Matter: I-Pay Clearing Services Pvt. Ltd. v. ICICI Bank Ltd
Order dated: 03 January 2022
I-Pay Clearing Services Pvt. Ltd. (“I-Pay”) and ICICI Bank Ltd. (“ICICI”) entered into an agreement wherein I-Pay was to provide software technology, management, and operations for a ‘Smart-Card’ based loyalty program for Hindustan Petroleum Corporation Ltd. Owing to sudden termination of the agreement at the hands of ICICI, without stating reasons for the same, dispute arose between the parties and I-Pay invoked arbitration. The Arbitral Tribunal passed an award in favour of I-Pay on the ground that there was no accord and satisfaction between the parties. However, the Arbitral Tribunal failed to give adequate reasons in support
of its finding. Being aggrieved by the award, ICICI filed an application before the Bombay HC to set-aside the award. While the hearing of this application was underway, I-Pay also filed an application seeking directions to adjourn the proceedings for a period of three months and for directions to the Arbitral Tribunal to reconsider the issues. I-Pay contented that the lack of reasons or gaps in the reasoning of an award is a ‘curable defect’ and in such a case, the Arbitral Tribunal can be directed to resume the proceedings to rectify such defects and fill such gaps. I-Pay’s application was rejected by the HC, and this order was challenged before the SC.
The issue before the SC was whether, in the absence of any reasons accorded to the findings on a particular issue by the Arbitral Tribunal, the matter can be relegated to the Arbitral Tribunal? The SC noted that the provisions of Arbitration and Conciliation Act, 1996 (“Arbitration Act”) which allow for the relegation of the award for reconsideration before the same Arbitral Tribunal, can only be used to record reasons for findings previously made in the award or to fill in the gaps in the award’s reasoning. The SC opined that the intention behind this remission is a ‘curative alternative’ to not set aside an award, and that only additional reasons could be attested to the findings already recorded in the award, whereas a finding already concluded cannot be changed or altered under the guise of provisions of remission.
The SC observed that certain relevant letters and evidence produced before the Arbitral Tribunal to prove ‘accord and satisfaction’ between the parties were not considered and this approach, in essence, amounts to patent illegality. The SC agreed with the view taken by the HC and that such aspects of patent illegality in the award require application of judicial mind and are to be considered by the court itself, and therefore the SC upheld the HC’s order dismissing I-Pay’s application.