J.B. Koshy, J.
1. For procedural violation, can an arbitral award be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') and whether Court has power to remit back the award to the same arbitrator or any other arbitrator vis-a-vis or dehors the power under Section 34(4) of the Act are some of the important questions discussed in this judgment.
2. Appellant and first respondent in this case are partnership firms engaged in the business of mining of china clay. Their mines are contiguously situated with a common boundary, running in the north-south direction. They have jointly secured an order for supply of china clay to M/s. English Indian Clays Limited. Since the appellant firm did not get sales-tax registration certificate, the two firms agreed that mining can be started from the respondent's firm. Mining was started from first respondent's firm on 23.11.1995. 23.11.1995, appellant firm also got sales-tax registration and joined the despatch of clay. Thereafter, some dispute arose between them and on 1.6.1996, the Managing Partner of both firms decided to refer the dispute for adjudication of Shri K.K. Abdul Aziz, second respondent, who is to act as the sole arbitrator. The reference is as follows:
'(i) A dispute has arisen between Messrs. Sulaikha Clay Mines (SCM) and Messrs Alpha Clays (AC) on the question of the quantum of saleable china clay to be compensated by AC from their mines to SCM in lieu of the quantum of china clay AC has availed in the past from the mines of SCM in the process of their joint working operations.
(ii) SCM's contention is that the compensation made by AC to SCM is not complete while AC's contention is that the compensation made is in excess of the quantity due to SCM and this should be given back to AC by SCM.
(iii) Having failed to come to an agreement in this dispute by mutual discussions SCM and AC have jointly agreed to refer this dispute for adjudication to Sri. K.K. Abdul Aziz who will act as the sole arbitrator. It is also agreed by both SCM and AC that the award of the sole arbitrator shall be accepted by both parties as final and will be implemented within a period of three months of the award (subject to fair weather conditions).
(iv) Sri. K.K. Abdul Aziz has given his consent to accept the appointment and to arbitrate the matter without any remuneration.
(v) Hence, Sri. K.K. Abdul Aziz is hereby appointed as the sole arbitrator with a request to enter on arbitration and adjudicate the dispute contained in para, 2 above.'
The sole arbitrator entered on the reference. Both parties filed their respective claims and, finally, second respondent made his award on 26.9.1998. Award was challenged by the respondent on several grounds and petition was filed under Section 34 of the Act to set aside the award. All the contentions were considered by the District Court in detail. The contention raised by the respondent that the arbitration agreement is not valid in law was repelled by the District Court. The District Court also found that subject-matter of the dispute is capable of settlement through arbitration and arbitrator did not go beyond the scope of arbitration clause. However, the District Court found that the procedure, as contemplated in the Act, was not complied with and the proceedings conducted by the second respondent was in violation of Section 18 of the Act There is also violation of mandatory provisions of Section 24(3) of the Act and the award is liable to be set aside under Section 34(2) (a) & (b) of the Act.
3. Since procedural irregularities are highlighted, we will now consider the procedure adopted by the arbitrator in this matter. Arbitrator was examined as PW2. His proceedings file was produced as Exts. B1 and B2. It shows that arbitrator received the appointment order on 5.6.1998 and he informed the parties over the phone to send their statements of facts. Statements of facts furnished by the respective parties were given to the opposite parties calling for their clarification. Reply from the appellant was received by the arbitrator on 11.7.1998 and reply from the respondent was received on 17.7.1998. Copies of the replies were not handed over to the opposite sides. The dairy further shows that the arbitrator heard the respondent on 18.7.1998 at their office at Vazhuthacaud and the appellant was heard at Attingal on 21.7.1998. On 2.8.1998, the appellant was heard at the residence of the Managing Partner and in the afternoon the arbitrator visited the site of the appellant and studied the topographical details of both the mines and the boundary line in between and the dump yards all round. Thus, both the mines were inspected by the arbitrator on that day in the presence of the appellant. Again, in the middle of August, 1998, arbitrator held discussions with the representatives of the respondent and proceeded to their site office and mines accompanied by the representatives of the respondent. On 17.8.1998, unaccompanied by any of the parties, the arbitrator visited both the mines and held final discussions with the appellant at the residence of its Managing Partner and final discussions with the respondent was held on 25.8.1998 at their premises. Thereafter, award was published on 26.9.1998. It is an admitted fact that none of the parties requested for an oral hearing separately. There was no agreement regarding the procedure to be followed by the arbitrator and place of arbitration. It was not intimated to the parties by the arbitrator. Proceedings further show that parties were heard separately without notice to the other. In other words, when the arbitrator head the respondent on 18.7.1998, no notice was given to the appellant and they were kept in dark regarding the arguments made by the opposite side. When the arbitrator visited the site of the appellant he was accompanied by the representatives of the appellant only and the date of inspection was not informed and observations and findings of the arbitrator in the inspection were not communicated to the respondent. Similarly, when the arbitrator heard the appellant, respondent was also not represented. Rejoinder filed by both parties were not communicated to the opposite parties. Under these circumstances, the District Court found that there is procedural violation which violates the mandates of the Act.
4. Now, we will consider the statutory provisions regarding the procedure to be adopted. Section 18 of the Act provides that the parties shall be treated with equality and each party shall be given a full opportunity to present his case. Section 19 provides that the arbitral tribunal shall not be bound by the Code of Civil Procedure or the Indian Evidence Act and parties are free to agree on the procedure to be followed by the arbitral tribunal and, in the absence of agreement, arbitral tribunal may, subject to the other provisions in Part 1 of the Act, conduct the proceedings in the manner it considers appropriate. Section 20 provides that parties are free to agree on the place of arbitration. The place of arbitration shall be determined by the tribunal, if there is no agreement between the parties. Section 24 deals with hearings and written proceedings. Section 24 is as follows:
'24. Hearings and written proceedings:--(1) Unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials:
Provided that the arbitral tribunal shall hold oral hearings, at an appropriate stage of the proceedings, on a request by a party, unless the parties have agreed that no oral hearing shall be held.
(2) The parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of documents, goods or other property.
(3) All statements, documents or other information supplied to, or applications made to the arbitral tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties.'
Section 24 (1) and (2) make it clear that in the absence of agreement it is for the arbitrator to decide whether oral hearings should be conducted or not. But, once it is decided to hold oral hearing, parties shall be given sufficient notice of hearing and of any meeting of the tribunal for the purpose of inspection of documents, books or other property. Section 24(3) makes it compulsory that all statements and other information supplied to the arbitral tribunal by one party shall be communicated to the other party. In this case, admittedly, rejoinder submitted by the appellant was not given to the respondent and the rejoinder submitted by the respondent was not given to the appellant. Oral hearings were granted by the tribunal at the premises of the parties without notice to the other. Inspections were conducted without notice to both parties. Notes of inspections were also not given to the parties. Hearing of one party, in the absence of other, violates the fundamental principles of natural justice, apart from violation of Section 24(2) as notice of hearing was not given to the parties. It is not that one party did not appear after receiving notice. No notice of hearing was given to the other side when the arbitrator decided to hear opposite side in the residence or office of the respondent. So, each party was kept in dark regarding arguments forwarded by the other party. Even the rejoinder or the evidence collected from one side were kept secret from the other side. The evidence collected at the inspection were not disclosed even at the time of hearing... Before conducting the inspection in the presence of one party, the arbitral tribunal should have given notice to the other party. Similarly, when meetings or hearings were conducted, notice should have been given to the other side. That was not done. This shows that equal opportunity was not given to the parties. Place of arbitration was also not determined and not intimated to the parties. Parties were not treated equally. In the above circumstances, there is violation of Sections 18, 19, 20 and 24 (2) and (3) of the Act and the court simply set aside the award under Section 34(2)(a) (iii) and (v) of the Act. Section 34(2)(a) (iii) and (v) are as follows:
'34. Application for setting aside arbitral award:--
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(2) An arbitral award may be set aside by the Court only if - (a) the party making the application furnishes proof that -
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(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;
or
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(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this part;
Here, the parties were unable to present their case and the procedure adopted was not in accordance with the procedure in Part II of the Act. Hence, we see no ground to differ from the Court below in setting aside the award.
5. Next question to be considered is what is the effect of setting aside the arbitration award. According to the counsel for the appellant, since the award is set aside for procedural violation hearing one side in the absence of the other side etc., it can be cured by the arbitrator and the matter should be remitted to the same arbitrator. Counsel for the respondent submitted that there is no provision in the Act for remitting to the arbitrator. Court cannot go beyond the provisions of the Act. Section 34 gives power to the Court to set aside the award in certain contingencies. But, there is no provision for remitting the matter back. Section 34(4) reads as follows:
'34. Application for setting aside arbitral award :--
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(4) On receipt of an application under Sub-section (1), the Court may, where it is appropriate and it is so requested by a 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.'
It is the contention of the respondent that the above provision is only regarding, correction of some arithmetical mistakes or calculation of the total amount or rewriting of the award in proper stamp paper or some other omissions that can be cured and that is to be done before setting aside the award. Before the award is set aside, a party may request to the court to send back the matter to the arbitral tribunal so that the tribunal can 'eliminate the grounds for setting aside the arbitral award'. Here, arbitration award was set aside already. No request was made by any other parties to remand back to the arbitral tribunal to cure defects before the award is set aside. It is further argued that in the application to set aside the award, specific allegations, were made against the, arbitrator. Even though they have reposed confidence on the arbitrator at the time of appointment, his conduct shows that he was partisan and one-sided. He has adopted such a procedure to help only one party. Having made up his mind and passed an award, a post decision herein by the same arbitrator will be of no use and it will be an empty formality. He will only justify his earlier decision and, therefore, question of remitting back to the same arbitrator cannot be granted in any event.
6. First, we may consider the question whether the court has power to remit back the award. Section 34(4) of the 1996 Act is almost equivalent to Section 16 of the 1947 Act. It is true that the arbitration award can be set aside under the new Act only on the grounds mentioned under Section 34. It is seen that arbitration award was passed violating the mandatory provisions of the Act regarding the procedure to be adopted by the arbitrator. Arbitral tribunal is bound to decide the dispute in accordance with the provisions of the Act as held by the Supreme Court in Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. ((2003) 5 SCC 705). The Supreme Court held as follows:
'12. Hence, the jurisdiction or the power of the Arbitral Tribunal is prescribed under the Act and if the award is dehors the said provisions, it would be, on the face of it, illegal. The decision of the Tribunal must be within the bounds of its jurisdiction conferred under the Act or the contract. In exercising jurisdiction, the Arbitral Tribunal cannot act in breach of some provision of substantive law or the provisions of the Act.
13. ............In our view, reading Section 34 conjointly with other provisions of the Act, it appears that the legislative intent could not be that if the award is in contravention of the provisions of the Act, still however, it couldn't be set aside by the court. If it is held that such award could not be interfered, it would be contrary to the basic concept of justice. If the Arbitral Tribunal has not followed the mandatory procedure prescribed under the Act, it would mean that it has acted beyond its jurisdiction and thereby the award would be patently illegal which could be set aside under Section 34.'
Here, award was rightly set aside for non-compliance of the mandatory procedure set out in the Act.
7. It is pleaded by the counsel for the appellant very vehemently that when the award is set aside only for procedural violation; the matter should be remitted back to the same arbitrator or any other arbitrator or arbitrators to pass the award in accordance with the procedure and appellant should not be left in the lurch without any remedy to redress its grievance. The contention of the respondent is that under the new Act, there is no provision for remitting back the award for reconsideration. Section 5 of the 1996 Act clearly provided as follows:
'5. Extent of judicial intervention:-- Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.'
According to the appellant, in the absence of a specific provision, if grounds for setting aside the award are proved, Court is bound to set aside the award and there ends the matter. It is further argued that Section 34(4) is an independent section and the award cannot be remitted back to the arbitrator after setting aside the same. Section 34(4) replaces Section 16 of the old Act. Under Section 16 of 1940 Act, more powers were given to the court, for remitting the award. The above circumstances were as follows:
(a) The award left any of the matters referred undetermined.
(b) A part of it was open on matters which had not been referred to arbitration and that part is not severable without affecting the decision of the matter referred for adjudication.
(c) Award is so indefinite as to be incapable of execution.
(d) Objections to the illegality is apparent on the face of the award.
But, Section 34(4) gives power to the court to adjourn the proceedings for some time and remitting the matter so that arbitral tribunal can eliminate the grounds for setting aside the arbitral award.
8. Apex Court in Union of India and Ors. V. Manager, M/s Jain and Associates (AIR 2001 SC 809) held that power of the court to remit back the award under Section16 is different from the power of the court to set aside the same under Section 30 of the old Act.
Apex Court in Sangamner Bhag Sahakari Karkhana Ltd. v. Krupp Industries Ltd. (AIR 2002 SC 2221) remitted the case back to the arbitrator when parties were not afforded a hearing on an issue under Section 16 instead of setting aside the award under Section 30 of the old Act. The provision to remit back the award under Section 34(4) is generally intended to cure the defects in the award so that grounds of setting aside the award can be eliminated. We are of the opinion that wordings of Section 34(4) makes it clear that it is intended only to correct the curable defects for eliminating the grounds of setting aside the award and not for remitting the award after setting aside the award under Section 34 (1) and (2) of the Act.
9. If the award is set aside for procedural violation or for any other reasons, according to the counsel for the respondent, the aggrieved party is left without any remedy. That is not the object contemplated in the Section. Section 34(4) is one of the enabling provision for remitting back the award without setting aside the award under Section 34 (1) and (2) of the Act. It is an independent power. Learned counsel for the appellant pointed out that under the old Act there are many cases were remitted back to the arbitrator after setting aside the award under Section 30 of the Act even though there were no specific provisions to remit back the award except under Section 16. We are of the opinion that even without a specific provision, the court is empowered to remit back the award If it is needed in the interest of justice and if circumstances compels. In ONGC 's case (supra), the Hon'ble Apex Court held as follows:
'14, The aforesaid interpretation of the Clause (v) would be in conformity with the settled principle of law that the procedural law cannot fail to provide relief when substantive law gives the right. The principle is - there cannot be any wrong without a remedy.'
In M.V. Elisabeth and Ors. v. Harwan Investment and Trading Pvt. Ltd. (1993 Supp. (2) SCC 433), the Supreme Court held that where substantive law demands justice for the party aggrieved and the statute has not provided the remedy, it is the duty of the court to devise procedure by drawing analogy from other systems of law and practice. The Apex Court held as follows in paragraph 86:
'86. ......... Access to court which is an important right vested in every citizen implies the existence of the power of the Court to render justice according to law. Where statute is silent and judicial intervention is required, Court strive to redress grievances according to what is perceived to be principles of justice, equity and good conscience.'
. 10. In Dhannalal v. Kalawatibai ((2002) 6 SCC 16), the Hon'ble Apex Court observed that wrong must not be left unredeemed and right not left unenforced. Therefore, we are of the view that if the award is set aside only because of the procedural violation, it can be remitted back. Those decisions were approved by the Apex Court in ONGC's case (supra). The maxim is 'Ubi jus ibi remedium' - there is no wrong without a remedy. Where there is aright, there is a forum for enforcement. Procedural law cannot be allowed to betray the substantive law by submitting it to unnecessary complexity and technicalities. The Apex Court in Dhannalal's case (supra) held as follows:
'20. Both the learned Senior Counsel for the parties stated that there is no specific statutory provision nor a binding precedent available providing resolution to the problem posed. Procedural law cannot betray the substantive law by submitting to subordination of complexity. Courts equipped with power to interpret law are often posed with queries which may be ultimate. The judicial steps of the Judge then do stir to solve novel problems by neat innovations. When the statute does not provide the path and precedents abstain0 to lead, then they are the sound logic, rational reasoning, common sense and urge for public good which play as guides of those who decide. Wrong must not be left unredeemed and right not left unenforced. Forum ought to be revealed when it does not clearly exist or when it is doubted where it exists.'
Here, the award was rightly set aside by the court below under Section 34(2)(a) (iii) and (v) of the Act. But, rights of the parties are not extinguished. We hold that in appropriate cases, court can remit back the case after setting aside the award dehors the power under Section 34(4), notwithstanding the fact that there is no specific provision in the Act enabling the court to do so.
11. Then, the next question is can we send back the matter to the same arbitrator in this case. We have seen that the arbitrator has violated the procedure. Various allegations were raised by one of the parties to the agreement before the court below in setting aside the award. The Court also found that the arbitrator was not fair and not treated both parties equally and he has already taken a partisan attitude. Therefore, it will be unfair to send back the matter to the same arbitrator. For resolving the dispute, we have directed the parties to name another arbitrator. Even though appellant was willing to agree for any other retired High Court Judges or District Judges to be the arbitrator, respondent was not willing to agree for another arbitrator.
12. There is no arbitration clause in the original agreement. If there was a clause in the original agreement, after setting aside the award, parties could have again delegated the procedure under Section 11 for appointment of arbitrators when the matter cannot be remitted to the same arbitrator and there is no agreement on substitute. It is true that here there was an agreement to refer the matter to a particular arbitrator. But, that agreement was entered into after the dispute arose and parties only 'jointly agreed to refer this dispute for adjudication to Sri. K.K. Abdul Aziz who will act as the sole arbitrator'. Therefore, it was not a general arbitration agreement. The agreement was only to refer the matter to one specific arbitrator for resolving the dispute. In fact, that agreement was entered into after the dispute arose and, therefore, court cannot enforce any other arbitrator on them. Further, there is no provision for arbitration in the original agreement. Therefore, the court cannot compel them to appoint another arbitration as per the procedure laid down under Section 11 or appointment of a substitute arbitrator under Section 15. In the absence of an arbitration clause in the agreement, civil remedy is not barred. Section 43(4) of the Act provides that the time spent for the arbitration proceedings shall be excluded for filing civil suit. Section 43(4) of the Act reads as follows:
'43. Limitations.--
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(4) Where the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act, 1963 (36 of 1963), for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted.'
Therefore, we are of the opinion that appellant is also not without any remedy. Time from 1.6.1998 till today will not excluded and the appellant can approach the civil court for redressal of its grievances. Court below has rightly set aside the award.
The appeal is dismissed with the above observations.