Alternative Dispute Resolution, in and of its very essence, contemplates minimal interference by the Judiciary in order to ensure speedy and timely delivery of justice. Arbitration, being one of these ADR mechanisms, has been widely preferred by the parties, especially when it comes to Commercial Dispute Resolution.
In an Arbitration process, Arbitrators have been conferred with wide powers to manage and adjudicate upon the matters before them. One such power is to call for witnesses and record evidence.
In India, the Arbitration & Conciliation Act, 1996 (“the Act”) governs the Arbitration process. Section 27 of the Act has carved out an exception to the general principle of minimal interference or non-interference of the Courts by stating that the Arbitral Tribunal or any party (with the approval of the Tribunal) can seek assistance of the Courts in taking of evidence.
In the normal course of an Arbitral Proceeding, the Arbitral Tribunal, under Section 19(4) of the Act, is empowered to decide admissibility, relevance, materiality and weight of evidence. However, if the Tribunal isn’t sure about a piece of evidence or if it refuses to take such evidence, then the party – with the Tribunal’s approval – can make an Application to the Court under Section 27 seeking assistance in taking the evidence. This Article seeks to analyze the scope of Section 27 and how far Courts have gone in their interpretations of the same as well as other remedies available to the parties in such cases.
Section 27(1) of the Act empowers the Tribunal to either file an Application or to authorize the concerned party to file such an Application before the Court, seeking the Court’s assistance in taking of evidence. Section 27(2) of the Act, on the other hand, lays down the details that such an Application must specify, as follows:
a) the names and addresses of the parties and the arbitrators;
b) the general nature of the claim and the relief sought;
c) the evidence to be obtained, in particular,
d) the name and address of any person to be heard as witness or expert witness and a statement of the subject-matter of the testimony required;
e) the description of any document to be produced or property to be inspected.
Section 27(3) confers upon the Court the discretionary power to execute such request, depending on its own competence and governed by the applicable rules on taking evidence, and direct that such evidence be provided to the Arbitral Tribunal directly.
Moreover, in doing so, the Court may act in the same manner and issue the same processes to the witnesses as it would do with respect to Civil Suits tried before it, which includes the issuing of summons for examination of witnesses as well as production of documents.
Section 27(5) pertains to penalties and punishments that are imposed on the persons failing to attend or respond to such processes, making defaults, refusing to furnish evidence or guilty of any contempt in accordance with such by the order of Court or on representation of the Arbitral Tribunal in the same way as they would incur from the offences in Suits tried before the Court.
EVOLVING SCOPE OF SECTION 27
The majority view of Courts under this Section 27 has been to avoid interference. The Courts have heavily relied on the word “may” and “execute” appearing in Section 27 of the Act to limit an active role from their side. The power of the Court in seeking evidence under this provision is discretionary.
The Courts have, time and again, reiterated that a balance needs to be struck between discretion under Section 27 and the general principle of Minimal Judicial Interference. Further, the Courts have merely to act as an Executing Authority and not an Adjudicating one. Their role is limited to executing an Order given by an Arbitrator which has been defied by the party with regards to the evidence or when the Arbitrator isn’t certain about the relevance of a piece of evidence.
An important reflection of this is the judgment in the case of Ennore Ports Ltd v. Hindustan Construction Company Ltd. [AIR 2007 Mad 73]. The Madras High Court, in this case, has held that they have a discretionary power when an Application is made under Section 27 of the Act and an Application under this Section does not confer a vested right. It is interesting to observe that although the Courts have held an Arbitrator to be the “sole judge of quality as well as quantity of the evidence”, the Courts still hold the discretion in considering their request.
The scope of Section 27 has been very well explained by the Hon’ble Supreme Court (SC) in the case of Delta Distilleries v. United Spirits Ltd. [AIR 2014 SC 113]. In this case, it was observed that the Arbitral Tribunal is responsible to ensure the delivery of justice. In order to do so, it can order any relevant evidence from the parties. In case either of the party defies the Order of the Tribunal, the aggrieved party may apply to the Courts under Section 27 of the Act to seek redressal. In the case in hand, the SC only allowed the evidence by one of the parties, thereby upholding the principle that Section 27 does not have a mechanical operation rather the provision operates on the discretionary power of the Court.
The Delhi High Court, in the case of Silor Associates v. Bharat Heavy Electrical Ltd. [210 (2014) DLT 312] the Arbitrator failed to exercise his power to call for evidence and approached the Court under this Section. However, the Court refused to entertain this Petition. It opined that an erroneous Application under this Section is not permitted and only when the party refuses to present the evidence by the Order of the Tribunal can the Court interfere.
However, this has not been the consistent view. There have been cases where the Courts have strongly applied their position as “Executors” and have treated the power under Section 27 as a mechanical process to issue Orders. This stems from the view that an Arbitrator is the sole judge in the dispute between them. The Bombay High Court (Bombay HC) had adopted this view in the case of Montana Developers v. Aditya Developers [2016 (6) MhLJ 660].
REMEDIES TO THE PARTIES
- Remedy Under Section 37
- Do parties have a right to appeal against the order of Tribunal under Section 37?
An Order passed by the Tribunal under Section 27 of the Act to seek assistance from the Court is not appealable under Section 37 of the Act. Section 37 of the Act has a limited scope as it lists down specific Orders from which an Appeal can lie. Hence, the parties do not have right to appeal from the decision of the Tribunal under Section 27.
- Do parties have right to appeal against the Order passed by the Court in a Petition made under Section 27 via Section 37?
Section 27 proceedings before the Court are not appealable under Section 37 for the same reason as stated above.
It should also be noted that the language of Section 27 further gives the impression that a person against whom the Court is passing an order to get the evidence doesn’t have any right to present his side of the case and has to follow it.
- Remedy Under Section 34
Section 34 of the Act provides a remedy to the parties to approach the Court if they are dissatisfied with the Arbitral Award. It is important to note that this remedy is available only after the Award has been passed by the Tribunal, not before it.
It is pertinent to note that on a plain reading of Section 34, it is understood that there no such Appeal can lie.
There are no remedies available to the party under Section 37 and Section 34 of the Act. However, a deeper dive into Section 34 proves otherwise.
The Tribunal has been conferred the power under Section 19(4) of the Act to decide admissibility, relevance, materiality and weight of an evidence. However, if the Tribunal isn’t sure about evidence or if it refuses to take it, then the party with Tribunal’s approval can make an application to the Court under Section 27 seeking assistance in taking the evidence. Taking or producing evidence from both the side of dispute has been considered as a part of ‘Audi Alteram Partem’. It is very important to hear the other side in order to arrive at a fair and conclusive judgement.
When the Tribunal refuses to allow seeking evidence, the party has a remedy to approach the Court under Section 27. However, it must be noted that an Order passed by Tribunal under Section 27 seeking assistance of the Court is not subject to challenge. When the party reaches the Court under this Section, there are no provisions in law which show that the party against whom such Order is to be made can present its view and dispute it. Further, there is no remedy available to the person to challenge the order of Court under Section 37 of the Act.
As per Section 34 (2)(a)(iii) of the Act, an Arbitral Award can be challenged by the party if he is able to prove that he was “otherwise unable to present the case”. This specific part of the Section can be claimed by the party who is aggrieved by such a decision. This is because in real sense he was unable to present his complete case before the Tribunal if he is not allowed to challenge an Order with respect to his evidence.
It can further be challenged under Section 34(2)(b), against the Public Policy of India. From the Explanation appended to this Section, an Award shall be considered in conflict with Public Policy if it goes against fundamental policy of Indian law or is against the basic notions of morality of justice. As discussed above, the proceedings under Section 27 are going against the Principles of Natural Justice and hence they can be considered to be against the Public Policy on account of being against the fundamental policy of Indian law and/or against the basic notions of morality of justice.
– Team AMLEGALS, assisted by Ms. Krati Agarwal (Intern)
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