SECTION 29A

CHIEF ENIGNEER V P SHIRODHKAR

Issue: Appointment of Arbitrator under Section 29A?

District Judge appointed arbitrator on application by one party under Section 29-A since
arbitrator retired before passing award owing to superannuation. The party responsible for
appointing the arbitrator did not do so in due time. However, it appointed a sole arbitrator during
the pendency of application in front of District Judge. Now the order of DJ is under Challenge.

Held: Appointment of Arbitrator by the DJ’s order under Section 29-A was valid since clause 4
gives power of substitution on termination of term for passing the award.

AWARD CHALLENGE, ENFORCEMENT

Associate Builders v DDA

STATE OF ARUNACHAL PRADESH V DAMINI INDUSTRIES LIMITED

Facts: A review petition was filed by the party against the interim award of the Arbitrator and
again a challenge was filed to the execution of the Award by the same party. There was delay in
filing of application under Section 34.

Held: Since, the reply given by the arbitrator wrt the review application does not give any
fresh cause of action to the appellant so as to move an application under Section 34 (3) of the
Act. In fact, when the award dated 12.10.2003 was passed the only option with the appellant
was either to have moved an application under Section 34 within three months as required
under sub-section (3) of Section 34 or within the extended period of another 30 days. But in
stead of that a totally misconceived application was filed and there too the prayer was for
review and with regard to mode of payment. The question of review was totally
misconceived as there is no such provision in the Act for review of the award by the
arbitrator and the clarification sought for as to the mode of payment is not contemplated
under Section 33 of the Act. Therefore, in this background, the application was totally
misconceived and the reply sent by the arbitrator does not entitle the appellant a fresh cause
of action so as to file an application under Section 34(3) of the Act, taking it as the starting
point of limitation from the date of reply given by the arbitrator i.e. 10.4.2004.

INTERIM AWARD SECTION 31(6)

IFFCO

The question as to what constitutes an ‗interim award' was settled by a recent judgment of
the Supreme Court in Indian Farmers Fertilizer Co- Operative Limited v. Bhadra Products,
2018 (1) Arb. LR 271 (SC) wherein the Supreme Court has observed as under:

"........................................
7. The point at issue is a narrow one: whether an award on the issue of limitation can first be
said to be an interim award and, second, as to whether a decision on a point of limitation
would go to jurisdiction and, therefore, be covered by Section 16 of the Act.
8. As can be seen from Section 2(c) and Section 31(6), except for stating that an arbitral
award includes an interim award, the Act is silent and does not define what an interim award
is. We are, therefore, left with Section 31(6) which delineates the scope of interim arbitral
awards and states that the arbitral tribunal may make an interim arbitral award on any matter
with respect to which it may make a final arbitral award.
9. The language of Section 31(6) is advisedly wide in nature. A reading of the said sub-
section makes it clear that the jurisdiction to make an interim arbitral award is left to the
good sense of the arbitral tribunal, and that it extends to ―any matter‖ with respect to which
it may make a final arbitral award. The expression ―matter‖ is wide in nature, and subsumes
issues at which the parties are in dispute. It is clear, therefore, that any point of dispute
between the parties which has to be answered by the arbitral tribunal can be the subject
matter of an interim arbitral award. However, it is important to add a note of caution. In an
appropriate case, the issue of more than one award may be necessitated on the facts of that
case. However, by dealing with the matter in a piecemeal fashion, what must be borne in
mind is that the resolution of the dispute as a whole will be delayed and parties will be put to
additional expense. The arbitral tribunal should, therefore, consider whether there is any real
advantage in delivering interim awards or in proceeding with the matter as a whole and
delivering one final award, bearing in mind the avoidance of delay and additional expense.
Ultimately, a fair means for resolution of all disputes should be uppermost in the mind of the
arbitral tribunal.
10. To complete the scheme of the Act, Section 32(1) is also material. This section goes on
to state that the arbitral proceedings would be terminated only by the final arbitral award, as
opposed to an interim award, thus making it clear that there can be one or more interim
awards, prior to a final award, which conclusively determine some of the issues between the
parties, culminating in a final arbitral award which ultimately decides all remaining issues
between the parties. .....................................

CINEVISTAAS

Whether the order of the Arbitrator constituted an 'award' that could be challenged under S.
34 of the Act which deals with applications for setting aside arbitral awards.
Under S. 2(1)(c) of the Act, an award includes an interim award. The Delhi High Court held that
the decision as to whether an order constitutes an interim award or not is to be made based on the
nature of order and not the title of the application. The Court ruled that the Arbitrator's rejection
of the proposed amendments by holding that the same were barred by limitation, amounted to a
final adjudication insofar as additional amounts that were sought to be claimed were concerned.
Thus, there is a finality attached to the award and there is nothing in the final award that would
be dealing with these claims. For this reason, the Court held that the impugned order is not just
an interim award, but also rejection of certain substantive claims finally.

Accordingly, it was held that the petition under S. 34 was maintainable and the claims sought to
be added by the Petitioner to its statement of claims were not barred by limitation. The Court
directed the arbitral tribunal to take the amended claims petition on record and adjudicate the
claims in accordance with law in a time bound manner.

“If there is "formal adjudication which conclusively determines‖, it would be a judgment. A final
judgment would either `dismiss or decree in part or in full'. Preliminary judgments are those that
decide finally, preliminary issues such as jurisdiction, res judicata, etc. Interlocutory judgments
are enumerated in Order XLIII Rule 1. Apart from those enumerated in the CPC, such judgments
would include those which possess ―characteristics and trappings of finality‖. If a ―valuable
right‖ is lost, it would be an interlocutory judgment. If the order is ―routine in nature‖, it would
not constitute a judgment. Allowing an amendment which takes away a vested right of the
Defendant, would constitute a judgment.”

ONGC

Issue:  impugned order only rejects OPaL’ s application for placing additional documents on
record. Whether such order is interim award and can be challenged under Section 34?

Held: Para 13 of Indian KAnoon, cited Cinevistass and IFFCO and distingusihed

In the present case, the impugned order does not decide or finally dispose of any issue. Dr.
Singhvi has attempted to overcome the objection of maintainability by focusing on the
question of finality of the decision. He has also relied upon certain decisions to contend that
the right to lead evidence is a valuable right and is inherently related to due process and
fairness in proceedings. There may not be much quarrel on this proposition in law, however,
the Court has to be mindful of the fact that the order impugned in the present petition is
nothing but a procedural order. The Arbitral Tribunal while passing such procedural order
may determine certain valuable rights of the parties. However, it does not mean that such
determination renders an order to be an award within the meaning of Section 2 (1) (c) of the
Act. The determination of a valuable right in any legal proceedings would not necessarily
result in an immediate actionable right. In order to ascertain whether an order is an interim
award or partial award, the two most important factors that would weigh upon the Court are
the concept of "finality" and "issue". If the nature of the order is "final" in a sense that it
conclusively decides an issue in the arbitration proceedings, the order would qualify to be an
interim award. This is not the situation in the present case. The impugned order only
rejects OPaL‟s application for placing additional documents on record. It does not
decide an issue or the subject matter of adjudication between the parties. The arbitral
tribunal has only decided the question as to whether the Petitioner would be permitted to file
additional documents at a later stage. The order impugned though conclusively determines
the application, however, it cannot be said that the subject matter of arbitration and the rights
of the parties in respect thereof have been finally determined. One cannot ignore the fact
there is no provision under the Act that permits OPaL to challenge a procedural order
passed by the Arbitral Tribunal. For an order to qualify as an "award", the test of
finality is undoubtedly essential, but that does not mean that any final view of the
Arbitral Tribunal would come within the ambit of an "award". Under the current
scheme of the Act, the intent is clear that procedural matters be left for the Arbitral Tribunal
to decide. The crux of the matter regarding the question of maintainability cannot be clouded
by reasons and grounds that touch upon matters of merits. I also cannot see any opening
granted by the Court in Cinevistaas (supra) that can be widened to allow this petition, no
matter how strong the case may be on merits.

Whether the impugned order is amenable to challenge under   section 34  of the Act?

14. Since the impugned order is not an interim award, there cannot possibly be any ground to
challenge the same under Section 34 of the Act. Thus, the Court is not really required to go
into the merits of the impugned order. 

KINNARI MULLICK V GHANSHYAM DAS DAMANI

INTERPRETATION OF "PUBLIC POLICY" U/S 34 OF THE ARBITRATION AND

Associate Buidlers and SSayong

Arbitration is an alternative system of dispute resolution. The system follows the mandate of
"minimal court intervention" and Courts can interfere in the arbitral process only under the
limited grounds provided under the Arbitration and Conciliation Act, 1996. One such provision,
section 34 provides grounds on which an arbitral award can be set aside by the Court. Section
34 (2)(b)(ii) states that a Court may set aside an arbitral award if it finds that the award is in
conflict with the public policy of India. Explanation 1 of S. 34(b) states three criteria on which an
award could be overturned on the ground of public policy – when the award was induced by
fraud, corruption or in violation S. 75 or S. 81; or it is against the fundamental policy of Indian
Law; or it is in contrast with the most basic notions of morality and justice. The second and third
grounds are vague and are susceptible to being interpreted too widely. Accordingly, a number of
Supreme Court judgments had widened the scope of interpretation of public policy. In 2015,
section 34 for amended in order to restrict the scope of"Public Policy."

Wide Interpretation in ONGC v. SAW PIPES

The Supreme Court, in the case of Renusagar Power Co. Ltd. v General Electric Co1, held that
an award against public policy would be an award that was passed in contravention of "(i)
fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality". In 2003,
the scope of interpretation of public policy was significantly widened in ONGC Ltd v Saw Pipes
Ltd.2 The Court held that in case of an application u/s 34 to set an award aside, the role of the
Court was similar to an appellate/revision court, therefore, it had wide powers. Further, the
Court also added a new ground – patent illegality to the grounds enumerated in Renusagar
Power Co. Ltd; under which the arbitral award could be set aside.
"Therefore, in our view, the phrase 'Public Policy of India' used in Section 34 in context is
required to be given a wider meaning. It can be stated that the concept of public policy connotes
some matter which concerns public good and the public interest. What is for public good or in
public interest or what would be injurious or harmful to the public good or public interest has
varied from time to time. However, the award which is, on the face of it, patently in violation of
statutory provisions cannot be said to be in public interest. Such award/judgment/decision is
likely to adversely affect the administration of justice."

This opened a floodgate of litigation under S. 34 as every award where there was an alleged
error of application statutory provisions could now be challenged.

Wide Interpretation in ONGC v. WESTERN GECO

Further expansion of the interpretation of "public policy" was given in the Apex Court Judgment
of ONGC Ltd v Western GECO Ltd.3 Here, a three-judge bench of the Supreme Court cited
the Saw Pipes Case, and noted that the judgment was silent on the meaning of "fundamental
policy of Indian Law". The Court went on to interpret "fundamental policy of Indian Law" to
comprise of three separate heads – "duty (of the tribunal) to adopt a judicial approach",
"adhering to the principles of natural justice (by the tribunal)" and that the decision of the tribunal
must not be "perverse or so irrational that no reasonable person would have arrived at the
same" – thereby further expanding the scope of "Public Policy", as each of these heads could
then be a subject of a challenge. In addition, the Court also held that the award of the arbitral
tribunal resulted in a miscarriage of justice, the award could be set aside, or even modified to
the extent the offending part was not severable.

Thus, not only did this judgment further leave it open to the Courts to examine arbitral awards
based on merits, it also stated that under the head of "fundamental policy of India Law" it would
be open to Courts to modify the arbitral award as well. This would thus defeat the purpose of
arbitration and reduce trust in the arbitral process.

INTERPRETATION OF MORALITY AND JUSTICE IN ASSOCIATE

Further, in Associate Builders v Delhi Development Authority4 the Supreme Court also clarified
the scope of interpretation of most basic notions of morality and justice. Accordingly, an award
could be set aside under the ground of justice when the "award" would be such that it would
shock the conscience of the Court. Further, an award against morality was considered to be
something that was against the mores of the day that would shock the conscience of the Court.

CHANGES MADE BY THE 2015 AMENDMENT

The Arbitration and Conciliation (Amendment) Act, 2015 made major changes to section 34.
The changes were suggested by the 246th Report of the Law Commission of India on
Amendments to the Arbitration and Conciliation Act, 1996 of August 2014 and the
Supplementary to the 246th Report of the Law Commission of India on Amendments to the
Arbitration and Conciliation Act, 1996 of February 2015. These changes were aimed at
restricting Courts from interfering with arbitral awards on the ground of "public policy."
Accordingly, the amendment added "Explanation 2" to section 34(2) as well as Section 2A.
Explanation 2 of section 34(2) states –

"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."

Thus, this explanation significantly curtailed the scope of interpretation supplied in ONGC v
Western GECO. Because of this amendment, Courts would no longer be able to interfere with
the award passed by the arbitrator. The explanation makes it especially clear that in no way
would a Court be entailed to review the award on merits of the dispute. Similarly, section 2A
also curtails the scope of interpretation of "patently illegal" as propounded in ONGC v Saw
Pipes. Section 2A states –

"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 vitiate 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 law or by reappreciation of evidence."

Thus, Courts can no longer reappraise evidence or set aside awards merely because the
Arbitral Tribunal has made errors when dealing with the same. It is interesting to note that the
amendment did not make any changes to the interpretation of "justice and morality" as
explained in Associate Builders.

Recent Trends in Interpretation of "Public Policy"

Since the amendment, Courts have refrained from giving a wide interpretation to "public policy"
or interfering with the merits of the case. In the November2017 Supreme Court Judgment of
Venture Global Engineering LLC and Ors v Tech Mahindra Ltd. and Ors5 the Court observed –

"The Award of an arbitral Tribunal can be set aside only on the grounds specified in Section 34
of the AAC Act and on no other ground. The Court cannot act as an Appellate Court to examine
the legality of Award, nor it can examine the merits of claim by entering in factual arena like an
Appellate Court."

A similar view was also taken in the judgment of Sutlej Construction v. The Union Territory of
Chandigarh. 6

These judgments show that the recent trend of interpretation of "public policy" has been one
where the Courts have refused to examine the arbitral awards on merits, thereby upholding the
legislative mandate of "minimal intervention of the Courts in the arbitral process" as reflected by
the changes brought by the Arbitration and d Conciliation (Amendment) Act, 2015.