"All Stakeholders Need To Introspect": SC Expresses Concern About Very Long Hearings, Bulky Pleadings & Evidence In Arbitration Cases

The Supreme Court said that the arbitral proceedings have become synonymous with very bulky pleadings and evidence and time-consuming submissions, resulting in very lengthy awards.

The Court was deciding a batch of civil appeals challenging the judgment of the Bombay High Court.

The two-Judge Bench comprising Justice Abhay S. Oka and Justice Pankaj Mithal remarked, “… we must record some serious concerns based on our judicial experience. Case after case, we find that the arbitral proceedings have become synonymous with very bulky pleadings and evidence and very long, time-consuming submissions, leading to very lengthy awards. Moreover, there is a tendency to rely upon a large number of precedents, relevant or irrelevant. The result of all this is that we have very long hearings before the Courts in Sections 34 and 37 proceedings.” 

The Bench noted that in many cases, the proceedings under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 (A&C Act) are being treated as if the same are appeals under Section 96 of the Civil Procedure Code (CPC).

“When members of the bar take up so many grounds in petitions under Section 34, which are not covered by Section 34, there is a tendency to urge all those grounds which are not available in law and waste the Court’s time”, it added.

Senior Advocates Abhishek Manu Singhvi and Ramesh Singh represented the appellant while Senior Advocates Mukul Rohatgi and C.U. Singh represented the respondent.

In this case, in the year 1993, the Maharashtra Housing and Area Development Authority (MHADA) executed a lease agreement in respect of the property in favour of Andheri Kamgar Nagar Co-operative Housing Society Limited, a society of slum dwellers. The said society appointed a property developer to implement a slum rehabilitation scheme which was to construct 237 rehabilitation tenements for slum dwellers and 40 tenements for project-affected persons (PAPs) free of cost and develop the property using the available Floor Space Index (FSI) and dispose of the same. However, it could not discharge its obligations and hence, the society appointed the appellant (Bombay Slum Redevelopment Corporation Private Limited) as the developer. In 2003, an agreement was executed between the appellant and the respondent under which it retained 45% of the total available FSI.

The respondent was appointed as a contractor to carry out the construction activities of the building on the site. The dispute began in 2012 when the respondent by his letter, alleged default against the appellant. After exchange of drafts of sale agreements, ultimately the respondent filed a petition before the High Court under Section 11 of A&C Act and an Arbitrator was appointed thereby. The arbitral proceedings concluded in the form of an award by the Arbitral Tribunal in 2018 in favour of the respondent. Being aggrieved, the appellant filed a petition under Section 34 of A&C Act and the same was allowed by the Single Judge. The respondent challenged the same before the Division Bench and it set aside the impugned judgment. Both the parties to the appeal under Section 37 preferred the cross appeals before the Apex Court.

The Supreme Court in the above regard observed, “By way of illustration, we are referring to the factual aspects of the present case. The award runs into 139 pages. The petition under Section 34 of the Arbitration Act runs into 93 pages and incorporates 151 grounds. The judgment of the learned Single Judge dealing with the petition under Section 34 consists of 101 pages. One of the contributing factors is that more than 35 decisions were relied upon by the parties before the learned Single Judge. On the same point, multiple judgments have been cited, taking similar views.”

The Court added that as per the practice in the Bombay High Court, a memorandum of appeal under Section 37 of the Arbitration Act does not contain the facts but only the grounds of challenge and in the memorandum of appeal preferred by the respondent consisting of 46 pages, 164 grounds have been incorporated.

“Considering the narrow scope of interference under Sections 34 and 37 of the Arbitration Act, we cannot comprehend how there could be 151 grounds in a petition under Section 34 and 164 grounds in an appeal under Section 37. It is not surprising that this appeal has a synopsis running into 45 pages, and it contains as many as 54 grounds of challenge”, it said.

Moreover, the Court observed that the time of the courts is precious, considering the huge pendency and this is happening in a large number of cases. It further said that all this makes the arbitral procedure inefficient and unfair and it is high time that the members of the Bar show restraint by incorporating only legally permissible grounds in petitions under Section 34 and the appeals under Section 37.

“Everyone associated with the arbitral proceedings must remember that brevity will make the arbitral proceedings and the proceedings under Sections 34 and 37 more effective. All that we say is that all the stakeholders need to introspect. Otherwise, the very object of adopting the UNCITRAL model will be frustrated. We are not called upon to consider whether the arbitral proceedings are cost-effective. In an appropriate case, the issue will have to be considered. Arbitration must become a tool for expeditious, effective, and cost-effective dispute resolution”, it concluded.

Accordingly, the Apex Court partly allowed the appeals, set aside the impugned judgment, and restored the appeal before the High Court.

Cause Title- Bombay Slum Redevelopment Corporation Private Limited v. Samir Narain Bhojwani (Neutral Citation: 2024 INSC 478)

Appearance:

Appellant: Senior Advocates Abhishek Manu Singhvi, Ramesh Singh, Advocates Atman Mehta, Anand Pai, Nishant Chotani, Vipul Patel, AOR Mohit D. Ram, Advocates Rachit Bharwada, Siddhant Sanghavi, AOR R. Gopalakrishnan, Advocates Murtaza Kachwalla, S. M. Algaus, Palash Moolchandani, Mahesh Agarwal, Parimal K. Shroff, Rishi Agrawala, Ankur Saigal, Anirudh Bhatia, Devansh Srivastava, Vidisha Swarup, and AOR E. C. Agrawala.

Respondent: Senior Advocates Mukul Rohatgi, C.U. Singh, Maninder Singh, Meenakshi Arora, Advocates Mahesh Agarwal, Parimal Shroff, Rishi Agrawala, Ankur Saigal, Victor Das, Anirudh Bhatia, Devansh Srivastava, Vidisha Swarup, AOR E. C. Agrawala, AORs Anup Jain, Anushree Prashit Kapadia, Advocate Nishant Chothani, AOR R. Gopalakrishnan, Advocates Murtaza Kachwalla, S. M. Algaus, and Palash Moolchandani.

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