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Court Cannot Partly Set Aside Award In Absence Of Manifest And Patent Error, And Without A Finding As To Its Severability: Uttarakhand High Court

Parina Katyal
11 Nov 2022 3:00 PM GMT
Court Cannot Partly Set Aside Award In Absence Of Manifest And Patent Error, And Without A Finding As To Its Severability: Uttarakhand High Court
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The Uttarakhand High Court has ruled that in the absence of a manifest and patent error in the arbitral award, the Court under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) cannot interfere with the award, by partly upholding it and by disallowing the rest of the claims of the claimant. The Division Bench of Justices Sanjaya Kumar Mishra and Ramesh...

The Uttarakhand High Court has ruled that in the absence of a manifest and patent error in the arbitral award, the Court under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) cannot interfere with the award, by partly upholding it and by disallowing the rest of the claims of the claimant.

The Division Bench of Justices Sanjaya Kumar Mishra and Ramesh Chandra Khulbe observed that the lower court had not given any finding as to whether the claims set aside by it were vitiated by patent illegality and whether they formed a severable part of the award or not.

It held that under Section 34, the Court can interfere with the findings of the arbitral tribunal and take a different view only when the award is vitiated by patent illegality, which goes to the root of the matter, or when there is contravention of law linking to public policy and public interest.

Against an arbitral award passed in favour of the appellant- M/s Ravindra Kumar Gupta & Sons, the respondent- the Union of India, filed an application under Section 34 of the A&C Act before the Commercial Court. The Commercial Court set aside few claims awarded to the appellant by the Arbitral Tribunal. Against this, the appellant filed an appeal under Section 37 of the A&C Act before the Uttarakhand High Court.

The respondent Union of India submitted before the High Court that in view of the judgment of the Supreme Court in Oil and Natural Gas Corporation Limited versus Western Geco International Ltd. (2014), the Court has jurisdiction under Section 34 of the A&C Act to modify the arbitral award if there is a miscarriage of justice, depending upon whether the offending part is severable from the rest of the award.

The appellant- M/s Ravindra Kumar Gupta & Sons, contended that under Section 34 of the A&C Act, the Court cannot modify the award by partly allowing some of the claims and rejecting the others.

Referring to the judgment of the Supreme Court in Delhi Airport Metro Express Pvt. Ltd. versus Delhi Metro Rail Corporation Ltd. (2021), the High Court observed that the Court can interfere with the findings of the arbitral tribunal and take a different view only when the award is vitiated by patent illegality, which goes to the root of the matter, or when there is contravention of law linking to public policy and public interest.

The Court added that the respondent had failed to demonstrate that there was a patent illegality which went to the root of the matter or that the Arbitral Award was in conflict with the public policy of India, or that the dispute was not capable of settlement by arbitration under the law for the time being in force.

While reiterating that there can be no interference with pure questions of fact and appreciation of evidence under Section 34 of the A&C Act, the High Court noted that the Supreme Court in Project Director, NHAI versus M Hakeem & Anr. (2021) had interpreted the term "recourse" under Section 34 as enforcement or method of enforcing a right. The Supreme Court had ruled that where the right itself is truncated, the enforcement of such truncated right can also only be limited in nature. Thus, the Apex Court had held that in view of the limited grounds of challenge available under Section 34 (2) and (3), an application can only be made to set aside an award and that Section 34 does not include within it the power to modify an award.

Thus, referring to the decision in Project Director, NHAI (2021), the High Court reiterated that under Section 34 of the A&C Act, the Court can either set aside an award or remand the matter back to the Arbitral Tribunal, under the circumstances mentioned in Section 34.

While holding that the Commercial Court had committed an error by partly upholding the award passed by the Arbitral Tribunal and by disallowing rest of the claims, the Court noted that the Commercial Court had failed to give a finding as to whether Arbitral Tribunal had drawn an inference which, on the face of it, was untenable resulting in miscarriage of justice. Further, the bench observed that the Commercial Court had not given any finding as to whether the claims which were set aside by it, formed a severable part of the award or not.

Ruling that the Commercial Court had not found any manifest and patent error in the award, the Court allowed the appeal and set aside the order of the Commercial Court to the effect that it disallowed the claims of appellant. The bench upheld the arbitral award passed in favour of the appellant.

Case Title: M/s Ravindra Kumar Gupta and Sons versus Union of India & Ors.

Dated: 21.10.2022 (Uttarakhand High Court, Nainital bench)

Counsel for the Appellant: Aditya Pratap Singh

Counsel for the Respondent: V.K. Kaparwan, Standing Counsel for Union of India

Citation: 2022 LiveLaw (Utt) 41

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