Sundara Vadivel.P vs M/S Kotak Mahindra Bank Ltd
2021 Latest Caselaw 22100 Mad

                                                                              O.P.No.422 of 2021

                                  IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                  DATED :10.11.2021

                                                       CORAM:

                             THE HONOURABLE MR.JUSTICE ABDUL QUDDHOSE

                                                  O.P.No.422 of 2021
                                                 and A.No.1954 of 2021

                     Sundara Vadivel.P                                       ..... Petitioner

                                                          Vs

                     1.M/s Kotak Mahindra bank Ltd.,
                       5th Floor, Samson Towers,
                       402 I, Pantheon Road,
                       Egmore, Chennai - 600 008.

                     2. C.Prasanna Venkatesh                                   ...Respondents

                     Prayer: Petition filed under Section 14(2) of the Arbitration and
                     Conciliation Act, 1996 to terminate the mandate of the 2nd respondent in
                     Arbitration Case No.KBSET 1707 of 2020 and the disputes arising out of
                     the loan agreement SPLN 63255601 dated 29.02.2020.


                                      For Appellant     : Ms.Abitha Banu
                                      For 1st Respondent: Mr.N.S.Sivakumar



                     1/9



https://www.mhc.tn.gov.in/judis
                                                                                O.P.No.422 of 2021

                                                        ORDER

This petition has been filed under Section 14(2) of the

Arbitration and Conciliation Act, 1996, seeking for termination of the

Arbitral Tribunal on the ground that the Arbitrator has been appointed by

the first respondent on its own, which is in violation of the latest decision

of the Hon'ble Supreme Court in the case of Perkins Eastman Architects

DPC and Another vs HSCC (India) Ltd reported in 2019 SCC Online

1517.(Arbitration Application No.32 of 2019 dated 26.11.2019).

2. Learned counsel for the petitioner drew the attention of

this Court to the following paragraphs in the aforementioned judgment:

" 22. ......

(vii) If circumstances exist, giving rise to justifiable doubts as to the circumstances warrant appointment of an independent arbitrator by ignoring the procedure prescribed, the Chief Justice or his designate may, for reasons to be recorded ignore the designated arbitrator and appoint someone else."

https://www.mhc.tn.gov.in/judis O.P.No.422 of 2021

23. Sub Para (vii) of aforesaid paragraph 48 lays down that if there are justifiable doubts as to the independence and impartiality of the person nominated, and if other circumstances warrant appointment of an independent arbitrator by ignoring the procedure prescribed, such appointment can be made by the Court. It may also be noted that on the issue of necessity and desirability of impartial and independent arbitrators the matter was considered by the Law Commission in its report No.246. Paragraphs 53 to 60 under the heading "Neutrality of Arbitrators" are quoted in the judgment of this Court in Voestapline Schienen Gmbh vs Delhi Metro Rail Corpn Ltd. while paras 59 and 60 of the report stand extracted in the decision of this Court in Bharat Broadband Network Limited vs United Telecoms Limited. For the present purposes, we may rely on paragraph 57, which is to the following effect:-

https://www.mhc.tn.gov.in/judis O.P.No.422 of 2021

" 57. The balance between procedural fairness and binding nature of these contracts, appears to have been titled in favour of the latter by the Supreme Court, and the Commission believes the present position of law is far from satisfactory. Since the principles of impartiality and independence cannot be discarded at any stage of proceedings, specifically at the stage of constitution of the Arbitral Tribunal, it would be incongruous to say that party autonomy can be exercised in complete disregard of these principles - even if the same has been agreed prior to the disputes having arisen between the parties. There are certain minimum levels of independence and impartiality that should be required of the arbitral process regardless of the parties' apparent agreement. A sensible law cannot, for instance, permit appointment of an arbitraror who is himself a party to the dispute, or who is employed by (or similarly dependent on) one party, even if this is what the parties agreed."

https://www.mhc.tn.gov.in/judis O.P.No.422 of 2021

3. In the aforementioned decision also, one of the parties to

the Arbitration agreement, has appointed an Arbitrator and the Hon'ble

Supreme Court has struck it down on the ground that it will raise

justifiable doubt as to the independence and impartiality of the Arbitrator

and therefore, the Hon'ble Supreme Court appointed a neutral Arbitrator.

4. In the case on hand also, admittedly, the first respondent

has appointed the second respondent as an Arbitrator. The petitioner has

entered into a loan agreement with the first respondent, under which,

there arose disputes between the parties. The first respondent has

appointed the second respondent as Arbitrator for adjudicating the

arbitral dispute. Since the decision of the Hon'ble Supreme Court,

referred to supra, squarely applies to the facts of the instant case also, the

appointment of an Arbitrator, by the first respondent, under the loan

agreement between the petitioner and the first respondent, is bad in law.

Hence, the appointment of the second respondent as an Arbitrator by the

first respondent is set aside by this Court and the Arbitral Tribunal,

https://www.mhc.tn.gov.in/judis O.P.No.422 of 2021

comprising of the second respondent as an Arbitrator, is terminated by

this Court under Section 14 of the Arbitration and Conciliation Act,

1996.

5. Even though counter has been filed by the respondents

denying the allegations of the petitioner that the second respondent is not

an independent arbitrator, the said contention cannot be accepted by this

Court in view of the admitted fact that the second respondent was

appointed as an Arbitrator only by the first respondent, which cannot be

done legally in view of the latest decision of the Hon'ble Supreme Court

in the case of Perkins Eastman Architects DPC and Another vs HSCC

(India) Ltd reported in 2019 SCC Online 1517, referred to supra.

6. Without casting any aspersion against the second

respondent with regard to his integrity and only in view of the decision

referred to supra by the learned counsel for the petitioner, this application

is allowed as prayed for.

https://www.mhc.tn.gov.in/judis O.P.No.422 of 2021

7. After dictating the order, both the counsels, on

instructions, agree for the appointment of Mr.N.C.Ramesh, learned

Senior Counsel as an Arbitrator. Accordingly, Mr.N.C.Ramesh, learned

Senior Counsel, is appointed as Arbitrator, who shall decide the dispute

between the parties under the loan agreement dated 29.02.2020.

8. Mr.N.C.Ramesh, learned Senior Counsel, the sole

Arbitrator, after issuing notice to the respective parties, shall fix his

remuneration as per the Schedule of fees, prescribed under the

Arbitration and Conciliation Act, 1996 and its Rules and complete the

arbitration.

9. Registry is directed to serve a copy of this order to

Mr.N.C.Ramesh, learned Senior Counsel.

https://www.mhc.tn.gov.in/judis O.P.No.422 of 2021

10. With the above direction, O.P.No.422 of 2021 is

allowed. No costs. Consequently, connected miscellaneous application is

closed.

10.11.2021

sr/rgi Index:Yes/No Speaking Order: Yes/No

https://www.mhc.tn.gov.in/judis O.P.No.422 of 2021

ABDUL QUDDHOSE.,J

sr

O.P.No.422 of 2021

10.11.2021

https://www.mhc.tn.gov.in/judis