Right to File Affidavits/Additional Evidence in the Proceedings under Section 34 of the Arbitration Act
It has been well established by catena of judgments that proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act“) are summary in nature and therefore, the scope of enquiry in any proceedings under Section 34 of the Act has been restricted to consider the grounds exhaustively mentioned in Section 34(2) or Section 13(5) or Section 16(6) in order to determine whether to set aside an award that has been challenged under section 34 of the Arbitration Act. The thumb rule is that an application for setting aside an arbitral award would not ordinarily require anything beyond the record that was before the Arbitral Tribunal.
In the matter of Fiza Developers and Inter-Trade Private Limited v. AMCI (India) Private Limited and Anr[1] the Court had held that framing of issues is not required as the proceedings are summary in nature. However, at the same time the Court indicated that according to section 34(2) of the Arbitration Act, an opportunity to the aggrieved party has to be afforded to prove existence of any of the grounds and allowed the applicant in the case to file affidavits of the applicant’s witnesses as “proof” and granted the respondent-defendant an opportunity to place their evidence by affidavit. The Court further went on to add that “Where the case so warrants, the court permits cross-examination of the persons swearing to the affidavit”.
In the matter of Emkay Global Financial Services Limited v. Girdhar Sondhi[2] it was clarified thatsince after 2015 amendments to the Arbitration Act, the proceedings under section 34 have become time bound, the thumb rule of summary proceeding shall be followed and only if there were matters not contained in the record before the arbitrator, and would be relevant for determining issues arising under Section 34(2)(a), only then they may be brought to the notice of the Court by way of affidavits filed by both parties. The Court further added that cross-examination of persons swearing to the affidavits should not be allowed unless absolutely necessary.
Since, clearly an exception has been carved out to the thumb rule, howsoever narrow, the question is how and when this exception be applied by the courts. When is it ‘absolutely necessary’ to cross examine? In a subsequent matter[3], the Apex Court further clarified the position by holding that if there is any exceptional circumstance wherein parties are required to adduce evidence in the form of an affidavit, the party must indicate on what point the party intends to adduce evidence along with disclosing specific documents or evidence that would be required to be produced. There must be specific averments in the affidavit as to the necessity and relevance of the additional evidence sought to be adduced which would be beyond the record that was before the arbitrator.
Recently, on a strong exceptional basis, the Apex Court in the matter of M/s Alpine Housing Development Corporation Pvt. Ltd. v. Ashok S. Dhariwal and Others[4] allowed a party to file affidavits/additional evidence in the proceedings under section 34 of the Arbitration Act and further permitted second party to cross-examine and/or produce contrary evidence. In this case, the award passed by the arbitrator was ex-parte. The respondent assailed the award under section 34 of the Arbitration Act along with the application to adduce additional evidence. The application was declined by the Court while relying on 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”. The Court explained in the following words: “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 of the Court was challenged by way of writ petition before the High Court which allowed the petition and permitted the respondent to adduce the evidence while relying on judgment in Fiza Developers.
The said judgment by the Hon’ble High Court was challenged before the Hon’ble Supreme Court. The Court foremost observed that arbitration proceedings commenced and even the award was declared by the arbitral tribunal in the year 1998, i.e., prior to section 34(2)(a) came to be amended and therefore, pre-amendment of section 34(2)(a) shall be applicable according to which 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.
The Court, therefore, applied the ratio in the judgments in Fiza Developers, Emkay Global and Canara Nidhi, and held that “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 Court observed that whereas the arbitral tribunal in the matter had passed the decree for specific performance of the contract/agreement subject to the amalgamation of the plots, the respondents, by way of application, had sought to place on record the communication from the appropriate authority by which the application for amalgamation of the plots was rejected. The case of the respondents was thus, in view of the refusal of the permission by the appropriate authority to amalgamate the plots, the case fell under section 34(2)(b), namely, that the dispute was not capable of settlement under the law for the time being in force and that the arbitral award was in conflict with the Public Policy of India, namely, against the relevant land laws. Since the event of refusal to amalgamate the plots was subsequent to the passing of the award, the same was not forming part of the record of the arbitral tribunal. Further, the award of the arbitral tribunal being an exparte award, no evidence was before the arbitral tribunal on behalf of the respondents.
According to the Court, therefore, the affidavit thus disclosed specific document and the evidence required to be produced, thus establishing a strong exceptional case to permit the respondents to file affidavits/adduce additional evidence. However, despite the Courts observation that “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,” no separate reasoning was provided by the Court for allowing cross-examination in the matter. The Court plainly added that, “at the same time, the appellant also can be permitted to cross-examine and/or produce contrary evidence.”
It is pertinent to note that as it appears, the permission to adduce additional evidence has been granted because the pre-amendment position of law has been applied. This was because not only were the proceedings commenced before the amendments, the award was also delivered prior to the amendments. After the amendment in 2019, the section does away with the requirement of furnishing proof under Section 34(2)(a) of the Arbitration Act. The phrase “party making the application furnishes proof” has been substituted with the words “establishes on the basis of the Arbitral Tribunal’s record that.” Further, the proceedings under section 34 before the Court has been made time bound.
[1] (2009 ) 17 SCC 796
[2] (2018) 9 SCC 49
[3] The judgment in Canara Nidhi Limited vs. M. Shashikala Civil Appeal Nos. 7544-7545 of 2019 further affirms the position.
[4] [CIVIL APPEAL NO. 73 OF 2023 decided on 19.01.2023]
