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M/s. Narinder Singh and Sons v. Union of India

Civil Appeal · 2021 INSC 747Decided 18 Nov 2021
Civil Appeal No. 6734 of 2021
Justice M.R. Shah · Justice Sanjiv Khanna

Background

The appellant contractor was awarded a Railway tender in 1993 for washing-line work at Jammu Tawi station; the Railways terminated the contract in 1996 alleging non-performance, while the contractor alleged the Railways had repeatedly changed the scope of work. After years of litigation over appointing an arbitrator, a retired judge was appointed and passed an ex parte award of over Rs.20 lakh in the contractor's favour in 2010. The Railways' objections to that award were dismissed by the trial court but upheld by the Punjab and Haryana High Court, which set aside the award for violating natural justice and excessive haste, prompting the contractor's appeal to the Supreme Court.

Decision Breakdown

The Supreme Court agreed with the High Court that the award deserved to be set aside, finding that the arbitrator had rushed proceedings, refusing to properly consider the Railways' evidence affidavit and denying it a fair opportunity to cross-examine a key witness, which amounted to the Railways being "unable to present its case" and the award being in conflict with public policy under Section 34 of the Arbitration Act. With both parties' agreement during the hearing, the Court appointed a new arbitrator (a retired High Court judge) to decide the dispute afresh, directed that arbitration resume from the stage where cross-examination had been wrongly denied, fixed how the arbitration costs would be shared, and left the question of interest open for the new arbitrator to decide. The civil appeal itself was thereby finally disposed of.

Lesson Learnt

An arbitrator who denies a party a fair chance to present evidence or cross-examine witnesses, even in the name of speedy disposal, risks having the award struck down for violating natural justice; speed in arbitration cannot come at the cost of a fair hearing for both sides.

Official source (sci.gov.in)View Judgment (PDF)

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