Millennium School vs. Pawan Dawar, O.M.P. (COMM) 590/2020: Delhi High Court (decided on 10 May 2022)

Relevant Facts:

• Petitioner is a school which entered into an Agreement with the Respondent, on 01.04.2012, for the operation and maintenance of its fleet of buses. The Agreement was for a term of eight years with a five-year lock-in period.
• On 07.06.2015, the Respondent requested the release of outstanding payments in terms of the Agreement, to which the Petitioner school replied (via e-mail dated 05.08.2015), pointing out deficiencies in services provided by the Respondent. Thereafter, the Petitioner school terminated the Agreement on 03.09.2015, i.e., within the lock-in period.
• The Respondent invoked the arbitration clause, and the matter was referred to arbitration under DIAC rules by the Delhi High Court.
• The Arbitral Tribunal (hereinafter “AT”) granted a partial Award in favour of the Respondent on the grounds that the termination of the contract was illegal and invalid.
• Aggrieved by the said Award, the Petitioner approached the High Court of Delhi under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter the “Arbitration Act”).
• One of the grounds urged in the petition was that the AT  had wrongly rejected crucial evidence led by the Petitioner, including the complaints filed by parents of the students against the Respondent on the ground that the Certificate under Section 65-B (4) of the Indian Evidence Act, 1872 (hereinafter “Evidence Act”) did not conform to the statutory requirements.
• It was also submitted that the Respondent had admitted to the receipt of various e-mails, which was again ignored by the AT on the mere basis of insufficiency of the Certificate under Section 65-B of the Evidence Act.

(*Note: Though a number of other grounds were urged by the Petitioner to challenge the impugned Award, the present case brief confines to the issue of application of Section 65-B of the Evidence Act to Arbitral Proceedings.)

Issue:

Whether the AT had erred in rejecting the evidence (put forth by the Petitioner) on the ground that requirements under Section 65-B of the Evidence Act were not satisfied?

Judgment:

The High Court held that the decision of the Tribunal to ignore communications submitted in evidence on the grounds that the Certificate required under Section 65-B of the Evidence Act was defective was manifestly erroneous. Although the principles of the Evidence Act are usually applied in Arbitral Proceedings, sensu stricto, the said Act is not applicable. Section 65-B of the Evidence Act is not applicable to Arbitral Proceedings.

The High Court also arrived at a finding that the requirement of Section 65-B of the Evidence Act relates to the mode and manner of leading evidence, and if no objection as to the same is taken at the material time, it would not be open for a party to raise it at a later stage. In the instant case, there was no objection to the Certificate under Section 65-B of the Evidence Act at the time when the same was produced. As such, the decision of the AT allowing the Respondent to file an objection to the admissibility of evidence at a later stage does not hold water.

Comments:

One of the main reasons behind the popularity of arbitration as a dispute resolution mechanism is the flexibility that it provides to the parties and to the Tribunal as well, in terms of the procedure that is to be followed as well as the rules regarding the admissibility of evidence.

Section 19(1) of the Arbitration Act clearly states that an Arbitral Tribunal is not bound by the Evidence Act and the Code of Civil Procedure, 1908. Other sub-sections of Section 19 also provide that failing any agreement between the parties regarding the procedure to be followed, the Arbitral Tribunal “may conduct the proceedings in the manner it considers appropriate”, including the power to determine the admissibility, relevance, materiality, and weight of any evidence.

The following words of the Bombay High Court, in the case of Maharashtra State Electricity Board v. Datar Switchgear Ltd. (2002) SCC Online Bom 983, eloquently capture the essence of Section 19 of the Arbitration Act:

“In Sub-section (1) of Section 19, the Act has prescribed that the Arbitral Tribunal shall not be bound by the Code of Civil Procedure, 1908 or by the Evidence Act, 1872. These are words of amplitude and not of restriction. These words do not prohibit the Arbitral Tribunal from drawing sustenance from the fundamental principles underlying the Civil Procedure Code or Evidence Act, but free the Tribunal from being bound, as would a Civil Court, by the requirement of observing the provisions of the Code and the law relating to evidence with all its rigour.”

The decision of the Delhi High Court in the instant case is very important because it reinforces the idea that Arbitration Proceedings are not shackled by strict rules of procedure and evidence. The decision is also consistent with other decisions of the same High Court, such as Megha Enterprises & others v. M/s Haldirams Snack Pvt. Ltd. (2021) SCC Online Del 2641 wherein it was held that an arbitral Tribunal could not be said to have “grossly erred” if it allows electronic proof without a Section 65-B affidavit as the Evidence Act is not applicable to Arbitration Proceedings.