Recorded Consent of Both Parties Enough for Courts to Remand the Matter to Same Sole Arbitrator
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Under the Arbitration and Conciliation Act, 1996 (“the Arbitration Act”), there is a recourse available to parties to challenge the arbitral award passed. Section 34 of the Arbitration and Conciliation Act, 1996 has witnessed many interpretations and judgments that shape the ambit under which an award can be challenged. This Section holds great accord for party autonomy and minimal interference from the judiciary.
It may also be stated that party autonomy is the soul of arbitration. Recent development in the law in the form of the Supreme Court holding in Mutha Constructions v Strategic Brand Solutions (I) Pvt Ltd, where the Bench comprising of Mr. Justice M.R. Shah and Mr. Justice B.V. Nagarathna of the Hon’ble Supreme Court held that on the basis of the consent of both the parties, the Courts have the power to remand the case back to the same arbitrator for a fresh reasoned award. The Hon’ble Bench held that,
“When both the parties agreed to set aside the award and to remit the matter to the learned Sole Arbitrator for fresh reasoned Award, it is not open to contend that the matter may not be and/or ought not to have been remanded to the same sole arbitrator”
The ratio decendi of the case can be well understood by a clear enumeration of the facts and circumstances of the case, as have been reproduced hereinafter:
- The parties to the dispute entered into an arbitration headed by a learned retired judge (“Sole Arbitrator”) of the Hon’ble Bombay High Court (“High Court”) for dispute resolution, on account of which the award dated 17.01.2018 was passed by the Arbitrator.
- Aggrieved, the Petitioner challenged the award before the Hon’ble Bombay High Court in a Commercial Arbitration Petition under Section 34 of the Arbitration Act. The Hon’ble Single Judge of the High Court disposed the petition on 30.03.2019, where he recorded the consent of both the parties and remanded the matter for fresh arbitration by the Sole Arbitrator.
- Post the passing of the aforementioned order, the Petitioner purportedly moved a modification application on 30.04.2019, before the aforesaid Single Judge of the Court on the ground that the consent given by the parties did not pertain to the remanding of the matter to the same Sole Arbitrator but to a different one. This was alleged to be dismissed by the Court.
- On approaching the Division Bench of the Hon’ble High Court of Bombay under appeal, the Petitioner prayed for the modification of the limited aspect of recorded consent. The said appeal was also dismissed on the ground of it not being pressed. It is pertinent to mention that in the appeal before the Division Bench, the Court was unable to find the presence of any order dated 30.04.2019.
- Thereafter, in his futile exercise to get the order modified, the Petitioner filed a review petition before the Single Judge of the Bombay High Court, which was rejected on the basis that the order in question was passed with consent of both the parties and did not require any review.
- The Petitioner then filed an Interim Application to seek restoration of his petition before the Court which was dismissed.
- Ultimately, the Petitioner approached the Hon’ble Supreme Court of India by way of a Special Leave Petition.
Analysis of the findings
The contention of the applicant remained that the Arbitration Act under Section 34 does not empower the Appellate Court to set aside the award and remand the matter to the same sole Arbitrator for a reasoned order.
The Hon’ble Supreme Court however observed that the High Court rightly dismissed the petitions as the order was a consent order whereby the parties agreed to set the orders aside and to remit the matter to the Sole Arbitrator to pass a fresh reasoned order. The Hon’ble Court held that,
“Once the learned Single Judge who passed the order dated 30.04.2019 was of the opinion that the order dated 30.04.2019 was a consent order the matter ends there.”
Assuming but not conceding, even if the order shouldn’t be treated as a consent order, the observations made by the Single Judge reveal the express consent of the parties. The Single Judge noted that “the parties intend to request the learned sole Arbitrator to publish a fresh award as expeditiously as possible”. From the aforesaid wordings, the intention of the parties can be culled out that the award be set aside by consent and the matter be remanded to the same learned Sole Arbitrator for a fresh reasoned award.
It is also to be noted that where the award is set aside under Section 34 of the Arbitration Act (on any of the grounds) the parties can still agree to fresh arbitration to the same arbitrator. This case is a great example to understand the extent of the power of the courts. As the parties had given consent to remit the matter to the Sole Arbitrator for a revised fresh award, it is clear that once an order of consent is passed, there is no scope to contend that the matter may not or should not be remanded to the same sole arbitrator.
The Apex Court has laid down a significant principle that brings to light the direction in which the court shall proceed in cases such as the present one. The court while deciding a petition under Section 34 of the Arbitration Act has no jurisdiction to remand the matter for fresh decision except when the court decides the application on merits. However, even in such cases, the parties can agree to fresh arbitration, possibly to the same arbitrator. The importance of the consent order is also emphasized as the order passed by the Single Judge is upheld acknowledging the power of orders passed at various levels of the judiciary. The power is allocated as part of the dynamic judicial system and the hierarchy must follow unless there is a need to be intervened for the sake of justice, which couldn’t be established in the present scenario. In the absence of it, the decision taken by the Supreme Court resonated with the idea behind Section 34 of the Arbitration Act.