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2018 Supreme(Del) 3077
IN THE HIGH COURT OF DELHI AT NEW DELHI
PRATHIBA M. SINGH, J.
S.P. RAWAT - Petitioner
Versus
M/S UNIVERSAL FINANCERS - Respondent
O.M.P. 416 of 2005
Decided On : 05-09-2018
For the Petitioner:Mr. Sandeep Sharma and Mr. Aman Dhyrim Advocates.
The main legal point established is that arbitration proceedings must adhere to basic fairness and logic, and any irregularities in the conduct of the proceedings can lead to the setting aside of the arbitration award.
Headnote:
Arbitration Clause - Hire Purchase Agreement - Indian Arbitration Act, 1940 - Section 34 of the Arbitration and Conciliation Act, 1996
Fact of the Case:
The case involves a challenge to an arbitration award passed in a dispute arising from a hire purchase agreement. The petitioner claims to have not received any notice from the arbitrator and challenges the validity of the arbitration clause, the arbitrator's impartiality, and the conduct of the arbitration proceedings.
Finding of the Court:
The court found that the arbitration proceedings were conducted in a manner that lacked fairness and logic. It observed that the arbitration clause was void, the arbitrator was related to the claimant, and the arbitral record was in the possession of the claimant. The court set aside the award based on these findings.
Issues: The main issues raised were the lack of notice to the petitioner, the validity of the arbitration clause, the arbitrator's impartiality, and the conduct of the arbitration proceedings.
Ratio Decidendi: The court held that the arbitration proceedings lacked basic fairness and logic, and the award was set aside based on the void arbitration clause, the arbitrator's relationship with the claimant, and the irregularities in the conduct of the arbitration proceedings.
Final Decision: The court allowed the petition and set aside the arbitration award.
Prathiba M. Singh, J.
1. Repeated attempts have been made to contact counsel for M/s Universal Financers as also counsels for Decree Holders no. 1 and 2 – Mrs. Suman Arora and Mr. Shekhar Arora respectively. Despite sending e-mails and speed post letter, no response has been received. The copy of the e-mail and postal receipt are taken on record. They are proceeded ex-parte and the matter is being heard in their absence.
2. The present OMP has been filed challenging the award dated 23rd May, 2002 passed by the learned Sole Arbitrator - Mr. Harminder Singh. The entire award is in two paragraphs and the same is captured herein below:
“By an agreement dt. 15.5.2001, I was appointed Sole Arbitrator by the parties above named. The dispute having arisen between them, which has been stated in the reference petition and the same has been referred me by the claimant for my adjudication and Award. Accordingly I entered upon the reference and sumoned the parties to appear before me. The claimant did appeared before me throughout the proceedings and none appeared on behalf of the respondent No.1, 2 & 3. Hence all the respondents were proceeded exparte. I have gone through the entire documents/ papers submitted to me by the claimant. After careful consideration of the matter and evidence/ documents produced before me, I award a sum Rs.642885/= in favour of the claimant M/S Universal Financiers and against the respondents No.1,2 & 3 who are jointly and severally liable for payment. The respondents are further directed to pay future interest @ 18% P.A. w.e.f. 23.05.2002 till the date of realisation. The claiment has paid my fee of Rs.1000/= and the same has been included in the Award which is payable by the respondents. Award made, announced and signed today on 23rd day of May,2002 at, E-31, Vijay Nagar,-11009.”
3. The case of M/s Universal Financers 1/10, Roop Nagar, Delhi is that one Mrs. Suman Arora - wife of Mr. Shekhar Arora had entered into Hire Purchase Agreement dated 15th May 2001, in respect of a car. It was claimed that Mr. Shekhar Arora was guarantor no. 1 and Mr. S.P. Rawat, the Petitioner herein, was guarantor no. 2. The said agreement had an Arbitration Clause which reads as under:-
“15. All disputes, differences and or claims arising out of this hire-purchase agreement shall be settled by arbitration in accordance with the provision of the Indian Arbitration Act, 1940 or any statutory amendments thereof and shall be referred to the sole arbitrator Sh. Harminder Singh or in case of his death, refusal, neglect, inability to act as an arbitrator to the sole arbitration of Sh. Harminder Singh, E-31, Vijay Nagar, Delhi. The reference of the arbitrator shall be with the clauses, Terms and Conditions of this Agreement. The award given by the Arbitrator shall be final and binding on all the parties concerned.”
Perusal of the Arbitration Clause itself shows that the same is illogical inasmuch as Mr. Harminder Singh is appointed as the Sole Arbitrator and in case of his death, he is appointed as the Sole Arbitrator again. Such an arbitration clause would be per se void.
4. Under the said agreement, notice was issued by counsel Mr. P.K. Shrivastava on behalf of his client – M/s Universal Financers, invoking the above arbitration clause, on 9th January, 2002, the contents of the notice read as under:
Dated : 09.1.2002
“REP.OF/1/4538/2001
Smt. Suman Arora
801.Dr. Mukherjee Ngr
Delhi-9
Sh. Shekhar Arora
801.Dr. Mukherjee Ngr
Delhi-9
Dr. Mukherjee Nagar,
Sh. Surya Prakash Rawat
389-F, Pocket-II, Mayur
Dear Sir,
Under instructions from and on behalf of my clients M/S Universal Financiers,1/10, Roop Nagar, Delhi, I m to address you as under:
1. That you Smt. Suman Arora party No. 1 as hirer and Sh. Shekhar Arora and Sh. Surya Parkash Rawat party No. 2, 3 a guarantor entered into a hire purchase agreement dt. 15.5.2001 with my clients at Delhi in res
