Partly allowed

Indian Oil Corporation Ltd. and Ors. v. M/S Shastri Nagar Gas Service

Rajasthan HC28 Oct 2021CMA/2467/2017

Case brief

AI extract

What is this about?

Arbitral awards concerning LPG distributorship penalties were challenged for procedural unfairness and denial of cross-examination. The Court upheld both awards, dismissing the distributor's appeal and allowing the corporation's connected appeal against the order setting aside an award.

What did the court decide?

The corporation's appeal was allowed; the order setting aside the arbitral award was quashed and the award upheld.

Indian Oil Corporation Ltd. and Ors. Vs M/S Shastri Nagar Gas… — Arbitration | Rajasthan HC (2021)

¶1

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR

¶2

S.B. Civil Miscellaneous Appeal No.2855/2017

¶3

M/s. Shastrinagar Gas Service through Partner Smt. Vandana Sharma W/o Late Shri Nagendra Sharma, Address 165, Ramnagar Shopping Center, Shastri Nagar Jaipur Rajasthan at Present A-104-D-1, AWHO Scheme, Sector No.1, Vidhyadhar Nagar, Jaipur

¶4

----Appellant/Objector

¶5

Versus

¶6

Indian Oil Corporation Limited through Director Marketing Finance and Leasing Company through proprietor deepak vaidh, R/o 21, Gopinath marg, M.I. road, Jaipur.

¶7

Senior Area Manager, Indian oil Corporation Limited, Indane Area office, SPL-1297, Sitapura Industrial Area, goner Road, Jaipur.

¶8

General manager (LPG) Indian oil corporation Limited, Ashok Chowk, Adarsh Nagar, Jaipur 302004.

¶9

----Respondents/Non-Claimants

¶10

Shri A.V. Rajan, Sole Arbitrator and chief manager (engineering) Indian oil corporation Limited, Ashok Chowk, Adarsh Nagar, Jaipur Rajasthan – Sole Arbitrator.

¶11

----Arbitral Tribunal (Performa Party)

¶12

Connected With

¶13

S.B. Civil Miscellaneous Appeal No.2467/2017

¶14

Indian Oil Corporation Limited Through Director Marketing G-9, Ali Yavarjung Marg, Bandra (East) Mumbai-400511.

¶15

Senior Area Manager, Indian Oil Corporation Ltd. Indane Area Office, SPL 1297, Sitapura Industrial Area, Goner Road, Jaipur.

¶16

General Manager (L.P.G.) Indian Oil Corporation Limited, Ashok Chowk, Adarsh Nagar, Jaipur.

¶17

----Appellants/ Non – Applicants

¶18

Versus

¶19

M/s Shastri Nagar Gas Service through Partner Smt. Vandana Sharma W/o Late Sh. Nagendra Sharma, R/o 165, Ram Nagar Shopping Center, Shastri Nagar, Jaipur Presently R/o A-104-D-1 AWHO Scheme, Sector, No.1, Vidhyadhar, Nagar, Jaipur.

¶20

----Respondent/Applicant

¶21

(2 of 21)

¶22

[CMA-2855/2017]

¶23

Mr.A. V. Rajan, Sole Arbitrator & Chief Manager (Engineering), Indian Oil Corporation, Ashok Chowk, Adarsh Nagar, Jaipur

¶24

----Performa Party- Sole Arbitrator

¶25

For Appellant(s) : Mr.Devidutt Sharma Mr.Rajesh Maharshi Ms.Aishwarya For Respondent(s) : Mr.Samit Bishnoi

¶26

HON'BLE MR. JUSTICE ASHOK KUMAR GAUR

¶27

Order

¶28

REPORTABLE

¶29

Reserved on : 02/09/2021 Date of Order : 28/10/2021

¶30

These two appeals are decided together by this common order, as the issues involved in both the appeals are same.

¶31

SB CMA No.2855/2017:-

¶32

The appellant - M/s. Shastarinagar Gas Service has filed the appeal challenging the order dated 13^th February, 2017 passed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short “the Act of 1996”) rejecting the application filed by the appellant against the award dated 19^th February, 2016, passed by the Sole Arbitrator.

¶33

The appellant was appointed as distributor of Liquefied Petroleum Gas (LPG) in 1995. The respondents had carried out surprise inspection and refill audit on 8^th September, 2012. The respondents, in their inspection, found following major/minor irregularities at the distributorship:-

¶34

a) Out of turn refill delivery to 331 customers.

¶35

(3 of 21)

¶36

[CMA-2855/2017]

¶37

b) Customer signatures are not being taken on refill vouchers.

¶38

c) 103 cylinders were shown delivered in Indsoft but actually not delivered to the consumers as per their Blue Book.

¶39

The appellant filed reply to the show cause notice and denied the allegations of diversion of cylinders for non-domestic use and further, affidavits of consumers and documents were also submitted.

¶40

The respondents, vide order dated 6^th June, 2013, imposed penalty of Rs.1,42,526/- as violation of 2^nd MDG (Marketing Discipline Guidelines) during last two years and adjusted recovery from the current account of the appellant.

¶41

The appellant invoked arbitration clause and requested to appoint the Arbitrator as per Clause No.37 of the agreement, executed between the parties.

¶42

The respondents appointed their own officer one Shri A.V. Rajan, Chief Manager (Engineer), IOCL as Arbitrator.

¶43

The appellant submitted his claim before the Arbitrator and raised objections with regard to conducting arbitration proceedings with prejudice attitude.

¶44

(4 of 21)

¶45

[CMA-2855/2017]

¶46

The respondent - Corporation filed reply to the claim petition and further rejoinder was filed and the issues were framed by the Arbitrator on 15^th October, 2014.

¶47

Since, the Arbitrator was not conducting arbitration in proper and fair manner, the appellant filed petition under Sections 14 & 15 of the Act of 1996 before the High Court to terminate the mandate of arbitrator and substitute the arbitrator. The matter was sub-judice before the High Court, however, the Arbitrator continued the proceedings and pronounced the ex-parte award on 19^th February, 2016.

¶48

The appellant, feeling aggrieved against the ex-parte award dated 19^th February, 2016, filed application under Section 34 of the Act of 1996.

¶49

The appellant raised various grounds in the application under Section 34 of the Act of 1996 and following main grounds were raised :

¶50

(a) The Arbitrator did not declare his interest under Section 12 of the Act of 1996, as he was working in the respondent’s office as officer.

¶51

(b) The Arbitrator was not independent and he was working with prejudice mind.

¶52

(c) The proceedings were not conducted by the Arbitrator as per law and no process was drawn with consent of the parties.

¶53

(5 of 21)

¶54

[CMA-2855/2017]

¶55

(d) No opportunity of hearing was given and crossexamination was not allowed to the witness of the respondents and award was passed ex-parte.

¶56

(e) The award was not containing any reason and the same was against the law and public policy of India.

¶57

The Additional District & Session Judge, vide order dated 13^th February, 2017, rejected the application of the appellant after considering four issues, which were framed during hearing of the application. The Court below confirmed the award dated 19^th February, 2016.

¶58

The appellant, in his appeal, has raised following

¶59

grounds :

¶60

(i) The Court below has failed to consider the legal aspect that the Arbitrator was required to declare his interest under Section 12(i) of the Act of 1996 but he failed to do so. The Arbitrator was under control of the respondents and as such, he was not free and independent.

¶61

(ii) The Arbitrator failed to draw process of conducting arbitration proceedings as per Sections 13(i)(4) and 19 of the Act of 1996 nor Manual of the Rajasthan High Court was followed and as such, the Arbitrator acted against the law and principles of natural justice.

¶62

(iii) The Arbitrator has given the award without proper consideration of the documents and evidence on record and the award is a not reasoned award as per Section 31(3) of the Act of 1996. The Arbitrator failed to pass the award and

¶63

(6 of 21)

¶64

[CMA-2855/2017]

¶65

he did not consider the affidavits of the consumers, which were filed before him.

¶66

(iv) The equal treatment was not given to both the parties as per Sections 18 and 27 of the Act of 1996.

¶67

(v) The award is bad in the eyes of law because 1^st MDG was set aside by the Court on challenge by the appellant and if 1^st MDG was not sustained then there was no basis to impose

¶68

2^nd MDG.

¶69

Counsel appearing for the Distributor-claimant has placed reliance on the following judgments:-

¶70

Ayaaubkhan Noorkhan Pathan Vs. State of Maharashtra and Others, reported in [(2013)4 SCC 465].

¶71

Nazim H. Kazi Vs. Kokan Merchantile Cooperative Bank Ltd., reported in [(2013)2 BCR 193].

¶72

Biwater Penstocks Ltd. Vs. Municipal Corporation of Greater Bombay & Ors., reported in MANU/MH/1531/2010.

¶73

Auto Craft Engineers Vs. Akshar Automobiles Agencies Private Limited, reported in [(2016) SCC OnLine Bom. 5185].

¶74

Heard learned counsel for the parties and with their assistance, perused the material available on record.

¶75

The primary question, for deciding these two appeals, before this Court is with regard to the scope of Section 34 of the Act of 1996 and the issue whether adequate opportunity has been

¶76

(7 of 21)

¶77

[CMA-2855/2017]

¶78

provided to both the parties in arbitral proceedings and whether principle of natural justice has been complied with by the Arbitrator or not.

¶79

This Court finds that after filing of the statement of claim by the appellant, the respondent-Corporation had filed its reply and thereafter rejoinder was filed and the matter was placed for framing of issues. The issues were framed by the Arbitrator on 15.10.2015 and thereafter parties were directed to submit affidavits in evidence and the respondent-Corporation filed its affidavit on 06.11.2015 and the Arbitrator vide order dated 09.11.2015 directed the claimant to file his affidavit and when despite various dates, given to the counsel of the claimant, neither affidavit was filed nor counsel for the claimant himself appeared, the case was fixed for oral arguments on 16.12.2015, however, the appellant-claimant sought another opportunity to file affidavit in evidence and finally it came to be filed on 24.12.2015 and both the parties were directed to submit their written/oral arguments on 04.01.2016. Thereafter, the claimant filed applications on 04.01.2016, 07.01.2016, 14.01.2016 & 28.01.2016 for staying proceedings, which was denied as there were no justified reason to stay the proceedings and final opportunity was fixed for advancing arguments on 01.02.2016. The counsel for the appellant-claimant was present on 01.02.2016 but he refused to continue with the arguments and as such the Arbitrator reserved the award after hearing counsel for the respondent-Corporation.

¶80

This Court finds that several opportunities were given to the counsel for the appellant-claimant not only for filing

¶81

(8 of 21) [CMA-2855/2017]

¶82

affidavit in evidence but also to submit their written/oral arguments. This Court further finds that even as per the proceedings of the Arbitrator, the counsel who was present on 01.02.2016 on behalf of the appellant-claimant also refused to continue with his arguments.

¶83

The Arbitrator, after going through the claim, reply to claim and documents filed by both the parties and also after perusing the documents and considering the pleadings, gave reasons for arriving at the conclusion in his award. The proceedings conducted before the Arbitrator nowhere show that adequate opportunity was not afforded to the appellant-claimant to plead his case or to lead evidence. The allegation of not affording adequate opportunity is not supported and reflected from the entire proceedings conducted by the Arbitrator.

¶84

The contention of the appellant that the Arbitrator had failed to declare his interest under sub-section (1) of Section 12 of the Act of 1996 and as such, he was not competent to undertake the arbitral proceedings, this Court finds that the sole Arbitrator vide his letter dated 10.03.2014, after his appointment as sole Arbitrator, had declared that there were no circumstances liable to give rise to justifiable doubts as to his impartiality or independence. The declaration made by the sole Arbitrator, as per Section 12(1) of the Act of 1996, does not require much discussion on the said issue, as raised by the appellant.

¶85

(9 of 21)

¶86

[CMA-2855/2017]

¶87

The submission of counsel for the appellant that neither proceedings under Section 19 of the Act of 1996 were undertaken nor Manual of the Rajasthan High Court was followed, suffice it to say by this Court that equal opportunity was afforded to both the parties by the Arbitrator and principle of natural justice was followed, as adequate opportunity was given to both the parties to lead their documentary evidence.

¶88

The submission of learned counsel for the appellant that the award is not a reasoned award, as per Section 31(3) of the Act of 1996, suffice it to say by this Court that the Arbitrator, after taking into account the pleadings and evidence of the parties, has given cogent reasons for arriving at the conclusion and as such, it cannot be inferred that proper award has not been passed.

¶89

The reliance placed by counsel for the appellant on the judgment passed by the Apex Court in the case of Ayaaubkhan Noorkhan Pathan (supra) , the Apex Court in the said case was concerned with the issuance of caste certificate of a candidate. The Apex Court has considered the scope of cross examination as a part of principle of natural justice and held that if any serious allegation is levelled about caste certificate and Scrutiny Committee conducted the enquiry, then in such an eventuality such candidate must be given a fair opportunity to cross examine the witness. This Court finds that the said judgment has no relevance to the present controversy.

¶90

(10 of 21)

¶91

[CMA-2855/2017]

¶92

The reliance placed by learned counsel for the appellant on the judgment passed by the Bombay High Court in the case of Nazim H. Kazi (supra) , this Court finds from the facts of the case that both the parties in the said case had not agreed before the Arbitral Tribunal that no evidence was to be led by both the parties and the proceedings were to be conducted on the basis of the documents and other material, while record of the Arbitrator indicated that the petitioner filed affidavit in lieu of examinationin-chief and he had offered himself for cross examination in support of his deposition on various disputed facts and he had also asked for permission to cross examine the respondents’ witness. The Bombay High Court after considering the fact situation of that case found that Arbitrator could not have conducted the matter only on the basis of documents and other materials when the petitioner himself had asked for an opportunity to lead overall evidence and had made himself available for cross examination.

¶93

The reliance placed by learned counsel for the appellant on the judgment passed by the Bombay High Court in the case of Biwater Penstocks Ltd. (supra), the Court has considered the fact of admitting certain documents in evidence by the Arbitrator without the same being proved and it was treated as an act of legal misconduct and blatant breach of principles of natural justice and accordingly the award was set-aside. The Bombay High Court has further held that even if the award is a non speaking order, however, the same must be in accordance with law and in consonance with the principles of natural justice. The said judgment is of little help to learned counsel for the appellant.

¶94

(11 of 21)

¶95

[CMA-2855/2017]

¶96

The reliance placed by counsel for the appellant on the judgment passed by the Bombay High Court in the case of M/s Auto Craft Engineers (supra) , this Court finds that the Bombay High Court after considering the proceedings of Arbitrator has held that a person cannot be prevented from participating in the arbitral proceedings only on the ground that the he has not complied with the payment of cost awarded by the Arbitrator and as such the award was found to be harsh, unjust, unreasonable and arbitrary and the award was also found to be against the principles of natural justice as defence was struck out by the Arbitrator.

¶97

The reliance placed by counsel for the appellant on the judgment passed by the Apex Court in the case of Bareilly Electricity Supply Co. Ltd. (supra) , the issue before the Apex Court was with regard to payment of bonus to the workmen and the award was passed by the Labour Court to the same effect. This Court finds that the said judgment does not have any bearing on the facts of the present matter.

¶98

The reliance placed by counsel for the appellant on the judgment passed by the Madras High Court in the case of Indian Oil Corporation and Anr. (supra) , the Madras High Court has held that the Arbitrator has all the powers to decide all the disputes and differences arising between the parties and the dealership of a claimant can be restored.

¶99

This Court, accordingly, finds that this misc. appeal deserves to be dismissed and is hereby dismissed and the order passed by the Additional District and Sessions Judge No.18, Jaipur

¶100

(12 of 21)

¶101

[CMA-2855/2017]

¶102

Metropolitan dated 13.02.2017 so also the award passed by the Arbitrator dated, 19.02.2016 are upheld.

¶103

Facts of SB CMA No.2467/2017:-

¶104

31 . The appellant – Indian Oil Corporation has challenged the order dated 1^st April, 2017, whereby the application filed by the respondent – M/s. Shastarinagar Gas Service under Section 34 of the Act of 1996 has been accepted and the award dated 16^th August, 2016, passed by the Sole Arbitrator has been set aside.

¶105

The appellants, during investigation of the respondentclaimant, had carried out the investigation on 24^th June, 2013 and during inspection, major/minor irregularities were observed at the distributorship and irregularities were in the nature of , are as follows:-

¶106

(i) Deliverymen were not carrying weighing scale, leak detector & identity cards of distributorship,

¶107

(ii) Customers reported that they are getting refill delivery confirmation message without booking for refills.

¶108

(iii) During refill delivery verification 5 customers confirmed nonreceipt of 26 no. of refills.

¶109

The appellant-Corporation sought distributor’s explanation and reply submitted by the respondent-claimant was not found satisfactory and the appellant, vide letter dated 31^st October, 2013, imposed penalty as violation of 3^rd MDG on the ground that

¶110

(13 of 21)

¶111

[CMA-2855/2017]

¶112

reply of the claimant was not found tenable and satisfactory. Due to dispute between the parties, the sole Arbitrator was appointed.

¶113

The sole Arbitrator conducted the arbitration proceedings and vide award dated 22^nd February, 2016, the claim petition of the respondent-claimant was dismissed.

¶114

The award dated 22^nd February, 2016 was put to challenge by the respondent by filing an application under Section 34 of the Act of 1996.

¶115

The said application was allowed vide order dated 4^th June, 2016 and the award dated 22^nd February, 2016 was set aside. The Court directed the Arbitrator to pass a reasoned order on the objection of claimant to get an opportunity of crossexamination and further, after affording proper opportunity to both the parties and by following ADR Rules, as framed by High Court, the Arbitrator was to pass the award, as per the procedure prescribed under Section 19 of the Act of 1996.

¶116

The Sole Arbitrator, after remand of the matter, passed an award on 16^th August, 2016 and claim of the respondentclaimant was dismissed.

¶117

The respondent-claimant, feeling aggrieved against the award dated 16^th August, 2016, filed an application under Section 34 of the Act of 1996.

¶118

(14 of 21)

¶119

[CMA-2855/2017]

¶120

The Court below, vide order dated 1^st April, 2017, has accepted the application of the respondent-claimant and has set aside the award dated 16^th August, 2016.

¶121

The appellant challenges the order dated 1^st April, 2017 on the following grounds:-

¶122

(i) The Court below has failed to consider the scope of jurisdiction of the Court under Section 34 of the Act of 1996.

¶123

(ii) The Court below has wrongly interpreted Section 19 of the Act of 1996 and has erroneously held that the Arbitrator was bound to permit the respondent-distributor to cross examine the Officials of the Corporation.

¶124

(iii) The Court below could not have gone into the merits of the matter and the same is not permissible as per the scope of Section 34 of the Act of 1996.

¶125

(iv) The Court below misinterpreted and misunderstood the direction passed in the previous order dated 04^th June, 2016.

¶126

(v) The Court below, under Section 34 of the Act of 1996, cannot sit as a court of appeal over the award and cannot reappreciate the evidence or go into the merits of the arbitral award or interfere with the finding of fact and reappraisal of material and substituting its own view, in place of Arbitrator’s view, is not permissible.

¶127

(vi) The Court below has failed to consider that as per Section 19 of the Act of 1996 dealing with the determination of rules of procedure, the Arbitral Tribunal is not bound by Code of Civil Procedure or the Indian Evidence Act, 1872 and it is for the

¶128

(15 of 21)

¶129

[CMA-2855/2017]

¶130

Arbitrator to decide whether in the facts of the case, there was requirement of cross-examination of evidence or not?

¶131

(vii) The scope of Section 19 of the Act of 1996 is only for the

¶132

compliance of natural justice and if ample opportunity has been given to both the parties to decide the matter, the same cannot result into violation of principles of natural justice when reasonable time and opportunity was afforded to substantiate the respective claims of the parties.

¶133

(viii) The Court below has failed to look into the conduct of the respondent-claimant as there was a willful motive to frustrate the purpose of arbitration proceedings by refusing to advance the arguments on merits of the matter.

¶134

This Court finds that the Arbitrator, during arbitral proceedings, after giving opportunities to the Distributor-claimant, took the affidavit in evidence on record vide order dated 29.12.2015. The Arbitrator had also directed the parties to remain present on 04.01.2016 for their oral arguments. The Arbitrator vide his order dated 22.01.2016 found that evidence submitted by the appellant-Corporation before the Arbitrator was based on the documentary evidence and as such, he declined the request for cross-examination and both the parties were directed to submit their written arguments on 01.02.2016 and present their oral arguments on the same day.

¶135

This Court finds that since counsel for the claimant had refused to participate in the arbitration proceedings, award was passed on 22.02.2016.

¶136

(16 of 21)

¶137

[CMA-2855/2017]

¶138

This Court finds, from the perusal of award, that request was made by filing an application for cross-examination of the witness on 15.07.2016 and on 26.07.2016 and the Arbitrator passed an order that the evidence submitted by the respondent-Corporation was based on documentary evidence available with him and the same was also submitted in the arbitral proceedings and as such, there was no need for cross-examination of the witness and as such, the request for cross-examination was denied and both the parties were requested to be present on 03.08.2016 for final arguments.

¶139

The perusal of the award further shows that after declining the request for cross-examination of witness of the respondent-Corporation, the claimant made another application for giving the opportunity and the same was also declined and finally the Arbitrator had fixed the matter for arguments, however, counsel for the claimant refused to argue the matter and as such, the award was reserved.

¶140

The perusal of award shows that all the issues were decided by the Arbitrator and the charge levelled against the Distributor was found to be proved of committing major irregularities and as such, the decision of the Corporation was upheld.

¶141

Scope of Sections 18, 19 & 34 of the Act of 1996

¶142

The scope of Sections 34 and 37 of the Act of 1996 has been dilated by the Apex Court in the case of MMTC Limited Vs.

¶143

(17 of 21)

¶144

[CMA-2855/2017]

¶145

Vedanta Limited reported in (2019) 4 SCC 163 . The relevant

¶146

portions of the judgment are quoted hereunder:-

¶147

“10. Before proceeding further, we find it necessary to briefly revisit the existing position of law with respect to the scope of interference with an arbitral award in India, though we do not wish to burden this judgment by discussing the principles regarding the same in detail. Such interference may be undertaken in terms of Section 34 or Section 37 of the Arbitration and Conciliation Act, 1996 (for short, “the 1996 Act”). While the former deals with challenges to an arbitral award itself, the latter, inter alia, deals with appeals against an order made under Section 34 setting aside or refusing to set aside an arbitral award.

¶148

As far as Section 34 is concerned, the position is wellsettled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii), i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the “fundamental policy of Indian law” would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury reasonableness. Furthermore, “patent illegality” itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.

¶149

It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. (See Associate Builders v. DDA, (2015) 3 SCC 49). Also see ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705; Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445; and McDermott International v. Burn Standard Co. Ltd., (2006) 11 SCC 181).

¶150

(18 of 21)

¶151

[CMA-2855/2017]

¶152

It is relevant to note that after the 2015 amendments to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, subsection (2A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

¶153

As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the Court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the Court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the Court under Section 34 and by the Court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.

¶154

XX XX XX

¶155

It is equally important to observe at this juncture that while interpreting the terms of a contract, the conduct of parties and correspondences exchanged would also be relevant factors and it is within the arbitrator’s jurisdiction to consider the same. (See McDermott International Inc. v. Burn Standard Co. Ltd. (supra); Pure Helium India (P) Ltd. v. ONGC, (2003) 8 SCC 593, D.D. Sharma v. Union of India, (2004) 5 SCC 325).”

¶156

This Court will also be required to consider Chapter-V of the Act of 1996 where procedure for conducting arbitral proceedings has been provided. Sections 18 and 19 of the Act of 1996, being relevant for the present controversy, are quoted hereunder:-

¶157

(19 of 21)

¶158

[CMA-2855/2017]

¶159

“ 18. Equal treatment of parties .—The parties shall be treated with equality and each party shall be given a full opportunity to present his case.

¶160

19. Determination of rules of procedure .—

¶161

The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).

¶162

Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings.

¶163

Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate.

¶164

The power of the arbitral tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence.”

¶165

The bare reading of Section 18 of the Act of 1996 shows that parties to the arbitral proceedings shall be treated with equality and each party shall be given full opportunity to present his case and the Arbitrator cannot make any discrimination between two parties as far as procedural part is concerned and further full opportunity is required to be given to each of the party to present his case.

¶166

The facts which have come on record in the present appeals clearly reflect that both the parties were treated equally and full opportunity was given to them to present their case. The non-cooperation of claimant by any means, either to argue the matter or to place document on record, cannot result into denial of full opportunity to both the parties to present their case.

¶167

This Court further finds that as per Section 19 of the Act of 1996, the arbitral proceedings are not bound by the Code of

¶168

(20 of 21)

¶169

[CMA-2855/2017]

¶170

Civil Procedure, 1908 or the Indian Evidence Act, 1872. This Court finds that sub-section (2) of Section 19 provides that parties are free to agree on the procedure to be followed in conducting the arbitral proceedings and sub-section (3) of Section 19 provides that in absence of any agreement, as provided under Section 19(2) of the Act of 1996, the arbitral proceedings will be conducted in the manner, the Arbitrator considers it appropriate. Sub-section (4) of Section 19 of the Act of 1996 gives power to the Arbitral Tribunal to determine the admissibility, relevance, materiality and weight of any evidence.

¶171

The Arbitrator, in the present facts of the case, if found that since documentary evidence was enough to consider the issue which was referred to him, the same could not have resulted into giving any right to the claimant to say that oral evidence was required or cross-examination of any of the employees of the Corporation was required.

¶172

This Court finds that the power given under Section 34 of the Act of 1996 to set aside the award, is limited and if the arbitral award is in conflict with the public policy of India, it can be one of the grounds to set aside the arbitral award. Explanation-1 added to Section 34 of the Act of 1996 also makes it clear that an award is said to be in conflict with the public policy of India only if it is in contravention with the fundamental policy of Indian law or in conflict with the most basic notions of morality or justice. Explanation-2 appended to Section 34 of the Act of 1996 makes it very clear that test as to whether there is a contravention with the

¶173

(21 of 21)

¶174

[CMA-2855/2017]

¶175

fundamental policy of Indian law, shall not entail a review on the merits of the dispute.

¶176

This Court, considering the scope of interference, as provided under Section 34 of the Act of 1996, finds that the award which has been passed by the Arbitrator cannot be reviewed by this Court by re-appreciating the evidence or giving any finding on the merits of the matter.

¶177

For the reasons stated in the foregoing paragraphs, the present appeal is allowed and the order dated 01.04.2017, passed by the Additional District & Sessions Judge No.14, Jaipur Metropolitan, allowing the application of the respondent filed under Section 34 of the Act of 1996, is quashed and set aside and the award dated 16.08.2016 passed by the Arbitrator is upheld.

¶178

(ASHOK KUMAR GAUR),J

¶179

Preeti Asopa /Himanshu Soni

Indian Oil Corporation Ltd. and Ors. v. M/S Shastri Nagar Gas Service

Case brief

What is this about?

What did the court decide?

Indian Oil Corporation Ltd. and Ors. v. M/S Shastri Nagar Gas Service

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Reliance General Insurance Company Limited Vs Manish S/O Shri Bhanwar Lal

Gram Panchayat Aligarh Vs the State of Rajasthan

Ms. Tara Kumari Ujjainiya Daughter of Mangal Chand Ujjainiya Vs State of Rajasthan

Azad Bansal S/O Sh. Bihari Singh Vs State of Rajasthan

M/S Shastrinagar Gas Service Vs Indian Oil Cor Ltd. and Ors.

Smt Rekha Bai and Others Vs Virendra Meena and Others