Judgments on section 34 of the Arbitration and Conciliation Act, 1996

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Judgments on Section 34 of the Arbitration and Conciliation Act, 1996.

Permitted Grounds of Challenge for setting aside award and Public Policy:-

1.Challenge to award can only be permitted on grounds available under S.34 - Court does not sit in appeal over award. - Plea that claim was based on fabricated documents - Cannot be re-examined. 1.1. P. R. Shah, Shares and Stock Broker (P) Ltd. v/s M/s. B. H. H.

Securities (P) Ltd., reported in AIR 2012 SC 1866. 2.Setting aside of on the ground that award was unreasoned - Not

available to petitioner as it has failed to produce relevant records before arbitrator and also failed to cross examine deponents of affidavit filed by claimants, making it impossible for arbitrator to give detailed reasons. 2.1. Union of India v/s M/s. Harbans Singh Tuli, reported in AIR 2010

SC 738 (FB). 3.Award - Setting aside - Award in conflict with public policy - Award

induced by fraud or corruption - Is against public policy. 3.1. The concept of public policy as given in the Explanation to S.

34(2)(b)(ii) has virtually adopted the international standard, namely if anything is found in excess of jurisdiction and depicts a lack of due process, it will be opposed to public policy of India. When an

Judgments on Section 34 of Arbitration Act

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award is induced or affected by fraud or corruption, the same will fall within the aforesaid grounds of excess of jurisdiction and a lack of due process. Therefore, it can be said that the Explanation to Section 34 is like 'a stable man in the saddle' on the unruly horse of public policy.

3.2. Venture Global Engineering v/s Satyam Computer Services Ltd., reported in AIR 2010 SC 3371.

4.Ex parte award - Setting aside of - No misconduct alleged against Arbitrator - Party against whom award was passed, proved to have deliberately stayed away from arbitration proceedings in order to frustrate and delay claim of claimant - Said party proved to have refused to accept copy of award from Postman - Thus, he was deemed to have been served - Application by said party u/S.34 filed beyond time as permissible for such application - Rejection of such application held to be proper. 4.1. Kailash Rani Dang v/s Rakesh Bala Aneja, reported in AIR 2009

SC 1662. 5.Award - Giving of reasons - Not empty formality - Simply noticing

submissions of parties and referring to some documents - Not giving of reasons - Award liable to be set aside. 5.1. State of Kerala v/s M/s. Somdatt Builders Ltd., reported in AIR

2009 SC (Supp) 2388. 6.Award - Interference by Court - Court not to interfere unless reasons

given are outrageous in their defiance of logic - Or arbitrator has acted beyond jurisdiction - Compensation claimed by contractor for 'gains prevented' because of delay in supplying material by principal - Claim allowed by arbitrator on reaching finding of fact that there was delay in supply of material by principal - Award not liable to be


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interfered with. 6.1. K.v/s Mohd. Zakir v/s Regional Sports Centre, reported in AIR

2009 SC (Supp) 2517. 7.Setting aside of award - Award based on wrong basis and perverse

conclusions - Liable to be set aside - No proposition that Courts could be slow to interfere with arbitrator's Award, even in such cases. 7.1. O. N. G. C. Ltd. v/s Garware Shipping Corporation Ltd., reported

in AIR 2008 SC 456. 8.Setting aside of award - Contractor raising claims on various accounts

- Arbitrator passing lump sum award - Award is unintelligible - Liable to be set aside. 8.1. M/s. M. B. Patel and Co. v/s Oil and Natural Gas Commission, AIR

2008 SC (Supp) 290. 9.The scope of interference in a non-speaking award is extremely

limited. The Court cannot probe into the mental process of the arbitrator. The Court should endeavour to support a non-speaking arbitration award provided it adhered to the parties' agreement and was not invalidated due to arbitrator's misconduct. Arbitration is a mechanism or a method of resolution of dispute that unlike Court takes place in private, pursuant to agreement between the parties. The par ties agree to be bound by the decision rendered by a chosen arbitrator after giving hearing. The endeavour of the Court should be to honour and support the award as far as possible. 9.1. M/s. Markfed Vanaspati and Allied Industries v/s Union of India,

reported in AIR 2007 SC (supp) 882. 10. Arbitral Award - Setting aside - Court's jurisdiction - Award

contrary to provisions of substantive law or Act or terms of contract - Can be set aside.


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10.1. Arbitral Award - Setting aside - Phrase 'public policy of India' - To be given wider meaning - Award could be set aside if it is contrary to fundamental policy of Indian law, interest of India, justice or morality or is patently illegal.

10.2. Oil and Natural Gas Corporation Ltd. v/s SAW Pipes Ltd., reported in AIR 2003 SC 2629.

11. Award - Setting aside of - Ground, non consideration of counter claim - No counter claim made in written statement - Counter claim sought to be raised after lapse of 4 years of reference - Refusal by arbitrator to consider it - Proper - Decree passed as per award - Not liable to be set aside. 11.1. State of Rajasthan v/s M/s. Nav Bharat Construction Com.,

reported in AIR 2002 SC 258. 12. Award - Setting aside - Ground, that arbitrator who was

appointed by designation had passed award after retirement - Order of appointment of arbitrator showing that appointment was by name and not by designation - Moreover after retirement arbitrator had applied to Court for extension of time - No such objection was raised by party at that time - Award not liable to be set aside on grounds that arbitrator had retired when he passed impugned award. 12.1. M/s. Himalayan Construction Co. v/s Executive Engineer,

Irrigation Division, J & K, reported in AIR 2000 SC 3539 (FB). 13. Setting aside of Arbitral Award - View of arbitrator on whether

agreement was terminated by natural consent or not - Not permissible for Court to interfere with Arbitrator's view merely because another view of matter is possible - It is not permissible for Court to re-appreciate evidence placed before Arbitrator - Arbitrator is the best Judge of quality as well as quantity of evidence and it will not be for


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Court to take upon itself the task of being a Judge of evidence before Arbitrator. 13.1. Himachal Joint Venture v/s Panilpina World Transport (India)

Pvt. Ltd., reported in AIR 2009 Delhi 80 (DB).

Period of Limitation provided u/s 34 (3) of the Act

14. Application challenging award - Filing of - Time limit prescribed under S. 34 - Is absolute and not extendable - S. 5 of Limitation Act is not applicable to it. 14.1. Union of India v/s M/s. Popular Construction Co., reported in

AIR 2001 SC 4010. 15. Facts of the case before the Hon'ble Apex Court were:- The

Arbitral Awards were received by the appellants on August 26, 2003. No application for setting aside the Arbitral Awards was made by the appellants before elapse of three months from the receipt thereof. As a matter of fact, three months from the date of the receipt of the Arbitral Award by the appellants expired on November 26, 2003. The District Court had Christmas vacation for the period from December 25, 2003 to January 1, 2004. On reopening of the court, i.e., on January 2, 2004, admittedly, the appellants made applications for setting aside those awards under Section 34 of the 1996 Act. If the period during which the District Court, Kamrup, Guwahati, remained closed during Christmas vacation, 2003 is extended and the appellants get benefit of that period over and above the cap of thirty


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days as provided in Section 34(3), then the view of the High Court and the District Judge cannot be sustained. But this would depend on the applicability of Section 4 of the 1963 Act. The question, therefore, that fell for determination was whether the appellants are entitled to extension of time under Section 4 of the 1963 Act in the above facts. 15.1. It is held in para No.13 that:- Section 2(j) of the 1963 Act

when read in the context of Section 34(3) of the 1996 Act, it becomes amply clear that the prescribed period for making an application for setting aside Arbitral Award is three months. The period of 30 days mentioned in proviso that follows sub-section (3) of Section 34 of the 1996 Act is not the 'period of limitation' and, therefore, not 'prescribed period' for the purposes of making the application for setting aside the Arbitral Award. The period of 30 days beyond three months which the court may extend on sufficient cause being shown under the proviso appended to sub-section (3) of Section 34 of the 1996 Act being not the 'period of limitation' or, in other words, 'prescribed period', in our opinion, Section 4 of the 1963 Act is not, at all, attracted to the facts of the present case. - Assam Urban Water Supply and Sew. Board v/s M/s. Subash Projects, reported in AIR 2012 SCW 1395.

16. Limitation Act, 1963), S.12 - General Clauses Act, 1897, S.9 - Award - Setting aside of - Petition for - Period of "three months from date on which party making that application had received Arbitral Award" - Computation - Day from which such period is to be reckoned, shall be excluded. 16.1. Date of delivery of award on a holiday could not be

construed as 'receipt' of award - Date of receipt should be taken as next working day. - State of H. P. and Anr. v/s M/s. Himachal Techno


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Engineers, reported in AIR 2010 SCW 5088. 17. Petition for setting aside award - Limitation - Period of "three

months" - Does not mean 90 days - Means actual period of calendar months - Moreover in proviso to S.34(3) words used are "30 days" - Such difference in choice of words by legislature clearly indicate intention of legislature that 3 months does not mean 90 days. 17.1. Petition for setting aside award - Limitation - Award

received on 12-11-2007 - Three months would expire on 12-2-2008 - 30 days under proviso would expire on 13-3-2008 - Petition filed on 11-3-2008 - Sufficient cause for condonation of delay shown - Not barred by limitation. - State of H. P. v/s M/s. Himachal Techno Engineers, reported in AIR 2010 SCW 5950.

18. Limitation Act, 1963, S.14 - Application for setting aside arbitration award - Limitation - Exclusion of time spent in pursuing remedy in wrong forum - Appellant instead of filing application filed appeal u/S.34 before High Court - On realising their mistake appellant demonstrated their diligence and bona fide by filing application u/S.34 immediately on reopening of court, without waiting for formal order of withdrawal of 'appeal' before wrong forum - Period spent before wrong forum is excluded and Application u/s 34 of the Act held be not barred by limitation. 18.1. Coal India Ltd. v/s Ujjal Transport Agency, reported in AIR

2011 SC 503. M/s. Consolidated Engineering Enterprises v/s Principal Secretary, AIR 2009 SC (Supp) 396 (FB). Gulbarga University v/s Mallikarjun S. Kodagali, reported in AIR 2009 SC (Supp) 1281. Union of India v/s M/s. Shring Construction Co. Pvt. Ltd., reported in AIR 2007 SC 318. State of Goa v/s M/s. Western Builders, reported in AIR 2006 SC 2525.


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19. Application for setting aside arbitration award - Limitation - Starts running from the date on which signed copy of award is delivered to party making application for setting it aside. 19.1. State of Maharashtra v/s M/s. Ark Builders Pvt. Ltd.,

reported in AIR 2011 SC 1374. 20. Whether incorporation of additional grounds by way of

amendment in the application u/S. 34 amounts to filing a fresh application?- Held- No. Amendment in the application for setting aside the award can be allowed to be added even after the prescribed period of limitation has expired as provided u/s 34(3). 20.1. State of Maharashtra v/s M/s. Hindustan Construction

Company Ltd., reported in AIR 2010 SC 1299. 21. Setting aside Arbitral Award - Application for - Delay in filing -

After passing of award application moved before arbitrator praying for (i) review of award and (ii) a mode of disposal of payment under award - Both prayers not in nature made u/S.33 - Prayers made, not maintainable - Re ply sent to applicants does not give fresh cause of action to seek setting aside of award. 21.1. State of Arunachal Pradesh v/s M/s. Damani Construction

Com., AIR 2007 SC (supp) 978. 22. Application for setting aside award - Award against Railways -

Delay of 27 days in filing application - Delay condoned in facts and circumstances of case. 22.1. Union of India v/s Tecco Trichy Engineers and Contractors,

reported in AIR 2005 SC 1832 (FB). 23. Setting aside of Arbitral Award - Limitation - Expression 'Arbitral

Award' u/S.34 does not necessarily mean award engrossed on stamp paper - Date of dispatch of final award engrossed on stamp paper is


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not of any relevance for purposes of computation of limitation u/S.34(3) of the Act. 23.1. D. M. Jawhar Merican v/s Engineers India Ltd., reported in

AIR 2009 Delhi 104 (DB). 24. S.5, S.34(4), S.11 and S.15 - Remission of award - Award set

aside under S. 34 (1) and (2) on grounds of procedural irregularity - Award can be remitted back - Maxim "Ubi jus ibi remedium" applies - Fact that there is no specific provision in the Act enabling Court to remit award, irrespective - However, in view of fact that arbitrator was not fair and had not treated both parties equally and has already taken a partisan attitude - Held, it will be unfair to send back the matter to same arbitrator - Agreement was only to refer the matter to one specific arbitrator for resolving dispute - Agreement was entered into after the dispute arose and, therefore, Court cannot enforce any other arbitrator on them - Civil remedy is not barred - In view of S. 43 (4) time spent for arbitration proceedings shall be excluded for filing civil suit. 24.1. Sulaikha Clay Mines v/s M/s. Alpha Clays, reported in AIR

2005 Kerala 3 (DB). 25. Arbitrator - Powers of - Filing of injunction application for

restraining arbitrator to proceed with Arbitral proceedings - Not permissible, since plaintiff has alternate remedy of challenging award under S. 34 of Act. 25.1. Pappu Rice Mills, Jaitu v/s Punjab State Co-operative

Supply and Marketing Federation Ltd., Chandigarh, reported in AIR 2000 P&H 276.

26. Setting aside award - Simply because arbitrator happened to be one of the witnesses to arbitration agreement - That by itself does not


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attach any disqualification to his becoming arbitrator - In absence of any further allegation or material about his bias against or in favour of one of parties - Award cannot be set aside on this ground. 26.1. Pukh Raj v/s Magh Raj, reported in AIR 2005 Rajasthan

235. 27. Setting aside of award - Order as to Powers of Court - Court

examining terms of the contract and interpreting them for purpose of deciding whether claims were covered by the terms of the contract - Court also examining merits of dispute and further- more arriving at different conclusion - Order of Court illegal. 27.1. M/s. Friends Coal Carbonisation v/s M/s. Hindustan Zinc

Ltd. reported in AIR 2002 Rajasthan 116.

Jurisdiction of the Arbitral Tribunal and Numbers of Arbitrators

28. The issue regarding the jurisdiction of the Arbitral Tribunal to decide an issue not referred to is no more res integra. It is a settled legal proposition that special Tribunals like Arbitral Tribunals and Labour Courts get jurisdiction to proceed with the case only from the reference made to them. Thus, it is not permissible for such Tribunals/authorities to travel beyond the terms of reference. Powers cannot be exercised by the Tribunal so as to enlarge materially the scope of reference itself. 28.1. If the dispute is within the scope of the arbitration clause, it

is no part of the province of the court to enter into the merits of the dispute on the issue not referred to it. If the award goes beyond the


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reference or there is an error apparent on the face of the award it would certainly be open to the court to interfere with such an award. (Vide: Grid Corporation of Orissa Ltd. v/s Balasore Technical School, AIR 1999 SC 2262 : (1999 AIR SCW 2303); and Delhi Development Authority v/s R.S. Sharma and Company, New Delhi, (2008) 13 SCC 80) : (AIR 2009 SC (Supp) 717 : 2008 AIR SCW 5735).

28.2. In Associated Engg. Co. v/s Govt. of Andhra Pradesh, AIR 1992 SC 232 : (1991 AIR SCW 2960), this Court held that an umpire or arbitrator cannot widen his jurisdiction by deciding a question not referred to him by the parties. If he exceeded his jurisdiction by so doing, his award would be liable to be set aside. Thus, an arbitrator cannot be allowed to assume jurisdiction over a question which has not been referred to him, and similarly, he cannot widen his jurisdiction by holding contrary to the fact that the matter which he wants to decide is within the submission of the parties.

28.3. Details of para Nos. 5.1 and 5.2 are taken from para Nos. 6 & 7 of M/s. MSK Projects (I) (JV) Ltd. v/s State of Rajasthan, reported in AIR 2011 SC 2979. M/s. M. B. Patel and Co. v/s Oil and Natural Gas Commission, AIR 2008 SC (Supp) 290. Delhi Development Authority v/s M/s. R. S. Sharma and Co., New Delhi, reported in AIR 2009 SC (Supp) 717. Food Corporation of India v/s Surendra, Devendra and Mahendra Transport Com., reported in AIR 2003 SC 1495 (FB). Oil and Natural Gas Corporation Ltd. v/s SAW Pipes Ltd., reported in AIR 2003 SC 2629. State of Karnataka v/s Siddaiah, reported in AIR 2002 SC 397. Rajinder Krishan Khanna v/s Union of India, reported in AIR 1999 SC 463. Oil and Natural Gas Corporation Ltd. v/s Off-Shore Enterprises Inc., reported in AIR 2012 SCW 428.


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29. Jurisdiction of Arbitral Tribunal - Plea of lack of jurisdiction - Not taken before Arbitrator as provided in S.16 - Cannot be permitted to be raised in proceedings u/S.34 for setting aside award. 29.1. M/s. Gas Authority of India Ltd. v/s M/s. Keti Construction

(I) Ltd., reported in AIR 2007 SC (Supp) 378. 30. Number of arbitrators - Composition of Arbitral Tribunal -

Objection as to - Whether and at what stage objection can be waived - Section 10 providing that number of arbitrators shall not be an even number is a derogable provision - Parties agreed upon an even number of arbitrators - Objection as to composition of Arbitral Tribunal not taken before Arbitral Tribunal itself or within time prescribed under S. 16(2) - There will be a deemed waiver of objection under S. 4 - Award so passed by Arbitral Tribunal cannot be set aside under S. 34(2)(a)(v) because composition of tribunal was in accordance with agreement between parties. 30.1. Narayan Prasad Lohia v/s Nikunj Kumar Lohia, reported in

AIR 2002 SC 1139 (FB). 31. Venue of arbitration - Decision, as to - Appeal against such order-

whether can be filed - Parties agreeing for referring dispute to arbitration tribunal - Decision as to venue of arbitration however, required to be determined by Joint Arbitration Committee - Such decision of committee - Is not a decision of dispute relating to agreement and therefore not an award or interim award - Not appealable. 31.1. Sanshin Chemicals Industry v/s Oriental Carbons and

Chemicals Ltd., reported in AIR 2001 SC 1219 (FB). 32. Jurisdiction - State Govt. Company awarding contract to build

school in District R - Disputes arising - Award passed in State capital -


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Application to set it aside filed by Govt. Company in City Court of state capital - Contractor pending such application seeking enforcement of award in Court at District 'R' - Entertainment of execution application by Court at 'R' on ground that Court in State capital had no jurisdiction to entertain setting aside application - Not proper - In view of S. 20 Civil P.C. it cannot always be said that only one Court has jurisdiction. 32.1. Khaleel Ahmed Dakhani v/s Hatti Gold Mines Co. Ltd.,

reported in AIR 2000 SC 1926. 33. Transfer of case - Dispute arising between petitioner/Company

and Respondent/Firm its carrying and forwarding agent - Jurisdiction of Court to determine dispute was fixed by agreement at Jhansi - Award passed by arbitrator in favour of Petitioner/Company at Jhansi - Application for setting aside award filed by respondent in Court at Ludhiana - Plea by respondent that as Petitioner-Company has an office in Punjab and Haryana it would not suffer prejudice - Not tenable when parties have opted for Court at Jhansi - Direction therefore issued that case be transferred to District Judge at Jhansi - Case filed by distributor appointed by respondent also directed to be transferred. 33.1. Shree Baidyanath Ayurved Bhawan Pvt. Ltd. v/s Praveen

Bhatia, reported in AIR 2009 SCW 7576. 34. Arbitral Award - Setting aside of - Jurisdiction of Court - On

application filed under S. 11(6) High Court at 'D', appointed an arbitrator to adjudicate upon disputes between parties - All subsequent application arising out of Arbitral proceedings would be required to be made only High Court at 'D' - Bar of jurisdiction under S. 42 is only intended to apply to 'Court' as defined in S. 2(1)(e) - To activate provisions of S. 42, it has to be shown that application in


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respect of Arbitral agreement filed in said Court - High Court at 'C' would have no jurisdiction to entertain application for setting aside Arbitral Award. 34.1. The bar of jurisdiction under Section 42 of the Act is only

intended to apply to a 'Court' as defined in Section 2(1) (e) of the Act. In order to activate provisions of Section 42, it has to be shown that an application in respect of an arbitration agreement has been filed in the said Court.

34.2. In the instant case, it appears to us that the application was filed in Court and since the Delhi High Court, in the facts and circumstances of this case, duly exercised its jurisdiction and appointed an arbitrator to adjudicate upon the disputes between the parties, on an application filed under Section 11(6) of the said Act. The said order was made after the law was settled by the Constitutional Bench in S. B. P. and Co. v/s Patel Engineering Ltd., reported in AIR 2006 SC 450 : (2005 AIR SCW 5932) in the said decision it has been held that the order appointing an Arbitrator is nothing but power exercised by the Court judicially under Section 11 and, therefore, it has been held that such appointment is based on a judicial order. It has been held that the said order was passed by a 'Court' as defined under Section 2(1)(e) of the said Act. Accordingly, for the purpose of the provisions of Section 42 of the said Act in our opinion, it would create a bar on the jurisdiction of this Court to entertain the present application under Section 34.

34.3. Accordingly, in our considered opinion, this factor has to be taken into account for the purpose of deciding this appeal. Hence, we accept the objection raised on behalf of the appellant and we find that this Court has no jurisdiction to entertain this application


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under Section 34 of the said Act. In our considered opinion, since the application has been made under Section 11 of the said Act before the Delhi High Court all subsequent applications arising out of the Arbitral proceedings are required to be made only in Delhi High Court.

34.4. Para Nos. 14 to 16 of Steel (Singapore) Trading Pvt. Ltd. v/s Bhushan Power and Steel Ltd., reported in AIR 2011 Calcutta 132 (DB).

35. Jurisdiction of arbitrator - Question, as to - Not raised before arbitrator - Cannot be raised for first time before Court under application for setting aside award. 35.1. M/s. Sarkar Enterprise v/s M/s. Garden Reach

Shipbuldersand Engineers Ltd., reported in AIR 2002 Calcutta 65. 36. Setting aside of arbitration award - Final payment received by

respondent contractor upto its full and final satisfaction - 'No claim certificate' given by respondent to that effect of having received contracted money to its full and final satisfaction - 'No claim certificate' not being conclusive - Award passed by arbitrator against other claims which were ignored - Not in excess of jurisdiction - Not liable to be set aside. 36.1. South Eastern Coalfields Ltd. v/s M/s. Niranjan Sarkar

Contractors, reported in AIR 2011 Chhattisghar 188 (DB). 37. Territorial jurisdiction of Court - Arbitration was entered into

between parties at Delhi - Objections to award was filed before Court at Delhi - As cause of action itself arose in Delhi - Court at Delhi held to have jurisdiction to entertain the claim. 37.1. A. P. Nirman Ltd. v/s Sindhu Trade Links Ltd., reported in

AIR 2011 Delhi 136 (DB).


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38. Setting aside of Arbitral Award - Petition for - Limitation - Award passed by Multi-member Arbitral tribunal - Refusal of minority arbitrator to sign award will not affect its validity - It is enough if award is signed by majority arbitrators - Limitation shall begin to run from date award signed by majority arbitrators is received by appellant - Bona fide mistake of legal advisor not liable to be condoned u/S.5 of Limitation Act, 1963 inasmuch as provision of S.5 Limitation Act, 1963 are not applicable to petition u/S.34 of Arbitration Act. 38.1. Government of India v/s M/s. Acome, reported in AIR 2009

Delhi 102 (DB). 39. Jurisdiction of Court - Dispute arising between parties out of

contract relating to transportation of coal - Cause of action substantially arose within Bokaro - Further, not only respondent carried on business within Bokaro, appellant has also area office in that jurisdiction - Merely because tendering process was done at registered office of appellant at Ranchi, claims were raised at Ranchi and arbitration clause was invoked before CMD sitting at Ranchi and arbitration clause was invoked before CMD sitting at Ranchi - It cannot be said that only Ranchi Court has jurisdiction to entertain applications. 39.1. Central Coalfields Ltd. v/s A. B. Singh, reported in AIR 2010

Jharkhand 96. 40. Award - Setting aside - Defect in composition of Arbitral Tribunal -

Tribunal composed of 5 members - Two arbitrators resigning - Vacancies not filled - Remaining arbitrators hearing matter and passing award - Award liable to be set aside - Plea that resignation by arbitrators was of no consequence as they had already given opinion -


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Not tenable - Moreover Tribunal was deprived of essence of joint deliberations amongst all members. 40.1. Conduct of proceedings - Multi-membered Arbitral Tribunal

- Joint deliberation amongst members is of essence - All members should participate on all material dates of enquiry.

40.2. When Arbitral tribunal is a Multi-member body what is of importance and need is the joint deliberation from amongst all the members of the Arbitral tribunal. There is a sound rationale behind the insistence that in a Multi-member body all the members should participate on all the material dates of enquiry. That insistence helps the members of the Arbitral tribunal to influence/pursue each other, to appreciate each other's view point and ultimately to arrive at a conscious and unanimous opinion, if that is possible or to accept the opinion of the majority with respect and perfect understanding.

40.3. Rudramuni Devaru v/s Shrimad Maharaj Niranjan Jagadguru, reported in AIR 2009 Kranataka 13.

Interest and Rate of Interest

41. Interest pendente lite - Parties had agreed that no interest will be payable upon the earnest money or the security deposit or amounts payable to the Contractor under the Contract - Arbitral Tribunal cannot award interest from date of cause of action to date of award, on amount awarded to contractor under contract in terms of which there was specific bar on payment of interest. 41.1. M/s. Sree Kamatchi Amman Constructions v/s Divisional

Railway Manager (Works), Palghat, reported in AIR 2010 SC 3337. Judgments on Section 34 of Arbitration Act

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Union of India v/s Saraswat Trading Agency, reported in AIR 2010 SC (Supp) 839.

42. Award - Post decree interest - Party aggrieved by award of future interest at rate of 11% per annum from date of decree till realization - Seeking reduction of rate to 6% per annum - In view of reval submissions and by considering circumstances of case and transaction in question in light of correspondence between parties post decree interest reduced to rate of 7% per annum. 42.1. M/s. Mukund Ltd. v/s Hindustan Petroleum Corporation Ltd.,

reported in AIR 2007 SC (Supp) 914. 43. Award - Interest - Grant of @ 18% p.a. for pre-reference,

pendente lite and post award period - Validity - Arbitration agreement did not provide for payment of interest - S. 34 CPC also had no application to arbitration proceedings - However, it was within power of arbitrator to award interest for all three stages - Rate fixed on ground that advance was given to BOL by HCL at 18% - Award deserved no interference - High Court was not right in reducing rate of interest to 6% - Award restored. 43.1. Bhagawati Oxygen Ltd. v/s Hindustan Copper Ltd., reported

in AIR 2005 SC 2071. 44. Award - Interest - Power to grant - Neither arbitrator nor the

Court dealing with the validity of the award can award a higher rate than the mutually agreed rate. 44.1. M/s. Gautam Constructions and Fisheries Ltd. v/s National

Bank for Agriculture and Rural Development,reported in AIR SC 3018.

45. Award of interest on damages, would not fall within ambit of said provision to interfere with award.


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45.1. Section 31(7) specifically contemplates that, in a situation where the parties have not agreed upon a rate of interest, the Arbitral Tribunal when awarding payment of money may include in the sum for which the award is made interest at such rate as it deems reasonable on the whole or any part of the money, for whole or any part of the period between the date on which cause of action arose and the date on which the award is made. Thus, under the 1996 Act the matter of interest is left entirely to the discretion of the Arbitral Tribunal.

45.2. M/s. Susaka Pvt. Ltd. , Appellant v/s Union of India, reported in AIR 2005 Bombay 257 (DB).

Severance of invalid part award from valid part of award.

46. Award - Arbitrator disallowing some of claims made by contractor - Valid part of Award can be saved by severance from invalid part. 46.1. M/s. Rashtriya Chemicals and Fertilizers Ltd. v/s M/s.

Chowgule Brothers, reported in AIR 2010 SC 3543. M/s. J. G. Engineers Pvt. Ltd. v/s Union of India, reported in AIR 2011 SC 2477.

International Commercial Agreement

47. The provisions of Part I of the Act would apply to all arbitrations including international commercial arbitrations and to all proceedings relating thereto. Where such arbitration is held in India, the provisions of Part-I would compulsorily apply and parties are free to deviate to


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the extent permitted by the provisions of Part-I. Even in the case of international commercial arbitrations held out of India provisions of Part-I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. Such an interpretation does not lead to any conflict between any of the provisions of the Act and there is no lacuna as such. 2002 AIR SCW 1285 followed. 47.1. Venture Global Engineering v/s Satyam Computer Services

Ltd., reported in AIR 2008 SC 456.

Applicability of CPC to the Act

48. Whether the provisions of Order XXI, Rules 18 and 19 of the C.P.C. are applicable in case of adjustment of the cross-awards?- Held- No. 48.1. Hon'ble Apex Court observed in para No.9 that :- “From a

bare reading of the Rules, extracted supra, it is clear that Rule 18 is applicable in the case where the applications are made to the Court for execution of the cross-decrees in separate suits for payment of two sums of money passed between the same parties and Rule 19 is applicable in the case where the application is made to the Court for the execution of a decree under which two parties are entitled to recover sums of money. As rightly observed by the High Court, in the case on hand, neither the application has been made for execution of cross-decrees in separate suits for the payment of money in between the parties nor the application is for execution of a decree in which the parties are entitled to recover sums of money from each other. In our opinion, in the instant case, the particulars furnished clearly show that the applications were in respect of two


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awards in the same arbitration case and as such the provisions of Rules 18 and 19 of Order XXI of C.P.C. are not applicable. It is also relevant to mention that in the Objection Petition under Section 34 of the Act the issue regarding interim award and final award came up for consideration before the subordinate Court, Bokaro. The said objection petition was dismissed on 27.6.2003 and the appeal preferred also met the same result at the hands of the High Court of Jharkhand. This Court also confirmed the order of the High Court except in the rate of interest. In the light of these materials and earlier orders including this Court and various clauses in the awards dated 19.04.1997 and 25.11.2000, learned subordinate Judge rejected the petition filed by the appellant herein. The High Court by the impugned order accepted the said factual conclusion and dismissed the Revision”. - N. R. Constructions Pvt. Ltd. v/s Sri Ram Badan Singh, reported in AIR 2007 SC (Supp) 1653.

49. Civil P.C. 1908, O.14, R.1 - Award - Setting aside of - S.34 application can be disposed of without framing any issues - Phrase 'in so far as they can be made applicable' used in R.4 does not mean that rule mandates applicability of O.14, CPC to application for setting aside award. 49.1. Fiza Developers and Inter-Trade Pvt. Ltd. v/s AMCI (India)

Private Limited, reported in AIR 2009 Kranataka 20.

Statutory Arbitrations provided under the Special Act, Electricity Ombudsman etc.

50. Whether in case of statutory arbitrations provided under the Special Act, the provisions of S. 34 of the Act are excluded?-Held- No.


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50.1. Sub-sec. (4) of S. 2 of the Arbitration and Conciliation Act, 1996 only excludes sub-sec. (1) of Ss. 40, 41 and 43. The other provisions of the Arbitration and Conciliation Act, 1996 are applicable even to the statutory arbitrations except insofar as the provisions of Part I of the Arbitration and Conciliation Act, 1995 are inconsistent, with any other enactment or with any rules made thereunder. There is no inconsistency between the Act of 1993 as amended in 1998 and the Arbitration and Conciliation Act, 1996. The award of the Arbitral Tribunal is not confined to the width of its jurisdiction and there is no impediment in contending before the Arbitral Tribunal that it has been wrongly constituted. Such plea must be raised at the threshold so that the Arbitral measures may be immediately taken and time and expense involved in the hearing of the matter may be avoided. Where the Arbitral Tribunal decides the question, the writ petition would not be maintainable at that stage or even after the award is made as sub-section (6) of Section 16 provides to make an application for setting aside such an Arbitral Award, which has been made after rejecting the plea under Section 16, in accordance with Section 34. The Court thus held that sub-section (4) of S. 2 of the Arbitration and Conciliation Act, 1996 makes the Arbitration and Conciliation Act, 1996 except sub-section (1) of Ss. 40, 41 and 43 of the Act applicable to the statutory arbitration provided under the Interest on Delayed Payments to the Small Scale and Ancillary Undertaking Act, 1993 as amended by Act No. 23 of 1998. Decision of the Facilitation Council on its own jurisdiction is subject to challenge only under Section 34 of the Arbitration and Conciliation Act, 1996.

50.2. Krishi Utpadan Mandi Samiti, Sikandra Rao v/s U. P. Industry


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Felicitation Council, Kanpur, reported in AIR 2009 Allahabad 14. 51. Award by Electricity Ombudsman - Challenge as to - Maintainable

only on grounds available u/S.34 of Arbitration and Conciliation Act. 51.1. Purvanchal Vidyut Vitran Nigam Ltd., Bhikaripur v/s Vidyut

Lokpal (Electricity Ombudsman), reported in AIR 2008 Allahabad 127.

Appeal u/s 37 of the Act

52. Whether adjudication of a counter claim by Arbitrator, simultaneously while passing the award can be challenged by way of appeal u/S.37? Held - No - Remedy is to file application for setting aside award u/S.34 of Act. 52.1. The arbitrator is required to examine the plea of a matter

being outside his jurisdiction and to decide the same before proceeding to make the award. When such order is passed before the award is made, an appeal under S. 37 (2) of Act, 1996 has been provided. But in case where the award is made simultaneously while adjudicating upon the issue of a particular matter being outside the scope of the Arbitral proceedings, or when the appeal is not filed against the order and final award is made, then the remedy made available to the person aggrieved is under S. 16 (6) i.e. by way of an application for setting aside the awards as per S. 34 of Act, 1996.

52.2. Thus, if an issue with regard to the matter being within or outside the dispute of Arbitral proceedings is decided before making of the award by the Arbitrator then such order to that extent can be challenged under S. 37 (2) by way of Appeal by the


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person aggrieved. But in case the Arbitral proceedings are continued even after the issue decided and or the award is made subsequently or simultaneously then the remedy available to the person aggrieved in respect of the aforesaid issue also would be by challenging the award as a whole under S. 34 of Act, 1996. In that circumstance appeal against part of the award, whereunder particular issue with regard to the jurisdiction of the arbitrator to examine a particular issue, cannot be independently challenged under S. 37 of Act, 1996. In as much as what is contemplated by S. 16 (6) is that once is made, all issues decided therein can be challenged by making an application under S. 34 of Act, 1996 as a whole. Therefore, it is only when during Arbitral proceedings, an issue referable to S. 16 (2) and (3) of Act, 1996 is decided before making of the award that it can be challenged independently by way of appeal under S. 37 of Act, 1996. In the instant case, it was an admitted position that the award has been made simultaneously, while deciding the issue, qua the counter claim being outside the scope of the Arbitral proceedings.

52.3. Therefore no remedy under S. 37 of Act, 1996 is available in the facts of the case.

52.4. Therefore, it can be said that a remedy under the provisions of Act, by way of an application under S. 34 for setting aside the award was available. - M/s. B. H. P. Engineers Pvt. Ltd. v/s Director, Industries, U. P. (Facilitation Council), Kanpur, reported in AIR 2009 Allahabad 155.

Engrossment of Arbitral Award


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53. Arbitral Award - Setting aside of - Question as to whether award is required to be stamped and registered - Would be relevant at time of filing of award for enforcement under S. 36 - At that stage parties can raise objections regarding its admissibility on account of non registration and non stamping - Said question cannot be gone into at stage of proceeding under S. 34. 53.1. M/s. A. and A. Restaurant and Hotel Pvt. Ltd., Kanpur v/s

M/s. Dwarikajeet Restaurant Pvt. Ltd., Kanpur, reported in AIR 2005 Allahabad 60.

Challenge under Sections 12(3), 13 and 16 of the Act

54. Whether a decision of arbitrator against whom allegations made, attracting the challenge of the nature as indicated in S. 12 (3) of the Act have been negatived by Arbitrators is final and not open to challenge in proceedings under S. 34? Held- Yes. 54.1. It may be noticed that under the scheme underlying the

various provisions of the Arbitration and Conciliation Act, 1996 in cases where the plea about the competence of Arbitral Tribunal on the ground that it had no jurisdiction to enter upon the arbitration, if raised, the Arbitral Tribunal has to decide such plea. The Arbitral Tribunal is also bound to decide the question if raised, regarding its exceeding the scope of its authority. The decisions of the Arbitral Tribunal in cases where such pleas are accepted, have been made appealable under Section 37(2) of the Act. But in case the pleas are not accepted, in that event, party aggrieved by the Arbitral Award may make an application for setting aside such an Arbitral Award in accordance with Section 34 of the Act only. The remedy is of a very


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limited scope of interference. This position is clear from the provisions of Sections 16 and 37 of the aforesaid Act.

54.2. It is, therefore, obvious that the decision of the arbitrator contemplated under Section 13(3) of the Act or a decision of the Arbitrators about the competence of the Arbitral Tribunal upholding its jurisdiction as contemplated under Section 16(5) of the Act has to be taken to be final which cannot be re-opened in the proceedings under Section 34 of the Act except on limited grounds as envisaged thereunder.

54.3. This indicates that the legislative intent underlying the provisions of the Act is that the decision of the arbitrator against whom allegations have been made attracting the challenge of the nature as indicated in Section 12(3) of the Act if negatived by the Arbitrators has to be taken to be final and not open to challenge in the proceedings under Section 34.

54.4. Para Nos.32 to 34 of Vipul Agarwal v/s M/s. Atul Kanodia, reported in AIR 2003 Allahabad 280 (DB).

55. Setting aside of - Arbitrability of issues relating to jurisdiction of Arbitrator - No objection was raised by filing application under S. 16 or even in counter statement - Appellant would be deemed to have waived its objection - Deliberation of these disputes before Arbitrator and his award on same cannot be held to be a nullity. 55.1. Union of India , Petitioner v/s M/s. Pam Development Pvt.

Ltd., reported in AIR 2005 Calcutta 332. 56. S.34(2)(v), S.12(3)(b), S.13(2) - Setting aside of Arbitral Award -

Ground that arbitrator is not a practicing lawyer of Delhi High Court as agreed between parties - Said objection had to be raised within 15 days from date when objector became aware of appointment of


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arbitrator 56.1. Vikesh Chugh v/s B. L. B. Ltd., reported in AIR 2009 Delhi

80. 57. Scope - Decision by arbitrator that it has jurisdiction to entertain

dispute - Appeal against - Does not lie - His decision under S. 16(5) is not interim award. 57.1. Where the Arbitral tribunal decides the issue of jurisdiction

in its favour under S. 16(5) of the Act and rules that the disputes raised in the claim petition are arbitrable, the petition under S. 34(2) (iv) of the Act is not maintainable as no appeal is provided under the Act against such order and the order is not an interim award and thus not challengeable under Section 34 of the Act.

57.2. The scheme of the Act is in clear terms. Provisions of Section 37 appear to have been consciously enacted not to provide relief to the aggrieved party at that stage of the Arbitral proceedings where the Arbitral tribunal decides the issue of jurisdiction in its favour. Otherwise, Section 37 of the Act would have been enacted differently. Section 37 had been enacted in that manner only to minimise the supervisory role of Courts in the Arbitral process at that stage.

57.3. From the scheme of the Act, it is apparent that the legislature did not provide appeal against the order under Section 16(5) where the Arbitral tribunal takes a decision rejecting the plea that the Arbitral tribunal has no jurisdiction. The intention appears to be that in such case the Arbitral tribunal shall continue with the Arbitral proceedings and make an award without delay and without being interfered in the Arbitral process at that stage by any Court in their supervisory role.


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57.4. Section 5 of the Act categorically provides that no judicial authority shall intervene except where so provided in Part I of the Act. On perusal of the provisions of Part I of the Act it is apparent that no where it is provided that a Court may intervene and entertain a petition challenging the order passed by Arbitral tribunal under Section 16(5) taking a decision that the Arbitral tribunal has jurisdiction to proceed with the arbitration case.

57.5. Para Nos.16, 19 &20 of Union of India v/s M/s. East Coast Boat Builders and Engineers Ltd., reported in AIR 1999 Delhi 44.

58. S.16 - Arbitral Tribunal - Is competent to rule on its own jurisdiction - Principle of Kompetenz-Kompetenz applies - Empowerment of such power on Arbitral Tribunal is with an intention and objective to set Arbitral proceedings in motion without any hurdles in future. 58.1. Appeal - Plea as to want of jurisdiction of Arbitrator - Not

raised by party within time limit set by S. 16(2) - Not raised before any of Court below or Arbitrator - Party having acquiesced in jurisdiction of Arbitral Tribunal without demur and protest - Appellant party should be deemed to have waived his right to object - Plea cannot be entertained at appellate stage - Else the object in enacting Act qua "Uncitral Modern Law" which entails early completion of proceedings and minimising role of Court, will stand defeated - Doctrine of waiver/estoppel also attracted - And question raised in appeal is not question of law.

58.2. Karnataka State Road Transport Corporation v/s M. Keshava Raju, reported in AIR 2004 Kranataka 109 (DB).

Orders passed u/s 27 of the ActJudgments on Section 34 of Arbitration Act

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59. Whether an order rejecting application under S. 27 for taking assistance of the Court for taking evidence amounts to award, interim or final? - Held - No - It is an order passed in course of continuing proceedings - It can be challenged only at time when final award is challenged - Every order passed by Arbitral Tribunal is not an award. 59.1. Harinarayan G. Bajaj v/s Sharedeal Financial Consultants

Pvt. Ltd., reported in AIR 2003 Bombay 296.

Dismiss for Default of application preferred u/s 34 and Ex-parte Awards

60. Setting aside award - Application for - Dismissal in default - Validity - Since power to entertain an application under S. 34 is only available to the Civil Court all the powers necessary for disposal of such application under CPC would be available to such a Court - Plea that dismissal is not proper since provisions of CPC are not applicable to proceedings under Act - Not tenable. 60.1. B. Rama Swamy v/s B. Ranga Swamy, reported in AIR 2004

A.P. 280 (DB). 61. Ex parte award - Setting aside of - Powers of arbitrator -

Arbitrator becomes functus officio, once he signed award - Arbitrator


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has no power to set aside award be it an ex parte one - It is Court which can set aside an award u/S.34(2)(i) of Act. 61.1. Section 25 of Act empowers Arbitrator to make award in

absence of opposite party. But Act does not provide for an Arbitrator setting aside his award once it is made, be it on ground that it was passed ex parte. On other hand Legislature was anxious to confer that power on 'Court' under Section 34 of Act. Section 34 (2)(i) of Act enables Court to set aside an award if "a party was under some incapacity" and under sub-section (iii), "if party making application was not given proper notice of appointment of an Arbitrator or of Arbitral proceedings or was otherwise unable to present his case". Thus power to set aside an award be it on ground that party concerned was under some incapacity or that he was not given proper notice of appointment of Arbitrator or of Arbitral proceedings or was otherwise unable to present his case. There is no reason to think that concurrent power to set aside an ex parte award on similar grounds has been given to Arbitrator.

61.2. Except for limited purpose of correction of errors referred to in Section 33 (1)(a) of Act, an Arbitrator appointed under Act becomes functus officio once he has signed award. Arbitrator can refuse to set aside ex parte award.

61.3. Ex parte award - Appeal against - Order passed by Arbitrator refusing to set aside ex parte award - S.34 does not enable Court to entertain an appeal against such order passed by Arbitrator - Thus, no appeal would lie against order of Arbitrator refusing to set aside ex parte award, not even u/S.37 of Act.

61.4. P. M. A. Shukkoor v/s Muthoot Vehicle and Asset Finance Ltd., Ernakulam, reported in AIR 2011 Kerala 31.


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Court Fees

62. Bombay Court-fees Act, 1959, Schedule I, Art.3 - Court fees - Determination - Petition u/S.34 challenging arbitration award filed before any Principal Civil Court of original jurisdiction which is not High Court - No Court-fee under Bombay Court Fees Act would be payable. 62.1. When a petition under Section 34 is to be filed before a

Principal Civil Court of original jurisdiction which is not a High Court, the question arises which Article of either First Schedule or Second Schedule would apply, In so far as the challenge to an Award made under the 1940 Act is concerned, an application under Section 33 of that Act could be made to a Civil Court and therefore, payment of Court-fee was governed by Article 1(a) of Schedule II. This was so because the application was to be presented to the Court of Civil Judge which was not a principal Civil Court of original jurisdiction. But now because of change of definition of term "Court" in the 1996 Act, a petition has to be presented, challenging an Award made under the 1996 Act in terms of the provisions of Section 34 thereof, before the Principal Civil Court of original jurisdiction. No entry either in the first Schedule or in the Second Schedule was pointed out which applies to an application or petition to be made before the Principal Civil Court of original jurisdiction, and therefore, when a litigant wants to file petition before a Principal Civil Court having original jurisdiction which is not High Court, challenging an Award made under the 1996 Act, no Court fee under Bombay Court Fees Act is payable because of absence of a general or specific provision. Therefore, it can be said that No Court-fee under the


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Bombay Court-fees Act is payable when a petition under Section 34 challenging an Award is filed before any Principal Civil Court of original jurisdiction which is not High Court.

62.2. On an appeal filed in this Court under Section 37 of the 1996 Act challenging an order passed in a petition filed under Section 34 of the 1996 Act Court-fee is payable according to Article 13 of Schedule II of the Bombay Court Fees Act.

62.3. Puneet Malhotra v/s R. S. Gai, reported in AIR 2009 Bombay 42 (Full Bench).
