Consolidated Civil ... vs Coimbatore Stock Exchange Ltd
2021 Latest Caselaw 21018 Mad

                                                                            C.M.A. No. 2567 of 2017

                              IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                    DATED: 21.10.2021

                                                        CORAM:

                                   THE HON'BLE MR. JUSTICE ABDUL QUDDHOSE

                                                C.M.A. No. 2567 of 2017

                     Consolidated Civil Constructions (India) Ltd.,
                     2G, Lakshmi Bhavan,
                     609, Anna Salai,
                     Chennai - 600 006.                                        ... Appellant
                                                       Vs.

                     1. Coimbatore Stock Exchange Ltd.,
                        Stock Exchange Building,
                        Trichy Road,
                        Coimbatore - 5.

                     2. H.B.N. Shetty (Sole Arbitrator)
                        17/4, 1st Cross Street,
                        Indira Nagar, Adyar,
                        Chennai - 20.                                         ...Respondents

                                Civil Miscellaneous Appeal filed under Section 37 of the
                     Arbitration and Conciliation Act, 1996 against the Order of the Hon'ble
                     Principal District Judge, Coimbatore dated 07.08.2016 passed in Arb.
                     O.P. No. 420 of 2005 (Impugned Order).


                                    For Appellant     : Mr. Prahalad Bhat

                                    For Respondents : Mr. Aashish
                                                      for M/s. Samvidhaan for R1.



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                                                                           C.M.A. No. 2567 of 2017


                                                     JUDGMENT

This Appeal has been filed under Section 37 of the Arbitration and

Conciliation Act, 1996 challenging the order dated 07.06.2016 passed in

A.O.P. No.420 of 2005 by the learned Principal District Judge,

Coimbatore under Section 34 of the Arbitration and Conciliation Act.

2. Under the impugned order, the learned Principal District Judge,

Coimbatore has allowed the application filed by the first respondent

under Section 34 of the Arbitration and Conciliation Act, 1996 by setting

aside the Arbitral Award dated 18.06.2003 passed in favour of the

Appellant on the ground that the Arbitrator has not decided the

application filed by the first respondent under Section 16 of the

Arbitration and Conciliation Act, 1996 questioning the Jurisdiction of

the Arbitral Tribunal before passing of the impugned Arbitral Award. In

the grounds raised by the respondents along with Section 34 application

challenging the Arbitral Award dated 18.06.2003 apart from raising the

ground under which the Arbitral Award has been set aside by the learned

Principal District Judge, Coimbatore, they have raised several other

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C.M.A. No. 2567 of 2017

grounds also questioning the Arbitral Award. However, as seen from the

impugned order passed by the learned Principal District Judge,

Coimbatore under Section 34 of the Arbitration and Conciliation Act, the

learned Principal District Judge, Coimbatore has considered only one

ground viz., whether the Arbitrator ought to have decided the

application under Section 16 filed by the first respondent before passing

of the Arbitral Award. Apart from the aforementioned ground under

which the Arbitral Award has been set aside by impugned order, the first

respondent have raised the following grounds in A.O.P. No. 420 of

2005:

A) The Award of the 2nd Respondent is absolutely without

jurisdiction and is based on a totally erroneous assumption of jurisdiction

in so far as he is not the Arbitrator appointed in conformity with clause 33

of the Agreement dated 15.07.95 and it is Mr. Kumaravel, who is the

properly appointed Arbitrator in accordance with said clause. The

impugned Award is grossly unconscionable in having disregarded the

proceeding pending before Sub Court, Coimbatore in O.S. No 77 of 2002

and in District Court, Coimbatore in A.S. No. 77 of 2002 and in having

proceeded with the Arbitration without awaiting final out-come in the

Appeal and in the Suit.

B) The impugned Award and specifically the finding of the

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C.M.A. No. 2567 of 2017

Arbitrator on the issue of jurisdiction is grossly perverse and

unconscionable inasmuch as the Arbitrator overlooked the fact that the

instant case was one where there were two Arbitrators each contending

himself to have jurisdiction to decide on his own jurisdiction, that

accordingly it was not open to the 2nd Respondent to assume himself to be

the Arbitrator competent to decide on his own jurisdiction, and that in the

instant case who is to exercise jurisdiction even under Section 16 of the

Arbitration and Conciliation Act was under dispute.

D. The impugned award is grossly unconscionable in having

concluded that the appointment of Mr. Kumaravel as Arbitrator is not valid

merely on the basis that the communication dated 12.09.2001 giving the

panel of names of Arbitrators has been sent only by Certificate of Posting

and not by RPAD by relying on Clause (i)(e) of the Agreement between the

parties. The Arbitrator attempted to be hyper technical in this regard.

Applying the same hypertechnical yardstick, the Arbitrator ought to have

seen that Clause (1) (e) warrants an RPAD only in cases of “Notice in

writing” or ''Written Notice”, that such expressions are used in several

places in the Agreement itself, that communication of panel of names is not

contemplated as a ''notice in writing'' or ''Written Notice'' in the Agreement

and that therefore there was no requirement in the Agreement that the

communication dated 12.09.2001 was to be sent by RPAD. The Learned

Arbitrator acted perverse in not even applying his mind to this Argument of

the Petitioner which was pleaded exhaustively in their pleadings. https://www.mhc.tn.gov.in/judis/

C.M.A. No. 2567 of 2017

E. The Arbitrator acted perverse in ignoring the specific finding of

the Sub Court, Coimbatore in I.A. 53 /2002 that the factum as to whether

the communication dated 12.09.2001 was in fact served on the 1st

Respondent could be gone into only at the time of trial of the Suit.

Therefore, the Arbitrator ought to have seen that even the Court had not

accepted the plea of the 1st Respondent that the communication dated

12.09.2001 is to be rejected merely because it was sent by Certificate of

Posting but that the Court had only taken in view that the factum as to

whether the communication was actually received by the 1st Respondent or

not could factually be decided only in trial.

F. The Arbitrator grossly erred in deciding to decide the issue as to

whether the letter dated 12.09.2001 was in fact received by the 1st

Respondent, summarily and without any trial, not-withstanding the

observation of the Civil Court that the determination of the said issue

requires trial. The Arbitrator has assumed himself to be capable of -18-

determining the issue without any trial whatsoever even though, the Civil

Court itself felt incapacitated in determining the issue without a trial.

G. The Arbitrator ought to have seen that Certificate of posting

having been produced, the presumption under Law is that the letter sent

under Certificate of Posting ought to have been received by the Addressee.

The Arbitrator ought to have therefore seen that the burden of proving non-

receipt of the letter dated 12.09.2001 was only on the 1st Respondent and https://www.mhc.tn.gov.in/judis/

C.M.A. No. 2567 of 2017

that the 1st Respondent has not dislodged this presumption by any positive

evidence from their side. In fact, the Arbitrator has even deliberately

overlooked the fact that the only evidence available in respect of the

preliminary issue was the evidence of the Petitioner's Witness in the form of

proof affidavit and that there was no contra evidence let in by the 1st

Respondent in this regard.

H. The Arbitrator approached the issue of jurisdiction from the

beginning with a pre-conceived mind and with bias. This is apparent from

the reluctance of the Arbitrator to go through a fair trial in respect of the

said issue and to give a finding on the said issue in the first instance before

proceeding with the merits of the case. This aspect has come out most

glaringly in the order of the Arbitrator dated 16.04.2003 rejecting the

challenge to Arbitrator wherein the Arbitrator has in one breadth stated

that the issue of jurisdiction would be decided along with merits and in

another breadth stating in the same order that he was “fully satisfied about

his competence as regard his jurisdiction”.

I. The Arbitrator acted unconscionably in rejecting the application

of the Petitioner challenging the Arbitrator. The Arbitrator ought to have

accepted the challenge and withdrawn from the Arbitration Proceedings

having regard to the following grounds on which the challenge was based:

a) The Arbitrator had been deliberately selective and had

shown partiality in the matter of adjourning the hearings. For his own

convenience and at the request of the 1st Respondent herein, adjournments https://www.mhc.tn.gov.in/judis/

C.M.A. No. 2567 of 2017

have been granted, even without regard to the fact that the Petitioner and

their Advocate travel all the way from Coimbatore. While so, request of the

Petitioner herein for adjournment, that too based on bonafide reason of

forthcoming hearing of the Appeal before the District Court on same issue,

is turned down and important proceedings such as recording of evidence

are conducted in the absence of the Petitioner.

b) The Arbitrator had consciously and deliberately failed to

comply with the mandatory procedure prescribed under Section 16 (5) of

the Arbitration and Conciliation Act, 1996 and has proceeded to record

evidence on merits, without deciding the issue of jurisdiction.

c) The Arbitrator has refused to await final outcome of

proceedings pending before the Court regarding jurisdiction.

d) The Arbitrator had refused to acknowledge receipt of

pleadings and other submissions filed by the Petitioner at the hearing on

25.02.2003 giving room for ambiguity later on as what were the written

submissions made by the Petitioner from time to time before the Arbitrator.

e) The Arbitrator has been selective in the matter of

maintenance of attendance records and Minutes of proceedings of hearings

held before him. While at earlier hearing, there was a record of

proceeding and attendance maintained by the Arbitrator, at the hearing on

25.02.2003, the Arbitrator has failed to record any attendance sheet and

also refused to make a record of proceedings that had transpired at the said

hearing giving room for ambiguity later on as to what transpired at the https://www.mhc.tn.gov.in/judis/

C.M.A. No. 2567 of 2017

hearing on 25.02.2003.

J. The impugned Award shows grave perversity even in the matter of

decision on merits. The Arbitrator has in toto failed to apply his mind to

the exhaustive pleadings of the Petitioner on merits including counter claim

as also the exhaustive documentary evidence that was placed on record.

The Arbitrator has proceeded as though there was no pleading or

documentary evidence placed on record by the Petitioner in respect of the

merits of the case. It is submitted that there has been no appreciation

whatsoever of the defence of the Petitioner or the Counter Claim of the

Petitioner or the documents filed in support thereof. The Award on merits

is accordingly perverse in toto and is liable to be set aside.

K. The Arbitrator acted unconscionably in awarding interest of 15%

p.a. after having specifically noted the falling interest rates ignoring that

even interest rate of 15% per annum is unconscionably high in the

prevailing economic scenario.

L. The Arbitrator by his overall conduct totally incapacitated the

Petitioner from putting forth their case on the issue of jurisdiction and on

merits effectively, motivated by his bias in favour of the 1st Respondent. The

award is totally opposed to public policy and is unconsionable to any

judicial mind and deserves to be set aside.

3. Since the learned Principal District Judge, Coimbatore under

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C.M.A. No. 2567 of 2017

the impugned order has not considered the other grounds raised by the

first respondent, this Court is of the considered view that the matter will

have to be remanded back to the very same Court for fresh consideration

on merits and in accordance with law.

4. It is the contention of the Appellant before this Court that there

is no necessity for the learned Principal District Judge, Coimbatore to

decide the application filed under Section 16 questioning the jurisdiction

of the Arbitral Tribunal even before passing of the Arbitral Award.

5. Learned Counsel for the Appellant, in support of his

submissions relies upon the judgments of the High Courts which is

reflected in the Arbitral Award viz., Kailash S. Mantry v Indraprastha

Holding Ltd., petition No.114 of 1997 decided on 1.10.97 by Bombay

High Court and relied on in Scan Organics Ltd. V. Mukesh Babu

Financial Services Ltd., 1998 (3) RAJ 240 (Bom). However, the

learned Principal District Judge under the impugned order has not

considered the aforementioned decisions relied upon by the learned

counsel for the appellant, which is also reflected in the impugned

Arbitral Award.

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C.M.A. No. 2567 of 2017

6. Since the learned Principal District Judge has not considered

the applicability of the aforementioned decisions in the impugned order

and has also not considered the other issues raised by the first

respondent, this Court is of the considered view that the matter will have

to be decided afresh by the learned Principal District Judge. Otherwise

one of the aggrieved party will lose the benefit of filing an effective

appeal arising out of an order where the learned Principal District Judge

has considered all the issues raised by the first respondent. As in the

case on hand admittedly, the learned Principal District Judge has

decided only the issue whether it is mandatory for the Arbitral Tribunal

to decide the Section 16 application before passing of the arbitral award.

Admittedly, the other issues have not been answered by the learned

Principal District Judge under the impugned order passed under Section

34 of the Arbitration and Conciliation Act, even though those issues

were raised by the first respondent in its application challenging the

Arbitral award.

7. For the foregoing reasons, the impugned order dated

07.06.2016 passed by the learned Principal District Judge in A.O.P. https://www.mhc.tn.gov.in/judis/

C.M.A. No. 2567 of 2017

No.420 of 2005 is hereby set aside and the matter is remanded back to

the learned Principal District Judge, Coimbatore for fresh consideration.

The learned Principal District Judge, Coimbatore is directed to pass final

orders on merits and in accordance with law in the Section 34 application

in AOP No.420 of 2005, within a period of three months from the date of

receipt of copy of this Judgment after considering all the grounds raised

by the first respondent and also after affording a fair hearing to both the

parties to the dispute.

8. With the aforesaid directions this Civil Miscellaneous Appeal

is disposed of . No Costs.

21.10.2021

Index: Yes/No Internet: Yes/No Speaking Order/Non-Speaking Order ab/vsi2

To The Principal District Judge, Coimbatore.

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C.M.A. No. 2567 of 2017

ABDUL QUDDHOSE, J.

ab

C.M.A. No. 2567 of 2017

21.10.2021

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