Arbitration and conciliation. Making room for ‘exceptional circumstances’

Can a party adduce fresh evidence when appealing against an arbitral award under Section 34 of the Arbitration and Conciliation Act? Normally it cannot, but it can under ‘exceptional circumstances’.

Section 34 deals with the circumstances under which one can appeal against an arbitral award. Under the original Act of 1996 an arbitral award “may be set aside by the court only if (a) the party making the application furnishes proof...” The 2019 amendment to the Act replaced the words “furnishes proof” with “establishes on the basis of record of arbitral tribunal that...”

The conditions that follow “furnishes proof” or “establishes on the basis of record of arbitral tribunal that” are the ‘exceptional circumstances’ under which a court may or may not set aside an arbitral award.

Therefore, the question of whether a party can adduce fresh evidence is a crucial one.

In this regard, a verdict of the Supreme Court of India in January 2023, in Alpine Housing Development Corporation vs Ashok S Dhariwal, sets a precedent for the scope of Section 34. The respondent wanted to bring additional evidence that was not available before the arbitral proceedings and a high court permitted it. Alpine Housing objected and approached the Supreme Court.

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The apex court upheld the high court verdict, noting that “the high court has not committed any error in permitting the respondents to file affidavits/additional evidence in the proceedings under Section 34 of the Arbitration Act”.

Analysing this verdict in legal content aggregator service Mondaq, Karan Joseph and Dushyanth Narayanan of Shardul Amarchand Mangaldas & Co note that the jurisprudence on this point is still evolving.

They say that, on the basis of the pre-amendment position of Section 34, the Supreme Court took the view that it could not ordinarily permit the adducing of evidence at the ‘set aside’ stage. However, in exceptional circumstances, the parties could be permitted to adduce evidence to establish that one of the grounds set out in Section 34(2) were met. (In Alpine, for instance, the ‘exceptional circumstance’ was the subsequent refusal of the authority to permit amalgamation of plots.)

The Supreme Court, in Fiza Developers and Inter-Trade Private Limited vs AMCI (India) Private Limited and other involved parties, observed that proceedings under Section 34 are single-issue and any exercise in framing issues will only cause delay. It also held that the burden is on the applicant to prove the existence of one or more of the enumerated grounds of challenge, by adducing supporting evidence.

The Supreme Court clarified, in Emkay Global Financial Services Limited vs Girdhar Sondhi, that an application for setting aside an award will not ordinarily require anything beyond the record of the arbitrator, except if there are matters not contained in such record that may be subsequently brought on record through an affidavit. Cross-examination will not ordinarily be permitted unless necessary, as such a procedure would defeat the object of Section 34 as a summary proceeding.

“We are therefore left with a vague and undefined standard of ‘exceptional circumstances’ that essentially allows a great degree of discretion to the court. This lacuna raises concerns that the above decisions may be relied on to stall or otherwise delay proceedings,” Joseph and Narayanan write.

They reason that, given the stated objective of “expeditious alternative binding dispute resolution process with minimal court intervention”, the “exceptional circumstances” should be restricted to subsequent developments, as in the case of Alpine, or circumstances that could not have been reasonably placed before the arbitral tribunal at the appropriate stage.

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