India: Court Has No Power On Its Own Motion To Relegate Parties Back To Tribunal After Setting Aside The Award

ABSTRACT

In Kinnari Mullick and another v Ghanshyam Das Damani (CIVIL APPEAL NO. 5172 OF 2017), the Indian Supreme Court considered whether the court has the power to suo moto  (on its own motion) to refer the parties back to the arbitral tribunal under section 34(4) of the Indian Arbitration and Conciliation Act 1996 (ACA 1996),  following the setting aside of an arbitral award.

SPEEDREAD

On 20 April 2017, the Indian Supreme Court concluded that a court does not have the power to refer parties back to an arbitral tribunal after setting aside the award under section 34(4) of the Indian Arbitration and Conciliation Act 1996 (ACA 1996).

Having examined the issues and arguments raised in detail, the Supreme Court confirmed that a  bare reading of section 34(4) clarifies that parliament gave no power suo moto (on its own motion)  of relegation to the court under this section, and the section does not contemplate such relegation  to the arbitral tribunal after having set aside the arbitral award in question. (Kinnari Mullick and another v Ghanshyam Das Damani (CIVIL APPEAL NO. 5172 OF 2017).)

BODY OF UPDATE

The Indian Supreme Court has allowed an appeal against the Divisional Bench of the Calcutta High Court and concluded that, under section 34(4) of the Indian Arbitration and Conciliation Act 1996 (ACA 1996), parties to an arbitration cannot be relegated back to the tribunal after the arbitral award has been set aside.

Paragraph 17 of the judgment noted:

         "A priori, it must be follow that the Division[al] Bench committed manifest error in issuing direction in the concluding part of the impugned judgment, as herein produced in para No. 7. Such judgment should 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".

The issue raised before the Supreme Court was whether courts have the power to relegate the parties back to the tribunal after setting aside the award under section 34(4) of the ACA 1996 suo moto (on its own motion) in absence of any application made in that  espect by the parties to the arbitration proceedings.

Relying on the judgment of McDermott International Inc v Burn Standard Ltd (2006) 11 SCC 181, while examining the section 34(4), the Supreme Court considered the legislative intent of parliament  and noted that no such power existed, except to adjourn the proceedings and that even such power of adjournment could only be used on the request of one of the parties by filing an application, and not suo moto.

The Supreme Court referred to the judgment of MMTC v Vicnivass Agency (2009) 1 MLJ 199 which stated that: 

"that there should be an application under Section 34(1) of the [ACA 1996] 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 [ACA 1996]".

The Supreme Court also noted that any adjournment under this section must be made before the award is set aside by the court. In the present case, no such application was filed before the single judge and accordingly the Divisional Bench had been incorrect to reach the conclusion it did.

The appellant, to substantiate its point, relied on the judgment of Bhaskar Industrial Development Ltd v South Western Railways (Arb. Petition No. 13 of 2015) in which the High Court of Karnataka noted that under section 34, the court is not permitted to remand the matter to the arbitral tribunal after setting aside the arbitral award.

The Supreme Court, after hearing at the parties at length, concluded that the Divisional Bench committed a manifest error in issuing directions in the concluding part of its judgment. 

Case: Kinnari Mullick and another v Ghanshyam Das Damani (CIVIL APPEAL NO. 5172 OF 2017) (Indian Supreme Court).

 This article was first published by Practical Law, UK and can be viewed by clicking here.

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