2009 Supreme(Bom) 1735

High Court of Judicature at Bombay
THE HONOURABLE CHIEF JUSTICE MR. SWATANTER KUMAR, THE HONOURABLE MR. JUSTICE A.M. KHANWILKAR & THE HONOURABLE MR. JUSTICE S.C. DHARMADHIKARI
M/s. R.S. Jiwani, a proprietorship firm and having its office at Narayan Niwas & Others Versus
Ircon International Ltd. & Others
APPEAL NO.245 OF 2009 IN ARBITRATION PETITION NO.347 OF 2005 ALONGWITH ARBITRATIN PETITION NO.457 OF 2006 ALONGWITH ARBITRATIN PETITION NO.370 OF 2008
Decided on : 16-12-2009

Headnote:Arbitration & Conciliation Act, 1996 - Section 34(2) - Civil Procedure Code, 1908, Section 89 - Doctrine of severability - Application of - Arbitral award - Held - Court has wide discretion to set aside an award wholly or partly within strict limitations stipulated in Section 34 of Act - Court, duty bound to invoke doctrine of severability where matter submitted to arbitration can clearly be separated from matters not referred to arbitration and decision thereupon by arbitral tribunal. - Court may now revert back to the facts of the present case which itself is a glaring example of what devastating results can be produced by accepting the contention which has been raised on behalf of the respondent in the present appeal. Undisputedly claims were adjudicated upon on merits. Parties led evidence, documentary as well as oral, argued the matter before the arbitrator whereafter the arbitral tribunal allowed some claims of the claimants and rejected all remaining claims of the claimants and the counter claim filed by the company. The claimant was satisfied with the award. An enforceable right by way of decree accrued to the claimant in terms of Sections 32, 35 and 36 of the Act. The company approached this Court by filing a petition under Section 34 which partially allowed in the sense that out of 15 claims allowed by the arbitrator in favour of the claimant, held that other claims were not payable to the claimants but still did not make any observation that the award in so far as it rejects the remaining claims and the counterclaim were unsustainable. However, to conclude, the learned Single Judge despite having upheld the claims in favour of the claimants, set aside the entire award in view of the Division Bench, judgment in the case of Ms. Pushpa Malchandani, (supra) Could there be a greater perversity of justice to a party which has succeeded before the Arbitral Tribunal as well as in the Court of law but still does not get a relief. Is that what is contemplated and was the purpose of introduction of the Act of 1996. An Act which was to provide expeditious effective resolution of disputes free of Court interference would merely become ineffective statute. Would not the canon of civil jurisprudence with the very object of the Arbitration Act, 1996 stand undermined by such an approach. The effective and expeditious disposal by recourse to the provisions of the 1996 Act would stand completely frustrated if submissions of the respondent are accepted. Partial challenge to an award is permissible then why not partial setting aside of an award. In a given case, a party may be satisfied with major part of the award but is still entitled to challenge a limited part of the award. It is obligatory on the Court to deal with such a petition under Section 34(1)(2) of the Act. Court may further take an example where the Arbitral Tribunal has allowed more than one claim in favour of the claimant and one of such claim is barred by time while all others are within time and can be lawfully allowed in favour of the claimant. The Court while examining the challenge to the award could easily severe the time barred claim which is hit by law of limitation. To say that it is mandatory for the Court without exception to set aside an award as a whole and to restart the arbitral proceeding all over again would be unjust, unfair, inequitable and would not in any way meet the ends of justice.

       For the reasons aforerecorded, Courts are of the considered view that the dictum of law stated by the Division Bench in the case of Ms. Pushpa Mulchandani, is not the correct exposition of law. Court would predicate the contrary, view expressed by different benches of this Court for the reasons stated in those judgments in addition to what Court have held hereinabove. It is difficult to prescribe legal panacea which, with regard to the applicability of the principle of severability can be applied uniformally to all cases. Courts find that the principle of law enunciated hereinabove is more in comity to object of the Act legislative intent, UNCITRAL Model Law and will serve the ends of justice better. Thus, Court proceed to record the answers to the questions framed as follows :

       The judicial discretion vested in the Court in terms of the provisions of Section 34 of the Arbitration and Conciliation Act, 1996 takes within its ambit power to set aside an award partly or wholly depending on the facts and circumstances of the given case. In Courts view, the provisions of Section 34 read as a whole and in particular Section 34(2) do not admit of interpretation which will divest the Court of competent jurisdiction to apply the principle of severability to the award of the arbitral tribunal, legality of which is questioned before the Court. The legislature has vested wide discretion in the Court to set aside an award wholly or partly, of course, within the strict limitations stated in the said provisions. The scheme of the Act, the language of the provisions and the legislative intent does not support the view that judicial discretion of the Court is intended to be whittled down by these provisions.

       The proviso to Section 34(2)(a)(iv) has to be read ejusdemgeneris to the main section as in cases falling in that category, there would be an absolute duty on the Court to invoke the principle of severability where the matter submitted to arbitration can clearly be separated from the matters not referred to arbitration and decision thereupon by the arbitral tribunal.