Delhi High Court: Amendment by way of Inclusion of New Grounds Containing New Facts is not Permissible under Arbitration Act

Delhi High Court: Amendment by way of Inclusion of New Grounds Containing New Facts is not Permissible under Arbitration Act

The Delhi High Court while observing that though it is permissible to introduce an amendment in a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), highlighted that new grounds of challenge containing new material/ facts cannot be introduced when the said grounds were neither raised in the original petition under Section 34 nor before the Arbitral Tribunal.

The brief facts of the case are that the Petitioner NEW DELHI MUNICIPAL COUNCIL (NDMC) filed an application seeking to include additional grounds in support of its challenge to the impugned award. The principal petition under Section 34 of the Arbitration and Conciliation Act, 1996 questions the correctness of the Award dated 16 March 2020.

As per the averments made in the instant application, the Petitioner asserted that the Respondent- DECOR INDIA PVT. LTD. in connection with the Agreement of 09 February 2009 was found guilty under Section 420 of the Indian Penal Code, 1860 and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 by the Special Judge - Central Bureau of Investigation, New Delhi (CBI Court).

The CBI Court in its judgment had ruled that the respondent had obtained the tender dishonestly and by misrepresentation and concealment of facts, NDMC averred. The proceedings before the Arbitral Tribunal commenced pursuant to its constitution by the Court in terms of its order dated 04 May 2012. The Award ultimately came to be rendered on 16 March 2020.

In light of the judgment rendered by the CBI Court, the Petitioner sought the introduction of a ground which essentially related to the award of the tender itself and of the same having been obtained by concealment of material facts and the Respondent practicing deception. It was accordingly averred that the Award of the tender, the execution of the Agreement and the arbitration proceedings in relation to the same stood vitiated due to fraud and corruption.

The petitioner asserted that the amendment was relevant to the dispute which arises and imperative for adjudication of the issues involved. It further asserted that the facts relating to the judgment dated 03 October 2018 recently came to the knowledge of the petitioner and thus necessitating the filing of the present application.

The single judge Justice Yashwant Varma at the outset noted that apart from the vague and unsubstantiated assertions, the petitioner had failed to place on the record any material particulars which may indicate as to when it first derived knowledge of the judgment dated 03 October 2018. The petitioner had also failed to either aver or establish that despite the exercise of due diligence, the factum of the judgment of conviction was not in their knowledge.

The Court pertinently observed that the proposed ground was neither pressed before the Arbitral Tribunal nor does it constitute a part of the challenge raised to the impugned Award in the present petition. It was in this aforesaid backdrop the Court was called upon to consider whether the application is liable to be granted.

The High Court referred the principles laid in the decision passed by the Supreme Court in State of Maharashtra vs. Hindustan Construction Co. Ltd. which governs the grant of amendments on a Section 34 petition.

The Court stated that, "it is, thus, manifest from the ultimate conclusions recorded in Hindustan Construction that the Supreme Court found that notwithstanding it being permissible for an amendment being introduced in a Section 34 petition, new and material facts could not have been introduced when admittedly those grounds were neither raised in the original arbitration petition or for that matter before the Arbitral Tribunal itself."

"Bearing in mind the aforesaid principles that have been enunciated in the aforenoted decisions and when this Court tests the proposed amendments on that pedestal, it finds that the ground which is proposed to be introduced is clearly a new case which has no foundation in the original petition. It is the thus not an expansion or amplification of a ground which may be said to form part of the challenge to the Arbitral Award. The application for amendment has come to be preferred long after the original petition itself came to be instituted before this Court on 07 October 2020," added the Court.

The Court however, discerned that while it may still be open for the Petitioner to assail the Arbitral Award on the ground of fraud based on material facts that form part of the record and so existed before the Tribunal, the introduction of these new facts would clearly not be merited.

Therefore, in the present case the Court concluded that the proposed amendments sought to be made by NDMC failed to meet the tests propounded by the Supreme Court in Hindustan Construction (2010), i.e., the existence of peculiar circumstances and the amendments being warranted in the interest of justice and thus, dismissed the application.