Monday, October 7, 2013

Oral Evidence for Written Arbitration Agreement Not Possible, says the Bom HC.

In the judgment of  Yashvant Chunilal Mody,Applicant v Yusuf Karmali Kerwala & Ors. delivered on September 19, 2013, a single bench of the Bombay High Court has decided on the issue of an arbitration agreement being in writing. 

With respect, the very first sentence of the single bench judgment has an error in it where the Act is wrongly attributed to the year 1997 whereas it is actually of 1996.This may be an inadvertent or a typographical error and needs to be corrected. 

The real issue however is with the regards to interpretation of Sections 7(3) and 7(4) in deciding a matter under Section 11 of the Act which relates to appointment of arbitrator. Section 7(3) of the Act mandates an arbitration agreement to be in writing and Section 7(4) elucidates what constitutes “writing”. 

With all due respect, the learned single bench has in its judgment gone overboard in interpreting Section 7(4) of the Arbitration and Conciliation act, 1996. The issue with regard to the arbitration agreement was that although the Applicant contended that the agreement is in writing, it did not have any copy of the same. On this the Applicant offered to lead evidence and be cross examined. While the learned judge recognized that normally a written agreement can be proved by secondary evidence of the oral account of the contents of the document given under Section 63 (5) of the Indian Evidence Act, 1872, he decided that such oral account of a written document is not contemplated to be allowed for invoking arbitration. The single bench was of the view that this goes outside the mandate of the Arbitration and Conciliation Act,1996 as S.7(4) is exhaustive and accepting such oral evidence would be going beyond the legislative command. This understanding seems to be misplaced. It is a possibility that in the given factual scene, even after giving the Appellant a chance to be examined, the bench would have found that no arbitration agreement existed but not allowing oral evidence to prove that arbitration agreement existed in writing is not the most appropriate way and sets a blurred precedence which may have to be reconsidered and cleared sooner or later. 

Hat-tip to Veena Kolachina for the case alert. 

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