Case: M/S OSWAL WOOLLEN MILLS LTD Vs. M/S OSWAL AGRO MILLS LTD

The present appeal is directed against the final judgment and order dated 22.10.2013 passed by the High Court of Delhi at New Delhi in FAO (OS) No. 211 of 2007 whereby a Division Bench of the High Court dismissed the appeal filed by the appellant herein while upholding the order dated 17.04.2007 passed by learned single Judge of the HighThe appellant Company-M/s Oswal Woolen Mills Ltd. and the respondent Company-M/s Oswal Agro Mills Limited are Companies incorporated under the Companies Act and are carrying on the business of manufacturing and trading of vegetable oils, soaps, chemicals, petrochemicals, woolen and related products.(b) Both the parties entered into an agreement dated 30.03.1982 in terms whereof the appellant Company appointed the respondent Company as its agent in accordance with the Handbook of Import Export Procedure, 1981-82 in order to advice, assist and guide the appellant Company to import materials under the REP licences for a CIF value of Rs. 1,85,95,100/- only with remuneration at the rate of 5% (per cent) of the CIF value of the goods imported along with all costs/expenditure incurred.(c) Out of the total value of the materials to be imported under the licences, the materials to the value of Rs. 1,16,00,800/- only could be imported and the material CIF value of Rs. 69,94,300/- could not be imported by the respondent-Company in the absence of the REP licences of the said value which resulted in breach of contract. (d) Both the parties took legal recourse and the High Court, on an application under Section 20 of the Arbitration and Conciliation Act, 1940 (in short ‘the Act?) referred the dispute to Arbitration of two Arbitrators. After completion of the arbitration proceedings before the Arbitrators, the arbitrators, could not reach to a consensus on the Award in terms of the Minutes of the Meeting held on 19.02.1999 and the matter was referred to the Umpire.(e) The appellant-Company moved an application dated 29.01.2000 before the Umpire seeking commencement of de novo proceedings. On 31.01.2000, the said application was dismissed as untenable. Learned Umpire, passed an award dated 21.02.2000, in favour of the respondent-Company to the tune of Rs. 64,65,782/- along with the interest at the rate of 18% (per cent) with effect from 01.11.1991 till the date of realization.(f) Being aggrieved by the Award dated 21.02.2000, the appellant Company filed objections before the High Court under Sections 30 and 33 of the Act which was registered as IA No. 803 of 2001 in CS (OS) No. 795-A/2000. Learned single Judge of the High Court, vide judgment and order dated 17.04.2007, substantially rejected the objections to the Award and made a Rule of the Court with slight modifications. Learned single Judge also observed that the appellant-Company failed to satisfy that there was any serious endeavour for getting the evidence recorded again before the Umpire and waived the right of de novo trial by conduct.(g) Aggrieved by the judgment and order passed by learned single Judge of the High Court, the appellant-Company preferred an appeal being FAO (OS) No. 211 of 2007 before a Division Bench of the High Court. The Division Bench, vide judgment and order dated 22.10.2013, dismissed the appeal.(h) Aggrieved by the judgment and order dated 22.10.2013, the appellant-Company has preferred this appeal by way of special leave before this Court.

Court's reasoning:
Either going by the very nature of functions entrusted to the Umpire or by the provisions of the First Schedule, it is crystal clear that there is no qualitative difference between the Arbitrators and the Umpire with regard to the methodology and modalities to be adopted for reaching a just and fair conclusion. It is trite to say that an Arbitrator is bound to observe the principles of natural justice and conform to the fundamentals of judicial procedure. It is his duty to afford a reasonable opportunity to the parties concerned. However, it would also be illogical to contend that the Umpire has to start de novo ipso facto. The very essence of the law of arbitration is to settle the matter efficiently in a time bound manner. Hence, when the Umpire enters upon a Reference and replaces the arbitrators, he is needed to review the evidence and submissions only on those matters about which the arbitrators have disagreed unless either party applies for the rehearing of the evidence of the parties or their witnesses. The Umpire can surely go through the evidence recorded by the previous arbitrators but without being influenced by the opinion expressed by them in that regard and even the notes taken by previous arbitrators can be relied if there exist special provisions in the agreement permitting him to do so. However, if the party makes an application for de novo hearing, the Umpire is bound to allow the same, subject to the condition that the application is made at the earliest and the applicant is not using it as last armory to turn the case around. An objection on the ground that the Umpire has not reheard the evidence may be waived by the conduct of the parties; the evidence already recorded before the previous arbitrator would remain valid and it would not be open for the parties to get the same recorded afresh later on. It is a well settled proposition that where a party seeking to impeach an Award has made no application to the Umpire for rehearing of the evidence, the same would generally operate as a waiver by conduct.inevitable outcome of the same is that a party is allowed to overcome the lacuna in the evidence already recorded before the previous arbitrators. Further, it would give an unnecessary option to the dishonest litigant to obliterate the evidence already recorded which would have adverse effect on them. Further, the witnesses to be examined afresh is a glaring anomaly that would ensue that the witnesses may not be available or might give a totally different version or a version inconsistent with their previous version, owing to the fact of faded memories. Such an interpretation of the word de novo trial would result in undue hardship to the parties and will defeat the very purpose of the Act and render arbitration ineffective.Hence, firstly, the word de novo hearing should be given a purposive interpretation and it should be understood as a fresh hearing of the matter on the basis of pleadings, evidence and documents on record. If the party wants to re-examine a witness or objects to the documents admitted, the Umpire is to hear the parties and decide the application in the interest ofHowever, having perused the records, it was found that the very first communication dated 24.05.1999, on which the appellant-Company has relied upon is a letter written to the Umpire with regard to the pending proceedings in the said matter before the High Court and the application that is filed before the High Court to which the appellant-Company was referring to in the said letter was an application filed under Section 5 of the Act for the dispute relating to quantum of fee of the Umpire. Though the appellant-Company in the said letter made a note with regard to the de novo hearing of the matter but the same seems to be an additional armory that the appellant is putting behind its back as it hasn?t demanded de novo trial of the said matter neither in the communication nor thereafter in the proceedings. The appellant-Company next referred to communication dated 12.01.2000 but the same is also with regard to the pending proceedings before the High Court. It is only on 29.01.2000 that the appellant-Company has filed an application for de novo hearing of the case i.e., at a stage where the final arguments on the side of the respondent-Company have been finished and the date was fixed for final argument from the side of appellant-Company. If the appellant-Company was serious in its endeavor that it should get an opportunity to get the evidence recorded afresh, an application could easily have been filed before starting the proceedings before the Umpire. It is only from oblique references that the appellant-Company seeks to derive such intent. This aspect is clearly an afterthought which arose during the culmination of the proceedings before the Umpire. Further, even the sum and substance of the highly belated application dated 29.01.2000 for commencement of proceedings de novo clearly shows that it was not asking for re-hearing/re-recording of the evidence but was actually requesting for review of the order of the two Arbitrators especially for re-examination of Shri K.L.is the case of the appellant-Company that the Arbitrators were wrong in permitting production of some other witness, by name, Shri Vijay Gupta instead of Shri K.L Jain. From the above, there is no doubt that the conduct of the appellant-Company amounts to waiver and the application filled on 29.01.2000 is nothing but trying a last armory to turn the case around. The Umpire was right in dismissing the saidFollowing the above judgments, we are of the opinion that the question of whether the claims were tenable or not are based on the contract and which of them had to be granted were within the exclusive domain of the Arbitrators. In this case, the Award considered the totality of circumstances, and weighed the relevant facts on balance while proceeding to award damages. The award does not disclose a manifestly erroneous approach; nor does it omit to consider and apply legal principles to the facts presented before the Arbitrators.In view of the above discussion, we do not find any infirmity or error in the approach and judgments passed by the courts below.