[Raghav Bhatia is an Advocate practising at the Supreme Court and Delhi High Court. He can be contacted at [email protected].]
Early this year, the Supreme Court of India in Alpine Housing Development Corporation Pvt. Ltd. v. Ashok S. Dhariwal reiterated that only in exceptional circumstances can a party adduce additional evidence under section 34 of the Arbitration and Conciliation Act, 1996.
Disputes arose between Alpine Housing Development Corporation Pvt. Ltd. and Ashok S. Dhariwal, which the parties referred to arbitration. The arbitral tribunal passed an ex-parte award dated March 12, 1998. As it was an ex-parte award, no evidence was led by Dhariwal before the arbitral tribunal. Aggrieved, Dhariwal preferred a petition under section 34 of the Arbitration Act.
The award passed by the tribunal was for specific performance of the agreement and liberty was granted to apply for amalgamation of khatas. Under the award, it was Alpine Housing which had to apply for amalgamation of khatas. However, since Alpine Housing did not apply for amalgamation, Dhariwal had to apply twice for the same. The said applications, however, were rejected.
During the pendency of the section 34 proceedings, Dhariwal filed an application for adducing additional documents. As the applications for amalgamation had been rejected, Dhariwal filed the aforesaid application for additional documents as it sought to “produce the final endorsement dated 17.03.2003 by which the prayer for amalgamation of khatas to plots were rejected”. Dhariwal wanted to place reliance on the said document to argue that the award was incapable of being executed and, thus, contrary to the public policy of India and liable to be set aside.
The application to adduce additional evidence was rejected by the court hearing the section 34 petition with the observation that “if such a permission is granted, it would defeat the object and purpose of early disposal of arbitration proceedings and it would delay further hearing of section 34 application”. For arriving at this decision, the court relied on section 34(2)(a) of the Arbitration Act which, after the 2019 amendment, allows the court to set aside an arbitral award if “the party making the application establishes on the basis of the record of the arbitral tribunal that…” one of the grounds mentioned in section 34(2)(a) of the Arbitration Act has been attracted. However, before the 2019 amendment, an award could be set aside where “the party making the application furnishes proof that…” one of the grounds mentioned in section 34(2)(a) has been attracted.
Returning to the present case, aggrieved with the order rejecting the application for additional documents, Dhariwal preferred a writ petition before the Karnataka High Court. The High Court allowed the writ petition and set aside the order disallowing the application for additional documents. Accordingly, Dhariwal was allowed to adduce additional documents. Aggrieved, Alpine Housing has approached the Supreme Court in the present proceedings.
Issue before the Supreme Court
The sole issue before the Supreme Court was whether the party challenging an award under section 34 of the Arbitration Act can be permitted to adduce additional evidence.
Proceedings before the Supreme Court
At the outset, the Supreme Court observed that in the instant case since the award was passed by the arbitral tribunal in 1998, the same was way before the 2019 amendment came into force. Accordingly, the provisions of unamended section 34(2)(a) of the Arbitration Act would be applicable. After the aforesaid observation, the Supreme Court proceeded to determine whether an applicant can adduce additional evidence where the applicant is required to furnish proof under section 34(2)(a) of the Arbitration Act.
Relying upon Fiza Developers and Inter-Trade Private Limited v. AMCI (India) Private Limited, Emkay Global Financial Services Ltd. v. Girdhar Sondhi and Canara Nidhi Ltd. v. M. Shashikala, the Supreme Court observed that in an application under section 34 of the Arbitration Act, nothing “beyond the record that was before the” arbitral tribunal would be required. Cross examination of persons swearing the affidavits filed in the section 34 proceedings is not to be allowed “unless absolutely necessary”. This is so because, the Supreme Court observed, the proceedings under section 34 are in the nature of summary proceedings and an award can only be set aside on one of the grounds mentioned in sections 34(2)(a) and 34(2)(b) of the Arbitration Act.
Further, issues are not required to be framed in section 34 proceedings as framing of issues and taking of oral evidence would defeat the objective behind the enactment of the Arbitration Act, i.e., speedy resolution of arbitral disputes. Although, in a section 34 proceeding, ordinarily nothing beyond the “record that was before the arbitrator” would be required, however, if there are certain issues which are not covered by the record before the arbitral tribunal, the same may be brought to the notice of the section 34 court by way of affidavits in exceptional circumstances.
After the aforesaid discussion, the Supreme Court proceeded to consider whether the present case was an exceptional one or not. The Supreme Court noted that what Dhariwal wanted to place on record was the communication “by which the application for amalgamation of the plots is rejected”. As aforesaid, the arbitral tribunal in the instant case had passed an order for specific performance, the same being subject to the amalgamation of the plots.
The Supreme Court concluded that the instant case fell under the category of “unless absolutely category” and that the High Court was right in permitting Dhariwal to adduce additional evidence. The Supreme Court observed that the “event of refusal to amalgamate the plots is subsequent to the passing of the award” and thus could not have formed part of the arbitral tribunal’s record. Further, the award was an ex-parte award and, thus, Dhariwal had no opportunity to lead evidence before the tribunal. Thus, the Supreme Court noted that an “exceptional case” has been made out by Dhariwal and he must be permitted to adduce additional evidence. At the same time, the Supreme Court held that Alpine Housing would also be given an opportunity “to cross – examine and/or produce contrary evidence”.
In the given facts of the case, the conclusion of the Supreme Court cannot be doubted. The order rejecting the permission for amalgamation went to the root of the dispute and the consequent arbitral award, and thus AS Dhariwal was rightly allowed to adduce the same before the court hearing the section 34 petition.
Although it can be said that the Supreme Court missed an opportunity to discuss in detail the exceptional circumstances in which the courts can allow the parties to adduce additional evidence, a deeper scrutiny of the instant decision reveals two aspects which weighed with the Supreme Court while deciding the issue. First, as the award was for specific performance subject to amalgamation, since the application for amalgamation was rejected, the award was clearly liable to be set aside. Second, the document sought to be produced came into existence only after passing of the award, and thus, could not have been filed before the arbitral tribunal.
Given the scheme of the Arbitration Act which places emphasis on minimal judicial interference, the courts should allow an additional document to be taken on record only where such document sought to be adduced goes to the root of the dispute. Merely because a document might be relevant while deciding a section 34 application cannot be the standard. This is so because, otherwise, parties would seek to file additional documents routinely and argue how the same are relevant for deciding the section 34 petition. Further, if the document in question was available with the parties at the time of filing of section 34 petition, then the parties cannot be allowed to file the same belatedly. Such a high standard would prevent the parties from filing applications for additional documents routinely in section 34 proceedings.
Further, the Supreme Court in the instant case was not required to analyse the impact of the 2019 amendment to section 34 of the Arbitration Act. Since the issue in the present case concerned around whether the award was in conflict with the public policy, the same is covered by section 34(2)(b) which uses the expression “the Court finds that”.
Interestingly, following the 2019 amendment, the language used in section 34(2)(a) of the Arbitration Act is “establishes on the basis of the record of the arbitral tribunal that” and for section 34(2)(b) of the Arbitration Act the language used is “the Court finds that”. Therefore, the legislative intent suggests is that, in so far as grounds in section 34(2)(a) are concerned, they can be invoked on the basis of the documents on the arbitral record only. Therefore, a literal interpretation of the section 34(2)(a), following the 2019 Amendment, suggests that parties cannot file additional documents in section 34 proceedings which were not on the arbitral record. However, insofar as section 34(2)(b) is concerned, the language suggests that parties can rely on additional documents.
With the issue of what constitutes an exceptional circumstance still not defined and delineated unambiguously, it will be interesting to see how the Supreme Court decides this issue going forward. It is hoped that the Supreme Court keeps the principle of section 5 of the Arbitration Act in mind and limit the circumstances in which additional documents can be filed.
– Raghav Bhatia