Calcutta High Court
Coal India Limited vs Hyderabad Industries Ltd on 15 March, 2021
Author: Moushumi Bhattacharya
Bench: Moushumi Bhattacharya
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
Present:
The Hon'ble JUSTICE MOUSHUMI BHATTACHARYA
I.A. No. G.A.1 of 2020 (Old No. G.A.653 of 2020)
AP No. 99 of 2009
COAL INDIA LIMITED
Vs.
HYDERABAD INDUSTRIES LTD.
For the Applicant : Mr. Siddhartha Mitra, Sr. Adv.
Ms. Priyanka Prasad, Adv.
Mr. Pratik Shanu, Adv.
For the Petitioner/ : Mr. Jishnu Chowdhury, Adv.
Respondent Mr. Ratul Das, Adv.
Mr. Pradipto Ghosh, Adv.
Mr. Sudhakar Prasad, Adv.
Last Heard on : 10.03.2021.
Delivered on : 15.03.2021.
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Moushumi Bhattacharya, J.
1. This is an application made by the respondent for seeking adjournment of the proceedings for setting aside of an arbitral Award dated 27th December, 2008 for granting an opportunity to the Arbitrator for eliminating the grounds for setting aside of the arbitral Award. The application has been made under Section 34(4) of the Arbitration and Conciliation Act, 1996 (the Act), which gives the option to a court, in fit cases, to adjourn the proceedings in order to give the Arbitral Tribunal an opportunity to resume the proceedings or to eliminate the grounds for setting aside of the arbitral Award. The applicant herein is the respondent/Award-holder in the proceedings for setting aside of the impugned Award.
2. Mr. Sidhartha Mitra, learned Senior Counsel for the applicant/ Award- holder, submits that Section 34(4) of the Act empowers the court to adjourn the proceedings in order to give the Tribunal an opportunity to take such action, as in the opinion of the Tribunal, would eliminate the grounds for setting aside of the arbitral Award. Counsel submits that the petitioner in A.P. No. 99 of 2009 (the application for setting aside of the Award) had rejected the applicant's recommendation of the names of two retired judges and one Senior Advocate and had instead recommended names of three Technical Nominees in their place. Among the three Technical Nominees a former Director (Technical) of Mahanadi Coalfields Ltd. a subsidiary of Coal India Limited (the petitioner in the Section 34 application) was selected as the sole arbitrator. Counsel submits 3 that the petitioner did not take any steps for more than eleven years to get the matter heard, since there was an automatic stay of the Award upon filing the section 34 application by the petitioner. According to Counsel, the circumstances in which a court can pass an order under Section 34(4) of the Act had been laid down in Kinnari Mullick vs. Ghanshyam Das Damani; (2018) 11 SCC 328 and since the impugned Award has not been set aside, this court can adjourn the proceedings for the purpose mentioned under Section 34(4) on an written application made by the applicant Award-holder.
3. The primary contention of Mr. Jishnu Chowdhury, learned Counsel appearing for the respondent/Award-debtor, is that the applicant was put on notice of the grounds for setting aside of the Award, namely, that the Award does not contain reasons, in February 2009 when the Section 34 application was filed. The present application was, however filed in March, 2020 after eleven years. Counsel cites several cases on the proposition that six months is the outer limit for retention of arguments made by the parties and that courts are duty-bound to deliver judgments within the aforesaid time period. Counsel further submits that Section 34(4) only gives the Arbitral Tribunal an opportunity to resume the Arbitral proceedings, but does not permit fresh arguments. Reliance is placed on Sundaram Fastener Limited vs Assistant Commissioner of Urban Land Tax; (1989)1 Mad LJ 72 to explain the meaning of the word "Resume". Counsel places a similar provision in the Arbitration Act, 1940 and submits that the power to reconsider an Award does not find place in 4 the present 1996 Act. Two decisions of the Singapore High Court and the Singapore Court of Appeal are cited in this regard.
4. Before embarking on the strength of the contentions made on behalf of the parties, the scope of Section 34(4) of the 1996 Act should first be stated. Under this sub-section, on receipt of an application for setting aside of an arbitral Award under Sub-section 1 of Section 34, the receiving court may, in appropriate circumstances, adjourn the proceedings for a given period of time in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such action as considered fit by the arbitral Tribunal for the purpose of eliminating the grounds on which the Award-debtor has sought to set aside the arbitral Award. Since the respondent has placed emphasis on the word "Resume" used in Section 34 (4), a Single Bench decision of the Madras High Court in Sundaram Fastener Limited vs. Assistant Commissioner of Urban Land Tax; (1989)1 Mad LJ 72 may be useful in this context. The decision refers to the definition of the word "Resume" in Stroud's Judicial Dictionary, which is as follows:
"...taken for the taking again into the king's hands..."
Similar words have been used in Venkataramaiya's law Lexicon and Legal Maxims, which uses the expression: "...Connotes taking back what was given...".
5. The argument of the respondent is that given the restrictive definition of the word "Resume", the Arbitrator is only allowed to take back the Award and 5 cannot be permitted to give a fresh hearing. In other words, according to counsel for the respondent, the application of Section 34(4) can only serve to give an opportunity to the Arbitrator for eliminating the grounds for setting aside of the Award by giving reasons, but would not permit the Arbitrator to do so after giving a fresh hearing to the parties. The word "resume" also has to be understood in the context of the doctrine of "functus officio" which lends itself to the principle of finality in dispute resolution. Upon delivery of the award, the arbitrator becomes functus officio having exhausted his/her mandate. Hence, the arbitrator has to "resume" the proceedings upon the Court allowing an application under 34(4).
6. The words used in Section 34(4) delineate the scope of the sub-section. The power of a court to receive an application for sending the Award back to the Arbitrator is circumscribed by two words used in Section 34(4) which are indicative of the limited scope of the sub-section. The "or" used between the word "Resume" and "eliminate the grounds" makes it clear that the objective of this provision is not to facilitate perfecting an Award which has already been delivered but only to eliminate the possible grounds on which the Award may be set aside under Section 34(2) and (2A) of the Act. This means that Section 34(4) does not permit the arbitrator to revisit the Award for the purpose of doing anything other than taking out the grounds which may be problematic or fatal to the Award-holder, who seeks to sustain the Award. "Eliminate the Grounds" used in 34(4) refers to the grounds available to an Award-debtor 6 under Section 34(1), 34(2) and 34 (2A) read with judicial pronouncements on the aforesaid grounds. It is settled that an Award without reasons is amenable to challenge. Hence, if an Award is bereft of reasons, the Arbitrator may put in the reasons upon the Award being sent back to him/her under Section 34(4). It is clear that Section 34(4) curtails the scope given to the Arbitrator by restricting "such other action" only for eliminating the grounds for setting aside of the Award and nothing more. Since the petitioner/Award-debtor (Coal India Ltd.) has not taken the ground in the Section 34 proceedings that the Arbitrator did not give Coal India Ltd. an opportunity of hearing, there is no window for the arbitrator to reconsider the matter and pass a reasoned award thereafter. The only ground taken in the Arbitration Petition is that the Award does not contain reasons.
7. The question which therefore becomes relevant is whether the Arbitrator can furnish reasons to make the Award withstand the challenge under Section 34 without hearing the parties once again? This answer involves certain relevant dates: The Award was passed by the Sole Arbitrator on 27th December, 2008; The application for setting aside of the Award was filed in February, 2009; Directions for affidavits were given on 2nd March, 2009 and affidavits were completed in July, 2009. The Section 34 application was taken up for consideration by this court in February, 2020. The present application under Section 34 (4) was filed on 5th March, 2020 as recorded in an order dated 13th March, 2020; Directions for affidavits were given in the application on 9th 7 December, 2020. The aforesaid dates show that the respondent/Award-holder (Hyderabad Industries) was aware of the grounds taken for setting aside of the Award and more specifically the ground that the Award does not contain any reasons, from February, 2009. The respondent has however chosen to wait till March, 2020 for making an application for sending the Award back to the Arbitrator for supplying reasons. Having regard to the dates, there is little doubt that the present application has been filed by the respondent to pursue a remedy which it should have initiated eleven years back. The fact that only directions for affidavits were given on 2nd March, 2009 and the matter was not heard thereafter does not help the respondent Award-holder since the relevant date in this case would be 18th February, 2009, when the respondent was made aware of the grounds of challenge to the Award.
8. R.C. Sharma vs. Union of India & Ors; 1976 (3) SCC 574, Indu Bhusan Jana vs. Union of India; (2009) 1 CHN 27 and Anil Rai vs. State of Bihar; (2001) 7 SCC 318 cited on behalf of the respondent Award-debtor are on the salutary effect of prompt pronouncement of judgments, being the rallying point in these decisions, to check against the delayed delivery of judgments. The Supreme Court issued guidelines in Anil Rai upon noticing the trend of judgments being delivered long after conclusion of hearing and attempted to shorten the time between conclusion of hearing and delivery of judgments. The logical presumption of fixing an outer limit of six months from the date of reserving of judgments (Ref. Anil Rai vs State of Bihar; (2001) 7 SCC 318) is that the 8 concerned judge would only be in a position to recall the arguments made by the parties within a reasonable period of time. Although the decisions cited concern the courts and may not strictly be applicable to a private contractual forum like arbitration, the logical adjunct of the cases is that it would be impossible for any adjudicating authority to retain the arguments of parties after a considerable length of time.
9. This court is of the view that the aforesaid decisions assist the petitioner/Award-debtor (Coal India Ltd.) in support of the issue that the Sole Arbitrator would not be in a position to remember the facts or the law culminating in the Award after eleven years. In this context, the decision of the Supreme Court in M/s. Dyna Technologies Pvt. Ltd. vs. Crompton Greaves Ltd.; (2019) 20 SCC 1, relied on by the Award-holder, is instructive. In this decision the Supreme Court considered the requirement of a reasoned Award as opposed to an Award which is muddled and unclear in form and content. In the penultimate paragraph of the decision, the Supreme Court noted that since the litigation had continued for more than 25 years, it was appropriate to direct the respondents before the Supreme Court to pay a certain some of money to the appellant in full and final settlement of one of the claims.
10. The decisions cited in support of the present application namely that the Award should be sent back to the Arbitrator for doing the needful proceed on the basis that Section 34(4) permits a Court to do so subject to a written 9 application being made by the party seeking such remand. Kinnari Mullick vs. Ghanshyam Das Damani; (2018) 11 SCC 328 was concerned with the issue whether Section 34(4) empowers a court to relegate the parties to the Arbitral Tribunal after having set aside the arbitral Award in question and further whether the Court can suo-moto do so without an application being made in that regard by the parties. Although, the applicant/Award-holder has placed much emphasis on this decision, the relevance of Kinnari Mullick essentially rests on the presence of a written request by the parties to seek resume of the arbitral proceedings under Section 34(4) and before the award is set aside. The Supreme Court relied on McDermott International Inc. vs. Burn Standard Co. Ltd.; (2006) 11 SCC 181 to highlight that the Parliament has not conferred any power of remand to the Court to remit the matter to the Arbitral Tribunal except to adjourn the proceedings as provided under the sub-section. Suresh Prabhu vs. Bombay Mercantile Co-op. Bank Ltd & Ors; 2007 SCC Online Bom 181, a Single bench decision of the Bombay High Court reiterates the limited scope of Section 34(4) where the Arbitral Tribunal was given an opportunity to only record a finding on the issue, namely whether the petitioner was a Member of the Respondent No. 1 Bank and whether the Tribunal had jurisdiction to entertain the dispute. In M/s. MMTC vs. Vicnivass Agency; 2008- 3-L.W.1063, a Single bench decision of the Madurai Bench of the Madras High Court gave a more expansive view of the scope of Section 34(4) but reiterates that the ultimate objective of the exercise is to eliminate the grounds for setting aside of the Award.
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11. A comparative assessment of section 16(1) of the Arbitration Act, 1940 with the present section 34(4) would give an interesting insight into the possible intent behind the change brought about by the 1996 Act. Section 16(1) of the 1940 Act stood as ;
"16. Power to remit award (1) The Court may from time to time remit the award. or any matter referred to arbitration to the arbitrators or umpire for reconsideration upon such terms as it thinks fit-
(a) where the award has left undetermined any of the matters referred to arbitration, or where it determines any matter not referred to arbitration and such matter cannot be separated without affecting the determination of the matters referred ; or (b) where the award is so indefinite as to be incapable of execution ; or (c) where an objection to the legality of the award is apparent upon the face of it."
Which under the 1996 Act stands transformed as:
"34. (4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order 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."
12. The above shows that under the erstwhile provision under the 1940 Act, there was a power to remit the award to the Arbitrator "for reconsideration" on any of the conditions present under clauses under 16(1). The power to reconsider the award or any related matter is conspicuous by its absence in 34(4) where the section 34 Court retains control over the matter by simply adjourning the proceedings for the limited purpose of giving an opportunity to the arbitrator to eliminate the grounds which makes the award vulnerable to 11 challenge. Significantly, "eliminate the grounds" has been introduced in the 1996 Act thereby specifying the parameters within which the arbitrator is to act. The omission of 'reconsideration' is also in keeping with the UNCITRAL Model Law which provides the framework for the 1996 Act; section 34(4) of the 1996 Act is based on and is substantially similar to Article 34 (4) of the UNCITRAL Model Law as is set out below:
"34. (4) The court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal's opinion will eliminate the grounds for setting aside."
13. The Singapore High Court in Tan Poh Leng Stanley vs. Tang Boon Jek Jeffrey; [2000] SGHC 260 relied on Article 34(4) of the UNCITRAL Model Law in deciding whether an arbitrator has the power to revisit and reverse a final award. The Court held that the absence of the power in the Model Law to reconsider an award is founded on the principle of finality and public policy to bring commercial disputes to an early end. The Singapore Court of Appeal in AKN v ALC; [2015] SGCA 63 held that there is nothing to warrant the conclusion that the tribunal which made the award would determine afresh the matters that had been dealt with in the award.
14. Although, Section 34 (4) does not mention a time limit, within which, an application has to be made by a party, who seeks to take advantage of the said provision, the overall objective of Section 34(4) has to be read into the words 12 particularly used in the context of the changes inserted by the 1996 Act. As stated above, the court will now "adjourn" the proceedings as opposed to "remit the Award...for consideration...", which was the procedure recommended earlier. Further the Arbitral Tribunal now "will (only) eliminate the grounds for setting aside the arbitral Award". The legislative intent is thus clear; the words "...or to take such action as in the opinion of arbitral Tribunal..." will exclude reconsideration of the Award for the purpose of eliminating the grounds on which the Award can be challenged under Section 34(1), 34(2) and 34(2A). The UNCITRAL Model Law lends weight to a restrictive interpretation of this Section. It is crucial to bear in mind that the primary ground of challenge to the impugned Award is that the Award is an unreasoned Award (Ground XI). There is no ground complaining that the petitioner in the Section 34 proceeding was not given a hearing. Hence, permitting the Arbitrator to hear the parties de novo will enlarge the mandate of Section 34(4) in the facts of this case. It is more important to bear in mind that the Award was passed by the Sole Arbitrator on 27th December, 2008 and 13 years have passed since the Arbitrator last heard the matter. It is impractical even to expect that the Arbitrator, without hearing the parties, will be in a position to supply the reasons in the Award. This would be an unreasonable demand on the Arbitrator to say the least.
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15. G.A. 1 of 2020 is dismissed in view of the above reasons without any order as to costs. The petitioner in A.P. 99 of 2009 will be at liberty to mention for listing of the matter.
Urgent Photostat certified copy of this Judgment, if applied for, be supplied to the parties upon compliance of all requisite formalities.
(MOUSHUMI BHATTACHARYA, J.)