2018 (4) TMI 678 - SC - Indian Laws

Arbitration award - waiver of the right of de novo trial by conduct - the conduct of the appellant-Company amounts to waiver or not - Whether an Umpire has to hear the matter de novo on a Reference or from the stage of disagreement between the Arbitrators? Held that - 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. 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 is only from oblique references that the appellant-Company seeks to derive such intent. This aspect is 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/re-recording 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 filled on 29.01.2000 is nothing but trying a last armory to turn the case around. The Umpire was right in dismissing the said application. Appeal dismissed.

Summary

Issues Involved:
1. Whether an Umpire has to hear the matter de novo on a Reference or from the stage of disagreement between the Arbitrators.
2. Whether the appellant-Company waived its right to de novo hearing by conduct.
3. Whether the damages awarded to the respondent-Company were tenable.

Issue-Wise Detailed Analysis:

1. Whether an Umpire has to hear the matter de novo on a Reference or from the stage of disagreement between the Arbitrators:

The court examined whether the Umpire must start the proceedings afresh or continue from where the Arbitrators left off. According to Section 3 of the Arbitration and Conciliation Act, 1940, unless otherwise agreed, the provisions of the First Schedule are incorporated into the arbitration agreement. Article 4 of the First Schedule states, “If the arbitrators have allowed their time to expire without making an award or have delivered to any party to the arbitration agreement or to the umpire a notice in writing stating that they cannot agree, the umpire shall forthwith enter on the reference in lieu of the arbitrators.” The court interpreted this to mean that the Umpire takes over the authority of the Arbitrators and must observe the principles of natural justice and judicial procedure. However, the Umpire is not required to start de novo automatically. The Umpire should review the evidence and submissions on the matters where the Arbitrators disagreed unless a party applies for a rehearing of the evidence. The court emphasized that a de novo hearing means a fresh hearing based on the existing pleadings, evidence, and documents unless a party requests re-examination of witnesses or objects to admitted documents.

2. Whether the appellant-Company waived its right to de novo hearing by conduct:

The appellant-Company argued that it had consistently demanded a de novo hearing, citing communications dated 24.05.1999, 12.01.2000, and an application dated 29.01.2000. However, the court found that the initial communications were related to pending proceedings before the High Court and did not explicitly demand a de novo trial. The application for de novo hearing was filed only after the respondent-Company had concluded its arguments, suggesting it was a last-minute tactic. The court concluded that the appellant-Company’s conduct amounted to a waiver of the right to de novo hearing, as it had not made a timely application for the same.

3. Whether the damages awarded to the respondent-Company were tenable:

The appellant-Company contended that damages awarded for goods not imported under the first agreement were untenable. The court referred to established legal principles that the scope for judicial interference with an arbitration award is limited. The arbitrator is the final arbiter of the dispute, and the court cannot substitute its evaluation of the evidence or conclusions. The court cited previous judgments, including Ravindra Kumar Gupta and Company vs. Union of India and Municipal Corporation of Delhi vs. Jagan Nath Ashok Kumar, to emphasize that the arbitrator’s appraisal of evidence is not ordinarily questioned by the court. The court found that the award considered the totality of circumstances and applied legal principles correctly, with no manifestly erroneous approach.

Conclusion:

The court dismissed the appeal, finding no merit in the appellant-Company’s arguments. The Umpire’s decision to proceed without de novo hearing was upheld, and the damages awarded to the respondent-Company were deemed tenable. The judgments of the lower courts were affirmed, with no order as to costs.