DR.

RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY, LUCKNOW

SESSION 2019-20

SUBJECT: ALTERNATIVE DISPUTE RESOLUTION LAW

FINAL DRAFT

ON

APPLICABILITY OF RULES OF EVIDENCE IN ARBITRATION LAW

Submitted to: Submitted by:

Dr. Prasenjit Kundu Sankalp Patel

Assistant Professor (Law) B (Hons) 7th Sem

Enrollment No. - 160101131

I would like to express my gratitude to all those who gave me the possibility to complete this
project. This project is the result of extensive literature study, hard work and labour put in to
it to make it worth reading. I extend my heartily thank to Dr. Prasenjit Kundu who inspired
me to do this project. I am deeply indebted to him.

I further extend my thanks to library staff of DR. RAM MANOHAR LOHIYA NATIONAL
LAW UNIVERSITY who helped me in getting all the materials necessary for the project.
 TABLE OF CONTENTS

1. Introduction………………………………………………………………...………………….3

2. Relevant provisions of Arbitration and Conciliation Act, 1996 Act ....................................4

3. International Bar Association Rules on Evidence ………………………………………….6

4. Kinds of Evidence..……………………………………………………………………….......8

5. Admissibility of Evidence……………………….…………………………………………...19

6. Remedy for assistance in taking evidence........……………………………………………..10

7. Recent Developments………………………………………………………………………...11

8. Conclusion……………………………………………………………………………………13

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INTRODUCTION

Arbitration is the procedure, which allows parties to resolve disputes outside the purview of the
courts. It’s an Alternative Dispute Resolution mechanism. Such proceedings are usually
voluntary and consensual between the parties. Arbitration comes into play only when there is an
Arbitration Agreement between the parties or when a clause for arbitration exists in the
commercial contract between the parties. The presence of an arbitration clause obliges the parties
first to resolve the matter through an arbitration tribunal, constituted in accordance with the
agreement, and when such proceeding doesn’t satisfy either party, they can approach the court of
law. If a party approaches a court of law about a dispute arising out of a commercial transaction
and such a transaction stipulates an arbitration clause, the courts will not entertain such a suit,
unless otherwise provided for in the statute. This project talks about the procedure which the
court follows while dealing with the arbitration issues such as taking of evidence etc and the
changes in this practice in recent time.

Relevant provisions of Arbitration and Conciliation Act, 1996 Act

Section 19-

"Determination of rules of procedure.—

1. The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908)
or the Indian Evidence Act, 1872 (1 of 1872).

2. Subject to this Part, the parties are free to agree on the procedure to be followed by the
arbitral tribunal in conducting its proceedings.

3. Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to
this Part, conduct the proceedings in the manner it considers appropriate.

4. The power of the arbitral tribunal under subsection (3) includes the power to determine
the admissibility, relevance, materiality and weight of any evidence."

Section 5-

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"Extent of judicial intervention.—notwithstanding anything contained in any other law for the
time being in force, in matters governed by this Part, no judicial authority shall intervene except
where so provided in this Part."

From a combined reading of the provisions, it can be clearly inferred that the legislative intent
was to curtail judicial interference of the civil courts which are infamous for their long, costly
and delayed proceedings. Further, it also satisfies the primary objective of the Act which was to
minimize the supervisory role of courts in the arbitral process and expeditious disposal of
disputes.

So far as the application of Civil Procedure Code (herein after referred to as "the Code") in the
arbitral proceedings is concerned, Section 19 of the Act exempts the arbitral tribunal from the
shackles of the Code as also the rules of evidence contained in the Indian Evidence Act, 1872
and empowers it to formulate its own rules of procedure. 1However, the Act itself in sections 36
and 37 of the Act provide for resorting to civil courts. The Delhi High Court, putting rest to the
contradictory provisions, correctly said that the parties are required to proceed to the civil courts
either for setting aside the award or its effective enforcement under section 36 or Section 37 of
the Act only once the arbitral proceedings are complete and an arbitral award is made. 2However,
the question whether all the features and provisions of CPC will be applicable to an arbitration
proceeding still remains unresolved. This issue has come up before the Apex Court and High
Courts in a number of cases.

High Court of Bombay in the year 2002 held that

"In Sub-section (1) of Section 19, the Act has prescribed that the Arbitral Tribunal shall not be
bound by the Code of Civil Procedure, 1908 or by the Evidence Act, 1872. These are words of
amplitude and not of restriction. These words do not prohibit the Arbitral Tribunal from drawing
sustenance from the fundamental principles underlying the Civil Procedure Code or Evidence
Act, but free the Tribunal from being bound, as would a Civil Court, by the requirement of
observing the provisions of the Code and the law relating to evidence with all its rigour."3

1
Mahanagar Telephone Nigam Limited Vs. Applied Electronics Ltd.; AIR2014Delhi182.
2
Ibid.
3
Maharashtra State Electricity Board Vs. Datar Switchgear Ltd.; 2003(105(1)) BOMLR937.

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The Supreme Court in its landmark judgment while examining the issue whether a revision
petition under Section 115 of the Code lies to the High Court as against an order made by a civil
court in an appeal preferred under Section 37 of the Act held that

"there is always a strong presumption that the civil courts have the jurisdiction to decide all
questions of civil nature, therefore, if at all there has to be an inference the same should be in
favour of the jurisdiction of the court rather than the exclusion of such jurisdiction and there
being no such exclusion of the Code in specific terms except to the extent stated in Section 37(2),
we cannot draw an inference that merely because the Act has not provided the CPC to be
applicable, by inference it should be held that the Code is inapplicable.4

So what can be inferred is that unless the statute expressly or implicitly provides, the jurisdiction
of a civil courts cannot be ousted.

Affirming the law laid down by the Apex Court in the case Municipal Corporation of Delhi v.
International Security and Intelligence Agency5 the High Court of Karnataka in the case of Syko
Bag Industries, Proprietor, Mr. T.K. Yahoo and Mrs. K. Zubaida Vs. ICDS Limited rep. by its
GPA Holder, K. Balakrishna Rao and Sri B.I. Sharma, Advocate and Arbitrator 6took a similar
view that

"The applicability of the provisions of the Code of Civil Procedure to the Arbitral proceedings
under the Arbitration and Conciliation Act shall be subject to affecting any rights of a party
under special law or local law in force in relation to the arbitration proceedings." and that "the
provisions of Civil Procedure Code can be applied if they are not inconsistent with the
provisions of Arbitration and Conciliation Act."

While all of the above judgments were regarding the application of CPC post arbitration award,
the High Court of Bombay in the case Sahyadri Earthmovers Vs. L and T Finance Limited and
Anr.7 examined the scope of applicability of CPC during the arbitration proceedings and held that
although the Code and the Evidence Act are not applicable strictly, (Section 19), but their settled
principles do apply. The court further took the view that,
4
I.T.I. Ltd. V Siemens Public Communications Network Ltd., AIR2002SC2308.
5
Municipal Corporation of Delhi v. International Security and Intelligence Agency AIR 2002 SC 2308.
6
K. Zubaida Vs. ICDS Limited 2007(4) KCCRSN 240.
7
Sahyadri Earthmovers Vs. L and T Finance Limited and Anr 2011(7) ALLMR 279.

5
"Section 19 of the Arbitration Act, which is reproduced contemplates when the parties agree on
a particular procedure to be followed by the Arbitral Tribunal, all are bound to follow the same,
but in its absence, the Arbitral Tribunal is bound to conduct the proceeding in the manner it
considers appropriate. It also means that the Arbitrator has power to determine the
admissibility, relevance, materiality and weight in evidence though the provisions of the Code of
Civil Procedure and/ or Indian Evidence Act, are not binding upon the Tribunal.

The principles of natural justice, fair play, equal opportunity to both the parties and to pass
order, interim or final, based upon the material/evidence placed by the parties on the record and
after due analysis and/or appreciation of the same by giving proper and correct interpretation to
the terms of the contract, subject to the provisions of law, just cannot be overlooked."

The division bench of the Supreme Court in Mahanagar Telephone Nigam Ltd. Vs. Applied
Electronics Ltd. had raised doubt over the correctness of judgment in ITI Ltd. vs. Siemens Public
Communications Network Ltd. wherein it was held that that the applicability of the Code is not
prohibited in an arbitration appeal proceedings under Section 37 of the Act.

International Bar Association Rules of Evidence

IBA Rules of Evidence are widely followed in international arbitration proceedings. They were
adopted by a resolution in 2010 by the International Bar Association. The Preamble provides that
the parties and the tribunal are free to adopt the IBA rules wholly or partly, they are allowed to
vary the rules or simply use them as guidelines to their proceedings. The rules are not limited or
restrictive; these rules are flexible, and the parties and tribunal are free to adopt them as per the
facts of the case. These IBA Rules on the Taking of Evidence in International Arbitration are
intended to provide an efficient, economical and fair process for the taking of evidence in
international arbitrations, particularly those between Parties from different legal traditions. They
are designed to supplement the legal provisions and the institutional, ad hoc or other rules that
apply to the conduct of the arbitration.8

 The IBA Rules contain 9 articles that deal with various aspects of evidence. They are:

8
file:///C:/Users/user/Downloads/IBA%20Rules%20on%20the%20Taking%20of%20Evidence%20in%20Int%20Ar
bitration%20201011%20FULL.pdf.

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  The Scope of application

 Consultation on Evidence issues

 Documents

 Witnesses of facts

 Party appointed experts

 Tribunal appointed experts

 Inspection

 Evidentiary hearing

 Admissibility and assessment of evidence

Among the key updates and revisions are the following:

 An obligation on the tribunal to consult the parties at the earliest appropriate time with a
view to agreeing on an efficient, economical and fair process for taking evidence. It also
includes a non-exhaustive list of matters which such ‘consultation’ may address.

 Greater guidance to the tribunal on how to address requests for documents or information
maintained in electronic form – so-called ‘e-disclosure’. Similarly, the revisions give
greater guidance as to requests for documents in the possession of third parties.

 Expansion of confidentiality protections respecting both documents produced pursuant to

 Greater clarity respecting the contents of expert reports and in particular the requirement
to describe the instructions given to the expert and a statement of his or her independence
from the parties, legal advisers and tribunal; the revised IBA Rules also foresee the
provision of evidence in reply to expert reports.

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  An obligation on witnesses to appear for oral testimony at a hearing only if their
appearance has been requested by any party or the tribunal; the revised IBA Rules also
provide for the use of videoconference or similar technology.

 More specific guidance respecting issues of legal impediment or privilege, including the
need to maintain fairness and equality particularly if the parties are subject to different
legal or ethical rules.

 Incorporation of an express requirement of good faith in taking evidence coupled with an

 Deletion of the word ‘commercial’ from the title, in recognition of the potential equal
application to ‘non-commercial’ arbitrations such as investment treaty-based disputes.9

Kinds of Evidence

1. Extrincic Evidence-It can be admitted by the court or the arbitral tribunal to determine the
issue of excess of jurisdiction. This kind of evidence is admissible in such cases because the
dispute is not something which arises under, or in relation to the contract, or dependent on the
construction of the contract, or to be determined within the award by the court.10The court can
resolve ambiguity by admitting extrinsic evidence. The rationale of this rule is that the nature of
the dispute is something which has to be determined outside and independent of what appears in
the award. Such jurisdictional error needs to be proved by evidence extrinsic to the award.

2. Fresh Evidence- The test of reference to which fresh evidence may be introduced in the court
of appeal as laid down in Ladd v Marshall11:

“To justify the recipients of fresh evidence or a new trial, three conditions must be fulfilled: first,
it must be shown that the evidence could not have been obtained with reasonable diligence for
use at the trial; secondly, the evidence must be such that, if given, it would probably have an
important influence on the result of the case, though it need not be decisive; thirdly, the evidence

9
https://www.ibanet.org/ENews_Archive/IBA_30June_2010_Enews_Taking_of_Evidence_new_rules.aspx
10
Jivarajbhai Ujamshi Sheth v Chintamanrao Balaj AIR 1965 SC 214.
11
Ladd v Marshall (1954) 1 WLR 1489.

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must be such as is presumably to be believed, or in other words, it must be apparently credible,
though it need not be incontrovertible.”

12
3. Expert Evidence- In order to establish whether an appointed expert has made a manifest
error in determination, the arbitrator is permitted to look at further correspondence between the
parties and the expert, the supporting documentation as well as the determination itself. The
finality of the determination must not be challenged because another view could, in the light of
further argument, properly be taken of the matters dealt with during the determination.13 If
opportunity to rebut expert’s opinion, tendered by one party in evidence before the arbitrator, is
not given to the opposite party it would amount to violation of the principles of natural justice.14

Admissibility of Evidence

The arbitrator is not bound by the technical rules of procedure, which the courts have to observe,
nor the Evidence Act, Limitation Act, CPC unless the parties expressly provide in the agreement,
admissibility, relevance, and materiality of evidence are within the exclusive jurisdiction of the
Tribunal. Where the parties have not agreed to any specific procedure, the arbitral tribunal has to
follow the statutory procedure. The arbitral tribunal has to follow the procedure under Sec. 19(4)
of the Act. An arbitrator must nevertheless observe the fundamental principles of natural justice.
An arbitral tribunal is not bound by the technical and strict rules of evidence but, he must not
disregard the rules of evidence which are founded on the fundamental principles of natural
justice and public policy. A breach of the principles of natural justice would make the award
liable to be declared invalid and inoperative15.

An award made by an arbitral tribunal without considering the evidence on record is liable to be
set aside. A complete absence of evidence, or arbitrator’s failure to take into consideration a very
material document on record, or admission of the parties in arriving at the finding, are good
grounds for challenging the proceeding16. The case of insufficiency of evidence before the
arbitrator must be distinguished from where there is no evidence. In the absence of the primary

12
Sec. 26 of the Arbitration and Conciliation Act, 1996.
13
Invensys Plc v Automotive Sealing Systems Ltd (2002) 1 All ER (Comm) 222.
14
Girdhari Lal v Kameshwar Prasad AIR 1989 All 210.
15
https://blog.ipleaders.in/evidence-arbitral-proceeding/
16
West Bengal Industrial Infra-Strictire Development Corporation v Star Engineering AIR 1987 Cal 126.

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documents which were the foundation of the disputes, the awards given by the arbitrator would
be one with no evidence at all or at best can be said to be based on speculation and therefore,
17
prima facie illegal and improperly procured. The court can set aside an award if a document
within the control of the parties and forming the foundation of their rights and liabilities was not
submitted before the arbitrator and the award was passed without perusing such document18.

Often the award of the arbitrator is challenged on the ground that there has been violation of the
principles of natural justice, either because the arbitrator omitted to consider the relevant
evidence while making the award, or arriving at his conclusions, or that the award passed is
19
based on no evidence at all. The finding of facts by the arbitrator must be based either on
evidence or on admission. They cannot be found to exist form a mere contention from one side
especially when they are denied by the other. An award based on no evidence is liable to be set
aside.20 Even an ex-parte award must be substantiated by evidence.21

Remedy for assistance in taking evidence

Section 27 of the Act provides that the arbitral tribunal or a party with the approval of the arbitral
22
tribunal may apply to the court for assistance in taking evidence. The application seeking
court’s assistance must specify:

1. The names and addresses of the parties and arbitrators

2. The general nature of the claim and relief sought

3. The evidence to be obtained; stating:

4. The name and address of the witness or expert witness required to be summoned.

5. Statement of the subject-matter of the testimony required.

6. The description of any document to be produced or property to be inspected.

17
Union of India v M/s Ajit Mehta and Associates AIR 1990 Bom 45.
18
Poulose v State of Kerala AIR 1975 SC 1259.
19
Delhi Jal Board v Esskay Kohli (2007) 3 Arb LR 314 (Del).
20
Basheshar Nath & Co v Union of India (1978) Rajdhani LR 65.
21
Union of India v M/s Pampassar Distillery Bellary and Other AIR 1981 Del 399.
22
Sec. 27 of the Arbitration and Conciliation, 1996

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On such an application being made, the court may direct that the evidence of such witness be
directly recorded before the arbitral tribunal. The court when dealing with the requests would
apply the provisions contained in the Code of Civil Procedure and Evidence Act. No provision
under the Act requires the court to give hearing to a witness, or a party against whom the court
wants to issue directions to produce record, or to issue summons to witness.23

Arbitration award should not be set aside on the ground that there was insufficient evidence, or
that it was unsubstantial and the like, as amongst many reasons, one of the main reasons for
going to arbitration is that technical rules of evidence do not apply to it. The objection that the
award is liable to be set aside on the ground that the evidences and submissions of the parties
were not considered, would be untenable if the arbitrator has specifically recorded the award that
he had considered the claims and counter-claims, evidences adduced by the parties, submissions
and documents filed by the parties and the arguments advanced by the parties. Also, the award
cannot be set aside merely on the ground that the arbitrator has not specifically referred to any
evidence of a witness. Appraisal of evidence by the arbitrators is ordinarily never a matter which
the court questions and considers.

Recent Developments

The Supreme Court recently ruled in the case of M/s Emkay Global Financial Services Ltd. v.
Girdhar Sondhi24, that unless absolutely necessary, the courts should not go beyond the record
before the arbitrator in deciding an application for setting aside an award. The court also
reiterated that “seat” in the context of arbitration proceedings is akin to an exclusive jurisdiction
clause and would vest the seat courts with exclusive jurisdiction over the arbitration proceedings.

The Court took note of its several judgments on the effect of exclusive jurisdiction clause.
Noting that the concept of ‘juridical seat’ which was evolved by courts in England have taken
root in India, the Court, referred to its recent judgment in the case of Indus Mobile Pvt. Ltd. v.
Datawind Innovations Pvt. Ltd.25 In this case, it was opined that the moment a seat is designated
in arbitration, it is akin to an exclusive jurisdiction clause. The court held that, under law of

23
Rasiklal Ratilal v Fancy Corporation Ltd (2007) 4 Arb LR 173 (Bom).
24
M/s Emkay Global Financial Services Ltd. v. Girdhar Sondhi, Civil Appeal No. 8367 of 2018.
25
Indus Mobile Pvt. Ltd. v. Datawind Innovations Pvt. Ltd [(2017) 7 SCC 678].

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arbitration, unlike the Code of Civil Procedure which applies to civil suits, a reference to “seat”
is a concept by which a neutral venue can be chosen by parties to an arbitration clause. Such
neutral venue may not in the classical sense have jurisdiction – implying that it may not have
jurisdiction as per CPC. However, in arbitration, the moment a “seat” is determined, it would
vest the “seat” courts with exclusive jurisdiction i.e. if the “seat” is Mumbai, it would vest
Mumbai courts with jurisdiction for the purposes of regulating arbitral proceedings arising out of
the agreement between the parties.

The Court in the case of Fiza Developers & Inter-trade Pvt. Ltd. v. AMCI (India) Pvt. Ltd. and
Anr26. The question in this case was whether issues are required to framed in a section 34
proceedings as they are required in a normal suit as per Order XIV Rule 1 of the CPC.
Answering the question in negative, it was held that the Section 34 proceedings are summary
proceedings and framing of issues was not an integral process of the proceedings under Section
34. Thus, the Court indicated that proceedings under Section 34 may not have the facets of a
normal civil suit.

Subsequently, the Court also observed the report of High Level Committee to review the
institutionalization of arbitration mechanism in India, 2017 (“Srikrishna Committee Report”).
In the report, the committee had expressed its displeasure over practice that had evolved in some
High Courts which allowed parties to lead evidence in Section 34 proceedings just like in a suit.
Such practice was developed because of the language of Section 34(2) (a) which required parties
to “furnish proof” as to the existence of the grounds under Section 34. Accordingly, Shrikrishna
Committee Report recommended amending the language of Section 34(2) (a) such that petitions
under Section 34 do not take form of a civil suit. Taking heed from the Shrikrishna Committee
report, the government recently introduced Arbitration and Conciliation (Amendment) Bill of
2018 (“Proposed Amendments”) which proposes to incorporate this change into the Act and
was finally passed in August 2019.

Prior to the 2019 Amendment, any party seeking to challenge the arbitral award under Section
34(2) was required to "furnish proof" with respect to the ground on which it was seeking the
setting aside of the arbitral award. The amended Section 34 now restricts the ability of the parties

26
Fiza Developers & Inter-trade Pvt. Ltd. v. AMCI (India) Pvt. Ltd. and Anr , AIR 2009 Kant 20.

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to furnish any fresh proof before the court of challenge and restricts the scrutiny of the court to
"the record of the arbitral tribunal27". That is to say, no fresh evidence can be led at the stage of a
Section 34 challenge application before a court.

Recently, The Supreme Court in the case of M/S Canara Nidhi Ltd v M. Shashikala And Anr
28
has held that proceedings under Section 34 of Arbitration and Conciliation Act will not
ordinarily require anything beyond the record that was before the arbitrator and only in an
exceptional case, additional evidence can be permitted to be adduced.

CONCLUSION

It is now clear that rules of evidence and civil procedure are not applicable to the proceedings of
arbitration as the proceedings in the case of arbitration are summary proceedings and if rules of
evidence and civil procedure will start applying there then the whole objective of arbitration i.e.
less intervention of court and speedy solution of the problem will be nullified. However
assistance of court and principles of these procedures are allowed whenever there is any conflict
or ambiguity but strict rules of evidence and civil procedure are not allowed. Moreover the recent
amendment of 2019 and the judicial precedent of September 2019 has further clarified that strict
rules of evidence and CPC which promotes bringing of fresh evidence are not allowed so as to
not extend the process and not violate the basic objective of arbitration.

27
Sec 34 (2) (a), the Arbitration and Conciliation (Amendment) Act, 2019.
28
M/S Canara Nidhi Ltd v M. Shashikala And Anr, Civil Appeal 7544-7545of 2019.

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