Arbitration Act: Award Debtor cannot challenge Award claiming expert was not examined: Bombay High Court

Arbitration Act: Award Debtor cannot challenge Award claiming expert was not examined: Bombay High Court

The Bombay High Court through its single judge Justice Manish Pitale while dealing a petition challenging the arbitral award ruled that if an award debtor has failed to take recourse to the provisions of Section 26 of the Arbitration and Conciliation Act, 1996 (in short A&C Act), it cannot seek to set aside the award on the ground that the expert, whose report was relied upon by the arbitrator, was not examined by the opposite party.

The petitioner, Zenobia Poonawala, and the respondents, including Rustom Ginwalla, are partners in two partnership firms. It was alleged that on 25th and 27th October, 2014 the petitioner transferred certain amount from the account of the partnership firm to her personal account, without the knowledge or consent of the other partners. Subsequently, the other partners issued a notice for dissolution of the firms.

Disputes arose between petitioner Zenobia on the one hand and the other family members and partners in the two firms on the other hand. In this backdrop, on 28th July 2016, a petition was filed, under section 11 of the Arbitration and Conciliation Act, 1996, for constitution of an arbitral tribunal. Mr. Pradeep Sancheti, Senior Advocate, was appointed as the sole arbitrator, with the consent of the parties, by an order of this Court, for resolving the disputes.

Considering the fact that, the accounts of the two firms had to be settled, the learned arbitrator appointed M/s Dhanboora & Co., Chartered Accountants, as the auditor for accounts of both the firms. The Auditor submitted its report along with the financial statements. Taking into consideration the said report, the Arbitrator passed an award upholding the dissolution of the partnership firms, and directed the petitioner to pay certain amount to the firm.

The petitioner, Zenobia Poonawala, challenged the award by filing a petition under Section 34 of the A&C Act before the Bombay High Court. The petitioner asserted that since the author of the auditor's report was not examined, the Arbitrator could not have placed reliance on the same. Further, it was contended that since the respondents i.e., the original claimants in both the arbitration proceedings, chose to rely upon the report of the auditor, the burden was on the respondents to prove the same.

Therefore, the petitioner argued that the award violated the basic principles of the law of evidence, leading to miscarriage of justice.

The High Court opined that the arbitral awards cannot be casually interfered with, only because the Court finds that on merits, another view was possible. The scope of interference at the hands of the Court, under the said provision, has been specifically restricted, in tune with the object of the said Act, accentuated by the reasons for which, the Amending Act of 2015, was brought into force, stated the Court.

The High Court referred the Supreme Court in Ssangyong Engineering and Construction Company Ltd. (2019), after referring to Section 26 of the A&C Act, had ruled that if a party requests for the report of the expert along with the documents in its possession, the same ought to be made available to the party. Further, if requested, the parties must be given an opportunity to put questions to the expert and to present their own expert witnesses in order to decide the points at issue.

The Court was of the view that the respondents were justified to oppose the contentions raised on behalf of the petitioner, as regards the report of the auditor. The Court added that the petitioner, having failed to take recourse to the provisions of Section 26, cannot claim that the respondents ought to have examined the auditor, before the arbitrator could take the auditor's report into consideration.

"It is settled law that the arbitrator is the master of the evidence in the proceedings, including the quantity and quality thereof. It is only in cases of no evidence, that a ground is made out for interference under Section 34 of the Act. In the facts and circumstances of the present case, this Court is convinced that no such ground is made out and the judgments relied upon on behalf of the petitioner, cannot be of any assistance," observed the Court.

Therefore, no error could be attributed to the learned arbitrator for having held against the petitioner on the said ground, the Court dismissed the petition.