The era of liberalization, globalization & privatization has changed the scenario of commercial litigation throughout the country. Arbitration has become the preferred mode of dispute resolution, especially amongst the business community. The Indian Evidence Act, 1872 which is of cardinal importance in both criminal and civil trials plays an important role in commercial litigation as well. The Indian Evidence Act comes into play in all stages of the arbitration process. The Claimant leads oral & documentary evidence to prove his claims before the tribunal, while the Respondent does the same to deny the factum of these claims as well bring forth his own counter-claims. Cross-examination of witnesses are done by both sides to fortify one’s claims and deny the factum of others’ claims. The Evidence Act plays a significant role in proceedings under the anti-trust law as well.
Estoppel, which is a principle of Evidence, also comes into play. As an estoppel and like waiver it can be both used as a shield and a sword, it can be used to wriggle out of liability, as well as fasten liability. The rule of “best evidence”contained in Section 114(g) of The Indian Evidence Act is also applicable in arbitration proceedings. It can manifest itself in “non-examination of crucial witness, non-examination of witness on material points and withholding of document which can prove or disprove claims”.The rule of best evidence also finds resonance in Section 92 of The Indian Evidence Act which prohibits evidence of oral terms, when the terms of an agreement, grant or disposition of property, or any matter required by law to be reduced to a documentary form. This short article will attempt to understand through various case laws the manner in which principles of evidence law interact with the arbitration act and the Competition Act, 2002, and the effect which it has finally on the lis between the parties.
I. The meaning of Estoppel – Section 115 of The Indian Evidence Act, 1872 explains the concept of estoppel as follows -“when one person by acts or omission, or by declaration, has made another person believe something to be true and persuaded that person to act on it, then under no circumstances can he or his representative deny the truth in suit or proceedings”. The principle of estoppel can simply be put as “one cannot approbate & reprobate at the same time”.
II. The Best Evidence Rule – The rule of best evidence finds recognition in Section 114(g) of The Indian Evidence Act, 1872 which is as follows – “That evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it”. This rule essentially means that the evidence which will be the most effective in proving claims or successfully denying them must be put forth by the party making assertions or denying them, and failure to do so will lead to an adverse inference being drawn against such party. The Best Evidence rule also finds recognition in the principles of cross-examination, which is said to be the “strongest weapon in the armoury of a lawyer”.If a witness is not examined on a crucial “point in issue” or if a crucial witness is not examined at all, adverse inference is likely to be drawn against such party, who fails to do these tasks.
III. The approach of the National Courts in dealing with the tryst of Indian Evidence Act & Arbitration & Conciliation Act:
We shall analyse the decisions of the National Courts in the following case laws –
A. MMTC Ltd vs Anglo American Mettalurgical Society (FAO(OS) 532/2015) – Appellant had entered into a long-term agreement with the Respondent. As per the terms of the agreement the Appellant had agreed to purchase a quantity of freshly mined & cooked coal from the Respondent over three delivery periods. Disputes arose between the Petitioner & Respondent over the delivery of the third consignment. The Appellant wrote to the Respondent saying that the consignment of coal was ready, and the Respondent should nominate two stems (ships)for lifting the supply of coal. The Respondent via e-mail sought time to do the same. The Appellant sent numerous e-mails to the Respondent, however Respondent refused to confirm the availability of the stem, due to which the Appellant was unable to effectuate the supply of coal. The Respondent considered this a breach of the agreement, and brought forth a claim for damages against the Appellant for breach of contract before an Arbitral Tribunal. The Arbitral Tribunal made award in favour of Respondents, holding Appellants to be guilty of breach of contract. Appellant unsuccessfully contested the Award in a petition under Section 34 of The Arbitration & Conciliation Act, 1996. Appeal was made to the Division Bench under Section 37 of The Arbitration & Conciliation Act, 1996. It was contended on behalf of the Appellants that the Ld. Single Judge and the Arbitral Tribunal had erred in relying on the oral testimony of an official of Respondent, when an express written document (in this case the agreement between the parties) was present. Reliance was placed on Section 92 of The Indian Evidence Act, 1872 which prohibits and excludes oral evidence, which has been reduced in writing. In the facts of the present case, it was thus contended that when the agreement expressly stipulated that “there will be no delivery of coal, unless and until a suitable stem is first nominated for the delivery of such coal”.It was thus contended before the Hon’ble Court that placing reliance on such oral testimony in presence of a written agreement of the same, is wholly contrary to the provisions of The Indian Evidence Act, 1872. The Court proceeded to reverse the decision of the Single Bench primarily due to this contravention of The Indian Evidence Act, 1872, and other supporting factors. This decision highlights the importance of principles of evidence in Arbitration proceedings, and tells us that a contravention of evidence Law will be considered “an breach of the fundamental policy of Indian Law”as per Section 34 of The Arbitration & Conciliation Act, and award can be set aside for such breach.
B. In Re XYZ Association of Man Made Fibre Industry [CCI(Case No. 62 of 2016]: In the present case, the Informant filed information under Section 19 of The Competition Act, 2002 alleging contravention of Section 4 of The Competition Act, 2002. It was alleged that the Opposite Party was imposing discriminatory prices of VSF (Velcro Synthetic Fibre) from customers situated in similar positions, it was charging higher prices to customers in the domestic market, compared to their foreign counterparts. The Commission was of the opinion that this “prima facie, constituted a contravention of The Competition Act, 2002”and ordered an investigation by the Director General. The Director General embarked on an extensive investigation over a sustained period of time, it took the statements of many officials of leading retail brands such as BIBA etc, many spinners and other people who were in any way connected with the textile industry. The DG returned a finding that the actions of the OP in “imposing discriminatory tariff to similarly situated customers was an violation of Section 4 of The Competition Act, 2002”.The main crux of arguments of OP before the Appellate Tribunal that VSF was an easily substitutable material, and therefore it was not difficult for the local manufacturers to use any other material for its substitute. The Commission then referred to the cross-examination of Mr. Anantkumar Reddy (Vice President, Fabrics, BIBA) who stated emphatically before the DG that “VSF due to its distinct features is not capable of replacement by any other material”,this statement of the Mr. Reddy had not been cross-examined by the OP in any manner, whatsoever, and due to his testimony being unchallenged, it is taken to be true. Thus the OP was found guilty of violating Section 4 of The Competition Act, 2002.
C. Jackie Kakubhai Shroff vs Ratnam Sudesh Iyer(ARBITRATION PETITION NO. 167 OF 2015)– The Petitioner & Respondent were shareholders in a company called “Atlas Aquafin Pvt Ltd”In the year 2002, Respondents were looking at an exit opportunity from the company. Respondent asked Petitioner to sign a document giving authorization from them for permission to sell such shares. Petitioner at that time refused to do so. On 4.4.2010Petitioner received a notice from Clifford Chance with an attachment of placement instruction, the placement instruction allegedly bore the signature of the Petitioner. The Petitioner made a complaint to the Economic Offenses Wing of the Mumbai Police against Respondent complaining about forgery. Respondent approached the Petitioners for settlement of disputes. On 3rd January 2011 a settlement deed was drawn up & executed amongst the parties. The settlement deed envisaged payment of 3 million USD for withdrawal of police complaint against the Respondent, and for giving authorization to them to sell their shares. The said settlement deed contained an arbitration clause. The Petitioner performed their obligations satisfactorily, withdrawing the police complaint as well as giving the Respondents permission to sell their shares. The Petitioner’s wife, who was not connected with the Petitioner’s case in any way sent an email to certain mutual business associates, where she proceeded to call the Respondent a “forger”.The settlement deed had a clause wherein “it was prohibited to criticize the subject-matter of the settlement, in any manner whatsoever”. This email was constituted as a breach of settlement, and reference to arbitration was sought for damages. The sole arbitrator returned a finding that Petitioner had breached the settlement deed, he awarded the Respondent damages and held that the Petitioner was not entitled to the sum of 3.5 million USD as they had committed breach of settlement. Petitioner challenged the award under Section 34 of The Arbitration & Conciliation Act, 1996. It was argued by the Petitioners that there was no breach of the settlement deed as Petitioner’s wife was not authorized by the Petitioner to deal with the case in any manner, whatsoever , hence the statement made by her does not result in breach. It was further argued by the Petitioner that he had complied with all the obligations under the settlement deed, it was further argued that even if the settlement deed was purported to have been breached, the arbitrator awarding the sum of 2.5 million USD as liquidated damages for alleged breach cannot be countenanced as per law. The Respondent has argued that the mandate of Court in proceedings under Section 34 of The Arbitration & Conciliation Act, 1996 is limited, and findings of fact by the arbitrator should not be interfered with, when the sole arbitrator has given detailed reasons in support of decision. The Hon’ble Court opined that there is nothing on record to show that the Petitioner’s wife was his authorized representative. It has neither been proved in any manner whatsoever whether Petitioner’s wife made those insinuations against the Respondent with the authorization of the Petitioner. Petitioner in his reply to the “statement of claim”has denied that his wife was his authorized representative, or was authorized to take any decisions on his behalf. Respondent failed to cross-examine the Petitioner’s wife on this aspect, and failed to lead any evidence on the issue, whether Petitioner’s wife was his authorized agent or not. In the absence of cross-examination, primarily on this basis annulled the award in favour of the Respondent. The best- evidence also comes into picture in this case because the Respondent’s claim was mainly based on the proposition that “Petitioner’s wife was his authorized agent” who had breached the deed. The Respondent should have lead evidence to prove his contention, his failure to do so brings Section 114(g) of The Indian Evidence Act, 1872 into the picture, resulting in an adverse inference being drawn against him, and negating his claim.
Conclusion: The above illustrated case-laws show us the interaction between the principles of Evidence Law & commercial matters. It is a misconception indeed to believe that the skills of cross-examination and leading evidence are only needed for criminal & civil trials. They are very much “sine que non”in commercial disputes as well. Evidence Law is of such cardinal importance in arbitration matters, that incorrect application or failure to appreciate the principles of Evidence Law will often lead to the arbitral award being set aside as it is considered a “fundamental policy of Indian Law” within the contours of Section 34 of The Arbitration & Conciliation Act, 1996.
Advait is an associate in the litigation team of Kesar Dass B & Associates. He deals with arbitration, civil suits and matters pertaining to the Insolvency and Bankruptcy Code, 2016.Disclaimer: The views or opinions expressed are solely of the author.