The challenge to an arbitral award under Section 34 of the Arbitration and Conciliation Act 1996 is the only remedy available to the party against whom such award has been passed. The grounds enumerated under the provision are limited to the scope of challenging the award to prevent such persons against whom the award has been passed from approaching the Courts and filing frivolous applications challenging the award passed. However, in instances where certain facts and information has not been recorded in the proceedings before the Arbitrator and the same has been out forth by way of affidavits in determination of issues arising on account of the challenge under Section 34 of Act, the Supreme Court has permitted the same only in exceptional circumstances. In the matter of M/s Emkay Global Financial Services Limited Versus Girdhar Sondhi, the Hon’ble Justice RF Nariman granted the filing of affidavits by the Respondent in the challenge application filed by the Respondent in the District and Sessions Court against the arbitral award rejecting his claim.

The question of jurisdiction was raised at the Delhi Courts in which the Respondent filed the Application to set aside the award stating that the agreement gave exclusive territorial jurisdiction to the Court at Mumbai. The Apex Court to the decision in Indus Mobile Distribution Pvt Ltd v. Datawind Innovations Pvt. Ltd. and Ors, and observed:

“It is clear that once courts in Mumbai have exclusive jurisdiction thanks to the agreement dated 03.07.2008, read with the National Stock Exchange bye-laws, it is clear that it is the Mumbai courts and the Mumbai courts alone, before which a Section 34 application can be filed. The arbitration that was conducted at Delhi was only at a convenient venue earmarked by the National Stock Exchange, which is evident on a reading of bye-law 4(a)(iv) read with (xiv) contained in Chapter XI.”

The Bench comprising of Justice RF Nariman and Justice Indu Malhotra the

The Bench, while setting aside the Delhi High Court judgments in Sandeep Kumar v. Dr. Ashok Hans AND Sial Bioenergie v. SBEC Systems, stated as follows:

“We may hasten to add that if the procedure followed by the Punjab and Haryana High Court judgment (supra) is to be adhered to, the time limit of one year would only be observed in most cases in the breach. We therefore overrule the said decision. We are constrained to observe that Fiza Developers (supra) was a step in the right direction as its ultimate ratio is that issues need not be struck at the stage of hearing a Section 34 application, which is a summary procedure. However, this judgment must now be read in the light of the amendment made in Section 34(5) and 34(6). So read, we clarify the legal position by stating that an application for setting aside an arbitral award will not ordinarily require anything beyond the record that was before the Arbitrator. However, if there are matters not contained in such record, and are relevant to the determination of issues arising under Section 34(2)(a), they may be brought to the notice of the Court by way of affidavits filed by both parties. Cross-examination of persons swearing to the affidavits should not be allowed unless absolutely necessary, as the truth will emerge on a reading of the affidavits filed by both parties.”

 

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Judgment: MS Emkay Global Financial Service Limited Versus Girdhar Sondhi