Party Can Raise Additional Grounds Based On The Award Passed After The Case Is Remitted To Tribunal Under Section 34(4) Of A&C Act: Delhi High Court

The Court observed that during the pendency of the proceedings before the Delhi High Court for challenging the arbitral award, the matter was remitted back to the Arbitral Tribunal by the Court, and that the Tribunal thereafter passed an order.

The Single Bench of Justice Vibhu Bakhru held that a party cannot be precluded from raising additional grounds, which had arisen as a result of the subsequent order passed by Arbitral Tribunal, to challenge the arbitral award.

An arbitral award was passed against the petitioner UEM India Pvt. Ltd. The petitioner filed an application under Section 34(1) of the A&C Act before the Delhi High Court challenging the arbitral award. Thereafter, the petitioner filed an application before the Delhi High Court under Section 34(4) of the A&C Act to remand the matter back to the Arbitral Tribunal for rectifying the errors made in the arbitral award.

The High Court passed an order allowing the petitioner's application and remitted the matter back to the Arbitral Tribunal. The Arbitral Tribunal passed an order after considering the petitioner's contentions, but the Tribunal did not alter the arbitral award.

Thereafter, the petitioner filed an application before the Delhi High Court seeking to add further grounds to challenge the arbitral award under Section 34(1) of the A&C Act.

The respondent ONGC submitted before the Delhi High Court that the petitioner sought to raise fresh grounds to challenge the arbitral award, which could not be allowed since the time for filing an application under Section 34(1) to set aside the arbitral award had elapsed.

The respondent contended that the petitioner had failed to raise the said additional grounds while first impeaching the award. Thus, the respondent averred that the petitioner's challenge against the arbitral award on the said grounds was barred by limitation.

Section 34(4) of the A&C Act provides that the Court may, on request of a party, adjourn the proceedings under Section 34 (1) to set aside the arbitral award, and give the Arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action which in the opinion of Arbitral Tribunal would eliminate the grounds for setting aside the arbitral award.

The High Court held that the arbitral award challenged by the petitioner has to be read in light of the subsequent order passed by Arbitral Tribunal, after the matter was remitted to it by the High Court under Section 34(4).

The High Court noted that the petitioner had sought to raise further grounds to challenge the arbitral award and that the said additional grounds had arisen as a result of the subsequent order passed by Arbitral Tribunal.

The High Court ruled that an order passed by the Arbitral Tribunal, after the matter was remanded to it under Section 34(4) of the A&C Act, is not a fresh arbitral award that can be challenged by filing a separate petition under Section 34(1). Thus, the High Court held that no remedy was available to the petitioner against the order passed by the Arbitral Tribunal after the matter was remitted to it by the Court.

The Court observed that the though Arbitral Tribunal had passed an order after the matter was remanded to it, however, the Tribunal did not alter the arbitral award.

Thus, the Court held that the arbitral award had to be read in light of the order passed by the Arbitral Tribunal, after the matter was remitted to it by the Court under Section 34(4). The High Court held that the said order subsequently passed by the Arbitral Tribunal gave the petitioner the right to raise fresh grounds against the arbitral award, which the petitioner could not raise in its petition under Section 34(1) to set aside the arbitral award.

"The contention that an order passed by the Arbitral Tribunal does not give rise to any fresh ground to assail the impugned award which, in effect, in this case remains unaltered, is unpersuasive. Whilst the challenge in this petition remains to be the impugned award and the fact that it may be required to be read in the light of the orders passed by the Arbitral Tribunal under Section 34(4) of the A&C Act, this would give the petitioner the right to raise fresh grounds, which perhaps were not expedient to raise when the petition was filed."

Thus, the High Court observed that if the arbitral award was read in conjunction with the subsequent order passed by the Arbitral Tribunal after the matter was remitted to it by the Court, certain additional grounds would be available to the petitioner to challenge the arbitral award. The Court held that the petitioner could not be precluded from raising such additional grounds.

The Court noted that some of the additional grounds sought to be raised by the petitioner to set aside the arbitral award, were ex-facie untenable. However, the Court held that at the stage of filing of an application for raising fresh grounds, the Court need not examine the merits of the grounds.

The Court thus allowed the application of the petitioner seeking to add additional grounds for challenging the arbitral award.

Case Title: UEM India Pvt. Ltd. versus ONGC Ltd.

Citation: 2022 LiveLaw (Del) 564

Dated: 15.03.2022 (Delhi High Court)

Counsel for the Petitioner: Mr. Gaurav Pachnanda, Senior Advocate with Ms. Iti Agarwal, Mr. Praful Shukla and Ms. Avni Sharma, Advocates.

Counsel for the Respondent: Mr. Abhisek Puri and Ms. Surbhi Gupta, Advocates.

Click Here To Read/Download Order