Judgment name: Millennium School v Pawan Danwar
Court: High Court of Delhi
Citation: O.M.P (Comm) 590/2020
Single-judge Bench: Vibhu Bakhru, J.
Date: 10th May 2022
Keywords: Section 65-B of the Evidence Act, Lock-In Period, Non-Obstante, Section 34 of The Arbitration and Conciliation Act.
The Petitioner is the school ‘Millennium School’ and the Respondent is Mr. Pawan Danwar, who runs a business of providing transport services under the name "M/s Genesis Enterprises”. The parties entered into an agreement that bound the parties for eight years. As per the Agreement, the Petitioner agreed to provide around twenty-two school buses to the Respondent, who in turn provided personnel. The Respondent agreed to abide by the stipulations listed in the Agreement, but soon after, the Petitioner withdrew from the Agreement. Aggrieved by this, the Respondent approached the Arbitral Tribunal. The Tribunal held in favour of the Respondent and applied Section 65-B of the Evidence Act to discredit evidence produced by the Petitioner. When the matter reached the High Court, the Court mainly looked into the question of whether Section 65-B of the Evidence Act, 1872 (“Evidence Act”) applies to arbitration proceedings. The Court disagreed with the Tribunal in this regard.
The Petitioner filed a petition before the Court under Section 34 of the Arbitration and Conciliation Act, 1996 (“A&C”) regarding an arbitral award. The Respondent, who was engaged in providing transport services, entered into an agreement with the Petitioner to provide a service to pick up and drop off school children. The Petitioner agreed to provide buses and other facilities, whereas the Respondent agreed to maintain conductors, drivers and cleaners, in addition to offering transport services. The Agreement (hereinafter, “Agreement”) was for eight years, with a five-year lock-in period. The Petitioner wrote an email to the Respondent apprising him of his dissatisfaction with the latter’s services and asked the Respondent to rectify a few deficiencies. The Respondent alleged that he was getting payments in meagre instalments even though the Petitioner was demanding school fees from children on time. Thereafter, the Petitioner terminated the Agreement, following which the Respondent invoked the arbitration clause (Clause 36). The Arbitral Tribunal (“Tribunal”) held that the Petitioner could not terminate the Agreement during the lock-in period.
While giving partial relief to the Respondent, the Tribunal held that the Petitioner’s evidence did not meet the statutory requirements under Section 65-B of the Evidence Act and was inadmissible. The Petitioner had produced several copies of emails as evidence to substantiate the claim that the buses were not maintained properly and the Respondent was not performing his duties diligently. The Petitioner had produced a certificate as per Section 65-B to support the emails. The Tribunal rejected the Petitioner’s evidence on the ground that the certificate produced was defective as per the requirements of Section 65-B of the Evidence Act, so it was inadmissible. The Petitioner challenged the Arbitral award under Section 34 of the A&C, arguing that the Tribunal wrongly applied the statutory requirements of the Evidence Act, as it was in contravention of Section 19 of the A&C.
Whether, as per the facts of this case, the non-obstante clause overrides all other clauses in the Agreement, and if the Tribunal was correct in rejecting evidence for not meeting the standards under Section 65-B of the Evidence Act.
The first part of the issue was discussed at length by the Court. It examined Clause 33 of the Agreement, which contained the non-obstante clause, and stated that the Agreement could be terminated if there were any material breach of the Agreement. The Tribunal stated that this clause could not be invoked by the Petitioner during the lock-in period. The Court held that Tribunal’s ruling in this regard is erroneous since the clause begins with a non-obstante provision which would override all other clauses in the Agreement. It also held that the essence of the Agreement, even if not explicit, was to provide timely services to the Petitioner. If the Respondent were to contravene it, there would be a fundamental breach of the Agreement.
As for the second part of the issue, the Court examined whether the Petitioner had failed to prove defects in the Respondent’s services. The Court pointed out that the objection to the evidence under Section 65-B of the Evidence Act was not raised when the material was first presented. Regardless, the evidence was held to be inadmissible. While citing R.V.E. Venkatachala Gounder v. Arulmigu Viswesaraswami & V.P. Temple And Anr, the Court held that an objection concerning a certificate of Section 65-B of the Evidence Act would not be available if the objection had not been taken when the material was presented. Moreover, the Court held that Section 65-B would not apply to arbitral proceedings by virtue of Section 1 of the Evidence Act. Even though the principles of the Evidence Act are applicable in arbitral proceedings, the Act, in its strictest sense, does not apply to the proceedings. This means that the provisions of the Evidence Act are not binding on arbitral proceedings unless specified by the parties. Courts cannot impose provisions of the Evidence Act to reject evidence if it fails to meet the requirements under the Act. Therefore, the Tribunal erred by disregarding evidence regarding deficiency of services adduced by the Petitioner on the above ground. Therefore, the Tribunal’s finding to hold the termination of the Agreement as illegal was assailable. Additionally, the Court held that the scope of examination under Section 34 of the A&C does not include re-evaluation or revision of the evidence.
The High Court of Delhi observed that the Arbitral Tribunal’s decision was based solely on the ground that termination of the Agreement was illegal and invalid. The Court set aside the Tribunal’s decision and held that a non-obstante clause would override all other provisions in an Agreement. The Court also held that the Tribunal’s decision to dismiss the Petitioner’s evidence completely was erroneous because Section 65-B of the Evidence Act did not apply to arbitral proceedings.
[This case note has been authored by Paritoshika, who is a junior editor at Mapping ADR.]