2024 (7) TMI 459 - SC - Indian Laws

Jurisdiction - power of the Appellate Court dealing with the appeal under Section 37(1)(c) of the Arbitration Act to pass an order of remand to Section 34 Court - HELD THAT - In the facts of the case in hand, while deciding the petition under Section 34 of the Arbitration Act, the learned Single Judge has made a very elaborate consideration of the submissions made across the Bar, the findings recorded by the Arbitral Tribunal and the issue of illegality or perversity of the award - the finding of the Appellate Bench that the impugned judgment of the learned Single Judge does not address several issues raised by the parties cannot be sustained at all. The remedy of an appeal will not be effective unless there is a power of remand vesting in the appellate authority. 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. 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. 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 costeffective. 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 scope of interference in a petition under Section 34 is very narrow. The jurisdiction under Section 37 of the Arbitration Act is narrower - When members of the bar take up so many grounds in petitions under Section 34, which are not covered by Section 34, there is a tendency to urge all those grounds which are not available in law and waste the Court s time. The time of our Courts is precious, considering the huge pendency. The restored appeal shall be placed before the roster Bench on 29th July 2024 at 10 30 a.m. The parties to the appeal before this Court shall be under an obligation to appear before the concerned Bench on that day, and no fresh notice shall be served to the parties - Appeal partly allowed.

Summary

Issues Involved:
1. Jurisdiction of the Arbitral Tribunal
2. Validity of the Development Agreement
3. Specific Performance and Continuous Supervision
4. Award of Damages
5. Remand Order by the Division Bench
6. Scope of Interference under Sections 34 and 37 of the Arbitration Act

Detailed Analysis:

1. Jurisdiction of the Arbitral Tribunal
The learned Single Judge held that the Arbitral Tribunal had exceeded its jurisdiction by passing an award against third parties who were not part of the arbitral proceedings. The Tribunal's finding that 31 agreements/allotment letters for the sale of flats were sham and bogus was found to affect various banks and financial institutions, which were not parties to the arbitration. The Single Judge concluded that the Tribunal could not issue directions impacting these third parties.

2. Validity of the Development Agreement
The Arbitral Tribunal declared the Development Agreement dated 10th March 2003 as valid, subsisting, and binding upon the parties. However, the learned Single Judge found that some of the reliefs granted by the Tribunal, such as creating a charge over the flats, were beyond its jurisdiction. The Judge noted that a charge on properties could only be created by law or agreement, neither of which was present in this case.

3. Specific Performance and Continuous Supervision
The learned Single Judge observed that the reliefs granted by the Tribunal required continuous supervision by the Court, which is not permissible under the Specific Relief Act, 1963. The Judge held that specific performance was granted based on a Letter of Intent from 2010, whereas the claim was based on a 2012 Letter of Intent. Furthermore, the Judge found that the respondent had not proved readiness and willingness to perform his obligations, a prerequisite for specific performance.

4. Award of Damages
The Tribunal awarded Rs. 53 crores in damages for the delay in obtaining further Commencement Certificate (CC) for Wing C. The learned Single Judge found that the Tribunal had overlooked evidence and relied on extraneous material, such as a news report, which amounted to a breach of natural justice. The Judge also noted that the Tribunal applied different standards to the evidence presented by both parties, thus not treating them equally.

5. Remand Order by the Division Bench
The Division Bench set aside the judgment of the learned Single Judge and remanded the case for fresh consideration, stating that several issues were not addressed. However, the Supreme Court found this remand order unwarranted as the Single Judge had already dealt with the merits of the challenge in great detail. The Supreme Court emphasized that remand should only be ordered in exceptional circumstances, which were not present in this case.

6. Scope of Interference under Sections 34 and 37 of the Arbitration Act
The Supreme Court reiterated that the jurisdiction under Section 34 is narrow and even more constrained under Section 37. The Appellate Court's role is to ensure that the Section 34 Court has not exceeded its jurisdiction. The Supreme Court criticized the Division Bench for not scrutinizing the findings of the learned Single Judge and instead opting for a remand. The Court highlighted the need for efficiency and cost-effectiveness in arbitral proceedings and cautioned against routine remands.

Conclusion
The Supreme Court set aside the Division Bench's remand order and restored the appeal for a fresh hearing on merits. The Court emphasized the need for brevity and efficiency in arbitral proceedings and urged all stakeholders to introspect to prevent the arbitral process from becoming inefficient and costly. The interim relief granted earlier was extended until the disposal of the remanded appeal.