Amendment To Section 34 Application Of The A&C Act Would Not Be Permissible If It Intends A New Challenge: Bombay High Court

The Single Bench of Justice Mangesh S. Patil held that in an appropriate case it is permissible to allow the amendment to application under Section 34 even beyond the period provided under Section 34(3) of the Act, however, the amendment can only add some facts to the pending challenge but it cannot be allowed if it constitutes a fresh challenge.

The Court further held that the benefit of the decision of the Supreme Court in Ellora Paper Mills Limited Vs. State of Madhya Pradesh (2022) 3 SCC 1, wherein the Supreme Court held that Section 12(5) would also apply to pending arbitration that commenced before the 2015 Amendment Act, would not be available to a party if it failed to raise the objection regarding neutrality before the passing of the arbitral award.

Facts

Pursuant to an arbitration between the parties, an award was passed on 31.03.2018. Aggrieved by the award, the petitioner filed application on 26.06.2018. The respondent simultaneously filed for the enforcement of the award.

Thereafter, after a lapse of two years, the petitioner preferred an application for amendment to its application under Section 34 of the Act on the ground that some important legal points were not taken in the original application and for a stay on the execution of the award. The District Judge dismissed the applications preferred by the petitioner.

Aggrieved by the decision of the District Court, the petitioner preferred a writ petition against the impugned order.

Grounds of Challenge

• The provision of Section 12(5) of the A&C Act would also apply to pending arbitration as on the date of amendment; therefore, the petitioner via the proposed amendment is raising the ground regarding the neutrality of arbitrator. Reliance was placed on the decision on Ellora Paper Mills Limited Vs. State of Madhya Pradesh; (2022) 3 Supreme Court Cases 1.
• The petitioner is also raising an additional ground of fraud which goes to the root of the legality of the award, therefore, the District Court erred in rejecting the application of the petitioner.
• The District Court also erred in refusing to entertain the application of the petitioner for stay on the award.

The respondent countered the submission of the petitioner on the following grounds:

• Absolutely new grounds to challenge the award in a pending proceeding under Section 34 were being sought to be inserted by way of the proposed amendment and the same is impermissible.
• There was no foundation for the newly proposed grounds as those objections were never raised either before the arbitrator or in the original petition.

Analysis by the Court

The Court held that that by way of the proposed amendment the grounds which are now being sought to be inserted have absolutely no foundation in the petitioner's application preferred under Section 34 of the Arbitration Act.

The Court held that in an appropriate case it is permissible to allow amendment to application under Section 34 even beyond the period provided under Section 34(3) of the Act, however, the amendment can only add some facts to the pending challenge but it cannot be allowed if it constitutes a fresh challenge.

The Court observed that the ground of neutrality of the arbitrator and fraud were being sought to be raised for the first time by way of the proposed amendment and the petitioner at no point in time raised such objections under Section 12, 13 or 14 of the Act.

The Court further held that the benefit of the decision of the Supreme Court in Ellora Paper Mills Limited Vs. State of Madhya Pradesh (2022) 3 SCC 1, wherein the Supreme Court held that Section 12(5) would also apply to pending arbitration that commenced before the 2015 Amendment Act, would not available to a party if it failed to raise the objection regarding neutrality before the passing of the arbitral award.

However, the Court held that the District Court erred in refusing to entertain the application for stay on the award on the wrong assumption that by way of such application the interim relief/stay has been sought only till the decision on the amendment application whereby the petitioner had prayed for amendment of the application, when the prayer in the application clearly shows that the petitioner was seeking stay to the execution of the award till the decision of the arbitration application. The Court directed the District Court to consider the application for a stay afresh.

Accordingly, the Court party allowed the application.

Case Title: Friends & Friends Shipping Pvt. Ltd v. Central Warehousing Corporation, Writ Petition No. 6501 of 2022

Date: 12.07.2022

Citation: 2022 LiveLaw (Bom) 252

Counsel for the Petitioner: Mr. R.F. Totla with Swapnil Lohiya

Counsel for the Respondent: Mr. R.P. Uttawar

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