Proviso to Section 24(1) of the Arbitration and Conciliation Act, 1996 provides that oral hearing on the request of a party be granted as a matter of “right”

In the matter of Sukhbir Singh vs. M/s Hindustan Petroleum Corporation Limited bearing O.M.P. No. 1118 of 2014 decided on 16.01.2020, the Delhi High Court held that unless the right to require oral evidence or oral arguments has been waived by a prior agreement to the contrary between the parties, the proviso to Section 24(1) expresses a legislative preference for the grant of oral hearing at the request of either party.
Facts
The Petitioner’s petrol pump dealership was terminated by the Respondent on the ground that the motor spirit sample collected from the petrol retail outlet of the Petitioner failed to meet desired specifications while the supply location sample (used as a reference sample) met specifications. The said discrepancy confirmed adulteration of motor spirit at the retail outlet. The Petitioner initiated arbitration proceedings and claimed that the lab report confirming the reference sample to be within specifications, as well as the cover letter by which the supply location sample was sent to the laboratory, were fabricated documents. In order to prove this ground, the petitioner sought permission to cross-examine the respondent’s witness and filed an application dated 04.04.2014 to that effect.

The arbitrator made his award and dismissed the claim and also declined the petitioner’s request for an opportunity to cross-examine the witness.

In the present appeal, the sole ground urged by the Petitioner was that the arbitrator’s failure to permit cross examination of the respondent’s witness was a violation of first proviso of Section 24 of the Arbitration and Conciliation Act, 1996 which states that in the absence of an agreement to the contrary, an oral hearing for the presentation of evidence or for oral arguments is required to be held at the request of either party. It was emphasised that the petitioner was not a party to the documents in question, which were fundamental to the termination of the petitioner’s dealership and therefore, application for cross-examination ought to have been allowed.
It was contended on the other hand by the Respondent that the proviso to Section 24(1) only permits a party to approach the arbitrator in the absence of any prior determination as to the permissibility of oral hearings, but does not cast any obligation upon the arbitrator to permit oral hearings. It was further contended that such a reading of the proviso would render the main provision nugatory which provided that in the absence of the agreement of the parties, the arbitral tribunal shall have discretion whether to hold oral hearings or not.
Issue

Whether the proviso to Section 24(1) entitles a party to oral hearing at its option or leaves this matter to the discretion of the Arbitral Tribunal

Ratio
The Delhi High Court emphasised the importance of right to cross examination and held that Section 24(1) read with the proviso reflects that a party has a right (in the absence of a prior agreement to the contrary) to cross-examine a witness produced by the other party to further fulfil the mandate of Section 18 which states that parties should be given full opportunity to present their case.
The Court held that a request for oral hearings can only be declined in exceptional circumstances and for reasons to be recorded. The Court further observed that Article 24 of the Draft Model Law considered by UNCITRAL (on which the Arbitration and Conciliation Act, 1996 is based) used the directory “may”, rather than the imperative “shall” as used in the second part of Article 24(1). The distinct use of “shall” in place of “may” in Section 24 was held by the Court to be a deliberate and considered attempt to incorporate a mandate to the Tribunal to grant a request, if made by either party as a matter of “right”.
The Court ultimately held that the first proviso to Section 24(1) requires a party’s request for oral hearings at the stage of evidence or arguments to be granted and ought to have been granted in the facts if the present case as well. The award was set aside on this ground.