Rajesh Batra vs Ranbir Singh Ahlawat
2011 Latest Caselaw 3789 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI


+                     Date of Decision: 08.08.2011


%                 O.M.P. 396/2011 & I.A. No.8432/2011


       RAJESH BATRA                                  ..... Petitioner
                        Through:    Mr.   Sandeep        Sharma    and
                                    Ms.Kanika Singh, Advocates

                  versus


       RANBIR SINGH AHLAWAT                            ..... Respondent
                      Through:      Mr. H.S. Kohli, Advocate
                                    Mr. Deepak Arora, Arbitrator


       CORAM:
       HON'BLE MR. JUSTICE VIPIN SANGHI


       1. Whether the Reporters of local papers may
          be allowed to see the judgment?           :       No

       2. To be referred to Reporter or not?           :    Yes

       3. Whether the judgment should be reported
          in the Digest?                               :    Yes



VIPIN SANGHI, J. (Oral)

1. By this petition under Section 34 of the Arbitration and

Conciliation Act, the petitioner assails the award dated 12.02.2011

passed by Sh. Deepak Arora, Advocate, sole arbitrator made by him in

favour of the respondent and against the petitioner.

2. The parties entered into collaboration agreements dated

24.03.2008 and 30.03.2008. Both these agreements contain a dispute

resolution clause, which provides for arbitration by "a mutually

appointed arbitrator". The respondent sought to invoke the arbitration

agreements and nominated Mr. Deepak Arora, Advocate as the sole

arbitrator. Pertinently, there was no mutual consent given to his

appointment as the arbitrator, at any stage, by the petitioner.

3. The learned arbitrator assumed jurisdiction on the unilateral

nomination made by the respondent, without even bothering that

there was no consent to his appointment, given by the petitioner, and

started the proceedings by issuing notice to the parties; requiring the

respondent to file its statement of claim, and; also requiring the

petitioner to cause appearance before him.

4. The petitioner did not put in appearance despite repeated

notices, and for the first time, put in appearance on 01.09.2010. The

proceedings recorded by the arbitrator show that the proxy counsel for

the petitioner sought time to file their reply. On 11.09.2010, the

petitioner filed the Vakalatnama and the proceedings recorded are that

the petitioner sought further time to file the reply. The petitioner's

defence was, however, struck off by the arbitrator on the same date.

5. On 07.10.2010, the petitioner served a notice on the arbitrator

challenging his authority to proceed in the matter, as the arbitrator

had not been appointed by mutual consent. The arbitrator replied to

the said notice on 11.10.2010. In his reply, he shies away from the

petitioner's assertion that there was no mutual agreement between

the parties to nominate him as the arbitrator. He states in his reply,

and this is so stated by him in court as well, that the respondent had

sent a legal notice dated 03.02.2010 informing the petitioner regarding

reference of disputes under the two collaboration agreements to the

arbitrator, and despite receiving the notice, the petitioner did not raise

any objection to the appointment of the arbitrator. Therefore, his stand

is that there was an implied consent given to his appointment by the

petitioner.

6. Both the learned arbitrator as well as learned counsel for the

respondent, who has argued the matter without filing the reply despite

opportunity, have submitted that the petitioner did not object to the

respondent's nomination of the arbitrator and, consequently, the

mutual consent is taken as impliedly granted by the petitioner, to the

appointment of the arbitrator. It is also argued that the petitioner

participated in the proceedings on 01.09.2010, 11.09.2010 and again

18.09.2010, and did not object to the appointment of the arbitrator. It

is argued by learned counsel for the respondent that the plea of the

arbitrator having no jurisdiction in the matter was raised only when his

defence was struck off by the learned arbitrator.

7. Having heard learned counsel for the parties as well as the

learned arbitrator, I am of the view that the impugned award cannot be

sustained and is liable to be set aside. The present is a shocking case

where the arbitrator assumed jurisdiction without even caring to see

that the parties had not appointed him mutually as required by the

agreement.

8. It is well settled that an arbitrator derives his authority from the

arbitration agreement. Once the arbitrator had noticed that his

nomination had been only made by the respondent/claimant, without

the consent of the petitioner, before entering upon the reference and

issuing notice to the parties, or taking any steps in the arbitration

proceedings, he should have ensured that the petitioner also gave his

consent to his nomination as the arbitrator. The arbitrator derives no

authority or jurisdiction to even issue notice to the parties, either to file

their statement of claim, or statement of defence/counter claim, or to

appear before him, till his appointment has been made strictly in terms

of the arbitration agreement.

9. The fact that the petitioner had put in appearance on a couple of

sittings before the so-called arbitrator, to my mind, makes no

difference, keeping in view the express language of Section 16(2) of

the Act which permits the raising of a plea that the arbitral tribunal

does not have jurisdiction till the statement of defence has been filed.

In this case, the petitioner had raised the said plea on 07.10.2010 and,

admittedly, no statement of claim had been filed by then.

10. Despite being put to notice that his appointment itself is without

authority and jurisdiction, the arbitrator brazenly proceeded to conduct

the proceedings and passed the impugned award. If such conduct is

condoned, it will give encouragement to adoption of such sharp

practices and fraudulent conduct. If the respondents stand were to be

accepted, one or the other party can play havoc by nominating an

arbitrator unilaterally in breach of the agreement, and obtain an award

from the arbitrator, who may not command the confidence of both the

parties. Accordingly, the impugned award is patently illegal and has

been made by the arbitrator without jurisdiction and the same is

accordingly set aside.

11. The petitioner has been subjected to unnecessary harassment on

account of the completely unjustified and illegal conduct of the

respondent and the learned arbitrator. Accordingly, I subject the

respondent and the learned arbitrator to costs of Rs.20,000/- to be

shared equally by them. Costs be paid within a week.

VIPIN SANGHI, J

AUGUST 08, 2011 sr