The Indian Evidence Act, 1872 prohibits the annulment of an arbitration award on the grounds that the evidence used by the arbitral tribunal does not meet those requirements. Was held in the case of M/s Scholastic India Pvt. Ltd. & Anr. Vs. Kanta Batra Where the respondent argued that the appellant was not permitted to cancel the lease during the lock-in period because the fire was started due to the appellant's fault. As a result, the respondent/lessor asserted that the appellant was responsible for paying the lease fees for the remaining time as well as the respondent's repair expenses.
Arbitration was used to settle the disagreements between the parties, and the Arbitral Tribunal determined that the fire started because the appellant neglected to maintain its electrical equipment. As a result, the respondent/lessor was entitled to compensation for the cost of repairs and damages. The Tribunal used the lessor's bank statements, which showed the sums it had spent on making repairs to the leased property, to determine the amount of damages owed to the lessor. In light of the costs incurred by the lessor in reconstructing the leased premises, the Tribunal subsequently issued a judgement stating that the lessor was entitled to a certain amount.
The appellant Scholastic India filed an application with the Commercial Court according to Section 34 of the Arbitration and Conciliation Act, 1996 , contesting the arbitral verdict. The Income Tax Return and the Bank Statements given by the Respondent were not backed by a certificate under Section 65B of the Indian Evidence Act, 1872, the Commercial Court said, and the Arbitral Tribunal had committed a grave error in relying on them. The Commercial Court concluded that the award was based on no evidence and, as a result, suffered from patent illegality. It held that no person can be held responsible based on any entries in the books of accounts.
By bringing an appeal under Section 37 of the Arbitration & Conciliation Act before the Delhi High Court, both parties contested the order made by the Commercial Court. Scholastic India, the lessee, contested the Commercial Court's decision to deny its request for a refund of the security deposit. The lessor, Kanta Batra contested the Commercial Court's decision on the grounds that it had reconsidered the evidence and gone beyond what was permitted by Section 34 of the Arbitration & Conciliation Act in calculating the damages awarded to the respondent by the Arbitral Tribunal.
The Delhi High Court emphasized that the scope of interference with an arbitral award is constrained by Section 34 of the Act. The Commercial Court made a mistake by appreciating and reevaluating the evidence in the proceedings under Section 34 of the Act, the High Court ruled, holding that a court cannot do so and replace its view over that of the Arbitral Tribunal.
The Indian Evidence Act, 1872 is not applicable to proceedings before arbitral tribunals, hence the court ruled that an arbitral award cannot be criticised because it does not follow the Indian Evidence Act's rules.
The Court held that the income tax return provided by the respondent clearly indicated the expenditure incurred and claimed by the respondent, noting that there was material available on record to substantiate the claims of the respondent/lessor regarding the expenses incurred on the repairs of the leased premises. In addition, the Court noted that the respondent's bank statements showed payments it purportedly made to certain organisations to cover costs associated with making repairs to the property.
The Commercial Court had obviously acted outside the scope of Section 34 of the Act by re-evaluating the sufficiency of the evidence in material supplied by the respondent/lessor and determining that the Arbitral Tribunal had mistakenly assessed the adequacy of said material.
As a result, the Court dismissed the appeal of the appellant/lessee and permitted the appeal in favour of the respondent/lessor.