The Supreme Court on September 23, 2019, in the case of M/S. Canara Nidhi Limited v. M. Shashikala and Others has held that proceedings under Section 34 of Arbitration and Conciliation Act, 1996, will not ordinarily require anything beyond the record that was before the arbitrator and only in exceptional case, additional evidence can be permitted to be adduced.
A Division Bench comprising of Justice R. Banumathi and Justice A.S. Bopanna was hearing an appeal against an order passed by the Karnataka High Court whereby it granted opportunity to a party to Section 34 proceedings to adduce additional evidence.
The issue for consideration in the case was whether, in proceedings under Section 34 of the Arbitration and Conciliation Act, 1996, seeking to set aside the award, whether the parties can adduce evidence to prove the specified grounds in sub-section (2) to Section 34 of the Act.
The Karnataka High Court allowed the party to adduce additional evidence after placing reliance on the judgment in Fiza Developers and Inter-Trade Private Limited v. AMCI (India) Private Limited. The High Court allowed the writ petitions and directed the District Judge to "recast the issues" and allow the parties to file affidavits of their witnesses and further allow cross-examination of the witnesses.
In appeal, the apex court noted that, after the decision in Fiza Developers, Section 34 was amended by Act 3 of 2016. Referring to the changes brought through the amendment, the Bench said:
“The legal position is thus clarified that Section 34 application will not ordinarily require anything beyond the record that was before the arbitrator and that cross-examination of persons swearing in to the affidavits should not be allowed unless absolutely necessary.”
The Bench, on perusal of the case record, observed that, in the instant case, there are no specific averments in the affidavit as to the necessity and relevance of the additional evidence sought to be adduced. The court also agreed with District Judge's finding that grounds urged in the Section 34 Application can very well be considered by the evidence adduced in the arbitration proceedings and considering the arbitral award.
Further, the Bench also noted that, when the order of the District Judge did not suffer from perversity, the High Court, in exercise of its supervisory jurisdiction under Articles 226 and 227 of the Constitution of India, ought not to have interfered with the order passed by the District Judge.
Thus, setting aside the Karnataka High Court judgment, the Bench observed:
“The proceedings under Section 34 of the Act are summary proceedings and is not in the nature of a regular suit. By adding sub-sections (5) and (6) to Section 34 of the Act, the Act has specified the time period of one year for disposal of the application under Section 34 of the Act. The object of sub-sections (5) and (6) to Section 34 fixing time frame to dispose of the matter filed under Section 34 of the Arbitration Act, 1996 is to avoid delay and to dispose of the application expeditiously and in any event within a period 16 of one year from the date of which the notice referred to in Section 34(5) of the Act is served upon the other party. In the arbitration proceedings, the parties had sufficient opportunity to adduce oral and documentary evidence. The High Court did not keep in view that respondent Nos.1 and have not made out grounds that it is an exceptional case to permit them to adduce evidence in the application under Section 34 of the Act. The said directions of the High Court amount to retrial on the merits of the issues decided by the arbitrator.”