Karnataka State Electronics Development Corporation Limited, Represented By Its Authorized Signatory Mrs. B. S. Roopakala v. Lakshmi Nirman Pvt. Ltd. , Represented By Its Managing Director Mr. G. R. Suresh
2024-11-21
SURAJ GOVINDARAJ
body2024
DigiLaw.ai
ORDER : (Suraj Govindaraj, J.) 1. Petitioner is before this Court seeking for the following reliefs:- i. "Issue a Writ of Certiorari or any other Writ setting aside the Order dated 08.06.2020 passed on IA No.III in Com.A.S.No.238/2018 by the LXXXIII Add. City Civil and Sessions Judge, Bengaluru [CCH-84] vide Annexure - A; ii. Allow the application [IA No.III] dated 04.06.2019 fled under Rule 4(b) of the High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001 read with Section 151 of the Code of Civil Procedure, 1908 vide Annexure - C; iii. Pass such other order/s or grant such other relief/s as this Hon'ble Court deems fit to grant in the facts and circumstances of this case." 2. The respondent had filed a claim petition before the Arbitrator, in which, an award was passed against the petitioner. Challenging the same, the petitioner had filed proceedings under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as 'the Act' for short), which came to be numbered as Com.A.S.No.238/2018. 3. When the matter was posted for arguments, the petitioner had filed an application under Rule 4(b) of the High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001 read with Section 151 of CPC seeking permission of the Court to lead additional evidence by marking a document being letter dated 14.08.2015 addressed by the Senior Audit Officer, Commercial Audit Wing to the Managing Director of the petitioner. 4. The said application came to be rejected by the impugned order on the ground that the said application had been filed to drag on the proceedings and there is no valid reason which has been assigned for allowing the said application to lead further evidence by way of production of documents. Challenging the same, the petitioner is before this Court seeking for the aforesaid reliefs. 5. Sri. Nishanth A.V., learned counsel for the petitioner would submit that the present proceeding under Section 34 of the Act is filed on 29.11.2018. The same would be governed by unamended Section 34(2)(a) of the Act.
Challenging the same, the petitioner is before this Court seeking for the aforesaid reliefs. 5. Sri. Nishanth A.V., learned counsel for the petitioner would submit that the present proceeding under Section 34 of the Act is filed on 29.11.2018. The same would be governed by unamended Section 34(2)(a) of the Act. The amended Section 34(2)(a) of the Act would not be applicable to the present case and as such, the unamended Section 34(2)(a) of the Act would be applicable and in this regard, he submits that any party making an application under Section 34 of the Act, if furnishes proof of any of the events enumerated under Section 34(2)(a) of the Act, the Court seized of proceeding under Section 34 would take note of the said aspects and pass necessary orders. 6. In this matter, he submits that what is proposed to be produced is the report of the Accountant General Office which directed the petitioner to withhold a sum of Rs.43,20,000/- and it is in furtherance thereof that the withholding has been made by the petitioner, the petitioner not having any option but to withhold. 7. The petitioner, having produced the ledger statement marked as Ex.R26, where a journal entry had been made as regards the reason for withholding the petitioner was under the impression that the same would be sufficient proof for the order of withholding made by the Auditor General. However, the learned Arbitrator has negated the contention of the petitioner on the ground that no independent document has been produced regarding such direction of withholding. 8. He submits that firstly, the learned Arbitrator ought to have considered the entry made as proof thereof, secondly since the same has not been produced, the petitioner has now sought to produce the same under the Section 34 proceedings by filing the aforesaid application, which ought to have been considered by the Section 34 Court favourably. 9. In this regard, he relies upon the decision of Co-ordinate Bench of this Court in Ashok S. Dhariwal and another vs. M/s Alpine Housing Development Corporation Private Limited and others dated 01.09.2021 in W.P.No.50799/2019, more particularly, para 13 thereof which has been reproduced hereunder for easy reference:- "13.
9. In this regard, he relies upon the decision of Co-ordinate Bench of this Court in Ashok S. Dhariwal and another vs. M/s Alpine Housing Development Corporation Private Limited and others dated 01.09.2021 in W.P.No.50799/2019, more particularly, para 13 thereof which has been reproduced hereunder for easy reference:- "13. The decisions in Fiza Developers and Inter-Trade Pvt. Ltd., EMKAY Global Financial Services Limited, supra and M/s Canara Nidhi Limited v. M Shashikala and others do not make a distinction between the applications filed under Section 34(2)(a) or 34(2)(b) of the Act, and of course, in all the decisions the Hon’ble Supreme Court is engaged with proceedings prior to Act of 33/2019. This Court in the present case [which relates to the period prior to the Act 33/2019], must also opine that the application of the exposition – that an application for setting aside an arbitral award will not ordinarily require anything beyond the record that was before the arbitrator, and if there are no matters contained in such record but 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 - cannot be excluded only because the ground urged by the 16 petitioner could perhaps relate to a ground permissible under Section 34(2)(b) of the Act and the provisions thereof do not contemplate ‘furnishing of proof’ as in Section 34(2)(a) of the Act." 10. He submits that the decision of the Co-ordinate Bench of this Court has been upheld by the Hon'ble Apex Court in the case of Alpine Housing Development Corporation Pvt. Ltd. vs. Ashok S. Dhariwal and others reported in 2023 SCC Online SC 55, more particularly paragraph Nos.24 and 25 thereof, which are reproduced hereunder for easy reference:- "24.
He submits that the decision of the Co-ordinate Bench of this Court has been upheld by the Hon'ble Apex Court in the case of Alpine Housing Development Corporation Pvt. Ltd. vs. Ashok S. Dhariwal and others reported in 2023 SCC Online SC 55, more particularly paragraph Nos.24 and 25 thereof, which are reproduced hereunder for easy reference:- "24. 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 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. 25.
However, the same shall be allowed unless absolutely necessary. 25. 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 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." 11. On the basis of the above, he submits that the petition under Section 34 in the present case has been filed pre-amendment and the petitioner ought to be provided an opportunity to furnish proof of reason why the award is required to be set aside by coming under the purview of Section 34(2) (a) of the Act. 12. Learned counsel for the respondent No.2 would oppose the submission made by Sri.Nishanth A.V., learned counsel for the petitioner by contending that the document now proposed to be produced is of the year 2015. The petitioner always having been in possession of the said document could have produced the same before the Arbitral Tribunal.
12. Learned counsel for the respondent No.2 would oppose the submission made by Sri.Nishanth A.V., learned counsel for the petitioner by contending that the document now proposed to be produced is of the year 2015. The petitioner always having been in possession of the said document could have produced the same before the Arbitral Tribunal. Petitioner having chosen not to produce the same and having relied on only Ex.R26 has taken the risk by not producing. 13. That lacuna cannot now be filled up in proceedings filed under Section 34 of the Act, by filing an application for leading further evidence. He submits that there is no particular reasoning which has been given in the affidavit filed in support of the application and the impugned order has been passed indicating as to why the said document was not produced earlier and why it is required to be produced now. 14. Lastly, he submits that even by referring to the report of the CAG, there is no particular reason available as to why the amount has been deducted. In fact, it was for the petitioner to reply to the observations made in the CAGs report. Thus, he submits that there is no final order as such, passed by the CAG directing for withholding the amount and as such, even if the same is taken on record, the same would not enure to the benefit of the petitioner. 15. Heard Sri. Nishanth A.V., learned counsel for the petitioner, Sri. Siddharth B. Muchandi, learned counsel for respondent and perused papers. 16. The short question that would arise for consideration is, whether in a proceedings filed under Section 34 of the Act on 29.11.2018 prior to coming into force of the amendment to Section 34(2) (a) of the Act, an applicant under Section 34 of the Act be permitted to file an application to lead further evidence? 17. Section 34(2) (a) of the Act as it stood prior to the amendment is as under:- "34. Application for setting aside arbitral award. - (1) xxxx (2) An arbitral award may be set aside by the Court only if, - (a) the party making the application furnishes proof that,- (i) xxxxx" 18. Section 34(2) of the Act post amendment which came into effect on 30.08.2019 reads as under:- "34. Application for setting aside arbitral award.
Application for setting aside arbitral award. - (1) xxxx (2) An arbitral award may be set aside by the Court only if, - (a) the party making the application furnishes proof that,- (i) xxxxx" 18. Section 34(2) of the Act post amendment which came into effect on 30.08.2019 reads as under:- "34. Application for setting aside arbitral award. - (1) xxxxx (2) An arbitral award may be set aside by the Court only if, - (a) the party making the application establishes on the basis of the record of the arbitral tribunal that,- (i) xxxxx" 19. The essential difference is, in clause (a) where the words "furnishes proof that" were substituted by the words "establishes on the basis of the record of the arbitral tribunal that". 20. This substitution has been interpreted by the Co-ordinate Bench of this Court by holding that in proceedings filed under Section 34 of the Act prior to the amendment, applicant could furnish proof of any particular aspect which would satisfy the requirement of Section 34(2) (a). Thus, in view of Section 34(2) (a) of the Act as it stood prior to the amendment which came into effect on 30.08.2019 provided an opportunity to the applicant to in a Section 34 proceedings furnish proof of any particular aspect which would in my considered opinion go beyond what is available on the records. 21. It is for this reason by way of amendment, the same can be restricted to "establishes on the basis of record of the arbitral tribunal that", i.e., to say that post the amendment, there could be no other document which could be produced other than what is already available before the arbitral tribunal for consideration of the matter under Section 34 of the Act. 22. This aspect having been considered by the Co-ordinate Bench of this Court in Ashok S. Dhariwal's case supra which has also been upheld by the Hon'ble Apex Court in Alpine Housing Development Corporation Pvt. Ltd. case. It is clear that any proceedings filed under Section 34 of the Act prior to amendment coming into force at the discretion of the Court an application for leading further evidence could be considered and allowed. Thus, there is no statutory bar on an application to be considered and allowed prior to the amendment to Section 34 of the Act. 23.
Thus, there is no statutory bar on an application to be considered and allowed prior to the amendment to Section 34 of the Act. 23. Now, coming to the question of whether in the circumstances of the case, the application filed by the petitioner is required to be allowed, it is clear that one of the claims which had been made by the respondent was as regards the withholding of sum of Rs.43,20,000/-. In this regard, the petitioner, who was respondent before the Arbitral Tribunal had contended that it is not the deduction but it’s was a withholding of the aforesaid amount on the basis of the report of the CAG which was required to be complied with by the petitioner. 24. Though the petitioner had produced the ledger extract with the journal entry, the Arbitrator came to a conclusion that there is no independent document which has been produced to establish such a direction or observation by the CAG and rejected this contention while passing the award. Perusal of the award and cross-examination would indicate that at no point of time was the petitioner put to notice as regards the production of the said report even though Ex.R.26 relating to ledger entry and journal entry had been accepted by the claimant witness No.2 in his cross-examination. 25. Such being the case, the petitioner being under the bonafide belief that the journal entries made as also the balance sheet produced where a Chartered Accountant had certified that the withholding was on account of the report of the CAG would be sufficient and not produced the report. There is some substance in the submission and claim made by learned counsel for the petitioner. In this regard, the petitioner having produced the balance sheet and ledger entries, the document now which is sought to be produced would indicate a specific reference made at item No.10 of the report that a deduction has to be made on account of liquidated damages to the full extent of 5% permissible under the contract which had not been done by the petitioner. It is in that background that pending resolution of the said issue, the amount was withheld. 26.
It is in that background that pending resolution of the said issue, the amount was withheld. 26. Thus, in my considered opinion this aspect would have to be considered in detail while dealing with Section 34 of the Act, as such, the finding of the Section 34 Court that no grounds have been made out and no valid reasons have been shown is not sustainable. 27. In view of the above, I pass the following: ORDER : i) The petition is allowed. ii) The certiorari is issued, the order dated 08.06.2020 passed on I.A.No.III in Com.A.S.No.238/2018 by the LXXXIII Addl. City Civil and Sessions Judge, Bengaluru (CCH-84) vide Annexure - A is set aside. Consequently, I.A.No.III in Com.A.S.No.238/2018 is allowed. iii) The LXXXIII Addl. City Civil and Sessions Judge, Bengaluru (CCH-84), who is seized of Commercial A.S.No.238/2018 is directed to take on record the document which has been produced by the petitioner and proceed with the matter as observed by the Hon'ble Apex Court in Alpine Housing Development Corporation Pvt. Ltd. case dated 01.09.2021 in W.P.No.50799/2019.