S. 34 Petition Can’t Be Amended To Introduce New Grounds Containing New Facts, To Challenge Arbitral Award: Delhi High Court Reiterates

While dismissing the application seeking to raise additional grounds to challenge the arbitral award, the bench of Justice Yashwant Varma remarked that the proposed amendments sought to be made by the petitioner, NDMC, failed to meet the tests propounded by the Supreme Court in State of Maharashtra vs. Hindustan Construction Co. Ltd (2010), i.e., the amendments being warranted due to existence of very peculiar circumstances of the case and in the interest of justice.

The dispute between the petitioner, New Delhi Municipal Council (NDMC) and the respondent, Decor India Pvt Ltd, under an agreement, was referred to arbitration.

The petitioner, NDMC, challenged the arbitral award under Section 34 of the A&C Act before the Delhi High Court. In an application filed before the Court, NDMC sought inclusion of additional grounds to challenge the award.

NDMC submitted before the Court that the respondent, Decor India, in connection with the agreement between the parties, has been found guilty under Section 420 of the Indian Penal Code, 1860 (IPC) (Cheating) and under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 (criminal misconduct), by the Special Judge - Central Bureau of Investigation, New Delhi (CBI Court). The CBI Court in its judgment had ruled that the respondent had obtained the tender dishonestly and by misrepresentation and concealment of facts, NDMC averred.

Though the Arbitral Award was rendered after the judgment passed by the CBI Court, NDMC contended that the facts relating to the judgment recently came to its knowledge as it was not a party to the proceedings before the concerned CBI Court.

In light of the judgment rendered by the CBI Court, NDMC sought introduction of the ground that since the tender itself was obtained by the respondent, Decor India, by concealment of material facts and by practicing deception, the Award of the tender, the execution of the Agreement and the arbitration proceedings in relation to the same, stood vitiated due to fraud and corruption. Since the award was opposed to public policy, it was liable to be set aside, NDMC pleaded.

The Court observed that NDMC had failed to place on record any material particulars to indicate when it first derived knowledge of the judgment passed by the CBI Court. “The Petitioner has also failed to either aver or establish that despite the exercise of due diligence, the factum of the judgment of conviction was not in their knowledge,” the Court said.

Further, the additional ground sought to be raised by the petitioner, NDMC, was neither pressed before the Arbitral Tribunal nor did it constitute a part of the challenge raised in the Section 34 petition, the bench said.

It referred to the decision of the Supreme Court in State of Maharashtra vs. Hindustan Construction Co. Ltd (2010), where the Apex Court had observed that the words “the court finds that” in Section 34(2)(b) of the A&C Act, do enable the court to permit an amendment in a Section 34 petition, if the very peculiar circumstances of the case so warrant and it is so required in the interest of justice. However, new grounds of challenge containing new material/ facts, cannot be introduced for the first time in an appeal when the said grounds were not originally raised in the arbitration petition under Section 34, the Supreme Court had said.

Thus, the High Court concluded, “It is thus manifest from the ultimate conclusions recorded in Hindustan Construction that the Supreme Court found that notwithstanding it being permissible for an amendment being introduced in a Section 34 petition, new and material facts could not have been introduced when admittedly those grounds were neither raised in the original arbitration petition or for that matter before the Arbitral Tribunal itself.”

Further, the Court observed that the Calcutta High Court in Prakash Industries Limited vs. Bengal Energy Ltd & Anr. (2020) had laid down that the test for allowing or rejecting an amendment to the existing grounds in an Arbitration Petition is whether the proposed grounds would necessitate filing of a fresh application for setting aside of the Award.

Referring to the facts of the case, the bench concluded, “Bearing in mind the aforesaid principles that have been enunciated in the aforenoted two decisions and when this Court tests the proposed amendments on that pedestal, it finds that the ground which is proposed to be introduced is clearly a new case which has no foundation in the original petition.”

It added that the additional ground sought to be raised by NDMC is not an expansion or amplification of a ground forming a part of the challenge under Section 34.

While reckoning that the application for amendment was filed long after the original petition under Section 34 was instituted before the Court, the bench said the introduction of new facts is clearly not merited. The Court, however, added that it may still be open for NDMC to challenge the Arbitral Award on the ground of fraud, based on the material facts that formed a part of the record and which existed before the Arbitral Tribunal.

The bench concluded that in the present case, the proposed amendments sought to be made by NDMC failed to meet the tests propounded by the Apex Court in Hindustan Construction (2010), i.e., the existence of peculiar circumstances and the amendments being warranted in the interest of justice.

Thus, the Court dismissed the application.

Case Title: New Delhi Municipal Council versus Decor India Pvt Ltd

Citation: 2023 LiveLaw (Del) 185

Counsel for the Petitioner/Applicant: Mr. Abhinav Bajaj, ASC with Mr. Saksham Ojha, Advs

Counsel for the Respondent: Mr. Raj Shekhar Rao, Sr. Adv. with Mr. Vikas Mishra and Mr. Sanchit, Advs

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