caselaws
Supreme Court of India
I Pay Clearing Services Private … vs Icici Bank Limited on 3 January, 2022Author: R. Subhash Reddy
Bench: R. Subhash Reddy, Hrishikesh Roy
C.A.@S.L.P.(C)No.24278 of 2019
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7 OF 2022
[arising out of S.L.P.(C) No.24278 of 2019]
I-Pay Clearing Services Private Limited …Appellant
vs.
ICICI Bank Limited …Respondent
J U D G M E N T
R. SUBHASH REDDY, J.
1. Leave granted.
2. This appeal is filed, aggrieved by the order dated
16.07.2019 passed by the High Court of Judicature at
Bombay, in Commercial Notice of Motion No.1549 of 2019
in Commercial Arbitration Petition No.190 of 2018.
3. In the Commercial Arbitration Petition No.190 of
2018, filed under Section 34 of the Arbitration and
Signature Not Verified
Conciliation Act, 1996 (for short ‘the Act’), the
Digitally signed by
Rajni Mukhi
Date: 2022.01.03
16:37:04 IST
Reason: respondent–ICICI Bank has challenged the award dated
13.11.2017, of the learned Sole Arbitrator. By the
1
C.A.@S.L.P.(C)No.24278 of 2019
aforesaid award, learned Arbitrator directed the
respondent-ICICI Bank as under:-
“a) The respondent (ICICI Bank) is
ordered and directed to pay to the
claimant (I-pay) an amount of
Rs.50,00,00,000/- (Rupees Fifty Crores)
together with interest thereon to be
calculated at the rate of 18% per annum
as from the date of award till payment
or realization, whichever is earlier;
b) The respondent (ICICI Bank) is
ordered and directed to pay to the
claimant (I-pay) Rs.50,000/- (Rupees
Fifty Thousand) as cost on the
application under Section 16 made before
this Arbitral Tribunal.”
4. In the petition, filed by the respondent-ICICI Bank
under Section 34(1) of the Act, it has taken out Notice
of Motion No.550 of 2018 seeking interim order to stay
the effect, operation, implementation and execution of
the award dated 13.11.2017, passed by the learned
Arbitrator. In the same petition, the appellant/I-Pay
has taken out Notion of Motion No.1549 of 2019, under
Section 34(4) of the Act, seeking directions to adjourn
the proceedings for a period of three months or such
other time as may be determined by the Court, and direct
the learned Arbitrator to issue appropriate directions/
instructions / additional reasons and / or to take such
necessary and appropriate action. The High Court by a
common order, has passed the conditional order in the
Notice of Motion taken out by the respondent and
2
C.A.@S.L.P.(C)No.24278 of 2019
dismissed the Notice of Motion No.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 of Motion No.1549 of 2019 filed under Section
34(4) of the Act, this Appeal is filed.
5. The appellant is a Private Limited Company
incorporated under Companies Act, 1956 and is in the
business of providing card personalization, transaction
and reconciliation management for Smart Card based
loyalty programs, for which they have an operations
facility at 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 the
business of providing banking facilities, retail
financial assistance and related activities. The HPCL
(Hindustan Petroleum Corporation Limited) which was
originally impleaded as Defendent No.2 in the Suit, is a
Public Sector Company, which is engaged in refining and
selling petroleum products through their retail outlets
all over India.
6. It is the case of the appellant that it has entered
into an agreement with the respondent on 04.11.2002 to
provide technology and manage the operations and
processing of the Smart Card based loyalty programs for
3
C.A.@S.L.P.(C)No.24278 of 2019
HPCL. It was for HPCL, which was to improve fuel sales
at their retail outlets. The appellant was required to
develop various software application packages for
management of Smart Card based loyalty programs. The
said agreement was followed by another agreement dated
04.02.2003, as per which, the appellant was to develop a
software for postpaid Smart Card Loyalty Program akin to
a Credit Card under the name “Drive Smart Software”. It
is the case of the appellant that to further expand
their customer base, the respondent herein, requested
the appellant to also develop a “Drive Track Fleet Card”
management solution for the fleet industry and requested
by letter dated 10.12.2003 to treat it as an extension
for the Service Provider Agreement and appointed the
appellant for that purpose and it was named as “Drive
Track Program”.
7. It is the grievance of the appellant that in view
of sudden move by 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 employee retrenchment compensation, etc. It
is also their case that on account of sudden termination
of the agreement all its operations were paralyzed. The
appellant made a total claim of Rs.95 crores against the
4
C.A.@S.L.P.(C)No.24278 of 2019
respondent. At first instance, a suit was filed in O.S.
No.1094 of 2012 on its Original Civil Jurisdiction in
the High Court of Judicature at Bombay. As there was a
clause in the Agreement for arbitration, the High Court
has referred the dispute to arbitration under Section 8
of the Act by appointing Mr. Justice R.G. Sindhakar
(Retd.) as a Sole Arbitrator for resolving the dispute
between the parties.
8. Mr.Justice R.G.Sindhakar (Retd.), who was appointed
as Sole Arbitrator, has passed award dated 13.11.2017,
directing the respondent herein, to pay to the appellant
– claimant an amount of Rs.50,00,00,000/- (Rupees Fifty
Crores) together with interest @18% per annum from the
date of award till payment and further directed to pay
an amount of Rs.50,000/- (Rupees Fifty Thousand) towards
the costs.
9. Aggrieved by the award of learned Sole Arbitrator,
the respondent–ICICI Bank has filed application under
Section 34(1) of the Act for setting aside the award. In
the said application, it is the case of the respondent
that there was accord and satisfaction between the
parties and the contractual obligations between the
parties was closed mutually and amicably. Reliance is
placed on the letter dated 01.06.2010, which was signed
by both the parties recording the terms of closure of
5
C.A.@S.L.P.(C)No.24278 of 2019
the contract entered between the parties and other
communications. The award of the learned Arbitrator was
mainly questioned on the ground that it suffers from
patent illegality, inasmuch as there is no finding
recorded in the award to show that the respondent-ICICI
Bank has illegally and abruptly terminated the contract.
The learned Arbitrator has framed five points for
determination and Point No.1 was, “Whether the contract
was illegally and abruptly terminated by the
respondent?”. The main ground in the application filed
under Section 34(1) of the Act by the Respondent, is
that the learned Arbitrator without recording any
finding on Point No.1, has awarded Rs.50 crores to the
appellant/I-Pay. It is pleaded in the application that
the award of the Arbitrator does not reveal the exact
nature of the purported breach and the date of alleged
termination. It is the case of the respondent that
without addressing the vital issue viz. whether there
was an illegal and abrupt termination of the contract or
not, as pleaded, the learned Arbitrator has allowed the
claim to the extent of Rs.50 crores, as such, the same
is patently 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, for adjourning
6
C.A.@S.L.P.(C)No.24278 of 2019
the proceedings for a period of three months by
directing the learned Arbitrator to issue appropriate
directions/ instructions / additional reasons and / or
to take such necessary and appropriate action. In the
impugned order, the High Court has prima facie found
that unless and until a finding is recorded on point
no.1 first, the learned Arbitrator could not have
proceeded to record findings on the claims made by the
appellant, as such, the learned Arbitrator has committed
jurisdictional error.
The High Court was of the view that the defect in
the award is not curable, as such, there is no merit in
the application filed by the appellant under Section
34(4) of the Act and dismissed the same.
11. We have heard Dr. Abhishek Manu Singhvi and Mr.
Nakul Dewan, learned Senior Counsels appearing for the
appellant/I-Pay and Mr. K.V.Vishwanathan, learned Senior
Counsel appearing for the respondent–ICICI Bank.
12. By impugned order, the Notice of Motion moved by
the appellant for remitting the matter to the Sole
Arbitrator under Section 34(4) of the Act, has been
rejected. It is the case of the appellant that though
the Arbitrator has awarded compensation/damages in view
of the case of the appellant that the contract between
the parties was illegally and abruptly terminated by the
7
C.A.@S.L.P.(C)No.24278 of 2019
respondent, but he has not recorded detailed reasons on
the said point. On the other hand, it is the case of the
respondent, that there was full accord and satisfaction
between the parties, 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
communications between the parties including letter
dated 01.06.2010. It is the contention of Dr.Abhishek
Manu Singhvi, learned senior counsel appearing for the
appellant, that though the issue was resolved by the
Arbitrator by holding that there was no accord and
satisfaction between the parties, however, he has
omitted to give adequate reasons in support of point
no.1. Thus, it is pleaded that in view of settled legal
position that lack of reasons or gaps in the reasoning,
is a curable defect under Section 34(4) of the Act,
award can be remitted to the arbitrator to give reasons.
In support of said plea that lack of reasons or gaps in
reasoning in the award of the Arbitrator is a curable
defect, reliance is placed on the judgments of this
Court, in the cases of Kinnari Mullick and Anr. v.
Ghanshyam Das Damani1, Dyna Technologies Pvt. Ltd. v.
Crompton Greaves Ltd.2 and also in Som Datt Builders
1
(2018) 11 SCC 328
2
(2019) SCC ONLINE SC 1656
8
C.A.@S.L.P.(C)No.24278 of 2019
Limited v. State of Kerala3. It is submitted that the
language of Section 34(4) of the Act, is couched in very
wide terms and provides for remission of the matter to
enable the Arbitrator to take such steps, as may be
necessary for elimination of grounds for setting aside
the award. It is submitted, though there is sufficient
evidence in support of the point no.1, the Arbitrator
has not given adequate reasons in 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 on International Commercial Arbitration, which came
up for consideration before 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 of Singapore High Court in the
case of Permasteelisa Pacific Holdings Ltd. 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 remit was conceived of as an
alternative to setting aside the award. It is submitted
that categorical statutory aim of sending a matter back
to the Arbitral Tribunal for remission, is to eliminate
3
(2009) 10 SCC 259
4
(2015) SGCA 63
5
(2005) SGHC 33
9
C.A.@S.L.P.(C)No.24278 of 2019
defects which would preserve the award. Thus, it is
submitted that all the defects in an arbitral award,
which are capable of being remedied, ought to be
addressed in remission proceedings, if an application
under Section 34(4) of the Act is filed. Again referring
to the judgment of this Court in the case of Dyna
Technologies Pvt. Ltd. v. Crompton Greaves Ltd.2, learned
senior counsel has submitted that the provision under
Section 34(4) of the Act can be utilised in cases where
the arbitral award does not provide any reasoning or if
the award has some gaps in the reasoning. Learned senior
counsels, with the above submissions, requested to set
aside the impugned order and to issue directions for
remitting the award to Arbitral Tribunal for
consideration of the issue, on abrupt and illegal
termination of the agreement entered between the parties
and to give detailed reasons.
14. On the other hand, Shri K.V. Vishwanathan, learned
senior counsel for the respondent has made following
submissions:
The Notice of Motion moved by the appellant is
dismissed by the High Court by assigning valid reasons
in the impugned order and in view of the same, no
interference is called for. No grounds are made out in
the application filed by the appellant for remitting the
10
C.A.@S.L.P.(C)No.24278 of 2019
matter to the Arbitrator, and in fact, the Arbitrator
has not considered the relevant documentary evidence
produced on behalf of the respondent, and passed the
award. As the Arbitrator has passed the award by
ignoring important and relevant evidence on record, it
suffers from perversity and patent illegality, which
cannot be cured on remittal under Section 34(4) of the
Act by the Arbitrator. Under guise of adding reasons,
the Arbitrator cannot take contrary view against the
award itself. The Arbitrator in resumption proceedings
cannot change his award and the same would be contrary
to provision under Section 34(4) of the Act and would
amount to Arbitrator assuming the role of the Court,
which alone is empowered to set aside the award. It is
submitted that in spite of sufficient evidence on record
to prove that there was ‘accord and satisfaction’
between the parties, without considering such evidence,
the Arbitrator has proceeded on the premise that there
was no ‘accord and satisfaction’ and passed the award in
favour of the appellant. The findings recorded on the
plea of ‘accord and satisfaction’ in the award without
considering the entire evidence on record, constitute
patent illegality, as such, same is to be considered
only by the Court while considering the application
filed under Section 34(1) of the Act. Even assuming that
on remittal, the Arbitrator wants to consciously hold
11
C.A.@S.L.P.(C)No.24278 of 2019
that there was accord and satisfaction of claims and
there was no abrupt and illegal termination of the
contract, he would not be able to do so, as he cannot
change his own award. The Judgments relied on by learned
counsel for the appellant are distinguishable on facts
and would not render any support to the case of the
appellant. Oral submissions made before this Court, run
contrary to pleadings on record in the application.
15. To differentiate between ‘findings’ and ‘reasons’,
learned senior counsel Mr. K. V. Vishwanathan relied on
the judgment of this Court in the case of Income Tax
Officer, A Ward, Sitapur v. Murlidhar Bhagwan Das6. It is
also submitted that the Notice of Motion moved by the
appellant under Section 34(4) of the Act, is belated and
afterthought and is made only to protract the
litigation, and prayed for dismissal of the appeal.
16. Before we consider the various submissions made on
behalf of both sides, we need to notice certain relevant
provisions of the Arbitration and Conciliation Act,
1996. Section 31 of the Act deals with ‘form and
contents of arbitral award’. As per the same, an
arbitral award shall be made in writing and shall be
signed by the members of the Arbitral Tribunal. The
arbitral award shall state the reasons, upon which it is
6
AIR 1965 SC 342
12
C.A.@S.L.P.(C)No.24278 of 2019
based, unless parties agree that no reasons are to be
given, or the award is an arbitral award on agreed terms
under Section 30 of the Act. Chapter VII of the Act
provides recourse against arbitral award. The recourse
to a Court against an arbitral award is to be in terms
of Section 34(1) of the Act. As per Section 34(2A) of
the Act, if the arbitral award arising 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 than international
commercial arbitrations, may also be set
aside by the Court, if the Court finds that
the award is vitiated by patent illegality
appearing on the face of the award:
Provided that an award shall not be
set aside merely on the ground of an
erroneous application of the law or by
reappreciation of evidence.
(3) An application for setting aside may not
be made after three months have elapsed from
the date on which the party making that
application had received the arbitral award
or, if a request had been made under section
33, from the date on which that request had
been disposed of by the arbitral tribunal;
Provided that if the Court is
satisfied that the application was prevented
by sufficient cause from making the
application within the said period of three
months it may entertain the application
within a further period of thirty days, but
not thereafter.
(4) On receipt of an application under sub-
section (1), the Court may, where it is
appropriate and it is so requested by a
13
C.A.@S.L.P.(C)No.24278 of 2019
party, adjourn the proceedings for a period
of time determined by it in order to give the
arbitral tribunal an opportunity to resume
the arbitral proceedings or to take such
other action as in the opinion of arbitral
tribunal will eliminate the grounds for
setting aside the arbitral award.”
17. From a reading of Section 34(4) of the Act, it is
clear that on receipt of an application under sub-
section (1), in appropriate cases on a request by a
party, Court may adjourn the proceedings for a period
determined by it in the order to give the Arbitral
Tribunal an opportunity to resume the arbitral
proceedings or to take such other action as in the
opinion of Arbitral Tribunal, will eliminate the grounds
for setting aside the arbitral award.
18. It is the case of the appellant that in view of
abrupt and illegal termination of agreement by the
respondent, it has suffered losses of more than Rs.50
crores as all operations were paralysed, and the
appellant had to pay its employees retrenchment
compensation, etc. On the aforesaid grounds, a total
claim of Rs.95 crores was made against the respondent.
On the other hand, it is the case of the respondent that
there was ‘accord and satisfaction’ between the parties
and the same is evident from several letters, which are
part of record in the arbitration proceedings. Reliance
is placed on the documentary evidence i.e. letters dated
14
C.A.@S.L.P.(C)No.24278 of 2019
01.06.2010, 17.06.2010, email dated 02.08.2010 and
letters dated 08.11.2010 & 20.01.2011. It is the
specific case of the respondent that learned Arbitrator
failed to appreciate such evidence, which would
establish their case that there was accord and
satisfaction between the parties 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 on record, findings recorded by the Arbitrator
are perverse and constitute patent illegality within the
meaning of Section 34(2A) of the Act. The Notice of
Motion filed under Section 34(4) of the Act by the
appellant, clearly states that the said Motion was moved
as an abundant precaution and they are seeking remission
to the Arbitrator to provide detail and express reasons
in addition to reasons already stated in the arbitral
award dated 13.11.2017. It is also their case that it is
essential that additional reasons are made available by
learned Arbitrator in support of his findings recorded
in the award. On the other hand, it is the case of the
respondent, that there is no finding at all, on the
issue viz. “whether the contract was illegally and
abruptly terminated by the respondent?”, and in spite of
the same, the Arbitrator without considering the
important documents/communications between the parties,
which throw light on accord and satisfaction between the
15
C.A.@S.L.P.(C)No.24278 of 2019
parties, has proceeded to pass the award stating that
there was no ‘accord and satisfaction’.
19. As contended by learned senior counsel for the
appellant, it is true that Section 34(4) of the Act is
couched in a language, similar to Article 34(4) of the
UNCITRAL Model Law on International Commercial
Arbitration. In the case of AKN & Anr. v. ALC & Ors.4, by
considering legislative history of the Model Law, it was
held by Singapore Court of Appeals that remission is a
‘curative alternative’. In the case of Kinnari Mullick
and Anr. v. Ghanshyam Das Damani1, relied on by learned
senior counsel for the appellant, the question which
fell for consideration was whether Section 34(4) of the
Act empowers the Court to relegate the parties before
the Arbitral Tribunal after setting aside the arbitral
award, in absence of any application by the parties. In
fact, in the said judgment, it is held that the
quintessence for exercising power under Section 34(4) of
the Act is to enable the Tribunal to take such measures
which can eliminate the grounds for setting aside the
arbitral award, by curing the defects in the award. In
the judgment in the case of Dyna Technologies Pvt. Ltd.
v. Crompton Greaves Ltd.2, it was a case where there was
no inquiry under Section 34(4) of the Act and in the
said case, this Court has held that the legislative
16
C.A.@S.L.P.(C)No.24278 of 2019
intention behind Section 34(4) of the Act, is to make
the award enforceable, after giving an opportunity to
the Tribunal to undo the curable defects. It was not a
case of patent illegality in the award, but deficiency
in the award due to lack of reasoning for a finding
which was already recorded in the award. In the very
same case, it is also clearly held that when there is a
complete perversity in the reasoning, then the same is a
ground to challenge the award under Section 34(1) of the
Act. The case of Som Datt Builders Limited v. State of
Kerala3 is also a case where no reasons 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 Court ought to have given Arbitral Tribunal an
opportunity to give reasons.
20. The aforesaid case law cited by the learned counsel
appearing for the appellant, is distinguishable on facts
and would not render any assistance in this case. When
it is the specific case of the respondent that there is
no finding at all, on point no.1 viz. “whether the
contract was illegally and abruptly terminated by the
respondent?”, remission under Section 34(4) of the Act,
is not permissible. In our view, Section 34(4) of the
Act, can be resorted to record reasons on the finding
already given in the award or to fill up the gaps in the
17
C.A.@S.L.P.(C)No.24278 of 2019
reasoning of the award. There is a difference between
‘finding’ and ‘reasons’ as pointed out by the learned
senior counsel appearing for the respondent in the
judgment in the case of Income Tax Officer, A Ward,
Sitapur v. Murlidhar Bhagwan Das6. It is clear from the
aforesaid judgment that ‘finding is a decision on an
issue’. Further, in the judgment in the case of J.
Ashoka v. University of Agricultural Sciences and Ors.7,
this Court has held that ‘reasons are the links between
the materials on which certain conclusions are based and
the actual conclusions’. In absence of any finding on
point no.1, as pleaded by the respondent and further, it
is their case that 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 to be considered by
the Court itself. It cannot be said that it is a case
where additional reasons are to be given or gaps in the
reasoning, in absence of a finding on point no.1 viz.
“whether the contract was illegally and abruptly
terminated by the respondent?”
21. Further, Section 34(4) of the Act itself makes it
clear that it is the discretion vested with the Court
for remitting the matter to Arbitral Tribunal to give an
opportunity to resume the proceedings or not. The words
7
(2017) 2 SCC 609
18
C.A.@S.L.P.(C)No.24278 of 2019
“where it is appropriate” itself indicate that it is
the discretion to be exercised by the Court, to remit
the matter when requested by a party. When application
is filed under Section 34(4) of the Act, the same is to
be considered keeping in mind the grounds raised in the
application under Section 34(1) of the Act by the party,
who has questioned the award of the Arbitral Tribunal
and the grounds raised in the application filed under
Section 34(4) of the Act and the reply thereto. Merely
because an 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 Arbitral
Tribunal. The discretionary power conferred under
Section 34(4) of the Act, is to be exercised where there
is inadequate reasoning or to fill up the gaps in the
reasoning, in support of the findings which are already
recorded in the award. Under guise of additional reasons
and filling up 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. If
there are no findings on the contentious issues in the
award or if any findings 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 in
the reasoning, the power conferred on the Court cannot
19
C.A.@S.L.P.(C)No.24278 of 2019
be relegated to the Arbitrator. In absence of any
finding on contentious issue, no amount of reasons can
cure the defect 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 clear that in
appropriate cases, on the request made by a party, Court
can give an opportunity to the arbitrator to resume the
arbitral proceedings for giving reasons or to fill up
the gaps in the reasoning in support of a finding, 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 award itself, 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
opportunity to the Arbitral Tribunal to resume the
arbitral proceedings. Further, as rightly contended by
the learned counsel appearing for the respondent, that
on the plea of ‘accord and satisfaction’ on further
consideration of evidence, which is ignored earlier,
even if the arbitral tribunal wants to consciously hold
that there was ‘accord and satisfaction’ between the
parties, it cannot do so by altering the award itself,
which he has already passed.
22. For the foregoing reasons, we do not find any merit
in this appeal so as to interfere with the impugned
20
C.A.@S.L.P.(C)No.24278 of 2019
order passed by the High Court. Accordingly, this Civil
Appeal is dismissed, with no order as to costs.
………………………………………………J
[R. Subhash Reddy]
………………………………………………J
[Hrishikesh Roy]
New Delhi
January 3, 2022.
21
Comments