Unknown vs M/S S.K. Dynamics Pvt. Ltd
2022 Latest Caselaw 896 UK

        IN THE HIGH COURT OF UTTARAKHAND
                     AT NAINITAL

       THE ACTING CHIEF JUSTICE SHRI SANJAYA KUMAR MISHRA
                                 AND
                JUSTICE SHRI RAMESH CHANDRA KHULBE



              APPEAL AGAINST ORDER NO. 78 OF 2022

                             24th MARCH, 2022
 Between:

 M/s S.K. Dynamics Pvt. Ltd.                    ......            Appellant

 And

 Center of Excellence in Disaster
 Mitigation and Management                      ......         Respondent

Counsel for the appellant : Mr. Aditya Pratap Singh, learned counsel

Counsel for the respondent : None present for respondent

Upon hearing the learned Counsel, the Court made the following

JUDGMENT: (per the Acting Chief Justice Shri Sanjaya Kumar Mishra)

Heard learned counsel for the appellant.

2) In this Appeal Against Order, the appellant

being the respondent, in Arbitration Case No. 249 of

2019, Center of Excellence in Disaster Mitigation and

Management Vs M/s S.K. Dynamics Pvt. Ltd, Roorkee,

has assailed the order dated 05.10.2021, passed by the

learned Additional District Judge (Commercial),

Dehradun, in a proceeding initiated by the respondent

before us under Section 34 of the Arbitration and

Conciliation Act, 1996, thereby accepting the paper nos.

27 C-2 and 28 C-2, i.e. supplementary affidavit as a

rejoinder affidavit along with certain other additional

documents / facts.

3) The learned counsel for the appellant

submitted that the provisions of the Arbitration and

Conciliation Act, 1996, does not envisages filing of the

additional statements, documents / facts at the stage of

Section 34 proceeding, and such a recourse can be taken

only in exceptional circumstances. The learned counsel

relies upon the reported case of M/s Canara Nidhi

Limited Vs M. Shashikala and others, (2019) SCC OnLine

SC 1244, wherein the Hon'ble Supreme Court has

examined this aspect of the case, and has held as under:

14. After a decision in Fiza Developers,

Section 34 was amended by Act 3 of 2016 by which

sub-sections (5) and (6) of Section 34 were added

to the Principal Act w.e.f. 23.10.2015. Sub-

sections (5) and (6) to Section 34 of the Act read

as under :-

"34. Application for setting aside arbitral award. -

(1)-(4) .......

(5) An applications under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.

(6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party."

15. The judgment in Fiza Developers was

considered by Justice B.N. Srikrishna Committee

which reviewed the institutionalization of the

arbitration mechanism and pointed out that

opportunity to furnish proof in proceedings under

Section 34 of the Arbitration Act has led to

inconsistent practices. The said Committee

reported as under :-

"5. Amendment to Section 34(2)(a) of the ACA: Sub-section (2)(a) of Section 34 of the ACA provides for the setting aside of arbitral awards by the court in certain circumstances. The party applying for setting aside the arbitral award has to furnish proof to the court. This requirement to furnish proof has led to inconsistent practices in some High Courts, where they have insisted on Section 34 proceedings being conducted in the manner as a regular civil suit. This is despite the Supreme Court ruling in Fiza Developers & Inter- Trade (P) Ltd. Vs AMCI (India) (P) Ltd. (2009) 17 SCC 796 that proceedings under Section 34 should not be conducted in the same manner as civil suits, with framing of issues under Rule 1 of Order 14 of the CPC.

In light of this, the Committee is of the view that a suitable amendment may be made to Section

34(2)(a) to ensure that proceedings under Section 34 are conducted expeditiously.

Recommendation: An amendment may be made to Section 34(2)(a) of the Arbitration and Conciliation Act, 1996, substituting the words 'furnishes proof that' with the words 'establishes on the basis of the Arbitral Tribunal's record that'."

[Report of Justice B.N. Srikrishna Committee quoted in Emkay Global Financial Services Ltd. Vs Girdhar Sondhi (2018) 9 SCC 49]

16. 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."

17. 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 Vs

Girdhar Sondhi (2018) 9 SCC 49, it was held as

under :-

"21. It will thus be seen that speedy resolution of arbitral disputes has been the reason for enacting ht 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 proceedings 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 Vs Ashok Hans 2004 SCC OnLine Del 106, Sial Bioenergie Vs 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. Vs 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. Vs 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 Section 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 parities. 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 Vs 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 22.09.2016. 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.

4) Thus, it is clarified that ordinarily, in an

application under Section 34 of the Arbitration and

Conciliation Act, the Court does not require anything

beyond the record that was before the arbitrator. Thus,

additional facts / documents should not have been

accepted by the learned Additional District Judge

(Commercial) Dehradun, without giving reasons.

Moreover, if we admit the appeal, and give a stay order,

the entire proceedings shall linger because it cannot be

said as to after how many months or years the matter

can be taken up for final disposal.

5) Keeping in view the spirit of the Arbitration

and Conciliation Act, we hereby dispose of the Appeal

against Order giving liberty to the appellant to file an

appropriate application before the learned Additional

District Judge (Commercial), Dehradun delineating the

observations made by the Hon'ble Supreme Court in the

aforesaid case. In such an event, the learned Additional

District Judge (Commercial), Dehradun will reconsider

the question, and without being influenced by the order

he has passed earlier, which is impugned in this case,

and which, in our opinion appears to be contrary to the

judgment of the Hon'ble Supreme Court, cited supra.

The Additional District Judge shall decide the matter

afresh after giving reasonable opportunity of hearing to

the parties, and shall dispose of the matter within 21

days from the date of production of a certified copy of

this order along with a copy of brief of the appeal.

6) The Appeal against Order stands disposed of

accordingly.

____________________________ SANJAYA KUMAR MISHRA, A.C.J.

______________________ RAMESH CHANDRA KHULBE, J.

Dated: 24th MARCH, 2022 Negi