Isabella Mariam

The High Court of Madras Single Bench of Justice N. Anand Venkatesh held that the remand directions issued by appellate courts under Section 37 of the Arbitration and Conciliation Act, 1996 were legally incapable of implementation because none of the orders displaced or reversed the earlier findings on merits. The Court noted that the situation was unprecedented, as the statutory framework under the Civil Procedure Code permits a de novo remand only when an appellate court first overturns the underlying conclusions. The disputes arose from challenges to arbitral awards where parties sought rehearing pursuant to the remand orders. The Court ultimately determined that, since the earlier findings continued to subsist, a fresh adjudication could not be undertaken in law.

The matters before the Court consisted of several petitions filed under Section 34 of the Arbitration and Conciliation Act, 1996. These petitions arose from arbitral awards issued in contractual disputes involving Electronics Corporation of Tamil Nadu Limited and ICMC Corporation Limited; Ircon International Limited and the Government of Tamil Nadu, represented by the Superintending Engineer (H), SCRD Circle, Villupuram; URC Construction (P) Ltd. and the Airports Authority of India; and the Chennai Port Trust and Chennai Container Terminal (P) Ltd. The disputes related to contracts concerning construction works, supply arrangements, project execution, and financial claims arising from performance of the agreements.

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Each Arbitral Tribunal had adjudicated claims concerning delayed payments, liquidated damages, idling charges, escalation, increased costs of materials and labour, interpretation of specific contractual clauses, retention money, and interest. The petitions filed under Section 34 challenged these awards on the statutory grounds available under the Arbitration Act, supported by contractual documents, project records, technical materials, correspondence, and financial statements that formed part of the arbitral record.

After the Section 34 petitions were decided by different Single Judges through detailed orders examining evidence and contractual provisions, the aggrieved parties filed appeals under Section 37. These appellants included Electronics Corporation of Tamil Nadu Limited, ICMC Corporation Limited, Ircon International Limited, the Government of Tamil Nadu, the Airports Authority of India, and Chennai Container Terminal (P) Ltd. During these proceedings, reference was made to the then-pending matter before the Supreme Court concerning the scope of powers under Sections 34 and 37, particularly the ability of courts to modify arbitral awards.

On the basis of these discussions and with consent of counsel, the Division Bench issued remand orders directing de novo consideration by the Section 34 Court without addressing the merits of the findings made earlier. The record indicated that the original Section 34 orders contained extensive analyses of the contractual issues, evidence, and claims, while the remand directions did not disturb those findings.

The Court framed the central question of law as: “Whether an order of de-novo remand can be implemented by the Section 34 Court when the appellate court in an appeal under Section 37 has not gone into the merits and set aside/vacated the same?”

At the threshold, the Court noted: “At the outset, this Court is aware that the orders of remand have been passed by consent. They have not and cannot be challenged. In normal circumstances, the Court to which the remand is made cannot defy the order of remand. But this is not a normal or usual case. The difficulty arises since the order of remand has been made without going into the merits.”

Explaining the resulting predicament, the Court recorded that it had “pondered and fervently perambulated within the statutory perimeters of the legal position as regards remand” and “finally finds itself in a legal conundrum since now a very unfortunate situation has arisen where the ‘de-novo legal drill’ contemplated by the Division Bench simply cannot be given effect to.”

On the doctrine of merger and the nature of the remand, the Court stated: “It is for the above reason that it has been consistently held that the doctrine of merger would not apply where the appellate court does not affirm/reverse or modify the decree on merits.” It pointed out that “no order of remand can be passed unless the appellate court reverses the judgment of the learned single judge on merits” and that the Supreme Court’s interpretation of Order XLI Rule 23-A requires the appellate court to “go into the merits, set aside/vacate the findings and then order de-novo proceedings. This is the real impediment in this case as the merits have been left completely untouched while passing the order of remand.”

The Court also noted the subsequent development in arbitration law: “The aforesaid position of law held the field till 30.04.2025 when the Supreme Court delivered its decision in Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (2025) 7 SCC 1. In the said decision, the majority view set out in the judgment of Sanjiv Khanna, CJ held that the jurisdiction under Section 34 included the power to modify an award under certain limited circumstances.”

As to fairness to litigants and use of judicial time, the Court observed that the earlier Single Judges had “painstakingly gone through the records, spent several hours hearing the matter and writing a detailed judgment” and that “in these times, when judicial time is severely scarce it would seem to be a complete waste of time to repeat the exercise which has already been undertaken earlier but which has been knocked off by a sidewind by the order of remand without pointing out any perversity or error in reasoning.”

It further stated: “This Court must also factor in the fact that the litigant has also spent a considerable sum of money towards court fees, and an even more considerable sum of money to have their respective stands defended. In the opinion of this Court, when litigants come to the highest Court in this State, they are entitled to a certain standard and quality of justice.”

In this “unusual and unprecedent backdrop” the Court concluded that its “hands are tied by an unsurmountable legal obstacle” and that the “only effective remedy for the parties is to necessarily approach the Division Bench by way of appropriate applications to review the various orders of remand passed in the OSA’s.”

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The Court held that, in view of the legal impediment to giving effect to a de novo remand without the appellate court first vacating the findings on merits, the appropriate course lay before the Division Bench. It therefore directed that “the petitioners/respondents who were the appellants in their respective OSA’s … before the Division Bench are granted liberty to approach the Division Bench by way of applications seeking review of the common orders/orders passed in their respective appeals.”

If such review applications are filed “within four weeks from the date of receipt of a copy of this order, the Registry shall entertain and number the same without any objection as to limitation.”

The Court added that, “depending on the outcome of the review applications, the petitioners are granted liberty to revive these OP’s if the need or circumstances so arise. The Original Petitions are closed with the aforesaid liberty and directions. There shall be no order as to costs.”

Advocates Representing the Parties

For the Petitioner: Mr. E. Srikanth

For the Respondent: Mr. M. S. Krishnan, Senior Counsel for Mr. J. James

Case Title: Electronics Corporation Of Tamil Nadu Limited v. ICMC Corporation Limited
Neutral Citation: 2025:MHC:2614
Case Number: OP No.821 of 2019
Bench: Justice N. Anand Venkatesh