Source: Delhi High Court

Why in News?

Justice Yashwant Varma and Ravinder Dudeja held that once a petition under Section 34 of the Arbitration and Conciliation Act, been disposed of by a final order, the court cannot admit an application seeking to modify such an order.

• The Delhi High Court gave this judgment in the case of Anil Kumar Gupta v. MCD & Anr. 

What is the Background of Anil Kumar Gupta v. MCD & Anr.?

• On 12^th December 2018, the learned single judge partially allowed the petition based on Section 34 of Arbitration and Conciliation Act (A&C), reducing the interest rate awarded by the arbitral tribunal from 18% to 12%.
• The court restricted the application of interest from the date of the accrual of the cause of action to the date of the invocation of arbitration.
• No appeal was preferred against order by the appellant.
• The respondent filed an application for modification of the earlier order.
• The court admitted the application for modification and modified the award and denied the claim of interest.
• The appellant preferred an appeal under Section 37 of the A&C Act.
• The court observed that the subsequent application by the respondent, labeled as a modification plea, was deemed inappropriate once the petition had reached a final decision.
• The court allowed the appeal, setting aside the orders passed. Section 34 petition was restored and placed back on the board of the learned Single Judge for reconsideration.

What was the Court’s Observation?

• The court held that once a petition under Section 34 of the A&C Act has been disposed of by a final order, the court cannot admit an application seeking to modify such an order.
• The court held that the impugned order deserves to get set aside on this count alone.

What is the Arbitration and Conciliation Act, 1996?

• The 'Arbitration and Conciliation Act 1996' is an act that regulates domestic arbitration in India. It was amended in 2015 and 2019.
• Section 34: Application for setting aside arbitral awards.
  • (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 [establishes on the basis of the record of the arbitral tribunal 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 matter 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 Past; 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 1.-For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,- (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
      • Explanation 2.-For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
  • (2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence.
  • (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.
  • (5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.
  • (6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.
• Section 37: Appealable orders.
  • (1) An appeal shall lie from the following orders (and from no others) to the Court authorized by law to hear appeals from original decrees of the Court passing the order, namely: -
    • (a) granting or refusing to grant any measure under Section 9;
    • (b) setting aside or refusing to set aside an arbitral award under Section 34.
  • (2) An appeal shall also lie to a court from an order granting of the arbitral tribunal.
    • (a) accepting the plea referred in sub-section (2) or sub-section (3) of Section 16; or
    • (b) granting or refusing to grant an interim measure under Section 17.
  • (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.

What is the Landmark Judgment Cited in the Case?

• NHAI v. M Hakeem & Anr.(2021):
  • The Supreme Court had said that a Section 34 of A&C act, court can only set aside an arbitral award and not modify it.
• M/s Larsen Air Conditioning v. Union of India (2023):
  • The Supreme Court draws a line pertaining to the powers of the court under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, wherein the courts are considering the challenge to an award and appeal against the orders passed by the court or the tribunal.