§34(4) of the Arbitration and Conciliation Act 1996 gives the Court discretion, and if requested by a party, to refer an award back to the Tribunal because of, inter alia, a lack of reasoning or gaps in the reasoning. The Supreme Court of India has held that the Court cannot exercise the §34(4) discretion where there is an absence of a finding on an issue before the Tribunal.
Facts
Disputes arose between I-Pay and ICICI Bank in relation to the termination of a Service Provider Agreement and the dispute was referred to arbitration. One of the issues framed was "whether the contract was illegally and abruptly terminated by the respondent". The Tribunal directed ICICI Bank to, inter alia, pay I-Pay ₹50 Crores with interest, though no finding was returned on the issue of termination. ICICI Bank challenged the Award while I-Pay moved an application under §34(4) requesting the Court to remit the Award back to the Tribunal to cure the defect of lack of a finding.
The High Court dismissed I-Pay's application on the basis that the defect in the Award was not curable and fell outside the scope of §34(4). I-Pay took the matter to the Supreme Court of India.
Decision
The Supreme Court dismissed the Appeal while, inter alia, observing that:
- §34(4) provides the Court with a discretion, upon a request by a party, to remit an award back to the Tribunal to cure a deficiency or defect in circumstances where the award is not perverse or patently illegal. The fact that the exercise of the power is discretionary is evident from the use of the phrase "where it is appropriate".
- There is a difference between a "finding" and "reasons" and the power under §34(4) could be exercised where there is "inadequate reasoning" or to "fill up the gaps in the reasoning of the award" in support of a finding.
- However, "under the guise of additional reasons and filling up the gaps in the reasonings, no award can be remitted to the arbitrator, where there are no findings on the contentious issues in the award" or "if any findings are recorded ignoring the material evidence on record" as "the same are acceptable grounds for setting aside the award itself".
Conclusion
The decision of the Supreme Court restricts the scope of §34(4) and clarifies that the Court's discretion is only to be exercised "where it is appropriate".
* Decision dated 3 January 2022 passed by the Supreme Court in Civil Appeal No 7 of 2022
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