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Civil Appeal Nos. 7544-7545 of 2019 (Arising out of SLP (C) Nos. 35673-74 of 2014)

Decided On: 23.09.2019

Appellants: Canara Nidhi Limited Vs. Respondent: M. Shashikala and Ors.

Hon'ble Judges/Coram:
R. Banumathi and A.S. Bopanna


R. Banumathi, J.

1. Leave granted.

2. In the application Under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) seeking to set aside the award, whether the parties can adduce evidence to prove the specified grounds in Sub-section (2) to Section 34 of the Act, is the question falling for consideration in these appeals.

3. These appeals arise out of the judgment dated 12.09.2014 passed by the High Court of Karnataka at Bangalore in Writ Petition Nos. 18374-75 of 2010 (GM-RES) in and by which the High Court set aside the order passed by the District Judge and directed the District Judge to "recast the issues" and permit Respondent Nos. 1 and 2 to file affidavits of their witnesses and also permitting cross-examination of the witnesses.

4. Brief facts which led to filing of these appeals are as under:

The Appellant is the financial institution and the Appellant advanced a loan of Rs. 50,00,000/- to Respondent No. 1 and Respondent Nos. 2, 4 and 5 to 8 were the guarantors in respect of such loan. The loan was secured by a mortgage with deposit of title deeds and Respondent No. 1 is also said to have executed a demand promissory note for repayment of the loan. There was an arbitration Clause in the agreement to resolve dispute between the parties. It is alleged that the first Respondent did not repay the loan and failed to discharge the liabilities arising out of the transaction. The dispute between the Appellant and the first Respondent was referred to arbitration to the third Respondent-Arbitrator. Before the arbitrator, both the parties adduced oral and documentary evidence. The arbitrator passed an award dated 15.12.2007 and directed the Respondents to pay an amount of Rs. 63,82,802/- with interest on Rs. 50,00,000/- at 14% per annum from 11.08.2000 and cost of Rs. 52,959/-.

5. Assailing the award, Respondent No. 1 filed AS No. 1 of 2008 Under Section 34 of the Act in the Court of District Judge at Mangalore. Before the District Judge, Respondent Nos. 1 and 2 filed an application Under Section 151 Code of Civil Procedure to permit the Respondents to adduce evidence. The Appellant filed objections to the said application. By the order dated 02.06.2010, the learned District Judge dismissed the said application. Holding that the grounds urged in the application can very well be met with by the records of the arbitration proceedings and by perusing the arbitral award, the learned District Judge further held that in any event, there is no necessity of adducing fresh evidence in the application filed Under Section 34 of the Act.

6. Aggrieved by the dismissal of their application Under Section 151 Code of Civil Procedure, Respondent Nos. 1 and 2 filed writ petitions before the High Court Under Articles 226 and 227