Section 34 courts may admit new evidence in exceptional fraud cases despite 2019 amendment, Karnataka High Court rules

The petitioner had entered into a sale agreement and construction agreement with Respondent No. 1 for construction of a residential villa.

Alleging delay in construction and a shortfall of approximately 490 square feet in the built-up area, he initiated arbitration.

The arbitrator, by award dated 12 October 2021, rejected the petitioner’s claim for compensation for delay, relying upon an alleged occupancy certificate dated 27 April 2017 issued by Anneshwara Gram Panchayat.

The petitioner challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, contending that the occupancy certificate was false and that the award had been induced or affected by fraud, thereby violating the public policy of India.

During the Section 34 proceedings, the petitioner filed I.A. No. 2 of 2024 seeking permission to produce RTI responses, an inspection report and related official communications indicating that the alleged occupancy certificate was not available in the Panchayat’s records and had not been issued in accordance with the applicable requirements.

The Section 34 Court rejected the application on 16 September 2025, holding that, after the 2019 amendment to Section 34, only documents forming part of the arbitral record could be considered.

The petitioner consequently invoked Articles 226 and 227 of the Constitution.

Whether, after the 2019 amendment to Section 34 of the Arbitration and Conciliation Act, 1996, a Section 34 Court can permit production of documents that were not part of the arbitral record?

Whether the record-based restriction expressly contained in Section 34(2)(a) also applies to proceedings under Section 34(2)(b), including a challenge based on fraud or violation of the public policy of India?

Whether a party alleging that an arbitral award was induced or affected by fraud has an unrestricted right to produce additional evidence, or whether such permission is confined to rare and exceptional cases?

Whether the petitioner established an exceptional case warranting reception of the additional documents, considering their subsequent availability and their relevance to the alleged fraud?

Whether the Section 34 Court committed jurisdictional error, patent illegality or perversity by rejecting the documents solely because they were not part of the arbitral record?

Whether the impugned order warranted interference under the High Court’s supervisory jurisdiction under Article 227 of the Constitution?

Section 34(2)(a) of the Arbitration and Conciliation Act, 1996, as amended in 2019, requires the applicant to establish the specified grounds “on the basis of the record of the arbitral tribunal”; this express statutory restriction is confined to clause (a).

Section 34(2)(b), including Explanation 1(i), permits setting aside an award where the Court finds that it was induced or affected by fraud or is otherwise contrary to the public policy of India.

Under Fiza Developers v. AMCI (India) (P) Ltd., Emkay Global Financial Services Ltd. v. Girdhar Sondhi, Alpine Housing Development Corpn. (P) Ltd. v. Ashok S. Dhariwal, and Ashok S. Dhariwal v. Alpine Housing Development Corporation Pvt. Ltd., Section 34 proceedings are summary and additional evidence is not ordinarily permitted, but material outside the arbitral record may be received in a rare and exceptional case where it is absolutely necessary to determine a Section 34 ground.

Venture Global Engg. v. Satyam Computer Services Ltd. establishes that subsequently discovered concealment or fraud may be relevant where it has a causative link with the award.

The principles of minimal judicial intervention and restraint under Delhi Airport Metro Express (P) Ltd. v. DMRC and PSA Sical Terminals (P) Ltd. v. V.O. Chidambaranar Port Trust remain applicable, but do not create an absolute bar against receiving evidence relevant to a Section 34(2)(b) ground.

Under Shalini Shyam Shetty v. Rajendra Shankar Patil, Article 227 may be exercised where a subordinate court fails to exercise jurisdiction vested in it or adopts a legally impermissible approach.

Rule 18 of the Karnataka Civil Rules of Practice, 1967 permits a memorandum of facts in interlocutory applications of this nature and does not make an affidavit mandatory.

The High Court distinguished between the express record-based requirement under Section 34(2)(a) and the differently worded ground under Section 34(2)(b), which requires the Court to determine whether the award was induced or affected by fraud.

It held that although additional material cannot be introduced as a matter of right or to reopen the merits, documents may be received where they are directly relevant to fraud, have a causative connection with the award, could not reasonably have formed part of the arbitral record, and are absolutely necessary for deciding the statutory ground, subject to the opposing party’s opportunity to contest them.

The documents sought by the petitioner directly concerned the authenticity and existence of the occupancy certificate on which the arbitrator had relied to reject delay compensation.

The inspection report dated 15 May 2023 and the subsequent official reply dated 7 December 2023 arose after the arbitral proceedings and therefore could not have been part of the arbitral record.

The objections regarding delay, the identity of the RTI applicant, and the petitioner’s alleged reliance on the occupancy certificate went to the weight and ultimate effect of the documents, not to their admissibility at the threshold.

The Section 34 Court had rejected the application on the erroneous assumption that documents outside the arbitral record could never be received, without applying the exceptional-case test under Section 34(2)(b).

This amounted to failure to exercise jurisdiction and justified supervisory interference under Article 227.

The High Court set aside the order dated 16 September 2025 passed by the Section 34 Court and allowed I.A. No. 2 of 2024.

The additional RTI materials, inspection report and official communications were directed to be taken on record in A.P. No. 182 of 2022.

The Court clarified that reception of the documents did not establish that the occupancy certificate was fabricated, invalid or fraudulently used, nor did it determine that the arbitral award was in fact induced or affected by fraud.

Respondent No. 1 was granted liberty to challenge the authenticity, admissibility, relevance and evidentiary value of the documents and to place contrary material or seek appropriate safeguards, including cross-examination where permissible.

The Section 34 Court was directed to consider the documents and dispose of A.P. No. 182 of 2022 expeditiously in accordance with law.