No Obligation on the court to remit a matter to the Arbitral Tribunal

In a recent Supreme Court Judgement (I-Pay Clearing Services Private Limited vs ICICI Bank Limited), it was held that Section 34(4) of the Arbitration and Conciliation Act, 1996 ("the Act") can be used to record reasons for findings already produced in the award or to fill in the gaps in the award's reasoning. Additionally, the court also ruled that without findings on the contentious matters in the award, no decision may be remitted to the Arbitrator under the guise of new reasons and filling in the gaps in the reasoning.

In this matter, the appellant, I-Pay Clearing Services Private Limited, entered into an arrangement with the respondent, ICICI Bank Limited, to supply technology and handle the operations and processing of HPCL's Smart Card-based loyalty programmes. I-Pay claimed that it had incurred substantial losses as a result of the Bank's unexpected termination of the arrangement, which was the reason of a dispute between the parties. Consequently, the sole arbitrator passed an award in favour of the appellant directing the bank to pay Rs. 50,00,00,000/- (Rupees Fifty Crores) plus interest at 18 percent per annum from the date of the award till payment, as well as expenses of Rs. 50,000/- (Rupees Fifty Thousand). The Bank challenged the award before the Bombay High Court wherein it was asserted that the award in question was patently illegal since there was no finding in the award to indicate that the Bank had terminated the contract unlawfully and prematurely. The Bombay High Court, on the other hand, held that the flaw in the award could not be rectified, and so dismissed the appellant's challenge to the award. Consequently, the matter went before the Supreme Court, which had to decide whether the case can be remanded to the arbitral tribunal under Section 34(4) of the Act, considering the given facts of the case. The court here gave great importance to the difference in the meaning of 'findings' and 'reasons'. While no finding was made in this matter, Section 34(4) of the Act was entirely immaterial. It was held that the courts have the authority to grant remission under Section 34(4) only in circumstances where no reasoning is supplied for arriving at a finding or to fill in the gaps in the award's reasons.

This decision made in the matter of I-Pay Clearing Services Limited v. ICIC Bank Limited has definitely given an insight to what all need to be considered in an application made under section 34(4) of the Act. While the judgement has expounded on Sections 31, 34 (1), 34(2A) & 34(4) quite comprehensively, it has mainly established that there is no way to alter an award under Section 34(4) which can be seen as an order minimising judicial interference by some, and by some, as a missed opportunity to give the courts more power to interpret awards and prevent further delay in the settlement of such matters.

By - Arush Khanna & Bhavya Murgai