Delhi High Court: Recourse to Section 34(4) of Arbitration Act Cannot be Resorted where Award itself may Change as a Result

Delhi High Court: Recourse to Section 34(4) of Arbitration Act Cannot be Resorted where Award itself may Change as a Result

The Delhi High Court by its single judge Justice Prateek Jalan has observed that recourse to Section 34(4) of the Arbitration and Conciliation Act, 1996 (the Act), is not permitted by the Arbitral Tribunal to consider the documented which it earlier had failed to consider and in fact, such a course would also fall foul of the principle that the learned arbitrator cannot reconsider his conclusion, or that Section 34(4) of the Act cannot be resorted to in a situation where the award itself may change as a result.

The facts of the case are that the parties entered into a Sales and Purchase Agreement dated 14 December, 2009 whereunder the respondent- Air Liquide North India Private Limited was to supply Liquid Oxygen and Liquid Nitrogen to the petitioner- Inox Air Products Private Limited. The agreement contained an arbitration clause.

Disputes arose between the parties and an arbitrator was appointed. The respondent raised various claims before the learned arbitrator, with interest thereupon. The petitioner disputed those claims and also filed a counter-claim.

The petitioner sought to bring on record certain evidence for the perusal of the arbitrator. The Tribunal vide order dated 25 January, 2016 held that this evidence would be taken on record without any requirement of formal proof. However, the learned arbitrator passed away and the Court appointed the substitute arbitrator. After hearing the parties, the learned arbitrator passed the impugned award dated 2 February, 2018, by which a sum of Rs. 2,29,36,249 was awarded in favor of the respondent, along with interest and costs.

One of the grounds of challenge raised by the petitioner pertained to the failure of the learned arbitrator to consider the additional documents filed by the petitioner.

Mr. Akhil Sibal, learned Senior Counsel for the respondent/applicant, submitted that a proper reading of the award would show that the learned arbitrator has disregarded the documents in question, not merely on the ground of lack of formal proof, but on the ground that they did not establish the case which the petitioner set out to prove.

According to him, the order of the learned arbitrator dated 25 January, 2016 ought not to be read as a ruling on the admissibility of the documents, their relevance or their contents, but confined to the question of formal proof of the e-mails, for example by filing of certificate under Section 65B of the Indian Evidence Act, 1873.

Lastly, the Counsel asserted that impugned award suffers from a curable ambiguity and an effort ought to be made to resolve the ambiguity at the hands of the learned arbitrator, rather than to adjudicate it as a ground under Section 34 of the Act.

Mr. Jayant Bhushan, learned Senior Counsel for the petitioner, submitted that the matter lies outside the scope of Section 34(4) of the Act as the learned arbitrator would have to reconsider the award altogether in light of the documents in question.

He further submitted that recourse to Section 34(4) is only permissible in cases of absence of reasoning on any finding or to cure any other curable defect and not when the tribunal has failed to give a finding itself or where it failed to consider relevant material. Allowing the Tribunal to consider evidence afresh would have a direct impact on the outcome of the award and the same is not permissible under the Act as the tribunal cannot reconsider its decision.

The Court while referring to the decision passed in the case of I-Pay Clearing Services Private Ltd. vs. ICICI Bank Ltd (2022) stated that the Supreme Court has clarified that Section 34(4) of the Act can be invoked to enable the tribunal to provide reasoning or fill a lacuna in the reasoning in support of a finding rendered in the award, but not to render a finding which is altogether missed in the award. This decision also makes it clear that the power under Section 34(4) of the Act is a discretionary power of the Court, and the Court is obliged to consider whether it is appropriate, in the facts and circumstances of each case, to exercise the said jurisdiction.

After referring to catena of judgments, the Court while applying the principles to the present case, held that it was not appropriate to take recourse to the provision of Section 34(4) of the Act.

The Court opined that, “if the matter is taken back to the learned arbitrator on this point, the petitioner’s ground of challenge can be eliminated only if the learned arbitrator considers the documents he failed to consider. This in itself is not permitted under Section 34(4) of the Act.”

The Court held that Section 34(4) of the Act empowers the Court deciding an application under Section 34(1) of the Act to adjourn the challenge proceedings and remit the matter back to the Arbitral Tribunal to allow it to eliminate the ground of the challenge, however, this power can only be exercised to allow the tribunal to provide for gaps in the reasoning or cure any other curable defect, however, it does not extend to allow the Tribunal to give a new finding or a fresh decision.

In this regard, the Court stated, “consideration of the material left out at the first instance would be effective only if the learned arbitrator had the jurisdiction to reconsider or alter the ultimate award. As such power is not available to the learned arbitrator, Section 34(4) of the Act is not attracted.”

Thus, the Court held that to permit recourse to Section 34(4) of the Act in such a case was akin to a remand, which is prohibited.

Accordingly, the Court dismissed the application filed by the respondent.