Case Note & Summary
The dispute originated from a 1993 contract awarded by Northern Railway to M/s. Narinder Singh and Sons for additional washing line work at Jammu Tawi Railway Station, which was terminated in 1996 due to alleged non-performance. The appellant invoked arbitration, leading to appointment of an arbitrator after court proceedings. The arbitrator pronounced an ex parte award in 2010, which was upheld by the Additional District Judge but set aside by the Punjab and Haryana High Court in 2017 on grounds of violation of natural justice and undue haste. The core legal issues were whether the award should be set aside under Section 34 of the Arbitration and Conciliation Act, 1996, and whether a new arbitrator should be appointed. The appellant argued for upholding the award, while the respondent contended it was passed in violation of procedural fairness. The Supreme Court analyzed the arbitrator's conduct, noting that the respondent had filed written statements and an affidavit but was denied cross-examination opportunities and had its evidence excluded due to non-payment of costs, despite a waiver application. The court held that this constituted the respondent being 'unable to present his case' under Section 34(2)(a)(iii) and the award being 'in conflict with public policy of India' under Section 34(2)(b)(ii), violating Section 18's mandate of equal treatment. The court emphasized the balance between expeditious disposal and adequate opportunity. Both parties agreed to appoint a new arbitrator, leading the court to appoint a retired High Court judge, directing equal sharing of fees with upfront payment by the respondent due to past conduct, and allowing the arbitration to continue from the stage of cross-examination. The question of interest was left open for the new arbitrator. The appeal was disposed of with no costs.
Headnote
A) Arbitration Law - Setting Aside Arbitral Award - Violation of Natural Justice and Public Policy - Arbitration and Conciliation Act, 1996, Sections 34(2)(a)(iii), 34(2)(b)(ii), 18 - Arbitrator proceeded with haste, denied respondent opportunity to cross-examine witness and present evidence by rejecting waiver of costs application and not taking affidavit on record - Held that respondent was 'unable to present his case' under Section 34(2)(a)(iii) and award was 'in conflict with public policy of India' under Section 34(2)(b)(ii), violating Section 18's mandate of equal treatment and full opportunity (Paras 5-7). B) Arbitration Law - Arbitrator Appointment - Fresh Adjudication - Arbitration and Conciliation Act, 1996 - Parties agreed to appointment of new arbitrator after award set aside - Supreme Court appointed retired High Court judge as arbitrator, directing parties to equally bear fees and expenses, with respondent paying 50% upfront due to past conduct - Arbitration to continue from stage permitting cross-examination of witness and filing of evidence within four weeks (Paras 8-9). C) Arbitration Law - Interest Award - Pre-reference and Pendente Lite Interest - Arbitration and Conciliation Act, 1996, Section 31(7) - High Court held arbitrator could not award interest under contract clause 16(2) - Supreme Court left question open for new arbitrator to decide, not bound by High Court's findings (Para 10). D) Arbitration Law - Procedural History - Exclusion of Time - Arbitration and Conciliation Act, 1996, Section 43(4) - High Court excluded period spent in arbitration and litigation when setting aside award - Supreme Court did not disturb this aspect (Para 4).
Issue of Consideration
Whether the arbitral award should be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 due to violation of natural justice and public policy, and whether a new arbitrator should be appointed.
Final Decision
Supreme Court upheld High Court's setting aside of award, appointed Mr. Justice S.N. Aggarwal (Retd.) as new arbitrator, directed parties to equally bear fees with respondent paying 50% upfront, allowed arbitration to continue from stage of cross-examination of PW-1, left interest question open for arbitrator, disposed of appeal with no costs
Law Points
- Arbitration and Conciliation Act
- 1996
- Section 34(2)(a)(iii) - 'unable to present his case'
- Section 34(2)(b)(ii) - 'in conflict with the public policy of India'
- Section 18 - equal treatment and full opportunity
- Section 19 - arbitral tribunal procedure
- Section 31(7) - interest award
- Section 43(4) - exclusion of time
- principles of natural justice
- arbitrator's duty to avoid haste while ensuring expeditious disposal
