Case Note & Summary
The dispute arose out of a joint venture agreement dated 14.12.1996 between the appellants (joint owners of land) and the respondent (a construction company) for developing a residential-cum-commercial complex. The respondent was to complete construction within three years from obtaining the sanctioned plan (04.07.1997) and deposit Rs. 45,00,000 as guarantee. The respondent commenced construction in August 1997 but abandoned it by 31.03.1999. The appellants terminated the agreement on 01.11.2001. A cancellation agreement was executed on 26.10.2004, and Rs. 40,00,000 was returned from the security deposit. However, the respondent invoked arbitration, and a sole arbitrator was appointed. The arbitrator dismissed both the claim and counterclaim on 13.01.2010. The respondent's petition under Section 34 of the Arbitration and Conciliation Act, 1996 was dismissed by the Additional District Judge on 13.09.2012. The respondent then appealed under Section 37 before the High Court, which remanded the matter to the arbitrator for fresh consideration, holding that the parties were not given adequate opportunity to lead evidence and cross-examine witnesses. The Supreme Court set aside the High Court's order, holding that the arbitrator had recorded the consent of the parties to dispense with cross-examination and had considered all material on record. The Court emphasized the limited scope of interference under Sections 34 and 37 and restored the award.
Headnote
A) Arbitration Law - Remand by Appellate Court - Section 37 of Arbitration and Conciliation Act, 1996 - Scope of Interference - The High Court in an appeal under Section 37 set aside the award and remanded the matter to the arbitrator for fresh consideration on the ground that the parties were not given opportunity to lead evidence and cross-examine witnesses. The Supreme Court held that the High Court exceeded its jurisdiction as the arbitrator had recorded the consent of the parties to dispense with cross-examination and the award was based on material on record. The remand order was set aside. (Paras 1-27) B) Arbitration Law - Procedural Fairness - Section 19 of Arbitration and Conciliation Act, 1996 - Arbitrator's Power to Determine Procedure - The arbitrator, under Section 19, has the power to determine the rules of procedure. In the present case, the arbitrator recorded the consent of the parties to rely on affidavits and dispense with cross-examination. The Supreme Court held that the High Court erred in holding that the parties were not given adequate opportunity, as the procedure was agreed upon. (Paras 7, 27) C) Arbitration Law - Time Essence of Contract - Joint Venture Agreement - The agreement dated 14.12.1996 required completion of construction within three years from obtaining sanctioned plan. The project was abandoned by the respondent in March 1999. The arbitrator dismissed the claim and counterclaim. The Supreme Court upheld the award, noting that the respondent failed to complete the project despite the time being of essence. (Paras 2-3, 27)
Issue of Consideration
Whether the High Court, in an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, was justified in remanding the matter to the arbitrator on the ground that the parties were not given adequate opportunity to lead evidence and cross-examine witnesses, when the arbitrator had recorded the consent of the parties to dispense with cross-examination.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court order dated 31.07.2015, and restored the award dated 13.01.2010 passed by the sole arbitrator.
Law Points
- Arbitration award
- Section 34 of Arbitration and Conciliation Act
- 1996
- Section 37 of Arbitration and Conciliation Act
- Remand by appellate court
- Procedural fairness
- Opportunity to lead evidence
- Cross-examination
- Time essence of contract
