11 August 2021
Introduction
There are only a few sections in the Arbitration and Conciliation Act, 2016 (“Act”), in which Court’s reference or assistance is invited post commencement of arbitration and constitution of the arbitral tribunal.
One such provision is Section 27[i], which calls upon the courts to render assistance in taking evidence, by compelling appearance of a witness, production of a document or access to a property for inspection before the arbitral tribunal.
Section 27 of the Act has been enacted (a) to seek Court’s assistance in taking evidence and executing the request made by either the arbitral tribunal or the parties with permission of the arbitral tribunal; and (b) aid the arbitral tribunal or a party in taking evidence with a view to expedite the arbitral proceedings. Such assistance or as Section 27 of the Act terms it ‘execution’ of the arbitral tribunal’s request is considered useful and necessary, as an arbitral tribunal does not itself possess powers of compulsion, i.e., the power to issue witness summons or to compel the attendance of the witnesses or to compel production of documents. As such, due to the lack of powers of compulsion with the arbitral tribunal, the parties should not suffer.
In practice, the normal course of procedure for taking assistance of the Court in taking evidence is that a party files an application before the arbitral tribunal under Section 27 of the Act seeking permission to apply to Court explaining the admissibility, materiality and weight of the evidence, which the Arbitral Tribunal is empowered to determine under Section 19 (4). On perusal of the said application, the arbitral tribunal, as a master of its own proceedings, passes an order either permitting the party to apply to the Court for its assistance in taking evidence or dismissing the application. Once the permission is granted by the arbitral tribunal, the party is required to make an application before the Court in terms of Section 27(1), seeking ‘execution’ of the order passed by the arbitral tribunal. However, in a situation where the application is dismissed, the only remedy available to the aggrieved party is at the stage of challenge of award under Section 34 of the Act[ii].
Scope of Judicial Interference
The controversy remains as to the scope of interference of Courts into an order passed by the Arbitral Tribunal and sought to be executed by the Court. Various High Courts[iii] have delved into this controversy to hold that the scope of judicial interference of Courts, in view of the scheme of the Act particularly Sections 5, 19, 27, 34 and 37, is limited for reasons detailed herein below.
In view of Section 5 of the Act providing for limited interference of any judicial authority in the arbitration proceedings and Section 19 of the Act providing that the arbitral tribunal is within its competence to decide its rules of procedure, which includes the power to determine the admissibility, relevance, materiality and weight of any evidence. Therefore, the Court’s jurisdiction to determine the admissibility, relevancy, materiality and weight of any evidence is non-existent. The scope of judicial interference, available to the Court, is to only ensure that it is in accordance of its Rules on taking evidence (which are rules framed by the Court on its administrative side or the provisions of the Civil Procedure Code, 1908 like Order 16 for issuance of summons etc.).
Further, the proceedings before the Court under Section 27 are not appellate proceedings, such as under Section 34 or Section 37 of the Act. The Court is not a forum of appeal with an adjudicatory power against an order of the Arbitral Tribunal under Section 27 of the Act. An order passed by the Arbitral Tribunal under Section 27 of the Act is not appealable under Section 37 of the Act. Any aspect of relevance of the evidence sought, or the legality of the direction of the Arbitral Tribunal to produce the same can be challenged by the aggrieved party only at the stage when the arbitral award is challenged under Section 34 of the Act, which is an avenue available to a party for ventilating its grievances against the award including any in-between orders that might have been passed by the Arbitral Tribunal. This also limits the scope of interference of the Court in proceedings under Section 27 of the Act.
It is settled proposition of law that what cannot be done directly, is impermissible to be done obliquely, meaning thereby, that a party cannot indirectly challenge an order of the Arbitral Tribunal passed under Section 27 of the Act, which is not challengeable/ appealable as per Section 37 of the Act.
It is further settled law that orders under Section 27 of the Arbitration Act by the arbitral tribunal are not even capable of being corrected by Article 226 or 227 of the Constitution of India.
The position that stands today poses another challenge before the Courts, i.e., while deciding an application under Section 27 of the Act whether or not to consider that the arbitral tribunal applied its mind before passing an order under Section 27 of the Act. On one side, it cannot be ignored that the requirement of involving the arbitral tribunal under Section 27 of the Act is not a matter of mere formality. Instead, the tribunal is obligated to apply its mind before making, or allowing an application to be made before the Court. On the other side, the scheme of the Act does not allow judicial interference of the Court while executing the said order of the arbitral tribunal even if the same is not a speaking order.
Opposite parties often rely on certain judicial precedents[iv] which note that while deciding an application under Section 27 of the Act, the Court is not sitting over an appeal, it is still empowered to go into the issue to determine whether the order of the arbitral tribunal has been passed on an erroneous belief of law. A judgment, passed by the Division Bench of the Delhi High Court in Bharat Heavy Electricals Limited vs. Silor Associates S.A[v], has held that the Courts are duty-bound to correct the order of the Arbitral Tribunal if it is based on a complete non-application of mind or a misconception of law or an erroneous premise of law. Answering this challenge, it may be pertinent to note that such a finding was given under peculiar facts and circumstances where in the arbitral tribunal sought assistance of the Court based on an erroneous belief of law. i.e., a situation where the arbitral tribunal had the power/jurisdiction to pass an order for direct production of documents. Further, the Hon’ble Bombay High Court[vi] distinguishes these precedents as cases that did not take into account the effect of Section 5 (minimal judicial interference) of the Act.
Conclusion
In view of the above, it can be said that the proceedings before the Court under Section 27 of the Act are merely executory proceedings and not adjudicatory proceedings, wherein the Courts cannot go into the validity and correctness of the order passed by the Arbitral Tribunal, weather reasoned or unreasoned. The scheme of Section 27 of the Act doesn’t provide for any procedure to give a hearing to the opposite party or a witness or a party against whom the Courts wants to issue directions and only provides for a machinery to ensure that material evidence is bought before the arbitral tribunal for effective adjudication of disputes.
For further information, please contact:
Shikha Tandon, Partner, Cyril Amarchand Mangaldas
shikha.tandon@cyrilshroff.com
[i] Adopted from Article 27 of the UNCITRAL Model Law.
[ii] An order passed by the Arbitral Tribunal under Section 27 of the Act is not appealable under Section 37 of the Act.
[iii] Hon’ble High Court of Bombay
-
United Spirits Ltd. v. Delta Distilleries Ltd., Mumbai – 2012 (6) Mh. L.J. [Paragraphs – 11, 12, 15] [Upheld by the Hon’ble Supreme Court in Delta Distilleries Limited v. United Spirits Limited and Another – (2014) 1 SCC 113]
-
National Insurance Company Limited v. S.A. Enterprises – 2015 SCC Online Bom 5063 [Paragraphs – 36, 40]
-
Montana Developers Private Limited v. Aditya Developers and Ors. – 2016 (6) MhLj 660 [Paragraphs – 9, 16, 17, 18, 19, 20, 21]
Hon’ble High Court of Delhi
-
Thiess Iviinecs India v. NTPC Limited and Ors. – 229 (2016) DLT 721 [Paragraphs – 25, 26, 27]
Hon’ble High Court of Punjab
-
BJ Techno – Has (JV) vs. National Hyrdroelectric Power Corporation Limited – AIR 2019 P&H 142 [Paragraph – 19]
[iv] Hon’ble High Court of Delhi
-
Reliance Polycrete Limited vs. National Agriculture Co-operative Marketing Federation of India – (2008) SCC Online Delhi 837 [Paragraph 15]
-
Bharat Heavy Electricals Limited vs. Silor Associates S.A. – (2014) SCC Online Delhi 4442 [Paragraphs 2, 16 and 19]
[v] (2014) SCC Online Delhi 4442
[vi] Montana Developers Private Limited v. Aditya Developers and Ors. – 2016 (6) MhLj 660 [Paragraphs 9 and 21]
