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.,


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.,


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.,


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.,


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.


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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


20

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


21

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.


22

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


23

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


24

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


25

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


26

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


27

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.


28

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 Act


29

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


30

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.


31

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


32

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).
