Madras High Court
Mr.P.Sivagurunathan vs M/S Dugar Finance & Investments ... on 28 March, 2023
Arb.O.P.(Com.Div.) No.592 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 28.03.2023
CORAM
THE HON'BLE Mr. JUSTICE KRISHNAN RAMASAMY
Arb.O.P (Com.Div.) No.592 of 2022
and A.No.4845 of 2022
Mr.P.Sivagurunathan
...Petitioner
versus
1.M/s Dugar Finance & Investments Limited,
Rep. By its Authorized Signatory, Mr.Rajasekar,
Dugar Towers, 7th Floor,
No.34/123, Marshalls Road, Egmore,
Chennai 600 018.
2.E.Generous Crispona Jenny,
No.3216,C Block,
6th Cross Street,KKR Town,
Madhavaram, Chennai-600 060.
... Respondents
Arbitration Original Petition filed under Section 34 (2) (iii) (V) (b)
(ii) of the Arbitration and Conciliation Act, 1996, to set aside the award
dated 25.03.2022 passed by the sole Arbitrator in his proceedings in
1/28
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Arbitration Claim Petition No. LDG 305 of 2021.
For petitioner : M/s.A.S.Neela Narayani
For R1 : Ms.Anbarasi Rajendran
for AAV Partners
ORDER
This Arbitration Original Petition has been filed by the petitioner
seeking to set aside the award dated 25.03.2022 passed by the learned sole
Arbitrator.
2.The case of the petitioner is that the petitioner has entered into
Hypothecation-cum-loan Agreement with the respondent and borrowed a
sum of Rs.4,50,000/- by virtue of Loan Agreement No. HP 9261 dated
26.02.2015 for the purchase of vehicle namely SCORPIO, bearing
registration No. TN 73W 1333. The petitioner has admitted the fact about
the disbursement of the said loan. As per the terms and conditions of the
aforesaid agreement, the petitioner has to repay the total sum in the form of
36 equated monthly installments of Rs.18,500/-p.m. The petitioner further
submitted that after the purchase of the said vehicle, the 1st respondent got
the original RC book and gave promise to return it, but failed to issue the
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original RC book even after several repeated requests. The petitioner was
regularly paying the monthly installments without default . In this case, the
petitioner had stopped paying the EMIs from 26th EMI. When the petitioner
approached the 1st respondent financial institution to close the loan, a person
who was handling the above said loan had started demanding exorbitant
repayment of amount. Subsequently, the petitioner offered to make
Rs.1,50,000/- as One Time Settlement, hereinafter referred as OTS , but was
refused by the 1st respondent and they demanded a sum of Rs.5,50,000/- for
the OTS. Thereafter, the 1st respondent's authorized representative gave an
offer to pay Rs. 1,95,000/- as OTS to settle the loan. So, by believing the
words of the authorized representative the petitioner paid a sum of Rs.
1,95,000/- through IMPS transfer (Ref No. 101312523117) from the
petitioner Indian Overseas Bank, Valmiki Branch vide Account No.
147201000004398 to the 1st respondent bank account. Subsequent to the
OTS, the petitioner had sent a legal notice dated 15.02.2021 requesting to
release the original RC book and to issue NOC for the cancellation of the
hypothecation endorsement. But even after the receipt of the OTS i.e., a sum
of Rs.1,95,000/- and the legal notice the 1st respondent failed to return the
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original RC book. Hence the petitioner lodged a police complaint. Since no
action was taken by the inspector of police the petitioner lodged a complaint
to the Commissioner of Police, Chennai dated 27.05.2021. After repeated
requests and follow ups, inspector of Tiruvanmayur police station have
issued the CSR bearing No.421 of 2021 dated 30.05.2021. After issuance of
FIR, the 1st respondent have returned the original RC book but not the NOC.
Then the 1st respondent even after the receipt of the OTS also they
demanded to clear the outstanding through a notice dated 09.06.2021. The
1st respondent, on the receipt of OTS without intimation invoked the
arbitration clause in the arbitration agreement and unilaterally appointed a
sole Arbitrator and the Learned Arbitrator had sent a reference notice dated
27.07.2021. For which the petitioner has filed a Vakalath before the
Learned Arbitrator and periodically case was adjourned for filing objection.
But no other communications were received after the reference letter. The
Learned Arbitrator without hearing has passed an ex-parte award on
25.03.2022. Despite non-appearance of the petitioner and without giving
sufficient opportunity to the petitioner to contest and counter the matter in
the arbitration, the Learned Arbitrator passed an ex-parte award dated
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25.03.2022 against the petitioner,which is impugned and liable to be set
aside.
3.The main grounds of challenge made by the petitioner is that the 1st
respondent appointed the learned Arbitrator unilaterally and the ex parte
award also came to be passed on 25.03.2022 without giving sufficient
opportunity to the petitioner, such an award is in conflict with the most
basic notions of morality or justice. The learned Arbitrator has not ordered
fresh notice to the petitioner due to non-appearance of his counsel and also
the respondent has not served any claim statement to counter it. Also the
petitioner never received any notice from the respondent with regard to the
appointment of the Arbitrator unilaterally appointed and claimed the sum of
Rs.4,96,750/- with interest 18% though One Time Settlement has been
made, which is unlawful. Under these circumstances, without further any
scrutiny, the learned Arbitrator passed an ex parte award dated 25.03.2022,
which is liable to be set aside.
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4. The learned counsel for the petitioner would submit that as per the
law laid down by the Hon'ble Apex Court in the case of “Perkins Eastman
Architects DPC Vs. HSCC (India) Ltd.” reported in 2019 SCC OnLine SC
1517, in the event of any unilateral appointment of Arbitrator without the
consent of the other party, the same would be non-est in law. Therefore, he
contended that the appointment of Arbitrator in the present case is non-est
in law. In terms of the proviso of Section 12(5) of the Arbitration and
Conciliation Act (hereinafter referred as 'the Act'), in the event of unilateral
appointment, the appointed Arbitrator can proceed with, when the other
party waives the applicability of this Section by way of an express
agreement in writing. In the present case, no such express agreement has
been made between the parties. Therefore, he would contend that in the
absence of any such express agreement, the unilateral appointment of the
Arbitrator is null and void and consequently any award passed by the said
Arbitrator, is liable to be set aside.
5. The learned counsel for the petitioner would also contend that
since the unilateral appointment is contrary to proviso to sub-section (5) of
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Section 12 of the Act, the same would fall under Explanation (2) of Section
34(2)(b) of the Act, and it is in contravention with the fundamental policy of
Indian law as held by the Hon'ble Apex Court. Further, he would contend
that the award is also liable to be set aside, since the learned Arbitrator has
not given any opportunity to the petitioner to file a counter and contest the
matter. Hence, he prayed to set aside the award.
6. I have given due consideration to the submissions made by the
learned counsel appearing for the petitioner, the submissions made by the
learned counsel appearing for the respondents and perused the entire
materials placed on record.
7. Upon hearing the learned counsel on petitioner and perusing the
documents, it appears that in the present case in the terms of the provision
of Loan-Agreement, the respondent has an option for appointment of sole
Arbitrator at their discretion. In terms of the said agreement, the authorized
representative of the respondent had nominated the sole Arbitrator.
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8. In terms of Schedule VII of the Act, if the Arbitrator is an
employee, consultant, advisor or has any other past or present business
relationship with a party or if the Arbitrator is a Manager, Director or part of
the management, or has a similar controlling influence, in an affiliate of one
of the parties if the affiliate is directly involved in the matters in dispute in
the arbitration, shall be ineligible to be appointed as Arbitrator.
9. When a person is ineligible to be appointed as Arbitrator, in the
same way, he is also ineligible to nominate any Arbitrator also. This is what
the Hon'ble Apex Court has held in the Perkins' case (cited supra).
10. Any person can be appointed as the Arbitrator, subject to that he
shall not be either the employee, consultant, advisor or have any other past
or present business relationship or as Manager, Director or part of the
management of the respondent. If any of the above mentioned person is
appointed as Arbitrator, he is ineligible to act as an arbitrator in terms of
Section 12(5) of the Act. In the same way, the above persons are also not
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eligible to nominate any person as Arbitrator to act on behalf of them or the
concern.
11. In the present case, the respondent appointed the arbitrator
unilaterally without the consent of the petitioner. Section 12(5) of the Act
states as follows:
“12. Ground for challenge.-
(1).......................
(2).......................
(3).......................
(4).......................
(5) Notwithstanding any prior agreement to the contrary,
any person whose relationship, with the parties or counsel or the
subject-matter of the dispute, falls under any of the categories
specified in the Seventh Schedule shall be ineligible to be
appointed as an arbitrator:
Provided that parties may, subsequent to disputes having
arisen between them, waive the applicability of this sub-section
by an express agreement in writing.”
A mere perusal of the above makes it clear that the persons mentioned in
Schedule VII of the Act would be ineligible to be appointed as Arbitrator.
Further, the persons mentioned in Schedule VII are also ineligible to
nominate any person as arbitrator. Further there is no express agreement
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between the parties for providing consent in writing for the unilateral
appointment of the arbitrator. Hence, the unilateral appointment of the
arbitrator made by the respondent is in violation of provisions of Section
12(5) of the Act.
12. At this juncture, it would be appropriate to extract the relevant
portion of the judgment rendered by the Hon'ble Supreme Court in the
Perkins case. at paragraph Nos.16, 17, 18 and 21, which read as follows:
“16. However, the point that has been urged, relying
upon the decision of this Court in Walter Bau AG and TRF
Limited, requires consideration. In the present case Clause 24
empowers the Chairman and Managing Director of the
respondent to make the appointment of a sole arbitrator and
said Clause also stipulates that no person other than a person
appointed by such Chairman and Managing Director of the
respondent would act as an arbitrator. In TRF Limited, a
Bench of three Judges of this Court, was called upon to
consider whether the appointment of an arbitrator made by the
Managing Director of the respondent therein was a valid one
and whether at that stage an application moved under Section
11(6) of the Act could be entertained by the Court. The
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relevant Clause, namely, Clause 33 which provided for
resolution of disputes in that case was under:
“33. Resolution of dispute/arbitration
(a) In case any disagreement or dispute
arises between the buyer and the seller under or
in connection with the PO, both shall make
every effort to resolve it amicably by direct
informal negotiation.
(b) If, even after 30 days from the
commencement of such informal negotiation,
seller and the buyer have not been able to
resolve the dispute amicably, either party may
require that the dispute be referred for
resolution to the formal mechanism of
arbitration.
(c) All disputes which cannot be settled
by mutual negotiation shall be referred to and
determined by arbitration as per the Arbitration
and Conciliation Act, 1996 as amended.
(d) Unless otherwise provided, any
dispute or difference between the parties in
connection with this agreement shall be referred
to sole arbitration of the Managing Director of
buyer or his nominee. Venue of arbitration shall
be Delhi, and the arbitration shall be conducted
in English language.
(e) The award of the Tribunal shall be
final and binding on both, buyer and seller.”
17. In TRF Limited, the Agreement was entered into
before the provisions of the Amending Act (Act No.3 of 2016)
came into force. It was submitted by the appellant that by
virtue of the provisions of the Amending Act and insertion of
the Fifth and Seventh Schedules in the Act, the Managing
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Director of the respondent would be a person having direct
interest in the dispute and as such could not act as an
arbitrator. The extension of the submission was that a person
who himself was disqualified and disentitled could also not
nominate any other person to act Arbitration Application
No.32 of 2019 Perkins Eastman Architects DPC & Anr. v.
HSCC (India) Ltd. as an arbitrator. The submission countered
by the respondent therein was as under: -
“7.1. The submission to the effect that
since the Managing Director of the respondent
has become ineligible to act as an arbitrator
subsequent to the amendment in the Act, he
could also not have nominated any other
person as arbitrator is absolutely
unsustainable, for the Fifth and the Seventh
Schedules fundamentally guide in determining
whether circumstances exist which give rise to
justifiable doubts as to the independence and
impartiality of the arbitrator. To elaborate, if
any person whose relationship with the parties
or the counsel or the subject-matter of dispute
falls under any of the categories specified in
the Seventh Schedule, he is ineligible to be
appointed as an arbitrator but not otherwise.
18. The issue was discussed and decided by this Court
as under:-
50. First, we shall deal with Clause (d). There is no
quarrel that by virtue of Section 12(5) of the Act, if any person
who falls under any of the categories specified in the Seventh
Schedule shall be ineligible to be appointed as the arbitrator.
There is no doubt and cannot be, for the language employed in
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the Seventh Schedule, the Managing Director of the
Corporation has become ineligible by operation of law. It is
the stand of the learned Senior Counsel for the appellant that
once the Managing Director becomes ineligible, he also
becomes ineligible to nominate. Refuting the said stand, it is
canvassed by the learned Senior Counsel for the respondent
that the ineligibility cannot extend to a nominee if he is not
from the Corporation and more so when there is apposite and
requisite disclosure. We think it appropriate to make it clear
that in the case at hand we are neither concerned with the
disclosure nor objectivity nor impartiality nor any such other
circumstance. We are singularly concerned with the issue,
whether the Managing Director, after becoming ineligible by
operation of law, is he still eligible to nominate an arbitrator.
At the cost of repetition, we may state that when there are two
parties, one may nominate an arbitrator and the other may
appoint another. That is altogether a different situation. If
there is a clause requiring the parties to nominate their
respective arbitrator, their authority to nominate cannot be
questioned. What really in that circumstance can be called in
question is the procedural compliance and the eligibility of
their arbitrator depending upon the norms provided under the
Act and the Schedules appended thereto. But, here is a case
where the Managing Director is the “named sole arbitrator”
and he has also been conferred with the power to nominate one
who can be the arbitrator in his place. Thus, there is subtle
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distinction. In this regard, our attention has been drawn to a
two-Judge Bench decision in State of Orissa v. Commr. of
Land Records & Settlement. In the said case, the question
arose, can the Board of Revenue revise the order passed by its
delegate. Dwelling upon the said proposition, the Court held:
(SCC p. 173, para 25)
“25. We have to note that the Commissioner
when he exercises power of the Board delegated to
him under Section 33 of the Settlement Act, 1958,
the order passed by him is to be treated as an
order of the Board of Revenue and not as that of
the Commissioner in his capacity as
Commissioner. This position is clear from two
rulings of this Court to which we shall presently
refer. The first of the said rulings is the one
decided by the Constitution Bench of this Court in
Roop Chand v. State of Punjab. In that case, it was
held by the majority that where the State
Government had, under Section 41(1) of the East
Punjab Holdings (Consolidation and Prevention of
Fragmentation) Act, 1948, delegated its appellate
powers vested in it under Section 21(4) to an
“officer”, an order passed by such an officer was
an order passed by the State Government itself and
“not an order passed by any officer under this
Act” within Section 42 and was not revisable by
the State Government. It was pointed out that for
the purpose of exercise of powers of revision by the
State under Section 42 of that Act, the order sought
to be revised must be an order passed by an officer
in his own right and not as a delegate of the State.
The State Government was, therefore, not entitled
under Section 42 to call for the records of the case
which was disposed of by an officer acting as its
delegate.” (emphasis in original)
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51. Be it noted in the said case, reference was made to
Behari Kunj Sahkari Awas Samiti v. State of U.P., which
followed the decision in Roop Chand v. State of Punjab. It is
seemly to note here that the said principle has been followed in
Indore Vikas Pradhikaran.
52. Mr Sundaram has strongly relied on Pratapchand
Nopaji. In the said case, the three-Judge Bench applied the
maxim “qui facit per alium facit per se”. We may profitably
reproduce the passage: (SCC p. 214, para 9)
“9. … The principle which would apply, if the objects
are struck by Section 23 of the Contract Act, is
embodied in the maxim: “qui facit per alium facit per
se” (what one does through another is done by
oneself). To put it in another form, that which cannot
be done directly may not be done indirectly by
engaging another outside the prohibited area to do
the illegal act within the prohibited area. It is
immaterial whether, for the doing of such an illegal
act, the agent employed is given the wider powers or
authority of the “pucca adatia”, or, as the High
Court had held, he is clothed with the powers of an
ordinary commission agent only.”
53. The aforesaid authorities have been commended to
us to establish the proposition that if the nomination of an
arbitrator by an ineligible arbitrator is allowed, it would
tantamount to carrying on the proceeding of arbitration by
himself. According to the learned counsel for the appellant,
ineligibility strikes at the root of his power to arbitrate or get it
arbitrated upon by a nominee.
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54. In such a context, the fulcrum of the controversy
would be, can an ineligible arbitrator, like the Managing
Director, nominate an arbitrator, who may be otherwise
eligible and a respectable person. As stated earlier, we are
neither concerned with the objectivity nor the individual
respectability. We are only concerned with the authority or the
power of the Managing Director. By our analysis, we are
obligated to arrive at the conclusion that once the arbitrator
has become ineligible by operation of law, he cannot nominate
another as an arbitrator. The arbitrator becomes ineligible as
per prescription contained in Section 12(5) of the Act. It is
inconceivable in law that person who is statutorily ineligible
can nominate a person. Needless to say, once the
infrastructure collapses, the superstructure is bound to
collapse. One cannot have a building without the plinth. Or to
put it differently, once the identity of the Managing Director as
the sole arbitrator is lost, the power to nominate someone else
as an arbitrator is obliterated. Therefore, the view expressed
by the High Court is not sustainable and we say so.”
19..........................
20. We thus have two categories of cases. The first,
similar to the one dealt with in TRF Ltd4. where the Managing
Director himself is named as an arbitrator with an additional
power to appoint any other person as an arbitrator. In the
second category, the Managing Director is not to act as an
arbitrator himself but is empowered or authorised to appoint
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any other person of his choice or discretion as an arbitrator.
If, in the first category of cases, the Managing Director was
found incompetent, it was because of the interest that he would
be said to be having in the outcome or result of the dispute.
The element of invalidity would thus be directly relatable to
and arise from the interest that he would be having in such
outcome or decision. If that be the test, similar invalidity would
always arise and spring even in the second category of cases.
If the interest that he has in the outcome of the dispute, is taken
to be the basis for the possibility of bias, it will always be
present irrespective of whether the matter stands under the
first or second category of cases. We are conscious that if such
deduction is drawn from the decision of this Court in TRF Ltd.
all cases having clauses similar to that with which we are
presently concerned, a party to the agreement would be
disentitled to make any appointment of an arbitrator on its own
and it would always be available to argue that a party or an
official or an authority having interest in the dispute would be
disentitled to make appointment of an arbitrator.
21. But, in our view that has to be the logical deduction
from TRF Limited. Paragraph 50 of the decision shows that
this Court was concerned with the issue, “whether the
Managing Director, after becoming ineligible by operation of
law, is he still eligible to nominate an Arbitrator” The
ineligibility referred to therein, was as a result of operation of
law, in that a person having an interest in the dispute or in the
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outcome or decision thereof, must not only be ineligible to act
as an arbitrator but must also not be eligible to appoint anyone
else as an arbitrator and that such person cannot and should
not have any role in charting out any course to the dispute
resolution by having the power to appoint an arbitrator. The
next sentences in the paragraph, further show that cases where
both the parties could nominate respective arbitrators of their
choice were found to be completely a different situation. The
reason is clear that whatever advantage a party may derive by
nominating an arbitrator of its choice would get counter
balanced by equal power with the other party. But, in a case
where only one party has a right to appoint a sole arbitrator,
its choice will always have an element of exclusivity in
determining or charting the Arbitration Application No.32 of
2019 Perkins Eastman Architects DPC & Anr. v. HSCC (India)
Ltd. course for dispute resolution. Naturally, the person who
has an interest in the outcome or decision of the dispute must
not have the power to appoint a sole arbitrator. That has to be
taken as the essence of the amendments brought in by the
Arbitration and Conciliation (Amendment) Act, 2015 (Act 3 of
2016) and recognised by the decision of this Court in TRF
Limited.”
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Therefore, the above judgment of the Hon'ble Apex Court makes it clear
that the appointment of sole arbitrator unilaterally by one of the parties
would be ineligible by operation of law.
13. Now the question that arises for consideration is whether the
petitioner participated in the arbitral proceedings or after having the
knowledge of the appointment of the sole Arbitrator, failed to challenge the
said appointment in terms of Section 13 of the Act, and whether the same
would deprive the rights of the petitioner to challenge the said appointment
of the Arbitrator in terms of the provisions of Section 34 of the Act for the
violation of provisions of Section 12(5) of the Act?
14. In my considered view, the answer is no. The petitioner is
certainly entitled to challenge the appointment of the Arbitrator under
Section 34 of the Act, if there is any violation of the provisions of the Act.
Even though, the petitioner has not challenged the unilateral appointment of
the sole Arbitrator under Section 13 of the Act, it would not certainly take
away the rights of the petitioner to challenge the same under Section 34 of
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the Act. Even if there is any participation by the petitioner in the arbitral
proceedings, they would still have the right to challenge the violation of the
provisions of Section 12(5) of the Act under Section 34 of the Act.
15. Further, proviso to Section 12(5) envisages that the parties may
subsequent to disputes having arisen between them, waive the applicability
of this sub-section by an express agreement in writing. The definition of
'express and implied authority' is explicitly defined under Section 187 of
the Contract Act, which reads as under:
“187. Definitions of express and implied authority. An
authority is said to be express when it is given by words spoken
or written. An authority is said to be implied when it is to be
inferred from the circumstances of the case; and things spoken
or written, or the ordinary course of dealing, may be accounted
circumstances of the case.
16. A perusal of the above makes it clear that an authority is to be
implied when it is inferred from the circumstances of the case and is said to
be express when it is given by words spoken or written. In the present case,
from the circumstances even if it is inferred that the authority is implied by
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the act of the petitioner having not raised any objection towards the
appointment of the Arbitrator made by the respondent unilaterally, the same
cannot be taken as implied authority inasmuch as the proviso to Section
12(5) of the Act insists that the 'express agreement between the parties for
providing consent for unilateral appointment, must be in writing. Therefore,
if the consent is not in writing, no other inference can be drawn contrary to
what is provided under the proviso to Section 12(5) of the Act.
17. The endeavour of this Court is always to rectify the errors
apparent on the decisions/orders/judgments of the
authorities/Tribunals/lower Courts etc., at any stage of the matter in order to
avoid miscarriage of justice. Once this Court finds irregularity or illegality
in the orders/judgments of the lower authorities, while exercising inherent
jurisdiction, this Court can very well set right the same. In the present case,
the award itself was challenged under Section 34 of the Act primarily on the
ground that the appointment of Arbitrator is unilateral and cannot be
sustained. Therefore, now the question raises as to whether such a challenge
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to the appointment of the Arbitrator is sustainable in the proceedings filed
under Section 34 of the Act for setting aside the award?
18. The answer is 'yes'. When an authority exercises jurisdiction it
does not possess, its decision amounts to a nullity in law. Thus, a decision
by an authority having no jurisdiction is non est in law and its invalidity can
be set up whenever it is sought to be acted upon. In the present case, by
virtue of Section 12(5) of the Act, the learned Arbitrator, who was
appointed unilaterally, is ineligible to be an Arbitrator and the award passed
by him, deserves to be set aside, more particularly, as already observed,
there is no express waiver in writing as contemplated under the proviso to
Section 12(5). Therefore, this Court is of the considered view that
irrespective of the stage whether it is at the initial stage of the arbitral
proceedings or at stage of the execution of the award, the appointment of
the Arbitrator can be questioned, not particularly under Section 13 but also
under Section 34 of the Act and the same can be rectified by this Court.
19. In this regard, it is worthwhile to refer a judgment of the Hon'ble
Supreme Court reported in "Hindustan Zinc Ltd. v. Ajmer Vidyut Vitran
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Nigam Ltd., (2019) 17 SCC 82, wherein, it has been held under as under in
para 16 and 17:
“16. Shri Vaidyanathan, learned Senior Counsel for the
appellant, has argued that the challenge to the award was only
on merits before the learned Commercial Court, and no
challenge was raised stating that the arbitrator's appointment
itself would be without jurisdiction, both the parties having
agreed to the order dated 12-2-2007 to refer the matter to
arbitration. However, the said issue was argued and taken up
before the High Court in first appeal under Section 37 of the
Arbitration Act.
17. We are of the view that it is settled law that if there is
an inherent lack of jurisdiction, the plea can be taken up at any
stage and also in collateral proceedings. This was held by this
Court in "Kiran Singh v. Chaman Paswan [Kiran Singh
v.Chaman Paswan, (1955) 1 SCR 117 : AIR 1954 SC 340] as
follows : (SCR p. 121 : AIR p. 342, para 6)
“6. … It is a fundamental principle well-
established that a decree passed by a court without
jurisdiction is a nullity, and that its invalidity could be
set up whenever and wherever it is sought to be
enforced or relied upon, even at the stage of execution
and even in collateral proceedings. A defect of
jurisdiction, whether it is pecuniary or territorial, or
whether it is in respect of the subject-matter of the
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Arb.O.P.(Com.Div.) No.592 of 2022
action, strikes at the very authority of the Court to pass
any decree, and such a defect cannot be cured even by
consent of parties. If the question now under
consideration fell to be determined only on the
application of general principles governing the matter,
there can be no doubt that the District Court of
Monghyr was coram non judice, and that its judgment
and decree would be nullities.”
20. In "Sanjay Pukraj Bafna v. Volkswagon Finance (P) Ltd.
Reported in 2020 SCC OnLine Bombay 6362, it was held that an improper
and impermissible appointment imperils any arbitral award, for it goes to
the root of the matter.
21. Therefore, arbitration proceedings are liable be vitiated from the
stage of the appointment of the Arbitrator when the very appointment of the
Arbitrator unilaterally, is improper and impermissible by virtue of Section
12(5) of the Act.
22. Further, any violation of provisions of the Act is against the
public policy of India. The Hon'ble Supreme Court has also held at
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Arb.O.P.(Com.Div.) No.592 of 2022
paragraph No.27 in the case of “Associate Builders vs. Delhi Development
Authorities” reported in 2015 3 SCC 49, which reads as follows:
“Fundamental Policy of Indian Law
27. Coming to each of the heads contained in the Saw
Pipes judgement, we will first deal with the head "fundamental
policy of Indian Law". It has already been seen from the
Renusagar judgement that violation of the Foreign Exchange Act
and disregarding orders of superior courts in India would be
regarded as being contrary to the fundamental policy of Indian
law. To this it could be added that the binding effect of the
judgement of a superior court being disregarded would be equally
violative of the fundamental policy of Indian law.”
A perusal of the above judgment makes it clear that if any award passed in
violation of the provisions of the Act, the same would be against the public
policy of India.
23. In the present case, the petitioner and the authorized
representative of the respondent agreed for one time settlement of Rs.
1,95,000/-. Though on receipt of the payment, the 1st respondent failed to
return the original RC book and NOC. Only when the petitioner complained
in police station and received CSR the respondent gave the original RC
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Arb.O.P.(Com.Div.) No.592 of 2022
book back but not the NOC. Thereafter, the respondent sent a demand
notice in order to settle the remaining amount. Subsequently, without any
intimation the respondent proceeded with the arbitration and appointed the
Sole Arbitrator unilaterally and received a notice from the Learned
Arbitrator, where the petitioner filed a vakalat and was ready to contest but
never any received further notices of hearing. So the petitioner had thought
since the OTS has been settled the Learned Arbitrator could have withdrawn
the proceedings but to the contrary he had passed an ex-parte award. Due to
non-appearance of the petitioner the learned Arbitrator ought to have issued
a fresh notice to the petitioner and afforded an opportunity to contest the
matter. But the learned Arbitrator has proceeded with the matter and passed
the award ex parte. Therefore, the petitioner did not have any opportunity
to file the counter and contest the matter. Even if the petitioner has filed the
counter and considered, the present award is liable to be set aside for the
violation of the provision under Section 12(5) of the Act.
24.Hence the award passed by the learned Arbitrator is liable to be set
aside on the ground of unilateral appointment of the arbitrator. Further in
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Arb.O.P.(Com.Div.) No.592 of 2022
the present case, it appears that the award has been passed without giving
any opportunity to the petitioner and therefore, the award is suffered with
the violation of principles of natural justice also.
25. For all the reasons assigned above, this Court is of the view that
the present award is not sustainable under law and the same is liable to be
set aside as it is against the public policy of India and violates the principles
of natural justice.
26. In the result, this Arbitration Original Petition is allowed and the
Award dated 25.03.2022 passed by the learned Arbitrator is set aside. No
costs. Consequently, the connected application is closed.
28.03.2023
Speaking/Non-speaking order
Index : Yes / No
Neutral Citation : Yes / No
suk
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Arb.O.P.(Com.Div.) No.592 of 2022
KRISHNAN RAMASAMY.J.,
suk
Arb.O.P (Com.Div.) No.592 of 2022
and A.No.4845 of 2022
28.03.2023
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