M/s. Canara Nidhi Limited vs M. Shashikala and Others

2 also filed application u/s.151, CPC to permit the respondents to adduce evidence – Dismissed – High Court directed the District Judge inter alia to allow respondent nos.1 & 2 to file affidavits of their witnesses and further allow their cross-examination – On appeal, held: Proceedings u/s.34 are summary in nature and not in the nature of regular suit – Scope of enquiry in the proceedings u/s.34 is restricted to a consideration whether any of the grounds mentioned in s.34(2) or s.13(5) or s.16(6) are made out to set aside the award – Grounds for setting aside the award are specific – s.34 application will not ordinarily require anything beyond the record that was before the arbitrator and cross-examination of persons swearing in to the affidavits should not be allowed unless absolutely necessary – In the present case, no ground was made out as to the necessity/relevance of adducing evidence and what was the nature of the evidence sought to be led by respondent nos.1 & 2 – In the arbitration proceedings, the parties had sufficient opportunity to adduce oral and documentary evidence – Grounds urged in the application can very well be considered by the evidence adduced in the arbitration proceedings and considering the arbitral award – High Court did not keep in view that respondent nos.1 & 2 did not make out grounds that it was an exceptional case to permit them to adduce evidence in the application u/s.34 – Impugned judgment set aside – Order of the District Judge dismissing the application u/s.151, CPC in AS No.1 of 2008, affirmed – District Judge to take up AS No.1 of 2008 and dispose of expeditiously, in accordance with law – Code of Civil Procedure, 1908 – s.151 – High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001 – r.4(b) – Constitution of India – Arts. 226 and 227 – Arbitration and Conciliation (Amendment) Act, 2019.

Arbitration and Conciliation Act, 1996 – s.34(5), (6) – Held: By adding sub-ss.(5) & (6) to s.34, the Act has specified the time period of one year for disposal of the application u/s.34 – Object is to avoid delay and to dispose of the application expeditiously – Arbitration and Conciliation (Amendment) Act, 2015. Allowing the appeals, the Court

HELD: 1.1 The proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 are summary in nature. The scope of enquiry in the proceedings under Section 34 of the Act is restricted to a consideration whether any of the grounds mentioned in Section 34(2) or Section 13(5) or Section 16(6) are made out to set aside the award. The grounds for setting aside the award are specific. It is imperative for expeditious disposal of cases that the arbitration cases under Section 34 of the Act should be decided only with reference to the pleadings and the evidence placed before the arbitral tribunal and the grounds specified under Section 34(2) of the Act. Rule 4(b) of High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001, providing that all the proceedings of the Civil Procedure Code shall apply to such proceeding/application filed under Sections 14 or 34 of the Act insofar as they could be made applicable are only procedural. [Paras 9, 10] [643-E-H; 644-AB]

1.2 After referring to the judgment in Fiza Developers, in the impugned judgment, the High Court held that respondent Nos.1 and 2 are to be afforded an opportunity to file their and their witnesses’ affidavits in proof of their case to prove the grounds set out in Section 34(2)(a) of the Act. After the decision in Fiza Developers, Section 34 was amended by Act 3 of 2016 by which sub-sections (5) and (6) of Section 34 were added to the Principal Act w.e.f. 23.10.2015. The judgment in Fiza Developers was considered by Justice B.N. Srikrishna Committee which reviewed the institutionalisation of the arbitration mechanism and pointed out that opportunity to furnish proof in proceedings under Section 34 of the Arbitration Act has led to inconsistent practices. Based upon Justice B.N. Srikrishna Committee’s report, Section 34 of the Principal Act has been amended by Arbitration and Conciliation (Amendment) Act, 2019. [Paras 13-16] [645-H; 646-A-B-E; 647-B-C]

1.3 Section 34 application will not ordinarily require anything beyond the record that was before the arbitrator and that cross-examination of persons swearing in to the affidavits should not be allowed unless absolutely necessary. The affidavit filed by the respondents along with application filed under Section 151 CPC does not indicate as to what point the first respondent intends to adduce except stating that the first respondent intends to adduce additional evidence relating to the 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 the arbitration suit filed by her under Section 34 of the Act. There are no specific averments in the affidavit as to the necessity and relevance of the additional evidence sought to be adduced. The grounds urged in the application can very well be considered by the evidence adduced in the arbitration proceedings and considering the arbitral award. Further, the application filed by respondent Nos.1 and 2 seeking permission to adduce evidence, no ground was made out as to the necessity of adducing evidence and what was the nature of the evidence sought to be led by respondent Nos.1 and 2. The proceedings under Section 34 of the Act are summary proceedings and is not in the nature of a regular suit. By adding sub-sections (5) and

(6) to Section 34 of the Act, the Act has specified the time period of one year for disposal of the application under Section 34 of the Act. The object of sub-sections (5) and (6) to Section 34 fixing time frame to dispose of the matter filed under Section 34 of the Arbitration Act, 1996 is to avoid delay and to dispose of the application expeditiously and in any event within a period of one year from the date of which the notice referred to in Section 34(5) of the Act is served upon the other party. In the arbitration proceedings, the parties had sufficient opportunity to adduce oral and documentary evidence. The High Court did not keep in view that respondent Nos.1 and 2 have not made out grounds that it is an exceptional case to permit them to adduce evidence in the application under Section 34 of the Act. The said directions of the High Court amount to retrial on the merits of the issues decided by the arbitrator. When the order of the District Judge dismissing the application filed by respondent Nos.1 and 2 does not suffer from perversity, the High Court, in exercise of its supervisory jurisdiction under Articles 226 and 227 of the Constitution of India, ought not to have interfered with the order passed by the District Judge and the impugned judgment cannot be sustained. In the result, the impugned judgment passed by the High Court is set aside. The order of the District Judge dismissing the application filed under Section 151 CPC is affirmed. The District Judge shall take up AS No.1 of 2008 and dispose of the same expeditiously in accordance with law. [Paras 17-20] [648-E-H; 649-A-D-H; 650-A-B]

Fiza Developers and Inter-Trade Private Limited v. AMCI (India) Private Limited and another (2009) 17 SCC 796 : [2009] 12 SCR 1 ; Emkay Global Financial Services Limited v. Girdhar Sondhi (2018) 9 SCC 49 : [2018] 10 SCR 937 – referred to.