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SUPREME COURT OF INDIA
R. BANUMATHI, A.S. BOPANNA, JJ.
M/s. Canara Nidhi Limited – Appellant
Versus
M. Shashikala and Others – Respondents
Civil Appeal Nos. 7544-7545 of 2019, SLP (C) Nos. 35673-35674 of 2014
Decided On : 23-09-2019
(A) Arbitration and Conciliation Act, 1996 – Section 34 – Challenge to arbitral award – Proceedings under Section 34 of the Act are summary in nature – Scope of enquiry in proceedings under Section 34 of Act is restricted to a consideration whether any of grounds mentioned in Section 34(2) or Section 13(5) or Section 16(6) are made out to set aside award – Grounds for setting aside award are specific – It is imperative for expeditious disposal of cases that arbitration cases under Section 34 of Act should be decided only with reference to pleadings and evidence placed before Arbitral Tribunal and the grounds specified under Section 34(2) of Act. (Para 9)
(B) Arbitration and Conciliation Act, 1996 – Section 34(2) – Challenge to arbitral award – Section 34 application will not ordinarily require anything beyond record that was before arbitrator and cross-examination of persons swearing in to affidavits should not be allowed unless absolutely necessary – In present case, affidavit filed by respondents along with application filed under Section 151 CPC does not indicate as to what point first respondent intends to adduce except stating that first respondent intends to adduce additional evidence relating to subject of dispute – Affidavit does not disclose specific documents or evidence required to be produced except stating that first respondent intends to adduce additional evidence or otherwise first respondent will be subjected to hardship in arbitration suit filed by her under Section 34 of Act – There are no specific averments in affidavit as to necessity and relevance of additional evidence sought to be adduced – Grounds urged in application can very well be considered by evidence adduced in arbitration proceedings and considering arbitral award – Directions of High Court amount to retrial on merits of issues decided by Arbitrator – When order of District Judge dismissing application filed by respondents does not suffer from perversity, High Court, in exercise of its supervisory jurisdiction under Articles 226 and 227 of Constitution of India, ought not to have interfered with order passed by District Judge and impugned judgment cannot be sustained – Impugned judgment passed by High Court set aside and order of District Judge dismissing application filed under Section 151 of CPC affirmed. [Rule 4(b) of High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001] (Paras 17, 18, 19 and 20)
Facts of the Case:
In application under Section 34 of Arbitration and Conciliation Act, 1996 seeking to set aside award, whether the parties can adduce evidence to prove specified grounds in sub-section (2) to Section 34 of the Act, is the question falling for consideration in these appeals.
Findings of the Court:
Affidavit filed by the respondents along with application filed under Section 151 CPC does not indicate as to what point first respondent intends to adduce except stating that the first respondent intends to adduce additional evidence relating to subject of dispute. The affidavit does not disclose specific documents or evidence required to be produced except stating that the first respondent intends to adduce additional evidence or otherwise the first respondent will be subjected to hardship in arbitration suit filed by her under Section 34 of the Act.
Result : Appeals allowed.
JUDGMENT :
R. BANUMATHI, J.
1. Leave granted.
2. In the application under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) seeking to set aside the award, whether the parties can adduce evidence to prove the specified grounds in sub-section (2) to Section 34 of the Act, is the question falling for consideration in these appeals.
3. These appeals arise out of the judgment dated 12.09.2014 passed by the High Court of Karnataka at Bangalore in Writ Petition Nos. 18374-18375 of 2010 (GM-RES) in and by which the High Court set aside the order passed by the District Judge and directed the District Judge to “recast the issues” and permit respondent Nos. 1 and 2 to file affidavits of their witnesses and also permitting cross-examination of the witnesses.
4. Brief facts which led to filing of these appeals are as under:-
The appellant is the financial institution and the appellant advanced a loan of Rs. 50,00,000/- to respondent No. 1 and respondent Nos. 2, 4 and 5 to 8 were the guarantors in respect of such loan. The loan was secured by a mortgage with deposit of title deeds and respondent No. 1 is also said to have executed a demand promissory note for repayment of the loan. There was an arbitration clause in the agreement to resolve dispute between the parties. It is alleged that the first respondent did not repay the loan and failed to discharge the liabilities arising out of the transaction. The dispute between the appellant and the first respondent was referred to arbitration to the third respondent-Arbitrator. Before the arbitrator, both the parties adduced oral and documentary evidence. The arbitrator passed an award dated 15.12.2007 and directed the respondents to pay an amount of Rs. 63,82,802/- with interest on Rs. 50,00,000/- at 14% per annum from 11.08.2000 and cost of Rs. 52,959/-.
5. Assailing the award, respondent No. 1 filed AS No. 1 of 2008 under Section 34 of the Act in the Court of District Judge at Mangalore. Before the District Judge, respondent Nos.1 and 2 filed an application under Section 151 CPC to permit the respondents to adduce evidence. The appellant filed objections to the said application. By the order dated 02.06.2010, the learned District Judge dismissed the said application. Holding that the grounds urged in the application can very well be met with by the records of the arbitration proceedings and by perusing the arbitral award, the learned District Judge further held that in any event, there is no necessity of adducing fresh evidence in the application filed under Section 34 of the Act.
6. Aggrieved by the dismissal of their application under Section 151 CPC, respondent Nos.1 and 2 filed writ petitions before the High Court under Articles 226 and 227 of the Constitution of India. The High Court by the impugned judgment allowed the writ petitions and directed the learned District Judge to “recast the issues” and allow respondent Nos. 1 and 2 to file affidavits of their witnesses and further allow cross-examination of the witnesses. After referring to the judgment in Fiza Developers and Inter-Trade Private Limited vs. AMCI (India) Private Limited and Another, (2009) 17 SCC 796, the High Court observed that in order to prove the existence of the grounds under Section 34(2) of the Act, respondent Nos. 1 and 2 are permitted to file affidavits of their witnesses. In the impugned judgment, the High Court concluded that the reasoning of the District Judge not permitting respondent Nos. 1 and 2 to file their own affidavits and affidavits of other witnesses to prove their case is erroneous and opposed to settled principles of law. As pointed out earlier, the learned District Judge was directed to “recast the issues” and the court below was directed to permit respondent Nos. 1 and 2 to file affidavits of their witnesses and extend corresponding opportunity to the appellant to place their evidence by affidavit. Being aggrieved, the appellant has preferred these appeals. This Court ordered notice vide
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