Order Of Remand In An Appeal U/S. 37 A&C Act Can Be Made Only In Exceptional Cases Where It Is Unavoidable: SC

The Supreme Court observed that an order of remand in an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (A&C Act) can be made only in exceptional cases where remand is unavoidable.

The Court was deciding a batch of civil appeals challenging the judgment of the Bombay High Court.

The two-Judge Bench comprising Justice Abhay S. Oka and Justice Pankaj Mithal enunciated, “The object of the Arbitration Act is to provide an arbitral procedure that is fair, efficient, and capable of meeting the needs of specific arbitration. The object is to ensure that the arbitral proceedings and proceedings filed for challenging the award are concluded expeditiously. The proceedings have to be costeffective. The supervisory role of the Courts is very restricted. Moreover, we cannot ignore that arbitration is one of the modes of Alternative Disputes Redressal Mechanism provided in Section 89 of the CPC. If the Courts dealing with appeals under Section 37 of the Arbitration Act start routinely passing the orders of remand, the arbitral procedure will cease to be efficient. It will cease to be cost effective. Such orders will delay the conclusion of the proceedings, thereby defeating the very object of the Arbitration Act. Therefore, an order of remand by Section 37 Court can be made only in exceptional cases where remand is unavoidable.”

The Bench pointed out the following exceptional cases where remand in an appeal under Section 37 A&C Act may be warranted –

a. Summary disposal of a petition under Section 34 of the Arbitration Act is made without consideration of merits;

b. Without service of notice to the respondent in a petition under Section 34, interference is made with the award; and

c. Decision in proceedings under Section 34 is rendered when one or more contesting parties are dead, and their legal representatives have not been brought on record.

Senior Advocates Abhishek Manu Singhvi and Ramesh Singh represented the appellant while Senior Advocates Mukul Rohatgi and C.U. Singh represented the respondent.

Brief Facts -

In 1993, Maharashtra Housing and Area Development Authority (MHADA) leased a property to Andheri Kamgar Nagar Co-operative Housing Society for a slum rehabilitation project. The society appointed a developer, who failed to deliver, and later appointed Bombay Slum Redevelopment Corporation (appellant) as the new developer. In 2003, the appellant and respondent (contractor) agreed to share the available Floor Space Index (FSI), with the respondent responsible for construction.

A dispute arose in 2012, leading to arbitration and the arbitral proceedings concluded in the form of an award by the Arbitral Tribunal in 2018 in favour of the respondent. Being aggrieved, the appellant filed a petition under Section 34 of A&C Act and the same was allowed by the Single Judge. The respondent challenged the same before the Division Bench and it set aside the impugned judgment. Both the parties to the appeal under Section 37 preferred the cross appeals before the Apex Court.

The Supreme Court in the above regard said, “The provisions of the CPC have not been made applicable to the proceedings before the learned Arbitrator and the Court under Sections 34 and 37 of the Arbitration Act. The legislature's intention is reflected in Section 19(1) of the Arbitration Act, which provides that an Arbitral Tribunal is not bound by the provision of the CPC. That is why the provisions of the CPC have not been made applicable to the proceedings under Sections 34 and 37(1)(c). We are not even suggesting that because the provisions of the CPC are not applicable, the Appellate Court dealing with an appeal under Section 37(1)(c) is powerless to pass an order of remand.”

The Court added that the remedy of an appeal will not be effective unless there is a power of remand vesting in the appellate authority and in the Arbitration Act, there is no statutory embargo on the power of the Appellate Court under Section 37(1)(c) to pass an order of remand. The Court said that, however, looking at the scheme of the Arbitration Act, the Appellate Court can exercise the power of remand only when exceptional circumstances make an order of remand unavoidable.

“As observed earlier, the scope of interference in a petition under Section 34 is very narrow. The jurisdiction under Section 37 of the Arbitration Act is narrower. Looking to the objects of the Arbitration Act and the limited scope available to the Courts to interfere with the award of the Arbitral Tribunal, this Court, while dealing with the decisions under Sections 34 and 37 of the Arbitration Act, in its jurisdiction under Article 136 of the Constitution of India, has to be circumspect. By their own volition, the parties choose to go before the Arbitral Tribunal instead of availing remedy before the traditional civil courts”, it further noted.

The Court emphasised that the courts must be very conservative when dealing with arbitral awards and confine themselves to the grounds strictly available under Section 34 of the Arbitration Act.

“In the facts of the case, the remand was completely unwarranted. The reason is that the learned Single Judge has elaborately dealt with the merits of the challenge in the Section 34 petition. This Court should benefit from reasoned judgment rendered by the Court under Section 37. In this case, we do not have the benefit of a decision of the Appellate Court dealing with all the issues dealt with by the learned Single Judge while deciding the petition under Section 34 of the Arbitration Act. Therefore, it will not be appropriate for this Court to look at the arbitral award and the findings recorded by the Section 34 Court and exercise the jurisdiction of the Section 37 Court. If we do something which Section 37 Court was required to do, it will be unjust to the parties as the unsuccessful party before us will be deprived of one forum of challenge”, it also observed.

The Court therefore, concluded that it has no option but to set aside the impugned judgment of the Division Bench and request the Division Bench to decide the appeals on merits after considering the arbitral award and the decision of Section 34 Court.

Accordingly, the Apex Court partly allowed the appeals, set aside the impugned judgment, and restored the appeal before the High Court.

Cause Title- Bombay Slum Redevelopment Corporation Private Limited v. Samir Narain Bhojwani (Neutral Citation: 2024 INSC 478)

Appearance:

Appellant: Senior Advocates Abhishek Manu Singhvi, Ramesh Singh, Advocates Atman Mehta, Anand Pai, Nishant Chotani, Vipul Patel, AOR Mohit D. Ram, Advocates Rachit Bharwada, Siddhant Sanghavi, AOR R. Gopalakrishnan, Advocates Murtaza Kachwalla, S. M. Algaus, Palash Moolchandani, Mahesh Agarwal, Parimal K. Shroff, Rishi Agrawala, Ankur Saigal, Anirudh Bhatia, Devansh Srivastava, Vidisha Swarup, and AOR E. C. Agrawala.

Respondent: Senior Advocates Mukul Rohatgi, C.U. Singh, Maninder Singh, Meenakshi Arora, Advocates Mahesh Agarwal, Parimal Shroff, Rishi Agrawala, Ankur Saigal, Victor Das, Anirudh Bhatia, Devansh Srivastava, Vidisha Swarup, AOR E. C. Agrawala, AORs Anup Jain, Anushree Prashit Kapadia, Advocate Nishant Chothani, AOR R. Gopalakrishnan, Advocates Murtaza Kachwalla, S. M. Algaus, and Palash Moolchandani.

Click here to read/download the Judgment