India: Production Of Evidence At A Belated Stage In Arbitral Proceedings

Introduction

Arbitration in India is governed by the Arbitration & Conciliation Act, 1996 (the "Act"). In any arbitral proceeding, the parties are free to appoint arbitrator(s) of their own choice. However, the arbitrators so appointed cannot act as agents of parties as this would give rise to justifiable doubts as to their independence or impartiality. The arbitrators so appointed have to adopt a judicial approach in deciding the dispute between the parties. In Soceite Aninmina Lucchesse Oil Vs. Gorakhram Gokalchand1, the Madras High Court has held that the Arbitrators are bound to come together and act judicially, conforming to principles of natural justice. They must not merely act judicially, but should not consider themselves as the agents or advocates of the party who appoints them. Once nominated, they ought to perform their duty of deciding impartially between parties.2

Whether Arbitrator s are bound by Rules of Evidence while conducting Arbitral Proceedings?

The Arbitrators are the masters of their own procedure and may conduct arbitral proceedings in a manner they consider appropriate. It is a settled law that arbitrators are not bound by the technical rules of evidence as observed by the courts.3 Section 19 of the Act clearly states that the Arbitral Tribunal shall not be bound by the Code of Civil Procedure, 1908, or the Indian Evidence Act, 1872. The power of Arbitral Tribunal to conduct arbitral proceedings includes the power to determine the admissibility, relevance, materiality and weight of any evidence.4 Thus, the relevancy or admissibility of a particular fact is to be decided by the Arbitral Tribunal as per its own good sense, and reference to the statutory provisions are not necessary.

However, this does not imply that the arbitrators are not bound by rules of evidence and fundamental principles of natural justice. In Hindustan Shipyard Limited Vs. Essar Oil Limited and Ors.5, the Andhra Pradesh High Court has categorically stated that parties are free to agree on the procedure to be followed by the Arbitral Tribunal. When such procedure is not fixed, the Arbitral Tribunal has to follow the statutory procedure; it means it has to weigh the entire evidence on record properly and that it has to come to a just conclusion within the parameters of the dispute. It has been held that the principles of natural justice, fair play, equal opportunity to both the parties and to pass order, interim or final, based upon the material/ evidence placed by the parties on the record and after due analysis and/or appreciation of the same by giving proper and correct interpretation to the terms of the contract, subject to the provisions of law, just cannot be overlooked.6 It has been further held that parties, by consent, may adopt their own procedure for conducting arbitration. An Arbitral Tribunal is not a Court. Any lacuna in procedure does not vitiate the Award, unless it is in breach of principle of natural justice, equity or fair play for the aggrieved parties.7 It has been reiterated by the Bombay High Court in Vinayak Vishnu Sahasrabudhe v. B.G. Gadre and Ors.8 that though the Arbitration Act does not provide for the procedure to be followed by the arbitrators, even so, the Arbitrators are bound to apply the principles of natural justice.

Can arbitrator allow production of additional evidence at a later stage of proceedings?

Considering that the arbitrator is the sole judge of quantity and quality of evidence, the next question to be discussed is whether the arbitrator can allow additional evidence to be submitted at a later stage of the arbitration. Whether a particular document is material document or not and whether the arbitrator should call for its production is essentially a matter for the arbitrator to decide, and whatever decision is taken by the arbitrator is binding upon the parties.9 As per the Code of Civil Procedure, 190810, a document which ought to be produced in court by the plaintiff when the plaint is presented, or to be entered in the list to be added or annexed to the plaint but is not produced or entered accordingly, shall not, without the leave of Court, be received in evidence on his behalf at the hearing of the suit. Thus, no additional evidence can be presented at such a stage where substantial part of the proceedings have already been conducted. In Polyflor Limited Vs. A.N. Goenka and Ors.11, the Delhi High Court has stated- "To grant leave to and permit the plaintiff to file and lead in evidence additional documents at this stage would mean that the defendants would be put to serious prejudice. The defendants have not had the occasion to deal with the said documents. Had the documents now sought to be produced, been produced at the relevant time, i.e. at the stage of filing of the suit, or at least at the time when the issues were framed, the defendants would have had the occasion to deal with the same by making appropriate pleadings and filing their own documents to counter the reliance placed by the plaintiff on the documents in question." The above observation makes it clear that allowing the plaintiff to produce additional documents, which were not produced earlier, at a later stage of the proceedings, would cast a prejudice on the defendant. If there is no justifiable reason for not filing the said documents at an earlier stage of proceedings, it indicates the casual approach of the party doing so and the progress of the case cannot be stopped on this account. Hence, if the issues have been framed and the evidence of the petitioner has already commenced, the belated filing of the documents as evidence would prejudice the Respondent.12

To conclude, a plaintiff does not have a legally vested right to file documents at a belated stage of proceedings. The provision under Order 7 Rule 14 (3) gives a discretionary power to the Court, which needless to say has to be exercised in a reasonable and legal manner. In fact, this power has to be exercised sparingly and for some overpowering reason and not as a matter of routine.13

Similar principles have been extended to arbitral proceedings as well. Even in case where an arbitrator passes a non-speaking order, principles of natural justice are required to be observed. The meaning of application of principles of natural justice in this context has been explained by the Supreme Court of India in Bareilly Electricity Supply Co. Ltd. v. The Workmen and Ors.14. In paragraph 21 it has been held as under:

. ...But the application of principles of natural justice does not imply that what is not evidence can be acted upon. On the other hand, what it means is that no materials can be relied upon to establish a contested fact which are not spoken to by persons who are competent to speak about them and are subjected to cross-examination by the party against whom they are sought to be used. When a document is produced in a Court or a Tribunal the question that naturally arises is, is it a genuine document, what are its contents and are the statements contained therein true.

Thus, the admission of documents which are not proved in spite of serious objections from the other party implies a non-application of mind and such an award deserves to be set aside on this ground.15 If the Arbitrator allows inadmissible evidence though objected to and takes it into consideration in framing the award and is presumably misled by it, there is patent error of law on the face of the award. It has been held by the Division Bench of Allahabad High Court in the case of Banwari Lal vs. Jagannath Prasad and Anr.16 in paragraph 6 as under:

"6. It is a well-established principle of law that an arbitrator ought not to hear or receive evidence from one side in the absence of the other side without giving the side affected by such evidence, the opportunity of meeting and answering it."

In Pradyuman Kumar Sharma and Ors. Vs. Jaysagar M. Sancheti and Ors.17, the Bombay High Court has clearly laid down the law in regard to admissibility of additional evidence in paragraph 32 as under:

"32......In my view, though arbitrator is not bound by the provisions of Code of Civil Procedure or Evidence Act, principles of Evidence Act and Code of Civil Procedure are applicable even to arbitration proceedings. A document which is disputed by a party and if not proved, cannot be considered even by the arbitrator to be on record or as a piece of evidence. Taking into consideration an unproved document by an arbitrator, on the contrary would be in violation of principles of natural justice. In my view, arbitrator was not bound to refer the alleged document to an expert witness suo moto."

In Russell on Awards (7th Edition page 191), the proposition is put thus - Neither side can be allowed to use any means or influencing his (the arbitrator's) mind, which are not known to, and capable of being met and resisted by the other. As much as possible the arbitrator should decline to receive private communications from either litigant respecting the subject matter of the reference.18

Thus, an award cannot be vitiated on the ground that the Arbitrator refused to take evidence into consideration on account of belated filing of the same. Merely because another Arbitrator may have permitted a party to produce a document even at the later stages of arguments, and may have thereafter permitted the opposite party to deal with the same, is no ground to conclude that the refusal of the Arbitrator to adopt that course of action vitiates the award.19 It is upon the discretion of the Arbitral Tribunal to permit the party to rely on certain additional evidence as long as the other party is not prejudiced by such late production. If after production of such additional documents, the other party has full opportunity to contest the veracity and evidentiary value of the documents, there will be no infirmity with the procedure adopted by the Arbitral Tribunal as decided by the Delhi High Court in Glencore International AG vs. Dalmia Cement (Bharat) Limited.20

Conclusion

The power to decide the relevancy and admissibility of evidence is the sole jurisdiction of the Arbitrator. The Arbitrator is the judge of the quality and quantity of evidence that is produced by the parties. By virtue of this power, an arbitrator can call for additional evidence too, if it will be helpful for him to decide upon the dispute. But the exercise of this power has to be circumscribed within the fundamental principles of natural justice. It must be exercised cautiously and for some legitimate cause and not as a matter of routine. As stated by the Delhi High Court21, you cannot win battles by springing surprises. It means that the Arbitrator is free to call for additional evidence at a belated stage of the arbitral proceedings as long as it does not cause prejudice to the other party. It would be unfair if parties are permitted to plead and proof at variance. If permission to lead evidence is ordinarily allowed, it will be impossible to conclude the hearing of any arbitral proceedings.

Footnotes

1. AIR 1964 Mad 532

2. Id., at para 15.

3. NPCC Limited Vs. Jyothi Sarup Mittal Engineers, Contractors and Builders

2007 (93) DRJ 379 at para 20

4. Section 19(4) of the Arbitration & Conciliation Act, 1996

5. 2005 (1) ALT 264

6. Sahyadri Earthmovers Vs. L and T Finance Limited and Ors. (2011) 4 MhLJ 200 At para 7

7. Id. At para 9

8. AIR 1959 Bom 39

9. Bachawat's Law of Arbitration & Conciliation 6th Ed. Volume1 Page 1419

10. Order 7, Rule 14 (3)

11. MANU/DE/0943/2016

12. Shri Ramanand Vs. Delhi Development Authority & Anr. 2016 SCC Online Del 4925 at para 11

13. Haldiram (India) Pvt. Ltd. Vs. Haldiram Bhujiawala (2009) ILR 5 Delhi 503 at para 21

14. AIR 1972 SC 330

15. Biwater Penstocks Ltd. Vs. Municipal Corporation of Greater Bombay and Ors. 2011 (1) ARBLR 278 (Bom) at para 14

16. AIR 1958 All 717

17. 2013 (5) MhLJ 86

18. Supra, Note 15

19. Public Works Department Vs. Navayuga Engineering Co Ltd. and Ors. MANU/DE/0831/2014 at para 44

20. 2017 (4) ARB LR 228

21. Delhi Development Authority Vs. Krishna Construction Co. 183 (2011) DLT 331 (DB) at para 19

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