Section 34(4) of the Arbitration and Conciliation Act, 1996: A Second Chance for an Arbitral Tribunal?

At its simplest, arbitration means assigning a dispute, for the purposes of adjudication, to a third, neutral person, who is appointed by the parties mutually, rather than engaging in court proceedings. The decision arrived at by such a third person, as per the Arbitration & Conciliation Act, 1996 (“Act”), is binding upon both the parties. The purpose and objective of resorting to the arbitration mechanism, as stated in the Act as well, is to adjudicate and resolve the disputes between the parties, with minimal judicial intervention.

However, at the stage of Section 34, the Act paves a narrow way for judicial intervention. In terms of the said provision, an award may be set aside if it suffers from any of the grounds enumerated under section 34(2) of the Act.

There have been times when an award passed by the arbitral tribunal had some gaps or flaws. The tribunal, in such cases, may have awarded a claim either without assigning proper reasoning behind arriving at such a finding or without assigning any finding at all, which draws a Section 34 challenge. Setting aside the whole award, due to some gaps in the reasoning for passing the award, can cause a great harm to either of the parties.

To save the parties from such hassle, and to uphold the object of the Act, Section 34(4) comes to the rescue. It allows the Courts to adjourn the proceedings under Section 34 for a while, and offer an opportunity to the arbitral tribunal to cure and rectify the defects in the award.

Section 34

Section 34 is the mechanism which allows the Courts to set aside the award on the grounds laid down in Sections 34(2) and 34(2A) of the Act. However, it has been time and again reiterated by the Hon’ble Supreme Court that neither can a Court sit in appeal over an arbitral award unless it falls within the stated categories, nor can it re-evaluate the pleadings and re-appreciate the evidence led by the parties, under Section 34 of the Act [Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49].

Extent of applicability of Section 34(4)

Before 1996, the Arbitration Act, 1940 allowed a Court to send an award back to the arbitrator for reconsideration with an aim of curing the defects based on which the award was set aside. The idea behind the implementation of Section 34(4) is borrowed from Article 34(4) of the Model Law.

When a Section 34(4) application is filed before the Court, it may adjourn the proceedings under Section 34 for such a period of time as the tribunal may take to remove the grounds on which the award could be set aside. However, the power is discretionary, and a court is under no duty to exercise it.

Under Section 34(4) of the Act, the arbitral tribunal may only be allowed to fill in the gaps to its already given reasoning, or may be allowed to assign the reasons to an already arrived-at finding. In no circumstances may the arbitral tribunal be allowed to arrive at a new finding altogether, which was not a part of the award at the time of passing it. [Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1 and I-Pay Clearing Services Pvt. Ltd. v. ICICI Bank Ltd., (2022) 3 SCC 121]

The proceedings under Section 34(4) of the Act are set in motion by a party’s request and serve one purpose, which is to remove the ground of challenge and put forth an award which can be executed. Although in Kinnari Mullick v. Ghanshyam Das Damani, (2018) 11 SCC 328 the Hon’ble Supreme Court had interpreted that a written request has to be made for remitting back the award to the tribunal and no oral request shall be entertained. The said interpretation was not accepted & followed by the Hon’ble Supreme Court in its subsequent judgment of Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (2025) 7 SCC 1 whereby it was held that an oral request can be made for remitting award back to the arbitral tribunal.

Interpretation(s) of the provision so far

Looking at the cases, it shows that while Kinnari Mullick (supra) dealt with procedure and timing, Dyna Technologies (supra) and I-Pay (supra) laid down what can actually be cured. Recently, Gayatri Balasamy (supra) not only retained the tests laid down in Dyna Technologies (supra) and I-Pay (supra), but also relaxed the procedural side.

The Hon’ble Supreme Court, keeping in mind the judicial precedents with respect to minimum judicial intervention of the Courts in the arbitration regime, and with the wider interpretation of Section 34(4) of the Act, has tried to minimise the hurdles being created in the enforcement & execution of the otherwise well-reasoned award, which can easily be done when the arbitral tribunal fills the gap when the award is rendered back to it.

Conclusion

Although the principle is now fairly settled, the just and proper application of the said provision is yet to be achieved due to the prevailing ambiguity between the curable and incurable defects. Section 34(4) works at best as a narrow repair tool, and not as a right to a second hearing. Further, the Courts should also be mindful of the fact that this provision might be used by the award-debtors as a dilatory tactic, which may defeat the entire purpose of resorting to arbitration, i.e., timely adjudication of disputes as well as enforcement of the award. Courts, in such situations, shall also be willing to impose costs, where it becomes clear that the remand request is plainly a delaying move. Finally, arbitral institutions can help at the front end by reviewing draft awards for missing issues and missing reasons, as some institutional rules already do, which would highlight the defects before the award is finally passed.