Tribunal Didn't Meet Objections Raised, Allahabad High Court Sets Aside Arbitral Award, Remits Case To Tribunal

The Allahabad High Court has held that under Section 34(4) of the Arbitration and Conciliation Act, 1996, the High Court can set aside an arbitral award and remit the case back to the Arbitral Tribunal for a fresh decision.

The bench comprising Justice Ajay Bhanot placed reliance on the judgment of the Apex Court in National Highways Authority of India Vs. P. Nagaraju and Ors to hold thus:

“In light of the provisions of Section 34 of Arbitration and Conciliation Act, 1996 and the appellate powers of this Court, interest of justice which are consistent with the provisions of law will be served by remitting the matter to the Arbitral Tribunal.”

Factual Background

Compensation was determined under Section 3-G of the National Highway Authority of India Act, 1988 which was challenged before an Arbitral tribunal constituted under Section 3-G(5) of the Act. The Arbitral Tribunal ignored the objections raised by NHAI and determined the final award based solely on the objections filed by the claimants.

The arbitral award was challenged under Section 34 of the Act of 1996 on grounds that the Tribunal had failed to consider the objections filed by NHAI. However, the Court below failed to return a finding on this specific ground taken by the appellant-NHAI that the application filed by it was not decided by the Tribunal. Accordingly, NHAI approached the High Court under Section 37 of the Act of 1996.

Counsel for the appellant argued that the Court below erred in not deciding the objection taken by the appellant and in turn perpetuated the error of the arbitral tribunal. It was also argued that the consequently, award which is contrary to a fundamental policy of Indian law and in conflict with basic notions of morality and justice was sought to be executed against the appellants.

Counsel for the respondent argued that the appellant had not sought any opportunity to adjourn the proceedings before the Court below to give a chance to the Arbitral Tribunal to resume the proceedings and cure the defect.

High Court Verdict

At the outset, the Court observed that Section 34(4) of the Arbitration and Conciliation Act, 1996 provides an opportunity for the arbitral tribunal to revive arbitration proceedings to cure defects in its award.

The Court further noted that there are two prerequisites for the exercise of power under Section 34 of the Act of 1996. Firstly, when the Court below has applied its mind to the grounds taken by the parties to conclude that an opportunity must be given to the arbitral tribunal to resume arbitral proceedings or to take such other action as in the opinion of the arbitrator will eliminate the grounds for setting aside the arbitral award.

The second prerequisite, as held by Justice Bhanot, is that a specific plea must be taken by the party for given an opportunity to the arbitral tribunal.

“The legislature has not used legalese or formal legal terms, but the provision is in a less formal cast. The phrase "so requested by a party" stands in contradistinction to "a formal prayer made by the party" or "a specific relief sought by the party". The request by a party as contemplated in Section 34(4) of the Act can be gleaned out from the grounds in the application under Section 34 of the Act.”

The Court observed that NHAI had specifically pointed out the deficiencies in the arbitral award in the application under Section 34. The Court below could have accepted the request made by NHAI as provided under Section 34(4) of the Act of 1996.

Accordingly, the Court held that the Court below had not applied its mind on the grounds taken by the appellant-NHAI and consequently, “misdirected itself in fact and law by declining to give the arbitral tribunal an opportunity to resume the arbitral proceedings and cure the aforesaid defects.”

Relying on the decision of the Supreme Court in National Highways Authority of India Vs. P. Nagaraju and Ors, the Court remitted the matter back to the Arbitral Tribunal to resume proceedings in the application filed by NHAI and to determine objections filed thereunder.

Case Title: National Highway Authority Of India vs. Parimal Bajpai And 3 Others 2023 LiveLaw (AB) 474 [Appeal Under Section 37 Of Arbitration And Conciliation Act 1996 No. - 901 of 2023]

Citation: 2023 LiveLaw (AB) 474

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