HIGH COURT OF JUDICATURE AT ALLAHABAD AFR Court No. - 58 Case :- MATTERS UNDER ARTICLE 227 No. - 6498 of 2015 Petitioner :- Mahesh Kumar Agarwal & Another Respondent :- Suresh Chand Agarwal & 2 Others Counsel for Petitioner :- Krishna Mohan Garg Counsel for Respondent :- Shrey Sharma Hon'ble Suneet Kumar,J.
Heard learned counsel for the parties.
The applicant has approached this Court assailing the order dated 17 October 2015 passed by the Court of District Judge, Mathura in Arbitration Case No. 39 of 2013 (Mahesh Kumar Agarwal vs. Sahab Chandra Agarwal) rejecting the application to lead evidence to prove the allegations made in an application under Section 34 of the Arbitration and Conciliation Act.
The facts of the case, briefly is, that in an arbitration proceedings, against an award, applicant filed an application under Section 34 of the Arbitration and Conciliation Act, 19961, assailing the award dated 12 June 2013. The main ground of challenge, inter alia, was under Section 34(2)(iii) i.e. "the party making the application was unable to present case". During the pendency of the proceedings applicant made an application (14-C) stating that he may be permitted to lead evidence by way of an affidavit so as to prove the contentions raised in the application.
Learned District Judge upon noticing the case laws cited before him rejected the application.
Submission of the learned counsel for the applicant is that sub-section (2)(a) of Section 34 would require the party making the application to furnish proof of the grounds of challenge. The phrase "party making the application furnishes prove" would clearly indicate that the applicant will have to lead evidence, though it may be on affidavit, in order to prove any of the grounds taken therein, as is permissible under section 34. Learned counsel in support of his submission placed reliance on a decision rendered in Fiza Developers and Inter-Trade vs. AMCI (India) Private Limited and another2.
Learned counsel for the respondent would submit that the proceedings being summary in nature and not being a civil suit, therefore, a detailed procedure for leading evidence as contained in Code of Civil Procedure would not apply. In support of his submission, learned counsel for the respondent placed reliance on Udupi Paper Corporation Limited vs. Simplex Infrastructures Limited3.
It is not in dispute that the proceedings before the competent Civil Court, under Section 34 of Act 1996, is summary proceedings and normally the Courts would not interfere in the award until any of the grounds stated therein is reasonably proved by the applicant. In order to substantiate any of the ground taken under sub-clause (2), the onus is upon the applicant to prove the allegations and in order to prove the allegations, some evidence would have to be led by way of filing of an affidavit of the witnesses. The evidence need not be proved by oral evidence or cross-examination but some sedulous evidence would have to be led to prove the allegations and the party cannot be refused to lead evidence. In Fiza Developers case (supra) the question before Supreme Court was, as to whether, issues have to be framed by the Court in proceedings under Section 34, though the question of leading evidence was not involved, but the observations made by the Court in paragraph 31 would suggest that the applicant may be permitted to file affidavit of the witnesses in proof and a corresponding opportunity is given to the respondent/defendant to place his evidence.
The perusal of other provisions of the Act 1996 would further fortify the need for fair opportunity to the parties. Chapter V of the Act provides for Conduct of Arbitral Proceedings. The later part of Section 18 of the Act 1996 mandates that each party shall be given a full opportunity to present his case before the Arbitrator. Section 19 would provide that arbitral tribunal shall not be bound by the Code of Civil Procedure or the Indian Evidence Act. The parties are free to agree on the procedure, failing agreement the tribunal may conduct proceedings in the manner it considers appropriate which includes to determine "admissibility, relevance, materiality and weight of any evidence" (Sub-section (4) of Section 19). Sub-section (2) of Section 24 of the Act 1996 mandates that the parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of documents, goods or property. The proviso to sub-section (1) of Section 24 mandates that the arbitral tribunal shall hold oral hearings at an appropriate stage of proceedings on a request by a party, unless the parties have agreed that no oral hearing shall be held. Sub-section (3) of Section 24 provides that whatever statements, documents or other information are supplied to, or applications made to the arbitral tribunal by one party shall be communicated to the other party. Further, any expert report or evidentiary documents shall not be relied by the arbitral tribunal in making its decision which has not been communicated to the parties.
If any of the above provisions are violated, ground will be made out for setting aside of arbitral award under clauses (iii) and (v) of Section 34(2) of the Act 1996.
The following observations in Halsbury's Laws of England are also pertinent.
"In the conduct of the proceedings in his capacity as arbitral tribunal the arbitrator or umpire must conform to any directions which may be contained in the agreement of reference itself. Subject to any such directions, he should observe, so far as may be practicable, the rules which prevail at the trial of an action in Court, including rules as to issue estoppel, but he may deviate from those rules provided that in so doing he does not disregard the substance of justice. Fundamental to notions of justice are the rules that each party has a right to know the case made against him and a right to put his own case, but it does not follow that a party is entitled to an oral hearing.
If the agreement of reference requires the evidence to be taken on oath or affirmation, the arbitrator or umpire has no option but so to take it; and even where the agreement is silent as to whether the evidence shall be given on oath, since it is the ordinary practice that it should be so given, the arbitrator or umpire should not take it otherwise than on oath unless with the parties consent."
It is well-know proposition of law that although an arbitrator is allowed considerable latitude in the procedure adopted by him at the hearing, it is essential that he should afford the parties a reasonable opportunity of being heard and of presenting their case. If he makes an award without complying with this essential requirement, he does so at the peril of his award being declared invalid and inoperative in the eye of law.
An arbitrator normally has to permit parties to adduce evidence where oral evidence is felt necessary. Arbitrary refusal to permit oral evidence will undoubtedly amount to misconduct.
In Fiza Developers case, the Supreme Court referred to the following extract approvingly from the Law Practice of Arbitration and Conciliation by Sri O.P. Malhotra (1st Edition Pg. 786, para(I)) "It provides, in all, seven grounds for setting aside an award. In other words, an arbitral award can be set aside only if one or more of these grounds exits.
The first five grounds have been set forth in Section 34(2)(a). In order to successfully invoke any of these grounds, a party has to plead and prove the existence of one or more of such grounds. That is to say, the party challenging the award has to discharge the burden of proof by adducing sufficient credible evidence to show the existence of any one of such grounds. The rest of the two grounds are contained in Section 34(2)(b) which provides that an award may be set aside by the Court on its own initiative if the subject matter of the dispute is not arbitrable or the impugned award is in conflict with the public policy of India."
The ground for setting aside the award are specific. Therefore, necessarily, an applicant who approaches the civil Court under Section 34 will have to plead the facts and grounds of challenge and prove the same. The burden of proof is on the person who makes the applications which is statutorily specified.
Reverting to the facts of the case at hand, would reflect that arbitration clause was invoked by the respondents claiming dissolution of partnership firm, claiming shares of business, distribution of assets of the firm between partners and award of a sum and interest thereon. In the application under Section 34, inter alia, the emphasis was that the arbitrator has misconducted by depriving the applicants to participate in the proceedings, evidence were not taken on record, the arbitrator had no right or jurisdiction to render the award. The application under Section 34 being summary proceedings, in view of the Section 19 of the Act 1996, Code of Civil Procedure and Evidence Act is not applicable, but the applicant would have to prove the existence of any ground specified therein. The applicant can be permitted to file evidence of his witnesses in proof. Framing of issues as contemplated under Rule 1 of Order 14 is not an integral part of proceedings under Section 34, the very fact that an application has been instituted under a particular provision declares the issue inter se parties.
Having considered the facts, the blanket rejection of the application by the Court below, to lead evidence to prove the allegations by way of affidavit is erroneous, accordingly, the impugned order is set aside, applicant is permitted to lead evidence by filing affidavit of the witnesses.
Petition is, accordingly, allowed.
No cost.
Order Date :- 18.11.2015 S.Prakash