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IN THE HIGH COURT OF DELHI AT NEW DELHI
Chandra Dhari Singh, J.
M/s Mittal Pigments Pvt Ltd – Appellant
Versus
M/s Gail Gas Limited – Respondent
O.M.P. (COMM) 509 of 2020, I.A. 9551 of 2020 & I.A. 18042 of 2022
Decided On : 01-02-2023
Arbitration Act - Challenge to Ex-Parte Award - Section 34
Fact of the Case:
The petitioner, a Private Limited Company, filed a petition under Section 34 of the Arbitration Act challenging an ex-parte Arbitral Award dated 21st October 2019. The petitioner contended that the Award was erroneous and bad in law as it was passed without proper notice and failed to observe the provisions laid down under Section 25 (b) and 25 (c) of the Arbitration Act. The petitioner also argued that the Award was passed without proper appreciation of the terms of the Agreement executed between the parties and erroneously awarded interest at a higher rate without considering the prevailing prime lending rate. The respondent opposed the petition, contending that the Award was not erroneous and that the petitioner had not raised objections in its pleadings. The respondent also argued that the Court did not have the power to enter into detailed evidence at this stage under Section 34 of the Arbitration Act.
Finding of the Court:
The Court found merit in the petition and allowed the same, setting aside the ex-parte Arbitral Award dated 21st October 2019. The Court held that the Award was passed without proper communication to the petitioner before proceeding ex-parte and without affording a reasonable opportunity to present its case. The Court also noted that the learned Arbitrator did not make adequate efforts to be satisfied that sufficient cause was shown for non-appearance before proceeding ex-parte against the petitioner. Furthermore, the Court found that the learned Arbitrator did not furnish reasons for his findings in favor of the respondent.
Issues: The controversy between the parties was narrowed down to the following issues: Issue I - Whether sufficient notice was served upon the petitioner regarding arbitration proceedings as well as ex-parte proceedings. Issue II - Whether the Award dated 21st October 2019 was a reasoned Award not inviting the interference from the Court.
Ratio Decidendi: The Court held that the Arbitrator should have provided a preemptory notice to the petitioner before proceeding ex-parte and that the Suit pertaining to the same issues between the parties being pending was sufficient cause for the learned Arbitrator not to proceed ex-parte against the petitioner after only one intimation and opportunity to appear for arbitration proceedings. The Court also found that the Award was not reasoned and did not meet the requirements under Section 31(3) of the Arbitration Act.
Final Decision: The Court allowed the petition and set aside the ex-parte Arbitral Award dated 21st October 2019.
ORDER
Chandra Dhari Singh, J. (Oral)--The instant petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter "Arbitration Act") has been filed on behalf of the petitioner against the ex-parte Arbitral Award dated 21st October 2019 (hereinafter "the Award") passed by the learned Sole Arbitrator. The following reliefs are prayed for on behalf of the petitioner:
"a) Set aside the ex-parte award dated 21.10.2019 received on 05.11.2019 passed by Hon'ble Mr. Justice K. Ramamoorthy (Retd.) in arbitration proceedings held between M/s Gail Gas Ltd. and M/s Mittal Pigments Pvt. Ltd.
b) And/or pass such other order/orders as this Hon'ble Court may deem it to be fit and proper in the facts and circumstances of the case."
FACTUAL MATRIX
2. The facts relevant for adjudication of the instant petition are as under:
a. The petitioner is a Private Limited Company engaged in manufacturing of metals and chemicals and the respondent is a Central Public Sector Undertaking having diversified interests across the Natural Gas value chain of trading, transmission, LPG production & transmission, LNG re-gasification, petrochemicals, city gas, etc.
b. The petitioner obtained supply of Natural Gas for its factory premises located at A-203, Road No.5, Indraprastha Industrial Area, Kota, Rajasthan-324005 and accordingly, on 9th March 2010 a Gas Sale Agreement (hereinafter "the Agreement") was executed between the parties. In terms of the Agreement, the supply was to commence from 1st August 2010 and was to continue till 2025.
c. As per the agreement, Minimum Guaranteed Quantity of Gas (hereinafter "MGQ") had to be purchased every month equivalent to the quantity obtained by multiplying 90% of the daily Nominated Quantity. Moreover, in accordance with a Price Side Letter dated 9th March 2010, the selling price of the Gas for the quarter beginning from January 2010 to March 2010 was decided to be Rs.17.2/-SCM, including taxes. Another Side Letter dated 15th April 2010 was executed between the parties, whereby certain clauses of the Agreement were amended/revised, including the Arbitration Clause.
d. The amended Arbitration Clause read as follows:
"If any dispute, difference or question shall at any time hereafter arise between the parties hereto or their respective representatives in respect of the construction of these presents or concerning anything hereunder contained or arising out of these presents or as to the rights, liabilities or duties of the said parties hereunder, which cannot be mutually resolved by the parties, within (60) days after written notice of a dispute by one party to the other party, the same shall be referred to sole Arbitration. After the expiration of sixty (60) days seller shall suggest a panel of three (3) distinguished persons to the Buyer to select any one among them to act as the sole Arbitrator within thirty (30) days. The Buyer shall select sole Arbitrator within thirty (30) days from the receipt of communication suggesting the panel of Arbitrators. In the event of failure of the Buyer to select the sole Arbitrator within thirty (30) days from the receipt of the communication suggesting the panel of Arbitrator, the right of selection of Sole Arbitrator by the Buyer shall stand forfeighted and the seller shall have discretion to proceed with the appointment of sole Arbitrator. The decision of the Arbitrator shall be binding on both the parties. "The Arbitration proceedings shall be held in accordance with the provision of the Arbitration and Conciliation Act, 1996, as amended from time to time. The Arbitrator shall decide by whom and in what proportions the Arbitrator's fees as well as cost incurred in Arbitration shall be borne. The Arbitrator may, with the consent of the parties, enlarge the time, from time to time, to make and publish award, as the case may be. The venue of Arbitration shall be at Delhi."
e. During the course of the business between the parties, certain disputes arose amongst them, regarding
AI
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