Jurisdiction - India
India – Delhi High Court On The Issue Of The Re-Examining Evidence Under Section 34 Of The Act.

10 December, 2012



In two recent decisions, the Delhi High Court has considered the extent to which evidence placed before the Tribunal may be re-examined by the Court, and the extent of its powers under section 34 of the Indian Arbitration and Conciliation Act 1996 (the “Act“) in this regard. In one case the award was set aside under section 34 while in the other it was not. From a joint reading of both decisions, it appears that the Court’s approach is to give due respect to the Arbitrator’s decision and refrain from interfering with the award, except where there appears to be a definite breach of natural justice resulting in prejudice being caused to one or more parties.
Section 34 of the Act empowers the court to set aside an arbitral award if it is contrary to (a) the fundamental policy of Indian law, (b) the interests of India, (c) justice or morality, or if it is patently illegal. In both the case of Steel Authority of India Ltd. v. Salzgitter Mannesmann as well as the case of Ogilvy & Mather Pvt. Ltd & Anr. v. Union of India, the award was challenged under section 34 of the Act as being patently illegal.
The two decisions of the Delhi High Court
In Steel Authority of India v Salzgitter Mannesmann, the Steel Authority of India Limited (“SAIL“) challenged the validity of the award passed by the Tribunal upholding the claims of Salzgitter Mannesmann International (“SI“) and dismissing the counterclaims of SAIL. SAIL’s grounds were that there were several procedural irregularities in the manner in which the Tribunal conducted the arbitration proceedings and that the Tribunal had failed to correctly appreciate the evidence put before it.
The Court rejected all of SAIL’s contentions regarding procedural irregularities in the arbitral proceedings, and found that SAIL had contributed to several delays in the arbitration process, and that it was SAIL’s own fault that it did not examine some of SI’s witnesses (SAIL had declined to do so on the ground that a transcript was not available). The Court did not accept SAIL’s substantive contentions either and held that the submissions of SAIL were an invitation to the Court to re-appraise the evidence on record. The Court noted that section 34 of the Act did not permit the re-appraisal of evidence.
The Court determined that the issue in the proceedings was whether on the basis of the evidence put forward by SAIL, the conclusion arrived at by the Tribunal was a possible view to adopt. The Court decided, given the scope of the Court’s jurisdiction under section 34 of the Act, it was not persuaded that the impugned award suffered from patent illegality and should be set aside.
In the case of Ogilvy & Mather & Anr. v. Union of India, however, the Delhi High Court allowed the petition under section 34 of the Act on the grounds that the impugned award was patently illegal and opposed to the public policy of India. In this case, the Arbitrator rejected the claims of Ogilvy & Mather and Hindustan Thompson Associates (the “Agency”) for short-payment of certain advertising bills (the “Disputed Sum”). The Agency filed an application before the sole Arbitrator under section 33 of the Act for an additional award, on the ground that the award had omitted/wrongly rejected a major claim of the Agency relating to the Disputed Sum for want of evidence, even though more than fifty documents filed by them in support of the claim had not been considered by the Arbitrator. The section 33 application was also rejected by the Arbitrator.
In this case, the Court held that, on an examination of the documents that formed a part of the arbitral record, it was satisfied that the grounds stated in the award for rejecting the claim for the Disputed Sum were contrary to the evidence that had been placed before the sole Arbitrator. The Court held that the Arbitrator had failed to take note of the evidence placed on record and held that an award that omitted to notice the evidence on record and erroneously rejected the claim could not be anything but patently illegal and opposed to the public policy of India. The Court called for the order rejecting the section 33 application as well as the award, to the extent that it rejected the Agency’s claim for the Disputed Sum, to be set aside and for the claim to be remitted to the Arbitrator for a fresh decision.
In both the above judgments, although the Court took care to state that it was not its role to re-appraise the evidence, it necessarily considered, and formed some view of, the evidence at the root of the section 34 applications, in order to decide (in SAIL) that the award should not be disturbed, as the arbitrators reached a conclusion which was possible on the evidence, or (in Ogilvy) that the evidence not considered was material to the issue in dispute.
Nonetheless, the judgments show the recent trend adopted by the Indian Courts in stating a refusal to re-open the case or re-appraise the evidence put before the Tribunal. Even in Ogilvy, the Court refrained from adjudicating upon the claim itself and instead chose to remit it to the Arbitrator for re-consideration.
Given the decision of the Supreme Court in Bharat Aluminium v Kaiser Aluminium, the impact of section 34 of the Act will now be limited to domestic arbitration awards and foreign arbitration awards made pursuant to an agreement concluded before 6 September 2012.
Such an approach does have the potential to emerge as a form of appeal on the facts/evidence which would be unhelpful in the arbitral context.


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