Madhya Pradesh High Court

Ved Warehouse Rajoda (1) Thru. Hari ... vs M.P. State Civil Supplies Corporation ... on 3 November, 2025

NEUTRAL CITATION NO. 2025:MPHC-IND:31915

1 AA-49-2017
IN THEHIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE PAVAN KUMAR DWIVEDI
ARBITRATION APPEAL No. 49 of 2017
VED WAREHOUSE RAJODA (1) THRU. HARI SINGH THAKUR AND
OTHERS
Versus
M.P. STATE CIVIL SUPPLIES CORPORATION LTD.
Appearance:
Shri Rohit Kumar Mangal, learned counsel for the appellant.
Shri Jayant Vipat, learned counsel for the respondent.

Heard on : 03.09.2025
Pronounced on : 03.11.2025
.......................................................................................................................................................
ORDER

The appellant has filed this appeal challenging the order dated 18.05.2017 passed in arbitration case No.5/2016 (also mentioned as 19/16) whereby the issue with respect to eligibility of the person acted as an arbitrator in the matter has been raised.

2. The facts in brief are that the appellant is running business of storage

of goods in the warehouse in the name and stye of M/s. Ved Warehouse. The appellant and respondent executed an agreement on 04.05.2010 for storage of food-grains. Pursuant to the said agreement, goods were stored in the warehouse of the appellant. However, the respondent while making payment made deduction of a sum of Rs.98616/- against the storage gain. Being aggrieved by the same, appellant submitted a representation by raising an issue that as per clause 4, the amount deducted against the storage gain is

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2 AA-49-2017 impermissible because the storage was made after the cut-of-date i.e. 30.06.2010. The appellant also stated that the goods which were stored from other warehouse after deduction of storage gain are not required to be subjected to further deduction for storage gain repeatedly.

3. The said representation of the appellant came to be rejected by the general manger (procurement) by stating that representation of the appellant was examined and the deduction was found in accordance with the terms of the agreement, hence, the same was rejected vide communication dated 19.08.2011. A note was made in the bottom of the communication to the effect that "as per the orders of manager director". The appellant being aggrieved by the rejection of his representation invoked arbitration clause as

contained in clause No.7 of the agreement. The claim of the appellant was rejected by the sole arbitrator i.e. the person designated to act as an arbitrator by virtue of his post i.e. Managing Director, M.P. State Civil Supplies Corporation Ltd.

4. The appellant being aggrieved by the rejection of his claim by the arbitrator filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 before the learned District Judge, Dewas who has rejected his application by the impugned order on 18.05.2017. Hence, this appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996.

5. Learned counsel for the appellant has raised the issue of competence of managing director to act as an arbitrator. He submits that it has clearly been mentioned in the communication dated 19.08.2011 that his representation

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3 AA-49-2017 was rejected by the general manager (procurement) as per the orders of managing director. As such, managing director was disqualified from acting as arbitrator. Although, a plea was raised by the appellant in para 2 of the application filed under Section 34 that same person has acted as arbitrator who has rejected his representation as such the entire exercise of arbitration is non-est in the eyes of law but the same has not been considered by the learned District Judge in its proper perspective. He submitted that this plea of disqualification of arbitration could not have been rejected on the ground that this was not taken before the Arbitrator. In support of his submission, he has placed reliance on the judgment of the Hon'ble Apex Court rendered in the case of M/s. Lion Engineering Consultants Vs. State of M.P. and others, AIR 2018 SC 1895.

6. Learned counsel for the appellant further stated that in view of the provision of Section 34 (2)(b)(ii), his application should have been allowed as the arbitration agreement was not valid under the law under which the parties have been subjected to, he points out that penal of in-house officers for appointment of arbitrator, MD in the present case renders the arbitration agreement invalid. He thus submits that on this ground his application filed under Section 34 before the District Judge should have been entertained. He has placed reliance upon the recent judgment of the Hon'ble Apex Court in the case of Central Organisation For Railway Electrification Vs. ECI SPIC SMO MCML (JV) A Joint Venture Company, 2025 (4) SCC 641.

7. Per contra, learned counsel for the respondent submits that in fact, the

issue with respect to ineligibility of the arbitrator is an after thought. Initially,

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4 AA-49-2017 no such objection was raised by the appellant rather during entire process of arbitration this objection was never raised by the appellant. Thus, in view of the provision of Section 4 of the Arbitration and Conciliation Act, 1996, the appellant has waived his right to object on this count. He further submits that the person who passed the order was not the person who acted as arbitrator. His submission is that the representation was rejected by the general manager and not by the managing director himself. However, the award has been passed by the managing director himself, hence, in any case there is no disqualification attached to managing director to act as arbitrator in the present case. In support of his submission, he placed reliance upon the judgments of the Hon'ble Apex Court in the case of Bharat Sanchar Nigam Ltd. Vs. Motorola India Pvt. Ltd., 2009 AIR SC 357 and Suresh Gupta Vs. Madhya Prdesh Agro Industries Corporation Ltd and others, 2021 (0) Supreme (M.P.) 253. He thus prays for dismissal of the appeal.

8. Heard the learned counsel for the parties and perused the record.

9. The singular contention with which the present appeal has been file by the appellants, in essence, is about the eligibility of the person who acted as an arbitrator. Although, the issue on merits have also been raised, however, looking to the limited scope under the provisions of Section 37 of the Act, 1996, the merits of the case are not required to be looked upon. The grounds of interference in arbitral award have already been provided in terms of Section 34 of the said Act, thus, the examination is only to the limited issue of eligibility of the arbitrator.

10. In the present case, the communication of rejection of representation

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5 AA-49-2017 dated 19.08.2011 would show that it was signed by the general manger (procurement), however, there is a note at the bottom that as per the orders of the managing director. This communication was issued on 19.08.2011 and thereafter, the award was passed by the arbitrator on 13.08.2012. The appellant has not demonstrated by any material whatsoever that on both the occasions i.e. at the time of consideration of his representation and at the time of decision on his arbitration application, the same person was considering his case, though a ground is raised (ground no. 2) but without there being any factual assertion or support for the same. Even the name of the person in question has not been mentioned in the entire appeal. Apart from this, it has also to be kept in mind that the objection with respect to eligibility or impartiality for that matter should have been taken by the appellant at the initiation of the arbitration proceedings. Section 4 of the Arbitration and Conciliation Act, 1996 provides as under:-

"4. Waiver of right to object. - A party who knows that-

(a) any provision of this Part from which the parties may derogate, or

(b) any requirement under the arbitration agreement, has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object."

11. The Hon'ble Apex Court in the case of Bharat Sanchar Nigam Ltd. (supra) has held in para 18 as under:-

"18. Pursuant to Section 4 of the Arbitration and Conciliation Act, 1996, a party who knows that a requirement under the arbitration agreement has not been complied with and still proceeds with the arbitration without raising an objection, as soon as possible, waives their right to object. The High Court had

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6 AA-49-2017 appointed an arbitrator in response to the petition filed by the appellant. At this point, the matter was closed unless further objections were to be raised. If further objections were to be made after this order, they should have been made prior to the first arbitration hearing. But the appellant had not raised any such objections. The appellant therefore had clearly failed to meet the stated requirement to object to arbitration without delay. As such their right to object is deemed to be waived."

12. As per the terms of the agreement, managing director was the person designated to act as an arbitrator. The appellant was well aware about this fact, hence, this cannot be presumed that he was not aware about the terms of the agreement executed by him with the corporation. As such the provisions of Section 4 and the law laid down by the Hon'ble Apex Court apply in full force. As regards the reliance placed by the learned counsel for the appellant on the judgment of M/s. Lion Engineering Consultants (supra), in the said case, the question was not about the eligibility of the arbitrator but about the jurisdiction of the arbitrator. As such the present case is distinguishable on facts from the case relied upon by the learned counsel for the appellant.

13. As regards the judgment in the case of Central Organisation For Railway Electrification (supra), in fact, the Hon'ble Apex Court while passing the said judgment has itself held that it shall apply prospectively which means that the effect of the judgment as a binding precedent has a prospective overruling of law in other words earlier orders are safe from its effect. The said order was passed by the Hon'ble Apex Court on 08.11.2024

whereas in the present case the award was passed in the year 2012. As such, the said case is also not applicable in the facts of the present case.

14. In fact, the appellant took a calculated risk, first he himself raised

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7 AA-49-2017 dispute before the Managing Director of the Corporation in terms of arbitration clause without raising objection against his eligibility to act as an arbitrator and waited till the final adjudication of his disputed and once the same was decided against him, he started to raise objection against the eligibility of the MD, which in the considered view of this court was no more available to him in view of the findings recorded herein above.

14. In view of the above analysis, this Court is of the considered view that the appeal is sans merits thus deserves to be dismissed and is hereby dismissed. However, there is no order as to costs.

(PAVAN KUMAR DWIVEDI) JUDGE

N.R.