Calcutta High Court
Videsh Sanchar Nigam Limited vs Shapoorji Pallonji And Company Limited on 9 April, 2008
Author: Ashim Kumar Banerjee
Bench: Ashim Kumar Banerjee
Form No. J.(2)
IN THE HIGH COURT AT CALCUTTA
In Appeal from its Constitutional Writ Jurisdiction
Original Side
Present :
The Hon'ble Mr. Justice Ashim Kumar Banerjee
And
The Hon'ble Mr. Justice Tapas Kumar Giri
A.P.O No. 455 of 2007
Arising out of
A.P.No. 288 of 2005
Videsh Sanchar Nigam Limited
-Vs-
Shapoorji Pallonji and Company Limited
For the Appellant : Mr. Anindya Kumar Mitra, Senior Advocate
Mr. Pratap Chatterjee, Senior Advocate
Mr. Abhrajit Mitra
Mr. Sakya Sen
Mr. Jishnu Chowdhury
Mr. Joseph Banerjee
For the Respondent : Mr. Hirak Kumar Mitra, Senior Advocate
Mr. S.N.Mukherjee, Senior Advocate
Mr. Debdutta Sen
Mr. Soumen Sen
Heard on : February 7, 2008; February 20, 2008; March 05, 2008; March 12, 2008;
March 19, 2008 and March 26, 2008; March 28, 2008; March 31, 2008
and April 1, 2008.
Judgment on : April 9, 2008.
ASHIM KUMAR BANERJEE.J:
The appellant Videsh Sanchar Nigam Limited (hereinafter referred to as "VSNL")
issued a notice inviting tenders for construction of their office complex at Ultadanga,
Calcutta. Shapoorji Pallonji and Company Limited (hereinafter referred to as
"SPCL") became the successful tenderer. An agreement was entered into by and
between the parties on August 22, 1996. The said agreement also found the parties to
abide by General Terms and Conditions of Contract which, inter alia, contained an
arbitration clause to resolve future dispute, if any. As per the letter of intent SPCL
was to commence work on March 28, 1995 and to finish the construction within 21
months i.e., by December 27, 1996. Despite the stipulated period being over
construction could not be completed. Ultimately, the construction was completed and
complex was handed over on or before March 31, 1999. According to SPCL, the
construction could not be completed earlier in view of non-co-operation on the part
of the VSNL. VSNL denied such charge. Four letters asking for extension and reply
thereto are relevant herein being letter dated February 10, 1999; March 25, 1999;
April 28, 1999 and December 27, 1999 appearing at pages 177, 182, 189 and 227
respectively of Volume-I of the brief of documents.
By the letter dated February 10, 1999 VSNL contended, the contract is to continue to
be in force till the completion of the work or its abandonment. As neither party has
abandoned the work, the contract continues to be in force till its completion. In
paragraph 3 of the said letter VSNL asked SPCL to submit necessary application for
extension of time beyond August 31, 1998. By the said letter it was also pointed out
that some important items of work were badly delayed in the later part of 1998
although payments were made from time to time.
By the letter dated March 25, 1999 VSNL informed SPCL that final programme for
completion of the project had not been received by them. Testing, repairing and other
works were still pending. Project management consultancy services would be
available only upto March 31, 1999. VSNL stated, we hope all measurements after
the execution has been done till date for their processing. SPCL was also advised to
speed up the job so that final bill could be submitted.
SPCL by their letter dated April 28, 1999 recorded that the work had been completed
to the satisfaction of VSNL. They gave details of the cause of delay and prayed for
extension upto March 31, 1999 in terms of Clause 9.4 of the agreement.
By the letter dated December 27, 1999 VSNL replied to the letter of SPCL, the
contents of the said letter are quoted below :-
"This has reference to your letter NO. SP/GMW/VSNL-CAL/99/04281 dated 28th
April, 1999 and it is hereby informed that the date of completion of the contract has
been extended upto 31-12-97 without prejudice to the rights of the purchaser in the
contract.
Under the circumstances you are advised to revalidate the Performance Bank
Guarantee which is expiring on 31-12-99. This has to be acknowledged before 29th
or 30th of this month."
Pertinent to note, while granting extension upto December 31, 1997 vide letter dated
December 27, 1999 VSNL did not assign any reason as to why the extension was not
granted upto 31st March, 1999 as prayed for by SPCL.
Parties raised their claims and cross-claims. According to VSNL the contract was for
Rs. 21.00 Crores which was subsequently enhanced to Rs. 25.00 crores
approximately out of which about Rs. 23.00 crores had already been paid. However,
while making payment of 37th and 38th running account bills VSNL deducted a sum
of Rs. 57.68 lacs on various account. Such deduction was, however, opposed by
SPCL. As per the arbitration clause the matter should be resolved by Indian Council
of Arbitration (hereinafter referred to as "ICA"). The parties chose their respective
nominees. The council appointed the third Arbitrator. Three retired Judges of this
court thus became members of the Arbitral Tribunal to resolve the dispute. Parties
submitted their pleadings before the Tribunal. Arbitration commenced on March 12,
2002. After 5/6 routine sittings the claimant, SPCL through Mr. Hirak Kumar Mitra,
learned senior counsel, started placing their case. The Tribunal recorded minutes of
the meeting on each occasion as also maintained Order Sheets for each day's hearing.
Thus tribunal maintained two sets of recordings being minutes of the meeting as well
as order sheets. We were handed over each set of compilation of order sheets and
minutes which we would be referring to as and when necessary. Mr. Hirak Kumar
Mitra started making submission on April 22, 2002 and continued till January 17,
2003. While Mr. Mitra was continuing his submission issues were suggested by
parties on November 14, 2002. On perusal of the minutes as well as order sheets we
find that except issue no. 12 the parties were ad idem on other issues. VSNL objected
to issue no. 12(a) and 12(b). There had been dispute with regard to the 12(c) also.
Ultimately on December 5, 2002 the issues were settled by the Tribunal. Mr.
H.K.Mitra continued his submission and concluded on 17th January, 2003. On
January 14, 2003 just on the eve of closing of the claimant's submission Learned
counsel appearing for VSNL prayed for suitable direction for filing affidavit of
evidence. The Tribunal on such prayer passed the following order -
"Mr. Pratap Chatterjee, learned Senior Counsel for the Respondent, has submitted
that the opportunity be given to his client to rely on affidavit evidence. He requests
the Tribunal for giving suitable directions for filing of such affidavit and counter-
affidavit, if any.
Mr. Mitra, Ld. Senior Counsel for the Claimant, has strongly opposed this
submission on the ground that the parties have all throughout proceeded that no
affidavit evidence or oral evidence will be adduced in the proceeding and they will
proceed on the basis of the materials disclosed and at the fag end of his argument, if
any such direction is given, it will prejudice his clients enormously.
We have considered the submissions of the Ld. Counsel for the parties. In our view,
the parties have proceeded from the very beginning that no oral evidence or affidavit
evidence would be adduced in this matter although it was not formally recorded
earlier but from the proceedings so far held, it will be evident that the submission of
Mr. Mitra is correct. We, therefore, reject the prayer of Mr. Chatterjee for taking
affidavit evidence or oral evidence."
Mr. H.K.Mitra concluded his submission on the next date i.e. on January 17, 2003.
On February 13, 2003 an affidavit was affirmed by one Mr. S.K.Chowdhury on
behalf of VSNL and the same was admitted to be filed before the Tribunal. The
Tribunal although taken the same on record did not permit the same to be filed. The
learned counsel for VSNL then started his argument without prejudice to the rights
and contentions for insisting upon admission of affidavit of evidence of Shri
S.K.Chowdhury. The order passed by the Tribunal on February 15, 2003 in this
regard is quoted below :-
"Affidavit evidence of Mr. S.K.Choudhury is not permitted to be filled by the
Respondent and the same is taken on record.
Mr. Pratap Chatterjee, Ld. Counsel for the Respondent, submits that he is
commending his submission without prejudice to the contention of the Respondent
that the affidavit of Sushanta Kumar Choudhury should have been admitted in the
evidence by the Ld. Arbitrators.
Mr. Hirak Mitra, Ld. Counsel for the Claimant, submits that it was all throughout
agreed between the parties that no evidence either on affidavit or viva voce would be
adduced in this proceedings and on that basis he has advanced his argument on the
entire matter. It is too late for anyone to change the agreed procedure which was
accepted by both the parties all throughout and there is nothing of further
appearance on the part of Mr. Chatterjee without prejudice. This is something
unknown in law.
In reply, Mr. Chatterjee submits that there was no such agreed procedure and that is
the recollection of each of the persons appearing on behalf of the Respondent as well
as his client present at the meetings before the Ld. Arbitrators.
We had already passed an order on 14th January, 2003 which correctly records the
fact. We are not inclined to grant leave to file affidavit competence at this stage after
conclusion of the argument of the Claimant.
Mr. Chatterjee commences his arguments and continues with the same."
Arguments continued on behalf of the VSNL. Ultimately on February 26, 2003
VSNL filed an application for recall of the order dated January 14, 2003 as also for
necessary direction for adducing evidence. Paragraph 12 of the said application and
the prayers made therein being relevant herein are quoted below :-
"12. Your petitioner humbly states that the order dated 14th January, 2003 rejecting
the petitioner's advocate prayer for adducting evidence may be recalled and/or
suitably modified and/or reviewed for the following reasons :-
(a) On 14th January, 2003 no prayer was at all made by the petitioner for leave to
adduce evidence.
(b) From the minutes of the meetings of the Arbitral Tribunal it would be evident
that the question of adducting oral and/or documentary evidence has not arisen at
any earlier point of time and therefore, the petitioner could not have even given the
impression to the Learned Arbitral Tribunal that evidence would not be adduced.
(c) From the minutes of the meeting of the Learned Arbitral Tribunal it would
appear that the stage for adducing evidence had not arisen at any earlier point of
time.
(d) The petitioner produced its first witness at the earliest opportunity even before
the stage of opening argument by the petitioner's Advocate.
(e) The petitioner had a right to adduce evidence and denial of such right would
amount to violation of the principles of natural justice and fair play.
(f) The parties had not been asked to submit a list of witness by ICC Council of
Arbitration and/or the Learned Arbitral Tribunal. This is the requirement prescribed
in Paragraph 6 of the "Guidelines for arbitrators and the parties to arbitration for
expeditious conduct of arbitration proceedings" published by ICC Council of
Arbitration. These guidelines are usually treated as a part of the Rules of Arbitration
of the Indian Council of Arbitration.
(g) The stage for adducing evidence is after the framing of issues. In fact this is
the standard practice followed in all Courts of Law. Issues were framed at the 14th
meeting held on 5th December, 2002. "
Prayer :
"(a) The order passed at the arbitration meeting held on 14th January, 2003 be
recalled;
(b) The petitioner be granted leave to adduce evidence in connection with the
present arbitration proceeding;
(c ) Ad-interim order in terms of prayers above;
(d) Such further or other order or orders be made and/or directions be given as
the Learned Arbitrators may deem fit and proper."
The Tribunal heard the parties on the application and ultimately rejected the same by
an order dated August 27, 2003. The Tribunal while passing the order of rejection
observed as follows
"On going through the sequence of events that had taken place in course of the
arbitral proceeding as recorded in the minutes of the proceeding and as briefly
stated above, it is evident that -
• The conduct of the parties reveals that they proceeded on the definite
understanding and consensus that no affidavit of evidence or oral evidence
would be adduced and that the Tribunal would proceed to arbitrate the
disputes on the basis of the documents relied upon and disclosed and
submissions made by the parties.
• Having regard to and accepted the procedures to be adopted for conducting
this proceeding, the parties proceeded on the basis of the said arrangements
and/or procedures and the Ld. Sr. counsel for the Claimant commenced and
continued with his arguments on behalf of the Claimant for about seventeen
days since 22.4.2002 and concluded the arguments on 17.1.2003.
• Just one day before the argument on behalf of the Claimant was concluded, the
Ld. Sr. Counsel for the Respondent prayed for leave of the Tribunal to adduce
evidence by way of affidavit. Mr. S K Chowdhury's affidavit was not ready till
then. His affidavit was affirmed on 13th February, 2003.
• Such prayer being disallowed, the Ld. Counsel for the Respondent commenced
his arguments on 15.2.2003 and has been continuing with the same."
After rejection of the prayer for adducing evidence the Tribunal proceeded with the
hearing and ultimately published its award mostly in favour of the respondent. The
award is appearing at pages 165 to 182 of the Paper Book. After taking into account
the claims and cross-claims the Arbitrator awarded a sum of Rs. 8,94,65,783.00 in
favour of SPCL together with interest @ 18% per annum for the pre-reference period
as well as interest pendente lite. The Arbitrator also awarded interest @ 6.5% on the
awarded amount after expiry of three months from the date of making of the award.
Being aggrieved and dissatisfied with the award VSNL applied for setting aside of
the award. One of the grounds taken in the said application was that the VSNL was
not allowed to adduce evidence in support of their cross-claim. The learned Single
Judge by His Lordship's judgment and order dated November 15, 2007 appearing at
pages 345-380 of the Paper Book dismissed the application. While doing so His
Lordship not only rejected the primary ground taken by VSNL on rejection of their
prayer for adducing evidence but also dealt with the award on merits and ultimately
found that the challenge to the same could not be sustained save and except the claim
on account of escalation between January 1, 1998 and March 31, 1998. His Lordship
granted liberty to SPCL to seek a fresh reference on that score. His Lordship also did
not allow interest on the awarded amount for the period after June 30, 2002.
We feel it convenient to set out the portion of His Lordship's judgment dealing with
such preliminary ground. The same is extracted below :-
"But before the merits of the award can be addressed, to the extent they can in
proceedings of such nature, it is another aspect, more in the nature of a point of
order, that the petitioner raises. According to the employer, the nature of the claims
was such that it was incumbent on the contractor to adduce oral evidence in support
of its case. The petitioner complains that the petitioner sought to adduce oral
evidence on its understanding that during the first few months of the reference up to
the 14th hearing held on December 5, 2002, the claimant in the reference had merely
introduced its case to the Arbitral Tribunal and that only upon the issues being
settled by the Arbitral Tribunal at the 14th hearing, would the question of oral
evidence arise. The petitioner submits that it was up to the claimant to not adduce
oral evidence in support of its case, but the employer wanted to examine its officers,
not only to defend the claim but in support of the counter-claim that it put forth
before the Tribunal. The petitioner asserts that in shutting out oral evidence, the
Arbitral Tribunal misguided itself, and adopted a procedure unknown to the rules of
the Indian Council for Arbitration apart from causing serious prejudice to the
petitioner
According to the petitioner, the minutes of the proceedings before the Tribunal
preceding the 14th hearing, do not record that the parties had agreed that no oral
evidence would be adduced and, in any event, such a stage had not been reached
before the issues were finalised at the 14th hearing. In support of such contention,
the petitioner refers to the rules of the Council, particularly to Rules 44, 51 and 52
thereof to suggest that they postulate oral evidence being received. The petitioner
relies on Section 19 of the Arbitration and Conciliation Act, 1996 (the 1996 Act) and
submits that though such section that contemplates that the parties are free to agree
on the procedure to be followed by the Arbitral tribunal in conducting its
proceedings, but there was no agreement in the proceedings before the Tribunal that
oral evidence would not be adduced. The petitioner places Section 24 of the 1996 Act
to show that if the parties cannot agree then the arbitrator needs to decide whether
to receive oral evidence. The proviso to Section 24 (1) of the 1996 Act is stressed
upon in support of the contention that upon a request made by a party, the Arbitral
Tribunal is required to receive oral evidence.
The petitioner challenges the orders of January 14, 2003 and February 15, 2003 on
the aspect of oral evidence. The minutes prior to the 15th hearing suggest that the
claimant before the Tribunal was not merely opening the case or introducing the
facts to the Tribunal. The minutes of the meeting of December 12, 2002 show that
several cases were cited on behalf of the contractor and the law in support of the
contractor's case was placed. Surely, this was no ordinary opening where the facts
were placed, case laws presented and legal provision cited over fourteen sittings.
True, the issues were settled or taken on record only on December 5, 2002, but an
Arbitral Tribunal is neither strictly required to frame issues nor is the procedure of
trial as laid down by the Code of Civil Procedure needed to be adhered to in
arbitration. It would appear from the minutes preceding the 15th hearing that the
claimant was aware what the claimant was required to establish and went about the
business with the impression that all the evidence was before the Tribunal. The
procedure before an Arbitral Tribunal is informed and the Rules of the Council,
however, strict, cannot rob the proceedings of such informality. It is precisely the
informality in the conduct of proceedings that the parties chose in opting for
resolution of their disputes outside court. Rules 44, 51 and 52 referred to by the
petitioner relate to fast track arbitrations. It is not in dispute that the subject
reference was in the nature of fast track arbitration where the rules of procedure
from Rule 43 to Rule 57 would apply. Though it is irrelevant in the context, even if it
was a fast track arbitration, the mere fact that the rules of procedure had not been
strictly adhered to would not have rendered the award nugatory. The contractor has
relied on Rule 58 of the Council's Rules and on the guidelines appended to the Rules
as a guide for expeditious conduct of proceedings. If the Rules were to be strictly
applied, either party could make out a case in its support. While clause 6 of the
guidelines would suggest that oral evidence need be adduced only after issues have
been settled, and thus support the petitioner's challenge, it has to be appreciated that
the guidelines are, as they suggest, meant to be a guide for parties and arbitrators
and not to be applied or construed as a statute. Upon an arbitration agreement
providing for arbitration to be conducted by a particular body, the rules of such body
become the agreement as to procedure to be followed in course of the reference, but
unlike a statutory provision, such rules are subject to modification by conduct of
parties.
It appears that on January 14, 2003 the petitioner submitted for the first time in
course of the reference that it would adduce oral evidence and invited the Arbitral
Tribunal to give directions for filing affidavit in lieu of examination-in-chief and
counter affidavit, if any. The order of January 14, 2003 records that the claimant
opposed such submission on the ground that the parties had "although out
proceeded that no affidavit evidence or oral evidence would be adduced" and to
permit oral evidence to be received at the very end of the claimant's arguments
would seriously prejudice the claimant. The Arbitral Tribunal recorded that the
parties had proceeded "from the very beginning that no oral evidence or affidavit
evidence would be adduced....although it was not formally recorded earlier.." The
arbitrators agreed with the submission made on behalf of the contractor and rejected
the petitioner's request for adducing oral evidence. The petitioner did not rest upon
such order being made. On February 15, 2003, at the 19th hearing, the petitioner
attempted to file an affidavit of evidence by one of its officers that the Tribunal did
not permit. The petitioner participated in the reference thereafter without prejudice
to its contention that oral evidence sought to be adduced on its behalf should have
been received by the Tribunal.
A subsequent petition was filed by the petitioner for recalling the order of January
14, 2003 refusing leave for the affidavit of evidence on its behalf to be filed. Such
application was disposed of in August, 2003 by an order running into more than five
pages. In rejecting the application, the Arbitral Tribunal recorded that its first
sitting was held on March 12, 2002 and pleadings were required to be completed by
April 19, 2002 before the sitting scheduled for April 22, 2002. On April 22, 2002,
the claimant's case was opened and parties were directed to discover documents.
The time to file documents was subsequently enlarged. By the third siting, suggested
issues were submitted on behalf of the petitioner herein. At the fourth sitting held on
August 7, 2002, the claimant's arguments commenced. The order records that on
September 1, September 3, September 9 and September 11, 2002 elaborate
arguments were made on behalf of the claimant and all documents tendered till then
were relied upon. The issues were settled on December 5, 2002 and the claimant's
arguments continued on December 12, 2002 and January 14, 2003 and concluded on
January 17, 2003. After the petitioner was declined leave to file the affidavit of
evidence on January 14, 2003, it filed the application for recalling the order of
January 14, 2003 and during the pendency of such application the petitioner
proceeded with the matter on six days up to the beginning of May, 2003. The
arbitrators concluded that the conduct of the parties revealed that they proceeded on
the definite understanding and consensus that no oral evidence would be adduced
and the matter would be decided on the basis of documents relied upon and disclosed
and submissions made on behalf of documents relied upon and disclosed and
submissions made on behalf of the parties. The Arbitral Tribunal opined that it was
on such basis that the claimant proceeded and concluded arguments by January 17,
2003 and only a day before the claimant was to conclude arguments, a prayer was
made on behalf of the petitioner herein for adducing oral evidence. The Tribunal
recorded that even at such time the affidavit of evidence was not ready and such
affidavit was affirmed on February 13, 2003 after the claimant's arguments had been
concluded. The Tribunal was of the view that when the parties had, by their conduct,
accepted that no evidence other than documentary evidence would be adduced, the
petitioner could not be permitted to resile therefrom. The Tribunal also noted that
the affidavit of evidence presented for being filed was based "on information derived
from the records of (the) case and believed to be true" and doubted the need therefor
when the petitioner herein had already disclosed its documents. According to the
arbitrators, the petitioner herein sought to make out a case beyond its statement of
defence and counter-claim, and the arbitrators were of the view that the same could
not be permitted at that stage of the proceedings.
The petitioner relies on a judgment reported at (2003) 7 SCC 492 (Sohan Lal Gupta
v. Asha Devi Gupta) and places paragraphs 21 to 23 thereof:
"21. What would constitute a reasonable opportunity of putting case as also
qualification of the right has been stated in 'Russell on Arbitration', 22nd Edition,
paragraphs 5-054 which are in the following terms.
"5-053. A reasonable opportunity of putting case. Each party must be given a
reasonable opportunity to present his own case. This means he must be given an
opportunity to explain his arguments to the Tribunal and to adduce evidence in
support of his case. Failure to comply with this requirement may render the award
subject to challenge under Section 68 of the Arbitration Act, 1996. It is also a
ground for refusing enforcement of the resulting award under the New York
Convention.
5-054. Qualification of the right. The need to allow a party a reasonable opportunity
to present his case can give rise to difficulties. To what extent can the Tribunal
intervene where, for example, a party's submissions or evidence is needlessly long,
repetitive, focuses on irrelevant issues or is sought to be made over an extended
period of time? What if a party ignores procedural deadlines imposed by the
Tribunal but maintains he still has points to put before it in support of his case?
Inevitably each situation has to be dealt with in its own context but the following
general considerations should be taken into account."
22. There cannot, therefore, by any Court that a party does not have an
unfettered right. The Arbitrator cannot only ask a party to comply with procedural
order and directions including those imposing limits as to time and content of
submissions and evidence but also the Arbitrator has a right of managing the
hearing. In 'Russell on Arbitration', 22nd Edition the law is stated thus:
"5.057. Managing the hearing. Similarly, a Tribunal cannot be expected to sit
through extended oral hearings listening to long-winded submissions on irrelevant
matters. The Tribunal is entitled, and under Section 33 is obliged and encouraged,
to avoid the unnecessary delay and expense that would be caused by such an
approach. The Tribunal should take a grip on the proceedings and indicate to the
parties those areas on which it particularly wishes to be addressed and those which
it does not consider relevant to the real issues in dispute. If a party fails to heed such
guidance, the Tribunal might seek to focus the proceedings by allocating the
remaining hearing time between the parties. This the Tribunal is entitled to do,
provided it will allow a reasonable time for both parties to put forward their
argument and evidence."
23. For constituting a reasonable opportunity, the following conditions are
required to be observed:
1. Each party must have notice that the hearing is to take place.
2. Each party must have a reasonable opportunity to be present at the
hearing, together with his advisers and witnesses.
3. Each party must have the opportunity to be present throughout the
hearing.
4. Each party must have a reasonable opportunity to present evidence and
argument in support of his own case.
5. Each party must have a reasonable opportunity to test his opponent's
case by cross-examining his witnesses, presenting rebutting evidence
and addressing oral argument.
6. The hearing must, unless the contrary is expressly agreed, be the
occasion on which the parties present the whole of their evidence and
argument."
The Supreme Court judgement was rendered in a matter where the question raised
before it was as to what constitutes reasonable notice by an arbitrator. Two groups
held several properties, including partnership firms, limited companies and other
assets, in equal share. Disputes and differences arose between the two groups and
the disputes were referred to the arbitration of a chartered accountant and tax
consultant. The Supreme Court noticed that the jurisdiction of the arbitrator was of
wide import. During the arbitral proceedings, disputes arose as regards
management of some business and the arbitrator's intervention was sought. The
arbitrator made two awards, the first of division between the two groups and the
second of division between the members of one group. The internal division made
within one group was challenged by several members of such group. The award was
set aside on the ground of procedural irregularity holding that no reasonable notice
was issued to one of the members of the group in which internal division was
directed to be carried out by the second award. The Division Bench did not interfere
with the order of the Single Judge setting aside the award. The Supreme Court
noticed the challenges on the ground of procedural irregularity and following earlier
judgments held that the mere breach of the principles of natural justice without any
serious prejudice being suffered by the complainant was not enough ground for
upsetting the award on the count to procedural irregularity. The award as to
internal division within one of the groups that was successfully challenged before the
High Court, was reinstated by the Supreme Court.
The challenge here is again more on the shutting out of oral evidence on
behalf of the petitioner rather than any serious prejudice being suffered by it. The
petitioner may have suffered for oral evidence on its behalf not being received. But
even if the petitioner had made out a case of prejudice on account of oral evidence
on its behalf being shut out, the petitioner would have to first overcome the ground
put forward by the Arbitral Tribunal in the orders of January 14, 2003 and August
27, 2003 rejecting its plea. It is totally unconvincing that the petitioner herein was
under the impression till January 14, 2003 that the stage for receiving oral evidence
had not ripened. It is also difficult to appreciate that the petitioner herein would be
labouring under the impression that only after the claimant's arguments were
concluded would it be open for the petitioner herein to seek oral evidence to be
adduced on its behalf. Whatever the informality of procedure before the Arbitral
Tribunal, it cannot be stretched to make room for oral evidence on behalf of the
respondent to be received after conclusion of the claimant's arguments. There is no
necessity for a signed agreement to be made between the parties that no oral
evidence would be adduced in course of a reference just as there is no strict
requirement of the arbitrators recording such an agreement. It can be culled out, as
in the instant case, from the conduct of the parties and the manner in which they
approach the reference and proceed therein.
Again, it is a matter on which the arbitrators may have a last word and unless
the arbitrators' ruling thereon is so perverse to meet the exalted test under Section
34 of the 1996 Act, the court would not interfere. In this case the arbitrators
accepted the claimant's submission that the matter had progressed to the conclusion
of the claimant's arguments on the understanding that no oral evidence would be
adduced. The proceedings were conducted before the arbitrators and the arbitrators
have recorded that there was such an understanding. If there was no understanding
of such nature, then the court in setting aside proceedings, without the benefit of the
hearings that the arbitrators had, cannot conclude that there was no such
understanding contrary to the arbitrators' impression of there being an implied
understanding. Despite the agreement or understanding not being recorded earlier,
there are other pointers to substantiate the basis for the arbitrators to conclude that
the petitioner herein had given an impression that it would not seek to adduce oral
evidence in the reference.
The preliminary challenge to the award, on the ground of oral evidence sought to be
adduced by the petitioner being arbitrarily shut out, fails. "
Analysis of the extract quoted (Supra) reveals as follows :-
(i) Minutes prior to the 15th hearing suggest that the claimant before the
Tribunal was not merely opening the case or introducing the facts to the Tribunal.
(ii) Cases were cited. Hence, this could not be said to be an "ordinary opening".
(iii) Arbitral Tribunal is neither strictly required to frame issues nor is the
procedure for trial as laid down by the Code of Civil Procedure needed to be adhered
to.
(iv) Claimant was aware what the claimant was required to establish and proceeded
with an impression that all the evidence was before the Tribunal.
(v) Procedure before the Arbitral Tribunal was informal and the rules of the
council cannot rob the proceedings of such informality.
(vi) Rules 44, 51 and 52 referred to by the petitioner relate to fast track
Arbitration. It is not in dispute that the subject reference was in the nature of fast
track Arbitration where the rules of procedure from Rule 43 to Rule 57 would
apply.
(vii) Clause 6 of the guidelines suggests that oral evidence need be adduced only
after issues have been settled. Guidelines, however, are meant to be a guide for the
parties and arbitrators and not to be applied or construed as a statute.
(viii) Upon an arbitration agreement providing for arbitration to be conducted by
a particular body, the rules of such body become the agreement as to procedure to
be followed in course of reference, but unlike a statutory provision, such rules are
subject to modification by conduct of parties.
(ix) The petitioner participated in the reference thereafter without prejudice to its
contention that oral evidence sought to be adduced on its behalf should have been
received by the Tribunal.
(x) Arbitrator concluded that the conduct of the parties revealed that they
proceeded on the definite understanding and consensus that no oral evidence
would be adduced and the matter would be decided on the basis of the documents
relied upon and disclosed and submissions made on behalf of the parties.
(xi) Prayer for adducing evidence was made just one day before conclusion of the
submissions of SPCL. Even on that date the affidavit-of-evidence was not ready
which was subsequently affirmed on February 13, 2003 after the claimant's argument
had been concluded. Even if VSNL suffered prejudice on account of shutting out oral
evidence they would have to first overcome the ground put forward by the Tribunal
in the orders dated January 14, 2003 and August 27, 2003.
(xii) It is totally unconvincing that the petitioner herein was under the impression
till January 14, 2003 that the stage for receiving oral evidence had been ripened. It
is also difficult to appreciate that the petitioner herein would be labouring under
the impression that only after the claimant's argument were concluded would it be
open for the petitioner herein to seek oral evidence to be adduced on its behalf.
(xiii) There is no necessity for a signed agreement to be made between the parties
that no oral evidence would be adduced in course of a reference as there is no
strict rule of the Arbitrators regarding such an agreement. it cannot be culled out,
as in the instant case, from the conduct of the parties and the manner in which
they approach the reference and proceed therein.
(xiv) Arbitrator's ruling is final unless it is found to be perverse. The Tribunal
herein accepted SPCL's contention that the matter had progressed to the conclusion
of their argument on the understanding that no oral evidence would be adduced. If
there was no such understanding the Court in setting aside the proceedings, without
the benefit of the hearing that the arbitrators had, cannot conclude that there was no
such understanding contrary to the arbitrator's impression of there being an implied
understanding.
(xv) Despite such agreement or understanding being not recorded earlier there are
other grounds to substantiate the basis for the arbitrators to conclude that VSNL had
given an impression that it would not seek to adduce oral evidence in the reference.
Being aggrieved and dissatisfied with the judgment and order of the learned Single
Judge the appellant preferred the instant appeal. SPCL also filed cross-objection.
The appeal and the cross-objection were heard by us on the above mentioned dates.
Mr. Anindya Kumar Mitra, learned senior counsel appearing in support of the appeal
contended as follows :-
(i) Learned Judge erred in holding that the Rules 43 to 58 relate to fast track
Arbitration whereas except Rule 43 no other rule was applicable for fast track
Arbitration. Learned Judge also erred in holding that the instant arbitration was a fast
track Arbitration.
(ii) The parties agreed that the rules of the ICA would apply during arbitration
reference. Hence, such agreement in writing could not be overlooked and/or
bypassed by the Tribunal while proceeding with the reference.
(iii) Rule 52 squirely applied in the instant case where parties were entitled to
adduce evidence in support of their claims and/or cross-claims.
(iv) Under Section 7(3) of the Arbitration and Conciliation Act, 1996 the
agreement in writing making ICA rules applicable could only be avoided by
modifying such clause by another written agreement. In absence of such express
agreement the Tribunal erred in rejecting the prayer for adducing evidence.
(v) On a combined reading of Sections 7, 19 and 24 of the said act of 1996 it
would show that VSNL was entitled to adduce evidence at the appropriate stage
Arbitrators erred in rejecting such prayer.
(vi) The Tribunal observed that the rules were given a go bye by conduct of
parties. Such finding of the Tribunal was accepted by the learned Single Judge. Both
the Tribunal as well as the learned Single Judge failed to appreciate that when there
was specific agreement to the effect that ICA Rules would be followed the parties
could not have by their conduct bypassed such agreement.
(vii) Assuming that the Tribunal was free to proceed evolving their own procedure
rules of natural justice demanded adequate opportunity to be given to the parties to
adduce evidence in support of their claims and/or cross-claims.
To elaborate his submissions Mr. Anindya Kumar Mitra drew our attention to the
relevant rules of ICA. Mr. Anindya Kumar Mitra also referred to the pleadings being
the petition made before the Arbitrator entirely asking for opportunity to adduce
evidence as well as various paragraphs of the affidavit-in-opposition and the
affidavit-in-reply filed by the parties on the said application.
Mr. Anindya Kumar Mitra in support of his contention also relied on the following
decisions :-
(i) All India Reporter, 1948, Lahore, Page 50 (Tirath Singh & Anr. Vs. Isher Singh)
(ii) All India Reporter, 1951, Pepsu, Page 115 (Lal Chand Vs. Dev Raj)
(iii) 1998, Volume - 100(3), Bombay Law Reports, Page 739 (Vinay Bubna Vs.
Yogesh Mehta & Ors.)
(iv) 2003, Volume-VII, Supreme Court Cases, Page 492 (Sohan Lal Gupta (Dead)
Through Lrs. & Ors. Vs. Asha Devi Gupta (Smt.) & Ors.)
Mr. Mitra also relied on the passages from Boyd on Arbitration (Original Edition)
and Russell on Arbitration (22nd Edition).
Mr. Hirak Kumar Mitra, learned Senior Counsel appearing for SPCL, while opposing
the appeal contended as follows :-
(i) Once the right to adduce evidence was not specifically reserved when SPCL
was allowed to make submissions on merits such belated prayer was rightly rejected
by the Tribunal.
(ii) The issues were settled by the Tribunal for their own convenience. There was
no dispute on the settlement of issues except suggested issue no. 12(a) and 12(b)
which were ultimately reframed by the Tribunal. Hence, there was no occasion for
VSNL to have an impression that the appropriate stage did not come before
settlement of issues to pray for permission to adduce formal evidence.
(iii) Once the documents were submitted by the parties and formal proof was
agreed to be dispensed with as recorded in the order sheet dated October 2, 2002 the
right to adduce evidence stood waived by VSNL.
(iv) Even if VSNL had right to adduce evidence by their conduct and/or
understanding between the parties such right was waived and the Tribunal was right
in rejecting such belated prayer.
(v) The guidelines of ICA could not be given the status of statute. Hence, non-
observance of any of the clauses of the guidelines could not vitiate the entire
proceeding.
(vi) The prayer for adducing affidavit-of-evidence was rejected on January 14,
2003. The VSNL commenced their arguments on February 14, 2003 without
reserving their right to contend that they were entitled to have the said affidavit-on-
evidence to be received by the Tribunal.
(vii) While making prayer for adducing evidence reference was made to the
guidelines of ICA and not the rules. Rules were referred to only after making of the
formal application.
(viii) VSNL was inconsistent in their stand on the issue of adducing of evidence.
While elaborating his submissions Mr. Hirak Kumar Mitra drew our attention to the
minutes of the meeting as well as the order sheets maintained by the Tribunal. He
also referred to various paragraphs of the pleadings filed before the Arbitrator
pertaining to the prayer for adducing evidence. He contended that in view of Section
4 of the said Act of 1996 the right, if any, of VSNL stood waived and they were
precluded from making such prayer belatedly. Mr. Hirak Kumar Mitra while
distinguishing the cases cited by Mr. Anindya Kumar Mitra contended that passage
of Russell on Arbitration could not have any application in the instant case as the
English Law was totally different from our Indian Law. In this regard he referred to
Section 68(2) of the English Arbitration Act. He contended that the decision in the
case of Lal Chand (supra) did not have any application in the instant case. On the
other hand the decision in the case of Tirath Singh (supra) would rather support the
contention of SPCL. In this regard he referred to paragraph 5 of the said decision.
Mr. Hirak Kumar Mitra in support of his contention relied upon the Apex Court
decision in the case of All India Reporter, 1982, Supreme Court, Page 1249 (State of
Maharashtra Vs. Ramdas Shrinivas Nayak & Anr.).
Mr. Anindya Kumar Mitra, learned senior counsel in reply contended as follows :-
(i) From the minutes it would appear that SPCL was opening their case. Such fact
would be evident on perusal of the order sheets chronologically as the parties were
allowed to disclose their documents while the SPCL was making such submissions.
Such disclosure was made upto October 2, 2002 when formal proof of the inter party
documents were dispensed with.
(ii) The Tribunal did not dispense with the formal proof of the third party
documents. Hence, parties were entitled to adduce further evidence to prove third
party documents relied on by them respectively.
(iii) Purported rejection of the prayer made on January 14, 2003 was not known to
VSNL as copy of the said order was sent on February 17, 2003 along with the settled
issues.
(iv) The Tribunal while rejecting the prayer for adducing evidence did not accept
the argument of SPCL that there had been an agreement for not adducing evidence.
Hence, the Tribunal was not right in rejecting the prayer for adducing evidence on
the plea of implied conduct and/or understanding.
(v) Waiver or estoppel must be unambiguous and pleaded. In absence of specific
pleading on that score such plea could not be raised.
(vi) Plea of waiver was specifically argued before the Tribunal. The Tribunal,
however, did not accept such plea. Such contention was, however, not raised before
the learned Single Judge. Hence, SPCL was not entitled to raise the same before the
Court of Appeal.
(vii) In case of waiver or acquisance there must be intentional relinquishment. In
absence of that prayer for adducing evidence could not have been rejected.
Mr. Anindya Kumar Mitra in reply cited three Apex Court decisions reported in :-
(i) 2001, Volume - II, Supreme Court Cases, Page 41 (Tata Iron & Steel Co. Ltd. Vs.
Union of India & Ors.)
(ii) 2005, Volume - IV, Supreme Court Cases, Page 613 (V.M.Salgaocar and Bros.
Vs. Board of Trustees of Port of Mormugao & Anr.)
(iii) 2006, Volume - VII, Supreme Court Cases, Page 756 (Jai Narain Parasrampuria
(Dead) & Ors. Vs. Pushpa Devi Saraf & Ors.)
Since new cases were cited we permitted Mr. Hirak Kumar Mitra to address us as
and by way of rejoinder.
Mr. Mitra while counter-acting the argument of Mr. Anindya Kumar Mitra, took us
to the pleadings to show that there had been adequate pleadings in support of their
contention as contained in the affidavit-in-opposition filed before the Tribunal. He
also referred to the minutes of the Tribunal to show that there had been extensive
argument by both the parties on merits. Cases were cited and argument was made on
the decisions cited at the bar. Hence, it could not be said that such argument was
merely an opening of the case. He also contended that the decision in the case of
State of Maharashtra (Supra) was cited by him to support his contention that when
there was a controversy with regard to the fact recollection of the learned Judge was
final and binding upon the parties. Once the Tribunal held that the parties understood
that they would not adduce evidence such recollection of the Tribunal was final and
binding upon all including VSNL.
Let us first discuss the law on the subject.
On a combined reading of the said Act of 1996 we find that under Section 7 an
arbitration agreement has to be in writing. The arbitration clause might be included in
an agreement between the parties or can be by way of a separate agreement. Such
clause might be contained in any letters or any document. However, such agreement
must be in writing in any form to be signed by both the parties. Under Section 19 the
Arbitral Tribunal would be entitled to decide their own procedure and they are not
bound to follow either the Code of Civil Procedure or the Indian Evidence Act. The
parties are free to agree on the procedure to be followed by the Tribunal while
conducting its proceeding. However, in absence of any agreement the Tribunal may
conduct the proceeding in the manner it considers appropriate. Such power of the
Tribunal includes determination on the question of admisibility relevance, materiality
and weight of any evidence. Under Section 24 unless otherwise agreed by the parties
the Tribunal shall decide whether to hold oral hearings for the presentation of
evidence or for oral argument, or whether the proceeding shall be conducted on the
basis of the documents and other materials. The Tribunal shall held oral hearings at
the appropriate stage on a request by a party unless the parties have agreed that no
oral hearing shall be held. In terms of Section 4 the parties, however, may waive
their right to object in case of derogation of any provision or any requirement under
the Arbitration Agreement. If a party proceeds with the arbitration without recording
his objection to non-compliance of any requirement under the arbitration agreement
or any other right under the statute without undue delay it shall be deemed that such
party has waived his right to object.
Let us now discuss the proposition of law so cited at the bar.
In the case of Tirath Singh (Supra) the Division Bench of Lahore High Court
observed that the Arbitrator may give his reasons for shutting out a certain amount of
evidence sought to be tendered by a certain party. This is not, however, open to the
Arbitrator to refuse to grant an opportunity to a party to produce evidence on the
ground that there was no necessity for the same. If Arbitrator does so he would be
guilty of judicial misconduct.
In the case of Lal Chand (Supra) it was observed that a written contract does not
mean a contract stated at the outset but one in which the terms are expressed in
writing in the act of making it. Refusal of the Arbitrator to give opportunity for
adducing further evidence to one of the parties would affect the legality of the award.
In the case of State of Maharashtra (Supra) complain was filed against the Chief
Minister of Maharashtra. The complaint was not entertained without having the
appropriate sanction of the Governor. Before the High Court it was contended that
since the complaint involved the Chief Minister himself the Governor should take an
independent decision in the matter of sanction without having regard to the cabinet
approval. Before the High Court learned counsel appearing for the State made
concession to such extent and on such basis the Division Bench permitted the
Governor to apply his mind independently in the matter of sanction without any
reference to any ministry. The issue was taken up to the Apex Court. It was
contended before the Apex Court by the State that such a decision was contrary to
the provisions of the statute. The Apex Court placed reliance on the recording of two
learned judges of the Division Bench of the High Court and observed that their
recollection of the submissions made on behalf of the State was final and conclusive.
The Apex Court observed, so the judges' record is conclusive. Neither lawyer nor
litigant may claim to contradict it, except before the Judge himself but no one else.
In the case of Vinoy Bubna (Supra) the learned Single Judge of the Bombay High
Court held that if the parties before the Tribunal seek to lead oral evidence it must be
granted as the expression is "shall hold oral hearing at the request of the parties".
The High Court further held that when the petitioner had pointed out the need to
examine the witness the Tribunal could not have denied that opportunity. On that
count the award is liable to be set aside.
In the case of Sohan Lal Gupta (Supra) the Apex Court held that a reasonable
opportunity would mean that a party must be given an opportunity to explain his
argument before the Tribunal and to adduce evidence in support of his case. Here the
Apex Court relied upon a passage from Russell on Arbitration with regard to the
conduct of the arbitration proceedings. Paragraph 23 of the decision being relevant
herein is quoted below :-
" For constituting a reasonable opportunity, the following conditions are required to
be observed :
(1) Each party must have notice that the hearing is to take place.
(2) Each party must have a reasonable opportunity to be present at the hearing,
together with his advisers and witnesses.
(3) Each party must have the opportunity to be present throughout the hearing.
(4) Each party must have a reasonable opportunity to present evidence and argument
in support of his own case.
(5) Each party must have a reasonable opportunity to test his opponent's case by
cross-examining his witnesses, presenting rebutting evidence and addressing oral
argument.
(6) The hearing must, unless the contrary is expressly agreed, be the occasion on
which the parties present the whole of their evidence and argument."
In the case of Jai Narain Parasrampuria (Supra) it was held that the doctrine of
estoppel by acquisecence was not restricted to cases where the representor was aware
both of what his strict rights were and that the representee was acting on the belief
that those rights would not be enforced against him. Instead, the court was required
to ascertain whether in the particular circumstances, it would be unconscionable for a
party to be permitted to deny that which, knowingly or unknowingly, he had allowed
or encouraged another to assume to his detriment. Accordingly, the principle would
apply if at the time the expectation was encouraged both parties were acting under a
mistake of law as to their rights.
In the case of Tata Iron and Steel Co. Ltd. (Supra) the Apex Court held that issue of
estoppel by conduct can only be said to be available in the event of there being a
precise and unambiguous representation.
In the case of V.M.Salgaocar & Bros. (Supra) the Apex Court observed that plea of
waiver must be pleaded. No plea of waiver can be allowed to be raised unless it is
pleaded.
On a combined reading of the case law cited at the bar and upon perusal of the
provisions of the said Act of 1996 our understanding of the law on the subject is as
follows :-
(i) if the agreement does not stipulate any procedure to be followed in arbitration
the tribunal is free to decide its own procedure. The parties are also free to agree to
follow certain procedure. The Arbitrator is not obliged to follow the provisions of the
Code of Civil Procedure or the Evidence Act.
(ii) If the parties agree through the agreement in writing to follow certain
procedure the Arbitrator is bound to adhere to the same
(iii) If the agreement stipulates a particular procedure to be followed deviation
from the said procedure would vitiate the proceeding.
(iv) Despite a procedure agreed to be followed as contained in the arbitration
agreement the parties are free to agree to any other procedure. However, such
deviation must be expressly agreed by the parties.
(v) Although the Arbitrator is free to chose a particular procedure to be followed
in absence of any agreement the rules of natural justice must be followed by giving
reasonable opportunity to both the parties to the arbitration not only to place their
case but also to adduce evidence in support of their case. The Arbitrator, however,
may dispense with adducing evidence if it is not necessary.
(vi) If a party has a right under the agreement such right has to be exercised
contemporaneously. If there is any deviation of an agreed procedure by the Arbitral
Tribunal the party has to raise objection contemporaneously. Belated objection
would not vitiate the process of arbitration.
Let us now examine the present case applying the ratio as observed above.
Let us first discuss the issues raised by VSNL before us. According to VSNL, SPCL
opened their case after completion of the pleadings. They continued their argument
even when disclosure of documents were not complete. Issues were settled in the
midst of submission being made by SPCL. Hence, it could not be said that VSNL
waived their right to adduce evidence. They waited till the opening argument of
SPCL being the claimant was completed. They prayed for filing of the affidavit of
evidence just on the eve of closure of the submissions of SPCL. The Tribunal thus
erred in rejecting such affidavit to be admitted as affidavit- of-evidence.
Mr. Chatterjee also appearing for VSNL tried to give an impression to us that they
did not know of such rejection as recorded by the Tribunal on January 14, 2003 as
they got the order at a much belated stage.
It is true that by agreement the parties agreed to follow ICA Rules and guidelines.
This is apparent on a plain reading of the arbitration clause. Hence, to make a
departure the parties should have expressly agreed on that score. We, however, do
not find any such express recording in any of the minutes or the order sheet
maintained by the Tribunal. On that score argument of VSNL sounds logic. At the
same time we find that in the meeting held on October 2, 2002 the Tribunal recorded
that the inter party documents were taken on record and formal proof thereof was
dispensed with. Hence, there was no occasion for the parties to lead further evidence
on the mutual relationship of the parties and their conduct during execution of the
work. The Tribunal, however, kept the third party documents outside the purview of
such dispensation of formal proof. We would discuss about the third party documents
little later. On a perusal of the admitted facts we find that the core issue was the delay
in execution of the work and fixing up responsibility on such delay. Such core issue
could only be decided based upon inter party documents. If that be the situation there
was no scope for any further evidence to be laid. On a bare perusal of the affidavit-
of-evidence filed before the Arbitrator we find that VSNL lodged various claims
based upon third party documents with regard to the loss suffered by them during
execution of the contract. The core issue was, however, not touched by the deponent
of the said affidavit. Hence, the Tribunal was right in proceeding with the core issue
without any evidence and parties accepted such position. Express recording of
dispensation of the formal proof of inter party document would thus conclusively
prove that the parties did not want any evidence to be adduced on that score. To that
extent VSNL was wrong in contending that there was no such agreement between the
parties not to adduce evidence.
Let us now consider SPCL version.
According to SPCL on a combined reading of the day to day minutes of the meeting
it would appear that the submission made by SPCL were not mere opening of the
case. Case laws were cited and discussed on the core issue of delay. Upto this point
SPCL was right. In a case where the core issue was delay and the Tribunal was to
find out who was responsible for such delay it does not conclusively allow the
Tribunal to come to a conclusion that the party responsible for such delay was liable
to pay the damages as claimed by the other party. What is needed is to find out and
adjudicate to what extent the other party suffered loss. On that score evidence was
necessary. Here third party documents come into play. VSNL understood such
position and intended to file affidavit-of-evidence to show that they suffered loss so
that in case the Tribunal came to conclusion that VSNL was not responsible for the
delay they would be entitled to claim such damage so to be proved through evidence.
SPCL in our view is wrong on that score.
Let us now consider the working of the tribunal. The Tribunal recorded that the
formal proof of inter party documents dispensed with. If the parties agreed that they
would lead no evidence the Tribunal should have expressly recorded such concession
made by the parties contemporaneously. We cannot lose sight of the fact that three
members of the Tribunal were retired judges of this Court. The Tribunal rejected the
contention of SPCL to the extent that there was an agreement to the said effect, in
our view rightly. Hence, there was no occasion for the Tribunal to hold that by
conduct and/or implied understanding the parties gave an impression to the Tribunal
that they would lead no evidence and thereby rejected the prayer for adducing
evidence. Here the Tribunal went wrong.
Learned Single Judge on appreciation of facts held that it was a fast track Arbitration.
We are constrained to say that the parties did not claim so. The learned Single Judge
was probably misled by a misprint of the ICA rules. The copy of the ICA Rules was
handed over to the Learned Single Judge by the parties in course of argument. The
same copy was produced before us. We find that Rule 43 relates to fast track
Arbitration. This was expressly provided in Rule 43, however, the caption was boldly
printed over rule 43 which would lead to an erroneous impression that the rules under
the said caption being Rule 43 to 57 relate to fast track Arbitration. We have
carefully peruse the said rules. We find such impression was wrong and probably the
learned Judge was misled by such misprint. Rule 52 provides for adducing evidence.
Rule 58 provides that any party who proceeds with the arbitration with the
knowledge that any provision or requirement of these rules has not been applied with
and who fails to state his objection thereto in writing, shall be deemed to have
waived his right to object. VSNL should have expressly pointed out at the initial
stage of arbitration that they would lead evidence, they did not do so. However, they
did so at the 14th hearing when SPCL was making submissions. Significant to note,
documents were disclosed upto 9th hearing when at the 9th hearing the formal proof of
inter party document was dispensed. During this period SPCL was making their
submissions. It can be said that VSNL prayed for adducing evidence at a belated
stage but it was not so delayed that the Tribunal would refuse such prayer more so
because of the reason that SPCL was still making their submission.
SPCL should also be blamed as they also did not insist the Tribunal to record that the
parties agreed not to lead any evidence. They did not, however, do so.
Thus we find that both the parties as well as the Tribunal committed mistakes while
proceeding with the arbitration.
Brief analysis would reveal as follows :-
SPCL VSNL Arbitral Tribunal
• SPCL did not • VSNL did not • Tribunal knew
insist upon expressly inform that the
recording of the the Tribunal at arbitration
fact that the least at the time clause did
parties agreed when the formal stipulate ICA
not to lead proof was Rules to be
evidence. dispensed with followed.
on inter party Hence, it was
documents that incumbent upon
they would lead Tribunal to
evidence by record expressly
filing of that the parties
affidavit-of- agreed to the
evidence or effect that they
otherwise. would lead no
evidence.
• SPCL continued • Even if it is • After holding
to make accepted that that there was
submission VSNL did not no such express
labouring under know of the agreement
a misconception order dated between the
that the other January 14, parties the
party would lead 2003 it is not Tribunal erred
no evidence. clear as to how in observing that
they could there was
reserve their implied
right to lead understanding as
affidavit-of- apparent from
evidence in the the conduct.
meeting dated Implied
February 14, understanding or
2003. conduct of the
parties cannot
override the
express
agreement
between the
parties recorded
in writing.
• SPCL did not • In paragraph 10 • Assuming
lead any of the petition Tribunal was
evidence to filed before the correct to have
prove the third Tribunal VSNL an impression
party documents did point out that the parties
to assist the that the minutes would lead no
Tribunal to of the meeting evidence and
come to a dated January proceeded with
finding as to the 14, 2003 was such impression
actual damage not made when at the 14th
suffered by available on hearing they
them in case February 14 or prayed for
Tribunal held 16, 2003. They adducing
that VSNL was did not affidavit-of-
responsible for expressly say evidence the
delay. that such order Tribunal could
was not in fact have allowed
passed by the the same as such
Tribunal and affidavit did not
recording of touch the core
such order was issue. The
wrong. Tribunal herein
failed to
appreciate that
even if they
were competent
to decide the
core issue being
delay on the
basis of the inter
party documents
which was
admitted in
evidence by
consent of
parties this
would not help
them to finally
adjudicate as to
the quantum of
damage suffered
by the party who
was not at fault.
• SPCL failed to • No specific • Even assuming
appreciate that objection was VSNL
the agreement raised with approached the
clearly regard to the Tribunal at a
stipulated that recording of the belated stage for
arbitration order sheet adducing
would be dated January evidence the
conducted 14, 2003 by Tribunal could
following ICA VSNL. VSNL, have imposed
rules and however, in condition on
guidelines. paragraph 12(a) them. In our
Hence, contended that view the
departure from no such prayer Tribunal could
such rule and/or was made on have allowed
guidelines must January 14, such prayer for
be agreed upon 2003. Even ends of justice.
and/or expressly when the
recorded in the application for
minutes and/or adducing
order sheet. evidence was
rejected by the
Tribunal by a
reasoned order
save and except
making one
passing
reference VSNL
did not indicate
that they not
only wanted to
lead evidence by
filing affidavit-
of-evidence of
S.K.Chowdhury
but also other
witnesses too. In
this regard we
may refer to
minutes dated
May 18, 2003
where it was
recorded that
VSNL wanted
to file two
affidavits of
evidence. They
were, however,
not prepared
with the second
affidavit even at
the close of the
arbitration.
• It would thus
appear that
VSNL also was
not serious in
proceeding with
the reference in
the matter of
adducing
evidence.
On a comparative study of the conduct of the parties and the functioning of the
Tribunal we feel that interest of justice would subserve if we give one more
opportunity to VSNL to adduce evidence. We are permitting to do so following the
principles of natural justice by keeping all other technicalities at bay. At the same
time we feel that VSNL should be made liable for the cost incurred by SPCL for the
infructuous hearing. VSNL in our view, should also be put to terms to test their
bonafide.
ORDER :
(i) The judgment and order of the learned Single Judge dated November 15, 2007 is set aside. The award of the Tribunal dated July 14, 2005 is set aside.
(ii) The parties are directed to approach the ICA for a fresh reference in accordance with ICA Rules. In case Tribunal is constituted such Tribunal would enter upon reference and decide the issue de novo.
(iii) The Tribunal, however, would start from the stage where the prayer for affidavit-of-evidence was rejected meaning thereby the parties would restrict themselves to the pleadings and documents filed before the erstwhile Tribunal.
(iv) The inter party documents filed before the earlier Tribunal would be deemed to be admitted in evidence and formal proof thereof would be deemed to have been dispensed with. The parties, would, however be free to adduce further evidence on the third party documents. They would be free to file affidavit-of-evidence on that score and in such event the party filing affidavit-of-evidence must ensure presence of the deponent for cross-examination by the other party.
(v) VSNL would deposit Rs. 7.00 crores in any nationalised bank of their choice in a suitable interest bearing fixed deposit till arbitration proceeding is over. VSNL would inform the arbitral tribunal accordingly. They would also furnish a xerox copy of the fixed deposit certificate to SPCL. The said sum would be earmarked for payment in terms of the award to be published by the Tribunal in case SPCL gets a money award from the Tribunal.
(vi) VSNL would also pay to SPCL a sum of Rs. 3.00 lacs as and by way of cost thrown away for the infructuous arbitration hearing.
(vii) Deposit of the amount of Rs. 7.00 crores and payment of Rs. 3.00 lacs as directed above must be made within a period of eight weeks from date.
(viii) In default of deposit of Rupees seven crores and payment of costs as directed above, this order would stand recalled and the appeal would stand dismissed.
Learned Single Judge after rejecting the contention of VSNL on the preliminary issue also decided the matter on merits. We, at the time of commencement of hearing before us, made it clear to the parties that in case after hearing we decide the preliminary issue in favour of SPCL we would hear the appeal further on merits. Hence, parties did not argue on merits before us.
We abundantly make it clear that we have not gone into the merits of the matter and if there is any observation touching the merits of the case the Tribunal must not influence themselves by such observation, if any.
The appeal is disposed of accordingly without any order as to costs.
There would be stay of operation of this judgment and order for a period of four weeks from date.
Urgent xerox certified copy would be given to the parties, if applied for.
TAPAS KUMAR GIRI. J:
I agree.
[ASHIM KUMAR BANERJEE.J] [TAPAS KUMAR GIRI.J]