2003 (1) TMI 533 - SC - Companies Law

Whether the reference, if at all made to two arbitrators, was valid in law? Whether the fact that the arbitrators did not give reasons in support of their award would make the award bad in the eyes of law? Held that - As it was submitted by Senior Advocates appearing on behalf of the respondents, that the appellate Bench of the High Court has considered only two of the grounds on which the learned Single Judge set aside the award, namely - the ground pertaining to the objection raised on the basis of section 10 of the Act, and the ground pertaining to failure of the arbitrators to record reasons for their award. Apart from these two grounds, there were other grounds also on which the learned Single Judge had held the award to be void and ineffective. Those questions have not at all been considered by the appellate Bench and, therefore, it was only appropriate that the matters be sent back to the High Court for its decision on those questions.

Issues:
1. Validity of arbitral award made by two arbitrators.
2. Grounds for setting aside the arbitral award.
3. Consideration of additional grounds for challenging the arbitral award.

Issue 1: Validity of arbitral award made by two arbitrators
The case involved a challenge against an arbitral award made by two arbitrators, which was deemed void and unenforceable by the High Court. The central argument was whether arbitration by two arbitrators was permissible under the Arbitration and Conciliation Act, 1996, which prohibits an Arbitral Tribunal consisting of an even number of members. The Supreme Court noted the importance of this legal question and decided that the issue should be resolved by a larger Bench of at least three Judges. The Court clarified that the Act's provision allowing an even number of arbitrators was derogable, and since objections were not raised by the concerned parties, they were deemed to have waived their right to object. Consequently, the question was answered in favor of the appellant, leading to the remittance of the appeal for further consideration.

Issue 2: Grounds for setting aside the arbitral award
The learned Single Judge set aside the arbitral award based on various grounds. Firstly, the award was deemed incomplete as the Memorandum of Understanding was not annexed or initialled by the arbitrators. Secondly, the absence of the 3rd respondent's signature signifying acceptance was highlighted. Thirdly, the lack of reasons in the award, ambiguity in provisions, and failure to specify essential details rendered the award invalid under section 31 of the Act. The Single Judge also emphasized that the arbitrators' rejection of claims indicated the award was not a settlement. The Division Bench of the High Court affirmed these findings but only considered two specific questions, leading to the remittance of the case for a comprehensive review of all grounds by the High Court.

Issue 3: Consideration of additional grounds for challenging the arbitral award
The appellant's counsel argued that the High Court's appellate Bench did not address all the grounds on which the Single Judge invalidated the award. They contended that other significant grounds were overlooked, necessitating a revisit by the High Court for a thorough examination. The Supreme Court agreed with this submission, emphasizing the importance of considering all grounds for challenge to ensure a comprehensive and just decision. Consequently, the Court directed the remittance of the matters to the High Court for a detailed review of all grounds on which the award was set aside by the Single Judge. The appeals were disposed of with this directive, highlighting the need for a holistic assessment of the case.

In conclusion, the Supreme Court's judgment addressed the validity of the arbitral award made by two arbitrators, the grounds for setting aside the award, and the necessity of considering all grounds for challenge to ensure a fair and thorough decision-making process. The case underscores the importance of legal clarity, procedural adherence, and comprehensive analysis in arbitral proceedings to uphold the integrity of the arbitration process.

← Previous Next →