The Court finds the arbitral award based solely on pleadings without adequate evidence, violating principles of natural justice.
In a significant ruling, the Patna High Court has set aside an arbitral award and a subsequent dismissal by a lower court, stating that the award was rendered in violation of the fundamental principles of natural justice and the fundamental policy of Indian law. The judgment was delivered by a division bench comprising Justices Rajeev Ranjan Prasad and Soni Shrivastava in the case of Narayan Prasad versus the State of Bihar.
The case arose from an agreement between Narayan Prasad, a contractor, and the State of Bihar for the execution of work on the Zamania Canal. The arbitration was initiated following a dispute over alleged breaches and non-payment issues. The sole arbitrator in the case, Sri Rameshwar Choudhary, was found to have relied solely on pleadings without admitting or denying documents, nor did he call any witnesses for cross-examination. The High Court noted that these actions were in direct conflict with the principles of natural justice.
The Court emphasized the statutory mandates under the Arbitration and Conciliation Act, 1996, which require a fair process, including the presentation of evidence and the opportunity for cross-examination. It pointed out that the arbitrator failed to hold oral hearings and did not establish procedures for the admission or denial of documents.
The judgment also criticized the lower court's decision to dismiss the application under Section 34 of the Arbitration and Conciliation Act, 1996, which sought to set aside the arbitral award. The High Court found that the lower court overlooked crucial aspects concerning evidence admissibility and the principles of natural justice.
This ruling underscores the necessity for arbitral tribunals to adhere strictly to the procedural requirements laid down in law to ensure fairness and justice. The High Court's decision effectively nullifies the previous arbitral award and the lower court's order, allowing Narayan Prasad's appeal.
Bottom Line:
Arbitration and Conciliation Act, 1996 - Principles of natural justice and fundamental policy of law must be adhered to in arbitral proceedings. An arbitral award based solely on pleadings without proper evidence, admission/denial of documents, or cross-examination of witnesses violates the principles of natural justice and the fundamental policy of Indian law.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 34, 23, 24
Narayan Prasad v. State of Bihar, (Patna)(DB) : Law Finder Doc id # 2883359
