National Agricultural Cooperative Marketing Federation of India Ltd v. V.D. Agro Tech Ltd

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that —

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,—

(i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or

(ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice.

Explanation 2. – For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. (2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence. award to be set aside, broadly, if

(i) the party was under some incapacity, or

(ii) the arbitration agreement is not valid in law, or

(iii) the Section 34 petitioner was unable to present his case before the Arbitral Tribunal, or

(iv) the arbitral award dealt with issues beyond the remit of the Arbitral Tribunal, or

(v) the composition of the Arbitral Tribunal was not as per the agreement between the parties. Section 34(2)(b) further allows the award to be set aside if

(i) the dispute is non-arbitrable, or

(ii) the arbitral award is in conflict with the public policy of

India, meaning (a) the award was induced by fraud or corruption, or (b) the award contravenes the public policy of Indian law, or

(c) the award is in conflict with the most basic concepts of morality and justice. Section 34(2-A) further allows the arbitral award to be set aside if it is patently illegal.

12. Section 34(2)(a) underwent a small, but significant, amendment by Section 7 of the Arbitration and Conciliation (Amendment) Act,, w.e.f. 30 August 2019. Prior to the amendment, Section 34(2)(a) used the words “furnishes proof that”, for the words “establishes on the basis of the record of the arbitral tribunal that”. In “the 2019 Amendment Act” other words, prior to 30 August 2019, the Section 34 petitioner was entitled to furnish proof that the award was vitiated on one of the grounds envisaged by Section 34(2)(a), whereas, after 30 August 2019, he had to do so on the basis of the arbitral record. This amendment, however, applied only where the award was being challenged on one of the grounds envisaged in clauses (i) to (v) of Section 34(2)(a). The entitlement to “furnish proof”, available in Section 34(2)(a) prior to 30 August 2019, would clearly include the right to adduce evidence, whether in the form of additional documents, or otherwise. That freedom was, however, not available after 30 August 2019.

13. The petitioner in the present case is, undisputedly, not predicating its challenge to the impugned arbitral award on any of the grounds contemplated in Section 34(2)(a). The award was rendered prior to 30 August 2019.

14. The question that arises for consideration is, therefore, whether the petitioner should be permitted to support his Section 34 petition by additional documents. The respondent, as a ground to oppose the request, points out that the FIR was lodged prior to the passing of the impugned arbitral award and that, therefore, the petitioner could have easily produced it before the learned Arbitral Tribunal. The default in doing so, he submits, is of the petitioner, and he cannot be permitted to make it good in the present Section 34 proceedings.

15. To support his application, Mr. Thakur has placed reliance on the judgment of the Supreme Court in Alpine Housing Development Corporation Pvt Ltd v Ashok S. Dhariwal[3]. This decision, he submits, allows the petitioner to produce the said additional documents in support of its case, and to question the correctness of the observations of the learned Arbitral Tribunal in paras 4.6.10 and 4.6.11 even at this stage.

16. Mr. Thakur had sought to submit that the documents should be permitted to be taken on record as they are “relevant and material”, they “go to the root of the matter” and not permitting the documents to be taken on record would result in “injustice”.

17. The Supreme Court has, in Alpine Housing Development Corporation, examined, in detail, the circumstances in which, in the case where the impugned arbitral award is rendered prior to 30 August 2019, the Section 34 petitioner can be permitted to file additional documents at the Section 34 stage. Accepting the submissions of Mr. Thakur would require this Court to rewrite the judgment of the Supreme Court, which is obviously impermissible.

18. Alpine Housing Development Corporation was indeed concerned with the issue of whether the Section 34 petitioner could be permitted to produce additional documents to support its case in the Section 34 petition, when such documents were not part of the record before the learned Arbitral Tribunal.

19. Paras 21, 22 and 24 to 28 of the report are relevant and may be reproduced thus: “21. The short question which is posed for the consideration of this Court is, 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 & Conciliation Act, 1996?

22. At the outset, it is required to be noted that 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. Apart from the fact that it was conceded by the learned counsel appearing on behalf of the appellant before the High Court that the law prevailing prior to the amendment of Section 34(2)(a) by Act 33/2019 shall be applicable, even otherwise, we are of the opinion that the arbitration proceedings commenced and even the award was declared prior to the amendment of Section 34(2)(a) by Act 33/2019, Section 34(2)(a) pre-amendment shall be applicable. The view which we are taking is because by amendment of section 34(2)(a) by Act 33/2019, there is a substantial change. Prior to the amendment of section 34(2)(a), an arbitral award could be set aside by the Court if the party making an application “furnishes proof” and the grounds set out in section 34(2)(a) and section 34(2)(b) are satisfied. However, subsequent to the amendment of section 34(2)(a), the words “furnishes proof” have been substituted by the words “establishes on the basis of the record of the arbitral tribunal”. In that view of the matter, 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. *****

24. The ratio of the aforesaid three decisions on the scope and ambit of section 34(2)(a) pre-amendment would be that applications under sections 34 of the Act are summary proceedings; an award can be set aside only on the grounds set out in section 34(2)(a) and section 34(2)(b); speedy resolution of the arbitral disputes has been the reason for enactment of 1996 Act and continues to be a reason for adding amendments to the said Act to strengthen the aforesaid object; therefore in the proceedings under section 34 of the Arbitration Act, the issues are not required to be framed, otherwise if the issues are to be framed and oral evidence is taken in a summary proceedings, the said object will be defeated; an application for setting aside the arbitral award will not ordinarily require anything beyond the record that was before the arbitrator, however, 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' the cross-examination of the persons swearing in to the affidavits should not be allowed unless absolutely necessary as the truth will emerge on the reading of the affidavits filed by both the parties. Therefore, in an exceptional case being made out and if it is brought to the court on the matters not containing the record of the arbitrator that certain things are relevant to the determination of the issues arising under section 34(2)(a), then the party who has assailed the award on the grounds set out in section 34(2)(a) can be permitted to file affidavit in the form of evidence. However, the same shall be allowed unless absolutely necessary.

25. Now so far as the submission on behalf of the appellant that the requirement of “furnishing proof” as per pre-amendment of section 34(2)(a) of the Arbitration Act shall not be applicable to the application for setting aside the award on the grounds set out in section 34(2)(b) and the submission that in the execution proceedings the subsequent development of refusing to grant permission for amalgamation of the plots can be considered and it will be open for the applicants to point out in the execution proceedings that the award is not capable of being executed is concerned, at the outset, it is required to be noted that even for establishing that the arbitral award is in conflict with Public Policy of India, in a given case, the evidence may have to be led and by leading evidence, the person who is challenging the award on that ground can establish and prove that the arbitral award is in conflict with Public Policy of India and/or the subject matter of dispute is not capable of settlement by arbitration under the law for the time being in force. However, at the same time, from the record before the arbitrator, if the same can be established and proved that the subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force or the arbitral award is in conflict with the Public Policy of India, in that case, the person may not be permitted to file the affidavit by way of evidence/additional evidence.

26. Now so far as the submission on behalf of the appellant that the subsequent development of refusing to grant permission by the appropriate authority to amalgamate the plots can be considered in the execution proceedings, a person against whom the award is passed and who alleges on the grounds set out in section 34(2)(b) before the executing court, the executing court may hold that the award is not capable of being executed is concerned, it is required to be noted that so far as one of the grounds set out in section 34(2)(b), namely, that the arbitral award is in conflict with the Public Policy of India, the said ground could be available only after passing of the award. Therefore, the same can be permitted to be agitated in an application under section 34 of the Act and the person shall not have to wait till the execution is filed. 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. Therefore, the aforesaid submission has no substance.

27. Now the next question fell for consideration is, whether the present case is such an exceptional case that it is necessary to grant opportunity to the respondents to file affidavits and adduce evidence and whether any case is made out for the same.

28. From the affidavit, which is sought to be placed in the proceedings under Section 34 of the Act, it is seen that the respondents want to place on record the communication from the appropriate authority by which the application for amalgamation of the plots is rejected. At this stage, it is required to be noted that the arbitral tribunal has passed the decree for specific performance of the contract/agreement, subject to the amalgamation of the plots. Therefore, it is the case on behalf of the respondents that in view of the refusal of the permission by the appropriate authority to amalgamate the plots, the case falls under section 34(2)(b), namely, that the dispute is not capable of settlement under the law for the time being in force and that the arbitral award is in conflict with the Public Policy of India, namely, against the relevant land laws. The event of refusal to amalgamate the plots is subsequent to the passing of the award and therefore naturally the same shall not be forming part of the record of the arbitral tribunal. Even otherwise, it is required to be noted that the award of the arbitral tribunal was an exparte 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.”

20. It is important to understand exactly what the Supreme Court has held in the afore-extracted paragraphs from the decision in Alpine Housing Development Corporation. The ratio of the said decision may be set out in the form of the following propositions:

(i) Where the impugned arbitral award was rendered prior to

30 August 2019, the case would be covered by the pre-amended Section 34(2)(a). Section 34(2)(a) was amended by Section 7 of the 2019 Amendment Act, by replacing the words “furnishes proof that” with the words “establishes on the basis of the record of the arbitral tribunal”.

(ii) As such, in the case of arbitral awards rendered prior to

30 August 2019, the Section 34 petitioner was allowed to support a challenge relatable to one of the clauses (i) to (v) of Section 34(2)(a) by furnishing proof, even before the Section 34 court, of material which was not before the arbitral tribunal. In other words, if the Section 34 petitioner was seeking to challenge the arbitral award on one of grounds envisaged by clauses (i) to (v) of Section 34(2)(a), and the award had been rendered prior to 30 August 2019, the petitioner was entitled to rely on documents or material which were not before the arbitral tribunal.

(iii) Where the challenge to the arbitral award was not on one the grounds contained in clauses (i) to (v) of Section 34(2)(a), but was based on one of the clauses of 34(2)(b), the words “furnishes proof”, contained in Section 34(2)(a) prior to its amendment w.e.f. 30 August 2019 would, textually, not apply.

(iv) Nonetheless, if the petitioner was seeking to challenge the impugned arbitral award on the ground that it was violative of public policy, then, in an exceptional case, the Section 34 petitioner could be permitted to lead additional evidence, of documents which were not before the learned Arbitral Tribunal, even at the Section 34 stage.

21. Applying these principles to the facts before it, the Supreme Court found that

(i) the challenge of the Section 34 petitioner before it was not on one of the grounds contained in Section 34(2)(a),

(ii) the petitioner was, nonetheless, urging that the impugned award was passed in violation of the public policy,

(iii) this ground was found to have substance, as the award had been passed before the concerned plots in that case had been amalgamated and was, therefore, in conflict with the relevant land laws and, consequently, in violation of public policy,

(iv) the event of refusal to amalgamate the plots had occurred after the arbitral award had been rendered and could not, therefore, have been urged before the learned Arbitral Tribunal, and

(v) the respondent had been proceeded ex parte before the arbitral tribunal, and no evidence had therefore been led before the learned arbitral tribunal on behalf of the respondent. Keeping these factors in mind, the Supreme Court held that the respondent (before it) ought to have been allowed to lead evidence by producing additional documents, which were not before the arbitral tribunal, even at the Section 34 stage.

22. If one were to apply the ratio of Alpine Housing Development Corporation to the present case, the position that emerges is that the petitioner is seeking to introduce additional documents only to counter the observation of the learned Arbitral Tribunal in paras 4.6.10 and 4.6.11 that the petitioner had not taking any police or other action against the respondent consequent on the report dated 14 April 2009 of the insurance company. This ground cannot be said to relate to any of the clauses (i) to (v) of Section 34(2)(a). Nor can this plea be said to amount to a challenge to the arbitral award as being violative of a public policy as was the case in Alpine Housing Development Corporation. Further, unlike the position in Alpine Housing Development Corporation, it was always open to the petitioner to produce the FIR and other documents before the learned Arbitral Tribunal. The default in producing the document is, therefore, clearly, attributable to the petitioner alone.

23. The documents relating to re-investigating which had been directed were consequent to FIR being registered. They were also, therefore, a sequel to the police action which had been initiated. Moreover, the findings in para 4.6.10, which is what the petitioner seeks to refute by means of the additional documents, refer to the petitioner having defaulted in taking legal action against the respondent, following the letter of the insurance company of 14 April

2009. The only relevant document in that regard could have been the FIR and, as already noted, the petitioner, despite having been in a position to produce the FIR before the learned Arbitral Tribunal, did not do so.

24. At the cost of repetition, it needs to be noted that the Supreme Court, in Alpine Housing Development Corporation, has recognised the statutory right of the Section 34 litigant to produce additional proof only to sustain a challenge predicated on one of the clauses of Section 34(2)(a). Where the challenge is based on Section 34(2)(b), the Supreme Court has clearly permitted the challenge to be raised only in exceptional circumstances. Before the Supreme Court, the three circumstances which persuaded the Supreme Court to hold that the respondent (before it) was entitled to produce additional documents, which were not before the arbitral tribunal, were that (i) the documents were being brought on record to show that the impugned award was contrary to public policy, (ii) the documents could not have been produced on record before the arbitral tribunal, as they came into existence thereafter, and (iii) the respondent had been proceeded before the arbitral tribunal ex parte and had never been, therefore, in a position to lead any evidence.

25. In the present case, none of these circumstances exist. The only reason why the petitioner seeks to introduce additional documents is to answer the learned arbitral tribunal’s observation in para 4.6.10 that no action had been taken by the petitioner against the respondent following the insurance company’s letter dated 14 April 2009. This certainly cannot be said to be a challenge to the arbitral award on the ground that it is violative of public policy. Secondly, unlike the situation which obtained in Alpine Housing Development Corporation, the petitioner was in a position to produce the FIR dated 11 September 2015 before the learned Arbitral Tribunal, but was remiss in doing so. Further, this is not a case in which the proceedings were ex parte or the petitioner was for any other reason inhibited in leading evidence before the learned Arbitral Tribunal.

26. The Supreme Court has clearly set out the parameters and considerations to be borne in mind while allowing additional documents, which were not before the learned Arbitral Tribunal, to be taken on record. Mr. Thakur has not shown me any decision, including the judgment in Alpine Housing Development Corporation, which holds that the documents should be permitted to be placed on record because they are “relevant and material”, or because “they go to the root of the matter” or because, if they are not taken on record, “injustice would result”. These may be relevant considerations where the award was rendered prior to 30 August 2019 and the challenge is based on one of the grounds envisaged in clause (i) to (v) of Section 34(2)(a). They are certainly not grounds on which the additional documents can be permitted to be taken on record where the challenge is not based on Section 34(2)(a).

27. The submissions of Mr. Thakur cannot, therefore, be accepted.

28. The judgment in Alpine Housing Development Corporation, therefore, cannot be cited as a justification to permit the additional documents to be brought on record.

29. The grounds on which an arbitral award can be challenged are extremely limited. Ordinarily, the Court is supposed to defer to the findings of the learned Arbitral Tribunal and cannot sit as a court of appeal. It is only in cases where the award is vitiated for one of the grounds contemplated by Section 34(2)(a), or where the dispute is not arbitrable, or where the arbitral award is in conflict with the public policy of India, or suffers from patent illegality, that a court can interfere.

30. These grounds, even by their very nature, are ordinarily to be assessed on the basis of the material before the learned arbitral tribunal. A Section 34 Court cannot ordinarily find fault with the arbitral award based on material which the arbitral tribunal never had before it and which it had no occasion, therefore, to consider.

31. In that view of the matter, I do not see any reason to allow the additional documents which are sought to be introduced by the present application to be taken on record.

32. The application is accordingly dismissed.

33. Re-notify on 14 November 2024 for disposal at the end of the Board.

34. Both sides are directed to place written submissions on record not exceeding six pages each after exchanging copies with each other, at least a week in advance of the next date of hearing.

35. In the meanwhile, the Registry is directed to requisition the arbitral record and provide an electronic copy thereof to learned counsel for both sides.

C. HARI SHANKAR, J.