Final Order 8

Order Details: COPY OF ORDER
Pdf Text: IN THE COURT OF SHRI RAJESH MALIK, DISTRICT
JUDGE -06: CENTRAL DISTRICT,
TIS HAZARI COURTS, DELHI
ARBTN. No. 170/23
IN THE MATTER OF:-
Nagraj R. Sharma
S/o Late Rajagopalan
R/o Se No. 40B/41, Railway Station Road,
Kodambakkam,
Chennai, Tamil Nadu - 600024
.......APPLICANT
VERSUS
M/s SBI Cards and Payment Services Ltd.
Delhi Office at: Unit 401 & 402, 4th Floor,
Aggarwal Millenium Tower,
E-1,2,3 Netaji Subhash Place,
Wazirpur, New Delhi 110034
.…..RESPONDENT
Other Details :
Date of Institution : 09.02.2023
Date of Reserving Judgment : 30.05.2024
Date of Judgment : 30.05.2024
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PETITION UNDER SECTION 34 OF THE ARBITRATION
AND CONCILIATION ACT, 1996
JUDGMENT:-
1. The present petition u/s 34 of the Arbitration and
Conciliation Act for setting aside of the arbitral award
dated 10.10.2022 has been filed by the petitioner. The
impugned arbitral award was passed by the Ld.
Arbitrator on 10.10.2022, whereby the arbitral award
was passed in favour of the claimant (respondent
herein) in the following terms:-
a) The claimant company is awarded a sum of Rs.
513501.66/- as the balance outstanding amount from
the respondent;
b) The claimant company is further awarded interest @
of 18% per annum on Rs. 513501.66/- from 08.07.2022
till the date of realization of the entire aforesaid
amount;
c) The claimant company is also awarded a sum of
Rs.10,000/- towards cost and expenses; &
d) The respondent, in the first instance, do pay to the
Claimant the costs of arbitral proceedings including fee
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of arbitrator quantified at Rs. 5000/- and the claimant is
further directed to deduct the amount from the award
amount, if any, paid by the Respondent.
2. In the present case, the arbitrator was appointed
unilaterally by the respondent.
3. It is relevant here to refer to the judgment of the
Hon'ble Supreme Court in the matter of Perkins
Eastman Architects DPC & Anr, 2019 SCC Online SC
1517. The para No. 21 of the said judgment is
reproduced here as under:-
“21. But, in our view that has to be the logical
deduction from TRF Limited. The 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
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 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
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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.”
4. Further, the judgment of the Hon'ble Supreme Court of
India in Bharat Broadband vs United Telecoms Ltd.
AIR 2019 SC 2434 is also relevant to be considered.
The para no. 14 & 15 of the same are reproduced here
as under: -
“14. From a conspectus of the above decisions, it is
clear that Section 12 (1), as substituted by the
Arbitration and Conciliation (Amendment) Act, 2015,
makes its clear that when a person is approached in
connection with his possible appointment as an
arbitrator, it is his duty to disclose in writing any
circumstances which are likely to give rise to justifiable
doubts as to his independence or impartiality. The
disclosure is to be made in the form specified in the
Sixth Schedule, and the grounds stated in the Fifth
Schedule are to serve as a guide in determining whether
circumstances exist which give rise to justifiable doubts
as to the independence or impartiality of an arbitrator.
Once this is done, the appointment of the arbitrator may
be challenged on the ground that justifiable doubts have
arisen under sub-section (3) of Section 12 subject to the
caveat entered by sub-section (4) of Section 12. The
challenge procedure is then set out in Section 13,
together with the time limit laid down in Section 13 (2).
What is important to note is that the arbitral
tribunal must first decide on the said challenge, and if it
is not successful, the tribunal shall continue the
proceedings and make an award. It is only post award
that the party challenging the appointment of an
arbitrator may make an application for setting aside
such an award in accordance with Section 34 of the
Act.”
“15. Section 12 (5), on the other hand, is a new
provision which relates to the de jure inability of an
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arbitrator to act as such. Under this provision, any prior
agreement to the contrary is wiped out by the non-
obstante clause in Section 12 (5) the moment any
person whose relationship with the parties or the
counsel or the subject matter of the dispute falls under
the Seventh Schedule. The sub-section then declares
that such person shall be “ineligible” to be appointed as
arbitrator. The only way in which this ineligibility can
be removed is by the proviso, which again is a special
provision which states that parties may, subsequent to
disputes having arisen between them, waive the
applicability of Section 12 (5) by an express agreement
in writing. What is clear, therefore, is that where, under
any agreement between the parties, a person falls
within any of the categorises set out in the Seventh
Schedule, he is, as a matter of law, ineligible to be
appointed as an arbitrator. The only way in which this
ineligibility can be removed, again, in law, is that
parties may after disputes have arisen between them,
waive the applicability of this sub-section by an
“express agreement in writing”. Obviously, the
“express agreement in writing” has reference to a
person who is interdicted by the Seventh Schedule, but
who is stated by parties (after the disputes have arisen
between them) to be a person in whom they have faith
notwithstanding the fact that such person is interdicted
by the Seventh Schedule”.
5. Reverting back to the facts of the present case, the
present arbitration proceedings were initiated at the
instance of the respondent as the arbitration agreement
had empowered the respondent to appoint the sole
arbitrator. It would thus be seen that the arbitrator was
appointed without the consent of the petitioner. No
names were suggested to the petitioner to choose one of
the persons as the arbitrator. The respondent, by its
own, appointed the arbitrator and informed the same to
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the petitioner. Thus, in the light of the judgment of the
Hon'ble Supreme Court in the matter of Perkins
Eastman Architects DPC & Anr (
supra), the arbitral
award dated 10.10.2022 is not sustainable in law due to
patent illegality and is accordingly set aside. Since, the
award was per-se illegal and non-est in law, the period
of limitation to file the objections under Section 34
Arbitration and Conciliation Act is not applicable to
such award inasmuch as this court does not decide this
award on merits. Even without these objections, the
executing court cannot execute this award in view of
the judgment of the Hon’ble Supreme Court in the
matter of Kotak Mahindra Bank Ltd. v. Narendra
Kumar Prajapat, 2023.
6. File be consigned to Record Room as per rules after
compliance of necessary legal formalities.
Announced in open Court
Dated: 30.05.2024 (RAJESH MALIK)
District Judge-06 (Central)
Tis Hazari Courts Delhi
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