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.