Reliefs Requiring 'Additional Adjudication' Not Permissible Under Section 33 Of Arbitration Act: Karnataka High Court

The Karnataka High Court Bench of Justices Anu Sivaraman and Justice K Manmadha has observed that an order under Section 33, Arbitration and Conciliation Act, 1996 (“ACA”), even of an interim nature, amounts to an arbitral award and not an interlocutory order. The Court highlighted that the scope of Section 33, ACA was limited to a correction of a clerical or similar mistake or a recomputation or a consideration of a claim presented in the arbitral proceedings but omitted from the arbitral award, but there is no scope for an "additional adjudication" under Section 33, ACA. Facts The present appeal had been filed under Section 13(1)(a), Commercial Courts Act, 2015 read with Section 37(1)(c), AC,A challenging the judgment dated 27.07.2024 passed by the LXXXVI Additional City Civil and Sessions Judge at Bengaluru in Com A.P. No. 154/2023. Disputes arose between the parties, and pursuant to an arbitral proceeding, an arbitral award dated 23.02.2016 (“Arbitral Award”) was passed by the arbitral tribunal. Upon an unsuccessful challenge of the arbitral award by the Appellants, an appeal was preferred before this Court. The Court set aside clauses 4 to 9 of the operative portion of the Arbitral Award and maintained the rest, directing that the disputes between the parties relating to inter alia valuation of properties be referred to an arbitrator who may be appointed. Subsequently, Respondent No.2 was appointed as a sole arbitrator who passed an arbitral award directing the Appellants to pay an amount of Rs. 4,13,95.193 to the Respondent No.1 and rejected all other claims of Respondent No.1.Thereafter, Respondent No.1 filed an application under Section 33(4), ACA dated 24.06.2023 for additional claims by the Claimant, which according to Respondent No.1 were raised before the Arbitral Tribunal but were omitted or not adjudicated by the Tribunal in the Arbitral Award. The Appellants filed objections to the said application dated 13.07.2023, contending that the relief sought for amounted to modification and review of the arbitral award which was beyond the scope of Section 33, ACA. However, after hearing both sides, the learned arbitrator passed the impugned order dated 18.08.2023 (“Impugned Order”) wherein the said application was allowed. Aggrieved by the Impugned Order, the Appellants preferred an application under Section 34, ACA along with an interim application under Section 36, ACA to stay the operation of the arbitral order before the LXXXVI Additional City Civil and Sessions Judge Bangalore to set aside the impugned order dated 18.08. 2023 by Respondent No.2 and to dismiss the Application under Section 33, ACA filed by Respondent No. 1. While the interim application was allowed and the Section 34 was held to be maintainable on 13.10.2023, the trial court ignoring its previous order dismissed the application filed under Section 34 on the ground of maintainability. Hence, the present appeal has been filed before this Court. Contentions The Counsel for the Appellant submitted that the arbitral award specifically stated that all claims which were not granted in the award stood rejected. In these circumstances, the application preferred under Section 33, ACA by the Respondent was in effect a direct challenge to the award and was not maintainable under the professed provision of law. Additionally, the Counsel submitted that the trial Court erred in observing that the additional award dated 18.08.2023 was not an award but rather an interlocutory order and hence cannot be set aside invoking Section 34, ACA. The Counsel for Respondent No.1 contended that upon considering the contentions of the Appellants the trial court had come to the specific conclusion that the Arbitral Tribunal was empowered to pass additional award invoking Section 33(5), ACA. Once such additional award was passed, the Appellant would have the right to challenge the award so passed and not the interlocutory order passed by the Arbitral Tribunal under Section 33, ACA. Further, it was contended that the rejection of other claims by the Arbitrator without considering them on merits was a clear defect which could be rectified under Section 33(4) of the Act. It is further contended that the impugned order being only an interim arbitral award as defined under Section 2(1)(c) of the Act and no application under Section 34 of the Act would lie. Observations The Court observed that, though it was contended that the order passed by the learned Arbitrator was not an award in the strict sense of the term. However, in its opinion the said order was definitely beyond the scope of Section 33(4), ACA which permits only an additional award in respect of matters which are raised but omitted to be considered in the arbitral award. Subsequently, the Court discussed the law with respect to interim awards. The Court observed that section...

Reliefs Requiring 'Additional Adjudication' Not Permissible Under Section 33 Of Arbitration Act: Karnataka High Court

Arpita Pande