Arbitration- Rajasthan HC on scope of adjudication in a Section 34 application and availability of remedy of remanding matter for de novo adjudication in a section 37 appplication

In the attached judgment the issue which fell for consideration before the Hon’ble Rajasthan High Court was whether the court below had provided justifiable reasoning in rejecting the section 34 application under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) and the remedy in the event such order of disallowing the section 34 application were not reasoned. Facts in brief The instant litigation was in pursuance of a section 37 application under the Arbitration Act. In the arbitral proceeding which led to the instant litigation an arbitral award was passed against the appellant. The appellants preferred an application under section 34 of the Arbitration Act claiming that the award was passed in a partitioned manner and in ignorance of condition no. 7 [Deviations (Applicable specifically to Measurement and Lump Sum Contracts and generally to Term Contracts)] of IAFW 2249 [General Conditions Of Contracts For Lump Sum Contracts (I.A.F.W.-2159) Term Contracts For Artificers’ Work (I.A.F.W.-1821) and Measurement Contracts (I.A.Fs.W-1779 and 1779-A) Order Of Conditions] and against the pleadings of the appellant. Judgment and Analysis The Hon’ble Rajasthan High Court held that, “The Court, while considering the application under Section 34 of the Act cannot shirk from its responsibility of adjudication without meaningful consideration of the grounds set out in the application for setting aside arbitral award. Furthermore, the Court is also expected to examine the true purport of the phrase “Fundamental Policy of India” propounded by the authoritative legal precedents. It is also necessitated in view of the fact that the phrase as such is not defined under the Act. In the instant matter, the learned Court below essentially relied upon some of the legal precedents wherein this phrase as such has not been examined and the matters are decided on facts.” It was also held that, “...that at least it is expected of the learned Court below to record its finding negating the grounds set out by the appellant.” and “May be, jurisdiction under Section 34 is limited but in case where Courts find that arbitrator has acted without jurisdiction and has put an interpretation of the clause of agreement wholly contrary to law, then the Courts are not prohibited from interfering with the arbitral award.” The court observed that, “The reasons spelt out, for overturning the application of the appellant under Section 34 of the Act, I am afraid, cannot satisfy the test of true meaning of “reasons”. Any judicial order is required to be a reasoned order showing application of mind and law is also trite that even purely administrative or quasi-judicial order must disclose reasons.” The Hon’ble Rajasthan High Court dealt with remanding of matters as a way of relief in the case and held that, “The mechanism of remand is specifically available under Section 34(4), which permits the Court under Section 34 of the Arbitration Act to issue appropriate direction, by keeping the matter pending, to re-adjudicate and/or determine particular issue/point so that the grounds so raised for setting aside the award would be eliminated.” In finality the Hon’ble Rajasthan High Court ordered that, “Thus, in the backdrop of glaring facts and circumstances of the instant case and noticing serious legal infirmity in the impugned order, it has become necessary and expedient in the interest of justice to exercise power of remand to facilitate de novo decision of the application. The exercise of such power would also prevent miscarriage of justice and multiplicity of proceedings.” Download Pdf