Arbitral Tribunal Is Master of Evidence, Delhi High Court Upholds Award Against Railways

The Delhi High Court division bench of Justice Rajiv Shakdher and Justice Tara Vitasta Ganju has held that when an arbitrator delivers an Arbitral Award, the assessment of the quality and quantity of evidence presented to her must be respected, and any reasonable conclusion drawn by the arbitrator based on the facts should be upheld. The bench held that that the Arbitral Tribunal is the master of evidence and a findings of fact arrived at by an arbitrator is on an appreciation of the evidence on record are not to be scrutinised as if the Court was sitting in appeal (referred to State of Jharkhand v. HSS Integrated Sdn). Brief Facts: The matter pertained to an appeal filed by the Ministry of Railways under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996 challenging the judgment passed by the Commercial Court. The Commercial Court dismissed the petition filed by the Railways under Section 34 of the Arbitration Act which sought to set aside the Arbitral Award. Initially, the appeal was dismissed in default. The Railways subsequently sought to restore the appeal filing an application for the condonation of a 96-day delay. The delay was condoned by a Coordinate Bench which restored the appeal. Aggrieved by this order, M/s Parishudh Machines Pvt. Ltd. (Respondent) filed a Special Leave Petition (SLP) before the Supreme Court. The Supreme Court disposed of the SLP directing that all contentions including those regarding the delay in the restoration application be considered on their merits by the High Court. The facts of the case revolve around a contract awarded to Parishudh by the Railways for the supply of a CNC Twin Spindle Chucker machine. The contract required delivery within 300 days to the Diesel Locomotive Works in Varanasi. The delivery period was extended twice, first to 06.06.2016 and then to 31.01.2017. Parishudh requested a further extension, which was denied by the Railways, leading to the termination of the contract by a letter dated 29.03.2017. The dispute was referred to arbitration with a sole arbitrator appointed by the competent authority at COFMOW. During arbitration, Parishudh made several claims including the cost of the partially manufactured machine and interest on the delayed payment. The Railways contended that the contract was rightfully terminated due to Parishudh's failure to deliver the machine on time and that the cancellation was accepted by Parishudh without protest. The Railways argued that no payment was due as the machine was not inspected or completed according to the contractual terms. The Arbitral Tribunal however found in favor of Parishudh and awarded a sum equivalent to 70% of the machine's cost along with interest while rejecting Parishudh's claim for loss of profit. The Railways, dissatisfied with the Award, approached the Commercial Court under Section 34 of the Arbitration Act and argued that the Tribunal erred in its findings. They also alleged bias on the part of the arbitrator. The Commercial Court dismissed these contentions and noted that the arbitrator was appointed by the Railways themselves and that the Award was well-reasoned and free from procedural defects. Before the High Court, the Railways argued that the Tribunal's decision to award 70% of the machine's cost to Parishudh was without evidence as the machine was neither completed nor inspected. It contended that the Tribunal's conclusions were based on irrelevant evidence and that the terms of the contract were ignored. Parishudh, on the other hand, argued that the appeal should not be entertained due to the delayed filing and lack of sufficient cause for the delay. It further defended the Award and contended that the arbitrator's findings were based on a thorough examination of the evidence and should not be interfered with by the court. Observations by the High Court: The primary contention raised by the Railways before the High Court centered on allegations of bias within the Arbitral Tribunal. The Railways argued that the Tribunal was biased in favor of Parishudh because documents submitted by Parishudh during the final arguments were considered in the Award. The contract between the parties included a clause that designated a sole arbitrator, a gazetted Railway officer, to be appointed by the Chief Administrative Officer of COFMOW (Railways). The contract stated that the arbitrator would not have had prior involvement with the issues at hand ensuring impartiality. Parishudh, in its Statement of Claim, clarified that the appointed arbitrator was a senior Railway official and former Controller of Stores possessing the necessary technical expertise to adjudicate the dispute. During the arbitral proceedings, no objection was raised by the Railways regarding the jurisdiction or authority of the Tribunal. It was only before the Commercial Court that the Railways raised the issue of bias and...

Arbitral Tribunal Is Master of Evidence, Delhi High Court Upholds Award Against Railways

Rajesh Kumar

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