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2013 Supreme(SC) 201
Supreme Court of India
SURINDER SINGH NIJJAR & M.Y. EQBAL, JJ.
Sachin Gupta & Another
Versus
K.S. Forge Metal Pvt. Ltd.
Civil Appeal No.2058 of 2013
Decided On : 01-03-2013
For the Petitioners:R.S. Suri, Sr. Advocate, A.K. Singh, Ajay Baury, Shantanu Singh, Nikilesh Ramachandran, Advocates.
For the Respondents:Sandeep Aggarwal, Ms. Manjeet Kirpal, Advocates.
When an arbitration award is set aside under Section 34(2)(a)(iii) for lack of notice, the court should not act as a court of first appeal on merits and should refer the matter back to an arbitrator rather than adjudicating the dispute itself.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34(2)(a)(iii) - Award rendered without issuance of notice and without hearing the respondent - Award liable to be set aside on this ground alone.
(B) Section 34 - Scope of judicial review - Court setting aside an award on procedural grounds should not convert itself into a Court of First Appeal - No necessity to examine the dispute minutely or make strong remarks against parties - Judges are required to be restrained and circumspect in the use of language, even when criticizing the conduct of a party.
(C) Procedure following set aside of award - After setting aside an award for lack of notice, it is appropriate to refer the matter back to the arbitrator or appoint an independent arbitrator agreeable to both parties.
Facts of the case:
An arbitration award was passed against the respondent without the issuance of any notice or providing an opportunity for a hearing. The High Court set aside the award under Section 34(2)(a)(iii) of the Arbitration and Conciliation Act, 1996. However, the High Court's judgment involved a detailed examination of the merits of the dispute and contained strong remarks regarding the conduct of the parties.
Findings of Court:
The Court found that while the High Court was correct in setting aside the award due to the lack of notice, it erred by acting as a Court of First Appeal and using unrestrained language. The Court held that the proper course of action upon setting aside such an award is to refer the matter to an arbitrator.
Issues: Whether the High Court exceeded its scope by reviewing the merits of the dispute and using strong language against the parties while setting aside an award for failure to provide notice under Section 34(2)(a)(iii).
Ratio Decidendi: When an arbitration award is set aside for failure to give notice, the court should not substitute its view on the merits of the case as if it were a court of first appeal. Judicial decorum must be maintained in language, and the appropriate remedy is to refer the matter back to an arbitrator to determine the dispute on merits.
Result: Appeal disposed of, order of the High Court set aside, and an independent arbitrator appointed.
Legal Category Hierarchy
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alternative dispute resolution
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arbitration
- setting aside award
- appointment of arbitrator
- natural justice
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arbitration
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practice and procedure
- scope of section 34
- judicial restraint
JUDGMENT :
Leave granted.
We have heard learned senior counsel for the appellants as well as learned counsel for the respondent. We are satisfied that the High Court could have set aside the Award only on the ground that the Award has been rendered against the respondent without issuance of any notice and without hearing the respondent. On this ground alone, the Award was liable to be set aside under Section 34(2)(a)(iii) of the Arbitration and Conciliation Act, 1996. There was no necessity for the learned Single Judge to convert itself into a Court of First Appeal. It was certainly not necessary to examine the dispute between the parties so minutely or to make such strong remarks against any of the parties. Judges at all levels are required to be restrained and circumspect in use of the language, even when criticizing the conduct of a party. However, we agree with the conclusion of the High Court that the Award had to be set aside as no notice had been served on the respondent. But, having set aside the Award, it would have been appropriate if the matter had been referred back to the Arbitrator. In the event, any of the parties were not satisfied, an independent arbitrator agreeable to both the parties could have been appointed.
In view of the above, we deem it appropriate to set aside the order passed by the High Court. As noticed above, instead of leaving the parties to seek their remedy in accordance with law, the matter ought to have been referred to a specific arbitrator. Learned counsel for the parties are agreed that we appoint Mr. Justice A.P. Shah, former Chief Justice of the Delhi High Court, residing at F6A, Hauz Khas Enclave, New Delhi-110 016, as the Arbitrator. We order accordingly. The learned Arbitrator shall be at liberty to determine his remuneration/fees in consultation with the parties. It is made clear that the arbitrator shall proceed with the arbitration proceedings without, in any manner, being influenced by any observations made either by the learned Single Judge or by the Division Bench of the High Court.
The appeal is, accordingly, disposed of.
