REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 73 OF 2023
M/s Alpine Housing Development Corporation Pvt. Ltd. …Appellant
Versus
Ashok S. Dhariwal and Others …Respondents
J U D G M E N T
M.R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 1.9.2021 passed by the High Court of Karnataka at
Bengaluru in Writ Petition No. 50799/2019, by which the High Court has
allowed the said writ petition and while quashing and setting aside the
order passed by the learned Additional City Civil and Sessions Judge,
Bengaluru, has permitted the respondents – original writ petitioners to
Signature Not Verified
Digitally signed by
Neetu Sachdeva
Date: 2023.01.19
16:40:12 IST
Reason:
adduce evidence in an application under Section 34 of the Arbitration &
Conciliation Act, 1996 (hereinafter referred to as the ‘Act’), the original
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respondent before the High Court and in whose favour the award has
been passed by the learned Arbitral Tribunal has preferred the present
appeal.
2. The facts leading to the present appeal in a nutshell are as under:
That against the award passed by the learned arbitrators dated
12.03.1998, an application under Section 34 of the Act being Arbitration
Case No. 38/1998 has been filed by the respondents. That the
respondents filed an interim application being IA No. 4 in section 34
application to adduce additional evidence. At this stage, it is required to
be noted that as such the award passed by the learned arbitrators was
an ex-parte award and no evidence was led by the respondents herein,
who subsequently assailed the award by way of section 34 application.
The appellant herein filed objections to the said interim application
seeking permission to adduce evidence on the ground that the same
was not maintainable in accordance with the provisions of the Arbitration
Act, 1996. The grounds on which the respondents submitted an
application to permit them to adduce evidence shall be dealt with and
considered hereinafter.
2.1 The Court dealing with interim application being IA No. 4 in section
34 application rejected the said interim application and refused to permit
the respondents to adduce evidence by observing that if such a
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permission is granted, it would defeat the object and purpose of early
disposal of arbitration proceedings and it would delay further hearing of
section 34 application. For that purpose, reliance was placed on the
provisions of Section 34(2)(a) of the Act, as amended in the year 2019,
by which expression “furnish proof” in section 34(2)(a) came to be
substituted with the expression “establish on the basis of record of
arbitral tribunal”. Therefore, the Court dealing with section 34 application
opined that the said amendment intended to limit the scope of judicial
review under Section 34 of the Act only in exceptional circumstances
enumerated under Section 34(2)(a) of the Act on the basis of the record
available and even if the grounds urged relate to section 34(2)(b) of the
Act, the applicants cannot have a right to produce additional evidence.
The order passed by the Court dealing with Section 34 application which
rejected the interim application being IA No. 4 preferred by the
respondents permitting them to adduce additional evidence/evidence
was the subject matter of writ petition before the High Court.
2.2 Before the High Court, it was conceded on behalf of the appellant
herein – original respondent before the High Court, so recorded in
paragraph 8 of the impugned judgment, that the provisions of Section 34
(2)(a) of the Act, as it stood prior to Act 33 of 2019 would apply, namely,
pre-amendment to section 34(2)(a) of the Act shall be applicable. That
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thereafter, by the impugned judgment and order, after following the
decision of this Court in the case of Fiza Developers and Inter-Trade
Private Limited v. AMCI (India) Private Limited & Another, reported
in (2009) 17 SCC 796 , the High Court has allowed the said writ petition
and set aside the order passed by the court below and has allowed the
application preferred by the respondents herein permitting them to
adduce evidence in the proceedings under section 34 of the Act. The
impugned judgment and order passed by the High Court permitting him
respondents to adduce evidence/additional evidence in the proceedings
under Section 34 of the Act is the subject matter of present appeal
before this Court.
3. Shri Krishnan Venugopal, learned Senior Advocate has appeared
on behalf of the appellant and Shri Balaji Srinivasan, learned Advocate
has appeared on behalf of the respondents – original writ petitioners.
3.1 Shri Krishnan Venugopal, learned senior counsel appearing on
behalf of the appellant has vehemently submitted that in the facts and
circumstances of the case, the High Court has committed a very serious
error in permitting the respondents to adduce evidence in an application
under section 34 of the Act. It is submitted that the impugned judgment
and order passed by the High Court permitting the respondents to
adduce additional evidence in an application under section 34 of the Act
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is against the object and purpose of the amending section 34(2)(a),
amended vide Act No. 33/2019. It is submitted that if in an application
under section 34 of the Act, the applicant who is aggrieved by the award
passed by the arbitral tribunal is permitted to adduce evidence, it would
defeat the object and purpose of amending section 34(2)(a) of the Act by
which the expression “furnishes proof” has been substituted with the
expression “establish on the basis of record of the arbitral tribunal”. It is
submitted that the object and purpose of amending section 34(2)(a) of
the Act is to decide and dispose of the arbitration proceedings at the
earliest and to avoid delay.
3.2 It is further submitted by Shri Krishnan Venugopal, learned senior
counsel appearing on behalf of the appellant that though it was
conceded before the High Court by the counsel appearing on behalf of
the appellant that section 34 of the Act prior to amendment amending
section 34(2)(a) shall be applicable, the said concession is not binding
as the same would be against the law and any concession contrary to
law shall not be binding. It is submitted that therefore according to him
the provisions of section 34(2)(a) post amendment shall be applicable by
which in the proceedings under section 34 of the Act, the applicant is not
required to furnish proof on the grounds set out in section 34 (2)(a) to set
aside the award and the court dealing with section 34 application has to
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decide the same only on exceptional circumstances enumerated under
section 34(2)(a) of the Act on the basis of the record available. It is
submitted that therefore the applicants cannot have a right to produce
additional evidence/evidence.
3.3 It is further submitted that even otherwise and assuming that the
provisions applicable prior to amendment (Act 33 of 2019) are
applicable, in that case also, as the respondents – original applicants
have assailed the award on the grounds enumerated under section 34(2)
(b) of the Act, the expression “furnish proof” in section 34(2)(a) cannot
apply to section 34(2)(b). It is submitted that the award passed by the
arbitral tribunal can be assailed either on the grounds enumerated under
section 34(2)(a) or under section 34(2)(b). It is submitted that the
grounds enumerated under section 34(2)(a) and section 34(2)(b) are
separate grounds/clauses. It is submitted that therefore “furnish proof” in
section 34(2)(a) of the Act cannot apply to section 34(2)(b) because if
the Parliament intended so, Section 34(2) would have applied the proof
requirement to all seven grounds, without any need for separate clauses
(a) and (b). It is submitted that the effect of “the court finds that” in
section 34(2)(b) is that the court can on its own decide based on the
arbitral award that the dispute was not arbitrable or that award conflicts
with public policy. It is submitted that therefore, the disjunctive “or”
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between clauses (a) and (b) of section 34(2) cannot be read as the
conjunctive “and”.
3.4 It is further submitted that the ratio of this Court in the case of Fiza
Developers(supra) was for framing of issues which is not required in
section 34(2) proceedings. It is submitted that in the case of Emkay
Global Financial Services Limited v. Girdhar Sondhi, reported in
(2018) 9 SCC 49 , this Court has explained the decision in the case of
Fiza Developers (supra) and has expressly held that only section 34(2)
(a) contemplates furnishing proof. It is submitted that the subsequent
decision of this Court in the case of Canara Nidhi Limited v. M.
Shashikala, reported in (2019) 9 SCC 462 has approved the
interpretation of section 34(2)(a) in Emkay Global (supra) .
3.5 It is further submitted that in the case of Gemini Bay
Transcription Private Limited v. Integrated Sales Service Limited,
reported in (2022) 1 SCC 753 , this Court has treated 2019 amendment
to section 34(2)(a) as clarificatory, while considering section 48(1) which
are broadly in pari materia with section 34(2)(a) and 34(2)(b) as they
stood prior to the 2019 amendment. It is submitted that this Court in the
aforesaid decision in paragraphs 39 & 40 held that grounds under
unamended section 48 including conflict with public policy in section
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48(2) are to be established only on basis of “record of arbitral tribunal” in
the interest of speedy enforcement of foreign award.
3.6 It is submitted that as such there is no legal bar to the Parliament
to provide two different procedures for two different sets of grounds in a
proceeding or even having two different procedures for the same relief.
It is submitted that the Parliament intended that grounds in section 34(2)
(b) must be established on the basis of the record of the arbitral tribunal.
It is submitted that even assuming proof is required under section 34(2)
(b), it does not apply to a case of alleged conflict of an award with
statute. Being a pure question of law, it can be considered on the
findings/directions recorded in the award.
3.7 It is further submitted that even otherwise on merits also, general
rule is that unless exceptional circumstances are made out, no additional
evidence is permissible. It is submitted that the present case does not
fall within the meaning of “exceptional circumstances” as held by this
Court in the case of Canara Nidhi (supra) . It is submitted that the
directions in the award that the parties shall apply for statutory
permissions is the legally correct decree to pass in a suit for specific
performance. Therefore, the award cannot be said to be in conflict with
“public policy of Indian law.”
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3.8 It is submitted that the respondents’ contention that the award is
frustrated because corporation refused permission for clubbing of khatas
which is the basis for award to be executed does not fall within the
conflict with public policy ground under section 34(2)(b) because it is the
award and not its execution that must conflict with the public policy of
India. It is submitted that apart from the fact that the respondents
contention is premised on his having accepted the award, the
corporation’s alleged refusal is admittedly a subsequent event after the
award. It is submitted that it is the executing court that would determine
that the decree is inexecutable due to change in circumstances. It is
submitted that the evidence can be led during execution. It is submitted
that the respondents are bound to suffer the consequence of their wilful
failure to participate in the arbitration proceedings before the arbitral
tribunal, despite attending them after the rejection of their objection to
the jurisdiction of the Tribunal. It is submitted that therefore the
respondents cannot be allowed to lead evidence by taking advantage of
their own wrong.
3.9 It is further urged by the learned senior counsel appearing on
behalf of the appellant that if this Court is inclined to allow the
respondents to lead evidence, in that case, (a) the appellant may be
permitted to lead evidence including the permission for clubbing khatas
9
where there are nalas and the corporation’s later endorsement dated
28.6.2004 agreeing to consider clubbing of khatas concealed by the
respondents, and (b) the questions of law regarding whether the
corporation’s refusal falls under section 34(2)(b) may kindly be left open.
4. The present appeal is vehemently opposed by Shri Balaji
Srinivasan, learned counsel appearing on behalf of the respondents. It
is submitted that in the present case initially the respondents challenged
the arbitration proceedings/constitution of the arbitral tribunal and
therefore did not participate in the arbitration proceedings. It is
submitted that thereafter the arbitral tribunal proceeded with the hearing
ex-parte. It is submitted that therefore as such no evidence was
adduced or led by the respondents before the arbitral tribunal.
4.1 It is submitted that in the present case the arbitration proceedings
begun on 7.2.1997 under old Arbitration Act, 1940 and on 25.03.1997
arbitrators arbitrarily decided to proceed with the arbitration proceedings
under the Arbitration Act, 1996. It is submitted that the respondents
withdrew from the arbitration. That thereafter the respondents filed an
application challenging the bias and higher fees before the arbitral
tribunal. However, ex-parte award dated 12.03.1998 came to be passed
for specific performance of the agreement reserving liberty to apply for
amalgamation of khatas. It is submitted that in fact though it was for the
10
appellant to apply for amalgamation of khatas but it did not and it was
the respondents who applied for the same twice. It is submitted that
applications for amalgamation of khatas made by respondents twice
have been rejected due to presence of RzajaKaluve or rain water drain.
It is submitted that therefore the respondents made an application to
produce the evidence in section 34 application to produce the final
endorsement dated 17.03.2003 by which the prayer for amalgamation of
khatas to plots were rejected and thereafter it is required to examine the
concerned officer. It is submitted that therefore it is the case on behalf of
the respondents that the award is incapable of being implemented
and/or executed in view of section 34(2)(b) (i) & (ii) of the Arbitration
Act, 1996 and section 56 of the Indian Contract Act. It is submitted that
therefore according to the respondents the enforcement of the award is
contrary to Public Policy, Local Law & void arbitration proceedings
further leading to Section 56 of the Indian Contract Act.
4.2 It is submitted that as such in the present case the provisions prior
to the amendment to section 34(2)(a) of the Act, i.e., prior to Act 33/2019
shall be applicable in which the words used are “furnish proof”. It is
submitted that as such the words “ furnish proof” shall be applicable with
respect to an application to set aside the award on the grounds set out in
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section 34(2)(a) & 34(2)(b) and not section 34(2)(a) alone, as sought to
be contended on behalf of the appellant.
4.3 Learned counsel appearing on behalf of the respondents has
heavily relied upon the decisions of this Court in the cases of Fiza
Developers (supra) ; Emkay Global (supra); and Canara Nidhi
(supra) . He has also relied upon the decision of this Court in the case of
S.P. Singla Constructions Pvt. Ltd. v. State of Himachal Pradesh,
reported in (2019) 2 SCC 488 in support of his submission that the
amending arbitration Act shall not be applicable with respect to
arbitration proceedings commenced before the commencement of the
amending act, unless the parties otherwise agree.
4.4 Making above submissions, it is prayed to dismiss the present
appeal.
5. We have heard learned counsel for the respective parties at
length.
6. The short question which is posed for the consideration of this
Court is, whether the applicant can be permitted to adduce evidence to
support the ground relating to Public Policy in an application filed under
Section 34 of the Arbitration & Conciliation Act, 1996?
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At the outset, it is required to be noted that in the present case the
arbitration proceedings commenced and even the award was
declared/passed by the arbitral tribunal in the year 1998, i.e., prior to
section 34(2)(a) came to be amended vide Act 33/2019. Apart from the
fact that it was conceded by the learned counsel appearing on behalf of
the appellant before the High Court that the law prevailing prior to the
amendment of Section 34(2)(a) by Act 33/2019 shall be applicable, even
otherwise, we are of the opinion that the arbitration proceedings
commenced and even the award was declared prior to the amendment
of Section 34(2)(a) by Act 33/2019, Section 34(2)(a) pre-amendment
shall be applicable. The view which we are taking is because by
amendment of section 34(2)(a) by Act 33/2019, there is a substantial
change. Prior to the amendment of section 34(2)(a), an arbitral award
could be set aside by the Court if the party making an application
“furnishes proof” and the grounds set out in section 34(2)(a) and section
34(2)(b) are satisfied. However, subsequent to the amendment of
section 34(2)(a), the words “furnishes proof” have been substituted by
the words “establishes on the basis of the record of the arbitral tribunal”.
In that view of the matter, we hold that in case of arbitration proceedings
commenced and concluded prior to the amendment of section 34(2)(a)
by Act 33/2019, pre-amendment of section 34(2)(a) shall be applicable.
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7. Now so far as the question, whether in an application filed under
section 34(2)(a) pre-amendment where the requirement is that the party
making an application has to “furnish proof”, whether such an applicant
can be permitted to adduce evidence by way of affidavit or otherwise is
concerned, few decisions of this Court are required to be referred to.
(i) In the case of Fiza Developers (supra) , the question that was
posed by the Court was, whether issues as contemplated under Order
14 Rule 1 CPC should be framed in applications under Section 34 of
the Act. Answering the same, this Court observed and held in
paragraphs 14, 17, 18, 21, 22, 24, 29 & 31 as under:
| “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. | | | |
| 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- | | |
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| section (2) of Section 34 exists. The third is that proceedings under | |
|---|
| Section 34 requires to be dealt with expeditiously. | |
| 22. The scope of enquiry in a proceeding under Section 34 is restricted to<br>consideration whether any one of the grounds mentioned in sub-section<br>(2) of Section 34 exists for setting aside the award. We may approvingly<br>extract the analysis relating to “grounds of challenge” from The Law &<br>Practice of Arbitration and Conciliation by Shri O.P. Malhotra [1st Edn., p.<br>768, Para (I) 34-14]: | | | |
|---|
| “Section 5 regulates court intervention in arbitral process. It provides<br>that notwithstanding anything contained in any other law for the time<br>being in force in India, in matters governed by Part I of this Act, the<br>court will not intervene except where so provided in this Part. Pursuant<br>to this policy, Section 34 imposes certain restrictions on the right of the<br>court to set aside an arbitral award. It provides, in all, seven grounds for<br>setting aside an award. In other words, an arbitral award can be set<br>aside only if one or more of these seven grounds exists. | | |
| The first five grounds have been set forth in Section 34(2)(a). In order to<br>successfully invoke any of these grounds, a party has to plead and<br>prove the existence of one or more of such grounds. That is to say, the<br>party challenging the award has to discharge the burden of proof by<br>adducing sufficient credible evidence to show the existence of any one<br>of such grounds. The rest two grounds are contained in Section 34(2)<br>(b) which provides that an award may be set aside by the court on its<br>own initiative if the subject-matter of the dispute is not arbitrable or the<br>impugned award is in conflict with the public policy of India.” | | |
| The grounds for setting aside the award are specific. Therefore,<br>necessarily a petitioner who files an application will have to plead the facts<br>necessary to make out the ingredients of any of the grounds mentioned in<br>sub-section (2) and prove the same. Therefore, the only question that<br>arises in an application under Section 34 of the Act is whether the award<br>requires to be set aside on any of the specified grounds in sub-section (2)<br>thereof. Sub-section (2) also clearly places the burden of proof on the<br>person who makes the application. Therefore, the question arising for<br>adjudication as also the person on whom the burden of proof is placed is<br>statutorily specified. Therefore, the need for issues is obviated. | | | |
| | | |
| XXXXXXXX | | | |
| | | |
| 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. | | | |
| | | |
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| | | |
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| 29. | | In a regular civil suit, in the event of failure to file a defence, it will be | | | | | | | | | | |
|---|
| lawful for the court to pronounce the judgment on the basis of facts | | | | | | | | | | | | |
| contained in the plaint [vide Order 8 Rule 5(2) of the Code]. But in an | | | | | | | | | | | | |
| application under Section 34, even if there is no contest, the court cannot, | | | | | | | | | | | | |
| on the basis of the averments contained in the application, set aside the | | | | | | | | | | | | |
| award. Whether there is contest or not, the applicant has to prove one of | | | | | | | | | | | | |
| the grounds set out in Sections 34(2)( | | | | a | ) and ( | | | b) | . Even if the applicant does | | | |
| not rely upon the grounds under clause ( | | | | | | b | ), the court, on its own initiative, | | | | | |
| may examine the award to find out whether it is liable to be set aside on | | | | | | | | | | | | |
| either of the two grounds mentioned in Section 34(2)( | | | | | | | | | | b | ). It is perhaps in | |
| this sense, the High Court has stated that the proceedings may not be | | | | | | | | | | | | |
| adversarial. Be that as it may. | | | | | | | | | | | | |
| | | | | | | | | | | | |
| XXXXXXXX | | | | | | | | | | | | |
| | | | | | | | | | | | |
| 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.” | | | | | | | | | | | | |
| | | | | | | | | | | | |
(ii) The decision of this Court in the case of Fiza Developers(supra)
has been subsequently considered by this Court in the case of
Emkay Global (supra) and in paragraph 21, it is observed and held
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 [ | | | Sandeep Kumar | v. | Ashok Hans | , 2004 SCC | | | | |
| OnLine Del 106 : (2004) 3 Arb LR 306] | | | | , [ | Sial Bioenergie | | | v. | | SBEC |
16
| Systems | | , 2004 SCC OnLine Del 863 : AIR 2005 Del 95] , 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 [ | | | | | | | | | | | | | | | | | | | 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 [ | | | | | | | | | | 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 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 [ | | | | | | | | | Girdhar Sondhi | | | | | | | 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.” | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(iii) The decision of this Court in the case of Fiza Developers(supra)
again fell for consideration of this Court in the subsequent decision in
the case of Canara Nidhi (supra) . After taking note of the
observations made in paragraph 21 in Emkay Global (supra) ,
thereafter it is observed by this Court in the case of Canara Nidhi
(supra) that the legal position is thus clarified that section 34
application will not ordinarily require anything beyond the record that
was before the arbitration and that cross-examination of persons
17
swearing in to the affidavits should not be allowed unless absolutely
necessary .
8. The ratio of the aforesaid three decisions on the scope and ambit
of section 34(2)(a) pre-amendment would be that applications under
sections 34 of the Act are summary proceedings; an award can be set
aside only on the grounds set out in section 34(2)(a) and section 34(2)
(b); speedy resolution of the arbitral disputes has been the reason for
enactment of 1996 Act and continues to be a reason for adding
amendments to the said Act to strengthen the aforesaid object; therefore
in the proceedings under section 34 of the Arbitration Act, the issues are
not required to be framed, otherwise if the issues are to be framed and
oral evidence is taken in a summary proceedings, the said object will be
defeated; an application for setting aside the arbitral award will not
ordinarily require anything beyond the record that was before the
arbitrator, however, if there are matters not containing such records and
the relevant determination to the issues arising under section 34(2)(a),
they may be brought to the notice of the Court by way of affidavits filed
by both the parties’ the cross-examination of the persons swearing in to
the affidavits should not be allowed unless absolutely necessary as
the truth will emerge on the reading of the affidavits filed by both the
parties. Therefore, in an exceptional case being made out and if it is
18
brought to the court on the matters not containing the record of the
arbitrator that certain things are relevant to the determination of the
issues arising under section 34(2)(a), then the party who has assailed
the award on the grounds set out in section 34(2)(a) can be permitted to
file affidavit in the form of evidence. However, the same shall be allowed
unless absolutely necessary .
9. Now so far as the submission on behalf of the appellant that the
requirement of “furnishing proof” as per pre-amendment of section 34(2)
(a) of the Arbitration Act shall not be applicable to the application for
setting aside the award on the grounds set out in section 34(2)(b) and
the submission that in the execution proceedings the subsequent
development of refusing to grant permission for amalgamation of the
plots can be considered and it will be open for the applicants to point out
in the execution proceedings that the award is not capable of being
executed is concerned, at the outset, it is required to be noted that even
for establishing that the arbitral award is in conflict with Public Policy of
India, in a given case, the evidence may have to be led and by leading
evidence, the person who is challenging the award on that ground can
establish and prove that the arbitral award is in conflict with Public Policy
of India and/or the subject matter of dispute is not capable of settlement
by arbitration under the law for the time being in force. However, at the
19
same time, from the record before the arbitrator, if the same can be
established and proved that the subject matter of the dispute is not
capable of settlement by arbitration under the law for the time being in
force or the arbitral award is in conflict with the Public Policy of India, in
that case, the person may not be permitted to file the affidavit by way of
evidence/additional evidence.
10. Now so far as the submission on behalf of the appellant that the
subsequent development of refusing to grant permission by the
appropriate authority to amalgamate the plots can be considered in the
execution proceedings , a person against whom the award is passed and
who alleges on the grounds set out in section 34(2)(b) before the
executing court, the executing court may hold that the award is not
capable of being executed is concerned, it is required to be noted that so
far as one of the grounds set out in section 34(2)(b), namely, that the
arbitral award is in conflict with the Public Policy of India, the said ground
could be available only after passing of the award. Therefore, the same
can be permitted to be agitated in an application under section 34 of the
Act and the person shall not have to wait till the execution is filed. The
defence that the arbitral award is in conflict with the Public Policy of India
itself can be a ground to set aside the award in view of section 34(2)(b)
of the Act. Therefore, the aforesaid submission has no substance.
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11. Now the next question fell for consideration is, whether the present
case is such an exceptional case that it is necessary to grant opportunity
to the respondents to file affidavits and adduce evidence and whether
any case is made out for the same.
From the affidavit, which is sought to be placed in the proceedings
under Section 34 of the Act, it is seen that the respondents want to place
on record the communication from the appropriate authority by which the
application for amalgamation of the plots is rejected. At this stage, it is
required to be noted that the arbitral tribunal has passed the decree for
specific performance of the contract/agreement, subject to the
amalgamation of the plots. Therefore, it is the case on behalf of the
respondents that in view of the refusal of the permission by the
appropriate authority to amalgamate the plots, the case falls under
section 34(2)(b), namely, that the dispute is not capable of settlement
under the law for the time being in force and that the arbitral award is in
conflict with the Public Policy of India, namely, against the relevant land
laws. The event of refusal to amalgamate the plots is subsequent to the
passing of the award and therefore naturally the same shall not be
forming part of the record of the arbitral tribunal. Even otherwise, it is
required to be noted that the award of the arbitral tribunal was an ex-
parte award and no evidence was before the arbitral tribunal on behalf
21
of the respondents. We are not opining on whether the arbitral tribunal
was justified in proceeding with the further proceedings ex-parte or not.
Suffice it to record that before the arbitral tribunal, such evidence was not
there and nothing was on record on the amalgamation of the plots.
The affidavit thus discloses specific document and the evidence
requires to be produced. In that view of the matter, a strong exceptional
case is made out by the respondents to permit them to file
affidavits/adduce additional evidence. However, at the same time, the
appellant also can be permitted to cross-examine and/or produce
contrary evidence.
12. In view of the above and for the reasons stated above, we are of
the opinion that the High Court has not committed any error in permitting
the respondents to file affidavits/additional evidence in the proceedings
under section 34 of the Arbitration Act.
13. In view of the above and for the reasons stated above, the present
appeal fails and the same deserves to be dismissed and is accordingly
dismissed. However, it is observed that the appellant herein may also be
permitted to cross-examine and/or lead contrary evidence including the
permission for clubbing khatas where there are nalas as it is the case of
the appellant that thereafter the corporation vide endorsement dated
28.6.2004 has agreed to consider clubbing of khatas. As and when such
22
evidence is produced/led, the same may also be dealt with by the
concerned court in accordance with law and on its own merits. However,
at the same time, the court dealing with section 34 application shall
finally decide and dispose of section 34 application expeditiously,
considering the object and purpose of the Arbitration Act, namely,
speedy disposal.
14. With these observations, the present appeal is dismissed. There
shall be no order as to costs.
………………………………….J.
[M.R. SHAH]
NEW DELHI; ………………………………….J.
JANUARY 19, 2023. [C.T. RAVIKUMAR]
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