Arbitrator Failed To Consider Document Based On Procedural Defects, Delhi High Court Sets Aside Award

The High Court of Delhi has held that an arbitrator should not refuse to take on record any additional material evidence merely on the ground of certain procedural ground such as non-payment of costs by the party tendering such evidence. The bench of Justice Neena Bansal Krishna held that failure of the arbitrator to take on record important additional evidence merely on procedural grounds would be a ground to set aside the award. It held that such a decision would not just be violative of the principle of natural justice but also amounts to patent illegality. It also held that if a document is sought to be brought on record before the commencement of cross examination for that party, it would not result in any prejudice to the other party as it would have amble opportunity to address the documents in the rebuttal evidence. The Court also explained the difference between ‘material facts’ and ‘material particulars’ to hold that it is only a material fact that must be present in the pleading and the absence of which would deny the party to lead an evidence on such a fact, however, a material particular, which is used to provide a material fact, need not be specifically mentioned in the pleading. It held when a material fact has been pleaded, an evidence in the form of a material particular cannot be refused on the ground of lack of pleading. Facts The parties entered into an agreement dated 01.03.2011. In terms of the agreement, the respondent agreed to store certain number of carrot bags in the cold storage of the petitioner for a period from 01.03.2011 to 31.10.2011. A dispute arose between the parties when the carrots stored by the respondent were dumped by the petitioner. Accordingly, the respondent invoked the arbitration clause and the parties were referred to arbitration. Before the arbitrator, the respondent filed its claims and the petitioner also filed the counter-claims. The petitioner also preferred an application under Section 16 of the A&C Act challenging the jurisdiction of the arbitral tribunal on the ground that the petitioner is covered under the provisions of Uttar Pradesh Regulation of Cold Storages Act 1976, therefore, the dispute has to be referred to the authority mentioned in the act and the dispute is non-arbitrable as a special forum is created therein. Before the commencement of the cross-examination of its witnesses, the petitioner moved an application seeking to bring on record certain documentary evidences in support of its case, these included certain communications with the government department regarding the rotten state of carrots stored in the cold storage facility. However, both these applications were dismissed by the arbitrator. Vide the impugned award, the arbitrator allowed the claims of the respondent and partly allowed the counter-claims preferred by the petitioner. It held that the petitioner acted in breach of the contract by disposing of the stored bags of carrot and is liable to compensate the respondent for the loss. It allowed the counter-claim on to the extent of unpaid rent. Aggrieved by the award, the petitioner challenged it under Section 34 of the A&C Act. Grounds of Challenge The petitioner challenged the award on the following grounds: The dispute between the partis is covered by the Uttar Pradesh Regulations of Cold Storage Act which provides for a specific forum of dispute resolution, therefore, the dispute is non-arbitrable. It placed reliance on the judgment of Supreme Court in Vidya Drolia. The arbitrator erred in holding that the petitioner had misappropriated the bags of the carrots during the currency of the agreement by relying upon an unproved show cause notice. It erred to appreciate that the serving of the same is not proved as it was issued in October 2011 and the courier receipts and tracking status report is dated October 2012 and the tribunal erred in holding that the show cause notice was served on the petitioner in October 2011 during the currency of the agreement.The tribunal also failed to accept in evidence two letters issued by the petitioner to the respondent, calling upon it to remove the carrots lying in the cold storage. The arbitrator also erred in dismissing the application filed by the petitioner for bringing on record certain additional evidences which were essential to prove the case of the petitioner. The tribunal rejected this application merely on the ground that the cheque furnished by the petitioner to pay the costs imposed by the tribunal for such application got dishonoured, however, the petitioner was willing to pay in cash the costs on the date when the application was scheduled to be heard. The arbitrator also erred in rejecting the application preferred by the petitioner under Section 27 of the A&C Act seeking he assistance of Civil Court for examination of Government official i.e. District Horticulture...

Arbitrator Failed To Consider Document Based On Procedural Defects, Delhi High Court Sets Aside Award

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