The Supreme Court dials down the bass; restricts the power of remand of the court sitting in appeal over a decision emanating from a challenge to an award

A party aggrieved by an award may challenge the award under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) and the resulting judgment is amenable to appeal as per Section 37(1)(c) of the Act. Recently, the Supreme Court of India carved out the circumstances under which the court under Section 37(1)(c) of the Act can remand proceedings to the court under Section 34 of the Act[1].

Circa 1996, a housing society (Society) entered into a development agreement with a developer (Aurora). As Aurora was unable to fulfil its obligations, the Society appointed BSCRPL[2] (Appellant) as the new developer. Subsequently, in 2003, the Appellant and a contractor (Respondent) entered into an agreement. While the Appellant retained 45% of the available FSI[3], the remaining FSI was allotted to the Respondent for constructing the free sale area. The Respondent, the Appellant and Aurora also executed a tripartite agreement in the year 2009. Alleging default of various obligations by the Appellant, the Respondent invoked arbitration against the Appellant and in 2018, the tribunal passed an Award in favour of the Respondent (Award).

Consequently, the following proceedings ensued before the Bombay High Court:

• The Appellant challenged the Award under Section 34 of the Act. In 2019, the Ld. Single Judge set aside the Award on the ground of patent illegality (Section 34 Judgment).
• The Respondent then preferred an appeal to the Division Bench under Section 37(1)(c) of the Act. By an Order dated 7 July 2023 (Impugned Judgment), the Division Bench, upon observing that issues raised by both parties were not addressed in the Section 34 Judgment, remanded the matter back to the Ld. Single Judge.

Thus, both parties preferred cross appeals before the Supreme Court, which were decided together since they arose in context of the Impugned Judgment.[4]

The Supreme Court observed that:

• The Ld. Single Judge had set out its findings exhaustively, particularly on the issue of patent illegality. The Division Bench’s conclusion that several grounds were not addressed in the Section 34 Judgment, was therefore unsustainable.
• The jurisdiction of an appellate court under Section 37(1)(c) is narrow as compared to a court under Section 34. The appellate court is required to (i) determine if the jurisdiction under Section 34 of the Act has been exercised correctly and within the confines of the grounds raised under Section 34 of the Act; and (ii) scrutinize the findings.
• Section 37(1)(c) does not impose a statutory restriction on the appellate court’s power to order a remand. Without the power of remand, an appellate court will essentially be ineffective. However, considering that court interference in arbitral process is intended to be limited, it can be inferred that such a power should only be exercised in exceptional circumstances. Otherwise, it would lead to undue delay in disposal of matters.
• Three illustrations of the said exceptions were carved out i.e.,
• Summary disposal of a Section 34 petition, without consideration of merits;
• Interference in the award, without service of notice to the respondent in a Section 34 petition; and
• Decision rendered under Section 34 when one or more contesting parties are deceased, and their legal representatives are not on record.

The Supreme Court concluded that the remand directed under the Impugned Judgment was unwarranted and hence, the Impugned Judgment was set aside. Given the absence of a reasoned judgment under Section 37 of the Act, it would not be proper to assume the role of the court under Section 37 of the Act as this would deprive the aggrieved parties of an available forum for legal recourse.  Hence, the Supreme Court ordered a rehearing of the appeal and reinstated the petition under Section 37 of the Act.

The Supreme Court has rightly cautioned that the power of remand must be exercised “only in exceptional cases where remand is unavoidable”. There is brewing concern among award holders that the additional layers of judicial intervention will prolong the legal process and undermine the efficiency of arbitration. This is even more so following Delhi Airport Metro[5], wherein the Supreme Court exercised its curative jurisdiction (ordinarily reserved for exceptional circumstances) to reassess the tribunal’s findings in a domestic award. As we move forward, let us heed Pink Floyd’s timeless words, and consider: can we leave the award alone?

On a positive note, the Supreme Court came down heavily on the propensity of stringing together innumerable grounds in challenge proceedings (151 grounds in the challenge petition and 164 grounds in the appeal!) when the scope is limited under the statute. The Supreme Court also served a reminder how protracted legal arguments waste the courts’ time and frustrate the purpose of adopting the UNCITRAL Model Law. All in all, one hopes that this suggestion does not serve as ‘Another Brick In The Wall’[6], but instead resonates with all stakeholders.

We hope you have found this information useful. For any queries/clarifications please write to us at insights@elp-in.com  or write to our authors:

Alok Jain, Partner – Email – alokjain@elp-in.com

Ria Dalwani, Principal Associate – Email – riadalwani@elp-in.com

Anuli Mandlik, Associate – Email – anulimandlik@elp-in.com

[1] Bombay Slum Redevelopment Corpn. (P) Ltd. v. Samir Narain Bhojwani, 2024 SCC OnLine SC 1656

[2] Bombay Slum Redevelopment Corporation (P) Ltd

[3] Floor Space Index

[4] CA No. 30144/2023 (filed by the Appellant) and the CA No. 36711/2023 (Filed by the Respondent)

[5] DMRC v. Delhi Airport Metro Express (P) Ltd., 2024 SCC OnLine SC 522

[6] Parker, A. (1982). Pink Floyd: The Wall. MGM/UA Entertainment Company