In Canara Nidhi Limited v M. Shashikala 2019 SCC OnLine SC 1244, the Supreme Court addressed the issue of whether the parties can adduce evidence to prove the grounds to set aside a domestic award under Section 34(2) of the Arbitration & Conciliation Act, 1996 (‘Act’). The Court while deciding in negative inter alia held that the proceedings under Section 34(2) are summary proceedings. Moreover, the issue is already decided by the 2019 Amendment Act which inter alia changed the evidentiary threshold to challenge a domestic award from “furnishes proof” to “establishes on the basis of the record of the Arbitral Tribunal”. However, in light of its earlier dictum in Fiza Developers and Inter-Trade Private Limited v AMCI (India) Private Limited (2009) 17 SCC 79 and Emkay Global Financial Services Ltd. v. Girdhar Sondhi (2018) 9 SCC 49, the Supreme Court also observed while deciding an application under Section 34 of the Act, the Court may permit the parties to file affidavits in proof of their respective stands, and if necessary permit cross-examination by the other side, before hearing arguments but only in exceptional circumstances where the case so warrants. Detailed case analysis given below:-
The dispute between the parties was referred to arbitration which culminated into an award. Both the parties adduced oral and documentary evidence before the arbitrator. The award was assailed by the Award Debtor under Section 34 of the Act before a District Judge along with an application seeking to permit it to adduce evidence to substantiate the grounds for aside the award. The application was dismissed holding that the grounds to set aside the award can very well be met by perusing the arbitral award and there is no necessity of adducing fresh evidence in the application under Section 34 of the Act. This decision of the District Judge was appealed before the High Court under its writ jurisdiction enshrined under Article 226 & 227 of the Indian Constitution which deals with the extraordinary powers of the High Court. The High Court while placing reliance on the Supreme Court decision of Fiza Developers and Inter-Trade Private Limited (Supra), remanded the matter back to the District Judge to “recast the issues” with further granting the liberty to the Award Debtor to place its evidence by affidavit in the proceedings under Section 34 of the Act. This decision of the High Court was in appeal before the Supreme Court in the present proceedings.
Award Creditor contended as under:
- That the proceedings under Section 34 to set aside a domestic award are summary in nature;
- That the validity of the award has to be decided on the basis of the materials produced before the arbitrator and there is no scope for adducing fresh evidence before the court in the proceedings under Section 34 of the Act;
- That the High Court had misread the ratio of the Supreme Court in Fiza Developers and Inter-Trade Private Limited (Supra).
Per contra the Award Debtor contended as under:
- That in order to prove the grounds to set aside the award under Section 34 of the Act, adducing additional evidence is necessary;
- That the grounds enumerated under Section 34(2) of the Act are specific and therefore necessarily the Award Debtor have to plead and prove such grounds.
Ratio of Fiza Developers and Inter-Trade Private Limited
In this case, the question that was posed before the Supreme Court was whether issues as contemplated under Order XIV Rule 1 of the Code of Civil Procedure, 1908 of India (‘Code’) should be framed in applications to set aside a domestic award under Section 34 of the Act. While deciding this issue, the Court inter alia observed that an application under Section 34 for setting aside an award will not ordinarily require anything beyond the record that was before the arbitrator. However, if there are matters beyond the record, and are relevant to the determination of issues arising under Section 34(2)(a), they may be brought to the notice of the Court by way of affidavits filed by both parties.
The Court held as under:
- The proceedings under Section 34 of the Act (i.e. application to set aside a domestic award) are summary in nature.
- For expeditious disposal of arbitration proceedings, the application under Section 34 of the Act should be decided only with reference to the pleadings and evidence placed before the Arbitral Tribunal;
- In Fiza Developers and Inter-Trade Private Limited (Supra), the Court albeit held that the application under Section 34 are summary proceedings, an opportunity to the aggrieved party has to be afforded to prove existence of any of the grounds under Section 34(2) of the Act;
- This judgement was considered by Justice B.N. Srikrishna Committee which pointed out that opportunity to furnish proof in proceedings under Section 34 of the Act has led to inconsistent practices and therefore the Act needs an amendment in Section 34 to rectify this anomaly;
- Based on the aforesaid recommendations, the Act is amended by the Arbitration & Conciliation Amendment Act 2019 which changed the parameters to adduce evidence under Section 34 from “furnishes proof” to “establishes on the basis of the record of the Arbitral Tribunal”.
- Therefore, Section 34 application does not ordinarily require anything beyond the record that was before the arbitrator and that cross-examination of persons swearing in to the affidavits should not be allowed unless absolutely necessary.
- By adding sub-clauses 5 & 6 to Section 34 fixing time frame to dispose of the matter under Section 34 is to avoid delay and to dispose of the application expeditiously and in any event within 1 year from the date on which the notice of such application is served upon the other party.
- In addition, in arbitration proceedings, the parties had sufficient opportunity to adduce oral and documentary evidence.
- In the case in hand, the Award Debtor have not made any exceptional grounds in order to permit it to adduce oral and documentary evidence in an application under Section 34. Therefore, the Supreme Court set aside the order of the High Court.
Position in Singapore
Section 48 of the Arbitration Act of Singapore (‘AA’) is the equivalent of Section 34 of the Act. The material part of Section 48 reads as under:-
48.—(1) An award may be set aside by the Court —
(a) if the party who applies to the Court to set aside the award proves to the satisfaction of the Court that —
The expression used is “proves to the satisfaction of the Court” in distinction to the expression “establishes on the basis of the record of the Arbitral Tribunal” as provided under Section 34(2) of the Act.
An application to set aside a domestic award under Section 48 of AA is to be made by originating summons as per Order 69 Rule 2(e) read with Order 69 Rule 5 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (‘ROC’). This application is supported by an affidavit stating the grounds on which it is contended that the award should be set aside. Further, the supporting affidavit inter alia should set out any evidence relied on by the plaintiff.
It is pertinent to lay emphasis on the word ‘set out’ which may imply that the Singaporean Courts may not allow adducing fresh evidence at the time of hearing of setting aside application. In addition, under the Indian regime, the requirement of filing an affidavit in support of a setting aside application is permissible only in exceptional circumstances as held by the Supreme Court of India in the above-discussed case. However, under AA, it appears to be a mandatory condition to file such an affidavit in terms of express wordings used in Order 69 Rule 5 of ROC which reads as under:-
Application to set aside award (O. 69, r. 5)
5.—(1) The originating summons for setting aside an award under section 48 of the Act must be supported by an affidavit stating the grounds on which it is contended that the award should be set aside.
(2) The supporting affidavit must —
(b) set out any evidence relied on by the plaintiff
A similar scheme is available under Order 69A Rule 2 of ROC in respect of application to set aside a foreign award under IAA. In AQZ v ARA –  2 SLR 972, the Singapore High Court while dealing with the issue of whether oral evidence and cross-examination should be allowed by the Court while hearing an application to set aside a foreign arbitral award inter alia held that the court would undertake a de novo hearing of the arbitral tribunal’s on its jurisdiction in an application to set aside an arbitral award on the ground of lack of jurisdiction to hear the dispute. But that did not mean that oral evidence and cross-examination would be allowed in every application, in effect, turning every challenge into a complete rehearing of all that had occurred before the arbitral tribunal. Rather, Order 69A Rule 2 of the ROC (similar worded as Order 69A Rule 2 as per as present analysis is concerned) which set out the procedure to be followed in an application to set aside an arbitral award, contemplated that generally the matter would be resolved by way of affidavit evidence. The court could allow oral evidence and/or cross-examination pursuant to Order 28 Rule 4(3) if it considered
- that there was or could be a dispute as to fact; and
- that to do so would secure the “just, expeditious and economical” disposal of the application.
Thus, it appears where the scheme under Section 34(2) of the Act read with the Supreme Court observations in Fiza Developers and Inter-Trade Private Limited (Supra) and Canara Nidhi Limited v M. Shashikala, parties may not be allowed to adduce oral and documentary evidence while deciding an application to set aside a domestic award, under the IAA and AA of Singapore, the parties may be allowed to adduce oral evidence and/or cross-examination subject to conditions stipulated by Prakash J in AQZ v ARA –  2 SLR 972 as set out above.
Disclaimer: The views expressed on this post are mine and do not reflect the views of the organisation(s) I am engaged with