Bombay High Court
Aakash Packaging vs Arenel (Private) Limited on 8 September, 2025
Author: R.I. Chagla
Bench: R.I. Chagla
2025:BHC-OS:14540
J-CARBP 349.2020.doc
Kavita S.J.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL ARBITRATION PETITION NO.349 OF 2020
Aakash Packaging ...Petitioner
Versus
Arenel (Private) Limited ...Respondent
----------
Mr. Mustafa Doctor, Senior Advocate a/w Ms. Spenta Havewala, Mr.
Aashdin Chivalwala, Ms. Aditi Prabhu and Mr. Pratik Dave i/b Desai
Desai Carrimjee and Mulla for Petitioner.
Mr. Shrinivas Deshmukh a/w Mr. Sunilkumar Neelambaran, Mr.
Jeyhaan Carnac and Mr. Aaron Kevin Fernandes i/b Mulla & Mulla &
Craigie Blunt & Caroe for Respondent.
----------
CORAM : R.I. CHAGLA, J.
RESERVED ON : 6th FEBRUARY, 2025.
PRONOUNCED ON : 8th SEPTEMBER, 2025.
JUDGMENT :
1. By the present Commercial Arbitration Petition, the
Petitioner has challenged Award dated 2nd December, 2019
("impugned Award") under Section 34 of the Arbitration and
KAVITA
SUSHIL
JADHAV Conciliation Act, 1996 ("Arbitration Act"). The Petitioner was the
Respondent in the arbitration and the Respondent was the Claimant.
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2. The facts briefly stated are as under:
(i) On 18th October 2012, the Petitioner raised an
Invoice No. 35 on the Respondent for a sum of USD
78,101.85 for supply of 18,555.450 Kg of goods.
(ii) The Petitioner raised Proforma Invoice (No.
AP/A004/2012-23) on 20th December 2012, for a sum
of USD 87,000.50 on the Respondent for additional
supplies of goods. It is pertinent to note that the goods
under the Proforma Invoice were never dispatched by
the Petitioner to the Respondent.
(iii) On 21st January, 2013, material sent under Invoice
No.35 was received by the Respondent in Zimbabwe
("First Shipment").
(iv) The Petitioner raised Invoice No.53 on 1st February
2013 for the sum of USD 70,996.88 for supply of
17307.762 kgs quantities of goods.
(v) The Respondent's Managing Director (Mr. Joshua
Lepar) over a Skype on 11th February, 2013 informed
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the Petitioner's authorized representative (Miss Sheetal
Bhatia) that goods supplied under the First Shipment
were defective.
(vi) The e-mail correspondence between the parties
was exchanged on 13th March 2013 in relation to the
above, in the course of which the Respondent's
representative invited the Petitioner's representative to
Zimbabwe to check the material supplied by the
Petitioner. At that relevant time, the Petitioner's Manager
had to get her passport revalidated and therefore, could
not travel.
(vii) On 25th March 2013, the Petitioner obtained a
Report from an international laboratory's India Branch,
which is known as SGS India in respect of the said goods
at the request of the Respondent. This test was done at
the request made by the Respondent vide e-mail dated
13th March 2013. It is pertinent to note that the Report
concluded that the samples had passed the test and that
the samples (retained by the Petitioner and tested by
SGS India) complied with the permissible safety limits as
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stated in the German code. Further, it complied with the
requirements of the relevant EU regulations on materials
and articles intended to come in contact with food; and
on a sensorial examination on both, odour and taste, the
test results were lower than the maximum permissible
limits.
(viii) The Respondent itself obtained a report from the
same laboratory viz. SGS India in respect of the said
goods. It is pertinent to note that the material used for
this report was sent directly by the Respondent from
Zimbabwe to the laboratory in India. Further, the
impugned Award wrongly records at Paragraph 9/Page
49 of the Petition that this report was obtained by the
Petitioner. The report concluded that both samples had
passed the test and that both samples submitted by the
Respondent complied with the permissible safety limits,
as stated in the German code; both the samples complied
with the requirements of the relevant EU regulations on
materials and articles intended to come in contact with
the food; and on a sensorial examination on both, odour
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and taste, the test results were lower than the maximum
permissible limits.
(ix) The goods sent under Invoice No.53 were received
by the Respondent in Zimbabwe on 6 th June, 2013
("Second Shipment").
(x) The Respondent obtained a report from the SGS
Germany on 18th June, 2013 wherein it is stated that the
packaging had a strong smell of plastic. It is pertinent to
note that the Respondent sent to SGS Germany the entire
packet of biscuits containing the biscuits, the plastic tray
in which the biscuits were placed as also the outer
packaging. It is also pertinent to note that it was only the
outer packaging and not the plastic tray that was
supplied by the Petitioner.
(xi) The Respondent sent a Legal Notice dated 11 th
July, 2013 to the Petitioner claiming a refund of a sum of
USD 165,102.10, claiming that the goods supplied to
them were defective, and a further sum of USD 13045.70
towards costs and taxes towards shipment and landing of
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material in Zimbabwe.
(xii) The Petitioner responded on 25th July, 2013 to the
said legal notice denying the claim made by the
Respondent and seeking payment of the balance amount
of USD 27,996 that remained unpaid in respect of
Invoice No. 53 and an amount of USD 41,079 in respect
of Proforma Invoice No. AP/A004/2012-13.
(xiii) Pursuant to an application filed under Section 11
of the Arbitration Act, the learned Arbitrator was
appointed vide Order dated 10th November, 2014.
(xiv) The pleadings before the learned Arbitrator were
completed between 16th February, 2015 and 27th June,
2018.
(xv) The Respondent made a claim for refund of USD
165,102.10 paid; reimbursement of storage charges,
import duties etc. of USD, 62,204.50; costs of USD
44,281.90 incurred in filing Section 11 petition and
interest on claims till filing SOC at 12% p.a. of USD
44,281.90.
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(xvi) The Petitioner made a counter claim inter alia
seeking dismissal of the Respondent's claim; payment of
USD 27,996 towards Invoice No.53 and USD 41,079
towards Proforma Invoice No.AP/A004/2012-13.
(xvii) During the course of the arbitration, between 23 rd
December, 2015 and 27th June, 2018, both the parties led
the evidence of two witnesses each. The Petitioner led
the evidence of Sheetal Bhatia (RW-1) and Bharat
Tulsiani (RW-2), whereas the Respondent led the
evidence of Joshua Lepar (CW-1) and Pierra Pienaar
(CW-2). CW-2 was an expert witness and not a witness of
fact.
(xviii)The Respondent's Witness, Joshua Lepar
(Managing Director of the Respondent) produced a
report dated 4th March, 2016 of CW-2 alongwith his own
Additional Affidavit. As per this report, tests were
performed by National Measurement Institute
Laboratory, Melbourne and Gunn Laboratories in
Victoria, Australia. CW2 as an expert concluded that the
source of the odour was 2, 6 Dicholoroanisole. It is the
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Petitioner's case that Dicholoroanisole does not generally
originate in plastic but is really absorbed by plastic
should it come into contact with plastic. Further, it is
possible that the stain may have come from
shipping/transportation of the film, rather than its
manufacture.
(xix) On 25th July, 2019 written submissions were filed
by both the Petitioner and Respondent.
(xx) The learned Arbitrator passed the impugned award
on 2nd December 2019 allowing the claims of the
Respondent (except for the Respondent's claim for
reimbursement of expenses) on the ground that the
disputed consignments were defective and sub-standard
and that the Petitioner, by supplying defective and sub-
standard packaging material, had breached the contract
between the parties. Furthermore, the learned Arbitrator
rejected the counter claim of the Petitioner. The learned
Arbitrator directed the Petitioner to pay the awarded
amounts to the Respondent in accordance with
provisions of the FEMA,1999.
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3. Mr. Mustafa Doctor learned Senior Counsel appearing for
the Petitioner has submitted that although both parties produced test
reports from the laboratories with regard to the Respondent's claim
that the packaging material supplied by the Petitioner was emitting
an odour and was therefore, defective, all reports produced by the
parties were rejected by the learned Arbitrator. He has submitted
that the learned Arbitrator whilst coming to the conclusion that,
"There is no documentary evidence worth considering which would
decide this core issue", has made a number of errors, which go to the
very root of the matter. He has submitted that the learned Arbitrator
mistakenly held that a report which was obtained by the Respondent
from SGS India, which is ex-facie in the favour of the Petitioner, was
obtained by the Petitioner and has wrongly rejected the same, though
it was an admitted document and binding on the Respondent who
had obtained the same. He has submitted that these errors
completely vitiate the impugned Award and will shock the conscience
of the Court, apart from the fact that the same results in grave
injustice to the Petitioner.
4. Mr. Doctor has submitted that the impugned Award
contains a number of findings that are ex-facie contrary to the facts
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and the record and are also plainly contrary to the rules of natural
justice. He has submitted that the learned Arbitrator has wrongfully
rejected the SGS India Reports. Further, the learned Arbitrator has
rejected the SGS Germany Report. This is by holding that the Reports
have no evidentiary value since the authors of the two SGS India
Reports have not been examined. He has submitted that this finding
in so far as it relates to the SGS India Reports is grossly erroneous
and contrary to the admitted facts and the record.
5. Mr. Doctor has submitted that the SGS India Report
dated 25th March 2013 was obtained from SGS India by the
Petitioner at Respondent's instance and the SGS India Report dated
8th May 2013 was obtained from SGS India by the Respondent.
6. Mr. Doctor has submitted that both the SGS India
Reports are in favour of the Petitioner, as in that they do not indicate
that there was any odour emanating from the packaging material. He
has submitted that during the admission and denial of the
documents, the Petitioner admitted both SGS India Reports, both
with respect to their existence, as also their contents, but denied the
contents of the SGS Germany Report. He has submitted that in these
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circumstances, since the SGS India Reports were admitted, the
learned Arbitrator proceeded to mark the two SGS India Reports as
Exhibit C-16 and C-17 respectively without any qualification. Hence,
the requirement of leading the evidence of the author of the report
did not arise.
7. Mr. Doctor has submitted that since the SGS Germany
Report had been disputed by the Petitioner, the same was marked as
Exhibit C-18 with the qualification that the contents of the same
would not be binding on the Petitioner.
8. Mr. Doctor has submitted that the SGS India Report
dated 8th May 2013, having been obtained by the Respondent was
binding upon the Respondent. He has submitted that without
prejudice to the above, if the learned Arbitrator had any doubts about
the evidentiary value of the SGS India Reports, he ought to have
marked the same with the same qualification as was made while
marking the SGS Germany Report, so as to put the parties to notice
that they needed to prove the contents of the said Reports by leading
the evidence of the authors thereof.
9. Mr. Doctor has submitted that had the learned Arbitrator
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taken into account, the SGS India Reports, both of which were
admitted documents, there would have been no reason for him to
have arrived at the finding to the effect that there was no
documentary evidence worth considering which would help in
deciding the core issue.
10. Mr. Doctor has submitted that without prejudice to the
above, even the report of SGS Germany, which was obtained by the
Respondent and produced in evidence by them contains a remark to
the effect that the odour in question was from the inner plastic tray
or a contamination of the food during the production process, neither
of which factors can be attributed to the Petitioner.
11. Mr. Doctor has submitted that notwithstanding, the
absence of direct evidence in respect of the "core issue" viz. whether
the packaging material emitted odour, the learned Arbitrator has
relied on hearsay evidence of the Respondent's expert witness in this
regard. He has submitted that this is inspite of the expert witness
having been called in on or about February 2016 and who admittedly
had no personal knowledge of the facts when the goods were
delivered in January 2013. The deposition of expert witness (CW-2)
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which the learned Arbitrator relied on is ex-facie based upon hearsay
evidence. CW-2 has deposed to what he was told by the staff
members of the Respondent in the year 2016 about the smell in the
packaging material, when it received the same in the year 2013. No
evidence was led of any staff member to corroborate this evidence,
and nonetheless, the learned Arbitrator seems to have on the basis of
this evidence which was ex-facie in the nature of hearsay, come to the
conclusion that there was a smell in the packaging supplied by the
Petitioner.
12. Mr. Doctor has submitted that the learned Arbitrator has
reversed the burden of proof by holding that "Had any question been
put in cross examination to CW1 about the condition of consignment
and presence or absence of smell in January 2013 or even to CW-2
with regard to above quoted portion of his report, it would have
thrown some light about the presence or absence of smell in January
2013" (Petition/Page 66/Para 50/Award).
13. Mr. Doctor has submitted that there was no requirement
to cross examine either CW-1 or CW-2 in this regard. CW-1's Affidavit
did not contain any positive assertion in this regard, as observed by
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the learned Arbitrator himself and CW2's evidence in his regard was
apparently in the nature of hearsay evidence.
14. Mr. Doctor has submitted that the learned Arbitrator has
first rejected the most objective and contemporaneous evidence
produced by the parties viz. the Laboratory Reports of SGS India,
which tested the samples in question virtually concurrently to them
having been supplied. The learned Arbitrator then proceeded to rely
upon the evidence of an expert witness (CW-2) produced by the
Respondent with respect to matters of fact which were evidently not
within his knowledge and thereafter he faulted the Petitioner for not
cross-examining CW-2 on hearsay evidence in this regard.
15. Mr. Doctor has submitted that it is pertinent to note that
CW-2's Report was rejected by the learned Arbitrator by holding that
the Report had no evidentiary value since it was not based on his
personal knowledge. However, the learned Arbitrator then
surprisingly relies on the Report made by CW-2, on the specious
ground that the same is annexed to the Affidavit of Evidence of CW-1.
16. Mr. Doctor has submitted that the learned Arbitrator has
dispensed with the most elementary rules of evidence, natural justice
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and fair play in the manner that he has conducted the arbitral
proceedings. He has submitted that the learned Arbitrator has acted
contrary to the provisions of Section 18 of the Arbitration Act in that
he has rejected admitted evidence that favoured the Petitioner and
has relied on the hearsay evidence which favoured the Respondent.
He has submitted that the conduct of the learned Arbitrator can only
be termed as arbitrary, contrary to justice and such that would shock
the conscience of the Court. He has submitted that the impugned
Award is in conflict with public policy of India [Section 34(2)(b)(ii)
of the Arbitration Act]. He has submitted that the impugned Award
is also in conflict with the most basic notions of justice [explanation
1(iii) of Section 34(2)(b)(ii) of the Arbitration Act].
17. Mr. Doctor has submitted that the settled position in law
in so far as a challenge to an Arbitral Award (passed in an
international commercial arbitration) under Section 34 of the
Arbitration Act is concerned is as follows:
(i) In Associate Builders Vs. Delhi Development
Authority in (2015) 3 SCC 49. The Supreme Court has
held in Paragraph 36 that an Award can be said to be
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against justice only when it shocks the conscience of the
Court;
(ii) In Ssangyong Engineering & Construction
Company Limited Vs. National Highway Authority of
India, 2019 SCC online SC 677, the Supreme Court has
in Paragraph 36 upheld the observations in Associate
Builders (supra) by holding that it is only such awards
that shock the conscience of the Court, that can be set
aside on this ground (i.e. on the grounds of being in
conflict with justice)
(iii) In Dyna Technology Pvt. Ltd. Vs. Crompton
Greaves Limited (2019) 20 SCC 1, the Supreme Court
has held in Paragraph 35 that if the reasoning in an
Award is improper, it reveals a flaw in the decision-
making process. If the challenge to an Award is based on
impropriety or perversity in the reasoning, then it can be
challenged strictly on the grounds provided under
Section 34 of the Act.
(iv) In Delhi Airport Metro Express Private Limited Vs.
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Delhi Metro Rail Corporation Limited, (2022) 1 SCC
131, the Supreme Court has held in Paragraph 31 that if
an Award shocks the conscience of the Court, it can be
set aside as being in conflict with the most basic notions
of justice.
18. Mr. Doctor has submitted that the impugned Award in
that it (i) rejects admitted documents, which have previously been
marked in evidence without any qualification on the ground that the
same has not been proved; (ii) disregards the fact that the only
witness of fact (CW-1) produced by the Respondent has not adverted
in his Affidavit of Evidence to what the learned Arbitrator refers to as
the "core issue" viz. whether the goods supplied by the Petitioner to
the Respondent emitted any odour; (iii) relies upon hearsay evidence
of CW-2 who was brought in only in his capacity as an expert
witness; (iv) relies upon the report made by CW-2, after having
rejected the same, on the specious ground that the same was annexed
to the Affidavit of Evidence of CW-1; and (v) reserves the burden of
proof; is contrary to the most basic notions of justice and would
qualify within such matters, both, when viewed singularly and more
particularly, when viewed collectively, as shocking the conscience of
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the Court.
19. Mr. Doctor has submitted that the impugned Award
ought to be set aside under Section 34(2)(b)(ii) as being in conflict
with the public policy of India.
20. Mr. Shrinivas Deshmukh, learned Counsel appearing for
the Respondent has submitted that the two grounds of challenge to
the Award passed made by the Petitioner are non-consideration of
admitted documents and consideration of hearsay evidence. The
challenge to the Award on these two grounds is not maintainable as
both the grounds fall under perversity which is covered by ground of
patent illegality. He has placed reliance upon the Judgment of the
Supreme Court in Ssangyong Engineering & Construction Co. Ltd.
(supra) at Paragraph 41. He has submitted that the ground of patent
illegality is not available to challenge the present Award, which is a
domestic Award passed in international, commercial arbitration. He
has placed reliance upon Section 34 (2A) of 1996 of the Arbitration
Act in this context.
21. Mr. Deshmukh has submitted that without prejudice to
the above submission, these challenges are not maintainable in law
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and they are devoid of any merit.
22. Mr. Deshmukh has submitted that for the first time,
before this Court, the Petitioner has come up with a plea that the two
SGS India Reports were admitted documents and ought to have been
considered by the learned Arbitrator. He submitted that this is not the
case of the Petitioner before the Tribunal as can be seen from the
written submissions of the Petitioner before the Tribunal more
particularly Paragraph 9.34 at Page 714 of the compilation.
23. Mr. Deshmukh has submitted that the Petitioner cannot
raise a plea which was not raised before the learned Arbitrator, for
the first time before this Court in a Section 34 Petition. He has placed
reliance upon the Judgment of this Court in Dhiren Lalit Shah Vs.
Sandeep & Company1.
24. Mr. Deshmukh has submitted that the contents of the
SGS India Reports had never been admitted by the Respondent. The
Respondent had disputed the findings of the Report. This is evident
from the Statement of Claim at Paragraph 4(q) read with 4(o) and
(p). He has submitted that the Respondent has relied upon the Report
1 (2015) SCC Online Bom 5792
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from SGS Germany and sought to lead SGS Germany in evidence of
CW-1 in Paragraphs 22 and 23.
25. Mr. Deshmukh has submitted that in the minutes of
meeting dated 14th October 2015, the learned Arbitrator has
recorded the admission of the Reports by the Petitioner. This is not an
admission of the Respondent.
26. Mr. Deshmukh has submitted that the Petitioner, being
aware that these reports are not admitted by the Respondent, has put
its case to CW-1 that SGS India Report dated 25 th March, 2013 was
accepted by the Respondent. He has referred to Question 151 and
173 at Pages 464 & 468 of the CoD (Compilation of documents) in
this context. He has submitted that had the Report been admitted by
the Respondent, the Petitioner would not have put this case to the
witness.
27. Mr. Deshmukh has submitted that it is settled law that
mere marking of a document in evidence does not prove the contents
of the document. In this context, he has placed reliance upon the
Judgment of the Supreme Court in LIC Vs. Ram Pal Singh Bisen 2, at
2 (2010) 4 SCC 491
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Paragraphs 25 and 31 and Judgment of this Court in Hiren P. Doshi
Vs. State of Maharashtra3 at Paragraph 12.
28. Mr. Deshmukh has submitted that it is well settled that
evidence of the contents of a document is hearsay evidence, unless
the writer thereof is examined. In this context he has placed reliance
upon the Judgment of his Court in Om Prakash Berlia Vs. Unit Trust
of India4 at Paragraph 10.
29. Mr. Deshmukh has submitted that the learned Arbitrator
has rightly held in Paragraph 41 of the impugned Award that the two
Reports of SGS India, though marked in evidence have no evidentiary
value, since the author of the Reports have also not been examined.
30. Mr. Deshmukh has submitted that the Petitioner has
contended that the learned Arbitrator has considered the Report of
CW2 about what was told to him by the staff members of the
Respondent in the year 2016, about the smell in the packaging
material when it was received in the year 2013. He has submitted
that the learned Arbitrator has considered what CW-2 personally
smelled when he visited the warehouse in 2016. He has relied upon
3 2016(1) Mh.L.J. 571
4 AIR 1983 Bom 1
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Paragraph 43 to 47 of the impugned Award in this context.
31. Mr. Deshmukh has also placed reliance upon Paragraphs
48 to 50 of the impugned Award, where the learned Arbitrator
observed, while considering the submission of the Petitioner that
there is contradiction in the evidence of CW-1 and CW-2 regarding
when the smell in the consignment was noticed by the claimant for
the first time.
32. Mr. Deshmukh has submitted that the learned Arbitrator
has not considered any hearsay evidence to come to a finding that the
consignment had odour. He has submitted that the Petitioner is
seeking re-appreciation of evidence by this Court, which is not
permissible as per proviso to Section 34(2A) of the Arbitration Act.
33. Mr. Deshmukh has accordingly submitted that the above
Commercial Arbitration be dismissed with costs.
34. Having considered the submissions, I am of the view that
the learned Arbitrator has by placing reliance upon the Report of
Respondent's Expert Witness (CW-2), relied upon hearsay evidence as
the deposition of CW-2 is ex-facie based upon hearsay evidence. CW-2
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has deposed to what he was told by staff members of the Respondent
in the year 2016 about the smell in the packaging material when they
received the same in the year 2013. Further, no evidence was led of
any of the staff members to corroborate this evidence. Nonetheless,
the learned Arbitrator seems to have on the basis of the evidence of
CW2, come to the conclusion that there was a smell in the packaging
supplied by the Petitioner.
35. Further, it is pertinent to note that the learned Arbitrator
had rejected the SGS Reports although the SGS India Report dated
8th May 2013 was obtained from SGS India by the Respondent itself.
In Paragraph 9 of the impugned Award the learned Arbitrator has
incorrectly found that both the SGS India Reports i.e. one dated 25 th
March 2013 obtained by the Petitioner at the Respondent's instance
and the other dated 8th May, 2013 obtained from SGS India by the
Respondent, were obtained by the Petitioner. The SGS India Reports
were in favor of the Petitioner, as they did not indicate that there was
any odour emanating from the packaging material.
36. The learned Arbitrator has himself found in Paragraph 9
of the impugned Award that both the SGS India Reports were
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produced by the Respondent in its compilation of documents. In fact,
during the admission and denial of documents, the Petitioner had
admitted both the SGS India Reports as to their existence as well as
contents. The SGS India Reports having been admitted were marked
by the learned Arbitrator as Exhibit-C16 and C17 without any
qualification. The SGS Germany Report which was produced by the
Respondent had been denied by the Petitioner with regard to its
contents and accordingly the learned Arbitrator marked the SGS
Germany Report as Exhibit-C18 with the qualification that the
contents of the same would not be binding on the Petitioner. The
learned Arbitrator has, in spite of the SGS India Report having been
obtained by the Respondent and the existence and contents having
been admitted by the Petitioner and thus binding upon the parties
has held that "There is no documentary evidence worth considering
which would decide this core issue." The core issue being whether
the packaging material emitted odour.
37. The learned Arbitrator ought to have considered that the
laboratory reports of SGS India were the most objective and
contemporaneous evidence produced by both the parties as they
tested the samples virtually concurrently to them having been
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supplied. The SGS India Report dated 25th March, 2013 had been
prepared pursuant to the test done at the request made by the
Respondent vide e-mail dated 13th March, 2013 and which
concluded that the samples had passed the test as it had complied
with the permissible safety limits. Further, the SGS India Report
dated 8th May, 2013 obtained by the Respondent had also concluded
that the samples had passed the test as both the samples submitted
by the Respondent complied with the permissible safety limits. On
sensorial examination of both samples, odour and taste, the test
results were lower than the maximum permissible limits. Thus, the
learned Arbitrator by holding that the SGS India Reports have no
evidentiary value, has arrived at a grossly erroneous finding which is
contrary to the admitted facts and record and which shocks the
conscience of the Court.
38. Insofar as the SGS Germany Report obtained by the
Respondent, the finding arrived at was that "smell of plastic,
significant deviation" and on taste "strongly perceptible off-flavour,
significant deviation objectionable". The report noted that "possibly
benzaldehyde from the inner white plastic tray (odour) or a
contamination of the food during the production process (off-flavour
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appears to be stronger than the smell)". This finding is in relation to
the inner white plastic tray which had not been supplied by the
Petitioner but was procured directly by the Respondent. Further, the
contamination of the food as noted in the Report was during the
production process and also the responsibility of the Respondent.
Thus, even the report of SGS Germany obtained by the Respondent
and produced in evidence by them containing the aforementioned
findings cannot be attributed to the Petitioner.
39. The submission on behalf of the Petitioner that the
learned Arbitrator has reversed the burden of proof by holding that
"had any question been put in cross examination to CW-1 about the
condition of consignment and presence of or absence of smell in
January 2013 or even to CW-2 with regard to above quoted portion
of his report, it would have thrown some light about the presence or
absence of smell in January 2013". (Petition's/Page 66/Para
50/Award) merits acceptance. The learned Arbitrator ought to have
appreciated that there was no requirement to cross examine either
CW-1 or CW-2 in view of CW-1's Affidavit not containing any positive
assertion and CW-2's evidence being in the nature of hearsay
evidence.
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40. The learned Arbitrator by rejecting the most objective
and contemporaneous evidence produced by the parties i.e. the SGS
India Reports which had tested the samples concurrently to them
having been supplied, and relying on the expert evidence (CW-2)
produced by the Respondent which was evidently not within the
knowledge of CW-2 and thereafter faulting the Petitioner for not
cross-examining the CW-2 on hearsay evidence, shocks the conscience
of this Court.
41. I do not find merit in the contention on behalf of the
Respondent that the Petitioner has raised the plea that the two SGS
India Reports were admitted documents and for the first time in the
Section 34 Petition i.e. not raised before the learned Arbitrator, and
hence cannot be considered. It is apparent from the finding of the
learned Arbitrator that the Petitioner had relied upon the two SGS
India Reports which according to the Petitioner was of best
evidentiary value in view of SGS India having tested the samples in
question concurrently to them having been supplied. Thus, the
evidentiary value of the SGS India Reports was clearly raised by the
Petitioner. The fact of these Reports being admitted documents is in
support of the plea of the Petitioner raised before the Arbitrator viz.
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that the SGS India Reports ought to have been taken into
consideration by the learned Arbitrator as being of best evidentiary
value. Thus, the Judgments relied upon by the Respondent in
support of their contention that the Petitioner cannot raise a plea, not
raised before the Arbitrator, for the first time before this Court in
Section 34 Petition, is inapplicable in the circumstances of this case.
42. The Respondent has also contended that it is settled law
that mere marking of document in evidence does not prove the
contents of the document. The Respondent has relied upon
Judgments of the Supreme Court and this Court in support of his
contention. The Petitioner as aforementioned has not merely relied
upon the marking of the SGS India Reports in evidence as proving
their contents, but has gone on to establish that the SGS India
Reports were of best evidentiary value considering that SGS India
had tested the samples in question, concurrently to them having been
supplied. The Reports of SGS India having found that the samples
had passed the test, was required to be taken into consideration by
the learned Arbitrator. Instead, the learned Arbitrator has relied
upon, the Expert's Evidence which in my considered view is hearsay
evidence i.e. evidence of CW-2 of what he had been told by the staff
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members of the Respondent in the year 2016 about the smell in the
packaging material, when they received the same in the year 2013.
43. Further, the contention of the Respondent that evidence
of the contents of the document, to be hearsay evidence is to be
accepted only if the writer thereof is examined is inapplicable in the
present case. It is evident from the face of the Report of CW-2 that
CW-2 has referred to the information given by the staff members of
the Respondent in the year 2016 about the smell in the packaging
material when they received the same in 2013. Thus, compared to
the two Reports of SGS India which tested the samples in question
concurrently to them having been supplied, the Report of CW-2 had
no evidentiary value as it is ex-facie in nature of hearsay evidence.
Thus, the learned Arbitrator by failing to consider the Reports of SGS
India, and placing reliance upon the Report of the Expert (CW-2)
which is based on hearsay evidence, has acted in an arbitrary manner,
contrary to justice, which shocks the conscience of this Court.
44. The settled position of law as regards challenge to an
Award (passed in an international commercial arbitration) under
Section 34 of the Arbitration Act has been laid down by the Supreme
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Court in the Judgments which have been relied upon by the
Petitioner viz. Associate Builders (supra) ; Ssangyong Engineering &
Construction Company Limited (supra); Dyna Technology Pvt. Ltd.
(supra) and Delhi Airport Metro Express Private Limited (supra).
These Judgments hold that if an award shocks the conscience of the
Court, it can be set aside as being in conflict with the most basic
notions of justice, as per Explanation 1(iii) to Section 34(2)(b)(ii) of
the Arbitration Act, as it is in conflict with the public policy of India.
45. The contention of the Respondent that the grounds of
challenge of the Petitioner on non-consideration of admitted
documents and consideration of hearsay evidence are not
maintainable as they fall under perversity which is covered by ground
of patent illegality and not available to a challenge as the present
award is a domestic award passed in international commercial
arbitration, is misconceived. The grounds of challenge to the
impugned Award include the impugned Award being in conflict with
the public policy of India, as it is in conflict with the most basic
notions of justice and shocks the conscience of the Court. This
ground can certainly be raised to challenge the impugned Award
which is a domestic award passed in International Commercial
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Arbitration. Thus, this ground of challenge in the present Commercial
Arbitration Petition under Section 34(2)(b)(ii) is maintainable.
46. The Respondent has also sought to contend that the
Petitioner is seeking re-appreciation of evidence by this Court which
is not permissible as per the provision to Section 34(2) of the
Arbitration Act. This contention is also, in my view, misconceived.
The Petitioner is not seeking a re-appreciation of evidence by this
Court, but is in fact contending that the learned Arbitrator has failed
to consider the evidence viz. the SGS India Reports by holding that
they are of no documentary evidence worth considering, which
would decide a core issue of whether packaging material emitted
odour. This finding of the learned Arbitrator itself is flawed in view of
the laboratory reports of SGS India which tested the samples in
question virtually concurrently to them having been supplied.
47. The learned Arbitrator although observing that neither in
the Statement of Claim nor in the evidence of the Respondent's only
witness of fact (CW-1) has it been stated that CW-1 noticed any smell
on the material date i.e. in January 2013 has nonetheless gone on to
hold that "...it is not possible to conclude on the basis of this omission
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that there was no smell as alleged." The learned Arbitrator has based
his finding on the hearsay evidence of CW-2 who was brought in only
in his capacity as an expert witness. This after first rejecting the
report made by CW-2 and thereafter relying upon the same only on
the specious ground that the same is annexed to the Affidavit of
Evidence of CW-1. In view of these findings, the impugned Award
has shocked the conscience of Court and accordingly is in conflict
with public policy of India and is required to be set aside under
Section 34(2)(b)(ii) of the Arbitration Act.
48. In view thereof, the Commercial Arbitration Petition is
allowed by setting aside the impugned Award dated 2nd December,
2019 passed by the learned Arbitrator.
49. The Commercial Arbitration Petition No. 349 or 2020 is
accordingly disposed of. There shall be no orders as to costs.
[R.I. CHAGLA, J.]
50. Upon this Judgment being pronounced, the learned
Counsel appearing for the Respondent has referred to the Order
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dated 7th April 2021, by which this Court had stayed the execution
and implementation of the impugned Award on the condition that
the Petitioner deposits in this Court, the sum of USD 165,000 (or it's
Rupee equivalent) within a period of four weeks from the date of said
order. He has submitted that pursuant to the said order, the
Petitioner has deposited the amount.
51. The learned Counsel for the Respondent has accordingly
applied for stay on the withdrawal of the deposit by the Petitioner in
view of the impugned Award being set aside.
52. Having considered the application for stay, the Petitioner
is permitted to withdraw the deposited amount after a period of four
weeks from today.
[R.I. CHAGLA, J.]
