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Allahabad High Court allows appeal under Section 34(4) of the Arbitration and Conciliation Act, 1996

The Allahabad High Court while allowing an appeal observed that under Section 34(4) of the Arbitration and Conciliation Act, 1996, the High Court can set aside an arbitral award and remit the case back to the Arbitral Tribunal for a fresh decision.

A Single Bench of Justice Ajay Bhanot passed this order while hearing an appeal filed by National Highway Authority Of India.

The competent authority under Section 3-G of the National Highway Authority of India Act, 1988 determined the compensation amount liable to be paid to the claimants by award dated 27.08.2020. The Arbitral Tribunal was constituted under Section 3-G(5) of the National Highway Authority of India Act, 1988. The appellant before this Court as well as the respondent-claimant preferred objections against the said award before the Arbitrator.

The Arbitral Tribunal while drawing its award neglected to consider the objections raised by the appellant and made the final determination solely on the footing of the objections tendered by the respondents-claimants.

Thus, aggrieved, the appellants took out proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 before the District Judge which came to be registered as Arbitration Case (National Highway Authority of India vs Parimal Bajpai and Others).

In the aforesaid proceedings, the case of the appellants before the Court below was that the challenge to the compensation determined by the competent authority was specifically made by the NHAI before the Arbitrator.

The Arbitrator failed to make any finding on the objections raised by the appellants/ petitioners and the arbitral award dated 27.08.2020 was passed while the said application remained pending in Case.

A ground in regard to the aforesaid illegality which vitiates the arbitral award was taken in the proceedings under Section 34 of the Act registered as Arbitration Case (National Highway Authority of India vs Parimal Bajpai and Others) before the court below.

The court below did not advertise the said grounds and no finding in this regard was made in the impugned order dated 27.08.2020 rendered by the court below while deciding the said Arbitration Case (National Highway Authority of India vs Parimal Bajpai and Others). These are the undisputed facts of the case.

Aloke Kumar, counsel for the appellants submitted that the failure of the court below to decide the said categorical objections taken in the proceedings under Section 34 of the Act perpetuates the error of the arbitral tribunal. And as a consequence thereof, an award which is contrary to the fundamental policy of Indian law and also in conflict to the basic notions of morality and justice is sought to be executed against the appellants.

Per contra, Shashank Shekhar Mishra, counsel assisted by Devesh Kumar Verma, counsel on behalf of the respondents contends that the prerequisites for exercise of powers under Section 34 of the Act are not satisfied in as much as no request under Section 34(4) of the Arbitration and Conciliation Act, 1996 was made before the court below to adjourn the proceedings to give the Arbitral Tribunal an opportunity to resume the arbitral proceedings and cure the errors.

The Court noted that,

The prerequisites of exercise of powers under Section 34(4) of the Act are two fold. Firstly, the court in proceedings under Section 34 of the Act has come to a conclusion that it is appropriate to give the arbitral tribunal an opportunity to resume arbitral proceedings or to take such other action as in the opinion of the arbitrator will eliminate the grounds for setting aside the arbitral award. This precondition requires the court to apply its mind to the grounds taken by the parties in their application for setting aside an arbitral award and also to examine the other material evidence in the record.

The second condition precedent for exercise of powers under Section 34(4) of the Act is that the party should make a request for giving the arbitral tribunal such an opportunity. The legislative intent of Section 34(4) of the Act can be determined from the words used in the provision. The legislature has not used legalese or formal legal terms, but the provision is in a less formal caste. The phrase “so requested by a party” stands in contradistinction to “a formal prayer made by the party” or “a specific relief sought by the party”. The request by a party as contemplated in Section 34(4) of the Act can be gleaned out from the grounds in the application under Section 34 of the Act. The pleadings as regards the deficiencies in the award have been explicitly made in the application under Section 34 of the Arbitration Act. In these circumstances, it is safe for the court below to accept the same as a request by the party contemplated under Section 34(4) of the Act.

In the facts of this case, there is no difficulty in concluding that the said prerequisite for exercise of powers under 34(4) of the Act was duly satisfied as the appellants have taken specific grounds as regards the errors in the arbitral award.

The court below neglected to make any finding in regard to the objections to the arbitral award, while passing the impugned order. The impugned order is vitiated by non application of mind.

“In these facts, the prerequisites for exercising powers under Section 34 of the Act are fully satisfied.

The court below misdirected itself in fact and law by declining to give the arbitral tribunal an opportunity to resume the arbitral proceedings and cure the aforesaid defects.

The question now arises as to whether the matter should be remitted to the court below for resuming proceedings under Section 34 of the Act or to the arbitral tribunal for resuming arbitral proceedings.

In light of the provisions of Section 34 of Arbitration and Conciliation Act, 1996 and the appellate powers of this Court, interest of justice which are consistent with the provisions of law will be served by remitting the matter to the Arbitral Tribunal. The narrative will be fortified by authorities in point”, the Court observed while allowing the petition.

“The order dated 21.08.2023 passed by the Additional District Judge, Kanpur Nagar in Arbitration Case (National Highway Authority of India vs Parimal Bajpai and Others) is liable to be set aside and is set aside.

The matter is remitted to the Arbitrator to resume proceedings in Case and to determine the objections raised by the appellant on merits. The proceeding shall be completed within a period of two months. The Arbitrator shall decide the objections made by the appellants against the award by the competent authority in accordance with law and after giving an opportunity of hearing to both the parties”, the Court ordered.

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