Article

In a recent  matter between M/s Alpine Housing Development Corporation Pvt. Ltd. (“Appellant”) and  Ashok S. Dhariwal and Others (“Respondents”) [CIVIL APPEAL NO. 73 OF 2023], the Appellant  approached  Hon’ble Supreme Court against the order by the High Court of Karnataka in a Writ Petition, by which the High Court had set aside the order passed by the learned Additional City Civil and Sessions Judge, and permitted the Respondents to adduce evidence in an interim application under Section 34 of the Arbitration & Conciliation Act, 1996 (“Act”). The award, passed in 1998, was an ex-parte arbitral award wherein no evidence was led by the Respondents.

The interim application filed along with the application under Section 34 of the Act by the Respondents, was rejected by the learned Additional City Civil and Sessions Judge refusing to permit the Respondents to adduce evidence on the ground that it would delay further hearing of section 34 application. The Court relied 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 Hon’ble High Court while following the decision of Supreme Court in the case of Fiza Developers and Inter-Trade Private Limited v. AMCI (India) Private Limited & Another [(2009) 17 SCC 796] allowed the writ petition filed by the Respondents and set aside the order passed by the lower court permitting them to adduce evidence in the proceedings under section 34 of the Act. The Court reasoned that the provisions of Section 34 (2)(a) of the Act, as it stood prior to the amendment in 2019, would apply.

The Appellant approached the Hon’ble Supreme Court.

The Supreme Court, at the very outset, laid down that since the arbitration proceedings commenced and even the award was declared prior to the amendment of Section 34(2)(a) in 2019, therefore, Section 34(2)(a) pre-amendment shall be applicable. The Court further reasoned that there was a substantial change vide amendment of section 34(2)(a) by 2019 amendment. 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”. The Court, therefore opined 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.

The Court, after examining the findings in the judgments of  Fiza Developers, Canara Nidhi Limited v. M. Shashikala [(2019) 9 SCC 462] and Emkay Global Financial Services Limited v. Girdhar Sondhi [(2018) 9 SCC 49], concluded that the three judgments lay down the position and the scope and ambit of section 34(2)(a) pre-amendment. Section 34 application will not ordinarily require anything beyond the record that was before the arbitration and that cross-examination of persons swearing in to the affidavits should not be allowed unless absolutely necessary. The Court made the observation saying that 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 is the objective behind the legislation. Therefore in the proceedings under section 34 of the Arbitration Act, the issues are not required to be framed which would otherwise defeat the said object of speedy resolution.

So far as leading evidence is concerned the Court observed that ordinarily in the Section 34 proceedings, the examination by the Court shall not require anything beyond the record that was before the arbitrator. However, the Court added, if there are matters not contained in 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 in exceptional cases, although cross-examination of the persons swearing in to the affidavits should not be allowed unless absolutely necessary.  The Court further added that the requirement of “furnishing proof” as per pre-amendment of section 34(2) (a) of the Arbitration Act shall also be equally applicable to the application for setting aside the award on the grounds set out in section 34(2)(b) such as the ground of public policy, provided the same cannot be established and proved from the record before the arbitrator.

After setting the law, the Court went on to examine whether the Respondents were able to establish  an exceptional case that it is necessary to grant opportunity to the Respondents to file affidavits and adduce evidence. Factually, the Court found that the evidence sought to be brought on record vide the interim application was subsequent to the passing of the award and therefore naturally the same shall not be forming part of the record of the arbitral tribunal. Additionally, the award of the arbitral tribunal was an ex-parte award and no evidence was before the arbitral tribunal on behalf of the Respondents. The affidavit, on the other hand, discloses specific document and the evidence required to be produced in order to determine the issue at hand. In that view of the matter, the Court found that a strong exceptional case is made out by the Respondents to permit them to file affidavits/adduce additional evidence. The Court also allowed the Appellant to cross-examine and/or produce contrary evidence at the same time. In the light of the reasoning thus, the Judgment of the High Court was upheld by the Supreme Court.