Expeditious Arbitration Alone Does Not Establish Arbitral Award Was Procured By Fraud: Calcutta High Court

The Calcutta High Court recently held that the mere expeditious conclusion of arbitral proceedings, by itself, does not establish fraud vitiating an award. Fraud must be demonstrated through cogent attending circumstances and cannot be inferred from speed alone.

The bench of Justices Debangsu Basak and Shabbar Rashidi set aside an order passed by the executing court in an award arising from a sale dispute, holding that no case of fraud had been made out.

The court held, “Simplicitor on the ground that, the arbitration proceeding was disposed of expeditiously, without any other attending circumstances support fraud being perpetrated we are not in a position to return a finding, the award stood vitiated by fraud.”

Kamala Bala Paul (vendor) executed a Power of Attorney (PoA) in favour of her son-in-law. Prem Lal Jain entered into an agreement for sale of 4 bighas of land at Tollygunje with the PoA holder. Subsequently, disputes arose between the parties, and the matter was referred to arbitration.

The entire arbitration was concluded in 27 days, and the award was passed on July 29, 2005 in favour of Prem Lal. Neither party filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 to challenge the award. Prem Lal sought to execute the award, which was resisted by Sujoy Kumar Dey, one of the legal heirs of the vendor, by filing an objection under Section 47 CPC.

Separately, proceedings under the Urban Land (Ceiling and Regulation) Act, 1976 were remanded to the competent authority. The Executing Court, by an order dated 24 December 2014, held the award to be a nullity on grounds including fraud and vesting of the land with the State, and set it aside (Impugned Order). Both parties appealed against the Impugned Order.

Kumar contended that the award was a nullity on two counts: (i) it was vitiated by fraud on the face of the record, and (ii) the underlying land stood vested with the State under the 1976 Act. It was submitted that fraud was evident from the entire conduct of the arbitral proceedings, from reliance on unregistered documents to the hot haste with which the proceedings were concluded.

Sujoy Kumar relied on MMTC Ltd. v. Anglo American Metallurgical Coal Pvt. Ltd. (MMTC Ltd.) to submit that an objection to the execution of an arbitral award under Section 47 CPC was maintainable even without first challenging the award under Section 34 of the Arbitration and Conciliation Act.

The court held that, based on the records before it, it was not in a position to conclusively hold whether the land stood vested in the State under the 1976 Act. The court noted Sujoy Kumar's contention that the award came to her knowledge belatedly and observed that even after gaining knowledge of it, she did not take any steps to challenge the award. It clarified that in MMTC Ltd., the Supreme Court had held that the scope of Section 47 CPC in assailing an award was narrow and that, unless prima facie grounds were made out, entertaining such objections would amount to an abuse of process.

The court observed that there was nothing on record to show that the vendor had not appointed a PoA or had not authorised him to enter into the agreement for sale or act in the arbitral proceedings. Additionally, there was nothing on record to show that the PoA holder was unaware of the award.

Merely because the arbitration proceedings were concluded expeditiously, the Court held, it could not conclude that the award was vitiated by fraud. The court also rejected Sujoy Kumar's contention that the arbitrator had considered an unregistered and unstamped document under Section 47 CPC, since she had not availed of her remedy under Section 34 of the Arbitration and Conciliation Act.

Since Sujoy Kumar had failed to establish fraud in the passing of the award, the court set aside the Order in challenge.