Page 58 - Banking Finance July 2024

FEATURES

Upholding tenets of fairness in

arbitration

T wo significant judgments by the Madras High Court Case 2

and the Bombay High Court underscore the role of
The second case is Government of India vs Additional Com-
judiciary in ensuring fairness and consideration of
missioner, Nagpur, which related to land acquisition for the
evidence in arbitration for natural justice. They highlight the
importance of transparency, equal opportunity and proper National Highway (NH-7) project. The landowner disputed
consideration of evidence in maintaining the integrity of the compensation awarded and sought arbitration. The
arbitrator, after concluding the hearings, enhanced the
arbitration proceedings.
compensation based on photocopies of two sale deeds sub-
Case 1 mitted post-hearing, which NHAI could not contest.
The first case is Geojit Financial Services vs Nalani Rajkumar GOI and NHAI challenged this award under Section 34,
& ors. It relates to a dispute between a stockbroker (Geojit which was rejected by the District Judge. However, on ap-
Financial Services Ltd) and its client (Nalani Rajkumar) over peal, the Bombay High Court (Nagpur Bench) identified sig-
unauthorised share transactions. Nalani Rajkumar claimed nificant issues. (a) The award was based on documents in-
to hold 5,05,000 shares in M/s Electro Steel Castings Ltd, troduced without NHAI’s knowledge, violating Section 24
which the Geojit allegedly failed to sell as instructed. This (mandating communication of all information) and Section
led Nalani to seek compensation and invoke arbitration per
28 (requiring adherence to Indian substantive law); and (b)
National Stock Exchange (NSE) bylaws. After the conclusion
The award was deemed contrary to fundamental legal prin-
of hearings, the Arbitral Tribunal sought additional state-
ciples, necessitating its setting aside.
ments from the NSE and, relying on these, rejected the
Nalani’s claim, concluding she did not hold the shares in On the landowner’s contention for remanding the case un-
question. der Section 34(4), the Court highlighted that this discretion-
ary power is not automatic. Importantly, it noted that the
Nalani challenged this award before the Appellate Tribunal,
which upheld the initial award. Subsequently, she appealed section is used to correct inadequate reasoning, not proce-
dural lapses. The court referred to the decision of the Su-
under Section 34 of the Arbitration & Conciliation Act, 1996,
preme Court of India in “I-Pay Clearing Services Pvt Ltd vs
before the Madras High Court, where the Single Judge set
aside the award. On appeal, the ICICI Bank Ltd,” decided against remanding the case.
Division Bench upheld this decision, noting several key points Both judgments highlight the essential principles of proce-
— (a) The Arbitral Tribunal’s action in obtaining NSE details dural fairness and the consideration of evidence in arbitra-
post-hearing prejudiced the Respondent, as she couldn’t tion, emphasising natural justice and due process. “The judg-
contest or explain these details; (b) Vital documents sup- ments highlight the importance of transparency, equal op-
porting the Respondent’s claim were ignored by the Tribu- portunity and proper consideration of evidence in maintain-
nal, which relied solely on NSE statements obtained behind ing the integrity of arbitration proceedings,” notes Abhishek
her back; (c) Disputed documents referred to a handwrit- Kumar, lawyer with Singhania & Partners, a law firm. “The
ing expert lacked findings, leading to procedural unfairness; rejection of evidence taken without the other party’s knowl-
and (d) The Tribunal’s actions compromised the fairness of edge reinforces the necessity for transparency and equal
the proceedings, justifying the award’s annulment under procedural rights, bolstering the credibility of the arbitra-
Section 34. tion process,” observes Kumar. (BusinessLine)

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