Arbitration In IndiaCommercial Agreements & Contracts In IndiaRule to Amend an Arbitration Petition

CALCUTTA HIGH COURT

Prakash Industries Limited Vs. Bengal Energy Limited & Anr.

G.A. 394 of 2020 with A.P. 684 of 2017 | Date: 11.06.2020

FACTS

The application was filed by the Petitioner for amendment of the Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) for setting the award passed by the Arbitral Tribunal. The Petition was filed within the statutory period of Section 34 (3) of the Act.

The application was filed on the ground that it was only after filing the  Petition that the Petitioner had appointed the current advocates and thereby new grounds were discovered by them to further amplify the existing grounds taken in the Petition.

ISSUE BEFORE THE CALCUTTA HIGH COURT

The following issue were considered by the Calcutta High Court:

Whether the amendment to Arbitration Petition filed under Section 34 of the Act was permissible?

OBSERVATION

The High Court of Calcutta firstly considered whether the amendments were in accordance with Order VI Rule 17 of CPC. The Court noted that it is a settled position of law that an amendment cannot be permitted if changes the nature and character of the original pleadings.

Court compared the grounds taken by the Petitioner in its original Petition and that in the amendment application and observed that the Petitioner wanted to bring in additional 26 grounds (apart from 30 existing grounds) to put forth the contention that the Arbitral Tribunal erred in not considering the provision of Sales of Goods Act, 1930. The existing Petition was premised on the ground that the award was against the public policy of India and violative of the principles of natural justice.

Further, the Court considered whether the amendment would change the nature and character of the Petition and observed that there was no ground in the Petition with regards to the Sales of Goods Act or quantum of damages and hence were completely new grounds in itself.

Secondly, the Court considered whether the amendments can be discreetly placed in the statutory scheme of Section 34 of the Act. The Court noted that the Section 34 provides mainly for a twofold recourse for a party seeking setting aside of an award:

1. Challenge based on the procedural lapse including absence of an equal opportunity to a party to present its case, lack of proper notice or the composition of the Arbitral Tribunal is contrary to the agreement etc (Section 34 (2) (a) (i), (iii), (v)); or

2. Challenge based on the arbitration agreement being invalid and decisions being made outside the scope of reference. (Section 34 (2) (a) (ii), (iv))

Nonetheless, the major of the challenges are bases on the ground that: 

1. Dispute is not capable to be settled by arbitration under the existing law (Section 34 (2) (b) (i)), or

2. The award is in conflict with the public policy of India (Section 34 (2) (b) (ii)) or

3. The award is patently illegal on the face of it (Section 34 (2-A)).

The Court noted that the Explanation 2 to Section 34 (2) of the Act provides that the challenge based on the fundamental policy of India explicitly excludes the review of the disputes on merit.

CONCLUSION 

With regards to the fact that the ground pertaining to the Sales of Goods Act do not have a foundation in the current Petition, the Court refereeing to Order XLI Rule 1 (2) and Rule 2 of CPC opined that, the grounds based on pure question of law need not necessarily be taken as legal arguments as it can be taken up during the submission stage before the Court.

The Court placed reliance on the case of State of Maharashtra Vs. Hindustan Construction Company Limited reported in (2010) 4 SCC 518, wherein the Supreme Court provided an expansive construction in favour of the permitting amendments to Section 34 application for incorporation of additional grounds. The Court had held that the amendment can be permitted in peculiar circumstances if the Court finds that it necessary in the interest of justice.  Nonetheless, the Court had rejected the amendment application constituted new grounds that was not there in the original petition.

Thereafter, the Court in the instant case held that –

“The test whether an amendment is permissible or not, is whether the proposed amendments would warrant a fresh application under Section 34. This means that the grounds which are sought to be brought in by way of an amendment would necessarily be new and independent grounds without having a foundation in the original Section 34 application. This also means that each case must be decided on the nature of the amendments.”

Further, the Court held that the Section 34 permits the scope of interpretation under the ground of public policy on India. The Court adjudicated that the phrase “in contravention with fundamental policy of Indian law” permits the scope of interpretation of any law forming part of Indian jurisprudence.

Accordingly, the Court interpreted that the Petitioner’s ground of the Arbitral Tribunal having erred in considering the provisions of Sale of Goods Act in its awards can be construed to be covered under the public policy of India. The Petitioner has already covered the ground of public policy in his current Petition.

However, the Court relied on its decision in the cases of Fiza Developers and Inter-Trade Private Limited Vs. AMCI (India) Private Limited, (2009) 17 SCC 796 and Emkay Global Financial Services Limited Vs. Girdhar Sondhi, (2018) 9 SCC 49, wherein the Supreme Court emphasised on the objective of the Act, that is to resolve the dispute in an expeditious manner, and clarified that

“an application under Section 34 will not “ordinarily” require anything beyond the record of what was before the Arbitrator and anything which was not contained in such record but is relevant for the adjudication of the issues arising in the application under 34, may be brought to the notice of the court by way of affidavits.”

Thus, the Court held that the grounds taken by the Petitioner in the amendment application are new grounds and thus does not fall under the realm of amplification of existing grounds of the Petition.

AMLEGALS REMARKS 

The High Court of Calcutta herein has provided for a general rule that amendments to the Petition would not be allowed if the very basic structure of the Petition is changed or the amendment itself is not bona fide. At the stage of setting aside an award, there is usually an assumption that the facts were known to the party at the time of presenting the Petition. Unless satisfactory explanation is furnished for not introducing those grounds in the Petition, the amendment would also be rejected.

To conclude, amendment of Petition cannot be claimed by a party as a matter of right nor can it be denied by the Court arbitrarily.

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