Case Note & Summary
The petitioners, Shunk Corrugators Pvt. Ltd. and five others, challenged an arbitral award dated 21st April 2010 passed by an arbitrator appointed under Section 84(4) of the Multistate Cooperative Societies Act, 2002 (MSCS Act) on a reference by the respondent, The Bharat Coop. Bank (Mumbai) Ltd., regarding monetary claims. The petitioners were absent throughout the arbitration proceedings and did not file any reply or defence to the statement of claims. The arbitrator took on record an affidavit in examination-in-chief and passed the award on the same day, without giving the petitioners any opportunity to cross-examine the respondent's witness. The arbitrator also relied on certified copies of documents instead of originals, as the originals were in police custody, but no application was made to lead secondary evidence. The respondent argued that the Arbitration and Conciliation Act, 1996 applied, and under Section 19, the arbitrator need not follow CPC or Evidence Act strictly, and since the petitioners were defaulters, the award should not be interfered with. The court held that while the arbitrator is not mandatorily bound by CPC and Evidence Act, the principles of natural justice, fair play, and equity cannot be overlooked. The award was passed in a manner that denied the petitioners any opportunity to cross-examine, and the reliance on secondary evidence without proper application or consent was improper. The court set aside the award and remitted the matter back to the arbitrator for fresh consideration, giving the petitioners an opportunity to file a reply and participate in the proceedings.
Headnote
A) Arbitration Law - Natural Justice - Ex-Parte Award - Arbitrator must follow principles of natural justice even if not bound by CPC/Evidence Act - The arbitrator proceeded ex-parte and passed award on the same day as taking affidavit evidence, denying petitioners opportunity to cross-examine - Held that such award violates natural justice and is liable to be set aside (Paras 7-9). B) Evidence Law - Secondary Evidence - Certified Copies - Without application or consent, arbitrator cannot rely on certified copies in place of originals - The respondent's documents were in police custody but no application was made to lead secondary evidence - Held that reliance on such evidence without proper procedure is improper (Para 4).
Issue of Consideration
Whether an arbitral award passed ex-parte without giving the petitioners an opportunity to cross-examine the respondent's witness and without following proper procedure for secondary evidence is sustainable under the Arbitration and Conciliation Act, 1996 and the Multistate Cooperative Societies Act, 2002.
Final Decision
The court set aside the impugned award dated 21st April 2010 and remitted the matter back to the arbitrator for fresh consideration, giving the petitioners an opportunity to file a reply and participate in the proceedings. The arbitrator is directed to decide the matter afresh in accordance with law and principles of natural justice.
Law Points
- Principles of natural justice must be followed in arbitration proceedings even if strict CPC/Evidence Act rules are not applicable
- Arbitrator cannot rely on secondary evidence without application or consent
- Ex-parte award without opportunity for cross-examination is unsustainable
