Arbitrator May Use Own Knowledge And Expertise To Arrive At Conclusion But Must Allow Parties To Present Their Case: Madras High Court

The bench of Acting Chief Justice T Raja and Justice Bharatha Chakravarthy was adjudicating appeals filed by Transtonnelstroy-Afcons who had entered into an agreement with CMRL for carrying out the construction of Chennai metro.

The appellant was challenging the order of the single judge setting aside an Arbitral award wherein the tribunal had ordered in favour of the appellants and conducted its own analysis to come at a conclusion with respect to extension of time for completing the project.

The bench noted that the arbitral tribunal had called for unmarked records after reserving the issues for orders and had failed to inform either of the parties the purpose of collecting the records. Merely emailing both the parties calling for the records would not mean granting them an opportunity when the parties were in the dark about the purpose of the such records.

Therefore, having found the necessity of the said documents, simply calling for the documents without divulging the reasons therefor, after reserving the case for orders and after their internal deliberation, clearly amounts to taking these materials behind the back of the parties. The E-Mails of both the Tribunals are extracted supra. It can be seen that there is absolutely no whisper whatseover as to what for the materials were called for. Mere marking a copy of the mail to both sides, does not amount to grant of opportunity, when the parties had no idea or clue as to what the purpose was.

Thus, the court noted that when the Tribunal had relied upon data that was disputed by one of the parties to arrive at a conclusion and the parties were not given an opportunity to present their case, it meant that the party was unable to present its case. Such an award, as per the opinion of the court was liable to be set aside.

The error committed by the Tribunal thus is apparent on the face of the record, substantial and fundamental in this case as only the additional materials forms the basis for the core reasoning of the award. Therefore, it is a compelling reason for the Court to set aside the arbitral award. Therefore, we do not find any error whatsoever in the order of the learned Single Judge inasmuch as it sets aside both the awards, hence, the question is answered accordingly.

The appellant had argued that mere non-affording an opportunity to comment is different from ‘unable to present the case’. It was submitted that even after calling for the records, the tribunal had passed the award only after 53 days and during this time there was no demur on the part of CMRL and it kept quiet.

It was further submitted that the tribunal did not rely upon any new document, but only called upon to install a software which was used by the parties to analyse the data entered into by the appellants on a day to day basis while it was working for CMRL. The tribunal had found some causes for delay in execution of work to be correct and some factually incorrect and thus had ordered accordingly.

CMRL on the other hand questioned the manner in which the tribunal had called for the records from one party after reserving the matter for orders and failed to list out the purpose. It submitted that the tribunal should have reopened the case if new materials had to be perused and marked the document through witnesses or as Court documents thus giving CMRL an opportunity to raise objections. Thus it was submitted that the principle of audi altarem partem was not followed.

The court noted that the tribunal had a duty to provide the parties an opportunity to comment when it decided to deviate from the agreed upon procedure for evaluating the case and to adopt the method of technical evaluation by its own expertise.

The court also disagreed with the decision of the tribunal to remand the matter back to the tribunal for fresh consideration since the tribunal was continuing adjudication in respect of other claims. The court held that the Apex court in Kinnari Mullick and Anr. Vs. Ghanshyam Das Damani has clearly held that an exercise of remand can only be resorted to if only a written application is made under Section 34(4) of the Arbitration Act without setting aside the award. In the present case, since the award was already set aside, the parties were given liberty to commence de novo proceedings in the manner known to law.

Case Title: M/s. Transtonnelstroy – Afcons (JV) v. M/s.Chennai Metro Rail Ltd

Citation: 2023 LiveLaw (Mad) 63

Case No: O.S.A.(CAD).Nos.147 of 2021