Fundamental Evidence Principles Cannot Be Ignored In Arbitration: Bombay High Court

The Bombay High Court on 9 March held that while arbitral proceedings are not strictly bound by the technical provisions of the Indian Evidence Act, the fundamental principles governing the burden of proof and the admissibility of evidence cannot be ignored to uphold an arbitral award that is patently illegal.

A Division Bench comprising Chief Justice Shree Chandrashekhar and Justice Gautam A. Ankhad was hearing an appeal filed by Arenel (Private) Ltd challenging a judgment dated 8 September 2025, which had set aside an arbitral award passed in its favour against Aakash Packaging.

The Bench observed:

“Section 102 of the Indian Evidence Act provides that the burden of proof in a suit or proceeding lies on that person, who would fail if no evidence at all, was given on either side. The strict rules of the Evidence Act may not be enforced in an arbitral proceeding but the fundamental rules of law and evidence cannot be ignored to affirm an Award which on the face of it is patently illegal.”

The dispute arose from a commercial arrangement between Arenel, a Zimbabwe-based manufacturer of biscuits and sweets, and Aakash Packaging for the supply of packaging materials. Between March 2012 and December 2012, the latter supplied packaging materials under multiple invoices.

Arenel later alleged that some consignments emitted a strong chemical odour and were therefore unsuitable for packaging food products. It also claimed a refund for an amount paid for a fifth consignment that was allegedly never supplied.

The matter was referred to arbitration, and on 2 December 2019, the sole arbitrator largely ruled in Arenel's favour, directing Aakash Packaging to refund USD 165,102.10 along with interest and costs, while rejecting the respondent's counterclaims.

However, the High Court noted that the arbitral tribunal had relied heavily on “hearsay evidence” and had reversed the burden of proof by expecting the respondent to demonstrate the absence of defects in the packaging material.

The Court observed that under Section 102 of the Indian Evidence Act, the burden lies on the party who would fail if no evidence were produced. Ignoring this fundamental principle rendered the award patently illegal.

Consequently, the Court largely upheld the order setting aside the arbitral award, restoring only Arenel's separate claim of USD 43,500.25 relating to payment made for packaging materials that were never supplied.

For Appellant: Senior Advocate Rahul Narichania with Advocates Shrinivas Deshmukh, Sunilkumar Neelambaran, Aaron Fernandes i/by Mulla & Mulla & Craigie Blunt & Caroe

For Respondent: Senior Advocate Mustafa Doctor with Advocates Spenta Kapadia, Aashdin Chivalwala i/by Wadia Ghandy & Co