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Case Reviews, The Law

M/s Canara Nidhi Limited v. M Shashikala And Others

The Supreme Court, by overruling the Karnataka High Court judgment, stated that the permission to adduce evidence under section 34 of the Arbitration and Conciliation Act,1996 can only be granted in exceptional circumstances and not otherwise.

By: Nishtha Srivastava, 4th year, BBA LLB (Corporate Laws), UPES, Dehradun.

Facts:

  • The Appellant is a financial institution which advanced a loan to the Respondent no.1 of Rs. 50,00,000 and while the respondents no. 2,4, 5 to 8 acted as the guarantors. 
  • Since the agreement contained an arbitration clause, when the respondent no.1 failed to repay the loan and discharge his liabilities, the dispute was thereafter referred to the Arbitrator. 
  • On the service of oral and documentary evidence, the Arbitrator finally passed an award in the favor of the appellant.
  • Thereby the Arbitrator, after the submission of oral and documentary evidence, passed an award and directed the Respondents to pay an amount of Rs.63,82,802/- with interest on Rs.50,00,000/- at 14% per annum from 11.08.2000 and cost of Rs.52,959/-.
  • This award made the respondents file an application under Section 151 CPC to be able to adduce fresh evidence by the permission of the Court as per Section 34 of the Act but this attempt went in vain, as the District Judge refused to grant permission for the same as the one that Section 34 does not always require additional evidence.
  • Aggrieved by this dismissal, the Respondent No.1 moved to the High Court with a writ petition under Article 226 of the Constitution of India. 

Hereafter careful examination of the case through judicial precedents, the High Court directed the District Judge to “recast the issues” thereby allowing the Respondents and the Appellant to state their witnesses by filing affidavits. 

  • Now the appellant moved to the Supreme Court by filing an appeal being aggrieved by the High Court.

Issues

Whether the parties can adduce evidence to prove the specified grounds in subsection (2) to Section 34 of the Act?

Rules

Section 34 of the Arbitration and Conciliation Act,1996.

Judgment:

The Supreme Court after referring to two important precedents stated that when the parties were in the arbitration proceedings, a sufficient amount of time and opportunity was provided to the parties, for them to adduce all types of evidence keeping in view the provisions under section 34(4) and section 34(6) of the Act1 and thus, their application in the High Court should not have been accepted.

Instead, the High Court should not have interfered in this case because there was no unreasonableness in the decision of the District Judge. 

Setting aside the decision in the Girdhar Sondhi case, it was remarked that

an application under section 34 application will not ordinarily require anything which is beyond the record as placed before the arbitrator unless necessary.

The parties did not produce any extraordinary pieces of evidence or documents which could justify the retrial ordered by the High Court dismissing the merits of the decision taken by the Arbitrator.

Thus, the Apex Court set aside the Judgment of the High Court of Karnataka holding that the permission to adduce fresh evidence in the proceedings under section 34 cannot be given in normal circumstances

unless extraordinary circumstances exist and thus shall be confined to the pleadings and evidence filed before the Arbitrator.

Judicial precedents:

1.Emkay Global Financial Services Limited v. Girdhar Sondhi2

2.Fiza Developers & Inter-Trade (P) Ltd. v. AMCI (India) (P) Ltd3

EndNotes:

  1. Arbitration and Conciliation Act,1996
  2. (2018) 9 SCC 49
  3. (2018) 9 SCC 49

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