Madras High Court: Duty of Arbitral Tribunal to Allow Parties to Comment when it Deviates from Agreed Procedure in Evaluating Case

Madras High Court: Duty of Arbitral Tribunal to Allow Parties to Comment when it Deviates from Agreed Procedure in Evaluating Case

The Madras High Court was adjudicating four appeals filed in the matter M/s. Transtonnelstroy – Afcons (JV) vs. M/s. Chennai Metro Rail Ltd, wherein it observed that it is a well settled legal position that a mere omission to mention the provision of law in the cause title by itself is not a ground to non-suit the petitioner.

The bench of Acting Chief Justice T Raja and Justice Bharatha Chakravarthy also noted that while an arbitral tribunal, which consists of experts in the field, is at liberty to apply its own knowledge and understanding to arrive at a conclusion it should always allow the parties involved to present their case.

Four appeals were filed under Section 37 of the Arbitration and Conciliation Act, 1996 read with Clause 15 of the Letters Patent, are between the same parties arising out of two Arbitral Awards in respect of two contracts.

The primary question entreats answer in these appeals was whether the course adopted by the Arbitral Tribunal, in calling for additional materials being the data entered into by the parties during the execution of the contract and the relevant software, from the claimant, well after reserving orders and thereafter technically analysing the same on its own and consequently awarding the claim, is bad in law on the ground that the respondent was otherwise unable to present their case?

The appellant- Chennai Metro Rail Limited (hereinafter referred to as 'CMRL') is a company incorporated under the Companies Act, 2013 for the purpose of creating, designing, establishing, maintaining, and running metro rail in and around the city of Chennai.

The respondent is an unincorporated joint venture of two companies namely, Transtonnelstroy Limited, and Afcons Infrastructure Limited (hereinafter referred to as 'TTA-JV'). They are contractors undertaking design and construction works.

The TTA-JV filed an Original Side of Appeal (O.S.A.Nos.147 and 148 of 2021) wherein it was challenging the order of the single judge setting aside an Arbitral award and to revive the awards. CMRL also filed O.S.A.Nos.79 and 85 of 2022, raising a grievance that once the arbitral awards are set aside, the directions of the learned Single Judge in Para 22 virtually would amount to remanding the matter back to the Arbitral Tribunal which is impermissible and unsustainable in law.

Mr. G. Masilamani, learned Senior Counsel appearing on behalf of TTA-JV in O.S.A.Nos.147 of 2021 and 85 of 2022, submitted that after filing the Arbitration Original Petitions for setting aside the award, the only contention raised by CMRL before the learned Single Judge during the oral arguments was that the Tribunal had relied on two unmarked documents after reserving the award without giving opportunity to them to comment on the said documents. No other ground was urged before the learned Single Judge. At the outset, he submitted that mere non-affording opportunity to comment is different from 'unable to present the case', and therefore, the phrase in Section 34(2)(a)(iii) of the Arbitration and Conciliation Act, 1996 has a distinct meaning in law.

In this regard, the Counsel pointed out that the Tribunal had summoned the said documents to the knowledge of CMRL. In both E-mails, copies have been marked to the parties as well as their respective Counsels on record.

Per contra, Mr.Yashodvaradhan, learned Senior Counsel appearing on behalf of CMRL, submitted that If there was any specific purpose behind summoning the documents, the Tribunal ought to have reopened the matter and heard the parties. Having called for the documents, if the Tribunal had found that the documents are relevant and necessary for the purpose of deciding the issue, as per the original procedure adopted for marking documents through oral evidence, it ought to have marked the said documents through the proper witnesses and if the proper witnesses were not coming forward, it could have marked as Court documents also and thereby, an opportunity could have been given to CMRL to raise all its objections.

Therefore, the Counsel submitted that the Tribunal totally ignored the parties and CMRL had no opportunity to comment on the data, method or analysis, and the results and thus, there was complete inability on the part of CMRL to present its case.

The bench noted that the parties in this case had chosen appoint well qualified domain experts as arbitrators. It was noted that the Arbitrators proceeded to adopt Critical Path Method which is the correct method as per the Contract and they had the expert knowledge within them, (intracranial information), to carry out such an exercise. But unfortunately, in this case, to apply their knowledge, there was no material on record to carry out such an exercise they needed additional evidence in the form of the native files and the data contained therein.

Therefore, having found the necessity of the said documents, simply calling for the documents without divulging the reasons therefor, after reserving the case for orders and after their internal deliberation, clearly amounted to taking these materials behind the back of the parties.

The bench observed, "a duty is enjoined on the Tribunal to provide the parties of an opportunity to comment on matters when it decided to deviate from the already agreed procedure of evaluating the case of the parties on the basis of evidence adduced, both oral and documentary and to adopt the method of technical evaluation by its own expertise."

The facts and circumstances of this case were that the parties had executed the contract. The project had become operational for CMRL and TTA-JV had availed the payments. Thus, the Arbitration Trial took place post execution. The Tribunals post mortem finding the methodology adopted as unacceptable, exhumed the data of the past and took them into account for their sua sponte expert analysis. Certainly, the parties were entitled to comment upon the correctness or otherwise of the data, opined the bench.

"The error committed by the Tribunal thus is apparent on the face of the record, substantial and fundamental in this case as only the additional materials form the basis for the core reasoning of the award. Therefore, it is a compelling reason for the Court to set aside the arbitral award. Therefore, we do not find any error whatsoever in the order of the learned Single Judge inasmuch as it sets aside both the awards," the bench stated.

Next the Court referred the Supreme Court judgment in the case of Kinnari Mullick and Anr. Vs. Ghanshyam Das Damani, held exercise of remand can only be resorted to if only a written application is made under Section 34(4) of the Arbitration Act which would be without setting aside the Award.

Applying the same the bench discerned, "Once the award has been set aside, the Court has no other option than to leave the matter for de novo proceedings by the parties in the manner known to law and therefore, the observations / directions contained in paragraph No. 22 of the judgment under appeal cannot be sustained and they are set aside."

In the present case, since the award was already set aside, the parties were given liberty to commence de novo proceedings in the manner known to law.