Section 27 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act") provides a mechanism whereby the arbitral tribunal or a party to the dispute (with the approval of the arbitral tribunal) can seek assistance of the court in taking evidence. Interestingly, this is one of the rare provisions of the Arbitration Act which allows for the court's interference/assistance in an arbitration proceedings governed by the provisions of Arbitration Act.
However, the extent of judicial intervention under this provision is still a matter of controversy and has been a subject of various judicial pronouncements. This piece will attempt to clear the ambiguity on this issue by analysing some of the important judgments passed by courts at different levels in this regard and give a clear and lucid account of judicial discretion under Section 27 of the Arbitration Act.
II. Judicial pronouncements on discretion of courts under Section 27 of the Arbitration Act
In Ennore Port Limited v. Hindustan Construction Co. Limited ("Ennore Ports"),1 the High Court of Judicature at Madras while acknowledging (and exercising) discretion of the court to rule on an application under Section 27 of the Arbitration Act opined that such exercise of discretion should not be automatic and a balance must be struck between exercise of such discretion and importance of minimal judicial interference enshrined under Section 5 of the Arbitration Act.
The Supreme Court of India ("SC") in Delta Distilleries Ltd. v. United Spirits Ltd. ("Delta Distilleries"),2 did not find any substance in the objection that an order passed by the arbitral tribunal permitting the respondent to apply under Section 27 could not have been passed. It held that an arbitral tribunal is required to make an award on the merits of the claim placed before it. For that purpose, if any evidence becomes necessary, the arbitral tribunal ought to have the power to get the evidence, and in the event it fails to procure such evidence on its own, it can do so by the virtue of an enabling provision i.e. Section 27 by seeking assistance of the court in taking the evidence. However, SC neither dealt with the powers of court under Section 27 while passing the judgment nor it interfered with the order passed by the learned Single Judge wherein the latter only directed respondent no. 1 to produce the documents instead of both the respondents, as sought by the opposite party in an application under Section 27. This reflects the position as laid down in Ennore Ports i.e. a court should not go on with passing the order automatically once an application under Section 27 is made rather it should apply its discretion while ordering or rejecting the said request.
In Silor Associates SA v. Bharat Heavy Electrical Ltd.("Silor Associates"),3 the High Court of Delhi ("DHC") while deciding a request made under Section 27 of the Arbitration Act held that in an event where it appears that the order of the arbitral tribunal invoking Section 27 is passed on an erroneous premise in law, court would not simply act on the request of the arbitral tribunal and would not only be entitled to, but would be duty bound to correct such error. In this case, despite finding two documents to constitute relevant evidence, the arbitral tribunal invoked Section 27 on an assumption that it did not have the power to order production of documents/witness/any other evidence without going through the procedure prescribed under Section 27. It is pertinent to note here that in this case the DHC delved into the correctness of the arbitral order and emphasised the role of the arbitral tribunal as master of the case. The DHC also referred to Section 5 of the Arbitration Act to reiterate the minimum judicial interference approach during arbitration proceedings. The DHC further held that there would be no cause to seek assistance of the court by resorting to Section 27 of the Arbitration Act, without first issuing a direction to the concerned party to produce the document, and only upon the failure to comply with such a direction, the arbitral tribunal would be justified in seeking the assistance of the court if so desired by the aggrieved/non defaulting party.
The DHC in Silor Associates also reiterated the approach taken by courts in Ennore Ports, and Delta Distilleries by holding that the court is not bound to act on a request made under Section 27 of the Arbitration Act and it can decline the request if it believes that the same is not within the competence of the court or if such request is not in accordance with the rules of the court qua taking evidence.
III. Contrary views
On the other hand, the DHC in National Insurance Company Limited v. M/S S.A. Enterprises ("National Insurance Company"),4 Thiess Iviinecs India vs NTPC Limited & Anr. ("Thiess") and the High Court of Judicature at Bombay ("BHC") in Montana Developers Pvt. Ltd v. Aditya Developers And Ors.,5 have taken an contrary view. The courts in these decisions refused to assess the correctness of the arbitral order under Section 27 of the Arbitration Act. The courts held that the role of the court under Section 27 of the Arbitration are not adjudicatory but executory.
These decisions emphasised the importance of Section 5 of the Arbitration Act and reiterated that interference by the judiciary in such cases should be minimal as there is no provision under the Arbitration Act which provides for challenging an order made by the arbitral tribunal under Section 27 of the Arbitration Act.
IV. Role of arbitral tribunal under Section 27(1) of the Arbitration Act
In Hindustan Petroleum Corporation Ltd. v. Ashok Kumar Garg ("Hindustan Petroleum"),6 the DHC emphasised the role of arbitral tribunal as the master of the case. In this case, an appeal arose out of the order of the learned Additional District Judge rejecting the application under Section 27 on the ground that the arbitral tribunal had to pass a reasoned order setting out circumstances which necessitated it to recommend that the court ought to exercise its jurisdiction under Section 27 of the Arbitration Act for summoning of witness. The DHC while disposing of the appeal held that before approving a request for an application to be filed under Section 27, the arbitral tribunal must necessarily apply its mind and provide reasons for granting such an approval. However, the DHC clarified that there is no need for the arbitral tribunal to provide detailed reason(s) for granting such approval but at least application of mind must be available from the order passed by the arbitral tribunal. More importantly, the DHC did not delve into the merits of the case and merely performed the executory role i.e. whether to grant or reject a request, while deciding an application made under Section 27.
Recently, in National Aluminium Company Ltd. v. Indo Power Projects Ltd. ("Indo Power Projects"),7 a petition was filed before the High Court of Judicature for Orissa ("OHC") challenging the order passed by the arbitral tribunal. In this case, an application was filed by the NALCO under Section 27 of the Arbitration Act seeking approval of the arbitral tribunal to apply to the court for assistance in taking evidence of NALCO's ex-employee and the same had been rejected. The petition was opposed on the grounds that NALCO has furnished the list of five witnesses and only two out of those five witnesses were examined by NALCO as of now. Indo Power further contended that no sufficient reasons are provided by NALCO as to how examination of an ex-employee (as requested in an application before the arbitral tribunal) is essential for adjudication of the case.
The OHC while allowing the petition held that NALCO has clearly mentioned the reasons for according approval of the tribunal under Section 27 of the Arbitration Act. It further held that the list of witnesses provided by a party does not preclude the arbitral tribunal to accord approval to apply to the court for assistance in taking evidence under Section 27 of the Arbitration Act, if the party has provided sufficient reasons for the same.
V. Can a foreign witness be summoned under Section 27 of the Arbitration Act?
In Reliance Polycrete Ltd. v. National Agricultural Co-operative Marketing Federation of India,8 the DHC came across an intriguing proposition as to whether the court under Section 27 of the Arbitration Act can order the presence of witness residing outside its jurisdiction, if the presence of such witness is considered relevant by the arbitral tribunal for adjudication of the dispute.
The DHC after considering relevant provisions and judicial pronouncements passed in this regard held that the court is bereft of any power to issue process to foreign witness. The process here includes "summonses and commissions for the examination of witness and summonses to produce documents."9 With regards to issuance of commission to examine the foreign witnesses, the DHC held that there exists not only the ambiguity as to how the attendance of such foreign witnesses to answer summons of the commissioner or depose before him can be obtained but also logistical difficulties in assembling the foreign witnesses.
However, a contrary view was taken by the BHC recently in Stemcor (S.E.A.) Pte Limited and Anr. v. Mideast Integrated Steels Limited ("Stemcor").10 In this case, one of the key witnesses of the petitioner refused to visit India due to the apprehension that he might face prosecution due to certain regulatory enquiries pending against him. The BHC while deciding an application filed under Section 27 of the Arbitration Act, held that evidence of the key witness was material and crucial to the arbitral proceedings and thus appointed the arbitrator as the Court Commissioner and directed the team of lawyers along with the Court Commissioner (arbitrator in this case) to visit Singapore for recording key witness' evidence. It further emphasised that the evidence recorded through the commission is more authentic than the one recorded through video conferencing as the commission so appointed would be the agent of the court for the purposes of recording evidence.
The decision of the BHC in Stemcor reflects the pro-arbitration approach of the Court as it not only facilitated the recording of the witness in Singapore but also overcame procedural hurdles inter alia logistical difficulties, issuing letter of request, etc.
VI. Analysis and Conclusion
A perusal of the above judgments passed by various High Courts and SC's decision in Delta Distilleries strongly indicates that the discretion available to courts while considering application under Section 27 of the Arbitration Act is minimal. The judgments referred above categorically provide that courts cannot interfere with the order of the arbitral tribunal granting approval to a party to file an application under Section 27 of the Arbitration Act as the same is outside the purview of the court.
However, this does not mean that the arbitral tribunal may proceed with granting such approvals relentlessly even if no case for such approval is made out based on facts and circumstances of the case. The arbitral tribunal must apply its mind judiciously as it is the master of the case and in a better position to determine the relevancy of evidence as sought by a party in an application seeking leave of the arbitral tribunal to file an application under Section 27 of the Arbitration Act. The courts must ensure minimum judicial approach while dealing with Section 27 application.
Moreover, the recent decision of the BHC in Stemcor reflects that if the evidence is considered crucial by arbitral tribunal, the courts under Section 27 of the Arbitration Act should ensure that such evidence is recorded even if it is outside the jurisdiction of the court.
1. AIR 2007 Mad 73.
2. AIR 2014 SC 113.
3. 210 (2014) DLT 312
4. 2015 SCC OnLine Bom 5063
5. Montana Developers Pvt. Ltd vs Aditya Developers And Ors, 2016 (6) MhLJ 660
6. 2007 (1) ARBLR 368 Delhi
7. (2019) 200 AIC 735
8. (2008) ILR 8 Delhi132
9. The Arbitration and Conciliation Act, 1996, § 27 (6)
Originally published 14 July 2021
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