The Hon’ble Apex court held that Article 4 of Schedule 1 of the Arbitration Act 1940 clearly states that when the Umpire enters upon a Reference, the Arbitrators become functus officio. The Umpire takes upon himself as the exclusive authority of determining the disputes.
This pronouncement was made by the Hon’ble Supreme Court of India in the matter M/s Oswal Woollen Mills Ltd. Vs. M/s Oswal Agro Mills Ltd. [CIVIL APPEAL NO. 3776 OF 2018] on 13.04.2018.
The point for consideration before the Court was whether an Umpire has to hear the matter de novo on a Reference or from the stage of disagreement between the Arbitrators.
The Hon’ble Supreme Court held that there is no qualitative difference between the Arbitrators and the Umpire with regard to the methodology and modalities to be adopted for reaching a just and fair conclusion. When the Umpire enters upon a Reference and replaces the arbitrators, he is needed to review the evidence and submissions only on those matters about which the arbitrators have disagreed unless either party applies for the rehearing of the evidence of the parties or their witnesses.
It was further held that the Umpire can surely go through the evidence recorded by the previous arbitrators but without being influenced by the opinion expressed by them in that regard and even the notes taken by previous arbitrators can be relied if there exist special provisions in the agreement permitting him to do so. However, if the party makes an application for de novo hearing, the Umpire is bound to allow the same, subject to the condition that the application is made at the earliest and the applicant is not using it as last armory to turn the case around.