Report No. 176
2.25.1 Section 34:
Proposal to amend sub-section (1) and insertion of new sub-section (1A) regarding procedural modifications and further procedure after remission to arbitral tribunal under sec. 34(4)) - proposal accepted by adding clauses (5) and (6) to Sec. 34 and the procedure to apply for grounds in sec. 34 and proposed sec. 34A.
We have seen that section 33 of the Act refers to correction of the award at the instance of the party or by the arbitral tribunal suo motu. A question has been raised whether a separate provision is necessary for court to remit the award only after setting aside the same. This is not necessary, because section 34(4) contains an inbuilt procedure for such remission.
But the procedure which is to be followed after the arbitral tribunal passes orders on such remission, has not been specified in sec. 34. Now we are proposing in sub-section (5) and (6), the remaining procedure after receipt of the response from the arbitral tribunal, as stated in detail below.
In Madan Mohan Agarwal vs. Suresh Agarwal AIR 1998 (MP) 212 = 1998(2) Arb. LR 166, a Bench of the Madhya Pradesh High Court held that if the arbitrator, on such request under sec.34(4) passed a fresh award, it must be taken that both awards have merged. Otherwise the award cannot be executed.
The court felt once an order was passed under sec.34(4) by the court, the first award must be deemed to have remain suspended. No doubt, the Court tried to make some thing good in spite of an anomalous procedure in sec. 34(4). Under section 34(4) of the Act, there is a provision for remission and the procedure is that the application under section 34(1) will be kept pending till the arbitral tribunal sends its response to the Court.
Section 34(4) states that the Court may, when it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by its order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of the arbitral tribunal will eliminate the grounds for setting aside the arbitral award. The objective of this provision is explained in Dr. P.C. Rao's commentary (page 117) as follows:
"The remission procedure was known even to the 1940 Act. The main difference between the remission procedure under sub section (4) of section 16 of the 1940 Act is that, whereas the 1940 Act conceived the remission procedure as an integral part of the procedure for setting aside the award. Prior to the invocation of the remedial procedure, the court will have to identify the remedial defects in the award and refer them to the arbitral tribunal.
The tribunal has an option to resume the arbitral proceedings which get otherwise terminated under section 32 or, without such resumption, to take such other action as in its opinion will eliminate the grounds for setting aside the award. The tribunal is given 'an opportunity' to cure the defects. The court may extend this period of time. If nothing happens during the period given by the court or the action taken by the tribunal does not cure the defects, the court will have to set aside the award."
Even under the 1940 Act, the provision regarding remission was that under sub-section (2) of section 16, 'the arbitrator or the empire shall submit his decision to the Court.' In other words, the application under section 34(1) to set aside the award is to be kept pending so that, in the mean time, the arbitral tribunal could send its decision to the Court. The position here is akin to the one under order 41 rule 25 CPC rather than one under order 41 rule 23 CPC.
2.25.2 However, there is a small procedural gap as to what should happen after section 34(4) is over. It is here that the Commission proposes to add to sub-section (5)and (6) as to what the arbitral tribunal is to do and for the aggrieved party to file objections and for the Court to dispose of the application filed under section 34(1) in the light of the response of the arbitral tribunal and the objections, if any, filed thereto.
Where such rectification procedure is retained in Section 34 (4) is applied to Section 34A grounds in cases of purely domestic arbitration also, same procedure as under Section 34 (5) and (6) will apply. But, after the receipt of the order from the arbitral tribunal we propose that the Court may, while dealing with the application under sub section (1) of sec. 34, take action to consider the said order and any objections that are filed thereto, in the light of the grounds permissible under sec. 34 and the proposed sec. 34A.
This will not, however, preclude the Court from exercising the powers under sub section (2) of the proposed sec. 37A and the procedure in sub section (3) of sec. 37A is also to be followed. The Commission further recommends that the parties may be permitted to include, in their application to set aside the award, the additional grounds proposed in section 34A in the case of purely domestic arbitration awards relating to Indian nationals and while filing an application to set aside the award, the parties should annex a photocopy of the award in case the original award has not been supplied to the applicant.
In this context, the Commission proposes to amend sub-section (1) of section 34 and insert a new sub-section (1A) below the proposed sub-section on the following lines to give effect to these recommendations:-
(a) for sub-section (1), the following sub-sections shall be substituted namely:-
"(1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award-
(a) in accordance with sub-section (2) and sub-section (3) ; and
(b) in the case of an award made in an arbitration other than an international arbitration (whether commercial or not), in accordance with sub-section (2) and (3) and the additional grounds mentioned in section 34A:
(1A) An application for setting aside an award under sub-section (1) shall be accompanied by the original award:
Provided that where the parties have not been given the original award, they may file in the court, a photocopy of the award signed by the arbitrators."
After sub-section (4) of section 34, the proposed sub-sections (5) and (6) shall be inserted, namely:-
"(5) Where the court adjourns the proceedings under sub-section (4) granting the arbitral tribunal an opportunity to resume its proceedings or take such other action and eliminate the grounds referred to in this section or in section 34A for setting aside the award, the arbitral tribunal shall pass appropriate orders within sixty days from the receipt of the request made under sub-section (4) by the Court and send the same to the court for its consideration.
(6) Any party aggrieved by the orders of the arbitral tribunal under sub-section (5), shall be entitled to file its objections thereto within thirty days of the receipt of the said order from the arbitral tribunal and the application made under sub-section (1) to set aside the award shall, subject to the provisions of sub-section (2) and (3) of section 37A, be disposed of by the court, after taking into account the orders of the arbitral tribunal made under sub-section (5) and the objections filed under this sub-section."