The Supreme Court in the case of Dr. A. Parthasarathy & Ors. v. E. Springs Avenues Pvt. Ltd & Ors., Special Leave Petition No. 1805-1806/2022 decided on 18.02.2022, held that the High Court has no jurisdiction to remand the matter to the same Arbitrator unless it is consented by both the parties that the matter is to be remanded to the same arbitrator under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”).
FACTS
E-Spring Avenues Pvt. Ltd. (hereinafter referred to as “the Defendant”) entered into a registered Joint Development Agreement (hereinafter referred as “JDA”) in 2007 with Dr. A. Parthasarathy (hereinafter “the Appellant”) and other owners of a site located in Bangalore, for the purpose of development of the property.
The JDA was sought to be cancelled vide a purported Deed of Cancellation dated 03.11.2008. Thereafter, disputes began between the parties and the Defendant invoked Arbitration clause in 2010. Pursuant to the Arbitration, an Award dated 19.08.2019 was passed wherein the Arbitrator held that the Cancellation Deed was invalid and the JDA was mutually terminated.
The Appellant and Defendant, both aggrieved by the said Award, filed petitions under Section 34 of the Act. The Commercial Court allowed the petitions and passed an Order setting aside the impugned Arbitral Award with the liberty to start the Arbitration proceedings afresh.
The Defendant appealed to the High Court under Section 37 of the Act. The High Court allowed the appeal and remitted the dispute to the same Learned Arbitrator. Aggrieved by the Order of the High Court, the Appellant preferred the said appeal before the Supreme Court.
ISSUE BEFORE THE SUPREME COURT
Whether High Court has the power to remand the matter to the same Arbitrator?
DECISION AND FINDINGS
The Supreme Court held that the Order passed by the High Court setting aside the Award, while remanding the matter to the same Arbitrator to reach a fresh decision, was outside the scope and jurisdiction of the High Court under Section 37 of the Act. The Supreme Court set aside the judgment of the High Court and directed the High Court to consider the appeal of merits.
The Supreme Court observed that there were only two options available with the High Court under Section 37 of the Act, which is to either direct the parties for fresh Arbitration, or to consider the Appeal on merits based on the material available on record, keeping in mind the scope and limitations of the Act. The Supreme Court emphasized that the High Court has no jurisdiction to remand the matter to the same Arbitrator unless consented to by the parties.
Reliance was placed on the law laid down in Kinnari Mullick and Anr. v. Ghanshyam Das Damini (2018) 11 SCC 328, wherein it was held that parties to the Arbitration cannot be relegated back to the same Arbitral Tribunal once the Award has been set aside under Section 34 of the Act.
The Supreme Court also referred to the decision in I-Pay Clearing Services Private Limited v ICICI Bank Ltd (2022) SCC OnLine SC 4, wherein it was held that:
“when it prima facie appears that there is a patent illegality in the award itself, by not recording a finding on a contentious issue, in such cases, court may not accede to the request of the party for giving an opportunity to the arbitral tribunal to resume the arbitral proceedings.”
The Supreme Court also held that in cases where the Award is allowed to be relegated, it can only be used to record reasons for a previous judgement or to fill up gaps in the rationale of the Award.
AMLEGALS REMARKS
In the present case, the parties were aggrieved by the Award passed by the Arbitrator and went through multiple rounds of litigation to protect their rights. The Supreme Court’s decision, disallowing the High Court to remand the matter back to the same Arbitrator without the parties’ consent, protects the rights of the parties as stipulated by the Act.
It is pertinent to note that the ambit and scope of Section 37 and the jurisdiction of the High Court under the Act is very well defined. The Supreme Court identified two options available to the High Court under Section 37 of the Act.
This decision is in line with the law laid down regarding the remand of matters back to Arbitration, which prevents remand to the same Arbitrator without the consent of the parties. However, when both parties are aggrieved by the Award passed by the Arbitrator, no question arises of the parties consenting to remand the matter back to the same Arbitrator.
The Supreme Court directed the High Court to consider the appeal on merits. However, since no new evidence can be admitted in the High Court at this stage, the High Court is restricted to adjudicate the matter based only on the material already on record.
For any queries or feedback, please feel free to get in touch with rohit.lalwani@amlegals.com or riddhi.dutta@amlegals.com.
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