High Court of Judicature at Bombay Partly Allows Appeal Under Arbitration Act; Confirms Setting Aside of Award for Non-Application of Specific Relief Act, 1963, but Finds Remand to Arbitrator Impermissible. Arbitrator Failed to Consider Readiness and Willingness Under Section 16(c) of Specific Relief Act, 1963, Rendering Award Patently Illegal; However, Court Cannot Remit After Setting Aside Award in Absence of Party Application Under Section 34(4).

Arbitration appeal under Section 37(1)(c) against order setting aside an arbitration award under Section 34 of the Arbitration and Conciliation Act, 1996, and remanding the matter for fresh arbitration.

The appellant sought to have the order of the District Court set aside and the arbitration award restored.

The appellant contended that the District Court wrongly found lack of sufficient opportunity and failure to consider readiness and willingness, and that remand was impermissible.

The sole arbitrator passed an award in favor of the appellant. The District Court set aside that award and remanded the proceedings for fresh adjudication.

Whether the District Court erred in finding that the arbitrator did not grant sufficient opportunity to the respondent to present its case, justifying setting aside under Section 34(2)(a)(iii) of the Arbitration and Conciliation Act, 1996? Whether the award was patently illegal for non-compliance with the substantive law, i.e., the Specific Relief Act, 1963, particularly Section 16(c) regarding readiness and willingness? Whether the District Court had the power to remand the matter to the arbitrator after setting aside the award, in light of Section 34(4) of the Arbitration and Conciliation Act, 1996?

The appellant argued that the arbitrator provided sufficient opportunity; the respondent deliberately chose not to contest. The scope of interference under Section 34 is limited, and the grounds raised were false. The Court erred in holding that readiness and willingness were not considered and in observing that the arbitrator could not direct sale without cancelling a prior sale deed. The appellant contended that there is no power to remand proceedings to the arbitrator after setting aside the award, relying on Kinnari Mullick v. Ghanshyam Das Damani and other precedents. The respondent, though served, did not contest the appeal.

1. An arbitration award that fails to apply the mandatory provisions of the Specific Relief Act, 1963, particularly the requirement of readiness and willingness under Section 16(c), is patently illegal and can be set aside under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996, as the arbitrator is bound under Section 28(1)(a) to decide in accordance with substantive Indian law. 2. The power of remission under Section 34(4) of the Arbitration and Conciliation Act, 1996, can be exercised only upon a written request by a party before the award is set aside. The court cannot suo motu remand the matter to the arbitrator after setting aside the award; such a direction is impermissible and must be set aside.

From the aforesaid it is clear that sufficient opportunity was given by the Arbitrator to the respondent No.1 to contest the arbitration proceedings. The Arbitrator was not expected to wait indefinitely for the respondent No.1. As per provisions of Section 28(1)(a) of the said Act, an arbitration other than an international commercial arbitration has to be conducted and decided by the Arbitral Tribunal in accordance with the substantive law for the time being in force in India. That a claim for specific performance can be adjudicated through arbitration has been held by the Hon'ble Supreme Court in Olympus Superstructures Pvt. Ltd. vs. Meena Vijay Khetan and others (1999) 5 SCC 651. It was therefore incumbent upon the Arbitrator to have applied the provisions of the Act of 1963 while passing the award. The award has been rightly set aside under provisions of Section 34(2)(b) (ii) of the Act. It has been held in the aforesaid decision that the limited discretion available to the Court under Section 34(4) of the said Act can be exercised only if a written application is made by a party to the arbitration proceedings before passing of the award. Said power cannot be exercised suomotu by the Court after the award has been set aside.

The appellant and respondent no.1 entered into an agreement of sale on 30-04-2012. Disputes arose, and the appellant filed an application under Section 11(6) for appointment of an arbitrator. The High Court appointed a Sole Arbitrator. On 03-09-2015, the Sole Arbitrator passed an award allowing the appellant's claim for specific performance. Respondent no.1 challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before the Principal District and Sessions Judge, Nagpur in Misc. Civil Application No.1118/2015. By judgment dated 06-01-2017, the District Judge allowed the application, set aside the award, and remanded the matter to the arbitrator. The appellant then filed the present appeal under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 before the High Court of Judicature at Bombay, Nagpur Bench.

• Arbitration and Conciliation Act, 1996: 37(1)(c), 34, 11(6), 28(1)(a), 34(2)(a)(iii), 34(2)(b)(ii), 34(4)
• Specific Relief Act, 1963: 16(c)