The Delhi High Court has held that a party that fails to effectively participate in arbitral proceedings cannot later challenge the award on the ground that it was denied a fair opportunity of hearing [South Eastern Railway v. Sara International].
Justice Jasmeet Singh made the observation while refusing to interfere with a ₹130 crore arbitral award passed against South Eastern Railway in favour of Sara International Private Limited.
The Court observed that South Eastern Railway (petitioner) had failed to cross-examine witnesses, lead evidence or pay arbitral fees despite repeated opportunities.
“Having failed to avail the opportunities granted, the petitioner, at this juncture, cannot be permitted to contend that it was denied a fair opportunity to present its case. The principles of natural justice do require reasonable opportunity be given to the parties to present their case but it does not require that the proceedings be kept in abeyance despite the blatant intent of the petitioner not to effectively participate in the Arbitral proceedings,” the Court said.
The Court was hearing South Eastern Railway’s petition under Section 34 of the Arbitration and Conciliation Act, 1996, seeking to set aside an arbitral award dated June 9, 2021 and a ratification order dated July 27, 2021.
The dispute arose from a Wagon Investment Scheme agreement entered into in 2006. Under the agreement, Sara International purchased two rakes for over ₹28.33 crore, which were to be utilised by the Railways in its common pool of wagons. In return, South Eastern Railway was required to provide an uninterrupted supply of six rakes every month for ten years, along with a 10 percent freight rebate.
The arbitral tribunal found South Eastern Railway in breach of the agreement for failing to provide the guaranteed number of rakes. It awarded Sara International ₹130,00,58,548 along with pendente lite payments and future interest at 8 percent per annum. It also awarded ₹71,790 towards administrative expenses and ₹60 lakh towards costs of arbitration.
Before the High Court, South Eastern Railway argued that the award was patently illegal, contrary to the fundamental policy of Indian law and based on an expert report without independent scrutiny. It also claimed that it was denied a reasonable opportunity to present its case.
The Court rejected the argument after noting that the arbitral tribunal had afforded South Eastern Railway “more than adequate opportunity” to cross-examine Sara International’s fact witness and expert witness and to adduce its own evidence.
“The petitioner was granted not just a single opportunity but multiple opportunities on various occasions. Despite indulgence on several occasions and repeated reminders the petitioner neither proceeded with the cross examination of the witnesses nor led its evidence,” the Court noted.
The Court said the conduct of South Eastern Railway showed a casual approach both towards rebutting Sara International’s case and prosecuting its own case before the tribunal.
The arbitral tribunal had also recorded that a witness of Sara International had travelled from Zimbabwe and remained present for cross-examination, but South Eastern Railway repeatedly sought adjournments.
Justice Singh upheld the tribunal’s decision to close South Eastern Railway’s right to cross-examine the fact and expert witnesses.
“Had any more opportunities be given to the petitioner the same would have infact caused prejudice to the respondent,” the Court said.
The Court also upheld the tribunal’s decision to strike off South Eastern Railway’s counterclaim for non-payment of arbitral fees. It noted that Section 38(2) of the Arbitration Act empowers an arbitral tribunal to suspend or terminate proceedings in respect of a claim or counterclaim if the required deposit is not paid.
Finding no ground to interfere with the award, the Court disposed of the petition.
South Eastern Railway was represented by Advocates Saransh Kumar and Harshita Kumar.
Sara International was represented by Senior Advocates Gaurav Pachnanda and Gyanendra Kumar, along with Advocates Anuradha Mukherjee, Shreya Som, Soumya Dasgupta, Shivam Tiwari and Shreya Bansal.
[Read Judgment]