Supreme Court: New grounds containing new material/facts could not have been introduced for the first time in an appeal when admittedly these grounds were not originally raised in the arbitration petition for setting aside the award

The question then arises, whether in the facts and circumstances of the present case, the High Court committed any error in rejecting the appellant's application for addition of new grounds in the memorandum of arbitration appeal. As noticed above, in the application for setting aside the award, appellant set up only five grounds viz., waiver, acquiescence, delay, laches and res judicata. The grounds sought to be added in the memorandum of arbitration appeal by way of amendment are absolutely new grounds for which there is no foundation in the application for setting aside the award. Obviously, such new grounds containing new material/facts could not have been introduced for the first time in an appeal when admittedly these grounds were not originally raised in the arbitration petition for setting aside the award. {Para 28}

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 2928 of 2010 

Decided On: 01.04.2010

State of Maharashtra Vs. Hindustan Construction Company Ltd.

Hon'ble Judges/Coram:

R.V. Raveendran and R.M. Lodha, JJ.

Author: R.M. Lodha, J.

Citation: 2010 INSC 191, MANU/SC/0215/2010.

Read full judgment here: Click here.

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Supreme court: Do the principles relating to amendment of pleadings in original proceedings apply to the amendment in the grounds of appeal?

 Do the principles relating to amendment of pleadings in original proceedings apply to the amendment in the grounds of appeal? Order XLI Rule 2 CPC makes a provision that the appellant shall not, except by leave of the Court, urge or be heard in support of any ground of objection not set forth in the memorandum of appeal; but the Appellate Court, in deciding the appeal, shall not be confined to the grounds of objections set forth in the memorandum of appeal or taken by leave of the Court. Order XLI Rule 3 CPC provides that where the memorandum of appeal is not drawn up as prescribed, it may be rejected, or be returned to the appellant for the purpose of being amended. {Para 20}

21. The aforesaid provisions in CPC leave no manner of doubt that the appellate court has power to grant leave to amend the memorandum of appeal. As a matter of fact, in Harcharan v. State of Haryana   MANU/SC/0166/1982 : (1982) 3 SCC 408 this Court observed that the memorandum of appeal has same position like the plaint in the suit. This Court said:

...When an appeal is preferred the memorandum of appeal has the same position like the plaint in a suit because plaintiff is held to the case pleaded in the plaint. In the case of memorandum of appeal same situation obtains in view of Order 41, Rule 3. The appellant is confined to and also would be held to the memorandum of appeal. To overcome any contention that such is not the pleading the appellant sought the amendment....

 IN THE SUPREME COURT OF INDIA

Civil Appeal No. 2928 of 2010 

Decided On: 01.04.2010

State of Maharashtra Vs. Hindustan Construction Company Ltd.

Hon'ble Judges/Coram:

R.V. Raveendran and R.M. Lodha, JJ.

Author: R.M. Lodha, J.

Citation: 2010 INSC 191, MANU/SC/0215/2010

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What is difference between Section 34 of arbitration Act and Section 37 of the Arbitration Act?

Understanding the distinction between Section 34 (application for setting aside an arbitral award) and Section 37 (appealable orders) is crucial to grasping the framework of judicial intervention in arbitration. While they operate together in challenging arbitral outcomes, they function at distinctly different stages with fundamentally different scopes.

Nature and Stage of Intervention

Section 34 represents the primary recourse mechanism against a final arbitral award. It permits a party to directly challenge the award itself on specifically enumerated grounds before the Court. This application targets the substantive output of the arbitral tribunal—the award.

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Whether court can undertake independent assessment of merits of arbitration award in arbitration appeal?

 Before proceeding further, we find it necessary to briefly revisit the existing position of law with respect to the scope of interference with an arbitral award in India, though we do not wish to burden this judgment by discussing the principles regarding the same in detail. Such interference may be undertaken in terms of Section 34 or Section 37 of the Arbitration and Conciliation Act, 1996 (for short, "the 1996 Act"). While the former deals with challenges to an arbitral award itself, the latter, inter alia, deals with appeals against an order made Under Section 34 setting aside or refusing to set aside an arbitral award.

11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided Under Section 34(2)(b)(ii), i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.

It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b) (ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. (See Associate Builders v. DDA, MANU/SC/1076/2014 : (2015) 3 SCC 49). Also see ONGC Ltd. v. Saw Pipes Ltd., MANU/SC/0314/2003 : (2003) 5 SCC 705; Hindustan Zinc Ltd. v. Friends Coal Carbonisation, MANU/SC/8095/2006 : (2006) 4 SCC 445; and McDermott International v. Burn Standard Co. Ltd., MANU/SC/8177/2006 : (2006) 11 SCC 181).

It is relevant to note that after the 2015 amendments to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, Sub-section (2A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence.

12. As far as interference with an order made Under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference Under Section 37 cannot travel beyond the restrictions laid down Under Section 34. In other words, the Court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the Court Under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the Court Under Section 34 and by the Court in an appeal Under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 1862 of 2014

Decided On: 18.02.2019

 MMTC Ltd. Vs. Vedanta Ltd.

Hon'ble Judges/Coram:

Mohan M. Shantanagoudar and Vineet Saran, JJ.

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Whether appeal is maintainable against order of rejection of amendment application to arbitration petition?

As reference is made to the above, which no where take into consideration a situation like this and so also the judgment. The Arbitration Petition under Section 34 to set aside an Arbitral Award is still pending. Merely because one or two grounds not permitted to be added, by rejecting the application that itself in no way can be stated to be the refusal to set aside the Arbitral Award.

9. The positive law, so far as contention under Section 37 is concerned, is very clear that it is maintainable against setting aside and/or refusing to set aside an Arbitral Award. In the present case, the rejection of the amendment application, in no way, can be stated to be concluding Section 34 petition finally.

10. The learned Judge, after considering the rival submissions, at the final stage of the arbitration petition, may set aside and/or refuse to set aside the Award. The Appeal against such orders under Section 37 is maintainable. However, rejection of such amendment application and/or refusing to permit to raise additional grounds, that itself can not be stated to be order, as contemplated under Section 37(c), against which Appeal, is maintainable. Against the rejection of amendment application, in view of plain reading of Section 37, the appeal itself is not maintainable. However, this in no way read and refer to mean that the Appellant has no remedy whatsoever to challenge and/or agitate the grounds, so raised in the Appeal.

In the High Court of Bombay

Ordinary Original Civil Jurisdiction

(Before Anoop V. Mohta and P.R. Bora, JJ.)

Messrs. Raghuvir Cotton Ginning & Pressing Pvt. Ltd.

v.

Messrs. Vijay Cotton & Fibre Co.

Appeal (L) No. 465 of 2006

In

Chamber Summons (L) No. 1977 of 2016

In

Arbitration Petition No. 507 of 2016

Decided on January 11, 2017

Citation; 2017 SCC OnLine Bom 76,2017(5) MHLJ 352

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