Recently, the Allahabad High Court held that the closure and return of a Section 34 of the Arbitration and Conciliation Act, 1996 application by the Commercial Court, Kanpur Nagar, on the ground of lack of jurisdiction, effectively amounts to refusal to set aside an arbitral award. The case involved an award passed by the U.P. State Micro & Small Enterprises Facilitation Council, Kanpur. The court highlighted the significance of the ‘effect doctrine,’ observing that the actual impact of an order matters more than its label.
The appellant had challenged an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996. During the pendency of proceedings, ICICI Bank filed for Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016, before the NCLT. The Commercial Court, taking note of the NCLT order and relevant provisions of the Code, closed the Section 34 proceedings for lack of jurisdiction and returned the application. The respondents’ bank guarantee was released, and subsequent applications by the appellant for correction and restoration were rejected.
The appellant contended that the closure of the Section 34 application was ex facie illegal and contrary to law. It was argued that the provisions of the Code were misconstrued, and Section 33, which applies only during liquidation, was wrongly invoked. Relying on ESSAR Constructions v. N.P. Rama Krishna Reddy and Chintels India Limited v. Bhayana Builders Private Limited, the appellant asserted that the appeal was maintainable under the effect doctrine.
The respondents argued that the appeal under Section 37 was not maintainable. The Commercial Court had only returned the application for lack of jurisdiction and did not refuse to set aside the award. Reliance was placed on BGS SGS SOMA JV v. NHPC Ltd.
The High Court observed that Section 37 allows appeals only against orders setting aside or refusing to set aside an arbitral award under Section 34. Applying the effect doctrine, the court noted that the Commercial Court’s order, closing and returning the application without indicating an alternative forum, effectively terminated the challenge, thus amounting to refusal to set aside the award.
The Court noted, "The order returning the application without indicating an alternative forum, which factually does not exist, seals the fate of the application once and for all, and therefore amounts to refusing to set aside the award impugned under Section 34 of the Act."
It further clarified that even procedural grounds, if they result in complete termination of the challenge, must be treated as refusal to set aside the award.
The Allahabad High Court overruled the preliminary objection on maintainability raised by the respondents. It held that the appeal under Section 37 of the Arbitration and Conciliation Act is maintainable and listed the matter for further proceedings on 23.09.2025.
Case Title: Jaiprakash Associates Limited vs. High Tech Tyre Retreaders Pvt. Ltd. and another
Case No.: Appeal Under Section 37 of Arbitration and Conciliation Act 1996 Defective No. - 112 of 2025
Coram: Chief Justice Arun Bhansali, Justice Kshitij Shailendra
Advocate for Petitioner: Adv. Rohan Gupta, Pranay Kumar
Advocate for Respondent: Adv. H.N. Singh (Sr. Advocate), Sumit Daga
Read Order @LatestLaws.com
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