Mandatory nature of notice under Section 21, ineligibility of arbitrator as per Section 12(5) and Seventh Schedule, implications of ineligibility on arbitrator's ability to perform functions

NAVIN CHAWLA, J.

1. None appears for the respondent in spite of pass-over. The reply has not been filed by the respondent. Even the Arbitral Record has not been filed by the Arbitrator.

2. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) challenges the Arbitral Award dated 16.06.2017 passed by the Sole Arbitrator adjudicating the disputes that had arisen between the parties in relation to the Agreement dated 03.03.2012 executed between the petitioner and the respondent. The Arbitrator, by way of the Impugned Award has directed as under:

“In view of the above discussion, this tribunal hereby passes an Award in favour of the Claimant and against the Respondents to the following effect:-

1. That the Respondents shall be jointly and severally liable to pay to the claimant a sum of Rs.3,27,30,621/-(Rupees Three Crore Twenty Seven Lakh Thirty Thousand Six Hundred Twenty One Only) with interest @ 22.99% from 22.03.2016 till realization of the same.

2. That the claimant is entitled to repossess and dispose off the property namely.

Product	No. of Product
Electric motor driven CNG compressor	1
180 RZXB Kohlel gas gensets	1
Gas dispenser	2
Hydraulic booster compressor 22 kw	2

6 in number and appropriate the sale proceeds towards the satisfaction of the present award.

3. The claimant is entitled to recover cost of the present arbitration proceeding which has been quantified at Rs.25,000/- from Respondents.

4. The claimant shall be entitled to recover all costs and expenses that may be incurred in seeking recovery of the amount awarded including cost of repossession of the subject vehicle/equipment and expenses incurred on conducting sale of the same from the Respondents.

The Respondents are directed to comply with the terms of the present award within 30(Thirty) days of the passing of the Award.”

3. The primary submission of the learned counsel for the petitioner in challenge to the Impugned Award is that the petitioner was never served with the notice invoking the arbitration or the arbitration proceedings and the petitioner gained knowledge of the arbitration proceedings only when a copy of the Award was sent to the petitioner by the Arbitrator. He further submits that even a perusal of the Award would show that the petitioner was never served with a notice of the arbitration proceedings and in spite of the postal report that the notice could not be served on the petitioner, the Arbitrator considered it as deemed service, observing as under:

“Keeping in view the fact that notice have been sent to respondent/s on the address inscribed in the subject agreement which have been delivered / or deemed to have been delivered on occasions as aforementioned, communication of change with regard to address is also not on record and overall Section-3 of Arbitration and Conciliation Act, 1996, clearly mandates assumption of services in case of communication having been sent on the last known address, respondent/s was /were proceeded ex-parte on 10.06.2016.”

4. Learned counsel for the petitioner further submits that the Arbitrator in any case is ineligible for being appointed as an Arbitrator as he had acted as an Advocate/Advisor of the respondent and had been appointed as an Arbitrator by the respondent itself for more than three times in the last three years.

5. Notice of this petition was issued to the respondent on 15.01.2018. On 13.03.2018, Mr. K.K.Sharma, Advocate entered appearance on behalf of the respondent and prayed for time to file the reply. In spite of opportunity being granted, the reply has not been filed by the respondent and in fact, on 06.07.2018 and even today, in spite of the petition being passed over twice, none appears for the respondent.

6. In spite of request being sent an