Recently, the single judge bench of the Calcutta High Court while dealing with the application filed under Section 36(2) of the Arbitration and Conciliation Act, 1996 examined the scope of adjudication between Section 34 and Section 36(2) and (3) of the Arbitration Act and held that when an application has been filed under Section 36 (2) praying for an unconditional stay of an award, the applicant must satisfy the court that there is a ground of fraud or corruption on the part of the tribunal within the meaning and scope of sub-Section (3) to Section 36 of the Arbitration Act.
Brief facts:
The factual matrix of the case is that the present application is filed under Section 36, Sub-Section 2, of the Arbitration and Conciliation Act, 1996 for an unconditional stay of the arbitral award dated November 30,2023 on the ground that circumstances exist which gives rise to the doubts as to the independence and impartiality of the Learned presiding arbitrator.
Contentions of the Award-Debtor:
The learned counsel appearing on behalf of the award-debtor contended that proviso the section 36(3) of the Act, 1996 provides that if prima facie case is made out that the making of arbitral award was induced or effected by FRAUD or CORRUPTION, the court shall stay the award unconditionally pending disposal of the challenge under Section 34 to the award. It was furthermore contended that one of the members of the arbitral tribunal had attended various programs where diverse new models of cars were launched by the award-holder, and all such programs were held during the pendency of the arbitral proceedings. Also, it was contended that ‘BIAS’ is an element of ‘FRAUD’. Therefore, when the expression ‘FRAUD’ has been included in the second proviso to sub-Section (3) to Section 36 of the Arbitration Act and the incorporation was made by way of a subsequent amendment to the Act, the legislature thought it fit that if fraud is established which includes ‘BIAS’ then the award-debtor, as of right, is entitled to an order for unconditional stay of the award.
Contentions of the Award-Holder:
The learned counsel appearing on behalf of the Award-holder contended that the instant application filed by the award-debtor is just a delaying tactic. It was furthermore contended that in the event an allegation of fraud is made in a proceeding for setting aside of an award against an arbitrator, such arbitrator is required to be impleaded in the setting aside proceeding so that he can get an opportunity to deal with the charge against him. It was also contended that ‘BIAS’ is not a ground which is included within the meaning of the second proviso of section 36(3) of the Act, 1996.
In order to support the contentions, the learned counsel relied upon the judgments titled Kothari Industrial Corporation Limited vs. Southern Petrochemicals Industries Corporation Limited, and SRMB Srijan Ltd. vs. Great Eastern Energy Corporation Ltd.
Observations of the Court:
The Court noted that the basis of the present application is based upon the law laid down by the Hon’ble Apex Court in the judgments titled Vinod Bhaiyalal Jain Jain vs. Wadhwani Parmeshwari Cold Storage, and Microsoft Corporation vs. Zoai Founder in which it was observed that
“While adjudicating a Section 34 proceeding, the setting aside court, though not a court of appeal but with its limited authority and jurisdiction shall cause the enquiry and review the award in detail within its permitted jurisdiction and limitation. An arbitral award whether would vitiate on the ground of fraud or corruption and/or the ground of bias alleged against the arbitral tribunal, shall be adjudicated at the Section 34 stage. When an application has been filed under Section 36 (2) praying for an unconditional stay of an award, the applicant must satisfy the court that there is a ground of fraud or corruption on the part of the tribunal within the meaning and scope of sub-Section (3) to Section 36 of the Arbitration Act. At that stage the setting aside court in exercise of its power under Section 36 (2) and (3) of the Arbitration Act, shall first has to arrive at a prima facie view that there has been an element of fraud or corruption as defined under sub-Section (3) to Section 36 of the Act. The scope of adjudication under Section 34 and Section 36(2) and (3) of the Arbitration Act are totally different.”
The court observed that in the present application, the award-debtor prayed for the impleadment of a member of the arbitral tribunal even before adjudication of the said pending Section 36 (2) application. However, the court is of the opinion that unless the court arrives at a prima facie finding of fraud or corruption or even bias as alleged by the award-debtor in the facts of this case, the question of impleadment of the concerned member of the arbitral tribunal does not and cannot arise.
The decision of the Court:
With the above direction, the Court dismissed the present application.
Case title: West Bengal Industrial Development Corporation Ltd V. Tata Motors Limited
Coram: Hon’ble Mr. Justice Aniruddha Roy
Case no.: AP-COM/88/2024 IA No. GA No. 1 of 2025
Advocates for the Award-Holder: Mr. Sudipto Sarkar, Sr. Advocate Mr. Siddhartha Mitra, Sr. Advocate Mr. Deepan Kr. Sarkar, Advocate Mr. Samridha Sen, Advocate Mr. Soumitra Datta, Advocate
Advocates for the Award-Debtor: Mr. Kishore Datta, Advocate General Mr. T.N. Siddique, Advocate Mr. Manoj Kumar Tiwari, Advocate Mr. Deepank Anand, Advocate Ms. Arpita Dey, Advocate
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