Court clarified that initial appointment of an Arbitrator must derive authority from the Arbitration Act, rejecting jurisdiction under Section 8 and confirming that participation does not waive jurisdictional defects.

JUDGMENT :

1. The 1st respondent herein had filed OS No.37 of 2006 before the II Additional District Judge (Fast Track Court), Vijayawada, for settlement of accounts in relation to a partnership firm, which is the 1st appellant herein. The appellants 2 to 4, who are the partners of this firm, were also arrayed as defendants 2 to 4 in the suit.

2. The appellants herein had filed an application in IA No.4592 of 2006 in OS No.37 of 2006 under Section 8 (1) of the Arbitration and Conciliation Act, 1996 [for short ‘the Act, 1996’], contending that the alleged dispute would have to be referred to arbitration, inasmuch as, the partnership deed, relied upon by the 1st respondent, contained an arbitration clause. This application was dismissed by the Trial Court. Aggrieved by the same, the appellants moved the erstwhile High Court of Andhra Pradesh by way of filing CRP No.4109 of 2007. It appears that the 1st respondent herein expressed no objection for reference of the dispute to arbitration. Recording this concession, a learned Single Judge of the erstwhile High Court of Andhra Pradesh, by judgment, dated 20.03.2009, closed the civil revision petition granting liberty to the parties to approach an Arbitrator for settlement of the disputes, if any.

3. Thereafter, the 1st respondent approached the Trial Court, in OS No.37 of 2006, by filing IA No.808 of 2010, ostensibly under Section 8 (1) of the Act, 1996, to appoint an Arbitrator for settlement of the accounts of the 1st appellant firm. This application came to be allowed by the Trial Court, by an order, dated 30.06.2010. The 2nd respondent, who was appointed under the said order as an Arbitrator, issued notice to both sides and initiated arbitral proceedings. The appellants had initially appeared before the 2nd respondent-Arbitrator, through their Advocate and sought time for filing pleadings. Thereafter, according to the appellants, they had not participated in the proceedings and were surprised to receive an award passed by the 2nd respondent, dated 16.06.2012. Aggrieved by the said award, the appellants moved the Principal District Judge, Machilipatnam, by way of AOP No.4 of 2012, under Section 34 of the Act, 1996.

4. The main contentions of the appellants, before the Principal District Judge, Machilipatnam, were that the 2nd respondent-Arbitrator had not granted reasonable opportunity to the appellants; the application for appointment of an Arbitrator was beyond the period of limitation; award passed by the 2nd respondent was a nullity under Section 18 of the Act, 1996; and the appointment of the 2nd respondent-Arbitrator, by the Trial Court, was illegal and unauthorized, as the High Court had not given any such direction to the Court. All the aforesaid objections were rejected by the Principal District Judge who dismissed AOP No.4 of 2012, by an order dated 01.06.2017. Aggrieved by the said order of dismissal, the appellants have approached this Court by way of the present appeal.

5. Sri P. Prabhakar Rao, learned Counsel appearing for the appellants, would contend that the initial appointment of the 2nd respondent-Arbitrator is itself illegal and without jurisdiction, as such an appointment could not have been made under Section 8 of the Act, 1996. He would submit that the provisions of Section 8 of the Act, 1996, do not empower or authorize the Trial Court to appoint an Arbitrator. H