Award Cannot Be Remitted To The Arbitral Tribunal Under Section 34 (4) Of The A&C Act, If No Reasons and Findings Are Recorded: Rajasthan High Court

The Single Bench of Justice Ashok Kumar Gaur reiterated that discretionary powers under Section 34 (4) of the A&C Act cannot be exercised under the guise of additional reasons or for filling up the gaps in the reasoning. The Court held that in the absence of any findings on the contentious issues in the award, no amount of reasons can cure the defect in the award.

An arbitral award was challenged by the respondent/ award debtor Ajmer Smart City Limited by filing an application under Section 34 of the A&C Act before the Commercial Court. The petitioner/award holder Eptisa Servicios De Ingenieria filed an application under Section 34 (4) of the A&C Act before the Commercial Court. The Commercial Court passed an order dismissing the application of the petitioner. Against this order, the petitioner filed a writ petition before the Rajasthan High Court.

Section 34(4) of the A&C Act provides that the Court may, on the receipt of an application under Section 34 (1) for setting aside an arbitral award, adjourn the proceedings to give the Arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of Arbitral Tribunal will eliminate the grounds for setting aside the arbitral award, where it is appropriate and it is so requested by a party.

The petitioner Eptisa Servicios De Ingenieria contended before the High Court that an application was filed by the petitioner under Section 34 (4) of the A&C Act to adjourn the proceedings in the application filed by the respondent under Section 34(1) of the A&C Act. The petitioner submitted that in its application under Section 34 (4), it sought resumption of the arbitral proceedings in order to eliminate the grounds for setting aside the arbitral award.

The petitioner averred that the Arbitral Tribunal while passing an award in its favour had failed to adjudicate on each of the issues framed before it and that it had not given findings on the issues separately. The petitioner submitted that the Arbitral Tribunal had not given any reasons while awarding an amount against loss of business and reputation in favour of the petitioner, nor had it given any reasons for holding as to why the principles of natural were not followed by the respondent. The petitioner contended that the Arbitral Tribunal had also failed to assign any explanation for setting aside the counter claim of the respondent.

The petitioner added that as per Section 34(4) of the A&C Act, the Arbitral Tribunal was required to be given an opportunity to eliminate the grounds for setting aside the arbitral award under Section 34 of the A&C Act.

Thus, the petitioner submitted that an application under Section 34 (4) was being filed by the petitioner to enable the Arbitral Tribunal to record reasons on the findings already given in the award or to fill up the gaps in the reasoning of the award.

The respondent Ajmer Smart City Limited contended that though several issues were framed by the Arbitral Tribunal separately, the Tribunal only recorded a finding with respect to two issues. The respondent added that the Arbitral Tribunal had not decided the issues separately and had given a common finding on the different issues.

Thus, the respondent averred that since there was no finding recorded by the Arbitral Tribunal on the contentious issues, the award could not be relegated back to the Arbitrator under the guise of filling up the gaps in the reasoning or for recording additional reasons.

The respondent added that where the Arbitral Tribunal had failed to record any findings on the contentious issues, no amount of reasons could cure the defect in the award.

The Court noted that the Supreme Court in the case of I-Pay Clearing Services Private Limited versus ICICI Bank Limited (2022) had ruled that when there is no finding recorded by the Arbitral Tribunal on an issue, remission under Section 34(4) of the A&C Act is not permissible. The Supreme Court had held that there is a difference between 'finding' and 'reasons', and that the discretionary power conferred under Section 34(4) can be exercised to record reasons on the findings already given in the award or to fill up the gaps in the reasonings. Thus, the Supreme Court had ruled that where there are no findings recorded by the Arbitral Tribunal on the contentious issues in the award, no award can be remitted back to the Arbitral Tribunal, since no amount of reasons can cure such a defect in the award.

The High Court ruled that the discretionary power under Section 34 (4) of the A&C Act cannot be exercised under the guise of additional reasons or for filling up the gaps in the reasoning. Therefore, the Court held that the arbitral award could not be remitted back to the Arbitral Tribunal if there were no findings recorded in the arbitral award on the contentious issues.

The Court observed that the petitioner in his application had itself stated that no findings were recorded by the Arbitral Tribunal on each issue separately and that the findings had been recorded by ignoring the material available on record.

The Court ruled that if there were no findings on the contentious issues in the award or if the findings were recorded by ignoring the material evidence on record, the same were acceptable grounds for setting aside the arbitral award itself. The Court added that in the absence of any findings on the contentious issues in the award, no amount of reasons could cure the defect in the award.

The Court noted that the respondent had also filed an application under Section 34 of the A&C Act to set aside the arbitral award on the ground that the Arbitral Tribunal had not decided the separate issues by giving any findings and reasons.

Thus, the Court held that the matter could not be reverted back to the Arbitral Tribunal to give its own additional reasoning or to fill up the gaps in the reasoning. Therefore, the Court ruled that the application filed by the petitioner could not be allowed.

The Court thus dismissed the writ petition.

Case Title: Eptisa Servicios De Ingenieria SL versus Ajmer Smart City Limited

Citation: 2022 LiveLaw (Raj) 181

Dated: 23.05.2022 (Rajasthan High Court)

Counsel for the Petitioner: Mr. Ajatshatru Mina, Advocate

Counsel for the Respondent: Mr. Rajendra Prasad, Senior Advocate with Mr. Anshuman Saxena, Advocate

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