Introduction-
In a recent ruling1, the Delhi High Court examined the extent of the scope of Arbitral Tribunal's power to pass an interim award based on evidentiary admissions in the context of arbitral proceedings. The Court observed that the power to grant an award on admissions is broad and that admissions made outside of pleadings, if sufficiently established, may form the basis of an arbitral award. The case primarily examined whether the Court under Section 34 of the Arbitration Act, could re-evaluate the Tribunal's findings on evidentiary admissions, and whether evidentiary admissions made outside pleadings could be relied upon for passing an award under the Arbitration and Conciliation Act, 1996 ("the Act").
Facts of the case-
The dispute arose from a Letter of Award (LOA) dated 11.10.2010, wherein the Respondent was assigned with the responsibility of design, engineering, manufacturing, inspection, testing, and other related services for a Boiler Turbine Generator for the Petitioner's 5x270 MW Thermal Power Plant at Amravati, Maharashtra.
Pursuant to the LOA, a supply contract and a services contract were signed on 26.05.2011 which provided for the supply of material and scope of services respectively. However, disputes arose between the parties because the Respondent claimed that the Petitioner had failed to meet its payment obligations for the plant, machinery, equipment and services supplied by the Respondent. The Petitioner unilaterally suspended the supplies and subsequently, the contract was terminated by the Respondent through communication dated 27.11.2015. The matter went to arbitration, wherein the Respondent filed their claim. The Petitioner also made a counterclaim, for a declaration that the contracts had been unlawfully terminated.
In the course of the arbitral proceedings, the parties filed applications for interim awards based on alleged admissions made by the other. The Respondent sought an interim award based on minutes from several meetings held between the parties between 2012 and 2014, where the Respondent alleged that the Petitioner had admitted a liability of Rs. 115 crores. The Arbitral Tribunal, upon examining the material, rejected the Petitioner's counterclaim and allowed the Respondent's application under Section 31(6) of the Act and passed an interim award, which the Petitioner challenged under Section 34 of the Act.
Contentions of the Petitioner-
The Petitioner argued that the minutes of the meetings had been misinterpreted and that the Petitioner had only acknowledged receipt of goods and invoices, which did not amount to an admission of liability. The Petitioner further contended that the Arbitral Tribunal had failed to consider that the Respondent had breached the terms of the contract by failing to make the supply of plant and equipment sequentially, and therefore the Respondent was not entitled to payment.
Further, the Petitioner argued that an arbitral award based on evidentiary admissions, i.e., admissions outside of pleadings, was improper. The Petitioner contended that such admissions could not form the basis of a final award unless they had been put to the concerned party in cross-examination, as such admissions could always be clarified or explained, and therefore, the Petitioner argued that the issues raised in the arbitral proceedings were prematurely decided, resulting in manifest error by the Tribunal.
Contentions of the Respondent
The Respondent's counsel argued that the Court's jurisdiction under Section 34 of the Arbitration and Conciliation Act was limited. The Respondent submitted that the Tribunal had correctly interpreted the pleadings and evidence before it, and the material had been fully considered. The Respondent further submitted that the goods were admittedly supplied by the respondent, delivered and accepted, and the invoices were therefore raised in terms of the supplies made, which ought to have been honoured. He argued that the petitioner's insistence upon "sequential supply" is not a bonafide defence but a moonshine, which ought not to absolve it of its liability to pay for the goods supplied, received and accepted. The Respondent maintained that the Tribunal's award was well-founded and should not be disturbed.
Observations of the Court-
- Principles governing Section 34 of the Act:
The Court reiterated the settled legal principles under Section 34
of the Act, which outlines the limited scope of interference for
setting aside an arbitral award. The Court emphasized that the
appreciation of evidence falls within the domain of the arbitrator,
and the role of the Court is not of an appellate court but is only
restricted review an award on limited parameters such as procedural
fairness, statutory compliance, and bona fides. As long as the view
taken by the arbitrator is based on evidence, not manifestly
unreasonable and arbitrary or contrary to fundamental policy, no
interference is required by the Court.
- Power to pass awards on admissions: The Court
then examined the legal principles regarding the power of courts to
pass judgments based on admissions under Order XII Rule 6 of the
Code of Civil Procedure (CPC). The Court noted that the Supreme
Court in Karam Kapahi v. Lal Chand Public Charitable
Trusts2 had clarified that the scope of Order XII
Rule 6 is not restricted to admissions contained solely within
pleadings but also includes admissions made "otherwise",
whether orally or in writing. Further, the Court relied on several
decisions, including Nimbus Communications Ltd. v. Prasar
Bharti3 and NDMC v. N.S. Associates (P)
Ltd4 (2024), which upheld that challenges to
arbitral awards based on admissions must be assessed under the
narrow principles governing Section 34.
In the present case, the Court observed that while admissions in pleadings carry a higher legal weight, evidentiary admissions, i.e., those made outside pleadings, must be assessed contextually. The Petitioner's argument that evidentiary admissions could not form the basis of an award was rejected, as it conflicted with the text of Order XII Rule 6 of the CPC.
- Admission of liability: The Court found that the Arbitral Tribunal had rightly considered the minutes of meetings as containing express admissions of liability. Further, this was supported by subsequent correspondence between the parties, including the issuance of C-Forms which acknowledge the receipt of goods. The Court observed that although the C-forms may not be an acknowledgement of liability, however along with other factors, they can be relied upon to take a view of whether there is an implied admission. The Petitioner's claims that these admissions were ambiguous and that C-Forms were issued only to help in taxation were found to be without merit. The Court concluded that the Tribunal had correctly assessed the evidence and that the Petitioner was merely seeking a reassessment of evidence, and the challenge under Section 34 by the Petitioner was an attempt to reargue the case, which was not within the Court's jurisdiction under Section 34.
Conclusion
The Court clarified that under the provisions of the Act an Arbitral Tribunal is empowered to pass an interim award as and when it seeks necessary. The present judgment further clarifies that the Tribunal can rely on evidentiary admissions made outside of pleadings to pass an award. The Court reaffirmed the broad scope of admissions under Order XII Rule 6 of the CPC and reinforced that the evidentiary admissions, including minutes of meeting and C-Forms, can form the basis of an arbitral award. The Court further emphasized that it cannot reassess evidence or act as appellate authority, and that the jurisdiction under Section 34 of the Act is limited to ensuring that the award is not manifestly erroneous or that the factual assessment is entirely bereft of evidentiary support or perverse, in the sense that no reasonable tribunal could have reached the same conclusion.
Footnotes
1 Rattan India Power Ltd. v. Bharat Heavy Electricals Ltd. (2025: DHC: 1464)
2 (2010) 4 SCC 753
3 2016 SCC OnLine Del 6886
4 2024 SCC OnLine Del 4289
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