Arbitration Act, 1940 – ss.3, 20, 30, 33 and Art.4 of the First Schedule – Disagreement between arbitrators – Reference to Umpire – Issue as to whether Umpire is to hear the matter de novo or from the stage of disagreement between the Arbitrators – Agreement between appellant and respondent – Breach of agreement – Matter referred for Arbitration by two Arbitrators – In view of lack of consensus between the Arbitrators, matter referred to the Umpire – Umpire passed an award in favour of the respondent – Objections filed by appellant, rejected by High Court holding that the appellant did not make any serious endeavour for getting the evidence recorded again before the Umpire and waived the right of de novo trial by conduct – Division Bench dismissed the appeal by appellant – On appeal, held: The very essence of the law of arbitration is to settle the matter efficiently in a time bound manner – When the Umpire enters upon a Reference and replaces the arbitrators, he is needed to review the evidence and submissions only on those matters about which the arbitrators had disagreed – However, if either of the party makes an application for de novo hearing, the Umpire is bound to allow the same, subject to the condition that the application is made at the earliest and is not being used as last armory to turn the case around – An objection on the ground that the Umpire has not reheard the evidence may be waived by the conduct of the parties – In the instant case, the belated application filed by appellant on 29.01.2000 for commencement of proceedings de novo was not asking for re-hearing/re-recording of the evidence but was actually for reviewing the order of the two Arbitrators and thus was nothing but a last armory to turn the case around – Conduct of the appellant amounts to waiver – No infirmity or error in the approach and judgments passed by the courts below – Waiver. Arbitration – ‘De novo’ hearing – Meaning of – Discussed.
Interpretation of Statutes – Purposive interpretation – When to be given – Discussed.
Dismissing the appeal, the Court
HELD: 1.1 The very essence of the law of arbitration is to settle the matter efficiently in a time bound manner. Hence, when the Umpire enters upon a Reference and replaces the arbitrators, he is needed to review the evidence and submissions only on those matters about which the arbitrators have disagreed unless either party applies for the rehearing of the evidence of the parties or their witnesses. The Umpire can surely go through the evidence recorded by the previous arbitrators but without being influenced by the opinion expressed by them in that regard and even the notes taken by previous arbitrators can be relied if there exist special provisions in the agreement permitting him to do so. However, if the party makes an application for de novo hearing, the Umpire is bound to allow the same, subject to the condition that the application is made at the earliest and the applicant is not using it as last armory to turn the case around. An objection on the ground that the Umpire has not reheard the evidence may be waived by the conduct of the parties; the evidence already recorded before the previous arbitrator would remain valid and it would not be open for the parties to get the same recorded afresh later on. It is a well settled proposition that where a party seeking to impeach an Award has made no application to the Umpire for rehearing of the evidence, the same would generally operate as a waiver by conduct. [Para 13][1070-A-D]
1.2 The word de novo hearing should be given a purposive interpretation and it should be understood as a fresh hearing of the matter on the basis of pleadings, evidence and documents on record. If the party wants to re-examine a witness or objects to the documents admitted, the Umpire is to hear the parties and decide the application in the interest of justice. [Para 15][1071C]
1.3 The very first communication dated 24.05.1999, on which the appellant-Company had relied upon was a letter written to the Umpire with regard to the pending proceedings in the said matter before the High Court and the application that was filed before the High Court to which the appellant-Company was referring to in the said letter was an application filed under Section
5 of the Act for the dispute relating to quantum of fee of the Umpire. Though the appellant-Company in the said letter made a note with regard to the de novo hearing of the matter but the same seems to be an additional armory that the appellant was putting behind its back as it did not demand de novo trial of the said matter either in the communication or thereafter in the proceedings. The appellant-Company next referred to communication dated 12.01.2000 but the same was also with regard to the pending proceedings before the High Court. It was only on 29.01.2000 that the appellant-Company had filed an application for de novo hearing of the case i.e., at a stage where the final arguments on the side of the respondent-Company had finished and the date was fixed for final argument from the side of appellant-Company. If the appellant-Company was serious in its endeavor that it should get an opportunity to get the evidence recorded afresh, an application could easily have been filed before starting the proceedings before the Umpire. It was only from oblique references that the appellant-Company sought to derive such intent. This aspect was clearly an afterthought which arose during the culmination of the proceedings before the Umpire. Further, even the sum and substance of the highly belated application dated 29.01.2000 for commencement of proceedings de novo clearly shows that it was not asking for re-hearing/rerecording of the evidence but was actually requesting for review of the order of the two Arbitrators. From the above, there is no doubt that the conduct of the appellant-Company amounts to waiver and the application filed on 29.01.2000 was nothing but trying a last armory to turn the case around. The Umpire was right in dismissing the said application. [Para 17][[1071-F-H; 1072-A-D]
1.4 The question of whether the claims were tenable or not are based on the contract and which of them had to be granted were within the exclusive domain of the Arbitrators. In this case, the Award considered the totality of circumstances, and weighed the relevant facts on balance while proceeding to award damages. The award does not disclose a manifestly erroneous approach; nor does it omit to consider and apply legal principles to the facts presented before the Arbitrators. There is no infirmity or error in the approach and judgments passed by the courts below. [Paras 20, 21][1073-G-H; 1074-A-B]
Ravindra Kumar Gupta and Company v. Union of India (2010) 1 SCC 409 : [2009] 16 SCR 142; Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar and Another (1987) 4 SCC 497 : [1988] 1 SCR 180 – relied on.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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