Umpire of an arbitration proceeding is bound to hear the matter de novo but subject to conditions

In M/S Oswal Woollen Mills Ltd. vs M/S Oswal Agro Mills Ltd. , the Supreme Court while hearing an appeal filed by the Appellant-Company against the rejection of an application seeking commencement of de novo proceedings.

The Supreme Court held that it is an undeniable fact that on reference of the matter to the Umpire, the Arbitrators become functus officio. The Umpire takes upon himself the exclusive authority of determining the disputes. He takes the place of Arbitrators, as the expression “in lieu of the Arbitrators” conveys. Unless there is an agreement to the contrary, defining or demarcating the powers of the Umpire, he is expected to discharge the same functions as Arbitrators with all the attendant powers, duties and obligations.

 It is trite to say that an Arbitrator is bound to observe the principles of natural justice and conform to the fundamentals of judicial procedure. It is his duty to afford a reasonable opportunity to the parties concerned. However, it would also be illogical to contend that the Umpire has to start de novo ipso facto. The very essence of the law of arbitration is to settle the matter efficiently in a time bound manner. Hence, when the Umpire enters upon a Reference and replaces the arbitrators, he is needed to review the evidence and submissions only on those matters about which the arbitrators have disagreed unless either party applies for the rehearing of the evidence of the parties or their witnesses. The Umpire can surely go through the evidence recorded by the previous arbitrators but without being influenced by the opinion expressed by them in that regard and even the notes taken by previous arbitrators can be relied if there exist special provisions in the agreement permitting him to do so. However, if the party makes an application for de novo hearing, the Umpire is bound to allow the same, subject to the condition that the application is made at the earliest and the applicant is not using it as last armory to turn the case around. An objection on the ground that the Umpire has not reheard the evidence may be waived by the conduct of the parties; the evidence already recorded before the previous arbitrator would remain valid and it would not be open for the parties to get the same recorded afresh later on.

The word de novo hearing should be given a purposive interpretation and it should be understood as a fresh hearing of the matter on the basis of pleadings, evidence and documents on record. If the party wants to re-examine a witness or objects to the documents admitted, the Umpire is to hear the parties and decide the application in the interest of justice.