Skip to main content

Oral Evidence In Application To Set Aside Arbitral Award Shouldn’t Be Allowed Unless Absolutely Necessary

In M/S EMKAY GLOBAL FINANCIAL SERVICES LTD. vs GIRDHAR SONDHI,  the questions before the Supreme Court was the issue of 'Exclusive Jurisdiction' & 'Furnishing of proof in a appeal against an arbitration award'

The Respondent, a client of the appellant who is a registered broker with the National Stock Exchange, had initiated an arbitration proceeding against the Appellant, claiming an amount of Rs.7,36,620/-, which was rejected by the Sole Arbitrator vide an Arbitration Award dated 08.12.2009.  The Respondent then filed a Section 34 application under the Arbitration and Conciliation Act, 1996 on 17.03.2010 before the District Court, Karkardooma, Delhi. By a judgment dated 22.09.2016, the learned Additional District Judge referred to the exclusive jurisdiction clause contained in the agreement, and stated that he would have no jurisdiction to proceed further in the matter and, therefore, rejected the Section 34 application filed in Delhi. In an appeal filed before the High Court, the Senior Judge remanded the matter back to lower court stating that since the impugned judgment decides the disputed question of fact without allowing parties to lead evidence evidence, and without opportunity to the other side to cross-examine the witnesses who give depositions, it is necessary that the disputed questions of fact as regards existence of territorial jurisdiction of the courts at Delhi be
decided by the court below after framing an issue to this effect and permitting. 

The Supreme Court decided that the effect of an exclusive jurisdiction clause was dealt with by this Court in several judgments, the most recent of which is the judgment contained in Indus Mobile
Distribution Pvt. Ltd. v. Datawind Innovations Pvt. Ltd. and Ors., which in turn had referred to the judgment of of five learned Judges in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. and  it is clear that once courts in Mumbai have exclusive jurisdiction thanks to the agreement signed by the two parties, read with the  National Stock Exchange bye-laws, it is clear that it is the Mumbai courts and the Mumbai courts alone, before which a Section 34 application can be filed. The arbitration that was conducted at Delhi was only at a convenient venue earmarked by the National Stock Exchange, which is evident on a reading of bye-law 4(a)(iv) read with (xiv) contained in Chapter XI. 

The Supreme Court then raised the issue of what is meant by the expression “furnishes proof” in Section 34(2) (a). 

The court said that in a early Delhi High Court judgment, Sandeep Kumar v. Dr. Ashok Hans, a learned Single Judge of the Delhi High Court specifically held that there is no requirement under the provisions of Section 34 for parties to lead evidence. The record of the Arbitrator was held to be sufficient in order to furnish proof of whether the grounds under Section 34 had been made out.

The court also referred to various judgment including the Delhi High Court in Sial Bioenergie v. SBEC Systems, Supreme Court in Fiza Developers & Inter-Trade Pvt. Ltd. v. AMCI (India) Pvt. Ltd. and Anr., Punjab and Haryana High Court judgment in M/s Punjab State Industrial Development Corporation v. Mr. Sunil K. Kansal, Calcutta High Court in WEB Techniques and Net Solutions Pvt. Ltd. v. M/s. Gati Ltd. and Anr., Supreme Court in Cochin Shipyard Ltd. v. Apeejay Shipping Ltd., the Supreme Court in The State of Bihar and Ors. v. Bihar Rajya Bhumi Vikas Bank Samiti and stated that 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.

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.

Comments

Post a Comment

Most viewed this month

Right of pre-emption under West Bengal Land Reform Act

In Rabindra Nath Kundu & Anr vs Sudhir Hira, Bijoy Krishna Hira being the owner in the suit plot, gifted to Santosh Kumar Hira demarcated 11 decimals of land vide deed of gift dated 27.4.2004 and the latter sold 9 decimals out of 11 decimals of land to Sudhir Hira the preemptor/opposite party no. 1 and well demarcated 1.65 decimals of land in the said plot along with several other plots were sold, transferred and conveyed to the preemptees/petitioners herein by a registered deed of sale dated 10.8.2010, the subject matter of preemption. It is argued on behalf of the preemptees that  the present opposite party no. 1/preemptor Sudhir Hira has no relationship of co-sharership with Santosh Kumar Hira opposite party no. 2 as the demarcated portion of land has been purchased. It is settled principle of law that partial preemption is not permissible and this was what the view adopted by this Hon'ble High Court is Surendra Vs. Abhimannu reported in (1980) 1 Cal LJ 135 whe...
Post a Comment
Read more

Merits and the terms of contract are irrelevant for invoking of the bank guarantees

In Sabarkantha Annuity Pvt. Ltd. Vs. NHAI and Ors, the Petitioner filed before the Delhi High Court  petition under Section 9 of the Arbitration and Conciliation (Amendment) Act, 2015 with a prayer that, Respondents be restrained from acting upon the letter dated 15th September, 2017 or from invoking the Bid securities of the Petitioner to the tune of Rs. 10.93 Crores and also restraining the banks from honouring the invocation of said bank guarantees on behalf of Respondent No. 1 acting in terms of letter dated 3rd November, 2007. Petitioner has relied upon Clauses Nos. 9.1.1, 9.1.2 and 4.3 of the agreement dated 28th April, 2017 entered into between the parties to say the claim for damages since is not a claim for a sum presently due and payable and the respondent would be entitled to damages only on proof of loss, per Clause 4.3 of the agreement and hence is not entitle to the entire sum of bid security.  The Court found that Clause No. 9.1.2 speaks of an exclusiv...
Post a Comment
Read more

Supreme Court clarified on how to determine if an allegation of fraud falls under “Fraud Exception” to Arbitrability

In AVITEL POST STUDIOZ LIMITED & ORS. vs HSBC PI HOLDINGS (MAURITIUS) LIMITED, the Supreme Court was hearing an appeal from the interlocutory judgment and order passed in the appeal under section 9 of the Arbitration and Conciliation Act, 1996 by the Bombay High Court in a dispute between HSBC and Avitel India. HSBC had alleged that the Appellants had committed fraud by siphoning off the funds provided by them. As the agreement entered into by HSBC and the Appellants contained arbitration clause, HSBC approached the Singapore Arbitration Centre and the arbitration committee so formed executed award in favour of HSBC who filed application before the Bombay High Court for execution of the award. The Appellants contended objected to the award on various grounds and further argued that as fraud has been alleged, the dispute cannot be arbitrated.  The Supreme Court has held that “serious allegations of fraud” as a ground for exemption from arbitral proceedings arise only if either o...
Post a Comment
Read more