The Supreme Court, in the case of M/s Alpine Housing Development Corporation Pvt. Ltd. v. Ashok S. Dhariwal and Others, [Civil Appeal No. 73 of 2023 decided on 19.01.2023], held that an Arbitral Award in conflict with the Public Policy is liable to be set aside.
Mr. Ashok S. Dhariwal (hereinafter referred to as the “Respondent”) filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “A&C Act”) before the Learned Additional City Civil and Sessions Judge, Benguluru (hereinafter referred to as the “Lower Court”) challenging an ex-parte award passed by the Arbitral Tribunal.
The Respondent had further filed an interim application IA No. 4 to adduce additional evidence. The Lower Court rejected the IA stating that if the permission to adduce evidence is granted, it would defeat the objective of A&C Act. The Lower Court further rejected the application under Section 34 of the A&C Act stating that the permission to adduce additional evidence was subject to writ petition before the High Court.
The Respondent subsequently filed a writ petition vide W.P. No. 50799/2019 before the Karnataka High Court (hereinafter referred to as the “High Court”) requesting to allow to adduce additional evidence under Section 34 of A&C Act. The High Court allowed the petition videorder dated 01.09.2021 (hereinafter referred to as the “Impugned Order”) and quashed and set aside the order of the Lower Court.
Being aggrieved by the Impugned Order, the Appellant has preferred the present appeal before this Hon’ble Court.
ISSUES BEFORE THE SUPREME COURT
- Whether the applicant can adduce evidence under the ground relating to Public Policy in an application filed under Section 34 of the A&C Act
- Whether the Respondents fall under such an exceptional case that it is necessary to grant an opportunity to file affidavits and adduce evidence?
CONTENTIONS OF THE PARTIES
The Appellant contended that the Impugned Order passed by the High Court permitting to adduce additional evidence is against the objective of the amending Section 34(2)(a) of the A&C Act vide Act No.33/2019 (hereinafter referred to as the “Amendment Act”) that is to decide and dispose the Arbitration Proceedings at the earliest and to avoid delay.
It was argued that even if the Section 34 of the A&C Act, prior to the Amendment is considered, the Respondents have assailed the Arbitral Award on grounds enumerated on Section 34(2)(b) of the A&C Act and hence, Section 34(2)(a) of the A&C Act cannot be made applicable.
It was submitted that the Parliament is empowered to lay down two procedures different procedures for the same relief and hence, under Section 32(2)(b) of the A&C Act the record of Arbitral Tribunal is enough and the Respondent shall not be allowed to adduce evidence. Moreover, the findings in the award are legally correct and hence cannot be said to be in contravention with the “public policy of Indian Law”.
It was asserted that the Respondent willfully failed in participating in the Arbitral Proceedings and hence, the Respondent cannot be given the advantage of their own wrong by allowing to lead the evidence.
The Respondent submitted that the constitution of the Arbitral Tribunal was challenged and hence it did not participate in the arbitral proceedings and the ex-parte award was passed. It was argued that the arbitral proceedings had begun under the old Act, whereas the award was passed based on the new Act. It is also submitted that the Respondents withdrew from the proceedings and another application was filed challenging bias and higher fees before the Arbitral Tribunal.
It was also contended that the words “furnish proof” shall be applicable to Section 32(2)(a) and Section 32(2)(b) of the A&C Act and not alone on Section 32(2)(a) of the A&C Act.
DECISION AND FINDINGS
The Supreme Court observed that the Section 34(2)(a) of the A&C Act before the Amendment Act would be applicable in the present case. The Court relied on Fiza Developers and Inter-Trade Private Limited v. AMCI (India) Private Limited [(2009) 17 SCC 796], and held that the pre-amendment Section 34(2)(a) of the A&C Act provided that the parties who has assailed the order can be permitted to file an affidavit in form of evidence only when it is absolutely necessary.
The Respondent was allowed to adduce evidence as an exceptional case was carved out as the affidavit filed stated the specific documents placed as evidence. .Furthermore, the Appellant was also permitted to cross examine and/or produce any contrary evidence. Thus, upheld the order passed by the High Court.
The Court also directed the Lower Court to deal with the evidence produced by the Respondent in accordance of the law and on merits and dispose the application under Section 34 of the A&C Act speedily and expeditiously considering the object of the A&C Act.
The Supreme Court has upheld the observation of the High Court and allowed the filing of affidavit and to adduce evidence and also allowed the cross examination of the evidence by the opposite party. Moreover, the provision of the A&C Act at the time of invocation of arbitral proceedings would be applicable and not the amended provision. Thus, an Arbitral Award in contravention to public policy is a ground to set aside the Arbitral Award. The Court further upheld the objective of the A&C Act and directed the lower court to expeditiously decide the application under Section 34 of the A&C Act on merit.
–Team AMLEGALS assisted by Ms. Diya Ambavi (Intern)
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