Agarwal Rasayan, Sambalpur v. National Aluminium Company Limited, Bhubaneswar
2019-04-30
BISWANATH RATH
body2019
DigiLaw.ai
JUDGMENT : BISWANATH RATH, J. 1. The writ petition involves quashing of order dated 7.5.2018 passed by the District Judge, Angul in ARBP No.24 of 2015 under Annexure-1 series as well as the consequential order dated 4.9.2018 in the same appeal under Annexure-1 series and further seeking a direction to the District Judge, Angul to complete the hearing of the application under Section 34 of the Arbitration & Conciliation Act, 1996 (short, the Act, 1996). 2. Short background involving the case is that the petitioner is a partnership firm represented through its Managing partner. Opposite party, a public sector undertaking initiated an arbitration proceeding involving the petitioner by appointing arbitrator from its own panel of arbitrators. The arbitration proceeding was concluded vide judgment dated 17.3.2015 thereby passing an award in favour of the opp. party, the public sector undertaking while also allowing the counter claim filed by the petitioner. The award of the arbitrator dated 17.3.2015 was challenged by NALCO before the District Judge, Angul involving an application under Section 34 of the Arbitration and Conciliation Act, 1996 registered as ARBP No.24 of 2015. It is alleged that while Section 34 proceeding was taken up for hearing, an attempt was made by the District Judge, Angul to treat the proceeding under Section 34 of the Act, 1996 like that of a suit and by order dated 7.5.2018, the District Judge directed the parties to produce evidence. Finding the direction remaining contrary to the purport of Act and also the settled position of law and referred to therein in the order dated 7.5.2018 itself, on 25.7.2018 a petition was filed by the opp. party to recall the order dated 7.5.2018. On receipt of copy, the present petitioner also filed a memo indicating therein it s no objection to allow such application in recalling the order dated 7.5.2018. By order dated 4.9.2018 petition filed by the opp. party to recall the order dated 7.5.2018 was rejected resulting filing of this writ application. 3. Shri Gautam Mishra, learned counsel appearing for the petitioner while making a statement that the impugned order is being aggrieved by both the sides, took this Court to a judgment of the Hon ble Apex Court in the case of Fiza Developers and Inter-Trade Pvt. Vrs.
3. Shri Gautam Mishra, learned counsel appearing for the petitioner while making a statement that the impugned order is being aggrieved by both the sides, took this Court to a judgment of the Hon ble Apex Court in the case of Fiza Developers and Inter-Trade Pvt. Vrs. Amci (I) (P), (2009) 17 SCC 796 , Shri Mishra taking this Court to the discussions and the findings therein submitted that the impugned orders vide Annexure-1 series are all bad and unless interfered and sets aside, the orders will create a bad precedent. 4. Shri Rath, learned Senior Counsel appearing for the opp. parties on the other hand while not disputing the submissions made by Sri Gautam Mishra, further taking this Court to a decision of the Hon ble apex Court in the case of M/s. Emkay Global Financial Services Ltd. v. Giridhar Sondhi, (2018) AIR SC 3894 submitted that for the repeated rulings of the Hon ble apex Court, it appears the District Judge has failed in appreciating the legal position involved herein and thus arrived in a wrong and illegal impugned orders and the opp. party has no objection in the event of interference of this Court in the impugned orders. 5. Considering the rival contentions of the parties, this Court finds the sole point involved herein is as to whether the proceedings under Section 34 of the Act, 1996 can be treated at par with the Civil Suit under the Code of Civil Procedure and consequently, procedures involving trial of the suit, if be followed in the consideration of the application under Section 34 of the Act, 1996? 6. Looking to the provisions involving Arbitration and Conciliation Act, 1996, from the provision, particularly Act, Section 19, this Court finds the Statute provides the Arbitral Tribunal shall not be bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872. Under sub-rule 3 provision has been made to the extent failing any agreement between the parties to follow any other procedure in conducting its proceedings, the arbitral Tribunal shall conduct the proceedings in the manner which considers appropriate, so as to include the powers to determine the admissibility, relevance, materiality and weight of any evidence. Section 23 invites the statement of claim and defence whereas Section 24 provides procedure for hearing and written proceedings.
Section 23 invites the statement of claim and defence whereas Section 24 provides procedure for hearing and written proceedings. From the reading of the above provision, this Court finds even in the original stage of the matter before the Arbitrator, there is no scope for following the procedures of the Code of Civil Procedure except however subject to agreement between the parties to apply any other procedure. The case at hand involves a proceeding at Section 34 of the Act. Now reading the provision at Section 34 of the Act, the provision under Section 34 is also absolutely silent on the applicability of the provisions of Code of Civil Procedure. The provisions rather go simply establishing that these proceedings are summary in nature. It is in this view of the matter, this Court observes the District Judge while undertaking the exercise of Section 34 of the Act, 1996 not justified in asking the parties to come for evidence. As a consequence, the order dated 7.5.2018 as well as the order dated 4.9.2018 refusing to recall the order dated 7.5.2018 becomes bad. 7. Now coming to law of the land involving such disputes, from the decision Fiza Developers (supra), this Court finds the Hon ble apex Court taking up an issue of framing of issues as contemplated under Order 14 Rule 1 of the Code of Civil Procedure involving Section 34 of the Act, proceeding in paragraph 28 to 31 concluded as follows:- 28. Before concluding, there is a need to clarify the observation by the High Court that a proceeding under Section 34 may not be in the nature of adversarial proceedings. In an adversarial process, each party to a dispute presents its case to the neutral adjudicator seeking to demonstrate the correctness of his own case and the wrongness of the other. See P. Ramanatha Iyer s Advanced Law Lexicon, 3rd Edn., Vol.I, p.152) While an applicant in an application under Section 34 is interested in getting an order setting aside an award, his opponent is equally interested in ensuring that it is not set aside, but upheld. While an applicant presents his case to the Judge to prove that the award is liable to be set aside, the respondent puts forth his case to refute the claim of the applicant that the award is liable to be set aside.
While an applicant presents his case to the Judge to prove that the award is liable to be set aside, the respondent puts forth his case to refute the claim of the applicant that the award is liable to be set aside. An application under Section 34 in that sense is adversarial in nature. But proceedings under Section 34 differ from regular civil suits in a significant aspect. 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. 30. Having regard to the object of the Act, that is, providing an expeditious alternative binding dispute resolution process with minimal court intervention, it is difficult to envisage proceedings under Section 34 of the Act as full-fledged regular civil suits under the Code of Civil Procedure. 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 witness 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. Therefore, 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.
Where the case so warrants, the court permits cross-examination of the persons swearing to the affidavit. Therefore, 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. 8. Going through this decision, this Court observes the District Judge even though taken care of this decision but appears to have failed to appreciate the decision. The little scope available in the above decision has ever been taken away vide 2015 (6) Arb.L.R., 199 (SC) and AIR 2018 SC 3894 . (A) Now coming to another decision of the Hon ble Apex Court in the case of COCHIN SHIPYARD LTD. vs. APEEJAY SHIPPING LTD., (2015) 6 ArbLR 199 (SC ), in a similar situation the Hon ble Apex Court taking into account a catena of decisions in paragraph 20 observed as follows-: 20. In the instant case, the High Court has granted liberty to the respondent herein to examine its General Manager to substantiate its claim and further opining that the said evidence should be considered within the parameters of Sections 30 and 33 of the 1940 Act. The learned senior counsel for the parties have pressed their arguments relating to legal misconduct. Both the learned senior counsel for the parties have construed the order that the said liberty has been granted to establish the misconduct and precisely that is the subject matter of challenge before us. Therefore, we have clearly opined that to substantiate a stance of legal misconduct on the part of the arbitrator, examination of any witness in court is impermissible. It is because it must be palpable from the proceedings and learned Single Judge has already directed that the proceedings before the arbitrator to be requisitioned by the civil court. Least to say, it will be open for the respondent to establish the ground of legal misconduct from the arbitral proceedings. We may hasten to add that we have not said anything as regards legal misconduct pertaining to the present case, although we have referred to certain authorities as regards the legal misconduct.
Least to say, it will be open for the respondent to establish the ground of legal misconduct from the arbitral proceedings. We may hasten to add that we have not said anything as regards legal misconduct pertaining to the present case, although we have referred to certain authorities as regards the legal misconduct. (B) Similarly, in a recent decision of the Hon ble Apex Court in the case of M/s. Emkay Global Financial Services Ltd. (supra), the Hon ble Apex Court again entering into such controversy in paragraph 14 observes as follows : 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 crossexamination 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. Further, the Hon ble Apex Court in paragraph 22 of the said decision held as follows: 22. 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, 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 (AIR 2012 (NOC) 345 (Cal)) (supra). We may hasten to add that if the procedure followed by the Punjab and Haryana High Court judgment (supra) 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.
So does the Calcutta High Court judgment (AIR 2012 (NOC) 345 (Cal)) (supra). We may hasten to add that if the procedure followed by the Punjab and Haryana High Court judgment (supra) 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, (2009) AIRSCW 6395 (supra) 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 amendment made in Section 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 of the Delhi High Court and reinstate that of the learned Additional District Judge dated 22.09.2016. The appeal is accordingly allowed with no order as to costs. 9. From the above decision and for the settled position of law, further keeping in view the intention of the law makers to have an alternate and efficacious remedy for adjudication of the dispute through Act, 1996, avoiding the rigor of the process of Code of Civil Procedure, this Court while observing that the District Judge has failed in appreciating the settled principle of law and the intention behind such legislation and thereby committed wrong in passing the orders dated 7.5.2018 as well as 4.9.2018 appearing at Annexure-1 series.
As a consequence, this Court interferes in both the orders under Annexure-1 series dated 7.5.2018 and 4.9.2018 involving Arbitration Case No.24 of 2015 sets aside the same and directs to proceed to decide the Arbitration Case No.24 of 2015 confining to the records of the Arbitration Proceeding nothing beyond that and subject to exception as provided in paragraphs 22 of AIR 2018 SC 3894 . 10. In the result, the writ petition succeeds. However, there is no cost.