2009 (11) TMI 884 - HC - Indian Laws

Summary

Issues Involved:
1. Application of the doctrine of severability to arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996.
2. Scope and interpretation of Section 34(2) and the proviso to Section 34(2)(a)(iv) of the Arbitration and Conciliation Act, 1996.

Issue-wise Detailed Analysis:

1. Application of the Doctrine of Severability to Arbitral Awards:
The judgment discusses whether the doctrine of severability can be applied to arbitral awards when dealing with a petition under Section 34 of the Arbitration and Conciliation Act, 1996. The court examined the legislative history and intent behind the Arbitration and Conciliation Act, 1996, comparing it with the previous Arbitration Act of 1940. The 1996 Act aimed to minimize judicial intervention and make arbitration proceedings more effective and expeditious. The court noted that while the 1940 Act provided specific provisions for modifying or remitting awards, the 1996 Act does not have equivalent provisions but does allow for setting aside awards under Section 34. The court emphasized that the legislative intent was to ensure that arbitration awards could be enforced with minimal court interference, and the doctrine of severability should be applied to uphold valid parts of an award while setting aside only the invalid parts.

2. Scope and Interpretation of Section 34(2) and the Proviso to Section 34(2)(a)(iv):
The court examined the scope of Section 34(2) of the Arbitration and Conciliation Act, 1996, which outlines the grounds for setting aside an arbitral award. The court highlighted that the grounds under Section 34(2)(a)(i) to (v) and Section 34(2)(b) do not necessarily mandate setting aside the entire award. The court argued that even within these grounds, there could be situations where only part of the award is affected, and it would be just and equitable to set aside only the affected part. The proviso to Section 34(2)(a)(iv) explicitly allows for partial setting aside when the matters submitted to arbitration can be separated from those not submitted. The court concluded that this principle of severability should extend to the entire Section 34(2), allowing courts to set aside only the invalid parts of an award, thereby preserving the valid parts.

Conclusion:
The court held that the judicial discretion vested in the court under Section 34 of the Arbitration and Conciliation Act, 1996, includes the power to set aside an award partly or wholly, depending on the facts and circumstances of the case. The proviso to Section 34(2)(a)(iv) should be read ejusdem generis to the main section, implying that the principle of severability can be applied to the entire Section 34(2). The court directed that the appeal and arbitration petitions be placed before the appropriate Bench for disposal in accordance with this interpretation.