affidavits filed by both parties. 
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8367 OF 2018
(ARISING OUT OF SLP (CIVIL) NO.33248 OF 2017)

M/S EMKAY GLOBAL FINANCIAL SERVICES LTD. Vs GIRDHAR SONDHI 

Dated:August 20, 2018.
R.F. NARIMAN, J.
Citation: AIR 2018 SC 3894,2018 (9) SCC 49

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Whether unjust arbitration award can be set aside by court?

We are not in agreement with the approach adopted by the learned single Judge. The dispute in question had resulted in a reasoned award. It is not as if the arbitrator has not appreciated the evidence. The arbitrator has taken a plausible view and, an in our view, as per us the correct view, that the very nature of job to be performed would imply that there has to be an area for unloading and that too in the vicinity of 5 kilometres as that is all that the Appellant was to be paid for. The route was also determined. In such a situation to say that the Respondent owed no obligation to make available the site cannot be accepted by any stretch of imagination. The unpreparedness of the Respondent is also apparent from the fact that even post termination it took couple of years for the work to be carried out, which was meant to be completed within 45 days. The ability of the Appellant to comply with its obligations were inter dependent on the Respondent meeting its obligations in time to facilitate appropriate areas for unloading of the earth and for its compacting. At least it is certainly a plausible view.

11. It has been opined by this Court that when it comes to setting aside of an award under the public policy ground, it would mean that the award should shock the conscience of the court and would not include what the court thinks is unjust on the facts of the case seeking to substitute its view for that of the arbitrator to do what it considers to be "justice." (Associate Builders v. Delhi Development Authority MANU/SC/1076/2014 : (2015) 3 SCC 49)

12. The approach adopted by the learned Additional District Judge, Chandigarh was, thus, correct in not getting into the act of re-appreciating the evidence as the first appellate court from a trial court decree. An arbitrator is a chosen Judge by the parties and it is on limited parameters can the award be interfered with. 

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 20885 of 2017 

Decided On: 05.12.2017

 Sutlej Construction Limited Vs. Union Territory of Chandigarh

Hon'ble Judges/Coram:

Jasti Chelameswar and Sanjay Kishan Kaul, JJ.

Citation:(2018) 1 SCC 718

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When arbitral award is not liable to be set aside?

As far as the last contention is concerned, namely that the Arbitrator has not considered and/or ignored the evidence adduced by the Appellant, the same need not detain us any further. We have carefully gone through the arbitral award. The arbitral award is from pages 49 to 203 of the paper-book. On perusal of the impugned award, the learned Arbitrator has passed a detailed reasoned award, taking into consideration all the facts of the case and after going through and analyzing the evidence of the witnesses examined by both parties. We find this grievance to be totally without any merit. It is now well settled that under Section 34 of the said Act, the grounds for interference are limited. The Court is not supposed to interfere with pure questions of fact and appreciation of evidence. The Act makes a provision for a supervisory role of the Courts and for review of the arbitral award only to ensure fairness. This supervisory role is to be kept at a minimum level and interference is only in case of fraud and violation of natural justice etc. In this regard, the observations of the Supreme Court in the case of McDermott International Inc. v. Burn Standard Co. Ltd. MANU/SC/8177/2006 : (2006) 11 SCC 181 are apposite and read thus:-

"Challenge to award: Legal scope of

45. Section 2(1)(b) of the 1996 Act reads as under:

"2. (1)(b) 'arbitration agreement' means an agreement referred to in Section 7;"

46. In terms of the 1996 Act, a departure was made so far as the jurisdiction of the court to set aside an arbitral award is concerned vis-à-vis the earlier Act. Whereas under Sections 30 and 33 of the 1940 Act, the power of the court was wide, Section 34 of the 1996 Act brings about certain changes envisaged thereunder.

47. Section 30 of the 1940 Act reads, thus:

"30. Grounds for setting aside award.-An award shall not be set aside except on one or more of the following grounds, namely-

(a) that an arbitrator or umpire has misconducted himself or the proceedings;

(b) that an award has been made after the issue of an order by the court superseding the arbitration or after arbitration proceedings have become invalid under Section 35;

(c) that an award has been improperly procured or is otherwise invalid."

48. The section did not contain the expression "error of law....". The same was added by judicial interpretation. While interpreting Section 30 of the 1940 Act, a question has been raised before the courts as to whether the principle of law applied by the arbitrator was (a) erroneous or otherwise, or (b) wrong principle was applied. If, however, no dispute existed as on the date of invocation, the question could not have been gone into by the arbitrator.

Changes under the new Act

49. The 1996 Act makes a radical departure from the 1940 Act. It has embodied the relevant rules of the modern law but does not contain all the provisions thereof. The 1996 Act, however, is not as extensive as the English Arbitration Act.

50. Different statutes operated in the field in respect of a domestic award and a foreign award prior to coming into force of the 1996 Act, namely, the 1940 Act, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. All the aforementioned statutes have been repealed by the 1996 Act and make provisions in two different parts, namely, matters relating to domestic award and foreign award respectively.

Vis-à-vis grounds for setting aside the award

51. After the 1996 Act came into force, under Section 16 of the Act the party questioning the jurisdiction of the arbitrator has an obligation to raise the said question before the arbitrator. Such a question of jurisdiction could be raised if it is beyond the scope of his authority. It was required to be raised during arbitration proceedings or soon after initiation thereof. The jurisdictional question is required to be determined as a preliminary ground. A decision taken thereupon by the arbitrator would be the subject-matter of challenge under Section 34 of the Act. In the event the arbitrator opined that he had no jurisdiction in relation thereto an appeal there against was provided for under Section 37 of the Act.

52. The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it."

18. In view of the foregoing discussion, we find no merit in this Appeal. 

IN THE HIGH COURT OF BOMBAY

Commercial Appeal (Lodg.) No. 16 of 2017 in Chamber Summons No. 320 of 2017 in Arbitration Petition No. 1698 of 2015

Decided On: 07.04.2017

 Zee Sports Ltd. Vs. Nimbus Media Pte. Ltd.

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Whether requirement to make application for stay and furnishing security provided under Arbitration amendment Act 2015 is retrospective in nature?

In such a situation, it would have to be considered, independent of Section 26 of the Amending Act, as to whether the amended provisions applied to the said second and third category of cases. In this regard, we may note the observations of the Supreme Court in Thyssen (supra) where, after, considering several earlier decisions, the Supreme Court observed in paragraph 32 (which we have already extracted above) that the principles enunciated in the judgments show as to when a right accrues to a party under a repealed Act. The Supreme Court observed that it is not necessary that for the right to accrue, legal proceedings must be pending when the new Act comes into force. Furthermore, and more importantly, the Supreme Court observed that to have the award enforced when arbitral proceedings commenced under the old Act under that very Act was certainly an accrued right. In other words, all the aspects of enforceability of an award entail an accrued right both in the person in whose favour the award is made and against whom the award is pronounced. It will also be noticed that the Supreme Court made it clear that for the right to accrue, there is no necessity that legal proceedings must be pending when the new Act comes into force. This exactly covers the situation as obtaining in the second category of cases, where the arbitral proceedings were commenced prior to 23.10.2015 and the award was also made prior to 23.10.2015, but the petition under Section 34 had not yet been filed. This is the same situation as in the present case. Thus, the pendency of any legal proceedings or otherwise would not come in the way of determining as to whether the right had accrued under the unamended provisions or not. We have already noted that the Supreme Court in Thyssen (supra) observed that the right to have the award enforced (which also comprises of the negative right of the award debtor to not have it enforced till his objections under Section 34 of the said Act are heard and decided) is certainly an accrued right. Given the fact that the amended Section 36 takes away the right of an automatic stay of enforcement of an award, it is clear that the amendment introduced in Section 36 by virtue of the Amending Act would definitely impinge upon the accrued right of the party against whom the award is given after the arbitral proceedings have been held under the unamended provisions. Since an accrued right is affected, unless a contrary intention appears in the amending statute, the amendments would have to be treated as prospective in operation. Prospective from the standpoint of commencement of the arbitral proceedings.

IN THE HIGH COURT OF CALCUTTA

E.C. No. 1 of 2017

Decided On: 28.06.2017

 Braithwaite Burn & Jessop Construction Co. Ltd. Vs.  Indo Wagon Engineering Ltd.

Hon'ble Judges/Coram:

Soumen Sen, J.

Citation: AIR 2017(NOC) 923 Cal

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When court will not set aside arbitration award?

In ONGC v. WIG Brothers Builders and Engineers (P) Ltd. reported at MANU/SC/0828/2010 : (2010) 13 SCC 377 at Page 379, Paragraph 4, while dealing with the challenge under Sections 30 and 33 of the 1940 Act, the Court opined that a court while considering a challenge to an award under Sections 30 and 33 of the 1940 Act, does not sit as an appellate court and it cannot re-appreciate the material on record. The Court further proceeded to state that:-

"4. ... An award is not open to challenge on the ground that the arbitrator had reached a wrong conclusion or had failed to appreciate some facts, but if there is an error apparent on the face of the award or if there is misconduct on the part of the arbitrator or legal misconduct in conducting the proceedings or in making the award, the court will interfere with the award."
56. The reasonableness of the reason cannot be gone into in this proceeding inasmuch as interpretation of the terms of the contract including the decisions and/or authorities citied before the arbitrator are within the exclusive province of the arbitrator unless, of course, it is demonstrated without battering of an eye-lid that the decision is contrary to the law laid down in those decisions.
IN THE HIGH COURT OF CALCUTTA

AP No. 596 of 2014

Decided On: 10.03.2017

Apeejay Pvt. Ltd. Vs. Steel Authority of India Ltd.

Hon'ble Judges/Coram:
Soumen Sen, J.

Citation: AIR 2017(NOC)1122 Cal

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Whether court can relegate parties before arbitral tribunal after setting aside arbitral award as per S 34 of arbitration Act?

 In any case, the limited discretion available to the Court Under Section 34(4) can be exercised only upon a written application made in that behalf by a party to the arbitration proceedings. It is crystal clear that the Court cannot exercise this limited power of deferring the proceedings before it suo moto. Moreover, before formally setting aside the award, if the party to the arbitration proceedings fails to request the Court to defer the proceedings pending before it, then it is not open to the party to move an application Under Section 34(4) of the Act. For, consequent to disposal of the main proceedings Under Section 34 of the Act by the Court, it would become functus officio. In other words, the limited remedy available Under Section 34(4) is required to be invoked by the party to the arbitral proceedings before the award is set aside by the Court.

15. In the present case, the learned Single Judge had set aside the award vide judgment dated 07.03.2014. Indeed, the Respondent carried the matter in appeal before the Division Bench. Even if we were to assume for the sake of argument, without expressing any opinion either way on the correctness of this assumption, that the appeal was in continuum of the application Under Section 34 for setting aside of the award and therefore, the Division Bench could be requested by the party to the arbitral proceedings to exercise its discretion Under Section 34(4) of the Act, the fact remains that no formal written application was filed by the Respondent before the Division Bench for that purpose. In other words, the Respondent did not make such a request before the learned Single Judge in the first instance and also failed to do so before the Division Bench rejected the appeal of the Respondent.

16. In the case of MMTC (supra), the Madras High Court, while dealing with the purport of Section 34(4) of the Act in paragraph 22 (C) of the reported judgment, observed thus:

(C)........... 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 Under Section 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 Under Section 34(4) of the new Act.

Again, in paragraph 22 (e) (IV) of the reported judgment, it observed thus:

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 Under Section 34(2); or

(ii) to adjourn the proceedings to enable the arbitral tribunal to resume the proceedings or take such other action as in the opinion of the tribunal will eliminate the grounds for setting aside the arbitral award.

In the case of Raitani Engineering Works Pvt. Ltd. (supra), the Gauhati High Court, placing reliance on the decision in MMTC (supra) in paragraph 8 of its decision, observed thus:

But unfortunately in the present case, the award given by the arbitration panel on 13.07.2012 was quashed in its entirety and the appeal Under Section 34 is no more pending before the Court. Therefore, invoking the powers conferred under Sub-section (4) of Section 34 of the Arbitration Act to facilitate the arbitration panel to take rectificatory steps is not an option in this matter. Moreover neither of the contesting party in this dispute have applied for an additional award and therefore it may not be appropriate to direct the arbitration panel to re-decide on the six un-decided claims of the contractor.

The Division Bench of the High Court of Karnataka in the case of Bhaskar Industrial Development Limited (Supra) has expounded that the power of the Court Under Section 34 of the Act is not to remand the matter to the Arbitral Tribunal after setting aside the arbitral award.

17. A priori, it must follow that the Division Bench committed manifest error in issuing direction in the concluding part of the impugned judgment, as reproduced hereinbefore in paragraph No. 7. Such direction could not have been issued in the fact situation of the present case. The impugned direction suffers from the vice of jurisdictional error and thus cannot be sustained. We have no-option but to quash and set aside the same.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 5172 of 2017 (Arising out of SLP (Civil) No. 2370 of 2015)

Decided On: 20.04.2017

 Kinnari Mullick and Ors.Vs. Ghanshyam Das Damani

Hon'ble Judges/Coram:

Dipak Misra, A.M. Khanwilkar and Mohan M. Shantanagoudar, JJ.

Citation:AIR 2017 SC 2785

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Whether arbitration award can be set aside if it is contrary to terms of contract?

 The High Court did not have the benefit of the
principles laid down in Saw Pipes : (2003) 5 SCC
705], and had proceeded on the assumption that
award cannot be interfered with even if it was contrary
to the terms of the contract. It went to the extent of
holding that contract terms cannot even be looked into
for examining the correctness of the award. This Court
in Saw Pipes : (2003) 5 SCC 705] has made it clear
that it is open to the court to consider whether the
award is against the specific terms of contract and if
so, interfere with it on the ground that it is patently
illegal and opposed to the public policy of India.

Bombay High Court

Maharashtra State Electricity ... vs Vijay Electricals Ltd on 4 February, 2015

Bench: R.D. Dhanuka

Citation:2016(5) ALLMR 74

Read full judgment here: click here

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When arbitration award should not be set aside?

I have heard the learned counsel for the parties, appraised
the paper book and of the view that there is no merit and force in the
submission of Ms.Pathak, for, the Arbitrator categorically recorded a
finding with regard to tendering of documents at the behest of the
respondent-contractor. The officials of the Corporation should not have
been right in calling upon the contractor to sign the agreement as he was
in custody and, therefore, had executed GPOA and assignment of right of
a principal to the agent is recognised in law and once the Corporation
failed to honour the contract and insisted upon the presence of the
contractor for signing the agreement, there was no occasion for them to
cancel the contract. The intention of the contractor is evident from the
deposit of the security deposit. It is the conceded position on record that
respondent No.1 was in judicial custody w.e.f. 1.9.2002 and on
6.11.2002, the appellant issued notice to respondent No.1 to sign the

agreement in person by 17.11.2002, failing which the contract shall be
rescinded at his risk and cost and earnest money shall also be forfeited.
It is now a settled law that in what circumstances, the award
has to be interfered with. The question, which is now raised in the
aforementioned appeal, has already been answered by the Hon'ble
Supreme Court in catena of judgments, wherein it has been laid down
that until and unless the award suffers from illegality as statutorily
prescribed under Section 34 of the Act, the same cannot be interfered
with. In this context, I intend to refer the judgments of Hon'ble Supreme
Court in Associate Builders Vs. Delhi Development Authority (2015)
3 SCC 49 and Navodaya Mass Entertainment Ltd. Vs. J. M.
Combines (2015) 5 SCC 698. In the aforementioned judgments, the
Hon'ble Supreme Court had culled out the ratio decidendi by holding that
until and unless there is error apparent on the face of record or the
arbitrator has not followed statutory legal position, it is only in these
circumstances, it would be justified interfering with the award. The High
Court should not act as a Court of appeal and reappraise the
material/evidence and embark on a path by substituting its own view in
support of the Arbitrator's view. It is not the case of the appellant that the
award is against the public policy or has violated the principles of
judicial approach, much less against the statute and other provisions of

Section 34 of the Act. The Arbitrator has dealt with the dispute, which
was contemplated and was within its scope. The parties to the lis had
participated in the proceedings and were given proper notice not only
with regard to the appointment of the Arbitrator but vis-a-vis
proceedings. In my view, the award of the Arbitrator does not suffer from
any illegality in as much as the Arbitrator, who is expert, has dealt with
the matter and decided the claims of respective parties to the lis.
In my view, the award read as a whole is just, fair and
reasonable. It is now a settled law that the Arbitrator is the sole judge of
quality and quantity of the evidence before him and decide on the basis
of the available evidence.
I am of the view that the award of the arbitrator is perfect,
legal and justice and based upon the appreciation of the evidence.

 IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
F.A.O.No.6853 of 2010 (O&M)
Dated: August 01, 2016
Central Ware Housing Corporation, Panchkula

V
M/s Jaswinder Singh,
CORAM:  AMIT RAWAL, JUDGE
Citation:AIR 2016(NOC)675 P&H

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When limitation for setting aside arbitration will start running?

However, the question is
whether the period of limitation for making an application under
Section 34 of the 1996 Act, would start running from the date on
which the signed copy was received by Mr. Pradip Saha, Assistant
Engineer.
In State of Maharashtra Vs. ARK Builders reported in (2011)
4 SCC 616, cited by Mr. Sen, the issue was, whether the period of
limitation for making an application under Section 34 of the 1996
Act, for setting aside an arbitral award, was to be reckoned from the
date on which a copy of the award was received by the applicant by
any means or source, or whether it was to start running from thedate a signed copy of the award was delivered to the applicant by the
Arbitrator.
The Supreme Court held that the period of limitation prescribed
under Section 34(3) of the 1996 Act, could only commence from the
date on which the award was received by the applicant in the manner
prescribed by law and/or in other words, in the manner for service of
the award prescribed in Section 31(5) of the 1996 Act.
In ARK Builders (supra) the Arbitrators had not supplied a
copy of the award to the appellants. The award holder had, however,
forwarded a photocopy of the award to the appellant and claimed
payment in terms of the award. The Supreme Court held that
limitation would run from the time the award duly signed, was
received by the appellant, from the Arbitrator.
In ARK Builders (supra) the Supreme Court did not consider
the question of whether the copies served by the Arbitrators to the
parties concerned, would all have to actually and separately be
signed by the Arbitrators themselves. However, the Supreme Court
clearly held that limitation would start running from the date on
which a copy of the award was received by the applicant from the
Arbitral Tribunal.In Benarsi Krishna Committee & Ors. Vs. Karmyogi
Shelters Private Limited reported in (2012) 9 SCC 496 the
Supreme Court held that the expression ‘party’ as defined in Section
2(i)(h) of the 1996 Act clearly indicates a person who is a party to an
arbitration agreement. The said definition is not clarified in any way
so as to include the agent of the party to such agreement. Any
reference, therefore, made in Section 31(5) and Section 34(2) of the
1996 Act could only mean the party himself and not his or her agent
or advocate empowered to act on the basis of a vakalatnama. In the
aforesaid case, the award had been served on the advocate.
In this case, Sri Pradip Saha, Assistant Engineer was not a
party to the arbitration. The State of West Bengal, represented
through the Secretary, Irrigation and Waterways Department and the
Executive Engineer were parties. Copies of the award should have
been served on the Secretary, Irrigation and Waterways Department,
and the Executive Engineer.
The award not having been served on the Secretary, Irrigation
and Waterways Department, or the Executive Engineer, it cannot be
said that limitation had started running. The application under
Section 34(2) for setting aside of the arbitral award cannot be held to
have been barred by limitation.
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
APPELLATE SIDE
FMA 4576 of 2015
The State of West Bengal and Anr.
Vs.
M/s Motilal Agarwala and Anr.
B E F O R E:
The Hon’ble Justice INDIRA BANERJEE
And
The Hon’ble Justice SAHIDULLAH MUNSHI

Judgment on : 01.03.2016.
Citation:AIR 2016 Calcutta 271

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When court should not set aside arbitration award?

 It is to be noted that an 'Arbitral Tribunal' is the 'Final Arbitrator' of both the questions of 'Fact and Law' referred to it for determination. The decision of the Arbitrator, being the select judge of the parties, is ordinarily final both on 'Facts and Law' and should not be lightly interfered with. Likewise, the Review in Court would not be justified to interfere with the Award merely because the views taken by the Arbitrator on the question of fact or law does not accord well within its own views. As a matter of fact, the 'Reviewing Court' is to accept the decision an Arbitrator as long as he had acted within jurisdiction in interpreting the provisions of the Contract and had applied the law to his evaluation of the facts. Indeed, the Arbitration and Conciliation Act, 1956 makes provision for the supervisory role of the courts for review of the 'Arbitral Award' only to ensure fairness as per decision McDermott International Inc. V. Burn Standard Co., Ltd., and Others MANU/SC/8177/2006 : (2006) 11 Supreme Court Cases 181.

It is to be borne in mind that an Arbitrator is the master of 'Facts and Law'. As such, the findings of fact recorded by the 'Arbitral Tribunal' are conclusive and final. It cannot be gainsaid that the finding of fact cannot be assailed on the grounds of admissibility, relevance, materiality and weight of any evidence. In fact, the Arbitration and Conciliation Act, 1996 does not provide for recourse against an 'Arbitral Award' on the facts or for any 'Judicial Review' of the award on its merits. If the Tribunal had jurisdiction, the correct procedures were adhered to, and the correct formalities are observed, the award - good, bad or indifferent is final and binding on the parties. It is not open to a Court of Law to examine the correctness of the award on merits with reference to the materials produced before the Arbitral Tribunal, nor can it re-examine or re-assess the materials on record to see the correctness of the view taken by the Tribunal.

Furthermore, the jurisdiction of a Court of Law to set aside an Arbitral Award under Section 34 of the Arbitration and Conciliation Act, 1996 is not an Appellate one and added further, it cannot interfere with erroneous on fact either in the absence of perversity. It is restricted to the grounds adumbrated in it, in the considered opinion of this Court. Also that if the award is passed fairly, after providing adequate opportunities to the respective parties to project their points of view in the manner provided by the Arbitration agreement, the Award is not amenable to correction by a Court of Law. Also in the decision of Delhi State Industrial & Infrastructure Development Corporation Limited reported in (2014) 3 Arb LR 116 (Delhi) (Division Bench) at Paragraph No. 9, it is observed and held as follows:--

"9. We may further add that the parties, by agreeing to be bound by the arbitral award and by declaring it to be final, agree to be bound also by wrong interpretation or an erroneous application of law by the arbitral tribunal and once the parties have so agreed, they cannot apply for setting aside of the arbitral award on the said ground. Even under the 1940 Act where the scope of interference with the award was much more, the Apex Court in Tarapore and Co., V. Cochin Shipyard Ltd., Cochin, MANU/SC/0002/1984 : (1984) 2 SCC 680 : 1985 Ar.LR 2 (SC) and U.P. State Electricity Board, MANU/SC/0541/1988 : (1989) 1 SCC 359 : 1989 (1) Arb. LR 244 (SC) held that the arbitrator's decision on a question of law is also binding even if erroneous. Similarly, in N. Chellappan V. Secretary, Kerala State Electricity Board, MANU/SC/0002/1974 : (1975) 1 SCC 289, it was held that even if the umpire committed an error of law in granting amount, it cannot be said to be a ground challenging the validity of the award; the mistake may be a mistake of fact of law."

However, a Court of Law can set aside the 'Award' only if it is apparent from the award that there is no evidence to support the conclusions or if the award is cemented on any legal view which is latently and patently an erroneous one.

If an Arbitrator fails to adjudicate a counter claim and does not consider it, then 'Award' is liable to be set aside in terms of the Arbitration and Conciliation Act, 1996 [26 of 1996]. An 'Arbitrator' is not only required to decide a counter claim but is also required to assail reasons for his decisions.

Factors to be Borne in Mind by an Appellate Court

31. When an Appellate Court deals with the 'Award' assailed in an 'Appeal' it is to bear in mind fully the salient factors:--

"(i) A Court of Law cannot substitute its own decision as if sitting in Appeal over the Award.
(ii) Ambit of interference that the 'Award' is limited.
(iii) A Court of Law is to look into whether there is any negation of the 'Principles of Natural Justice'.
(iv) A Court of Law can interfere only if there is an error on the face of the 'Award'.
(v) A Court of Law can interfere if an 'Arbitrator' had brushed aside/ignored the relevant clause and the terms of the agreement.
(vi) The Award is cemented on a proposition of Law which is erroneous.
(vii) An award could not be set aside just because the reasons are spelt out in brief.
(viii) Interpretation placed by the Arbitrator ought not be disturbed if it is plausible and not because a Court of Law would have come to a different conclusion.
(ix) No interference would be called for when an Arbitrator renders a finding on a particular question of Law when authorised by the concerned parties.
(x) A Court of Law should not disturb the 'Findings' of the Arbitrator when based on facts.

(xi) There must not be a reappreciation of the evidence by a Court of Law, in as much as the same was considered by an Arbitrator."

IN THE HIGH COURT OF MADRAS

O.S.A. No. 159 of 2015

Decided On: 01.12.2015

Appellants: Jeypore Sugar Company Ltd.
Vs.
Respondent: Laxmi Organic Industries Limited and Ors.

Hon'ble Judges/Coram:S. Manikumar and M. Venugopal, JJ.

Citation:AIR 2016 (NOC)288 Mad

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Whether S 5 of limitation Act is applicable to application for setting aside award U/S 34 of arbitration Act 1996?

 In view of Section 34(3) of the 1996 Act, delay beyond three months and thirty days, in filing an application under Section 34 of the 1996 Act, for setting aside an award, cannot be condoned under Section 5 of the Limitation Act, 1963.

9. Section 29(2) of the Limitation Act, 1963 provides as follows :-

"Where any special or local law prescribes for any suit, appeal or application a period of limitation different from the period prescribed by the Schedule, the provisions of Section 3 shall apply as if such period were the period prescribed by the Schedule and for the purpose of determining any period of limitation prescribed for any suit, appeal or application by any special or local law, the provisions contained in Sections 4 to 24 (inclusive) shall apply only insofar as, and to the extent to which, they are not expressly excluded by such special or local law."

10. The 1996 Act is a special law and Section 34 thereof provides for a period of limitation different from that prescribed under the Limitation Act, 1963 as observed by the Supreme Court in Union of India v. Popular Construction Company reported in MANU/SC/0613/2001 : (2001) 8 SCC 470.

11. In Popular Construction Company (supra), the Supreme Court reaffirmed that the mere stipulation of a period of limitation, howsoever peremptory the language, might not, in itself be sufficient to displace the applicability of Section 5 of the Limitation Act. The Supreme Court, however, held that the crucial words "but not thereafter" used in the proviso to sub-section (3) of Section 34 of the 1996 Act, would amount to express exclusion of Section 5 of the Limitation Act, under Section 29(2) of the said Act and would therefore bar the application of Section 5 of the Limitation Act, 1963. To quote the Supreme Court "to hold that the Court could entertain an application to set aside an award, beyond the extended period of limitation under the proviso, should render the phrase "but not thereafter" wholly otiose. No principle of interpretation would justify such result."

12. The proposition that the proviso to Section 34(3) bars the application of Section 5 of the Limitation Act, 1963, beyond the extended period of limitation also finds support from the judgment of the Supreme Court in Assam Urban Water Supply and Sewerage Board v. Subhash Projects and Marketing Limited reported in MANU/SC/0054/2012 : (2012) 2 SCC 624.

IN THE HIGH COURT OF CALCUTTA

G.A. 2518/2015, A.P.O.T. 337/2015 and A.P. 174/2015

Decided On: 28.08.2015

National Agricultural Cooperative Marketing Federation of Indian Ltd.

Vs.

 R. Piyarelall Import & Export Ltd.

Hon'ble Judges/Coram:Indira Banerjee and Sahidullah Munshi, JJ.

Citation:AIR 2016 Cal160

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Whether arbitration award can be set aside on the ground that there is no proper service of summons?

The service report dated 6.4.2010 is filed on record by the respondents of its Superintendent. The burden lies upon the respondent claimant to prove the valid service. The service of arbitration proceedings is a must, as the arbitrator was not appointed by the consent of the parties, but through the provisions of MSCS Act.

10 There is no affidavit in support of the service on record. The submission is that these service reports are part of record and, therefore, the Arbitrator proceeded accordingly and passed the impugned award, is unacceptable. In the affidavit filed by the respondent there is no specific reference made about the service of notices

11 I am of the view that there is a dispute and/or doubt raised with regard to the acknowledgments referring to the service of notices to petitioners 1, 2 and 3. It is not proved and as no affidavit of service is filed on record to show that it was duly served, the reliance on such acknowledgments and the reports, just cannot be the foundation to pass such exparte award. The respondent/Bank except filing these acknowledgments on record unable to demonstrate that the notices were duly served on petitioners 1, 2 and 3. Merely signature or acknowledgment by unknown person, that itself is not sufficient to accept the case of the Bank that the notices were duly served.

12 Even before the Arbitrator though there is no strict compliance of provisions of Code of Civil Procedure or the Evidence Act is necessary, yet so far as the service of arbitration notices, in my view, as it goes to the root of the matter, must be taken care of in all respects and unless it is satisfied and/or reliable material and/or affidavit placed on record to show effective service, such exparte award definitely causes great injustice and hardship to the person affected by such award.

13 So far as petitioners 4, 5 and 6 are concerned, though there was an order of pasting and there is a report filed by the officer of the Bank, that itself, in my view, is not sufficient. It is also not supported by additional affidavit and/or affidavit to show that it was duly pasted at appropriate place. The same service is also disputed. In the present case, they failed to prove the valid and effective service.

14 In view of above, without observing anything on the merits of the matter and as there is no serious dispute that the petitioners were absent and there was no opportunity given to the petitioners to proceed with the matter on the merits, therefore, in the interest of justice and considering the principles of natural justice, fair play and equity, I am inclined to set aside the award solely on these grounds.

Bombay High Court

Shunk Corrugators Pvt.Ltd. & 5 Ors vs The Bharat Co-Op. Bank (Mumbai) ... on 7 January, 2011

Bench: Anoop V.Mohta

Citation;2011(2) ARBLR11 Bom

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When civil court can not entertain application for setting arbitration award?

If the respondent was not satisfied with the award, the only course open to him was to file an application under section 34 of the Act of 1996. The Act is clear to the effect that any application under section 34 of the Act must be filed in a Court of highest civil  jurisdiction in the district. In the State of Bihar a Court of Civil Judge happens to be one of highest civil jurisdiction. The respondent, however, filed an interlocutory application in the suit, with a prayer to set aside the award. The procedure adopted by the respondent was totally untenable and contrary to the provisions of the Act of 1996. It is just unimaginable as to how the learned Munsif thought it fit to interfere with the award.

Firstly, with the appointment of arbitrator the suit itself stood disposed of, and thereby he became functus officio. Secondly, he is not competent to entertain the proceedings for setting aside the award. Thirdly, it is an original petition and not interlocutory application that is required to be filed under section 34 of the Act of 1996 before a Court of highest civil jurisdiction.

Patna High Court

Radha Devi @ Rekha Devi vs Punay Pratap Mandal on 7 May, 2015

 CORAM: HONOURABLE THE CHIEF JUSTICE

Citation;AIR 2015 Patna 131

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