Delhi High Court Ruling on Arbitration Participation
In a significant judgment, the Delhi High Court ruled that parties who do not actively participate in arbitration proceedings are not entitled to challenge the arbitral award on the grounds of being denied a fair hearing. This decision was made in the case of South Eastern Railway v. Sara International, where Justice Jasmeet Singh declined to overturn a substantial arbitral award of ₹130 crore against South Eastern Railway in favor of Sara International Private Limited.
Failure to Engage in Arbitration Proceedings
The court highlighted that South Eastern Railway, the petitioner, had multiple opportunities to engage in the arbitration process. However, it failed to cross-examine witnesses, produce evidence, or pay the necessary arbitration fees. Justice Singh pointed out, “Having failed to avail the opportunities granted, the petitioner, at this juncture, cannot be permitted to contend that it was denied a fair opportunity to present its case.” He emphasized that while natural justice requires a reasonable opportunity for parties to present their case, it does not mandate indefinite delays due to a party’s lack of participation.
Background of the Dispute
The legal dispute originated from a Wagon Investment Scheme agreement signed in 2006. Sara International purchased two rakes for ₹28.33 crore, which were to be used by the Railways. In return, South Eastern Railway was to provide six rakes monthly for ten years with a 10% freight rebate. The arbitral tribunal found South Eastern Railway in breach of this agreement for not providing the promised number of rakes. Consequently, the tribunal awarded Sara International ₹130,00,58,548, along with interest and other costs.
Arguments and Court’s Observations
In its defense, South Eastern Railway argued that the arbitral award was illegal and contrary to Indian law, further claiming an expert report was accepted without independent scrutiny. However, the Court noted that South Eastern Railway had been granted “more than adequate opportunity” to challenge Sara International’s evidence and present its own.
Justice Singh observed that South Eastern Railway’s conduct demonstrated a casual approach in both rebutting Sara International’s claims and presenting its own case. The tribunal noted that despite repeated adjournments, including for a witness who traveled from Zimbabwe, South Eastern Railway failed to proceed with cross-examinations.
Closing Arguments and Court’s Decision
The Court supported the tribunal’s decision to close South Eastern Railway’s right to cross-examine witnesses and upheld the tribunal’s decision to strike off South Eastern Railway’s counterclaim due to non-payment of arbitral fees. Under Section 38(2) of the Arbitration Act, an arbitral tribunal can suspend or terminate proceedings if the required deposit is unpaid.
The petition was ultimately dismissed, with the Court finding no grounds to interfere with the arbitral award. South Eastern Railway was represented by Advocates Saransh Kumar and Harshita Kumar, while Sara International was represented by Senior Advocates Gaurav Pachnanda and Gyanendra Kumar, alongside other legal professionals.
