'Denial Of Relevant Information To Party By Arbitral Tribunal Amounts To Violation Of Due Process': Bombay High Court
The Bombay High Court has held that an arbitral award passed without granting access to relevant documents or materials to one of the parties amounts to a violation of the principles of natural justice and due process. The Court observed that the arbitral tribunal's refusal to supply such documents deprived the party of a fair opportunity to defend its case, thereby rendering the...
The Bombay High Court has held that an arbitral award passed without granting access to relevant documents or materials to one of the parties amounts to a violation of the principles of natural justice and due process. The Court observed that the arbitral tribunal's refusal to supply such documents deprived the party of a fair opportunity to defend its case, thereby rendering the arbitral proceedings fundamentally flawed.
Justice Somasekhar Sundaresan was hearing an appeal filed by Iqbal Trading Company under Section 37 of the Arbitration and Conciliation Act, 1996, challenging the order of the District Judge, which had upheld an arbitral award passed in favour of the Union of India. The dispute arose from a contract for the supply of meat to the armed forces, in which the appellant was penalised for non-performance. The government, after forfeiting the appellant's security deposit, referred the matter to arbitration for recovery of damages.
The Court noted that the Learned Arbitral Tribunal was constituted by the Government Of India on April 4, 1996, well after the 1996 Act came into force. Hence, the Impugned Order is wrong to have held that the 1940 Act would apply. It also had no basis to hold that the Section 34 Application was barred by limitation.
The Court remarked that the Arbitral Award reads like a summary judgment without any analysis whatsoever. It was obligatory as a matter of the contract under which the Learned Arbitral Tribunal was constituted that the Arbitral Award should have been reasoned, explained and articulated in the Arbitral Award.
The Court observed that the arbitral tribunal had refused to provide the appellant with crucial documents such as market rate quotations, supply orders, and vouchers that the Union of India relied upon to substantiate its claim for damages. It observed:
“In arbitral proceedings conducted over a commercial contract with a third party, where care has been taken to stipulate that the arbitrator is required to give reasons for disputes of a value of Rs. 30,000 and above, the Learned Arbitral Tribunal has not only refused to provide documents and information that would be relevant for adjudication of the issue but has also denied information about availability of meat in the market despite noticing that one of the grounds of defence was that meat in bulk had simply not been available.”
The Court held that, focusing solely on the due process meant to be followed by the Learned Arbitral Tribunal, the Arbitral Award is in serious violation of principles of natural justice and has seriously prejudiced Iqbal by denying relevant information as well as by denying reasons in the Arbitral Award.
The Court further observed that the arbitral tribunal had failed to demonstrate a judicial approach, and was in conflict with public policy for being in conflict with fundamental principles of natural justice by denying inspection of relevant material.
Accordingly, the Court set aside both the arbitral award and the District Judge's order upholding it.
Case Title: Iqbal Trading Company v. Union of India & Ors. [ARBITRATION APPEAL NO.27 OF 2012]