The Single Bench of the Delhi High Court in the case of Inox Air Products Private Limited vs Air Liquide North India Private Limited consisting of Justice Prateek Jalan held that Section 34(4) of the Arbitration and Conciliation Act, 1996 cannot be invoked either to consider new evidence or render a finding which is altogether missed in the award.
Facts:
The respondent invoked Section 34(4) of the Arbitration and Conciliation Act, 1996 (“the Act”) to request an adjournment for a fixed period to allow the Arbitral Tribunal to resume the arbitration proceedings to eliminate the ground for setting aside the arbitral award relating to non-consideration of the petitioner’s documents.
The respondent supplied liquid oxygen and nitrogen to the petitioner under a Sales and Purchase Agreement in 2009. When disputes arose, this Court appointed an arbitrator in 2015 to resolve them.
Procedural History:
The respondent claimed 41,73,747/- under a debit note dated 11.08.2011/16.08.2011 and 1,87,62,502/- under another dated 07.11.2012/19.10.2012 with interest thereon before the learned arbitrator. The petitioner denied the allegations and counterclaimed 5,39,79,500/-. The petitioner filed Annexures A-1 to A-60 during proceedings before the learned arbitrator. The learned arbitrator ordered the documents recorded, subject to costs. The expert arbitrator further stated that the documents must be proven legally. Parties filed affidavits and began recording the claimant's [respondent herein] witness's statement. After a brief cross-examination, it held that the parties agreed that no oral evidence was needed, and the matter may be set for arguments.
The learned arbitrator died; thus this Court selected a substitute in 2017. The learned arbitrator considered eight issues, including whether the Respondent established that the Claimant’s price undercutting and customer solicitation violated the contract. After hearing the parties, the learned arbitrator issued the impugned judgment in 2018, awarding the respondent an amount of Rs 2,29,36,249/-, with interest and costs.
Regarding the non-consideration of the additional documents filed by the petitioner in Annexures A1 to A60, the learned Arbitrator held that a document that is disputed, by the other party if not proved, cannot be considered by the Arbitrator, to be on record or as a piece of evidence. Therefore, the Respondent had not proved that the Claimant had adopted predatory pricing and poached its customers.
Contentions Made:
Petitioner: It was contended that the learned arbitrator ignored the former arbitrator's orders by not recording Annexures A-1 to A-60. It was argued that Section 34(4) of the Act does not apply because the arbitrator would have to reassess the award in consideration of the documents.
Respondent: It was contended that the learned arbitrator rejected the materials because they did not prove the petitioner’s claims. The respondent disputed 33 emails and other documents filed by the petitioner before the learned arbitrator. Moreover, even if the petitioner’s claims were accurate, the challenged judgment had a curable ambiguity that the learned arbitrator should rectify rather than adjudicate u/s 34 of the Act.
Observations of the Court:
In light of the cases mentioned by the learned Senior Counsel for the parties, Section 34(4) of the Act was analyzed by the Bench.
In Som Datt Builders Ltd. v. State of Kerala, it was held that the Arbitral Tribunal must offer reasons, not just note the parties’ submissions or reference documents. The award must provide explanations, however brief, to show the thought process behind the decision.
In Kinnari Mullick v. Ghanshyam Das Damani, the Supreme Court concluded that Section 34(4) of the Act cannot be applied after the arbitral award had already been set aside. The Court stated that Section 34(4) of the Act does not entail the competence to remand the award to the arbitral tribunal, except to correct a curable deficiency upon the party's application.
In Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd., the Supreme Court listed three elements of a reasoned order- it must be proper, intelligible, and adequate. The Court decided that Section 34(4) of the Act may be used if the arbitral award lacks logic or has a gap that can be filled to avoid a challenge. In BTP Structural (I) Pvt. Ltd. vs. Bharat Petroleum Corp. Ltd., the Bombay High Court found that the award violated natural justice, fair play, and equality. The Court ruled that Section 34(4) of the Act cannot remit a void ab initio award for reconsideration or review.
The Bench noted that Section 34(4) of the Act should not be invoked in this case. The petitioner’s complaint was that the learned arbitrator gave findings on Issue No.4 without considering Annexures A1 to A-60. It further noted these documents were not evidence, according to the impugned award. As in Dyna Technologies and Som Datt Builders, the learned arbitrator did not render a finding without sufficient reasons. It was instead a scenario where the grievance involved non-consideration of material evidence.
In I-Pay Clearing Services Private Ltd. vs. ICICI Bank Ltd. and Bentwood Seating System Ltd. vs. Airport Authority of India, the Supreme Court and Division Bench considered Dyna Technologies. Both judgments stated that fresh material is not admissible as per the ground available. Petitioner’s counsel argued that these verdicts differed because the award in both cases did not address the issue. He noted that it is for this reason that recourse to Section 34(4) of the Act was rejected. It held that while that may truly be the fact in those cases, it did not see a distinction on point of principle in the current case. As said above, the learned arbitrator must have jurisdiction to examine or change the final award to reflect the material left out at the start. Section 34(4) does not apply because the learned arbitrator lacks such power.
It opined that if the matter was taken back to the learned arbitrator on this point, the petitioner’s basis of challenge could be deleted only if the learned arbitrator reviewed the documents he omitted to consider. This was not permissible u/s 34(4) of the Act, as was plainly obvious from the judgments in BTP Structural. In such a circumstance, allowing recourse to Section 34(4) of the Act is like a remand, which Kinnari Mullick and Radha Chemicals prohibit, but even less effective because it cannot change the outcome.
Judgment:
The Court held that Section 34(4) should not be applied in this case because it cannot be used to allow an arbitral tribunal to revisit its finding. For the aforesaid reasons, the application was dismissed. The case O.M.P. (COMM) 212/2018 & I.A. 6847/2018 was listed on 18.07.2023.
Case: Inox Air Products Private Limited vs Air Liquide North India Private Limited
Citation: O.M.P. (COMM) 212/2018 & I.A. 6847/2018
Bench: Justice Prateek Jalan
Advocates for Petitioner: Mr. Jayant Bhushan, Senior Advocate with Mr. Joseph Pookkatt, Mr. Dhawesh Pahuja, and Mr. Vaibhav Dwivedi, Advocates
Advocates for Respondent: Mr. Akhil Sibal, Senior Advocate with Mr. Gaurav Gupta, Mr. Samyak Gangwal, Ms. Eesha Bakshi, Ms. Deboshree Mukherjee, and Ms. Bahuli Sharma, Advocates.
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