COURT: Supreme Court of India

CORAM: Justice R. Subhash Reddy, Justice Hrishikesh Roy

DATE OF JUDGMENT: 3 January 2022

FACTS

I-Pay Clearing Services entered into an agreement with the ICICI Bank to develop software application packages for the management of Smart Card based loyalty programs (“Service Provider Agreement”) for one of the Appellant’s clients, Hindustan Petroleum Corporation Ltd. (“HPCL”). In furtherance to this, the Appellant and the Respondent entered into another agreement, to develop a post-paid Smart Card Loyalty Program akin to a credit card, under the name Drive Smart Software (“Drive Smart Agreement”). The Respondent sent a letter terminating the first Service Provider Agreement and requesting that the Appellant construct a Drive Track Fleet Card for the fleet industry, which would be viewed as an extension of the Drive Smart Agreement. Drive Track Program was the name given to it.

The legal process in this case began when the Appellant filed a petition in the Hon’ble Bombay High Court, alleging that the Respondent had abruptly terminated the Service Provider Agreement, causing the Appellant to lose a total of INR 95 crores. The Hon’ble court referred this issue to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 (“Act”) because the stated agreement had an arbitration clause, and the arbitration proceedings were thereafter initiated before a Sole Arbitrator.

Following the conclusion of the arbitration procedures, the Arbitrator issued an award ordering the Respondent to pay the Appellant a sum of Indian Rupees Fifty Crores plus interest at the rate of 18 percent per annum. The Tribunal further awarded the Appellant a cost award of Indian Rupees 50,000 to the Appellant.

Dissatisfied with the award, the Respondent filed an application under Section 34(1) of the Act to set aside the award on the grounds that the parties had reached an agreement and satisfaction by letter dated 1 June 2010 and that the parties’ contractual responsibilities had therefore been settled. While the Section 34 proceedings were ongoing, the Appellant filed a Notice of Motion under Section 34(4) of the Act, requesting that the proceedings be adjourned for three months and that the matters be reconsidered by the Arbitral Tribunal.

The Hon’ble High Court dismissed this Notice of Motion. Appellant, who was aggrieved by it, filed this appeal with the Hon’ble Supreme Court.

ISSUES RAISED

Whether an arbitral award can be remitted to the Arbitrator if no findings on the contentious issues are provided in the Award?

Whether the court has power to set aside the award when an application is filed under Section 34(4) to remit the matter to the Arbitrator?

JUDGMENT

The Hon’ble Supreme Court held that remission under Section 34(4) of the Act is inadmissible when the Respondent in the arbitration procedures received no decision on a specific claim. The court explained that Section 34(4) of the Act, which allows the Award to be relegated for reconsideration before the same Arbitral Tribunal, can only be used to record reasons for prior judgments or to fill up gaps in the Award’s rationale.

In the absence of a specific finding of the Arbitral Tribunal in its Award, as pleaded by the Respondent, the relevant letter and evidence produced before the Arbitrator to prove ‘accord and satisfaction’ between the parties were not considered, and this approach, in essence, amounts to patent illegality. Such considerations necessitate the use of a judicial mind and must be evaluated by the Court itself.

In light of the cited cases, the court clarified the difference between “Finding” and “Reasons.” “Finding” means “decision on an issue,” whereas “Reasons” means “connections between the materials that specific conclusions are founded on and the actual findings.” The court agreed with the respondents that there are no findings on Point No. 1 and that the issue of presenting more reasons, as requested by the appellants, does not arise. If there are no findings on the challenged issues in the award, it cannot be remitted to the Arbitrator under the guise of additional explanations and filling in the holes in the rationale.

The Hon’ble Supreme Court dismissed the appeal without interfering with the order of the Hon’ble Bombay High Court, citing J. Ashoka v. University of Agricultural Sciences and Ors.