The State Of Madhya Pradesh vs Nidhia (I) Industries Thr. Its ...
2021 Latest Caselaw 3920 MP

                                      1                                   RP-518-2021
         The High Court Of Madhya Pradesh
                     RP-518-2021
    (THE STATE OF MADHYA PRADESH Vs NIDHIA (I) INDUSTRIES THR. ITS PROPRIETOR SANJAY
                                    MAHESHWARI)

1
Gwalior, Dated : 03-08-2021
        Heard through Video Conferencing.
        Shri MPS Raghuvanshi, learned Additional Advocate General for State.
        Shri Prashant Sharma, learned counsel for respondent.

Review is sought of the final order dated 20.05.2021 in AC 37/2021

passed while disposing of an application u/S.11(6) of the Arbitration and Conciliation Act, 1996 ("1996 Act" for brevity) appointing Mr. Justice N.K. Mody, former Judge of this Court as sole Arbitrator.

The aforesaid appointment was made in the factual background that despite the respondents having proposed two names, one of Mr. Justice R.C. Lahoti, former CJI and the other of Mr. Justice N.K. Mody, former Judge of this Court, the review petitioner failed to respond to the same.

Thereafter the petitioner preferred an application u/S.11(6) of 1996 Act praying for appointment of Arbitrator proposing name of three persons Mr.

Justice R.C. Lahoti, former CJI, Mr. Justice N.K. Mody, former Judge of this Court and Mr. Justice Alok Verma, former Judge of this Court.

This Court by order under review appointed Mr. Justice N.K. Mody, former Judge of this Court as sole Arbitrator.

The contention of Mr. Raghuvanshi, learned AAG appearing for State in this review petition is that the order under review was passed without noticing the respondent i.e. the State and its functionaries who were denied their legitimate right of objecting to the names of persons proposed by respondent.

A perusal of the order-sheets in AC 37/2021 revealed that the said case was listed on 25.03.2021 and 17.05.2021 whereafter it was decided by the order under review on 20.05.2021 by marking appearance of Shri Jitesh Sharma, Govt. Advocate for the State and its functionaries.

2 RP-518-2021 True it is that the notice was not issued to the opposite side in AC 37/2021.

Learned counsel for the State submits by referring to SBP & CO. Vs. Patel Engineering Ltd. & Anr. (2005) 8 SCC 618 Para 37 that since the process of consideration and deciding the application u/S.11(6) of the

Arbitration and Conciliation Act, 1996 is adjudicatory in nature, issuance of notice to other side to afford opportunity of being heard is mandatory.

Relevant portion of said judgment is reproduced below for ready reference and convenience:-

"37. It is fundamental to our procedural jurisprudence, that the right of no person shall be affected without he being heard. This necessarily imposes an obligation on the Chief Justice to issue notice to the opposite party when he is moved under Section 11 of the Act. The notice to the opposite party cannot be considered to be merely an intimation to that party of the filing of the arbitration application and the passing of an administrative order appointing an arbitrator or an arbitral tribunal. It is really the giving of an opportunity of being heard. There have been cases where claims for appointment of an arbitrator based on an arbitration agreement are made ten or twenty years after the period of the contract has come to an end. There have been cases where the appointment of an arbitrator has been sought, after the parties had settled the accounts and the party concerned had certified that he had no further claims against the other contracting party. In other words, there have been occasions when dead claims are sought to be resurrected. There have been cases where assertions are made of the existence of arbitration agreements when, in fact, such existence is strongly disputed by the other side who appears on issuance of notice. Controversies are also raised as to whether the claim that is sought to be put forward comes within the purview of the arbitration clause concerned at all. The Chief Justice has necessarily 3 RP-518-2021 to apply his mind to these aspects before coming to a conclusion one way or the other and before proceeding to appoint an arbitrator or declining to appoint an arbitrator. Obviously, this is an adjudicatory process. An opportunity of hearing to both parties is a must. Even in administrative functions if rights are affected, rules of natural justice step in. The principles settled by Ridge v. Baldwin [(1963) 2 ALL ER 66] are well known, therefore, to the extent, Konkan Railway Rly. Corpn. Ltd. vs. Rani Construction (P) Ltd. (2002) 2 SCC 388 states that no notice need be issued to the opposite party to give him an opportunity of being heard before appointing an arbitrator, with respect, the same has to be held to be not sustainable."

On the other hand Shri Sharma, learned counsel for respondent relying upon Datar Switchgears Ltd. Vs. Tata Finance Ltd. and Anr. (2000) 8 SCC 151 submits that non-issuance of notice and non-affording of opportunity to other side can not vitiate the order under review as the review petitioners lost their right to propose name of an Arbitrator by failing to respond to the proposal of petitioner vide P/15 dated 29.01.2021.

There seems to be no authoritative decision on the said point and therefore, the same deserves to be argued especially in regard to maintainability of this review petition.

Since it is past 5:30 pm, let the case be taken up on 16th August, 2021.

(SHEEL NAGU) JUDGE YOGENDR A OJHA 2021.08.0 ojha 5 11:39:03 +05'30'