Madras High Court judge finds Division Bench orders unworkable after SC judgment, asks litigants to review

A single-judge of the Madras High Court recently delivered a sharp critique of Division Bench remand orders in six arbitration cases, stating that the appellate courts failed to discharge their duty by ordering fresh Section 34 hearings without examining or reversing the original findings on merits. [Electronics Corporation of India v. ICMC Corporation Limited].

Justice N Anand Venkatesh said that this created an “unusual and unprecedented legal conundrum” in which the Section 34 court had no jurisdiction to proceed.

Therefore, he directed litigants to approach the Division Benches with review petitions

The judgment spans six arbitration matters involving public bodies and large infrastructure contracts: ELCOT’s dispute with ICMC Corporation over LD imposition; disputes between IRCON International and the Tamil Nadu government concerning idling charges and price variation claims; cross-challenges between URC Construction and the Airports Authority of India over Chennai Airport works; and a challenge by the Chennai Port Trust to a majority award favouring Chennai Container Terminal Pvt Ltd.

Each matter had been decided in detail through reasoned Section 34 orders passed between January and October 2020.

However, in 2024, Section 37 Division Benches remanded all these matters back to the single-judge for a “de novo Section 34 legal drill,” stating that they were in a “peculiar situation” because the original orders had partially modified arbitral awards - a course which, after the Supreme Court’s ruling in Project Director, NHAI v M. Hakeem (2021), was considered impermissible.

Justice Venkatesh highlighted the contradiction in the Division Benches’ approach. On the one hand, the appellate courts declared that “we have not expressed any view or opinion on the merits of the matter.” On the other hand, they set aside the earlier judgments only to allow a fresh hearing, without disturbing the underlying findings.

This, he held, made performance of the remand impossible. The Court said,

"Thus, where the appellate court does not enter into the merits of the matter and orders re-trial the order of remand would be, apart from being wholly illegal, completely unworkable since the findings on merits would remain and is not vacated so as to allow the trial court to examine the issue afresh by way of a re-trial."

The Court then examined the procedural framework governing remand under the Code of Civil Procedure, which applies to Section 37 appeals in the Madras High Court through Rule 9(v) of the Madras High Court Arbitration Rules, 2020. Justice Venkatesh observed that a wholesale remand can be made only under Order XLI Rules 23, 23-A and 25 CPC — all of which require the appellate court to reverse the judgment on merits, find a retrial necessary, or call for a finding on a specific issue while retaining seisin of the appeal. The judgment said,

"The interpretation of Rule 23-A of Order XLI by the Hon'ble Supreme Court has made it clear that the appellate court must 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 judge noted that the Division Benches had not reversed the findings, had not identified any procedural violation such as absence of notice or death of a party, and had not pointed to any failure by the first court to adjudicate claims. He cited the Supreme Court’s reminder that “The appellate court cannot shirk its duties,” holding that the Division Benches should have decided the appeals on merits by applying the law as it stood.

The judgment also records the changed legal landscape. When the Division Benches remanded the cases, Hakeem barred modification of arbitral awards. But in April 2025, the Supreme Court in Gayatri Balasamy v ISG Novasoft Technologies recognised limited circumstances where courts may modify awards, including severable invalid portions, clerical errors and post-award interest corrections. Justice Venkatesh wrote that the new ruling “qualifies” the earlier understanding and “alters the foundation” on which the Division Benches proceeded.

He also stressed the practical burden of a second Section 34 review, stating that the earlier judgments were “fully reasoned” and involved extensive scrutiny of evidence, claims and counterclaims.

"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."

Concluding that the remands were incapable of implementation, the Court held that the only workable course was for the Division Benches themselves to correct their orders. Justice Venkatesh, therefore, closed all six Section 34 petitions, granting liberty to the litigants to file review applications before the concerned Division Benches within four weeks.

"This Court having pondered and fervently perambulated within the statutory perimeters of the legal position as regards remand, 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," the judgment said.

[Read Judgment]