Arbitration Act | New Evidence Cannot Be Adduced At S.37 Stage, Bar Of Limitation U/S 34(3) Is Attracted: Allahabad HC

The Allahabad High Court Bench of Justices Mahesh Chandra Tripathi and Prashant Kumar, held that the amendment obtained or raising fresh grounds virtually amounts to file a fresh appeal and would be barred by limitation as laid down under Section 34(3) of the Arbitration Act. Hence, it is not open for the appellant to raise any new ground or adduce any fresh evidence in an appeal under Section 37 of the Arbitration Act.

Brief Facts

The instant appeal under Section 37 of 1996 Act1 has been filed seeking quashing of the impugned judgment and order dated 14-02-2023 passed by the Presiding Officer, Commercial Court, Jhansi, arising out of Arbitration Case decided between the parties by the Sole Arbitrator on 03-05-2022.

A tender was invited on 01-08-2008 by the appellants for the construction of Head Regulator at Km.0.410 of Margin Bandh to protect the Banda City from the flood of Cane River. In response to it, the contractor/opposite party no.2/claimant applied and his bid was found to be responsive, when tender was opened on 10-09-2008. Accordingly, the tender was awarded to the claimant and letter of acceptance was issued on 07-11-2008.

The date of commencement of the work was given as 22-11-2008 and the period of completion of the work was nine (09) months, hence the stipulated date of completion was given as 21-08-2009.

The work remained suspended/closed at various times, due to which the claimant's staff, labours and machinery remained idle at work site without doing any work, and this was duly intimated to the appellants by the claimant.

The effect of this delay was that the project started after lapse of six months and this delay could not be attributed to the contractor. Because of this inordinate delay and various other issues, the claimant claims that he had suffered a huge loss, which resulted into a dispute between the parties. As per the agreement, the matter was referred to the Arbitrator.

After long-drawn proceedings of arbitration with filing of claim, reply and counter claim, filing of various applications and written submission, the Sole Arbitrator passed the award on 03.05.2022.

The award so made by the Sole Arbitrator was challenged by the State appellant under Section 34 of the 1996 Act before the Commercial Court. A vast variety of contentions urged on behalf of the parties were considered by the Commercial Court and the relevant points were answered in favour of the claimant and thereby, the award was upheld while rejecting the application under Section 34 of the 1996 Act.

Contentions

The appellant submitted that the Sole Arbitrator had proceeded to pass the impugned award dated 03.05.2022 without even perusing the document/agreement dated 22.11.2008, which contained the arbitration clause, which was invoked by the opposite party. However, the said documents were never placed before the Sole Arbitrator and he, without examining the said document, proceeded to pass the award dated 03.05.2022 therefore, the impugned award is vitiated by patent illegality appearing on the face of the award.

It was further submitted that the Commercial Court had erred in law in not considering the factual aspect of the matter that the claimant had not even started the concerned work even after substantial time of six months and indulged in malpractices by resorting to various excuses.

It was further submitted that the Sole Arbitrator had passed an award without having the glance of the agreement and in absence of any consideration of the relevant clauses of the contract, such award is patently illegal. They relied on judgments passed by Hon'ble Supreme in State of Chhattisgarh and ors v. Sal Udyog Pvt. Ltd.(2002) and Associate Builders vs. Delhi Development Authority (2015) in support of their contentions.

Per contra, the respondents submitted that as per Section 34 and 37 of the 1996 Act, the scope of interference by the Court is very limited and the Court can only interfere in a situation where the award is found to be contrary to the fundamental policy of Indian Law or is against the interest of India or the award suffers from justice or morality or if it is patently illegal.

The reliance was placed on a judgment passed by Hon'ble Supreme Court in the matter of Reliance Infrastructure Ltd. Vs. State of Goa (2024) .

Court's Analysis

The court discussed the scope of interference under section 37 of Arbitration Act and referred to the Supreme Court judgment in Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd (2019) wherein it was held that the Award made by the Arbitral Tribunal are not amenable to interference either on the Section 34 or Section 37 of the Arbitration Act. The scope of interference is only where the finding of the tribunal is either contrary to the terms of the contract between the parties or ex facie, perverse that interference by this Court, is absolutely necessary.

The court in the above case further observed that the Arbitrator/Tribunal is the final arbiter on facts as well as in law, and even errors, factual or legal, which stop short of perversity, do not merit interference under Sections 34 or 37 of the Arbitration Act.

The court further referred to another judgment of the Supreme Court in Delhi Airport Metro Express Private Limited Vs. Delhi Metro Rail Corporation Limited wherein it was held that contravention of law not linked to public policy or public interest is beyond the scope of expression 'patent illegality;. What is prohibited is for Courts to re-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as Courts do not sit in appeal against the arbitral award.”

Based on the above, the court observed that the Hon'ble Supreme Court in a plethora of judgments has clearly laid down that the scope of judicial intervention under Section 34 or Section 37 of 1996 Act should be minimum and the Court ought not to interfere with the findings of the Arbitrator unless the same is perverse, illegal and capricious and the award is such that shakes the conscience of the Court.

The court further rejected the contention of the appellant with respect to adducing fresh evidence and referred to the Supreme Court judgment in State of Maharashtra Vs. Hindustan Construction co. Ltd (2010) wherein it was held that the amendment in a pleadings under Section 37 of the 1996 Act cannot be allowed after expiry or limitation period as stated under Section 34 (3) of the 1996 Act.

Based on the above the court held that it is not open for the appellant to raise any new ground or adduce any fresh evidence in an appeal under Section 37 of 1996 Act.

The court further referred to section 5 of Arbitration Act which provides for minimum judicial interference and observed that the history of scheme of Arbitration and Conciliation Act, 1996 supports the conclusion that the time limit prescribed under Section 34 to challenge the award is absolute and unextendable by Court. There is no application of Section 5 of the Limitation Act qua Section 34 of the Act, 1996.

The court concluded that In view of the aforesaid facts and circumstances, we have no hesitation to hold that the appellants have failed to make out any case for interference under Section 37 of the 1996 Act. The Arbitrator after considering all the evidences and record had passed a detailed speaking award, dealing with every aspect of the claim separately, which is also approved by the Commercial Court.

The appellants herein have failed to make out any case, which may call for interference by this Court. Under the facts and circumstances, we do not find any merit to entertain both the applications and accordingly, the same stand rejected.

Case Title: State Of Uttar Pradesh and 2 others v. M/S Virat Construction

Case Reference: 2024:AHC:171241-DB

Judgment Date: 25/10/2024

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