2019 (12) TMI 170 - SC - Indian Laws

Cross-examination of witnesses - Section 37 of the Arbitration and Conciliation Act, 1996 - whether the challenge is sustainable on the ground available in law, at the outset it is necessary to examine whether the procedural lapse if any is committed by the learned Arbitrator in unilaterally denying the opportunity to the parties so as to make the award invalid and to set aside the same exercising the power under Section 34 or in an appeal under Section 37 of the Act, 1996? HELD THAT - The procedure to be followed in arbitration proceedings was settled by a separate order dated 28.11.2009 during the course of the proceedings before the learned Arbitrator. Thereafter the award was passed only on 13.01.2010. Though the respondent was represented by their learned counsel and the order dated 28.11.2009 was passed while recording the proceedings of that day, neither any application had been filed before the learned Arbitrator to recall the said order and provide opportunity to tender evidence or cross examine, nor was a challenge raised by initiating any other proceedings, before the award was passed. It is only subsequent to the award being passed such contention is being raised as an afterthought, which in such event cannot be accepted. From the photographs produced before us we have noticed that except raising some columns, there is no major construction that is put up. In so far as the expense as claimed by the respondent, as indicated by the learned Arbitrator as extracted above, there is no conclusive evidence to that effect. Though such columns are raised, admittedly construction activity has not taken place beyond March, 1999 and already two decades have elapsed. In view of the breach and the respondent herein failing in the present lis there would be no absolute right in their favour since the inevitable loss suffered by the appellants by not being able to enjoy the property for the last more than two decades also cannot be lost sight. The appellant herein who is the owner of the property will have to enter into a fresh contract and the need and manner of development may not be the same at this point and in such event the appellant herein also would be put to some loss to undertake the demolition process themselves or there would be reduction that would be made by the alternate developers who would undertake the project. The appellant is directed to pay the sum of ₹ 45,00,000/- in full quit of all claims, to the respondent within three months - the award dated 13.01.2010 passed by the learned Arbitrator is restored.

Summary

Issues Involved:

1. Validity of the High Court's order remanding the matter to the Arbitrator.
2. Procedural propriety of the arbitration proceedings.
3. Consideration of claims and counterclaims by the Arbitrator.
4. Scope of judicial intervention under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.
5. Determination of costs incurred by the respondent and the resultant compensation.

Detailed Analysis:

1. Validity of the High Court's Order Remanding the Matter:

The appellants challenged the High Court's order dated 31.07.2015, which remanded the matter to the sole Arbitrator for fresh consideration. The High Court concluded that the Arbitrator did not provide appropriate opportunities for evidence presentation and cross-examination, and failed to consider the extent of construction and expenses incurred by the respondent. The Supreme Court, however, found that the Arbitrator had duly considered all aspects and that the High Court overstepped its jurisdiction under Section 37 of the Act, 1996.

2. Procedural Propriety of the Arbitration Proceedings:

The appellants contended that the Arbitrator followed due procedure as agreed by the parties under Section 19 of the Act, 1996. The Arbitrator recorded that both parties consented to rely on affidavits and documents without cross-examining witnesses. The Supreme Court upheld this procedure, noting that the parties cannot later contest the agreed-upon process. The Court emphasized that the Arbitrator’s flexibility in determining procedural rules was within legal bounds.

3. Consideration of Claims and Counterclaims by the Arbitrator:

The respondent argued that the Arbitrator did not separately address each of the twelve claims. The Supreme Court found that the Arbitrator's award, dated 13.01.2010, provided a detailed consideration of all claims and counterclaims. The Arbitrator concluded that the respondent failed to complete the construction project and did not substantiate the claimed expenses of ?1,22,00,000. The Court noted that the Arbitrator’s findings were based on the evidence and affidavits presented.

4. Scope of Judicial Intervention under Sections 34 and 37 of the Act, 1996:

The Supreme Court examined whether the High Court's intervention under Section 37 was justified. It held that the High Court exceeded its scope by delving into the merits of the case and procedural aspects already settled by the Arbitrator. The Court reiterated that judicial intervention should be limited to grounds specified under Section 34(2), which include procedural impropriety affecting the ability to present the case. The Supreme Court found no such impropriety in the Arbitrator's conduct.

5. Determination of Costs Incurred by the Respondent and Resultant Compensation:

The High Court had remanded the matter partly due to the Arbitrator’s alleged failure to consider the respondent's expenses for the construction. The Supreme Court reviewed the Arbitrator’s findings, which dismissed the respondent's claims due to lack of reliable evidence. The Court noted that the Arbitrator had considered various financial documents and found discrepancies. To resolve the matter equitably, the Supreme Court exercised its power under Article 142 of the Constitution, directing the appellant to pay ?45,00,000 to the respondent and resume possession of the land.

Conclusion:

The Supreme Court set aside the High Court’s order and restored the Arbitrator's award. It directed the appellant to pay ?45,00,000 to the respondent within three months, allowing the appellant to resume possession of the land thereafter. Each party was ordered to bear its own costs.