Case: M/S Cochin Shipyard Ltd Vs. M/S Apeejay Shipping Ltd

2. The facts which are essential to be stated for the adjudication of this appeal are that an agreement was entered into between the parties on 29.11.1980. As per the terms and conditions of the agreement, the appellant, a Government undertaking, had agreed to build and deliver a cargo ship to the respondent for the price of Rs. 32.527 crores. Certain differences arose between the parties which led to an arbitration proceeding and a former Judge of this Court was appointed as the arbitrator/sole umpire to resolve the disputes between the parties. As facts would unveil, the learned arbitrator after holding series of sittings passed an award on 15.07.2009. After the award was sent to the civil court, the claimant-appellant moved the Court for passing a decree under Section 17 of the 1940 Act in terms of the award and the respondent filed O.P. (Arb.) No. 30 of 2009 under Sections 30 and 33 to set aside the award. During the pendency of the said petition, the respondent almost after expiry of two years filed an application, that is, I.A. No. 5625 of 2011 seeking permission to examine the learned arbitrator and the General Manager of the respondent as witnesses. The learned Additional Subordinate Judge, vide order dated 23.12.2011, rejected the application holding that there was no justification to examine the arbitrator; that the Court while considering the objections under Sections 30 and 33 of the 1940 Act does not sit in appeal over the arbitrators award; that the Court does not assess or re-appreciate the evidence; that the award passed by the learned arbitrator can only be assailed on the grounds as engrafted under Sections 30 and 33 of the 1940 Act; and that no reason had been disclosed by the respondent, the applicant before the Subordinate Judge, to examine the witness No. 2, that is, the General Manager3. The aforesaid rejection of the application constrained the respondent to file a Writ Petition before the High Court which concurred with the view expressed by the court below opining that there was no necessity to examine the arbitrator as a witness as more than five years had elapsed since the award was passed. The High Court further appreciated the reasoning expressed by the rule making Court and ruled that even if umpire would be examined, no fruitful purpose will be served and, accordingly, gave the stamp of approval to the same. However, the High Court granted liberty to the writ petitioner to produce other available evidence to substantiate its claim and specifically permitted to examine its employee as a witness in the proceeding. The High Court further observed that his evidence would be appreciated bearing in mind the scope of Sections 30 and 33 of the 1940 Act and, accordingly, modified the order passed by the civil court. Be it noted, further liberty was granted to summon the entire record including the orders passed in the course of the arbitral proceeding

Reasoning:
4. At the very outset, we are obliged to state that the respondent has not challenged the order passed by the High Court and, therefore, as far as examination of the umpire is concerned, it stands foreclosed. As far as liberty to examine the witness to substantiate the claim for the rule making Court is concerned, it is contended by Mr. Ranjit Kumar, learned Solicitor General for the appellant, that the respondent has been allowed to examine the employee as a witness to prove the misconduct of the learned arbitrator in conducting of the arbitral proceedings as the grounds had been raised pertaining to grant of adequate opportunity to the respondent and the recording of minutes. In essence, the stand of the respondent was that there had been violation of the principles of the natural justice by the learned arbitrator. It is urged by the learned senior counsel for the appellant that it is totally unwarranted to examine witnesses for the purpose of substantiating the claims before the Court which has the authority to accept the objection under Sections 30 and 33 of the 1940 Act or to pass a decree in terms of the award. In essence, the attack on the order by Mr. Ranjit Kumar is that the witness No. 2, General Manager, could not have been permitted by the High Court to be examined as a witness in the Court to prove any kind of legal misconduct, for the same has to be demonstrated from the records of the arbitral proceedings as well as the evidence adduced before the learned arbitrator. It is further contended that the witness sought to be examined had already been examined before the learned arbitrator and his evidence can be read by the trial court to discern and decide if there is any perversity of approach by the arbitrator. Learned Solicitor General, to bolster his submissions, has placed reliance on Arosan Enterprises Ltd. v. Union of India and Another (1999) 9 SCC 449 ), Inder Sain Mittal v. Housing Board, Haryana and Others (2002) 3 SCC 175 ), State of U.P. v. Allied Constructions (2003) 7 SCC 396 ), State Bank of India v. Ram Das and Another (2003) 12 SCC 474 ), D.D. Sharma v. Union of India (2004) 5 SCC 325 ), Hari Om Maheshwari v. Vinitkumar Parikh (2005) 1 SCC 379 ), Bhagawati Oxygen Ltd. v. Hindustan Copper Ltd. (2005) 6 SCC 462 )and Oil and Natural Gas Corporation v. Wig Brothers Builders and Engineers Private Limited (2010) 13 SCC 377 )19. We have referred to series of decisions to appreciate the concept of misconduct and how a party is entitled to make it the fulcrum of assail in his objection under Sections 30 and 33 of the 1940 Act. Misconduct, as has been laid down, does not always have a moral connotation. To elaborate, it may not have any connection with the individual/personal conduct of the arbitrator. The said conduct would be in sphere of moral misconduct. As far as legal misconduct is concerned, as the authorities would demonstrate, the same must be manifest or palpable from the proceedings before the arbitrator. To elaborate, a person urging the ground of legal misconduct has to satisfy the court from the records of the arbitral proceedings that there has been a legal misconduct on the part of the arbitrator as a consequence of which the award gets vitiated. The question of adducing any kind of oral evidence to substantiate the plea or stand or stance does not arise. It has to be shown from the proceedings carried on before the arbitrator and the evidence adduced before the arbitrator. Evidence cannot be adduced in court to substantiate the challenge on the score of legal misconduct. We are not entering upon any discussion pertaining to moral misconduct as that is not the issue in the case at hand. The decision in Fiza Developers and Inter-Trade Private Limited (supra) has been rendered by this Court while interpreting Section 34 of the 1996 Act. The context being different, we are not inclined to apply the principles enumerated therein to the objection filed under Sections 30 and 33 of the 1940 Act, for the simon pure reason that the authorities are plenty to make it limpid that the issue of legal misconduct on the part of the arbitrator should be manifestly discernable from the record