There should be minimal interference by courts in matters relating to arbitration

Ravikiran Shukre | Manikchand Pahade Law College, Aurangabad | 14th February 2020 

M/S Canara Nidhi Limited V. M. Sasikala and Ors. [Civil Appeal no. 7544-45 of 2019]

Facts of the case: 

1. appellant is the financial institution and the appellant advanced a loan of Rs.50,00,000/- to respondent No.1 and respondent Nos.2, 4 and 5 to 8 were the guarantors in respect of such loan. The loan was secured by a mortgage with deposit of title deeds and respondent No.1 is also said to have executed a demand promissory note for repayment of the loan. There was an arbitration clause in the agreement to resolve dispute between the parties. It is alleged that the first respondent did not repay the loan and failed to discharge the liabilities arising out of the transaction. The dispute between the appellant and the first respondent was referred to arbitration to the third Respondent-Arbitrator. Before the arbitrator, both the parties adduced oral and documentary evidence. The arbitrator passed an award dated 15.12.2007 and directed the respondents to pay an amount of Rs.63,82,802/- with interest on Rs.50,00,000/- at 14% per annum from 11.08.2000 and cost of Rs. 52,959/-.
2. Assailing the award, respondent No.1 filed AS No.1 of 2008 under Section 34 of the Act in the Court of District Judge at Mangalore. Before the District Judge, respondent Nos.1 and 2 filed an application under Section 151 CPC to permit the respondents to adduce evidence. The appellant filed objections to the said application. By the order dated 02.06.2010, the learned District Judge dismissed the said application. Holding that the grounds urged in the application can very well be met with by the records of the arbitration proceedings and by perusing the arbitral award, the learned District Judge further held that in any event, there is no necessity of adducing fresh evidence in the application filed under Section 34 of the Act.
3. Aggrieved by the dismissal of their application under Section 151 CPC, respondent Nos.1 and 2 filed writ petitions before the High Court under Articles 226 and 227 of the Constitution of India. The High Court by the impugned judgment allowed the writ petitions and directed the learned District Judge to recast the issues and allow respondent Nos.1 and 2 to file affidavits of their witnesses and further allow cross-examination of the witnesses. 

Judgment: 

1. The question falling for consideration is whether the present case is such an exceptional circumstance that it was necessary to grant opportunity to respondent Nos.1 and 2 to file affidavits and to cross-examine the witnesses is made out. The affidavit filed by the respondents along with application filed under Section 151 CPC does not indicate as to what point the first respondent intends to adduce except stating that the first respondent intends to adduce additional evidence relating to the subject of dispute. The affidavit does not disclose specific documents or evidence required to be produced except stating that the first respondent intends to adduce additional evidence or otherwise the first respondent will be subjected to hardship in the arbitration suit filed by her under Section 34 of the Act. As rightly contended by the learned counsel appearing for the appellant that there are no specific averments in the affidavit as to the necessity and relevance of the additional evidence sought to be adduced.
2. By perusal of the award, it is seen that before the arbitrator, respondent No.1 filed her written statement and other respondents also filed separate written statements. It was contended that the documents were forged. Both parties adduced oral and documentary evidence.
3. The appellant led evidence by examining two witnesses Balakrishna Nayak (PW-1) and B.A. Baliga (PW-2) and exhibited documents P1 to P47. Respondent Nos.1 and 2 also examined five witnesses viz. M. Shashikala (RW-1), Mamatha @ Mumtaz Hameed (RW-2) Latha (RW-3), Chitralekha Umesh (RW-4) and B.R. Nagesh (RW-5). Respondent Nos.1 and 2 also produced documentary evidence Ex.-R1 to R13. 
4. As held by the District Judge, the grounds urged in the application can very well be considered by the evidence adduced in the arbitration proceedings and considering the arbitral award. Further, the application filed by respondent Nos.1 and 2 seeking permission to adduce evidence, no ground was made out as to the necessity of adducing evidence and what was the nature of the evidence sought to be led by respondent Nos.1 and 2. 
5. The proceedings under Section 34 of the Act are summary proceedings and is not in the nature of a regular suit. By adding sub-sections (5) and (6) to Section 34 of the Act, the Act has specified the time period of one year for disposal of the application under Section 34 of the Act. The object of sub-sections (5) and (6) to Section 34 fixing time frame to dispose of the matter filed under Section 34 of the Arbitration Act, 1996 is to avoid delay and to dispose of the application expeditiously and in any event within a period of one year from the date of which the notice referred to in Section 34(5) of the Act is served upon the other party. 
6. In the arbitration proceedings, the parties had sufficient opportunity to adduce oral and documentary evidence. The High Court did not keep in view that respondent Nos.1 and 2 have not made out grounds that it is an exceptional case to permit them to adduce evidence in the application under Section 34 of the Act. 

Supreme Court finally concluded stating, the impugned judgment dated 12.09.2014 passed by the High Court of Karnataka at Bangalore in Writ Petition Nos.18374-75 of 2010 (GM-RES) is set aside and these appeals are allowed. The order of the District Judge dismissing the application filed under Section 151 CPC in AS No.1 of 2008 is affirmed. The learned District Judge shall take up AS No.1 of 2008 and dispose of the same expeditiously in accordance with law.