2003 (9) TMI 546 - SC - Companies Law

Supreme Court Upholds Validity of Arbitrator's Award Parts

The Supreme Court dismissed the appeal, upholding the validity of parts of the Arbitrator's Award not remitted for reconsideration. It clarified that ... Whether the Award will be void under section 16(3) of the Act in such cases even if the arbitrator fails to reconsider these matters and submit his decision within the time fixed? Held that:- Appeal dismissed. The entire Award was not remitted to the Arbitrator. The Arbitrator was only required to give determination on two points, and therefore, sub-section (3) is not applicable in the present case. The Parliament advisedly has restricted sub-section (3) of section 16 of the Act to an Award which would mean the whole Award or a part of it. The valid part of the Award always remains enforceable in a Court of law. What can be held to be void is that part of the Award which has not been made a Rule of Court by sustaining the objections raised with regard thereto inter alia on the ground that the same suffers from an error apparent on the face of the record or for any other reason; in the event the Arbitrator or Umpire fails to reconsider it and submits his decision within the time fixed therefor by the Court. In other words, the word ‘Award’ within the meaning of sub-section (3) would also include a part of the Award, which has been the subject-matter of the order of remission by the competent Court. In any view of the matter the applicability of sub-section (3) of section 16 of the Act, in the facts and circumstances of the present case, does not arise inasmuch as the matter is still pending before the Arbitrator. Issues Involved:1. Interpretation of sub-section (3) of section 16 of the Arbitration Act, 1940.2. Validity of the Arbitrator's Award when only specific matters are remitted for reconsideration.3. Consequences of the Arbitrator's resignation and failure to submit a decision within the stipulated period.Detailed Analysis:1. Interpretation of sub-section (3) of section 16 of the Arbitration Act, 1940:The core issue in this appeal pertains to the interpretation of sub-section (3) of section 16 of the Arbitration Act, 1940. The appellant argued that since the Arbitrator resigned and could not give the Award within the stipulated period, the Award was rendered void under sub-section (3) of section 16. However, the court found no merit in this submission. The court clarified that sub-section (3) of section 16 applies only when the entire Award is remitted for reconsideration and the Arbitrator fails to submit his decision within the time fixed. The court emphasized that sub-section (3) is not applicable when only specific matters are remitted for reconsideration. This interpretation was supported by various legal precedents and authoritative texts, including Russell on Arbitration and Halsbury's Laws of England.2. Validity of the Arbitrator's Award when only specific matters are remitted for reconsideration:The court examined whether the entire Award becomes void if only specific matters are remitted for reconsideration and the Arbitrator fails to submit his decision within the stipulated period. The court concluded that the valid part of the Award remains enforceable in a court of law. The court cited several legal precedents, including Johnson v. Latham and Brahma Swaroop Gupta v. Diwan Chand Minotra, to support this view. The court held that the part of the Award not remitted for reconsideration remains valid and enforceable, while only the remitted part may become void if the Arbitrator fails to submit his decision within the stipulated period.3. Consequences of the Arbitrator's resignation and failure to submit a decision within the stipulated period:The appellant contended that the Arbitrator's resignation and failure to submit a decision within the stipulated period rendered the entire Award void. However, the court rejected this argument, stating that the resignation of the Arbitrator does not affect the validity of the parts of the Award that were not remitted for reconsideration. The court emphasized that the appellant should have challenged the order of the learned Civil Judge dated 6th July, 1995, which held that only two specific points were required to be determined, and the rest of the Award remained intact. The court reiterated that the appellant's failure to challenge this order in a timely manner precluded them from raising the issue again before the Supreme Court.Conclusion:The Supreme Court dismissed the appeal, finding no merit in the appellant's submissions. The court upheld the validity of the parts of the Arbitrator's Award that were not remitted for reconsideration and clarified the interpretation of sub-section (3) of section 16 of the Arbitration Act, 1940. The court emphasized that the valid part of the Award remains enforceable, and only the remitted part may become void if the Arbitrator fails to submit his decision within the stipulated period. The judgment reinforced the principle that an Award can be valid in part and void in part, depending on the specific circumstances and the court's directions.