MANU/TN/1066/2008

Equivalent Citation: 2008-3-LW1063, (2009)1MLJ199

IN THE HIGH COURT OF MADRAS (MADURAI BENCH)

C.R.P. (PD) (MD) No. 806 of 2008 and M.P. (MD) No. 1 of 2008
Decided On: 21.08.2008
Appellants: M.M.T.C.
Vs.
Respondent: Vicnivass Agency
Hon'ble Judges/Coram:
V. Ramasubramanian, J.
Counsels:
For Appellant/Petitioner/Plaintiff: M. Vallinayagam, Adv.
For Respondents/Defendant: N. Dilipkumar, Adv. for Respondent 1
Case Note:
Arbitration - Remittal of Award - Section 34(4) of Arbitration and
Conciliation Act, 1996 - Respondent was Cargo Handling Agent of petitioner
- Subsequently dispute arose between them - Respondent invoked
arbitration clause - Arbitrator appointed - Arbitral Tribunal (Tribunal)
rejected claim of respondent - Filed appeal for setting aside of award -
Appellate Court while setting aside award remitted back case to Tribunal -
Hence, present petition - Whether remittal of award to Tribunal by
appellate Court without stating ground of setting aside of award was valid?
- Held, according to Section 34(4) of Act appellate Court can remit back
case to Tribunal for considering case afresh - Said remittal should with
reasons for setting aside of award passed by Tribunal so as to enable
Tribunal to remove defects - However Tribunal is not bound to consider
such grounds in stricto-sensu - In instant case Appellate Court while
setting aside award remitted case without stating reasons for said setting
aside - But as said remittal was as per Section 34(4) of Act it would be
appropriate only for Tribunal to consider same - Interference by present
Court does not warranted at this stage - Petition partly allowed
ORDER
V. Ramasubramanian, J.
1 . The first respondent herein was appointed as Cargo Handling Agent by the
petitioner viz., Minerals and Metals Trading Corporation Ltd., in the year 2000, for
handling Wheat in the Port of Tuticorin. Disputes arose between the petitioner and
the first respondent with regard to the payment of storage rent. Since the agreement
between the petitioner and the first respondent contained an arbitration clause, the
first respondent invoked the same and the second respondent herein was appointed
as Arbitrator.
2 . The Arbitrator conducted an enquiry and passed an award on 16.3.2006,
dismissing the claim made by the first respondent. Aggrieved by the said award, the
first respondent filed a petition in O.P. No. 127 of 2006 under Section 34 of the
Arbitration and Conciliation Act, 1996, on the file of the District Court, Tuticorin.

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 When the same was pending, the first respondent filed an Interlocutory Application in
I.A. No. 206 of 2007 under Section 34(4) of the Act, seeking to remit the award back
to the Arbitrator so as to eliminate the grounds for setting aside the award.
3. By an order dated 3.2.2008, the District Court, Tuticorin, allowed the application
I.A. No. 206 of 2007 and remitted the matter back to the Arbitrator for fresh
consideration after sufficient opportunities to both sides and further directed the
award already passed to be kept in abeyance for a period of six months in terms of
Section 34(4) of the Act. Aggrieved by the said order passed by the District Court,
Tuticorin in I.A. No. 206 of 2007, the petitioner has come up with the present Civil
Revision Petition.
4 . Heard Mr. M. Vallinayagam, learned Counsel for the petitioner and Mr. N.
Dilipkumar, learned Counsel for the first respondent. The second respondent is the
Arbitrator and hence is only a formal party.
5 . Mr. M. Vallinayagam, learned Counsel for the petitioner assailed the order of the
Court below on the following grounds viz.:
(a) that the affidavit in support of I.A. No. 206 of 2007 does not contain any
averment that necessitates an order of remand by the Court below under
Section 34(4) of the Act;
(b) that the first respondent already made an attempt to canvas the same
issues before the Arbitrator himself by filing an application under Section 33
of the Act, after the passing of the award, but the same was dismissed on
1.5.2006; and
(c) that in utter disregard to the scope of Section 34(4) of the Act, the Court
below remitted the matter back to the Arbitrator, throwing open for
reconsideration, all the issues and thereby making it incumbent upon the
Arbitrator to conduct proceedings afresh.
6 . Mr. N. Dilipkumar, learned Counsel for the first respondent contended that there
were two issues, on which the Court below was convinced to remit the matter back to
the Arbitrator. They are as follows:
(i) In his claim petition, before the Arbitrator, the first respondent claimed
that storage rent was paid to them by the very same petitioner under an
identical contract entered into with the Bangalore Office of the petitioner and
that therefore a departure made by the Chennai Office was unjustified. While
dealing with the said issue, in paragraph-22 of the arbitration award, the
Arbitrator recorded that after the conclusion of the proceedings before the
Arbitrator, on 10.2.2006, a letter of clarification was obtained from the
Bangalore Office to the effect that the payments made by the Bangalore
Office of the petitioner were erroneously made. An affidavit to the same
effect along with a document was filed before the Arbitrator, after the
conclusion of the proceedings and the Arbitrator decided the issue on the
basis of the affidavit and the document, without furnishing copies of the
same and affording an opportunity to the first respondent. Therefore the
remand of the matter became inevitable, so as to give an opportunity to
challenge the affidavit and the document produced after the conclusion of the
proceedings.
(ii) Before the Arbitrator, the first respondent took a stand that during the
period from 8.2.2001 to 7.4.2001, the petitioner paid storage rent, even from

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 Chennai Office. But the petitioner took a stand before the Arbitrator that
those payments were made when Cargo was diverted to Chennai Port on
account of Kandla Port becoming inoperative due to earthquake and that such
payments were not made in terms of the contract. The stand taken by the
petitioner was accepted by the Arbitrator. However when the first respondent
sent a query under the Right to Information Act, on 8.6.2007, he received a
reply dated 4.7.2007 from the Chief General Manager of the petitioner-
Company to the effect that MMTC did not divert any Wheat Cargo from
Kandla Port to Tuticorin Port during the relevant time. Therefore, according
to the 1st respondent, the petitioner has obviously played a fraud upon the
Arbitrator by giving false information deliberately and that therefore the
District Court, Tuticorin was convinced to remit the matter back for a fresh
consideration by the Arbitrator.
7. I have carefully considered the rival submissions. As seen from the contentions of
the learned Counsel for the first respondent, the first respondent primarily wants two
issues to be gone into by the Arbitrator, in pursuance of the order of remand. The
first issue relates to the payment of storage rent made by the Bangalore Office to the
first respondent, in respect of which an affidavit was filed by the petitioner before the
Arbitrator after the conclusion of the proceedings and about which the first
respondent had no opportunity of hearing. The second issue relates to the alleged
diversion of Cargo from Kandla Port to Tuticorin Port during the period from February
to April 2001, on account of which the petitioner allegedly made special payments.
8 . The first issue relating to the payments made by the Bangalore Office of the
petitioner, does not pose serious problems. Paragraph-22 of the arbitration award
dated 16.3.2006 shows that the Arbitrator issued a direction on 1.3.2006 to the
petitioner to explain the action of their office at Bangalore in making payment under
the same circumstances. In response to the said direction, one Mr. U.E. Rao, Manager
(Law) filed an affidavit before the Arbitrator on 7.3.2006 (wrongly typed as 7.3.2000
in the award). In the affidavit, the affiant had referred to a letter dated 14.2.2006
written by him to the DGM and a reply dated 3.3.2006 received from the DGM,
Bangalore. In the letter dated 3.3.2006, it was claimed that the payment in Bangalore
was wrongly made and that the Chennai Office had already been directed to recover
the amount from the first respondent, from the pending bills. On the basis of the said
affidavit dated 7.3.2006 and the reference therein to the letter dated 3.3.2006, the
Arbitrator accepted the contention of the petitioner and rejected the claim of the first
respondent, in his award passed on 16.3.2006. Between 7.3.2006 (the date on which
an affidavit was filed on behalf of the petitioner) and 16.3.2006 (the date on which
the award was passed), no hearings took place. There is no reference in the award
either in paragraph-22 or thereafter as to whether the copy of the affidavit dated
7.3.2006 was furnished to the first respondent and whether any opportunity was
given to him. In the arbitration O.P. No. 127 of 2006, the first respondent has taken
exception to the procedure adopted by the Arbitrator in receiving an affidavit and an
additional document after the conclusion of proceedings. In paragraph-24 of the
arbitration O.P., the first respondent has stated that he did not have any opportunity
to make any submissions on the affidavit dated 7.3.2006 and the letters dated
14.2.2006 and 3.3.2006 referred to in the affidavit. The first respondent has also
stated in paragraph-25 of the O.P., that he took up the matter with the Indian Council
of Arbitration who nominated the second respondent about the failure of the
Arbitrator to furnish copy of the affidavit dated 7.3.2006 and the correspondence
referred to therein. Thus it is clear that the first respondent did not have an
opportunity to challenge the affidavit filed on behalf of the petitioner on 7.3.2006
and the documents referred to therein. Therefore, there is no doubt that the first
respondent has at least prima facie made out one ground for setting aside the

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 arbitration award in terms of Section 34(2) of the Act. Since the first respondent has
made out at least one ground for setting aside the arbitral award in terms of Section
34(2) of the Act and also since the ground so made out by the first respondent is
capable of being eliminated by the Arbitrator, I cannot find fault with the District
Court, Tuticorin, in invoking Section 34(4) of the Act.
9. That the first issue raised by the petitioner is certainly a ground for setting aside
the award in terms of Section 34(2) of the Act and that therefore Section 34(4) of the
Act, could be invoked in the present case, can be appreciated even by a bare reading
of Section 34 of the Act. Section 34 of The Arbitration and Conciliation Act, 1996
reads as follows:
34. Application for setting aside arbitral award. - (1) Recourse to a Court
against an arbitral award may be made only by an application for setting
aside such award in accordance with Sub-section (2) and Sub-section (3).
(2) An arbitral award may be set aside by the Court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to
which the parties have subjected it or, failing any indication
thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper
notice of the appointment of an arbitrator or of the arbitral
proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated
by or not falling within the terms of the submission to
arbitration, or it contains decisions on matters beyond the
scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted,
only that part of the arbitral award which contains decisions
on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the
parties, unless such agreement was in conflict with a
provision of this Part from which the parties cannot
derogate, or, failing such agreement, was not in accordance
with this Part; or
(b) the Court finds that-
(i) the subject-matter of the dispute is not capable of
settlement by arbitration under the law for the time being in
force, or
(ii) the arbitral award is in conflict with the public policy of
India.
Explanation. - Without prejudice to the generality of Sub-clause (ii)

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 of Clause (b), it is hereby declared, for the avoidance of any doubt,
that an award is in conflict with the public policy of India if the
making of the award was induced or affected by fraud or corruption
or was in violation of Section 75 or Section 81.
(3) An application for setting aside may not be made after three months have
elapsed from the date on which the party making that application had
received the arbitral award or, if a request had been made under Section 33,
from the date on which that request had been disposed of by the arbitral
tribunal:
Provided that if the Court is satisfied that the applicant was
prevented by sufficient cause from making the application within the
said period of three months it may entertain the application within a
further period of thirty days, but not thereafter.
(4) On receipt of an application under Sub-section (1), the Court may, where
it is appropriate and it is so requested by a party, adjourn the proceedings
for a period of time determined by it in order to give the arbitral tribunal an
opportunity to resume the arbitral proceedings or to take such other action
as in the opinion of arbitral tribunal will eliminate the grounds for setting
aside the arbitral award.
10. It is seen from Sub-clause (i) and Sub-clause (iii) of Clause (a) of Sub-section
(2) of Section 34 that an arbitral award can be set aside if the party seeking it to be
set aside furnishes proof that he was under some incapacity or that he was otherwise
unable to present his case. The arbitration proceedings in the present case concluded
on 1.3.2006. On the same date, the Arbitrator directed the petitioner to clarify the
issue relating to payments made under same circumstances by the Bangalore Office.
Thereafter, the petitioner filed an affidavit referring to certain documents on 7.3.2006
and the Arbitrator pronounced the award on 16.3.2006. The Arbitrator rejected the
contention of the first respondent relating to the payments made by the Bangalore
Office, on the basis of the very same affidavit dated 7.3.2006 and the correspondence
referred to therein. Therefore, the first respondent was obviously under incapacity to
challenge the affidavit and documents. Even otherwise, the first respondent was
certainly unable to present his case on the affidavit so filed by the petitioner. Hence
the occasion to invoke Section 34(4) of the Act, so as to remove the incapacity or
inability on the part of the first respondent to present his case in terms of Section
34(4) of the Act, had arisen.
1 1 . On the validity of the Arbitral Tribunal receiving fresh evidence after the
conclusion of the proceedings but before the passing of the award, Russel on
Arbitration, Twenty-First Edition (1997) has the following to say (in chapter 8
Paragraph 38):
There would be an irregularity if the tribunal receives and acts on fresh
evidence obtained after the proceedings have closed, but prior to the award,
without giving the parties an opportunity to be heard on it. (Eastcheap Dried
Fruit Co. v. N.V. Gebroeders Catz' Handelsvereenigung [1962]1 L Rep. 283;
Sociedad Iberica de Molturacion S.A. v. Nidera Handelscompagnie BV [1962]
2 L Rep. 240. These decisions are based on the previous legislation, Section
22 of the Arbitration Act, 1950 in particular, but the facts in each case
disclose an irregularity. The Arbitration Act, 1996 also requires the court to
decide if the irregularity has caused or will cause substantial injustice to the
applicant; See Para. 8-047)

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 12. But, Mr. M. Vallinayagam, learned Counsel for the petitioner has a more serious
objection to the order of the Court below and that is, that the District court has now
remitted the matter back to the Arbitrator for a fresh consideration on all issues
including the one relating to the alleged diversion of goods from Kandla Port to
Tuticorin Port. According to the learned Counsel for the petitioner, the Arbitrator
came to the conclusion that during the period from February to April 2001, payments
were made on account of diversion of goods intended for Kandla Port to Tuticorin
Port, on the basis of the material adduced before the Arbitrator by both parties. The
Arbitrator passed the award on 16.3.2006. Thereafter the first respondent claims to
have sent an application under the Right to Information Act, on 8.6.2007 and got a
reply on 4.7.2007. On the basis of the said correspondence, entered into after nearly
15 months of the passing of the award, the first respondent is not, according to the
learned Counsel for the petitioner entitled to a re-enquiry under Section 34(4) of the
Act. In other words, the contention of the learned Counsel for the petitioner is that
taking advantage of the order of remand passed under Section 34(4) of the Act, the
first respondent cannot lead fresh evidence in the form of the letters dated 8.6.2007
and 4.7.2007, obtained post award. The learned Counsel for the petitioner submitted
that the scope of an order under Section 34(4) of the Act, is much restricted than an
order of remand passed by the Civil Court. The purpose of an order of remand under
Section 34(4) of the Act, is not to enable the parties to have a re-hearing nor to
enable the parties to adduce fresh and additional evidence. The object of Section
34(4) of the Act, is only to eliminate the grounds for setting aside an award.
13. As a matter of fact, the question as to whether fresh evidence obtained after the
passing of the award can be made use of at all, has always been a nagging one. An
Arbitrator is not a civil court and hence would become functus officio after the award.
He can resume the proceedings only by virtue of an order passed by a court. The
proceedings arising out of a challenge to an arbitration award before a court, cannot
also be equated to an appeal under Order XLI of the Code of Civil Procedure so as to
invoke Rule 27 of Order XLI. Therefore under normal circumstances, it is not possible
to allow a party to rely upon an evidence which he caught hold of after the
conclusion of the arbitral proceedings.
14. In Russell on Arbitration, Twenty-First Edition (1997), the learned authors say in
Chapter 8, Paragraph 79 as follows:
Fresh Evidence. If fresh evidence comes to light subsequent to the making of
a final award, the tribunal may be unable to take account of it because the
tribunal's duties will have been completed. In view of the terms of the
(English) Arbitration Act 1996, it is doubtful whether the court now has
power to overcome the difficulty by remitting the award to the tribunal for
reconsideration in the light of the fresh evidence.
Assuming that the court still has power to remit in these circumstances, the
party seeking to challenge the award, must at least show that (i) he did not
have the evidence at the time of the arbitration; (ii) he could not have got it
at the time of the arbitration by the exercise of due diligence; (iii) had he
had it, it would be likely to have had a substantial effect upon the result of
the arbitration; and (iv) where appropriate, that he had no opportunity for
asking the tribunal to delay issuing the award while he considered whether it
was possible to get evidence of the type which he now seeks to introduce. He
would also probably have to show fault on the part of the tribunal or one of
the other parties to the arbitration.
15. In the light of the above, the contention of the learned Counsel for the petitioner

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 with regard to the scope of Section 34(4) of the Act, merits a more elaborate
consideration, at least for two reasons viz.,
(i) that the 1996 Arbitration Act, has made a complete departure from the
provision for remand contained in Section 16 of the Arbitration Act, 1940;
and
(ii) that the scope of Section 34(4) of the 1996 Act, does not appear to have
come up for consideration in great detail, so far by the Courts.
Therefore, I shall now take up the issue relating to the scope of an order that can be
passed under Section 34(4) of the Act.
16. Section 34(4) of the Arbitration and Conciliation Act, 1996, has already been
extracted in paragraph-9 above. Section 16 of the Arbitration Act, 1940 reads as
follows:
16. Power to remit award. - (1) The Court may, from time to time, remit the
award of any matter referred to arbitration to the arbitrators or umpire for
reconsideration upon such terms at it thinks fit-
(a) where the award has left undetermined any of the matters
referred to arbitration or where it determines any matter not referred
to arbitration and such matter cannot be separated without affecting
the determination of the matters referred; or
(b) where the award is so indefinite as to be incapable of execution;
or
(c) where an objection to the legality of the award is apparent upon
the face of it.
(2) Where an award is remitted under Sub-section (1), the Court shall fix the
time within which the arbitrator or umpire shall submit his decision to the
Court:
Provided that any time so fixed may be extended by subsequent
order of the Court.
(3) An award remitted under Sub-section (1) shall become void on the
failure of the arbitrator or umpire to reconsider it and submit his decision
within the time fixed.
1 7 . Section 16 of the 1940 Act, empowers the Court to remit the award to the
Arbitrator for reconsideration, on such terms as the Court thinks fit, under three
circumstances viz.,:
(i) Where the award has left undetermined any of the matters referred to
arbitration or where it determines any matter not referred to arbitration and
such matter cannot be separated without affecting the determination of the
matters referred to; or
(ii) Where the award is so indefinite as to be incapable of execution; or
(iii) Where an objection to the legality of the award is apparent on the face
of it.

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 18. In contrast, Section 34(4) merely empowers the Court, where it is appropriate
and if so requested by a party, to adjourn the proceedings challenging the arbitral
award, in order to give the arbitral tribunal an opportunity to resume the 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. Thus Section 34 of the Act, has created a
dichotomy between what the Court could do while dealing with an application for
setting aside the award under Section 34(1) of the Act and what the arbitral tribunal
could do under Section 34(4) of the Act. What the Court is empowered to do under
Section 34(4) of the Act, is only to adjourn the proceedings in order to give the
arbitral tribunal an opportunity to resume the arbitral proceedings or to take such
other action as will eliminate the grounds for setting aside the arbitral award. Three
conditions are to be satisfied for the Court to adjourn the proceedings under Section
34(4) of the Act, viz.,:
(i) that an application under Section 34(1) of the Act, to set aside the award
should have been received by the Court;
(ii) that the Court considers it appropriate; and
(iii) that it is so requested by a party.
If the above conditions are satisfied, the Court would adjourn the proceedings. While
doing so, the Court would leave it to the discretion of the arbitral tribunal (i) to
resume the arbitral proceedings or (ii) to take such other action as in the opinion of
the arbitral tribunal will eliminate the grounds for setting aside the arbitral award.
19. While under Section 16(1) of the old Act, the Court is empowered to remit the
award for reconsideration, Section 34(4) of the Act, does not speak of such remission
and reconsideration. The words "remit the award" and "for reconsideration"
appearing in Section 16(1), clearly signify that what the Court was expected to do
under the 1940 Act, was something similar to what a Civil Court could do under
Section 107(1)(b) of the Code of Civil Procedure. But the circumstances under which
the power under Section 16(1) was to be invoked, were circumscribed by three
conditions imposed under Clauses (a), (b) and (c) of Section 16(1), unlike the
provisions of Order XLI, Rules 23 to 25 CPC.
20. Interestingly, the power of remand under Section 16(1) of the 1940 Act, was not
linked to the grounds for setting aside the award under Section 30 of the 1940 Act.
But the power under Section 34(4) of the 1996 Act, is inextricably intertwined with
the grounds for setting aside the award under Section 34(2), since the very object of
Section 34(4) of the 1996 Act, is to eliminate the grounds for setting aside the
award.
21. Moreover, since Section 16(1) of the 1940 Act, empowered the Court to remit the
award for reconsideration "upon such terms as it thinks fit", the scope of an enquiry
after remand, by the arbitral tribunal was limited to the terms upon which the award
was remitted by the Court itself. In other words, the arbitral tribunal, under the old
Act, was required to reconsider such of the issues upon which the matter was
remitted, in the manner stipulated by the Court remitting the Award and the arbitral
Tribunal cannot travel beyond the terms of such remission. But Section 34(4) of the
1996 Act, leaves it to the wisdom of the arbitral tribunal "either to resume the
proceedings or to take such other action as in the opinion of the arbitral tribunal will
eliminate the grounds for setting aside the award". Thus the scope of the enquiry
under Section 34(4) of the 1996 Act, is left to the discretion of the arbitral tribunal
and is not to be dictated by the Court which considers the application under Section
34(1). In simple terms, the focus has now shifted from the discretion of the Court as

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 given in Section 16(1) of the old Act, to the discretion of the arbitral tribunal under
Section 34(4) of the 1996 Act.
2 2 . To summarise, there are at least six distinguishing features between Section
16(1) of the 1940 Act and Section 34(4) of the 1996 Act, which are as follows:
(a) While Section 16(1) of the 1940 Act, empowered the Court "to remit the
matter for reconsideration to the Arbitrator", Section 34(4) of the 1996 Act,
empowers the court just to adjourn the proceedings to enable the arbitral
tribunal to do what in his opinion would eliminate the grounds for setting
aside the arbitral award. Thus there is an essential difference in the power
conferred upon the court.
(b) Under Section 16(1) of the old Act, the remand by the Court is "upon
such terms as the Court may think fit". On the contrary, Section 34(4) of the
New Act, leaves it to the discretion of the arbitral tribunal to do what in the
opinion of the arbitral tribunal was required to eliminate the grounds for
setting aside the award. In other words, the Court used to fix the terms of
reference while remitting the matter for reconsideration to the Arbitrator
under Section 16(1) of the old Act. But under the new Act, the arbitral
tribunal itself determines the scope of the enquiry, so as to eliminate the
grounds of objection.
(c) Section 16(1) of the old Act, enumerated three pre-conditions on the very
substance of the matter, under Clauses (a), (b) and (c), without satisfying
which, the Court cannot remit the matter for reconsideration. On the other
hand, Section 34(4) of the new Act, does not prescribe any condition
precedent on the substance of the matter but prescribes three procedural
conditions namely that there should be an application under Section 34(1) of
the new Act and that a request should emanate from a party and the Court
considers it appropriate to invoke the power under Section 34(4) of the new
Act.
(d) While the purpose of an enquiry under Section 16(1) of the old Act, was
to have a fresh award upon reconsideration of the previous award, the
purpose of the enquiry under Section 34(4) of the new Act, is to eliminate
the grounds for setting aside the arbitral award. This is why Section 16(1) of
the old Act, was not linked to the provisions of Section 30 of the old Act,
under which an award can be set aside on specified grounds. In contrast, the
power under Section 34(4) of the new Act, is linked to the grounds for
setting aside the award under Section 34(2) of the new Act.
(e) Since there was a provision under Section 14 of the 1940 Act, to file the
arbitration award into Court, the Court was empowered under the 1940 Act,
to do any of the following, namely:
(i) to modify or correct the award under Section 15
(ii) to remit the award for reconsideration under Section 16
(iii) to pass a judgment in terms of the award under Section 17 or
(iv) to set aside the award under Section 30.
But under the 1996 Act, the Court has only two sets of powers after the
award is pronounced viz.,

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 (i) to set aside the award under Section 34(2); or
(ii) to adjourn the proceedings to enable the arbitral tribunal to
resume the proceedings or to take such other action as in the
opinion of the tribunal will eliminate the grounds for setting aside
the arbitral award.
The power to correct or modify an award under Section 15 of the old Act, has
also been taken away though a power is now conferred upon the arbitral
tribunal itself to correct any computation errors or clerical or typographical
or similar errors under Section 33 of the new Act.
(f) It appears from a combined reading of Sections 14, 16 and 17 of the old
Act that the power to remit an award for reconsideration could be exercised
even suo moto by the court. Section 14(2) of the 1940 Act speaks of the
filing of the award into court either on a request made by a party to the
arbitration agreement or when so directed by the court. Section 17 mandates
the court to pronounce a judgment in terms of the award only if it sees no
cause to remit or set aside the award. Neither Section 16 nor Section 17
speaks of an application by a party. This is why, in Union of India and Ors.
v. Manager, Jain and Associates MANU/SC/0084/2001 : [2001]1SCR889 , the
Supreme Court held in paragraphs-11 and 14, as follows:
11. In view of the aforequoted sections, it can be stated that-
(a) after receipt of an award, the Court can suo motu refuse
to make award rule of the Court on the ground that (i) part
of the award is upon a matter not referred to arbitration;
and (ii) the award is imperfect in form or contains any
obvious error. The Court can also remit the award to
arbitrator in case (i) where the award has left undetermined
any matter referred to arbitration; or (ii) where it has
determined any matter not referred to arbitration; or (iii) the
award is so indefinite as to be incapable of execution; or
(iv) is on the face of it illegal. This is also provided under
parenthesis Clause of Section 17 which provides "where the
Court sees no cause to remit the award or any of the matters
referred to arbitration for reconsideration or to set aside the
award, the Court shall...proceed to pronounce judgment...."
Therefore, it cannot be stated that in case where objections
under Section 30 or 33 are not filed, the Court is bound to
pass decree in terms of the award.
1 4 . Similarly, when the Court is required to proceed without
objection application under Section 30 or 33 of the Act, it cannot
pronounce the judgment without considering the provisions of
Sections 15 and 16 of the old Act, which provide, as stated above,
for modification or correction of any award or for remitting it to the
arbitrator for reconsideration on the ground that (i) there is any
error of law apparent on the face of the award, (ii) the award is
incapable of being executed, (iii) the award has left undetermined
any of the matters referred to arbitration, (iv) that a part of the
award is upon a matter not referred to arbitration and (v) the award
contains any obvious error. Jurisdiction of the Court to pronounce
judgment depends on exercise of its power to modify or remit the

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 award.
Thus Section 16 of the old Act, does not specifically prescribe the filing of an
application by any party as a pre condition for ordering a remand. But in contrast,
Section 34(4) of the 1996 Act enables a court to act only upon receipt of an
application under Section 34(1) and in addition, a request by a party. No suo moto
power exists under Section 34(4) of the new Act.
23. Apart from keeping in mind the above distinguishing features between Section 16
of the old Act and Section 34(4) of the new Act, we may also have to look at the
UNCITRAL Model Law to see what is the scope of Section 34(4) of the new Act. The
Arbitration and Conciliation Act, 1996 is scripted on the basis of UNCITRAL Model
Law, as is clear from the Preamble as well as the Statement of Objects and Reasons.
While the Model Law was adopted as such for International Commercial Arbitration, it
was adopted with some modifications in respect of domestic arbitration. Therefore a
useful reference to the Model Law may throw light upon the scope of Section 34 of
the Act. Article 34 of the UNCITRAL Model Law reads as follows:
Article 34. Application for setting aside as exclusive recourse against arbitral
award.
(1) Recourse to a court against an arbitral award maybe made only
by an application for setting aside in accordance with paragraph (2)
and (3) of this article.
(2) An arbitral award may be set aside by the court specified in
Article 6 only if:
(a) the party making the application furnishes proof that: (i)
A party to the arbitration agreement referred to in Article 7
was under some incapacity; or the said agreement is not
valid under the law to which the parties have subjected it or,
failing any indication thereon, under the law of this State; or
(ii) the party making the application was not given proper
notice of the appointment of an arbitrator or of the arbitral
proceedings or was otherwise unable to present his case; or
(iii) the award deals with a dispute not contemplated by or
not falling within the terms of the submission to arbitration,
or contains decisions on matters beyond the scope of the
submission to arbitration, provided that, if the decisions on
matters submitted to arbitration can be separated from those
not so submitted, only that part of the award which contains
decisions on matters not submitted to arbitration maybe set
aside; or
(iv) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the
parties, unless such agreement was in conflict with a
provision of this Law from which the parties cannot
derogate, or, failing such agreement, was not in accordance
with this Law; or
(b) the court finds that:

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 (i) the subject-matter of the dispute is not capable of
settlement by arbitration under the law of this State; or
(ii) the award is in conflict with the public policy of this
State.
(3) An application for setting aside may not be made after three
months have elapsed from the date of which the party making that
application had received the award or, if a request had been made
under Article 33, from the date on which that request had been
disposed of by the arbitral tribunal.
(4) The court, when asked to set aside an award, may, where
appropriate and so requested by a party, suspend the setting aside
proceedings for a period of time determined by it in order to give the
arbitral tribunal an opportunity to resume the arbitral proceedings or
to take such other action as in the arbitral tribunal's opinion will
eliminate the grounds for setting aside.
24. A reading of Article 34 of the UNCITRAL Model Law would show that Section 34
of 1996 Act is almost in pari materia with the same except to the extent that an
explanation relating to what constitutes public policy is added under Section 34(2)(b)
(ii) and a Proviso enabling condonation of delay is added under Section 34(3).
Section 34(4) of the 1996 Act is a faithful adaptation of Article 34(4) except that the
former uses the expression "adjourn the proceedings", while the latter uses the
expression "suspend the proceedings". Thus the power to remit the award conferred
in Section 16 of the old Act has deliberately been omitted in the 1996 Act.
25. In view of the above, I hold that when an application to set aside the arbitration
award is filed under Section 34(1), the Court to which such an application is
presented, if so requested by a party and if the Court thinks it appropriate that any
one or more of the grounds for setting aside the award as prescribed under Section
34(2) exists and that it is also capable of being eliminated, may pass an order simply
adjourning the proceedings, with an indication as to the grounds that exist for setting
aside the award. It will then be open to the arbitral tribunal to resume the arbitral
proceedings and to take such other action which in its opinion, befits the situation. It
may be open to the arbitral tribunal to do all that is necessary to eliminate the
grounds for setting aside the award. The terms "to take such other action" and "in the
opinion of the arbitral tribunal" appearing in Section 34(4) give a clear indication that
sufficient elbow space is available to the arbitral tribunal to do whatever is necessary
in its opinion to eliminate the grounds. There is no restriction placed by the Act upon
the arbitral tribunal as to what it should do under Section 34(4). The arbitral tribunal
can have a free play, for after all, the purpose of such an exercise is to eliminate the
grounds for setting aside the award. It appears from the language employed that the
arbitral tribunal may even refuse to do anything further and leave it to the Court to
decide the matter on its own merits under Section 34(2), since Section 34(4) is only
an enabling provision and not strictly an order of remand, so as to compel the
Arbitrator to do something. This is why Section 34(4) uses the expression "to give
the arbitral tribunal an opportunity". The opportunity may or may not be made use
of. If the tribunal chooses not to make use of the opportunity so afforded, then the
Court will have to consider the application under Section 34(1), in tune with the
parameters laid down under Section 34(2). If Section 34(4) is understood in such a
perspective, there is no difficulty in coming to the conclusion that the arbitral tribunal
may also entertain additional evidence after resumption of the proceedings, since
there are no fetters under Section 34(4). All that is required under Section 34(4) is

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 the subjective satisfaction of the arbitral tribunal that the venture undertaken by it
would eliminate the grounds for setting aside the award.
26. In the light of what is stated above, the order of the Court below remitting the
award back to the Arbitrator (second respondent) for a fresh consideration on all
issues, may not strictly be in tune with Section 34(4) of the Arbitration and
Conciliation Act, 1996, since the power under Section 34(4) is not akin to the power
under Section 16 of the Arbitration Act, 1940. However to the extent that the District
Court has found that there are grounds for setting aside the award, the order of the
District Court cannot be interfered with. The District Court, in such circumstances,
ought to have just highlighted the prima facie existence of the grounds for setting
aside the award and adjourned the proceedings to enable the arbitral tribunal to
resume the proceedings or to take such other action as in the opinion of the arbitral
tribunal would eliminate the grounds for setting aside the award. It was then open to
the arbitral tribunal to do what in his opinion is necessary to eliminate the grounds
for setting aside the award.
27. Therefore, the Civil Revision Petition is allowed to a limited extent, modifying the
order of the Principal District Court, Tuticorin, dated 4.2.2008 in I.A. No. 206 of 2007
in Arbitration O.P. No. 127 of 2006, to the following effect:
(a) The Arbitration O.P. No. 127 of 2006 shall stand adjourned for a period
of 3 months with effect from the date of receipt of a copy of this order.
(b) It is now open to the Arbitrator (second respondent) either to resume the
proceedings or to take such other action, as in his considered opinion would
eliminate the grounds raised for setting aside the award. Since the discretion
is entirely left to the second respondent, it is open to him to form an opinion
as to whether such an exercise would be undertaken by him at all and if so,
the extent to which and the manner in which the exercise would be
undertaken by him. In case, the Arbitrator chooses to resume the
proceedings, he shall issue notice to both parties, fix a date for hearing and
proceed further.
(c) The Arbitrator is requested to communicate his decision, within a period
of 3 months to the Principal District Court, Tuticorin as well as to the parties,
to enable the Court below to proceed further with Arbitration O.P. No. 127 of
2006, if necessary.
(d) It is made clear that the finding recorded both by the District Court and
by this Court that there exist grounds for setting aside the award, is only a
prima facie finding and not a conclusive finding. Therefore the Arbitrator and
the District Court (while resuming the proceedings in the main O.P.) shall
consider the matter, uninfluenced by any finding recorded here or in the
District Court.
2 8 . The Civil Revision Petition is allowed on the above terms. No costs.
Consequently, connected miscellaneous petition is closed.

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