The Supreme Court has in an appeal held that the arbitral award in conflict with the public policy of India can be ground to set aside the award under Section 34(2)(b) of the Arbitration and Conciliation Act, 1996.

The appeal was filed against the judgment of the High Court by which it set aside the order passed by the Additional City Civil and Sessions Judge permitting the respondents to adduce evidence in an application under Section 34 of the Act.

The Bench comprising Justice M.R. Shah and Justice C.T. Ravikumar asserted, “The defence that the arbitral award is in conflict with the Public Policy of India itself can be a ground to set aside the award in view of section 34(2)(b) of the Act. … we are of the opinion that the High Court has not committed any error in permitting the respondents to file affidavits/additional evidence in the proceedings under section 34 of the Arbitration Act.”

The Bench also noted that the award of the arbitral tribunal was an ex-parte award and no evidence was before the arbitral tribunal on behalf of the respondents.

“We are not opining on whether the arbitral tribunal was justified in proceeding with the further proceedings ex-parte or not. Suffice it to record that before the arbitral tribunal, such evidence was not there and nothing was on record on the amalgamation of the plots”, the Court further noted.

Senior Advocate Krishnan Venugopal appeared on behalf of the appellant while Advocate Balaji Srinivasan appeared on behalf of the respondents.

Facts of the Case –

The respondents filed an interim application under Section 34 of the Arbitration Act to adduce additional evidence. The appellant filed objections to the said interim application seeking permission to adduce evidence on the ground that the same was not maintainable in accordance with the provisions of the Act.

The Court dealing with the interim application rejected the same and refused to permit the respondents to adduce evidence by observing that if such a permission is granted, it would defeat the object and purpose of early disposal of arbitration proceedings and would delay further hearing of Section 34 application. The High Court allowed the writ petition of the respondents and set aside the order passed by the court below permitting them to adduce evidence in the proceedings under Section 34 of the Act. The matter was therefore before the Apex Court.

The question for consideration before the Supreme Court was whether the applicant can be permitted to adduce evidence to support the ground relating to Public Policy in an application filed under Section 34 of the Arbitration Act.

The Court while considering the aforesaid question observed, “… in the present case the arbitration proceedings commenced and even the award was declared/passed by the arbitral tribunal in the year 1998, i.e., prior to section 34(2)(a) came to be amended vide Act 33/2019. … we hold that in case of arbitration proceedings commenced and concluded prior to the amendment of section 34(2)(a) by Act 33/2019, pre-amendment of section 34(2)(a) shall be applicable.”

It was further observed by the Court that if there are matters not containing such records and the relevant determination to the issues arising under Section 34(2)(a), they may be brought to the notice of the Court by way of affidavits filed by both the parties and that the cross-examination of the persons swearing into the affidavits should not be allowed unless absolutely necessary as the truth will emerge on the reading of the affidavits.

“The affidavit thus discloses specific document and the evidence requires to be produced. In that view of the matter, a strong exceptional case is made out by the respondents to permit them to file affidavits/adduce additional evidence. However, at the same time, the appellant also can be permitted to cross-examine and/or produce contrary evidence”, the Court said.

The Court further said that the appellant may be permitted to cross-examine and lead contrary evidence including the permission for clubbing khatas where there are nalas as the corporation vide endorsement agreed to consider clubbing of khatas.

Accordingly, the Court dismissed the appeal.

Cause Title- M/s Alpine Housing Development Corporation Pvt. Ltd. v. Ashok S. Dhariwal and Others

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