Full Text
HIGH COURT OF DELHI
Date of Decision: 24th March, 2023
INOX AIR PRODUCTS PRIVATE LIMITED ..... Petitioner
Through: Mr. Jayant Bhushan, Senior Advocate with Mr. Joseph Pookkatt, Mr. Dhawesh Pahuja and Mr. Vaibhav Dwivedi, Advocates.
Through: Mr. Akhil Sibal, Senior Advocate with Mr. Gaurav Gupta, Mr. Samyak Gangwal, Ms. Eesha Bakshi, Ms. Deboshree Mukherjee and Ms. Bahuli Sharma, Advocates.
JUDGMENT
1. By way of this application, the respondent in O.M.P(COMM.) 212/2018, Air Liquide North India Private Limited, invokes Section 34(4) of the Arbitration and Conciliation Act, 1996 [“the Act”] to seek NEUTRAL CITATION NUMBER- 2023:DHC:2092 O.M.P. (COMM) 212/2018 an adjournment for a fixed period of time, in order to give the Arbitral Tribunal an opportunity to resume the arbitration proceedings to eliminate the ground for setting aside the arbitral award, relating to non-consideration of the petitioner’s documents.
2. The facts in which the application has been filed are as follows:-
3. One of the grounds of challenge raised by the petitioner herein pertains to the failure of the learned arbitrator to consider the additional documents filed by the petitioner in Annexures A[1] to A60. The issue has been dealt with by the learned arbitrator thus[6]:- “The Respondent has, however, alleged that the Claimant had violated the implicit understanding by entering into various arrangements with the customers and suppliers of LOX and LIN including customers like PGI Chandigarh, Surya Pharmaceuticals Ltd. etc. The Respondent stated they had previously procured LOX and LIN from the Respondent company and that the Claimant had adopted predatory pricing so as to attract such customers of the Respondent. According to the Respondent owing to the predatory pricing and solicitation by the Claimant there was considerable reduction of orders from those customers to the Respondent. On predatory pricing and to establish poaching of customers, the Respondent, sought to produce Annexure A 1 to A60 documents alongwith an Application dated 20.10.2015. The Application was opposed by the Claimant vide its objection dated 26.11.2015 stating in none of the 60 documents there was any proof to show the Claimant had altered the terms of C[1] and C[2] and tinkered with the price formula agreed to by the parties. The Claimant also stated those documents would not show that the Claimant had poached the customers of the Respondent. The Respondent, in order to prove those documents wanted to examine two witnesses one Mr. Pankaj Chaturvedi and Mr. Saurabh Page 25-27 of the award in annexure-1 of the petitioner’s list of documents. Jain. Affidavit by way of evidence of those witnesses were also filed. Through Mr. Pankaj Chaturvedi, the Respondent wanted to prove RW1-1 to 17 and through Mr. Saurabh Jain, the Respondent wanted to provide RW2-1 to RW2-51. The Respondent has not taken any steps to examine both the witnesses and hence not proved Annexure A-1 to Annexure A-60 referred to in the Application dated 20.10.2015 filed by the Respondent. The Apex Court in Bareilly Electricity Supply Co Ltd v. Workmen (1971) 1 LLJ 407 while dealing with an order of the Industrial Tribunal, held that even though the Evidence Act as such is not strictly applicable to such Tribunals where issues are seriously contested, and have to be established and proved, the requirements relating to proof cannot be dispensed with. Following that the Bombay High Court in Rashmi Housing Pvt Ltd vs. Pan India Infraprojects Pvt Ltd (2015) 2 Born CR 697 held while dealing with an Arbitration Award, that it is bound to consider the principles of Evidence Act and CPC, and has to follow the principles of natural justice. In my view, a document which is disputed, by the other party if not proved, cannot be considered by the Arbitrator, to be on record or as a piece of evidence. Reference may also be made to the judgment of the Bombay High Court in Pradyuman Kumar Sharma vs. Jay Sagar M. Sancheti (2013) 5 Mah CJ 86. The Respondent has, therefore, not proved that the Claimant had adopted predatory pricing and poached the customers of the Respondent and that there was an implied understanding to that effect. Issue No.4 is therefore decided in favour of the Claimant.”7
4. Notice was issued in this petition on 09.10.2018, when this Court recorded the following contentions: -
5. In the present application, the respondent/applicant supports the view taken in the impugned award, and submits that the additional documents sought to be relied upon were throughout disputed by it. It is urged that the order of the learned arbitrator dated 25.01.2016 indicates a voluntary decision to forego oral evidence, but does not imply that the contents of the documents were per se to be taken as proved.
6. Without prejudice to these contentions, the respondent seeks to invoke Section 34(4) of the Act, by which the tribunal can be given an opportunity to resume proceedings and eliminate the ground of challenge. The petitioner has filed a reply to the application disputing the factual contentions of the respondent.
7. The parties have joined issue as to whether Section 34(4) of the Act is applicable in the present situation. The provision reads as follows:
8. Mr. Akhil Sibal, learned Senior Counsel for the respondent/applicant, submitted that a proper reading of the award would show that the learned arbitrator has disregarded the documents in question, not merely on the ground of lack of formal proof, but on the ground that they did not establish the case which the petitioner set out to prove. According to him, the documents included 33 e-mails and several other documents, the contents of which were disputed by the respondent even before the learned arbitrator. In this context, the order of the learned arbitrator dated 25.01.2016 ought not to be read as a ruling on the admissibility of the documents, their relevance or their contents, but confined to the question of formal proof of the e-mails, for example by filing of certificate under Section 65B of the Indian Evidence Act, 1873.
9. Mr. Sibal submitted that, even if the petitioner’s contentions are taken to be correct, the impugned award suffers from a curable ambiguity and an effort ought to be made to resolve the ambiguity at the hands of the learned arbitrator, rather than to adjudicate it as a ground under Section 34 of the Act. He cited the following judgments in support of the application: a. Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd.8; b. Kinnari Mullick v. Ghanshyam Das Damani[9]; c. Som Datt Builders Ltd. v. State of Kerala10; d. UEM India Pvt. Ltd. v. ONGC Ltd.11;and e. M/s MMTC v. Vicnivass Agency and Anr. 12
10. Mr. Jayant Bhushan, learned Senior Counsel for the petitioner, disputed Mr. Sibal’s interpretation of the award. He submitted that the learned arbitrator clearly overlooked the orders of the erstwhile arbitrator while declining to take Annexures A-1 to A-60 on record at all. In these circumstances, Mr. Bhushan submitted that the matter lies outside the scope of Section 34(4) of the Act as the learned arbitrator would have to reconsider the award altogether in light of the documents in question. In support of this contention, Mr. Bhushan relied upon the following judgments: a. I-Pay Clearing Services Private Ltd. vs.
ICICI Bank Ltd.13, b. Radha Chemicals vs. Union of India14, c. Bentwood Seating System Ltd. vs. Airport Authority of India15, d. Coal India Limited vs. Hyderabad Industries Ltd.16, and e. BTP Structural (I) Pvt. Ltd. vs. Bharat Petroleum Corp. Ltd.17
11. The scope of Section 34(4) of the Act must be examined in the light of the authorities cited by learned Senior Counsel for the parties.
The following judgments of the Supreme Court (enumerated here in chronological order) deal with it in some detail: a. Mr. Sibal relied upon the decision of the Supreme Court in Som Datt Builders Ltd.18, where the Court found the impugned award to be entirely devoid of reasons, and remitted it back to the Arbitral Tribunal for recording reasons:
b. In Kinnari Mullick20, the Supreme Court held that Section 34(4) of the Act cannot be invoked after the arbitral award has already been set aside. On the scope of Section 34(4) of the Act, the Supra (note 10). Supra (note 9). Court clarified that it does not include the power to remand the award to the arbitral tribunal, except for the purpose of rectifying a curable deficiency, that too upon an application by a party: “15.... The quintessence for exercising power under this provision is that the arbitral award has not been set aside. Further, the challenge to the said award has been set up under Section 34 about the deficiencies in the arbitral award which may be curable by allowing the Arbitral Tribunal to take such measures which can eliminate the grounds for setting aside the arbitral award. No power has been invested by Parliament in the Court to remand the matter to the Arbitral Tribunal except to adjourn the proceedings for the limited purpose mentioned in sub-section (4) of Section 34…”21 c. In Radha Chemicals22, following Kinnari Mullick23, the Supreme Court reiterated that the Court under Section 34 of the Act has no power to remand a matter to the arbitrator for a fresh decision. d. In Dyna Technologies Pvt. Ltd.24, while holding that an unduly literal reading of the award is unnecessary, the Supreme Court identified three characteristics of a reasoned order, viz. that it must be proper, intelligible and adequate. If the arbitral award does not provide any reasoning or has some gap in the reasoning or otherwise, which can be cured so as to avoid a challenge, the Court held that recourse may be had to Section 34 (4) of the Act: Supra (note 14). Supra (note 8).
e. The most recent judgment of the Supreme Court cited by learned counsel for the parties is I-Pay26, wherein the Court has considered its earlier judgments in Som Datt27, Kinnari Mullick28 and Dyna Technologies29. The Supreme Court clarified that Section 34(4) of the Act can be invoked to enable the tribunal to provide reasoning or fill a lacuna in the reasoning in support of a finding rendered in the award, but not to render a finding which is altogether missed in the award. This decision also makes it clear that the power under Section 34(4) of the Act is a discretionary power of the Court, and the Court is obliged to consider whether it is appropriate, in the facts and circumstances of each case, to exercise the said jurisdiction. The Supreme Court thus observed:- “39. Further, Section 34(4) of the Act itself makes it clear that it is the discretion vested with the Court for remitting the matter to Supra (note 13). Supra (note 10). Arbitral Tribunal to give an opportunity to resume the proceedings or not. The words “where it is appropriate” itself indicate that it is the discretion to be exercised by the Court, to remit the matter when requested by a party. When application is filed under Section 34(4) of the Act, the same is to be considered keeping in mind the grounds raised in the application under Section 34(1) of the Act by the party, who has questioned the award of the Arbitral Tribunal and the grounds raised in the application filed under Section 34(4) of the Act and the reply thereto.
40. Merely because an application is filed under Section 34(4) of the Act by a party, it is not always obligatory on the part of the Court to remit the matter to Arbitral Tribunal. The discretionary power conferred under Section 34(4) of the Act, is to be exercised where there is inadequate reasoning or to fill up the gaps in the reasoning, in support of the findings which are already recorded in the award.
41. Under the guise of additional reasons and filling up the gaps in the reasoning, no award can be remitted to the arbitrator, where there are no findings on the contentious issues in the award. If there are no findings on the contentious issues in the award or if any findings are recorded ignoring the material evidence on record, the same are acceptable grounds for setting aside the award itself. Under the guise of either additional reasons or filling up the gaps in the reasoning, the power conferred on the Court cannot be relegated to the arbitrator. In absence of any finding on contentious issue, no amount of reasons can cure the defect in the award.
42. A harmonious reading of Sections 31, 34(1), 34(2-A) and 34(4) of the Arbitration and Conciliation Act, 1996, make it clear that in appropriate cases, on the request made by a party, Court can give an opportunity to the arbitrator to resume the arbitral proceedings for giving reasons or to fill up the gaps in the reasoning in support of a finding, which is already rendered in the award. But at the same time, when it prima facie appears that there is a patent illegality in the award itself, by not recording a finding on a contentious issue, in such cases, Court may not accede to the request of a party for giving an opportunity to the Arbitral Tribunal to resume the arbitral proceedings.”30 Emphasis supplied.
12. Two judgments of this Court have also been relied upon by learned Senior Counsel for the parties. In UEM India Pvt. Ltd.31, relied upon by Mr. Sibal, a coordinate Bench of this Court applied Section 34(4) of the Act in view of an ambiguity as to whether the tribunal had awarded the amount of performance bank guarantee in favour of the respondent in addition to the liquidated damages. The decision of the Division Bench in Bentwood32, relied upon by Mr. Bhushan, concerned a challenge to a judgment setting aside an award. One of the grounds raised by the appellant was that Section 34(4) of the Act ought to have been resorted to. The Division Bench considered the judgments in Kinnari Mullick33 and Dyna Technologies34 and held as follows:
13. Three judgments of the other High Courts have also been cited before me: a. Mr. Sibal relied upon the judgment of the Madras High Court in M/s MMTC36, which held as follows: -
b. Mr. Bhushan, on the other hand, placed a judgment of the Calcutta High Court in Coal India Limited37, wherein the Emphasis supplied. Supra (note 12). Supra (note 16). provision has been given a limited interpretation after considering the judgments of the Supreme Court in Kinnari Mullick38 and Dyna Technologies39, as well as the judgment of the Madras High Court in M/s MMTC40. The Court also cited the UNCITRAL Model Laws to hold that the Tribunal cannot be permitted to “reconsider” the award under Section 34(4) of the Act, even for the purpose of eliminating the ground of challenge. c. In BTP Structural (I) Pvt. Ltd.41, the Bombay High Court came to the conclusion that an award had been passed in breach of the principles of natural justice, fair play and equity. The Court held that an award which is void ab initio for such reasons cannot be remitted for reconsideration and/or rehearing under Section 34(4) of the Act. (b) Application to the facts of the present case
14. Applying these principles to the facts of the present case, I am of the view that it would not be appropriate to take recourse to the provision of Section 34(4) of the Act. The grievance of the petitioner is that the learned arbitrator has rendered a finding on Issue No.4, without considering a material piece of evidence, being Annexures A- 1 to A-60. The impugned award holds that these documents could not be considered to be on record as a piece of evidence. This is thus not a case where the learned arbitrator has rendered a finding, but without Supra (note 12). Supra (note 17). any or adequate reasons, as indicated in Dyna Technologies42 and Som Datt Builders43. It is instead a case where the grievance concerns nonconsideration of material evidence. If the matter is taken back to the learned arbitrator on this point, the petitioner’s ground of challenge can be eliminated only if the learned arbitrator considers the documents he failed to consider. This in itself is not permitted under Section 34(4) of the Act, as is abundantly clear from the judgments in I-Pay44, Bentwood45, Coal India Pvt. Ltd.46 and BTP Structural47.
15. In fact, such a course would also fall foul of the principle that the learned arbitrator cannot reconsider his conclusion, or that Section 34(4) of the Act cannot be resorted to in a situation where the award itself may change as a result. It would be meaningless to enable the learned arbitrator to consider material which he failed to consider at the first instance, while imposing the fetter that he must maintain the conclusion which he then reached. To permit recourse to Section 34(4) of the Act in such a case is akin to a remand, prohibited by Kinnari Mullick48 and Radha Chemicals49, but even less effective, as it is a remand without the power to reach a different conclusion.
16. Mr. Sibal, in the course of arguments, drew my attention to the fact that in paragraph 37 of Dyna Technologies50, the Court emphasized that Section 34(4) of the Act can be utilized “in cases Supra (note 8). Supra (note 10). Supra (note 13). Supra (note 15). Supra (note 16). Supra (note 17). Supra (note 9). Supra (note 14). Supra (note 8). where the arbitral award does not provide any reasoning or if the award has some gap in the reasoning or otherwise and that can be cured so as to avoid a challenge based on the aforesaid curable defects.” He suggested that the Supreme Court has left open the possibility of other grounds in which Section 34(4) of the Act can be invoked. I am afraid this reasoning does not commend to me. Dyna Technologies51 has been considered by the Supreme Court in I-Pay52 and by the Division Bench of this Court in Bentwood53. Both the said judgments clearly indicate that consideration of fresh material does not fall within the grounds available. Mr. Sibal sought to distinguish these judgments on the ground that, in both these cases, the award did not contain any finding on the issue in question. He submitted that it is for this reason that recourse to Section 34(4) of the Act was declined. While that may factually be the position in those cases, I do not see a distinction on point of principle in the present case. As stated above, consideration of the material left out at the first instance would be effective only if the learned arbitrator had the jurisdiction to reconsider or alter the ultimate award. As such power is not available to the learned arbitrator, Section 34(4) of the Act is not attracted.
17. For the same reasons, I am unable to accept Mr. Sibal’s contention that judgments in BTP Structural54 and Coal India Limited55 turn principally on a fact-intensive analysis - in the case of Ibid. Supra (note 13). Supra (note 15). Supra (note 17). Supra (note 16). BTP Structural56, that the award was vitiated by breach of natural justice, and in the case of Coal India Limited57, that the tribunal would be required to rehear the case due to lapse of time. These fact-based conclusions do not take away from the analysis in the said judgments with regard to the scope and effect of Section 34(4) of the Act.
18. I am also not persuaded by Mr. Sibal’s reliance upon the decisions of this Court in UEM India58 and of the Madras High Court in M/s MMTC59. In UEM India60, the tribunal was only required to make a clarification with regard to the relief granted. While the Madras High Court in M/s MMTC61 appears to have taken a more expansive view, even this judgment makes it clear that the ground for setting aside the award must be capable of being eliminated and that the order is discretionary in nature.
19. Having regard to all the factors enumerated above, and most particularly to the fact that Section 34(4) cannot be used to enable an arbitral tribunal to reopen the conclusion reached, I am of the view that the exercise of the said power in the present case would not be appropriate.
20. For the aforesaid reasons, the application is dismissed. Parties are left to bear their own costs. Supra (note 17). Supra (note 16). Supra (note 11). Supra (note 12). Supra (note 11). Supra (note 12). O.M.P. (COMM) 212/2018 & I.A. 6847/2018 List on 18.07.2023.