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M/s Oswal Woollen Mills Ltd. v. M/s Oswal Agro Mills Ltd.

Civil Appeal · 2018 INSC 337Decided 13 Apr 2018
Civil Appeal No. 3776 of 2018
Justice R.K. Agrawal · Justice R. Banumathi

Background

Under a 1982 agency agreement for importing goods under import licences, a dispute arose when part of the contracted material could not be imported, leading both companies to arbitration. The two appointed arbitrators disagreed, so the matter went to an Umpire, who eventually awarded roughly Rs. 64.65 lakh with interest in favour of the respondent. The appellant-company objected, arguing the Umpire should have reheard the entire matter "de novo" (completely afresh) rather than continuing from the point of the arbitrators' disagreement, but both the Single Judge and Division Bench of the Delhi High Court rejected this and upheld the award.

Decision Breakdown

The Supreme Court held that when an Umpire takes over "in lieu of the Arbitrators" under the Arbitration Act, 1940, a de novo hearing does not automatically mean restarting the entire proceeding from scratch: it means the Umpire must give the parties a fair fresh hearing on the pleadings, evidence, and record, but need not re-record all evidence unless a party specifically and timely asks for it. The Court found that the appellant's demand for a full de novo rehearing came only belatedly, after the respondent had already concluded its final arguments, and was really aimed at reopening a decision about which witness could testify, not a genuine request for a fresh hearing, amounting to a waiver by conduct. The Court further held that courts have very limited power to interfere with an arbitrator's or umpire's appraisal of evidence, and since the award disclosed no manifest error, the appeal was dismissed, affirming the award.

Lesson Learnt

In arbitration, if you want a completely fresh hearing after an Umpire takes over from disagreeing arbitrators, you must ask for it clearly and at the earliest opportunity, raising it only after the other side has finished presenting its case will likely be treated as a waiver, and courts rarely second-guess an arbitrator's assessment of evidence.

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

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