Arbitrator Not Required To Provide Detailed Reasons When Granting Request To Summon Witnesses Under Section 27(1) of Arbitration Act: Delhi High Court

Section 27(1) of the Arbitration and Conciliation Act, 1996 allows the arbitral tribunal or a party with the tribunal's approval to apply to the court for assistance in taking evidence.

Brief Facts:

BPT Infra Project Pvt. Ltd. (Petitioner) was awarded the construction contract by Indraprastha Ice And Cold Storage Pvt. Ltd. (Respondent) for setting up of a CA (Control Atmosphere Storage) Plant of the respondent at Kullu, Himachal Pradesh.

The cost of the contract was enhanced from ₹ 10 crores to ₹ 20 crores while it was being performed. The Petitioner contended that this was done mala fide to ensure that the Petitioner could not carry out the contract and that, for untenable reasons, the contract was terminated. The Petitioner, therefore, claimed the expected loss of profits in the arbitral proceedings. During the course of arbitral proceedings, the Petitioner filed an application under Section 27 of the Arbitration and Conciliation Act, 1996.

The Petitioner contended that the claimant filed its list of witnesses before the Arbitrator with a copy to the Respondent and needed the assistance of the Court to summon the following witnesses: D.P. Singh and S.C. Jain or any other authorised person from M/s Architect Bureau. M/s Architect Bureau was the architect consultant engaged by the Respondent and the witness was required to depose regarding the changes made or directed by the Respondent from time to time in the project.

The Arbitral Tribunal, after considering the application, passed an order stating that the evidence of the witnesses was quite relevant for deciding the arbitration case. Therefore, the Petitioner was directed to approach the High Court to seek assistance in summoning the witnesses. Based on this order, the Petitioner has filed the application before the High Court.

The Respondent contended that an arbitral order does not suffice to constitute an order granting approval within the meaning of Section 27(1) of the Arbitration Act. According to it, the grant of approval cannot be a mechanical exercise and the order must reflect the conscious application of mind as to the relevancy of the evidence of witnesses.

Observations by the High Court:

The High Court noted that Section 27(1) does not explicitly mandate that the arbitral tribunal must offer detailed reasons when granting such a request. It noted that the rationale is that if the tribunal were to provide an elaborate opinion on the relevance of the evidence at this stage, it might lead to objections that the issue has been pre-judged.

The High Court referred to its decision in Hindustan Petroleum Corporation Ltd v. Ashok Kumar Garg where it was observed that while detailed reasons might not be necessary, an application of mind must be evident from the arbitral tribunal's order. It noted that the tribunal should not merely give mechanical approval but must scrutinize whether the evidence sought is relevant.

In the Steel Authority of India Ltd v. Uniper Global Commodities, the tribunal similarly failed to examine the relevance or materiality of the evidence when granting permission to summon witnesses.

The High Court noted that while these decisions affirm the need for the tribunal's application of mind, they do not require detailed reasoning on the relevance of evidence. It held that requiring detailed reasoning might overstep the statutory language of Section 27, which only requires the tribunal's approval.

Therefore, the High Court held that the arbitral tribunal appropriately exercised its discretion and that interference by the Court would contravene the principles of arbitral autonomy and minimal judicial intervention. Consequently, the petition was allowed, and the witnesses were directed to appear before the arbitral tribunal.

Case Title: BPT Infra Project Pvt. Ltd. Vs Indraprastha Ice And Cold Storage Pvt. Ltd.

Citation: 2024 LiveLaw (Del) 783

Case Number: O.M.P. (E) (COMM.) 20/2024 & I.A. 32811/2024

Advocate for the Petitioner: Mr. Akshu Jain, Ms. Stuti Jain and Ms. Vishwa Bharti, Advs.

Advocate for the Respondent: Mr. Naman Joshi, Adv with Mr. Aryan Verma, Adv.

Date of Judgment: 10.07.2024

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