The Bombay High Court allowed the challenge to the arbitral award passed on 2 December 2019 and set aside the award under Section 34 of the Arbitration and Conciliation Act, 1996 for violating natural justice and public policy.
The petitioner supplied packaging material to the respondent under multiple invoices during 2012-2013. Respondent claimed the packaging was defective due to odour and demanded refunds and costs. Both parties procured test reports from SGS India (samples concurrently tested) and SGS Germany. SGS India reports were favourable to the petitioner showing no defect, while SGS Germany’s report pointed to off-flavour related to plastic trays not supplied by petitioner. The arbitrator passed an award in favour of the respondent, relying on hearsay evidence provided by an expert witness. The petitioner sought setting aside of the award.
Counsel for the petitioner argued that the arbitrator erred by disregarding the contemporaneous SGS India reports that were admitted evidence and by relying solely on hearsay expert testimony lacking personal knowledge. It was submitted that the arbitrator reversed the burden of proof and failed to appreciate key objective evidence, thus shocking the conscience of the Court.
Counsel for the respondent contended that grounds of challenge were impermissible re-appreciation of evidence or fell under patent illegality excluded under Section 34(2A).
The Bench comprising Justice R.I. Chagla observed that admitted contemporaneous laboratory reports (SGS India) are the best evidence on packaging quality and must not be ignored arbitrarily. It was found that the hearsay evidence of expert witness was based on what others told him years after material delivery and thus lacked evidentiary value.
The Bench rejected respondent’s argument of inadmissibility of challenge and held the grounds for setting aside were maintainable as they related to public policy and justice, warranting interference for violating public policy under Section 34(2)(b)(ii).
In result, the Bombay High Court allowed the petition and set aside the arbitral award dated 2 December 2019. The Court instructed that the award was vitiated by ignoring best evidence and relying on hearsay expert testimony, wrongly shifting the burden of proof. This conduct was deemed arbitrary and a miscarriage of justice, violating natural justice and public policy provisions of the Arbitration Act. The petitioner was permitted to withdraw the deposit made in Court after four weeks.
Cases relied on:
1. Associate Builders vs Delhi Development Authority, (2015) 3 SCC 49
2. Ssangyong Engineering & Construction Company Limited vs National Highway Authority of India, 2019 SCC online SC 677
3. Dyna Technology Pvt. Ltd. vs Crompton Greaves Limited, (2019) 20 SCC 1
4. Delhi Airport Metro Express Private Limited vs Delhi Metro Rail Corporation Limited, (2022) 1 SCC 131
Appearances:
For the Petitioner: Mr. Mustafa Doctor, Senior Advocate a/w Ms. Spenta Havewala, Mr. Aashdin Chivalwala, Ms. Aditi Prabhu and Mr. Pratik Dave i/b Desai Desai Carrimjee and Mulla
For the Respondent: Mr. Shrinivas Deshmukh a/w Mr. Sunilkumar Neelambaran, Mr. Jeyhaan Carnac and Mr. Aaron Kevin Fernandes i/b Mulla & Mulla & Craigie Blunt & Caroe
