No Denial Of Opportunity When Arbitrator Allowed Claimants To Submit Additional Affidavit Revealed In Respondent's Response-Affidavit: Delhi High Court

Brief Facts:

DD Auto Pvt Ltd (Petitioner) was one of the co-claimants in an ongoing arbitration proceeding. The Respondents in the arbitration were Pivotal Infrastructure Pvt. Ltd., Forging Pvt. Ltd., and DD Global Pvt. Ltd. During the arbitration, Forging Pvt. Ltd. was transposed as a co-claimant by an order issued by the Sole Arbitrator. Following this transposition, Forging Pvt. Ltd., now recognized as Claimant No. 4, was allowed to submit an affidavit adopting the pleadings and documents of the other claimants to quantify its claim which the transposed claimant agreed to.

Concurrently, Respondent No. 1, Pivotal Infrastructure Pvt. Ltd., was given the opportunity to file a response to the newly filed affidavit. Respondent No. 1 complied and submitted a response-affidavit. Subsequently, the Petitioner raised an objection to the response-affidavit and contended that the Respondent altered its defense from the one initially presented in an earlier affidavit.

The Sole Arbitrator reviewed this objection and dismissed it. The Arbitrator observed that while Respondent No. 1 had not changed its defense, it had indeed provided additional details to support it. The Arbitrator noted that since arbitration proceedings are not strictly bound by the Civil Procedure Code (CPC) or the Evidence Act, and given that one of the grounds for challenging an arbitral award is the denial of adequate opportunity, it would not be appropriate to prevent Respondent No. 1 from providing these additional particulars. Further, the Arbitrator highlighted that Claimant No. 4, who filed the affidavit against which the response was directed, was originally a Respondent and was only recently transposed as a claimant.

The Arbitrator decided that Respondent No. 1's counsel should refrain from cross-examining the witness on these additional particulars during the current cross-examination session. Instead, Claimants Nos. 1 to 3 were allowed to respond to the new particulars during cross-examination and they were also given the opportunity to file an additional affidavit by way of examination-in-chief limited to addressing these particulars.

The Petitioner challenged this order under the supervisory powers of the High Court as per Article 227 of the Constitution of India. The Petitioner argued that the Sole Arbitrator, despite acknowledging the inclusion of new facts in the response-affidavit, not only accepted it into the record but also denied the claimants the opportunity to file any additional pleadings. This, the Petitioner contended, would make it challenging to address the new submissions and documents introduced through the affidavit during the trial.

Observations by the High Court:

The High Court noted that there was no denial of opportunity in the proceedings before the Sole Arbitrator. The High Court noted that the Sole Arbitrator explicitly allowed the claimants to file an additional affidavit by way of examination-in-chief concerning particulars that had allegedly surfaced for the first time in a response-affidavit filed by Respondent no. 1. This, according to the High Court, demonstrated that the contention of any denial of opportunity was unfounded and needed to be rejected outrightly.

The High Court further observed that the Sole Arbitrator even permitted the Petitioner to lead evidence on these additional particulars going beyond the initial pleadings. This, in the High Court's view, negated any claim of unequal treatment and ensured that the proceedings were conducted fairly. Consequently, the High Court held that the order under challenge did not violate the principles of Section 18 of the Arbitration Act which mandates equal treatment of parties in arbitration.

The High Court noted that judicial interference in arbitral matters should be minimal, and recourse to Article 227 should be exercised only in exceptional circumstances. The High Court referred to its decision in IDFC First Bank Limited v. Hitachi MGRM Net Limited where it was held that interference under Articles 226 and 227 should be avoided unless the arbitral order is so perverse that it is patently lacking in inherent jurisdiction. The High Court reiterated that excessive judicial interference in the arbitral process is discouraged and should only occur in cases of bad faith or where the order is exceptionally perverse.

Therefore, the High Court found no reason to exercise its supervisory powers under Article 227 of the Constitution.

Additionally, addressing the Petitioner's request to file an additional affidavit in response to the approximately 1200 pages of the response-affidavit filed by Respondent no. 1, the High Court stated that the Petitioner was free to make such a request before the Sole Arbitrator.

Case Title: DD Auto Pvt Ltd Vs Pivotal Infrastructure Pvt Ltd

Citation: 2024 LiveLaw (Del) 957

Case Number: CM(M) 3059/2024 & CM APPL. 43068-43069/2024

Advocate for the Petitioner: Mr. Nikhil Kohli, Mr. Kushank Garg and Ms. Saumya Tiwari, Advocates

Advocate for the Respondent: None

Date of Judgment: 08th August, 2024

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