Karnataka High Court

Archean Chemical Industries ... vs Council Of Scientific And ... on 5 March, 2022

Bench: S.G.Pandit

     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

        DATED THIS THE 5TH DAY OF MARCH, 2022

                         BEFORE

          THE HON'BLE MR.JUSTICE S.G.PANDIT

          WRIT PETITION NO.9759/2017 (GM-RES)

BETWEEN:

ARCHEAN CHEMICAL INDUSTRIES PRIVATE LIMITED
SUDHA CENTRE, FIRST FLOOR
NEW NO.31, OLD NO. 19
DR.RADHAKRISHNAN SALAI
MYLAPORE, CHENNAI - 600 004.

REP. ITS AUTHORIZED SIGNATORY
MR. V.SENTHIL KUMAR
AGED ABOUT 41 YEARS
S/O P.VENGADASAMI
HAVING HIS PLACE OF WORK AS ABOVE.
                                         ...PETITIONER

(BY SRI RAGHURAM CADAMBI, ADV.)

AND:

1.    COUNCIL OF SCIENTIFIC AND
      INDUSTRIAL RESEARCH
      ANUSANDHAN BHAWAN
      2, RAFI MARG
      NEW DELHI - 110 001
      REP. BY ITS SECRETARY.

2.    CENTRAL SALT AND MARINE
      CHEMICALS RESEARCH INSTITUTE
      GIJU BHAI BHADHEKA MARG
                            2

     BHAVNAGAR, GUJARAT-364 002
     REP. BY ITS SECRETARY.

3.   MR. JUSTICE D.K. SOMASEKHARA (RETD.)
     CHAIRMAN AND PRESIDING ARBITRATOR
     NO.175, 3RD E CROSS
     2ND BLOCK, III STAGE
     VISVESWARNAGAR
     BANGALORE-560 079.

4.   HON'BLE DR N.L.MITRA
     HON'BLE CO-ARBITRATOR PARTNER
     FOX MANDAL, F M HOUSE
     6/12, PRIMROSE ROAD
     BANGALORE - 560 025.

5.   HON'BLE MR. K.V.KUPPUSWAMY
     HON'BLE CO-ARBITRATOR
     OLD NO.197, NEW NO. 382
     LLOYDS ROAD, GOPALAPURAM
     CHENNAI - 600 086.
                                            ...RESPONDENTS

(BY SRI K P ANIL KUMAR, ADV. FOR R1
 SRI K ANAND, ADV. FOR R2
 R3, R4 & R5 SERVED AND UNREPRESENTED)


     THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER
DATED    16.12.2016  PASSED    ON   THE   UNNUMBERED
APPLICATION DATED 10.11.2016 IN A.S. NO.10/2016 ON THE
FILE OF THE CITY CIVIL JUDGE [ANNEXURE-A] AND
AWARD COSTS OF THIS WRIT PETITION.

       THIS PETITION COMING ON FOR PRELIMINARY HEARING
IN 'B' GROUP THROUGH VIDEO CONFERENCE THIS DAY, THE
COURT MADE THE FOLLOWING:-
                                  3


                              ORDER

Petitioner is before this Court under Article 227 of the

Constitution of India questioning the correctness and legality

of the order dated 16.12.2016 passed on interlocutory

application in A.S.No.10/2015 on the file of the City Civil

Judge at Bengaluru whereby the petitioner's application for

recalling the orders dated 05.08.2016 and 21.10.2016 is

rejected and also the petitioner is aggrieved by the

observation made during the course of the order to the effect

that the plaintiff cannot be permitted to lead evidence in the

matter.

2. Heard the learned counsel Sri.Raghuram Cadambi for

petitioner; Sri.K.P.Anil Kumar, learned counsel for respondent

No.1 and Sri.K.Anand, learned counsel for respondent No.2.

Perused the writ petition papers.

3. Learned counsel for the petitioner submits that the

petitioner filed A.S.No.10/2015 before the trial Court under

Section 34 of the Arbitration and Conciliation Act, 1996 ("the

Act" for short). On filing of the petition, notice was issued to

the respondent on 19.01.2015. On 05.08.2016, the trial

Court placed respondent No.5 ex parte. On the said date, the

petitioner also filed a memo along with citation reported in

(2009) 17 SCC 796 in the case of FIZA DEVELOPERS AND

INTER-TRADE PRIVATE LIMITED v/s AMCI (INDIA) PRIVATE

LIMITED AND ANOTHER. On the strength of the said

citation, petitioner sought permission of the Court to lead

evidence. Without considering the said memo, the matter

was posted for arguments to 21.10.2016. On 21.10.2016, the

petitioner filed another memo to summon the original

documents of the Arbitral proceedings. The said memo was

ordered to be heard along with the main matter. To recall

those two orders dated 05.08.2016 and 21.10.2016, the

petitioner filed interlocutory application under Section 151 of

the Code of Civil Procedure. The trial Court under the

impugned order dated 16.12.2016 rejected the application of

the petitioner. During the course of the said order, the trial

Court observed that the petitioner cannot be permitted to lead

evidence since the proceedings is summary in nature.

Aggrieved by the said order, the petitioner is before this Court

in this writ petition.

4. Learned counsel for the petitioner contends that the

trial Court instead of considering the request of the petitioner

to lead evidence on the strength of FIZA DEVELOPERS

(supra) rejected the request of the petitioner while passing

orders on I.A. filed for recalling the orders dated 05.08.2016

and 21.10.2016. Learned counsel would submit that Section

34 of the Act as stood on the date of the order permitted the

petitioner to lead evidence. Learned counsel relying upon

sub-Section (2) of Section 34 of the Act as on that date

submits that the trial Court could set aside the Arbitral

award, if the party making an application furnishes proof

regarding the grounds raised in the petition. He submits that

subsequently sub-Section (2) of Section 34 of the Act was

amended in the year 2019 and the words "furnishes proof"

were deleted and the words "establishes on the basis of the

record of the Arbitral Tribunal " were inserted. Learned

counsel also places reliance on the decision of the Hon'ble

Apex Court in the case of CANARA NIDHI LIMITED v/s

M.SHASHIKALA AND OTHERS reported in (2019) 9 SCC

462 wherein the Hon'ble Apex Court taking note of 2019

amendment has held that, to lead evidence or cross-examine

a witness, the Court could permit when the petitioner makes

out a case or when there is absolute necessity. Thus, he

submits that the Court has not examined as to whether there

was necessity to examine the witnesses or to permit the

petitioner to lead evidence. As the Court has not considered

the request of the petitioner on merits, he prays for setting

aside the order and remit the matter to the trial Court to

permit him to file necessary application to make out a case

for leading evidence.

5. Learned counsel for respondent No.1 submits that the

petitioner is not entitled to lead evidence and he submits that

the writ petition itself is not maintainable. According to the

learned counsel, the proceedings under Section 34 of the Act

is to be considered on the available records before the Court.

Thus, he prays for dismissal of the writ petition.

6. The petitioner filed A.S.No.10/2015 under Section 34 of

the Act praying to set aside award dated 22.09.2014 passed

by the Arbitrators/respondents No.3 to 5 herein. The

petitioner filed a memo along with citation in FIZA

DEVELOPERS and also memo to summon the original

documents from the Arbitral Proceedings. Both the memos

are rejected under the impugned order. While dismissing the

memos, the Court has made the following observation:

"I am of the considered opinion that the applicant/plaintiff cannot be permitted to lead evidence in the matter. The question of again taking further evidence by way of affidavit in the matter does not arise for consideration."

The above observation is not in tune with the decision of the

Hon'ble Apex Court. Leading of evidence is not an absolute

right in a proceeding initiated under Section 34 of the Act.

The petitioner who approaches the Court challenging the

award shall have to make out a case for leading evidence.

7. Section 34(2)(a)of the Act prior to 2019 amendment

reads as follows:

"An arbitral award may be set aside by the Court only if:-

(a) the party making the application 'furnishes proof

that'"

After 2019 amendment, Section 34(2)(a) reads as follows:

"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"

Earlier to 2019 amendment, the words used in Section

34(2)(a) were "furnishes proof ", the said words were

substituted in 2019 amendment by "establishes on the

basis of the record of the Arbitral Tribunal ".

8. The decision in FIZA DEVELOPERS was prior to 2019

amendment, when Section 34(2)(a) used the words "furnishes

proof". In that circumstance, the Hon'ble Apex Court at

paragraph 31 has held as follows:

"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 witnesses 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. Thereafter, 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."

A reading of the above portion makes it clear that an

applicant in Section 34 proceedings is permitted to lead

evidence of the witness in proof and correspondent

opportunity is given to respondent-defendant to place his

evidence by affidavit, where case so warrants, the Court could

permit cross-examination of the persons swearing through

affidavits. At that point of time, depending on the facts and

circumstances of the case, the Court could have permitted or

could have refused to lead evidence.

9. Subsequent to 2019 amendment, the Hon'ble Supreme

Court in CANARA NIDHI LIMITED (supra) considered 2019

amendment and at paragraphs 17 and 18 has held as follows:

"17. Based upon Justice B.N. Srikrishna Committee's report, Section 34 of the Principal Act has been amended by Arbitration and Conciliation (Amendment) Act, 2019 as under:-

"7. Amendment of Section 34.--In Section 34 of the principal Act, in sub-section (2), in clause (a), for the words "furnishes proof that", the words "establishes on the basis of the record

of the Arbitral Tribunal that" shall be substituted."

18. After referring to Justice B.N. Srikrishna Committee's Report and other judgments and observing that the decision in Fiza Developers must be read in the light of the amendment made in Section 34(5) and Section 34(6) of the Act and amendment to Section 34 of the Arbitration Act, 1996, in Emkay Global Financial Services Limited v. Girdhar Sondhi, it was held as under: (SCC p.63, para 21)

"21. 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 in Sandeep Kumar v. Ashok Hans, (2004 SCC OnLine Del 106) Sial Bioenergie v. SBEC Systems (2004 SCC OnLine Del 863), 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 in WEB Techniques and Net Solutions (P) Ltd. v. Gati Ltd. (2012 SCC OnLine Cal 4271). We may hasten to add that if the procedure followed by the Punjab and Haryana High Court judgment in Punjab SIDC Ltd. v. Sunil K. Kansal 2012 SCC Online P & H 19641 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 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 the amendment made in Sections 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 in Girdhar Sondhi v. Emkay Global Financial Services Ltd. (2017 SCC OnLine Del 12758) of the Delhi High Court and reinstate that of the learned Additional District Judge dated 22-9-2016. The appeal is accordingly allowed with no order as to costs."

The legal position is thus clarified that Section 34 application will not ordinarily require anything beyond the record that was before the arbitrator and that cross- examination of persons swearing in to the affidavits should not be allowed unless absolutely necessary."

The above portion of the judgment of the Hon'ble Apex Court

makes it clear that right to lead evidence or cross-examine in

a proceeding under Section 34 of the Act is not absolute, but

it could be allowed if absolutely necessary and if the party

seeking to lead evidence makes out a case for leading

evidence.

10. In the case on hand, the trial Court failed to examine as

to whether there is necessity or whether the petitioner has

made out a case to permit the petitioner to lead evidence.

The trial Court only observing that the proceedings under

Section 34 of the Act would be summary in nature held that

there is no necessity to frame issues and to permit to lead