25 January 2022, Tuesday

1 year ago

An award cannot be remitted to find a contentious issue not dealt with earlier but only fill up the reasoning gaps. More so because in the guise of additional reasons, the tribunal cannot alter the award: Supreme Court of India

03 January 2022 | I-Pay Clearing Services Private Limited v. ICICI Bank Limited | Civil Appeal No. 07 of 2022 | Supreme Court of India | R Subhash Reddy & Hrishikesh Roy JJ | 2022 SCC OnLine SC 4

A 2-judge bench of the Supreme Court has given an important ruling on the scope of Section 34 (4) ACA, the provision that gives the set-aside court a discretion to remit the award to the tribunal while keeping the set-aside proceedings pending. See Kinnari Mullick (2018) 11 SCC 328.

A central question before the tribunal was whether termination of the contract by ICICI was illegal. So, the tribunal was required to consider ICICI’s defence that the contract had been discharged by accord and satisfaction. The tribunal awarded damages on the footing that the termination was illegal but did not consider the issue of accord and satisfaction.

Could the tribunal remit the award under Section 34 (4) ACA? The High Court ruled no. Accepting ICICI’s arguments led by senior counsel Mr KV Viswanathan, the Supreme Court upheld the ruling. It said:

  1. Section 34 (4) ACA “can be resorted to record reasons on the finding already given in the award or to fill up the gaps in the reasoning of the award.”
  2. Finding is a decision on an issue. Reasons are the links between the materials on which certain conclusions are based and the actual conclusions [citing Muralidhar Bhagwan Das AIR 1965 SC 342]. In the absence of any finding on the issue of accord and satisfaction, the court must consider if it amounts to patent illegality.
  3. The power under Section 34 (4) ACA is discretionary. “It is to be exercised where there is inadequate reasoning or to fill up the gaps in the reasoning, in support of the findings which are already recorded in the award. Under guise of additional reasons and filling up the gaps in the reasoning no award can be remitted ...”
  4. If it prima facie appears that there is patent illegality by not recording a finding on the contentious issue, the court may not accede to the request of a party to remit the matter.
  5. Further, if the tribunal wants to consciously hold that there was accord and satisfaction between the parties, it cannot alter the word itself.

The court distinguished Dyna 2019 SCC OnLine SC 1656 and Som Datt Builders (2009) 10 SCC 259.

Read the decision here. [1] [1] The issue whether an award can be set aside and then remanded has been discussed in Kinnari. The 3-judge bench Supreme Court ruled that remand and set-aside are alternatives. Once an award is set aside, there is nothing to remand. Then, in Radha Chemicals, the 2-judge bench Supreme Court of RF Nariman and Navin Sinha JJ held that the set-aside court has no jurisdiction to remand the matter to the arbitrator for a fresh decision. This was in a context where the set-aside court found that the point of limitation had not been decided correctly and, therefore, remanded the matter to the arbitrator for the point be decided afresh. Because the court in I-Pay does not refer to it, it is unclear if Radha Chemicals was cited. Show More


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