I-PAY CLEARING SERVICES PRIVATE LIMITED versus ICICI BANK LIMITED on 3 January 2022

[2022] 2 S.C.R. 893

I-PAY CLEARING SERVICES PRIVATE LIMITED

v.

ICICI BANK LIMITED

(Civil Appeal No. 7 of 2022)

JANUARY 03, 2022

[R. SUBHASH REDDY AND HRISHIKESH ROY, JJ.]

Arbitration and Conciliation Act, 1996 – s.34(4) – Arbitralaward passed by sole arbitrator pursuant to dispute between partiesbeing referred to arbitration u/s.8 over claims made by appellant –Petition filed by respondent u/s.34(1) for setting aside the award –In the same petition, Notice of Motion moved by appellant forremitting the matter to Sole Arbitrator u/s.34(4) – The Arbitratorhad framed five points for determination and point no.1 was,“Whether the contract was illegally and abruptly terminated by therespondent?” – High Court held that unless and until a finding wasrecorded on point no.1 first, the Arbitrator should not haveproceeded to record findings on the claims made by appellant, assuch, the Arbitrator committed jurisdictional error – High Courtheld that the defect in the award was not curable and accordinglydismissed the Notice of motion taken out by appellant u/s.34(4) –Propriety – Held: Proper – Merely because an application is filedu/s.34(4) by a party, it is not always obligatory on the part of theCourt to remit the matter to Arbitral Tribunal – Discretionary powerconferred u/s.34(4), is to be exercised where there is inadequatereasoning or to fill up the gaps in the reasoning, in support of thefindings which are already recorded in the award – Under guise ofadditional reasons and filling up the gaps in the reasoning, no awardcan be remitted to the Arbitrator, where there are no findings on thecontentious issues in the award – A harmonious reading of ss.31,34(1), 34(2A) and 34(4), make it clear that in appropriate cases,on request made by a party, Court can give an opportunity to thearbitrator to resume the arbitral proceedings for giving reasons orto fill up the gaps in the reasoning in support of a finding, which isalready rendered in the award – But at the same time, when it primafacie appears that there is a patent illegality in the award itself, bynot recording a finding on a contentious issue, in such cases, Court Amay not accede to the request of a party for giving an opportunityto the Arbitral Tribunal to resume the arbitral proceedings.

Judgment / Order – ‘finding’ and ‘reasons’ – Differencebetween – Held: Finding is a decision on an issue whereas reasonsare the links between the materials on which certain conclusionsBare based and the actual conclusions.

Dismissing the appeal, the Court

HELD: 1. From a reading of Section 34(4) of the Arbitrationand Conciliation Act, 1996, it is clear that on receipt of anCapplication under sub section (1), in appropriate cases on arequest by a party, Court may adjourn the proceedings for a perioddetermined by it in the order to give the Arbitral Tribunal anopportunity to resume the arbitral proceedings or to take suchother action as in the opinion of Arbitral Tribunal, will eliminatethe grounds for setting aside the arbitral award. [Para 17][904-DB-D]

Conclusion

2. When it is the specific case of the respondent that thereis no finding at all, on point no.1 viz. “whether the contract wasillegally and abruptly terminated by the respondent?”, remissionunder Section 34(4) of the Act, is not permissible. Section 34(4)Eof the Act, can be resorted to record reasons on the finding alreadygiven in the award or to fill up the gaps in the reasoning of theaward. There is a difference between ‘finding’ and ‘reasons’.Finding is a decision on an issue whereas reasons are the linksbetween the materials on which certain conclusions are basedFand the actual conclusions. In absence of any finding on pointno.1, as pleaded by the respondent and further, it is their casethat relevant material produced before the Arbitrator to prove‘accord and satisfaction’ between the parties, is not considered,and the same amounts to patent illegality, such aspects are tobe considered by the Court itself. It cannot be said that it is aGcase where additional reasons are to be given or gaps in thereasoning, in absence of a finding on point no.1 viz. “whetherthe contract was illegally and abruptly terminated by therespondent?” [Para 20][905-H; 906-A-D]

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3. Section 34(4) of the Act itself makes it clear that it is thediscretion vested with the Court for remitting the matter toArbitral Tribunal to give an opportunity to resume the proceedingsor not. The words “where it is appropriate” itself indicate that itis the discretion to be exercised by the Court, to remit the matterwhen requested by a party. When application is filed under Section34(4) of the Act, the same is to be considered keeping in mindthe grounds raised in the application under Section 34(1) of theAct by the party, who has questioned the award of the ArbitralTribunal and the grounds raised in the application filed underSection 34(4) of the Act and the reply thereto. Merely becausean application is filed under Section 34(4) of the Act by a party, itis not always obligatory on the part of the Court to remit thematter to Arbitral Tribunal. The discretionary power conferredunder Section 34(4) of the Act, is to be exercised where there isinadequate reasoning or to fill up the gaps in the reasoning, insupport of the findings which are already recorded in the award.Under guise of additional reasons and filling up the gaps in thereasoning, no award can be remitted to the Arbitrator, where thereare no findings on the contentious issues in the award. If thereare no findings on the contentious issues in the award or if anyfindings are recorded ignoring the material evidence on record,the same are acceptable grounds for setting aside the award itself.Under guise of either additional reasons or filling up the gaps inthe reasoning, the power conferred on the Court cannot berelegated to the Arbitrator. In absence of any finding oncontentious issue, no amount of reasons can cure the defect inthe award. A harmonious reading of Section 31, 34(1), 34(2A)and 34(4) of the Arbitration and Conciliation Act, 1996, make itclear that in appropriate cases, on the request made by a party,Court can give an opportunity to the arbitrator to resume thearbitral proceedings for giving reasons or to fill up the gaps inthe reasoning in support of a finding, which is already renderedin the award. But at the same time, when it prima facie appearsthat there is a patent illegality in the award itself, by not recordinga finding on a contentious issue, in such cases, Court may notaccede to the request of a party for giving an opportunity to the A

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AArbitral Tribunal to resume the arbitral proceedings. Further, asrightly contended by the respondent, that on the plea of ‘accordand satisfaction’ on further consideration of evidence, which isignored earlier, even if the arbitral tribunal wants to consciouslyhold that there was ‘accord and satisfaction’ between the parties,it cannot do so by altering the award itself, which he has alreadyBpassed. [Para 21][906-E-H; 907-A-E]

Kinnari Mullick and Anr. v. Ghanshyam Das Damani(2018) 11 SCC 328; Dyna Technologies Pvt. Ltd. v.Crompton Greaves Ltd. (2019) SCC ONLINE SC 1656and Som Datt Builders Limited v. State of Kerala (2009)C10 SCC 259 : [2009] 14 SCR 611 – distinguished.

AKN & Anr. v. ALC & Ors. (2015) SGCA 63 [Decisionof Supreme Court of Appeals] – distinguished.

Income Tax Officer, A Ward, Sitapur v. MurlidharDBhagwan Das AIR 1965 SC 342 : [1964] SCR 411 andJ. Ashoka v. University of Agricultural Sciences andOrs. (2017) 2 SCC 609 : [2016] 11 SCR 81 – reliedon.Permasteelisa Pacific Holdings Ltd. v. HyundaiEEngineering & Construction Co. Ltd. (2005) SGHC 33[Decision of Supreme Court High Court] – referredto.

CIVIL APPELLATE JURISDICTION: Civil Appeal No.7 ofG2022.

From the Judgment and Order dated 16.07.2019 of the High Courtof Judicature at Bombay in Commercial Notice of Motion No.1549 of2019 in Commercial Arbitration Petition No.190 of 2018.

Dr. Abhishek Manu Singhvi, Nakul Dewan, Sr. Advs., Prithu Garg,Ms. Harimohana N., Ms. Supragya, Ms. Ashima Chauhan, Ms. NoorenSarna, Advs. for the Appellant.

K. V. Vishwanathan, Sr. Adv., Sumit Goel, Ms. Sonal Gupta, Ms.Sreeparna Basak, Raghav Bansal, R. Venkataraman, Chanakya Dwivedi,M/s Parekh & Co., Advs. for the Respondent.

The Judgment of the Court was delivered by

R. SUBHASH REDDY, J.

1. Leave granted.

2. This appeal is filed, aggrieved by the order dated 16.07.2019passed by the High Court of Judicature at Bombay, in Commercial Noticeof Motion No.1549 of 2019 in Commercial Arbitration Petition No.190of 2018.

3. In the Commercial Arbitration Petition No.190 of 2018, filedunder Section 34 of the Arbitration and Conciliation Act, 1996 (for short‘the Act’), the respondent–ICICI Bank has challenged the award dated13.11.2017, of the learned Sole Arbitrator. By the aforesaid award, learnedArbitrator directed the respondent-ICICI Bank as under:- “a) The respondent (ICICI Bank) is ordered and directed to payto the claimant (I-pay) an amount of Rs.50,00,00,000/- (RupeesFifty Crores) together with interest thereon to be calculated atthe rate of 18% per annum as from the date of award till paymentor realization, whichever is earlier;

b) The respondent (ICICI Bank) is ordered and directed to pay tothe claimant (I-pay) Rs.50,000/- (Rupees Fifty Thousand) as coston the application under Section 16 made before this ArbitralTribunal.”

4. In the petition, filed by the respondent-ICICI Bank under Section34(1) of the Act, it has taken out Notice of Motion No.550 of 2018seeking interim order to stay the effect, operation, implementation andexecution of the award dated 13.11.2017, passed by the learnedArbitrator. In the same petition, the appellant/I-Pay has taken out Notionof Motion No.1549 of 2019, under Section 34(4) of the Act, seekingdirections to adjourn the proceedings for a period of three months orsuch other time as may be determined by the Court, and direct the learned A

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AArbitrator to issue appropriate directions/ instructions / additional reasonsand / or to take such necessary and appropriate action. The High Courtby a common order, has passed the conditional order in the Notice ofMotion taken out by the respondent and dismissed the Notice of MotionNo.1549 of 2019, taken out by the appellant herein, under Section 34(4)of the Act. Aggrieved by the order of dismissal, dismissing the Notice ofBMotion No.1549 of 2019 filed under Section 34(4) of the Act, this Appealis filed.

5. The appellant is a Private Limited Company incorporated underCompanies Act, 1956 and is in the business of providing cardpersonalization, transaction and reconciliation management for SmartCCard based loyalty programs, for which they have an operations facilityat Mumbai, with operational hubs in various cities. The respondent–ICICI Bank is a company incorporated under the Companies Act, 1956,is licensed under Banking Regulations Act, 1949 and carries on thebusiness of providing banking facilities, retail financial assistance andDrelated activities. The HPCL (Hindustan Petroleum Corporation Limited)which was originally impleaded as Defendent No.2 in the Suit, is a PublicSector Company, which is engaged in refining and selling petroleumproducts through their retail outlets all over India.

6. It is the case of the appellant that it has entered into anEagreement with the respondent on 04.11.2002 to provide technology andmanage the operations and processing of the Smart Card based loyaltyprograms for HPCL. It was for HPCL, which was to improve fuel salesat their retail outlets. The appellant was required to develop varioussoftware application packages for management of Smart Card basedloyalty programs. The said agreement was followed by anotherFagreement dated 04.02.2003, as per which, the appellant was to developa software for postpaid Smart Card Loyalty Program akin to a CreditCard under the name “Drive Smart Software”. It is the case of theappellant that to further expand their customer base, the respondentherein, requested the appellant to also develop a “Drive Track FleetGCard” management solution for the fleet industry and requested by letterdated 10.12.2003 to treat it as an extension for the Service ProviderAgreement and appointed the appellant for that purpose and it was namedas “Drive Track Program”.

7. It is the grievance of the appellant that in view of sudden moveHby the Respondent herein, in abruptly terminating the Service Provider Agreement dated 04.11.2002, it has suffered losses of over Rs.50 crores,on account of loss of jobs of its employees, losses on account of employeeretrenchment compensation, etc. It is also their case that on account ofsudden termination of the agreement all its operations were paralyzed.The appellant made a total claim of Rs.95 crores against the respondent.At first instance, a suit was filed in O.S. No.1094 of 2012 on its OriginalCivil Jurisdiction in the High Court of Judicature at Bombay. As therewas a clause in the Agreement for arbitration, the High Court has referredthe dispute to arbitration under Section 8 of the Act by appointing Mr.Justice R.G. Sindhakar (Retd.) as a Sole Arbitrator for resolving thedispute between the parties.

8. Mr.Justice R.G.Sindhakar (Retd.), who was appointed as SoleArbitrator, has passed award dated 13.11.2017, directing the respondentherein, to pay to the appellant – claimant an amount of Rs.50,00,00,000/- (Rupees Fifty Crores) together with interest @18% per annum fromthe date of award till payment and further directed to pay an amount ofRs.50,000/- (Rupees Fifty Thousand) towards the costs.

9. Aggrieved by the award of learned Sole Arbitrator, therespondent–ICICI Bank has filed application under Section 34(1) of theAct for setting aside the award. In the said application, it is the case ofthe respondent that there was accord and satisfaction between the partiesand the contractual obligations between the parties was closed mutuallyand amicably. Reliance is placed on the letter dated 01.06.2010, whichwas signed by both the parties recording the terms of closure of thecontract entered between the parties and other communications. Theaward of the learned Arbitrator was mainly questioned on the groundthat it suffers from patent illegality, inasmuch as there is no findingrecorded in the award to show that the respondent-ICICI Bank hasillegally and abruptly terminated the contract. The learned Arbitratorhas framed five points for determination and Point No.1 was, “Whetherthe contract was illegally and abruptly terminated by therespondent?”. The main ground in the application filed under Section34(1) of the Act by the Respondent, is that the learned Arbitrator withoutrecording any finding on Point No.1, has awarded Rs.50 crores to theappellant/I-Pay. It is pleaded in the application that the award of theArbitrator does not reveal the exact nature of the purported breach andthe date of alleged termination. It is the case of the respondent thatwithout addressing the vital issue viz. whether there was an illegal and A

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Aabrupt termination of the contract or not, as pleaded, the learned Arbitratorhas allowed the claim to the extent of Rs.50 crores, as such, the same ispatently illegal and erroneous.

10. In the arbitration petition filed by the respondent, the appellant/I-Pay has taken out Notice of Motion under Section 34(4) of the Act, forBadjourning the proceedings for a period of three months by directing thelearned Arbitrator to issue appropriate directions/ instructions / additionalreasons and / or to take such necessary and appropriate action. In theimpugned order, the High Court has prima facie found that unless anduntil a finding is recorded on point no.1 first, the learned Arbitrator couldnot have proceeded to record findings on the claims made by the appellant,Cas such, the learned Arbitrator has committed jurisdictional error.

The High Court was of the view that the defect in the award isnot curable, as such, there is no merit in the application filed by theappellant under Section 34(4) of the Act and dismissed the same.

D11. We have heard Dr. Abhishek Manu Singhvi and Mr. NakulDewan, learned Senior Counsels appearing for the appellant/I-Pay andMr. K.V.Vishwanathan, learned Senior Counsel appearing for therespondent–ICICI Bank.

12. By impugned order, the Notice of Motion moved by theEappellant for remitting the matter to the Sole Arbitrator under Section34(4) of the Act, has been rejected. It is the case of the appellant thatthough the Arbitrator has awarded compensation/damages in view ofthe case of the appellant that the contract between the parties was illegallyand abruptly terminated by the respondent, but he has not recordeddetailed reasons on the said point. On the other hand, it is the case of theFrespondent, that there was full accord and satisfaction between theparties, as such, appellant is not entitled for any compensation/damages,as claimed for. To prove the case that there was ‘accord and satisfaction’between the parties, the respondent has filed certain communicationsbetween the parties including letter dated 01.06.2010. It is the contentionGof Dr.Abhishek Manu Singhvi, learned senior counsel appearing for theappellant, that though the issue was resolved by the Arbitrator by holdingthat there was no accord and satisfaction between the parties, however,he has omitted to give adequate reasons in support of point no.1. Thus, itis pleaded that in view of settled legal position that lack of reasons orgaps in the reasoning, is a curable defect under Section 34(4) of the Act,H

award can be remitted to the arbitrator to give reasons. In support ofsaid plea that lack of reasons or gaps in reasoning in the award of theArbitrator is a curable defect, reliance is placed on the judgments of thisCourt, in the cases of Kinnari Mullick and Anr. v. Ghanshyam DasDamani[1], Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd.[2]and also in Som Datt Builders Limited v. State of Kerala[3]. It is submittedthat the language of Section 34(4) of the Act, is couched in very wideterms and provides for remission of the matter to enable the Arbitratorto take such steps, as may be necessary for elimination of grounds forsetting aside the award. It is submitted, though there is sufficient evidencein support of the point no.1, the Arbitrator has not given adequate reasonsin support of the said point in the award. It is pleaded that Section 34(4)of the Act is based on the Article 34(4) of UNCITRAL Model Law onInternational Commercial Arbitration, which came up for considerationbefore the Singapore Court of Appeals in the case of AKN & Anr. v.ALC & Ors.[4], wherein, it was held that remission is a ‘curative alternative’to setting aside the award. Reference is also made to the judgment ofSingapore High Court in the case of Permasteelisa Pacific HoldingsLtd. v. Hyundai Engineering & Construction Co. Ltd.[5].

13. Shri Nakul Dewan, learned senior counsel for the appellant,supplementing the arguments, has submitted that the power to remitwas conceived of as an alternative to setting aside the award. It issubmitted that categorical statutory aim of sending a matter back to theArbitral Tribunal for remission, is to eliminate defects which wouldpreserve the award. Thus, it is submitted that all the defects in an arbitralaward, which are capable of being remedied, ought to be addressed inremission proceedings, if an application under Section 34(4) of the Act isfiled. Again referring to the judgment of this Court in the case of DynaTechnologies Pvt. Ltd. v. Crompton Greaves Ltd.[2], learned seniorcounsel has submitted that the provision under Section 34(4) of the Actcan be utilised in cases where the arbitral award does not provide anyreasoning or if the award has some gaps in the reasoning. Learned seniorcounsels, with the above submissions, requested to set aside the impugned 1 (2018) 11 SCC 328

2 (2019) SCC ONLINE SC 1656

3 (2009) 10 SCC 259

4 (2015) SGCA 63

5 (2005) SGHC 33

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Aorder and to issue directions for remitting the award to Arbitral Tribunalfor consideration of the issue, on abrupt and illegal termination of theagreement entered between the parties and to give detailed reasons.

14. On the other hand, Shri K.V. Vishwanathan, learned seniorcounsel for the respondent has made following submissions:B

The Notice of Motion moved by the appellant is dismissed by theHigh Court by assigning valid reasons in the impugned order and in viewof the same, no interference is called for. No grounds are made out inthe application filed by the appellant for remitting the matter to theArbitrator, and in fact, the Arbitrator has not considered the relevantCdocumentary evidence produced on behalf of the respondent, and passedthe award. As the Arbitrator has passed the award by ignoring importantand relevant evidence on record, it suffers from perversity and patentillegality, which cannot be cured on remittal under Section 34(4) of theAct by the Arbitrator. Under guise of adding reasons, the ArbitratorDcannot take contrary view against the award itself. The Arbitrator inresumption proceedings cannot change his award and the same wouldbe contrary to provision under Section 34(4) of the Act and would amountto Arbitrator assuming the role of the Court, which alone is empoweredto set aside the award. It is submitted that in spite of sufficient evidenceon record to prove that there was ‘accord and satisfaction’ between theEparties, without considering such evidence, the Arbitrator has proceededon the premise that there was no ‘accord and satisfaction’ and passedthe award in favour of the appellant. The findings recorded on the pleaof ‘accord and satisfaction’ in the award without considering the entireevidence on record, constitute patent illegality, as such, same is to beFconsidered only by the Court while considering the application filed underSection 34(1) of the Act. Even assuming that on remittal, the Arbitratorwants to consciously hold that there was accord and satisfaction of claimsand there was no abrupt and illegal termination of the contract, he wouldnot be able to do so, as he cannot change his own award. The Judgmentsrelied on by learned counsel for the appellant are distinguishable on factsGand would not render any support to the case of the appellant. Oralsubmissions made before this Court, run contrary to pleadings on recordin the application.

15. To differentiate between ‘findings’ and ‘reasons’, learned seniorcounsel Mr. K. V. Vishwanathan relied on the judgment of this Court inH

the case of Income Tax Officer, A Ward, Sitapur v. MurlidharBhagwan Das[6]. It is also submitted that the Notice of Motion moved bythe appellant under Section 34(4) of the Act, is belated and afterthoughtand is made only to protract the litigation, and prayed for dismissal of theappeal.

16. Before we consider the various submissions made on behalfof both sides, we need to notice certain relevant provisions of theArbitration and Conciliation Act, 1996. Section 31 of the Act deals with‘form and contents of arbitral award’. As per the same, an arbitral awardshall be made in writing and shall be signed by the members of theArbitral Tribunal. The arbitral award shall state the reasons, upon whichit is based, unless parties agree that no reasons are to be given, or theaward is an arbitral award on agreed terms under Section 30 of the Act.Chapter VII of the Act provides recourse against arbitral award. Therecourse to a Court against an arbitral award is to be in terms of Section34(1) of the Act. As per Section 34(2A) of the Act, if the arbitral awardarising out of arbitrations other than international commercial arbitrations,is vitiated by patent illegality, same is a ground for setting aside the award.Sections 34(2A),(3) & (4) of the Act, read as under:

“34.(2A) An arbitral award arising out of arbitrations other thaninternational commercial arbitrations, may also be set aside bythe Court, if the Court finds that the award is vitiated by patentillegality appearing on the face of the award:

Provided that an award shall not be set aside merely on theground of an erroneous application of the law or by reappreciationof evidence.

(3) An application for setting aside may not be made after threemonths have elapsed from the date on which the party makingthat application had received the arbitral award or, if a requesthad been made under section 33, from the date on which thatrequest had been disposed of by the arbitral tribunal; Provided that if the Court is satisfied that the applicationwas prevented by sufficient cause from making the applicationwithin the said period of three months it may entertain theapplication within a further period of thirty days, but not thereafter.

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A(4) On receipt of an application under sub-section (1), the Courtmay, where it is appropriate and it is so requested by a party,adjourn the proceedings for a period of time determined by it inorder to give the arbitral tribunal an opportunity to resume thearbitral proceedings or to take such other action as in the opinionof arbitral tribunal will eliminate the grounds for setting aside theBarbitral award.”

17. From a reading of Section 34(4) of the Act, it is clear that onreceipt of an application under sub-section (1), in appropriate cases on arequest by a party, Court may adjourn the proceedings for a perioddetermined by it in the order to give the Arbitral Tribunal an opportunityCto resume the arbitral proceedings or to take such other action as in theopinion of Arbitral Tribunal, will eliminate the grounds for setting asidethe arbitral award.

18. It is the case of the appellant that in view of abrupt and illegaltermination of agreement by the respondent, it has suffered losses ofDmore than Rs.50 crores as all operations were paralysed, and the appellanthad to pay its employees retrenchment compensation, etc. On theaforesaid grounds, a total claim of Rs.95 crores was made against therespondent. On the other hand, it is the case of the respondent that therewas ‘accord and satisfaction’ between the parties and the same is evidentEfrom several letters, which are part of record in the arbitrationproceedings. Reliance is placed on the documentary evidence i.e. lettersdated 01.06.2010, 17.06.2010, email dated 02.08.2010 and letters dated08.11.2010 & 20.01.2011. It is the specific case of the respondent thatlearned Arbitrator failed to appreciate such evidence, which wouldestablish their case that there was accord and satisfaction between theFparties and there was no abrupt termination or any breach on their part.It is their case that in view of such omission to consider vital evidence onrecord, findings recorded by the Arbitrator are perverse and constitutepatent illegality within the meaning of Section 34(2A) of the Act. TheNotice of Motion filed under Section 34(4) of the Act by the appellant,Gclearly states that the said Motion was moved as an abundant precautionand they are seeking remission to the Arbitrator to provide detail andexpress reasons in addition to reasons already stated in the arbitral awarddated 13.11.2017. It is also their case that it is essential that additionalreasons are made available by learned Arbitrator in support of his findingsrecorded in the award. On the other hand, it is the case of the respondent,H

that there is no finding at all, on the issue viz. “whether the contract wasillegally and abruptly terminated by the respondent?”, and in spite of thesame, the Arbitrator without considering the important documents/communications between the parties, which throw light on accord andsatisfaction between the parties, has proceeded to pass the award statingthat there was no ‘accord and satisfaction’.

19. As contended by learned senior counsel for the appellant, it istrue that Section 34(4) of the Act is couched in a language, similar toArticle 34(4) of the UNCITRAL Model Law on InternationalCommercial Arbitration. In the case of AKN & Anr. v. ALC & Ors.[4],by considering legislative history of the Model Law, it was held bySingapore Court of Appeals that remission is a ‘curative alternative’. Inthe case of Kinnari Mullick and Anr. v. Ghanshyam Das Damani[1],relied on by learned senior counsel for the appellant, the question whichfell for consideration was whether Section 34(4) of the Act empowersthe Court to relegate the parties before the Arbitral Tribunal after settingaside the arbitral award, in absence of any application by the parties. Infact, in the said judgment, it is held that the quintessence for exercisingpower under Section 34(4) of the Act is to enable the Tribunal to takesuch measures which can eliminate the grounds for setting aside thearbitral award, by curing the defects in the award. In the judgment in thecase of Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd.[2], itwas a case where there was no inquiry under Section 34(4) of the Actand in the said case, this Court has held that the legislative intentionbehind Section 34(4) of the Act, is to make the award enforceable, aftergiving an opportunity to the Tribunal to undo the curable defects. It wasnot a case of patent illegality in the award, but deficiency in the awarddue to lack of reasoning for a finding which was already recorded in theaward. In the very same case, it is also clearly held that when there is acomplete perversity in the reasoning, then the same is a ground tochallenge the award under Section 34(1) of the Act. The case of SomDatt Builders Limited v. State of Kerala[3] is also a case where noreasons are given for the finding already recorded in the award, as such,this Court held that in view of Section 34(4) of the Act, the High Courtought to have given Arbitral Tribunal an opportunity to give reasons.

20. The aforesaid case law cited by the learned counsel appearingfor the appellant, is distinguishable on facts and would not render anyassistance in this case. When it is the specific case of the respondent A

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Athat there is no finding at all, on point no.1 viz. “whether the contractwas illegally and abruptly terminated by the respondent?”, remissionunder Section 34(4) of the Act, is not permissible. In our view, Section34(4) of the Act, can be resorted to record reasons on the finding alreadygiven in the award or to fill up the gaps in the reasoning of the award.There is a difference between ‘finding’ and ‘reasons’ as pointed out byBthe learned senior counsel appearing for the respondent in the judgmentin the case of Income Tax Officer, A Ward, Sitapur v. MurlidharBhagwan Das[6]. It is clear from the aforesaid judgment that ‘finding is adecision on an issue’. Further, in the judgment in the case of J. Ashoka

v. University of Agricultural Sciences and Ors.[7], this Court has heldCthat ‘reasons are the links between the materials on which certainconclusions are based and the actual conclusions’. In absence of anyfinding on point no.1, as pleaded by the respondent and further, it is theircase that relevant material produced before the Arbitrator to prove‘accord and satisfaction’ between the parties, is not considered, and thesame amounts to patent illegality, such aspects are to be considered byDthe Court itself. It cannot be said that it is a case where additional reasonsare to be given or gaps in the reasoning, in absence of a finding on pointno.1 viz. “whether the contract was illegally and abruptly terminated bythe respondent?”

21. Further, Section 34(4) of the Act itself makes it clear that it isEthe discretion vested with the Court for remitting the matter to ArbitralTribunal to give an opportunity to resume the proceedings or not. Thewords “where it is appropriate” itself indicate that it is the discretion tobe exercised by the Court, to remit the matter when requested by aparty. When application is filed under Section 34(4) of the Act, the sameFis to be considered keeping in mind the grounds raised in the applicationunder Section 34(1) of the Act by the party, who has questioned theaward of the Arbitral Tribunal and the grounds raised in the applicationfiled under Section 34(4) of the Act and the reply thereto. Merely becausean application is filed under Section 34(4) of the Act by a party, it is not always obligatory on the part of the Court to remit the matter to ArbitralGTribunal. The discretionary power conferred under Section 34(4) of theAct, is to be exercised where there is inadequate reasoning or to fill upthe gaps in the reasoning, in support of the findings which are alreadyrecorded in the award. Under guise of additional reasons and filling up H7 (2017) 2 SCC 609

I-PAY CLEARING SERVICES PRIVATE LIMITED v. ICICI BANKLIMITED [R. SUBHASH REDDY, J. ]

the gaps in the reasoning, no award can be remitted to the Arbitrator,where there are no findings on the contentious issues in the award. Ifthere are no findings on the contentious issues in the award or if anyfindings are recorded ignoring the material evidence on record, the sameare acceptable grounds for setting aside the award itself. Under guise ofeither additional reasons or filling up the gaps in the reasoning, the powerconferred on the Court cannot be relegated to the Arbitrator. In absenceof any finding on contentious issue, no amount of reasons can cure thedefect in the award. A harmonious reading of Section 31, 34(1), 34(2A)and 34(4) of the Arbitration and Conciliation Act, 1996, make it clearthat in appropriate cases, on the request made by a party, Court can givean opportunity to the arbitrator to resume the arbitral proceedings forgiving reasons or to fill up the gaps in the reasoning in support of afinding, which is already rendered in the award. But at the same time,when it prima facie appears that there is a patent illegality in the awarditself, by not recording a finding on a contentious issue, in such cases,Court may not accede to the request of a party for giving an opportunityto the Arbitral Tribunal to resume the arbitral proceedings. Further, asrightly contended by the learned counsel appearing for the respondent,that on the plea of ‘accord and satisfaction’ on further consideration ofevidence, which is ignored earlier, even if the arbitral tribunal wants toconsciously hold that there was ‘accord and satisfaction’ between theparties, it cannot do so by altering the award itself, which he has alreadypassed.

22. For the foregoing reasons, we do not find any merit in thisappeal so as to interfere with the impugned order passed by the HighCourt. Accordingly, this Civil Appeal is dismissed, with no order as tocosts.

Bibhuti Bhushan Bose

Appeal dismissed.

(Assisted by : Neha Sharma, LCRA)

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