Section 34 Of Arbitration Act Can't Be Used To Seek Re-Litigation: Delhi High Court

The bench further held that under Section 34 the court cannot enter into a re-appreciation of facts.

Section 34 outlines the grounds on which a party can request the court to set aside an arbitral award.

Brief Facts:

Shakuntla Agency Pvt Ltd (Respondents) initiated arbitral proceedings against Krishan Kumar & Anr (Petitioners) seeking specific performance of an agreement to sell concerning a plot of land. By an award, the arbitrator allowed the claim of the Respondents and directed the Petitioners to execute a sale deed in respect of the disputed property in favor of Respondent 1. Aggrieved by this award, the Petitioners invoked Section 34 of the Arbitration and Conciliation Act and approached the High Court.

Observations by the High Court:

The Petitioners argued that the arbitral proceedings were ex parte as the Petitioners were unaware of the proceedings and only learned about the award when the Respondents filed an execution petition. However, this submission was rejected by the High Court because the arbitral record showed that Petitioner 1 appeared before the arbitrator as evidenced by his undisputed signature on the order sheet. Therefore, the High Court noted that the Petitioner 1 was aware of the arbitral proceedings but chose to remain absent and did not file a Statement of Defence or participate in the proceedings.

The Petitioners further contended that the agreement to sell could not have been executed because the allotment letter under which the disputed property was allotted to Mr. Zile Singh contained a covenant prohibiting further transfer of the property. However, the High Court noted that this allotment letter was never part of the arbitral proceedings. Since the Petitioners did not present the allotment letter or plead the non-transfer covenant before the arbitrator, the High Court held that they could not raise this argument in the Section 34 proceedings.

The High Court further found that Petitioner 1 explicitly admitted to receiving payments from Respondent 1 as per the terms of the ATS regarding the disputed property. Therefore, it held that the Petitioners could not now question the validity of the ATS or the Respondents' right to seek its specific performance.

The Petitioners' next argument revolved around an undated notice, which preceded the Section 21 notice issued by Respondent 1 to the Petitioners. They pointed out that the plot number was mentioned as 61 instead of 66 which was the subject of the dispute before the Arbitrator. The Respondents countered that this was merely a typographical error and noted that the correct plot number, 66,was mentioned later in the same letter. The High Court held that the discrepancy was in the legal notice preceding the Section 21 notice, not in the Section 21 notice itself, which did not mention any plot number but referred to the preceding legal notice.

Moreover, the High Court noted that the Petitioners participated in the arbitral proceedings without raising any objections about the plot number before the Arbitrator. Hence, it held that they could not now, under Section 34, claim that the arbitral proceedings concerned a different plot than what was mentioned in the Section 21 notice.

The High Court held that the arguments presented by the Petitioners essentially sought a reappreciation of the facts, which is beyond the scope of Section 34. The bench held that this section is not meant to allow litigants to avoid participating in arbitral proceedings only to later challenge the award in court. It held that the court cannot reappreciate the facts under Section 34, and the Petitioners should have raised their objections before the Arbitral Tribunal.

Therefore, the petition was dismissed.

Case Title: Krishan Kumar & Anr Vs Shakuntla Agency Pvt Ltd

Case Number: O.M.P. 437/2011

Advocate for the Petitioner: Mr. Rahul Dubey

Advocate for the Respondent: Mr. Saurabh Mishra, Ms. Aashnaa Bhatia and Mr. Abhinav Pandey

Date of Judgment: 25.07.2024

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