This article has been written by Harshala Keny pursuing a Diploma in Domestic & International Commercial Arbitration from LawSikho.
This article has been edited and published by Shashwat Kaushik.
Table of Contents
Introduction
The number of cases pending before the Indian court is more than 5 crore. Out of which about 30% are civil cases. A portion of civil cases would have been even more difficult without the existence of the Alternative Dispute Resolution System (ADRS). ADRS is a system that helps to resolve disputes out of court. There are several mechanisms under it like Lok Adalat, Mediation, Conciliation, Arbitration, etc. Arbitration has played a significant role in handling not only domestic civil matters but international commercial matters in a speedy way.
There have been constant efforts to build this mechanism more profoundly to make it stand as a strong and speedy alternative to the court as well as a tool to handle the profusely increasing disputes of an ever-flooding population. The Arbitration and Conciliation Act, 1940 and later the Arbitration and Conciliation Act, 1996, thus try to encode the process of carrying out arbitration and conciliation to make it more efficient. Out of several provisions regulating the process, one of the provisions is related to the Correction and Interpretation of Awards and Additional Awards, which helps in removing procedural defects in the process.
What is arbitration
Arbitration is the mechanism in ADRS that goes close to the setup of a court. Arbitration is a mechanism of dispute resolution where parties to the dispute amicably agree to resolve their dispute through an arbitrator or arbitrators who are either appointed by them or on their request, by whom a judgement is passed, which is called an award. Such an award is legally enforceable under Section 36 (1) of the Arbitration and Conciliation Act, 1996, as if it were a decree passed by the court.
Halsbury defines arbitration as “the reference of a dispute or difference between not less than two parties, for determination, after hearing both sides in a judicial manner, by a person or persons other than a court of competent jurisdiction.”
The primary elements of an arbitration are:
- An Arbitration agreement (whether before or after the dispute has arisen but before submitting the dispute to the court)
- No less than two parties agree to the same.
- Existence of a dispute that is covered in that arbitration agreement.
- Appointment of an arbitrator (mutually selected by the parties or on their request).
Arbitration has also been defined in the Collins vs. Collins (1997) case as “an arbitration is a reference to the decisions of one or more persons, either with or without an umpire, a particular matter in difference between the parties.”
Arbitration award
An arbitral award is legally enforceable as if it were a court decree under Section 36(1) of the Arbitration and Conciliation Act, 1996. Thus, the Arbitral Award must meet certain essentials for it to be a proper award. Section 31 of the Arbitration and Conciliation Act, 1996 prescribes the essentials for a properly enforceable award.
Essentials of a proper award:
- It should be in writing.
- It should be signed by all the members of the arbitral tribunal. In the case of more arbitrators, the signatures of the majority of the arbitrators are also valid if the reason for the absence of the signatures of other arbitrators is stated clearly.
- The arbitral award should contain reasons for its decision, except when the parties specifically agree for no reasons to be stated or if it is an award passed on agreed terms under Section 30 of the Arbitration and Conciliation Act, 1996.
- Date and place of making the arbitral award.
Things to take into consideration regarding an arbitral award:
- The signed copies must be delivered to all the parties.
- An interim award can be turned into a final award meeting the above essentials.
- Unless there is an agreement between the parties regarding this, an arbitral award dealing with the payment of money can include interest on the full or partial sum to be paid at the rate at which it deems fit. That interest can be either levied from the whole period between the commencement of the proceedings and the date of passing of the award or a part of it.
- If there is no express direction in an arbitral award regarding this, the sum to be paid in the arbitral award will have an interest rate of 2% more than the prevalent rate of interest on the day of the passing of the arbitral award. From the day of passing it to the day of payment.
- The costs of the arbitration will be fixed as per Section 31A of the Act by the Arbitral Tribunal.
Power to award interest
In the Supreme Court’s decision in Govt. of Orissa (Dept. of Irrigation) vs. G. C. Roy (1992), it was held that an arbitrator can only award interest from the date of passing the award to the date of decree or realisation. However, this was the case when the Arbitration and Conciliation Act of 1940 was in force. According to Section 31(7) of the Arbitration and Conciliation Act 1996, there are no restrictions on the power of the arbitrator or arbitral tribunal to award interest.
Correction of arbitral award
A legally enforceable award must be free from errors and aptly made. However, human errors are inevitable. However, the Arbitration and Conciliation Act, 1996, provides a provision to which parties can resort for correction of such awards.
Errors that can be corrected
Computation errors
If the award involves the amount to be paid by the parties or the computation of any liability that is levied on any or both parties. The computed amounts must be accurate. When both the parties and the arbitrators know how it is going to be calculated and the amount in the award is merely a calculation error, then under Section 33(1)(a), relief can be sought.
Clerical or typographical errors
Clerical or typographical mistakes that change the meaning of the award. Where both the parties and the arbitrator know the intention of the award, but either the use of words makes the meaning otherwise or the parties are incorrectly named. In such a case, recourse to Section 33(1)(a) can be taken.
Accidental slip or omission
At times, issues are mentioned in the claim about which the award is silent. Such omissions need to be conveyed and addressed. A new award, thus covering the omitted issue, is necessary.
What is an accidental slip? In Rees vs. Earl of Plymouth and Ors. (2020), it was a case of appeal. The issue before the judge was whether an accidental slip meant just a typographical error or an accidental slip in the judge’s thought process as well? The appeal was rejected, saying that an accidental slip includes an error in the judge’s interpretation of evidence, causing an error in a decision.
It is pertinent to note that on the pretext of applying for a correction of the award, a party cannot request to make material changes to the award that tries to change its decision made on merit.
In M/S Chandi Construction vs. Executive Engineer (2013), the High Court of Punjab and Haryana specifically stated that “a party seeking a review against the merits of an arbitral award, cannot be allowed to take siege of Section 33 of the Act. An Arbitral Tribunal or the Arbitrator, as the case may be, can, within 30 days from the receipt of the arbitral award, correct any computation, clerical or typographical errors, or any other errors of similar nature, but the Section does not enable any judicial review of the judgement. The Arbitral Tribunal has specific and limited jurisdiction that cannot traverse beyond the scope of Section 33 of the 1996 Act.”
Procedure to apply for correction
The party seeking to apply for correction has to complete the following two things within 30 days from the receipt of the arbitral award:
Give notice to the other party that he/she is applying for correction of the arbitral award.
This notice must be in writing and must be served on the other party in the manner prescribed by the arbitration rules. The notice must state the grounds on which the correction is sought and must be accompanied by a copy of the arbitral award.
Apply before the arbitrator for correction of the arbitral award through a request letter.
This request letter must be in writing and must be submitted to the arbitrator in the manner prescribed by the arbitration rules. The request letter must state the grounds on which the correction is sought and must be accompanied by a copy of the arbitral award.
The arbitrator must consider the request for correction and issue a decision within 30 days of receiving the request. The decision of the arbitrator is final and binding on the parties.
If the arbitrator denies the request for correction, the party seeking correction may appeal to the court. The appeal must be filed within 30 days of the arbitrator’s decision. The court will review the arbitrator’s decision and may uphold, modify, or vacate the award.
However, if some other period is agreed upon for requesting a correction in the arbitration agreement, that shall apply.
The time limit for the correction of the award
An arbitrator, after receiving the request and being satisfied that the request is justified, has to correct the ward within 30 days of receiving the request.
Limitation period for setting aside an award
The limitation period for setting aside an award starts after the passing of the corrected award and not after the passing of the original award.
Suo moto correction
An arbitrator has the authority to correct certain errors in their award on their own initiative. This authority is limited to clerical or typographical mistakes, accidental slips, or omissions. The arbitrator must act within 30 days of passing the award to make these corrections.
The purpose of this provision is to allow arbitrators to correct minor errors that do not affect the substance of the award. This helps to ensure that the award is accurate and reflects the arbitrator’s true intent.
Here are some examples of errors that an arbitrator may correct under this provision:
- A typographical error in the name of a party.
- A mistake in the calculation of damages.
- The omission of a provision that was clearly intended to be included.
If an arbitrator discovers an error that they believe is substantial and affects the substance of the award, they cannot correct it on their own initiative. In this case, the arbitrator must seek the consent of the parties to correct the error. If the parties do not consent, the arbitrator may only correct the error if they are directed to do so by a court.
The ability of arbitrators to correct errors on their own initiative is an important safeguard that helps to ensure the fairness and accuracy of arbitration awards. This provision allows arbitrators to correct minor errors without the need for a lengthy and expensive court proceeding.
Interpretation of an arbitral award
An arbitral award must be clear and self-explaining. To execute an award, there should be clarity in understanding an arbitral award. If any of the parties are unable to interpret the arbitral award or any of its clauses specifically, they can seek an interpretation from the arbitrator of the same.
Procedure:
Within 30 days from the receipt of the award, the party seeking interpretation has to:
- Give notice to the other party that he/she is seeking an interpretation of the arbitral award.
- Apply for an interpretation of the arbitral award before the arbitrator through a request.
However, if some other period is agreed upon between the parties in their agreement, that shall apply.
The time limit for giving an interpretation:
An arbitrator has to, within 30 days from the receipt of such a request, give an interpretation of the award.
Effect:
The interpretation given by the arbitrator will form part of the original award.
Court on the misuse of this provision:
In CMI Ltd. vs. BSNL (2011), it was pointed out that under the pretext of seeking interpretation, a party cannot reargue their claim.
Additional awards
In the realm of arbitration, it occasionally occurs that certain claims raised by the parties during the proceedings are not explicitly addressed or resolved in the final arbitral award. This situation, known as an omission or silence in the award, requires careful attention and appropriate action to ensure that all claims are adequately dealt with.
When an arbitral award remains silent on specific claims, it is crucial that the issue be promptly brought to the attention of the arbitrator. The party or parties affected by the omission may file a request for an additional or supplementary award, also referred to as an “additional ward.” This request serves to clarify or rectify the incomplete nature of the initial award by addressing the outstanding claims.
The process of obtaining an additional ward typically involves submitting a formal request to the arbitral tribunal or the institution administering the arbitration. The request should clearly identify the specific claims that were omitted from the original award and provide any relevant arguments or evidence supporting the request. The tribunal or institution will then consider the request and decide whether to issue an additional ward.
The issuance of an additional ward is generally governed by the arbitration rules and applicable laws. In some jurisdictions, there may be specific time limits or procedural requirements that must be met when requesting an additional ward. It is essential to comply with these requirements to ensure the validity and enforceability of the subsequent award.
Once an additional ward is issued, it becomes part of the original arbitral award and has the same binding effect. The additional ward may address the omitted claims in full or may provide partial resolution, depending on the circumstances of the case.
In summary, when an arbitral award fails to address certain claims, it is important to promptly request an additional ward to ensure that all claims are fully and fairly resolved. The process of obtaining an additional ward involves submitting a formal request to the arbitral tribunal or institution, complying with applicable rules and time limits, and presenting relevant arguments and evidence. The additional ward, once issued, becomes an integral part of the original award and carries the same legal weight.
Procedure
The party seeking an additional award within 30 days from the receipt of the award has to:
- Send a notice to the other party notifying them of his intention to seek an additional award on the claims that the original award was silent on.
- Formally request the arbitrator for an additional award by bringing his attention to the claims that the original award was silent on.
However, if some other period has been agreed upon by the parties, that shall apply.
The time limit for passing an additional award:
An arbitrator has to pass an arbitral award within 60 days from the receipt of a request for it.
Effect:
An additional award will be considered a separate award with a distinct identity.
Extension of Period:
An arbitrator or arbitral tribunal may extend the time limit for correction, interpretation, or passing an additional award.
Application on Section 31:
Section 31 will also apply to the correction made, the interpretation stated, or the additional award passed by the arbitrator or the arbitral tribunal.
Role of Section 34:
In the landmark case of Geojit Financial Services Ltd. vs. Kritika Nagpal (2013), the Indian courts focused on the crucial issue concerning the scope of judicial intervention in arbitration proceedings. The case centred around the question of whether a party could seek judicial recourse if an arbitrator refused to adjudicate on a claim that had not been considered in the original arbitral award. The court’s decision in this case has significant implications for the interpretation of Section 34(4) of the Arbitration and Conciliation Act, 1996, which empowers courts to intervene in certain limited circumstances.
The facts of the case were as follows: The parties had entered into an agreement containing an arbitration clause. A dispute arose, and the matter was referred to arbitration. In the course of the arbitration, the claimant raised additional claims that were not part of the original claim. The arbitrator, however, declined to consider these additional claims, holding that they were beyond the scope of the arbitration agreement. The claimant then approached the court under Section 34(4) of the Arbitration Act, seeking a direction from the arbitrator to adjudicate on the additional claims.
The court, in its judgement, held that Section 34(4) does indeed provide a mechanism for judicial intervention in cases where an arbitrator refuses to consider a claim that is within the scope of the arbitration agreement. The court observed that the purpose of Section 34(4) is to ensure that arbitral awards are complete and final, and that all claims between the parties are resolved in a fair and just manner. The court further held that the power of the court under Section 34(4) is limited to directing the arbitrator to eliminate any ground that may lead to the setting aside of the award on the ground of incompleteness.
The court’s decision in Geojit Financial Services Ltd. vs. Kritika Nagpal is a significant development in Indian arbitration law. It clarifies the scope of judicial intervention in arbitration proceedings and provides a much-needed mechanism for parties to seek redress when an arbitrator refuses to consider all claims within the scope of the arbitration agreement. The decision also underscores the importance of ensuring that arbitral awards are complete and final and that all disputes between the parties are resolved in a fair and just manner.
Conclusion
The purpose of Section 33 of the Arbitration and Conciliation Act, 1996, is nothing but to provide procedural efficiency. The remedy it gives should be sought before the Arbitrator within time, as no such applications for correction of the award can be sought before the executing court or under the Application before the court under Section 34 which deals with grounds for setting aside an award. Section 33 helps in eliminating human errors and thus makes the arbitration mechanism even more preferable, along with its other major benefits.
References
- https://www.mondaq.com/india/arbitration–dispute-resolution/1089272/interplay-between-the-scope-of-correction-and-setting-aside-of-an-arbitral-award-under-the-arbitration–conciliation-act-1996
- Law of Arbitration & Conciliation and Alternative Dispute Resolution Systems, Avtar Singh
- Arbitration & Conciliation Act, 1996 with Alternative Means of Settlement of Disputes, Dr. S. C. Tripathi
