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IN THE HIGH COURT OF DELHI AT NEW DELHI
Chandra Dhari Singh, J.
Anuj Kumar – Appellant
Versus
M/s Franchise India Brands Limited – Respondent
O.M.P. (T) (COMM.) 32 of 2023 & I.A. 7641 of 2023
Decided On : 24-04-2023
Arbitration - Branch Agreement - Arbitration and Conciliation Act, 1996 - Section 14, Section 15 - 13(2) - The judgment discusses the termination of the mandate of the arbitrator, unilateral appointment of the arbitrator, and the jurisdiction of the Arbitral Tribunal. It highlights the legal provisions of Section 12(5) and the proviso, and the application of express written agreement in waiving disqualification under Section 12(5). The court found that the appointment of the Sole Arbitrator did not warrant any interference.
Fact of the Case:
The petitioner entered into a Branch Agreement with the respondent, which included a dispute resolution clause for arbitration. The respondent unilaterally appointed a Sole Arbitrator, leading to the petitioner's objection and subsequent legal proceedings. The petitioner sought termination of the arbitrator's mandate and appointment of a neutral arbitrator.
Finding of the Court:
The Court found that the petitioner's objections to the arbitrator's appointment were waived by an express agreement in writing, as evidenced by the petitioner's email and letter consenting to the jurisdiction of the Arbitral Tribunal. The Court upheld the jurisdiction of the Arbitral Tribunal and dismissed the petition, concluding that the appointment of the Sole Arbitrator did not warrant interference.
Issues: The key issues revolved around the termination of the arbitrator's mandate, unilateral appointment of the arbitrator, and the waiver of disqualification under Section 12(5) through an express agreement in writing.
Ratio Decidendi: The Court's decision was based on the finding that the petitioner had waived the objections to the arbitrator's appointment through an express agreement in writing, and that the appointment of the Sole Arbitrator did not warrant interference.
Final Decision: The Court dismissed the petition and upheld the jurisdiction of the Arbitral Tribunal, concluding that the appointment of the Sole Arbitrator did not warrant any interference.
ORDER
Chandra Dhari Singh, J. (Oral)
1. The instant petition under Section 14 read with Section 15 of the Arbitration and Conciliation Act, 1996 (hereinafter "the Act") has been filed on behalf of the petitioner seeking the following reliefs:
"a. Allow the present petition and terminate the mandate of the Ld. Sole Arbitrator, Sh. Durgesh Kumar Pandey on account of the Arbitrator being dejure incapable of adjudicating the disputes between the Parties;
b. Appoint a neutral and impartial sole arbitrator and refer the dispute arising out of the Branch Agreement dated 17.02.2019 between the parties to the said neutral arbitrator if this Hon'ble Court deems fit that the disputes involved herein may be arbitrated;
c. Direct the Ld. Arbitral Tribunal to return the Arbitration Fees paid by the Petitioner.
d. Impose cost on the Respondent for unilaterally appointing the Ld. Sole Arbitrator for the dispute arising out of the Branch Agreement dated 27.02.2019 and acting in contravention to the law laid down on appointment of arbitrator.
e. Pass any other order(s) as this Hon'ble Court may deem fit in facts and circumstances of the present case."
FACTUAL MATRIX
2. The respondent approached petitioner with a proposal to become a Branch Associate and open up an office at Noida, the rent for which was to be borne by the petitioner.
3. During the preliminary meetings it was agreed between the parties, that the duties of the petitioner included supervising the sales staff, manager and other employees provided by the respondent who shall be bringing prospective clients for the respondent. It was further agreed that the respondent will pay certain percentage of the total revenue as remuneration to the petitioner.
4. Accordingly, the petitioner paid an amount of Rs 10, 00,000/- inclusive of tax and surplus charges for a period of 5 years as the refundable fees for Association with the respondent. Furthermore, it was agreed that petitioner's residence shall be used as the branch office.
5. The petitioner filled an Expression of Interest Form on 02nd January 2019. The Branch Agreement was finally signed on 17th February 2019. The contract provided inter alia for dispute resolution in Clause 13(2). The relevant portion of said clause was as under:
"13(2).Arbitration: All disputes and differences arising between the parties hereto as also between the Company and the BA. Including any dispute or difference in regard to the interpretation of any provision or term or the meaning thereof, or in regard to any claims of one party against the other or in regard to the rights and obligations of any parties under this Agreement shall be settled by Arbitration and Conciliation Act, 1996. Company will be sole authority to appoint the Arbitrator. The awards of the Arbitrator will be final and binding on both the parties. The place of such Arbitration shall be Delhi, India and Proceedings shall be in English Language."
6. The respondent modified the Branch Agreement on 02nd July 2019 vide "First Addendum Agreement to Branch Agreement" which restricted remuneration of the petitioner to thirty percent payout upfront and the remaining was to be paid on quarterly reconciliation basis.
7. Pursuant to execution and initiation of Agreement, there was no remuneration received by the petitioner. Moreover, it is alleged that the petitioner was directed to move to an expensive office premises and was not provided the committed sales personnel as per the Agreement. Due to which, the petitioner had to incur additional expenditure.
8. It is alleged by the petitioner that the respondent vide email on 21st November 2019, without any prior communication to the petitioner terminated the Branch Agreement dated 17th February 2019.
9. For the purpose of claiming its dues, the petitioner filed a consumer complaint at the District Consumer Dispute Redressal Commission, Gautam Buddh Nagar. In the interregnum, the respondent invoked arbitration vide letter dated 11th November 2020 and ap
Unilateral appointment of an arbitrator by a party with vested interests breaches principles of fairness and impartiality, rendering such appointment invalid under arbitration laws.
Point of Law : It is not open for the petitioner to challenge the learned Arbitrator on the ground that there are justifiable doubts as to his independence and impartiality in terms of the Guidelines....
A unilateral appointment of an arbitrator by one party contravenes Section 12(5) of the Arbitration and Conciliation Act, rendering the arbitral award void ab initio and against public policy.
The court emphasized the necessity for impartiality in arbitration, ruling that automatic appointments of arbitrators undermined the arbitration clause, rendering the award invalid.
Unilateral appointment of an Arbitrator without consent violates procedural fairness under the Arbitration and Conciliation Act, leading to the termination of the mandate.
Participation in arbitration without objection constitutes a waiver of the right to challenge the appointment of the arbitrator, as per Sections 4 and 12 of the Arbitration and Conciliation Act.
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