Orissa High Court
M/S Bhadra Products vs M/S Indian Farmers Fertilizer on 30 January, 2025
Author: S.K. Panigrahi
Bench: S.K. Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: AR-CUM-SR. SECRETARY
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 03-Feb-2025 11:39:32
IN THE HIGH COURT OF ORISSA AT CUTTACK
ARBA No. 21 of 2023
(From the judgment dated 3.8.2023 passed by the learned District
Judge, Jagatsinghpur in Arbitration Petition No. 4 of 2020arising
out of arbitration award dated 19.5.2020 passed by the Ld. Sole
Arbitrator Retd. Justice Deepak Verma of the Arbitral Tribunal
constituted under the Delhi International Arbitration Centre)
M/s Bhadra Products, Mumbai .... Appellant (s)
-versus-
M/s Indian Farmers Fertilizer .... Respondent (s)
Cooperative Ltd., Jagatsinghpur
Advocates appeared in the cases:
For Appellant (s) : Mr. Nilamadhab Bisoi, Adv.
-versus-
For Respondent(s) : Mr. Sarada Prasanna Sarangi,Adv.
Mr. Sanjay Grover, Adv.
CORAM:
DR.JUSTICE S.K. PANIGRAHI
DATE OF HEARING:-03.12.2024
DATE OF JUDGMENT:-30.01.2025
Dr. S.K. Panigrahi, J.
1. This Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‚A&C Act‛) has been filed seeking setting aside of the judgment dated 03.08.2023 passed by pg. 1 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 the learned District Judge, Jagatsinghpur in Arbitration Petition No. 4 of 2020.
I. FACTUAL MATRIX OF THE CASE:
2. The present dispute arises over a contract of supply of defoaming agent for manufacturing of phosphoric acid. The Appellant Company is a manufacturer and seller of POLYCOL PF-140, a Defoaming agent, amongst other chemicals. The present Respondent Company required a defoaming agent for the production of phosphoric acid in its plant. On 7.2.2006, the Respondent Company issued a tender enquiry for the supply of defoamer. A trial run of supply of Defoamer was taken up from bidders including the present Appellant. After an assessment, the Appellant Company was selected for supply of Defoamer to the Respondent Company's plant.
3. Subsequently, a Letter of Intent (LoI) dated 2.11.2006 and Purchase Order dated 24.1.2007 was issued in favour of the Appellant Company for supply of 800 MT of Defoamer for production of 3,08,880 MT of Phosphoric Acid (P2O5).
4. The Claimant Company claims that payment for the Defoamer supplied to the Respondent to the tune of Rs.6,27,08,886/- apart from interest. The said claim is denied by the Respondent who asserts that no payments are due to the Claimant as all payments as per the agreed upon terms and conditions have been duly paid to the Appellant Company.
pg. 2 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32
5. Upon the dispute arising between the parties, the matter was referred to the Delhi International Arbitration Centre (DIAC). On 15.1.2015, Retd. Justice Deepak Verma sent his formal consent to act as arbitrator in the arbitral proceedings. Accordingly, proceedings commenced with the first sitting being held on 3.3.2015. After hearing the parties, the Ld. Sole Arbitrator was pleased to pass his final award on 19.5.2020 wherein, all the claims of the Claimant were rejected.
6. Aggrieved, the Appellant assailed the final award dated 19.5.2020 under Section 34 of the A&C Act in the Court of the learned District Judge, Jagatsinghpurvide Arbitration Petition No. 4 of 2020. Vide judgment dated 3.8.2023in Arbitration Petition No. 4 of 2020 the Ld. District Judge, Jagatsinghpurwas pleased to dismiss the same upon arriving at the conclusion that the award was not in violation of the public policy of India, nor did it contain any plausible fact that would shock the conscience of the court and did not have any patent illegality on the face of the record.
7. It is also pertinent to mention here that during the course of hearing, the challenge under Section 34 of the A&C Act, the Appellant filed a petition under Section 151 of CPC praying for exhibiting three new documents which was rejected by the Ld. District Judge vide order dated 8.7.2022. Thereafter, the Appellant preferred a revision before this Court wherein vide order dated 13.10.2022 in W.P.(C) No. 18536 of 2022, this Court was pleased to pg. 3 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 direct the District Judge to admit the additional evidence. Aggrieved by the same, the present Respondent had approached the Supreme Court wherein the Court vide order dated 25.11.2022 in Civil Appeal No.8886 of 2022 [arising out of SLP(C)No.20504 fof 2022] was pleased to direct the Appellant to make all its submissions before the Ld. District Judge as to under what circumstances it could not lead evidence before the Ld. Arbitrator or show how the Ld. Arbitrator did not give sufficient opportunities to lead evidence as such a plea was a question of fact which would be considered by the Ld. District Judge.
8. Pursuant to the same, the Ld. District Judge did consider the plea of the Appellant at the time of final hearing of the matter under Section 34 of the A&C Act. The Ld. District Judge was pleased to conclude and sufficient opportunity was given to the Appellant to adduce evidence but no convincing explanation has been given as to what prevented the Appellant from doing so.
9. Aggrieved by the judgment dated 3.8.2023 in Arbitration Petition No. 4 of 2020, the instant Appeal has been preferred. As the facts leading up to the instant Appeal have been laid down, this Court shall endeavour to summarise the contentions of the Parties and the broad grounds that have been raised to seek the exercise of this Court's limited jurisdiction available under S. 37 of the A&C Act.
pg. 4 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 II. APPELLANT'S SUBMISSIONS:
10. The counsel for the Appellants assails the arbitral award and the judgment of the learned District Judge, mainly on the ground that the Learned District Judge has completely failed to deal with or cogently answer the groundsraised by the present appellant in its application under Section 34 of the A & C Act, 1996, challenging the Final Award dated 19.5.2020, passed by the learned Arbitrator, and has disposed of the matter in a cursory, casual and lackadaisical manner withcomplete non-application of mindcontrary to the well settled propositions of law and, hence, both the impugned order and the Final Award are liable to be set aside.
11. It is also contended that the Ld. District Judge being the final court on facts did not take into account the alleged errors in facts that had been committed by the Ld. Arbitrator and therefore by allegedly only copying the erroneous findings of the Ld. Arbitrator, the Ld. District Judge has committed gross illegality and such a judgment is liable to be interfered with and set aside.
12. It is further submitted that the Ld. District Judge erred in not permitting the present Appellant to adduce additional evidence despite the explanation provided which described the extent of his mental duress during the Arbitral proceeding and consequent failure to adduce the evidence at that stage.
pg. 5 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 III. RESPONDENT'S SUBMISSIONS:
13. Per contra, learned counsel for the present Respondent contends that the Appellanthas not been able to showcase any reasonable ground for interfering with the impugned judgment apart from making bald statements towards the same. It was vehemently submitted that the scope of interference of this Court in an application under Section 37 of the A&C Act is extremely limited and this Court cannot reappreciate evidence at this stage, therefore it may not revisit the factual findings of the Ld. Tribunal apart from testing the same on the mantle of reasonableness and public policy. It was also submitted that the Ld. District Judge had considered all the material aspects of the contentions raised by the parties and also duly regarded their submissions thereby warranting no interference with the concurrent views of the Ld. Arbitral Tribunal as well as the Ld. District Judge.
14. It is submitted that the award is based on appreciation of the material and evidence that were placed before the arbitrator and it is not open in these proceedings to re-appraise the same. It is thus prayed that the present appeal be dismissed. IV. ISSUES FOR CONSIDERATION:
15. Having heard the parties and perused the materials available on record, this Court here has identified the following issues to be determined:
pg. 6 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 A. Whether the Ld. District Judge erred in rejecting the Appellant's petition seeking permission to adduce additional evidence?
B. Whether this Court should interfere with the impugned order given the narrow scope of its powers under Section 37 of the A&C Act?
V. ISSUE A: WHETHERTHE LD. DISTRICT JUDGE ERRED IN REJECTING THE APPELLANT'S PETITION SEEKING PERMISSION TO ADDUCE ADDITIONAL EVIDENCE?
16. What is meant by the expression ‚furnishes proof‛ in Section 34(2)
(a)? In a judgment of Delhi High Court in Sandeep Kumar v. Ashok Hans,1 the learned Single Judge of the Delhi High Court specifically held that there is no requirement under the provisions of Section 34 for parties to lead evidence. The record of the arbitrator was held to be sufficient in order to furnish proof of whether the grounds under Section 34 had been made out or not.
17. Again, a learned Single Judge of the Delhi High Court in Sial Bioenergie v. SBEC Systems,2 stated :
‚5. In my view the whole purpose of the 1996 Act would be completely defeated by granting permission to the applicant JD to lead oral evidence at the stage of objections raised against an arbitral award. The 1996 Act requires expeditious disposal of the objections and the minimal interference by the court as is evident from the Statement of Objects and Reasons of the Act which reads as follows:1
2004 SCC OnLine Del 106 2 2004 SCC OnLine Del 863 pg. 7 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 '4. The main objectives of the Bill are as under: ***
(ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration;
***
(v) tominimise the supervisory role of courts in the arbitral process;'
6. At the stage of the objections which are any way limited in scope due to the provisions of the Act to permit oral evidence would completely defeat the objects underlying the 1996 Act. The process of oral evidence would prolong the process of hearing objections and cannot be countenanced.
7. Furthermore, the Supreme Court in Food Corpn. of India v. Indian Council of Arbitration [Food Corpn. of India v. Indian Council of Arbitration, (2003) 6 SCC 564] had summarised the ethos underlying the Act as follows : (SCC p. 572, para 14) '14. ... The legislative intent underlying the 1996 Act is to minimise the supervisory role of the courts in the arbitral process and nominate/appoint the arbitrator without wasting time leaving all contentious issues to be urged and agitated before the Arbitral Tribunal itself.'
8. Accordingly, I see no merit in these applications and the prayer made therein is rejected.‛ pg. 8 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32
18. This Court now come to a judgment of the Supreme Court in Fiza Developers & Inter-Trade (P) Ltd. v. AMCI (India) (P) Ltd.3 wherein the question that was posed by the Court was whether issues as contemplated under Order 14 Rule 1 of the Code of Civil Procedure, 1908 should be framed in applications under Section 34 of the Arbitration and Conciliation Act, 1996. The Court held :
‚14. In a summary proceeding, the respondent is given an opportunity to file his objections or written statement. Thereafter, the court will permit the parties to file affidavits in proof of their respective stands, and if necessary permit cross-examination by the other side, before hearing arguments. Framing of issues in such proceedings is not necessary. We hasten to add that when it is said issues are not necessary, it does not mean that evidence is not necessary.
***
17. The scheme and provisions of the Act disclose two significant aspects relating to courts vis-à-vis arbitration.
The first is that there should be minimal interference by courts in matters relating to arbitration. Second is the sense of urgency shown with reference to arbitration matters brought to court, requiring promptness in disposal.
18. Section 5 of the Act provides that notwithstanding anything contained in any other law for the time being in force, in matters governed by Part I of the Act, no judicial authority shall intervene except where so provided in the Act.
*** 3 (2009) 17 SCC 796 pg. 9 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32
21. We may therefore examine the question for consideration by bearing three factors in mind. The first is that the Act is a special enactment and Section 34 provides for a special remedy. The second is that an arbitration award can be set aside only upon one of the grounds mentioned in sub-section (2) of Section 34 exists. The third is that proceedings under Section 34 require to be dealt with expeditiously.
***
24. In other words, an application under Section 34 of the Act is a single issue proceeding, where the very fact that the application has been instituted under that particular provision declares the issue involved. Any further exercise to frame issues will only delay the proceedings. It is thus clear that issues need not be framed in applications under Section 34 of the Act.
***
31. Applications under Section 34 of the Act are summary proceedings with provision for objections by the respondent-defendant, followed by an opportunity to the applicant to ‚prove‛ the existence of any ground under Section 34(2). The applicant is permitted to file affidavits of his witnesses in proof. A corresponding opportunity is given to the respondent-defendant to place his evidence by affidavit. Where the case so warrants, the court permits cross-examination of the persons swearing to the affidavit. Thereafter, the court hears arguments and/or receives written submissions and decides the matter. This is of course the routine procedure. The court may vary the said procedure, depending upon the facts of any particular case or the local rules. What is however clear is that framing of issues as contemplated under Rule 1 of Order 14 of the Code is not an integral part of the process of a proceedings under Section 34 of the Act.‛ pg. 10 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32
19. In a similar case, the Punjab and Haryana High Court in Punjab SIDC Ltd. v. Sunil K. Kansal,4 after referring to the Supreme Court's judgment in Fiza Developers (supra) has succinctly held:
‚30. In view of the above, we answer the question of law framed as follows:
(i) The issues, as required under Order 14 Rule 1 of the Code as in the regular suit, are not required to be mandatorily framed by the Court. However, it is open to the Court to frame questions which may arise for adjudication.
(ii) The Court while dealing with the objections under Section 34 of the Act is not bound to grant opportunities to the parties to lead evidence as in the regular civil suit.
The jurisdiction of the Court being more akin to the appellate jurisdiction;
(iii) The proceedings before the Court under Section 34 of the Act are summary in nature. Even if some questions of fact or mixed questions of law and/or facts are to be decided, the court while permitting the parties to furnish affidavits in evidence, can summon the witness for cross- examination, if desired by the other party. Such procedure is keeping in view the principles of natural justice, fair play and equity.‛
20. Further, Calcutta High Court in WEB Techniques & Net Solutions (P) Ltd. v. Gati Ltd.,5 after referring to Fiza Developers (supra) has held that oral evidence is not required under a Section 34 application when the record before the arbitrator would show whether the petitioners had received notice relating to his 4 2012 SCC OnLine P&H 19641 5 2012 SCC OnLine Cal 4271 pg. 11 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 appointment.In Cochin Shipyard Ltd. v. Apeejay Shipping Ltd.6 also, the Supreme Courtdid not follow the decision in Fiza Developers (supra).
21. After the decision in Fiza Developers (supra), Section 34 was amended by Act 3 of 2016 by which sub-sections (5) and (6) of Section 34 were added to the principal Act with effect from 23.10.2015. Sub-sections (5) and (6) to Section 34 of the Act are read as under:
‚34. Application for setting aside arbitral award.-- (4) * * * (5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.
(6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-
section (5) is served upon the other party.‛
22. The Justice B.N. Srikrishna Committee, in its report on reviewing the institutionalization of arbitration in India, recommended ensuring consistency and expediting the process of setting aside arbitral awards. It emphasized that proceedings under Section 34(2)(a) of the A&C Act, 1996, should not be treated as regular civil suits requiring extensive evidentiary proceedings, such as the framing of issues under Rule 1 of Order 14 of the CPC. Instead, the 6 (2015) 15 SCC 522 pg. 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 party challenging an arbitral award should establish its case primarily based on the record of the arbitral tribunal, thereby streamlining the process and avoiding unnecessary procedural delays. The relevant recommendations are produced hereinbelow:
‚5. Amendment to Section 34(2)(a) of the ACA : Sub- section (2)(a) of Section 34 of the ACA provides for the setting aside of arbitral awards by the court in certain circumstances. The party applying for setting aside the arbitral award has to furnish proof to the court. This requirement to furnish proof has led to inconsistent practices in some High Courts, where they have insisted on Section 34 proceedings being conducted in the manner as a regular civil suit. This is despite the Supreme Court ruling in Fiza Developers & Inter-Trade (P) Ltd. v. AMCI (India) (P) Ltd. [Fiza Developers & Inter- Trade (P) Ltd. v. AMCI (India) (P) Ltd., (2009) 17 SCC 796 : (2011) 2 SCC (Civ) 637] that proceedings under Section 34 should not be conducted in the same manner as civil suits, with framing of issues under Rule 1 of Order 14 of the CPC.
In light of this, the Committee is of the view that a suitable amendment may be made to Section 34(2)(a) to ensure that proceedings under Section 34 are conducted expeditiously.
Recommendation : An amendment may be made to Section 34(2)(a) of the Arbitration and Conciliation Act, 1996, substituting the words 'furnishes proof that' with the words 'establishes on the basis of the Arbitral Tribunal's record that'.‛ (emphasis is ours) pg. 13 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32
23. Thereafter, Arbitration and Conciliation (Amendment) Bill, 20187, being Bill No. 100 of 2018, containing an amendment to Section 34(2)(a) of the principal Act was introduced which reads as follows:
‚7. Amendment of Section 34.--In Section 34 of the principal Act, in sub-section (2), in clause (a), for the words ‚furnishes proof that‛, the words ‚establishes on the basis of the record of the Arbitral Tribunal that‛ shall be substituted.‛
24. Based on Justice B.N. Srikrishna Committee's Report, Section 34 of the principal Act has since been amended by the Arbitration and Conciliation (Amendment) Act, 2019 which is as under:
‚7. Amendment of Section 34.--In Section 34 of the principal Act, in sub-section (2), in clause (a), for the words ‚furnishes proof that‛, the words ‚establishes on the basis of the record of the arbitral tribunal that‛ shall be substituted.‛
25. After referring to Justice B.N. Srikrishna Committee's Report and other judgments and observing that the decision in Fiza Developers (supra) must be read in the light of the amendment made in Section 34(5) and Section 34(6) of the Act and amendment to Section 34 of the Arbitration Act, 1996, the Supreme Court in Emkay Global Financial Services Ltd. v. GirdharSondhi,8 held that Section 34 proceedings under the Arbitration and Conciliation Act, 1996, are summary in nature and must be resolved expeditiously. These proceedings should primarily rely on the arbitral tribunal's record, 7 [Bill No. 100 of 2018, The Arbitration and Conciliation (Amendment) Bill, 2018, p. 3.] 8 (2018) 9 SCC 49 pg. 14 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 with additional evidence permissible only through affidavits if relevant to Section 34(2)(a). Cross-examination of the affiants is allowed only in exceptional circumstances where necessary, ensuring efficiency without compromising fairness. The relevant excerpt is produced as under:
‚21. It will thus be seen that speedy resolution of arbitral disputes has been the reason for enacting the 1996 Act, and continues to be the reason for adding amendments to the said Act to strengthen the aforesaid object. Quite obviously, if issues are to be framed and oral evidence taken in a summary proceeding under Section 34, this object will be defeated. It is also on the cards that if Bill No. 100 of 2018 is passed, then evidence at the stage of a Section 34 application will be dispensed with altogether. Given the current state of the law, we are of the view that the two early Delhi High Court judgments in Sandeep Kumar v. Ashok Hans [Sandeep Kumar v. Ashok Hans, 2004 SCC OnLine Del 106 : (2004) 3 Arb LR 306] , SialBioenergie v. SBEC Systems [SialBioenergie v. SBEC Systems, 2004 SCC OnLine Del 863 : (2005) 79 DRJ 156] , cited by us hereinabove, correctly reflect the position in law as to furnishing proof under Section 34(2)(a). So does the Calcutta High Court judgment in WEB Techniques & Net Solutions (P) Ltd. v. Gati Ltd. [WEB Techniques & Net Solutions (P) Ltd. v. Gati Ltd., 2012 SCC OnLine Cal 4271] We may hasten to add that if the procedure followed by the Punjab and Haryana High Court judgment in Punjab SIDC Ltd. v. Sunil K. Kansal[Punjab SIDC Ltd. v. Sunil K. Kansal, 2012 SCC OnLine P&H 19641] is to be adhered to, the time-limit of one year would only be observed in most cases in the breach. We therefore overrule the said decision. We are constrained to observe that Fiza Developers [Fiza pg. 15 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 Developers & Inter-Trade (P) Ltd. v. AMCI (India) (P) Ltd., (2009) 17 SCC 796 : (2011) 2 SCC (Civ) 637] was a step in the right direction as its ultimate ratio is that issues need not be struck at the stage of hearing a Section 34 application, which is a summary procedure. However, this judgment must now be read in the light of the amendment made in Sections 34(5) and 34(6). So read, we clarify the legal position by stating that an application for setting aside an arbitral award will not ordinarily require anything beyond the record that was before the arbitrator. However, if there are matters not contained in such record, and are relevant to the determination of issues arising under Section 34(2)(a), they may be brought to the notice of the court by way of affidavits filed by both parties. Cross-examination of persons swearing to the affidavits should not be allowed unless absolutely necessary, as the truth will emerge on a reading of the affidavits filed by both parties. We, therefore, set aside the judgment in GirdharSondhi v. Emkay Global Financial Services Ltd. [GirdharSondhi v. Emkay Global Financial Services Ltd., 2017 SCC OnLine Del 12758] of the Delhi High Court and reinstate that of the learned Additional District Judge dated 22-9-2016. The appeal is accordingly allowed with no order as to costs.‛
26. The legal position is thus clarified that Section 34 application will not ordinarily require anything beyond the record that was before the arbitrator and that cross-examination of persons swearing in to the affidavits should not be allowed unless absolutely necessary.
27. In the subsequent decision of the Apex Court in the case of CanaraNidhi Limited v. M. Shashikala9 which has approved the interpretation of section 34(2)(a) in Emkay Global (supra) while 9 (2019) 9 SCC 462 pg. 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 holding that such permission to adduce additional evidence ought to be accorded only in ‚exceptional circumstances‛ and very sparingly.
28. The question falling for consideration now is whether the present case is such an exceptional circumstance that it was necessary to grant opportunity to the Appellant to adduce additional evidence.
29. At the outset, it may be observed that it is not a matter of absolute right for a party to tender additional evidence in proceeding filed under Section 34 of the Act, as these proceedings are summary proceedings. The intention of the legislation is expeditious disposal of the arbitral disputes in the manner known to Section 34 of the Act. As evident from the legislative scheme of the A&C Act, the parties have all the opportunity to object to the tribunal on all the counts as permissible under Sections 12 and 13 and in the manner recognized by Section 16 of the Act. No doubt, if such an objection fails, the same would be subject matter of consideration on the basis of the record of the arbitral tribunal in proceedings of a Section 34 application.
30. The Appellant contends that the additional documents could not be filed at the time of the arbitration proceedings due to the fact that the Appellant was unable to locate the said additional documents at the relevant time due to the mental trauma of the ongoing arbitration. It is further submitted that the Appellant Company's partner was old and unwell apart from the Appellant's bank pg. 17 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 account being declared as a non-performing asset due to default in repayment of loan amounts which is alleged to have been caused due to non-payment of dues by the present Respondent.
31. At this juncture, this Court deems it appropriate to peruse and reproduce relevant portions of the Arbitral Award.
‚E. Procedural History i. 3.3.2015: 1st Arbitral Proceeding ‚17. ... During this proceeding, Ld. Counsel for the Parties submitted that the matter be first heard on the issue of limitation and for which no =oral evidence was required to be adduced. The Parties exchanged notices of admission/denial of documents on affidavit. The Claimant admitted all documents filed by Respondent whereas, Respondent only admitted some of the documents and for the remaining documents, only receipt was admitted thereof.
18. ... The Tribunal also allowed the Respondent's application seeking filing of additional documents on record in the interest of justice with a clarification that Claimant had the liberty tofile additional documents in rebuttal. It was further clarified that both Parties wereat liberty to file additional documents pertaining to the Purchase Order in issue before the next date of hearing i.e. 09.04.2015.
ii. 9.4.2015: 2nd Arbitral Proceeding
19. Ld. Counsel for Parties filed Interim Applications for bringing additional evidence on record. After hearing the parties, it was observed pg. 18 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 that all documents filed should betaken on record....
ii. ...
iii. ...
iv. 23.7.2015: 4th Arbitral Proceeding
23. ... The Tribunal decided the Issue of limitation nifavour of the Claimant and held that the claim of the Claimant had not become time barred. Ld. Counsel for the Claimant submitted that with respect to the other issues, no oral evidence was required. ...
v. ...
vi. ...
vii. 5.10.2015: 5th Arbitral Proceeding
27. The evidence for Claimant was closed on account of the fact that Claimant did notlead any oral evidence. Respondent's witnesses, RW1 and RW2, were dischargedafter their cross examination. The matter was thereafter fixed for final hearing on 19.11.2015.‛
32. It is apparent from the orders of the Ld. Arbitrator of the arbitral proceedings,on the different dates, that the Appellant was given sufficient opportunity to file any relevant documents. However, instead of doing the same, the Appellant chose to bring the additional documents during the proceeding under Section 34 of the Act. The Ld. District Judge has also correctly noted that no document whatsoever hasbeen filed by the Appellant in support of the claim of deteriorating mental health condition or bankruptcy.
pg. 19 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 The arbitral proceeding commenced on 3.3.2015 and the final Award was passed on 19.5.2020. The arbitral proceeding continued for more than 5 years but such a prayer was not made at any point in time by the Appellant.
33. The Appellant sought for mainly producing 166 nos. of tax invoices, permission for which was denied leading to the first round of litigation between the parties. In this regard, this Court is bound by the Ld. Arbitrator's findings on fact that payment was based on production of P2O5, irrespective of quantity of defoamer consumed in the process which would render the invoices irrelevant. It is not the case that the invoices being on record before the Ld. Tribunal would alter the finding of fact, neither does it seem appropriate that a document which could have been produced at the stage of the arbitral proceeding, having been withheld and produced belatedly, should render an entire award arrived at consciously by the Ld. Arbitrator null or void.
34. Section 34 of A & C Act proceedings are not meant to be converted into mini-trials or an appellate proceedings. If the issues raised were already considered and decided by the arbitral tribunal, they cannot be reopened through additional evidence unless exceptional circumstances are demonstrated. Courts are justified in rejecting such requests to maintain the summary nature of these proceedings.
pg. 20 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32
35. Furthermore, since the general rule dictates that additional evidence is permissible only in exceptional circumstances, the Learned District Judge was correct in refusing the Appellant's request to adduce additional evidence, and no error can be attributed to this decision.
VI. ISSUE B:WHETHERTHIS COURT SHOULD INTERFERE WITH THE IMPUGNED ORDER GIVEN THE NARROW SCOPE OF ITS POWERS UNDER SECTION 37 OF THE A&C ACT?
36. It is no longer res integra in arbitration jurisprudence that the scope for interference in an appeal under Section 37(1)(c) of the Act is very narrow. In order to succeed, the Appellant must establish that the finding of the arbitrator is based on no evidence or the arbitrator has taken into account material which is irrelevant or has ignored vital evidence.
37. One may also note that, it has been repeatedly held that while entertaining appeals under Section 37 of the Act, the court is not actually sitting as a court of appeal over the award of the Arbitral Tribunal and therefore, the court would not reappreciate or reassess the evidence. The position of law stands crystallised today, that findings, of fact as well as of law, of the arbitrator/Arbitral Tribunal are ordinarily not amenable to interference either under Sections 34 or Section 37 of the Act. The scope of interference is only where the finding of the tribunal is either contrary to the terms of the contract between the parties, or, ex facie, perverse, that pg. 21 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 interference, by this Court, is absolutely necessary. The arbitrator Tribunal is the final arbiter on facts as well as in law, and even errors, factual or legal, which stop short of perversity, do not merit interference under Section 34 or Section 37 of the Act.
38. While deciding an appeal it must be kept in mind that the arbitrator tribunal is the final arbiter on facts as well as law, and even errors, factual or legal, which stop short of perversity, do not merit interference under Section 34 or Section 37 of the Act. The Supreme Court has consistently held that an arbitration award should not be lightly interfered with. In this regard, it is apposite to place reliance on the Apex Court's judgments in Renusagar Power Co. Ltd. v. General Electric Co.10; ONGC v. Saw Pipes Ltd.11; Hindustan Zinc Ltd. v. Friends Coal Carbonisation12 and Associate Builders case[Associate Builders v. DDA13.
39. The scope of judicial scrutiny and interference by an appellate court under Section 37 of the Act is even more restricted, than while deciding a petition under Section 34 of the Act. The Supreme Court in McDermott International Inc. v. Burn Standard Co. Ltd.14 has held as under:
‚52. The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by 10 1994 Supp (1) SCC 644 11 (2003) 5 SCC 705 12 (2006) 4 SCC 445 13 (2015) 3 SCC 49 14 (2006) 11 SCC 181 pg. 22 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it'.‛
40. It is also settled law that the courts cannot travel beyond the scope of Section 34 in an appeal under Section 37 from an order of the court in an application preferred by a party to set aside an arbitral award under Section 34 of the A&C Act as has been laid down by the Supreme Court in MMTC Ltd. v. Vedanta Ltd.15 wherein it was held as following:
‚14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section
34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.‛
41. Section 34 of the Act makes provision for the supervisory role of courts for review of arbitral award only to ensure fairness. 15 (2019) 4 SCC 163 pg. 23 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 Intervention of the court is envisaged in few circumstances only, like, when an award is in conflict with the public policy of India, which includes cases of fraud, breach of fundamental policy of Indian law and breach of public morality. The other ground provided under Section 34 is patent illegality. It specifically provides that an award cannot be set aside on the ground of erroneous application of law or on re-appreciation of fact. In the decision of McDermott International Inc. v. Burn Standard Co. Ltd. (supra), a reference was made to the decision of U.P. State Handloom Corpn. Ltd. v. Asha Lata Talwar16and it was observed that under Section 34 of the Act of 1996 there is a departure from the scheme of Section 16 in the 1940 Act where perhaps the court was given wider amplitude of powers. The Apex Court interpreted the scope of interference under Section 34 and observed that the court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. The scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it. Under Section 34(2) of the Act 1996 the court is empowered to set aside an arbitral award on the grounds specified therein. There is no specific power 16 2009 SCC OnLine All 624 pg. 24 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 granted to the court to itself allow the claims originally made before the Arbitral Tribunal where it finds the Arbitral Tribunal erred in rejecting such claims. If such a power is recognised as falling within the ambit of Section 34(4) of the Act, then the court would be acting no different from an appellate court which would be contrary to the legislative intent of the Section 34 of the Act, 1996. The court shall decline to decide the claim that had been rejected even if wrongly so by the learned Arbitrator.
42. In the decision of Dyna Technologies (P) Ltd. v. Cromption Greaves Ltd.17, the Supreme Court noted that only when there is complete perversity in the reasoning then it can be challenged under the provisions of Section 34 of the Act. The power vested under Section 34(4) of the Act, 1996 to cure defects can be utilised in cases where the arbitral award does not provide any reasoning or if the award has some gap in the reasoning or otherwise and that can be cured so as to avoid the challenge based on the aforesaid curable defects under Section 34 of the Act.
43. As far as Section 34 is concerned, the position is well settled by now that the court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation 17 (2019) 20 SCC 1 pg. 25 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32 of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the 'fundamental policy of Indian law' would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and reasonableness.
44. It is only if one of these conditions is met then only the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts.
45. In view of the law laid down by the Supreme Court, the scope of judicial scrutiny and interference by an appellate Court under Section 37 of the Act is even more restrictive than Section 34 of the Act. In fact, while entertaining appeals under Section 37 of the Act, the court is not actually sitting as a court of appeal, this Court shall examine the judgment of the Ld. District Judge in a narrow campus.
pg. 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32
46. The Ld. District Judge has first and foremost taken note of the scope of its powers under Section 34 of the A&C Act and the settled position of law pertaining to the grounds where it may exercise its powers as laid down by the Supreme Court in PSA SICAL Terminals Pvt. Ltd. v. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin and Ors.18; K. Sugumar and Anr. v. Hindustan Petroleum Corporation Ltd. &Anr.19; UHL Power Company Ltd. v. State of Himachal Pradesh20; Sutlej Construction Limited v. Union Territory of Chandigarh21; Venture Global Engineering v. Satyam Computer Services Limited and Anr.22and Patel Engineering Limited v. North Eastern Electric Power Corporation Limited23.
47. Thereafter, the Ld. District Judge has taken note of the contentions of the Parties including the law relied upon by either side. Then the Ld. District Judge applied its mind and referring to the findings of the Ld. Arbitrator has come to the conclusion that the Ld. Arbitrator has arrived at its findings after due consideration of the documents on record, the agreement and the evidence adduced by the Parties. Such a finding having been arrived at, cannot be trifled with in the absence of a glaring error as it is trite in law that a finding arrived at by the Ld. Arbitral Tribunal if plausible, cannot be interfered with.
18 AIR 2021 SC 4661 19 (2020) 12 SCC 539 20 (2022) 4 SCC 116 21 (2018) 1 SCC 718 22 (2010) 8 SCC 660 23 (2020) 7 SCC 167 pg. 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 03-Feb-2025 11:39:32
48. A bare perusal of the impugned judgment makes it amply clear that the Ld. Tribunal has ignored any relevant submission, or not applied its mind at any juncture. This Court, therefore, does not find that the order of the Tribunal, as confirmed by the learned District Judge, is so perverse or suffers from patent illegality which requires interference.
49. In view of the discussion above, I find no infirmity, illegality or impropriety in the award and the order of the learned District Judge, which would require interference in the present appeal. Appeal is accordingly dismissed.
VII. CONCLUSION:
50. Therefore, in light of the discussion above, keeping the settled principles of law in mind and for the reasons given above, this Court is of the considered view that the impugned order as well as the Arbitral Award warrants no interference under Section 37 of the A&C Act.
51. The ARBA is disposed of, accordingly.No order as to costs.
(Dr.S.K. Panigrahi) Judge Orissa High Court, Cuttack, Dated the 30th Jan., 2025/ pg. 28