Recourse To Section 34(4) Of The A&C Act Can’t Be Opted For Consideration Of New Material Evidence: Delhi High Court

The bench of Justice Prateek Jalan held that Section 34(4) of the A&C Act empowers the Court deciding an application under Section 34(1) of the Act to adjourn the challenge proceedings and remit the matter back to the arbitral tribunal to allow it to eliminate the ground of the challenge, however, this power can only be exercised to allow the tribunal to provide for gaps in the reasoning or cure any other curable defect, however, it does not extend to allow the tribunal to give a new finding or a fresh decision.

The Court held that failure of the arbitral tribunal to consider material evidence is not a curable defect and the recourse to Section 34(4) would not be permissible in such a situation as the new evidence may have the potential of changing the outcome of the dispute which is beyond the powers under Section 34(4) as the tribunal cannot overturn its decision. It held that permitting an arbitral tribunal to consider the evidences that it originally failed to consider would be akin to a remand which is prohibited under the law.

Facts

The parties entered into a Sales and Purchase Agreement dated 14.12.209 wherein the respondent was to supply Liquid Oxygen and Nitrogen to the petitioner. The agreement contained an arbitration clause.

A dispute arose between the parties which was referred to an arbitrator appointed by the Court. The petitioner sought to bring on record certain evidence for the perusal of the arbitrator. The tribunal vide order dated 25.01.2016 held that these evidence would be taken on record without any requirement of formal proof. However, the learned arbitrator passed away and the Court appointed the substitute arbitrator.

The new arbitrator formed eight issues and additional evidence (Annexure A1- A60) pertained to issue no. 4. The tribunal refused to consider these documents on the ground that these were disputed by the respondent and the petitioner failed to prove these documents. In this process, the tribunal ignored the earlier order dated 25..01.2016 wherein the tribunal had dispensed with the requirement of any formal proof. Accordingly, the tribunal decided the issue in favour of the respondent and passed an award in its favour.

Aggrieved by the award, the petitioner challenged it under Section 34 of the Act. Thereafter, the respondent moved an application under Section 34(4) of the A&C Act and requested the Court to remit the matter back to arbitrator and allow it to consider the documents and remove the defect in the award.

Contention of the Parties

The respondent/applicant made the following submissions in favour of remitting the matter to the tribunal under Section 34(4) of the Act:

• The order of the tribunal dated 25.01.2016 ought not to be read as a ruling on the admissibility of the documents, their relevance or their contents, but confined to the question of formal proof of the e-mails, for example by filing of certificate under Section 65B of the Indian Evidence Act, 1873, thus, there is no fault in the reasoning of the arbitral tribunal as it has not refused to consider the documents but held the documents to be not proved. However, without prejudice to this contention, the respondent invoked Section 34(4) of the Act, by which the tribunal can be given an opportunity to resume proceedings and eliminate the ground of challenge.
• The non-consideration of an evidence is a curable defect which can be resolved by the tribunal under Section 34(4) of the Act.
• Any deficiency in the award including the lack of reasoning can be removed by taking recourse to Section 34(4) of the Act, therefore, the matter must be remitted back to the tribunal to allow it to consider the documents filed by the petitioner and remove the defect in the award if any.

The petitioner made the following submissions against the application moved by the respondent:

• The matter lies outside the scope of Section 34(4) as it is not a case wherein the tribunal has failed to provide reasoning for any of its finding but a case wherein the tribunal has not considered the material evidence in complete disregard to its earlier order dispensing with the requirement of formal proof.
• Recourse to Section 34(4) is only permissible in cases of absence of reasoning on any finding or to cure any other curable defect and not when the tribunal has failed to give a finding itself or where it failed to consider relevant material. Allowing the tribunal to consider an evidence afresh would have a direct impact on the outcome of the award and the same is not permissible under the Act as the tribunal cannot reconsider its decision.

Analysis by the Court

The Court observed that arbitrator has rendered a finding on an issue without considering material piece of evidence. The Court held that is it not a case where the tribunal has rendered a finding with inadequate reasons but a case of non-consideration of material evidence.

The Court held that recourse to Section 34(4) of the A&C Act cannot be taken to permit the arbitral tribunal to consider the material evidence which it earlier failed to consider.

The Court held that Section 34(4) of the A&C Act empowers the Court deciding an application under Section 34(1) of the Act to adjourn the challenge proceedings and remit the matter back to the arbitral tribunal to allow it to eliminate the ground of the challenge, however, this power can only be exercised to allow the tribunal to provide for gaps in the reasoning or cure any other curable defect, however, it does not extend to allow the tribunal to give a new finding or a fresh decision.

The Court held that failure of the arbitral tribunal to consider material evidence is not a curable defect and the recourse to Section 34(4) would not be permissible in such a situation as the new evidence may have the potential of changing the outcome of the dispute which is beyond the powers under Section 34(4) as the tribunal cannot overturn its decision. It held that permitting an arbitral tribunal to consider the evidences that it originally failed to consider would be akin to a remand which is prohibited under the law.

Accordingly, the Court dismissed the application filed by the respondent.

Case Title: INOX AIR PRODUCTS PVT. LTD. v. AIR LIQUIDE NORTH INDIA PVT. LTD. O.M.P. (COMM.) 212 OF 2018

Citation: 2023 LiveLaw (Del) 271

COUNSEL FOR THE PETITIONER: Mr. Jayant Bhushan, Senior Advocate with Mr. Joseph Pookkatt, Mr. Dhawesh Pahuja and Mr. Vaibhav Dwivedi, Advocates.

COUNSEL FOR THE RESPONDENT/APPLICANT: Mr. Akhil Sibal, Senior Advocate with Mr. Gaurav Gupta, Mr. Samyak Gangwal, Ms. Eesha Bakshi, Ms. Deboshree Mukherjee and Ms. Bahuli Sharma, Advocates.

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