Section 27 of the Arbitration and Conciliation
Act, 1996 (“1996 Act”) provides that an arbitral tribunal, or a party with the
approval of the arbitral tribunal, may apply to the court for assistance in
taking evidence. On Monday, the Supreme Court of India (“Supreme Court”), in
the case of Delta Distilleries Limited v. United Spirits Limited & Ors,[1] has
to deal with the scope of Section 27 of the 1996 act. In this post, I am explaining
the relevant parts of the judgment.
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Facts:
In
the present case, a judgment of the Bombay High Court (“High Court”) had been
challenged wherein an arbitration petition, filed by United Spirits Limited (“Respondent”
before the Supreme Court), was allowed. The arbitration petition had sought to invoke the powers of the
court under Section 27 of the 1996 Act. The Respondent had filed arbitration
petition before the High Court when Delta Distilleries (“Appellant” before the Supreme
Court”), on being ordered by the arbitral tribunal, refused to produce sales
tax assessment orders. It was the contention of the
appellant that such orders were highly confidential and cannot be produced
before the arbitral tribunal. Further, it
was contented, for the first time before the High Court, that appellant was not
in possession of those sales tax orders. The contention was rejected by
the High Court. Apart from these contentions, it was further submitted on
behalf of the appellant that at the highest, an adverse inference can be drawn
against him under Order 21, Rule 11 of Code of Civil Procedure (“CPC”).
Reliance was also placed on some other acts which do not deal specifically deal
with the 1996 Act.
Issues
and Findings of the Court:
While determining the issue, Supreme Court had to
deal with the analogy, as made by the appellant, between Section 43 of the
Arbitration Act, 1940 (“Old Act”) and Section 27 of the 1996 Act. Section 43 of
the Old Act provided for the power of court to issue process for appearance
before arbitrator. Similarly, Section 27 of the 1996 Act provides for assistance of court in
taking evidence. The relevant part of Section 27 can be read as:
‘Court assistance in taking evidence.-
(1) The arbitral tribunal, or a party with the approval of the arbitral tribunal,
may apply to the Court for assistance in taking evidence.’
On behalf of the appellant, reliance was placed on
Union of India v. Bhatia Tanning
Industries, AIR 1986 Delhi 195. It was contended by the appellant that the said
section applies only to calling witnesses, and not for giving any direction to the
parties. Supreme Court, however, observed that the Delhi High Court, in Bhatia Tanning Industries (supra), had
held that Section 43 of the Old Act is confined to cases where a person,
whether a party or a third person, is required to appear as a witness before
the arbitrator. In the opinion of the Supreme Court, the judgement in Bhatia Tanning Industries (supra) did not help the case of the appellant.
Another contention was made with respect to the
scope of Section 27 of the 1996 Act. While Section 43 of the Old Act used the
phrase ‘parties and witnesses’, Section 27 provides for calling of ‘any person’
as the witness. Explaining that such a substitution of words in Section 27 of
the 1996 cannot whittle down the powers of a court, Supreme Court held that:
“...It is
an enabling provision, and it has to be read
as such. The term
‘any person’ appearing under Section 27 (2) (c) is wide
enough to cover not merely the
witnesses, but also
the parties to
the proceeding. It is undoubtedly
clear that if a party fails to appear before the Arbitral Tribunal,
the Tribunal can
proceed ex-parte, as provided under Section 25 (c). At the same time, it cannot be ignored that
the 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
Tribunal ought to have the power to get the evidence, and it is for this purpose
only that this
enabling section has
been provided.
Other contentions, which were advanced on behalf of
the appellant, were rejected by the Supreme Court. With regard to the
contention that at the highest, an adverse inference can be drawn against the
appellant under CPC, court was of the opinion that the same, if necessary, can
be used. But, the court held that when sales tax orders are available, the same
should be used for assessment. The court held that:
“....A
hypothetical calculation should not be resorted to when actual Sales Tax Assessments
are available, which would show as to whether the quantum of
set-off allowed and
claimed was in
fact justified”
Decision
of the court: On the above grounds, appeal was
dismissed by the Supreme Court.
To download the judgment, click here
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