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2022 Supreme(Guj) 1822

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
ASHUTOSH J. SHASTRI, J.
Sandipbhai Ashokbhai Parmar – Petitioner
Versus
The Arbitrator, Kumari Neetaben Vitthabhai Patel – Respondent
Petition Under Arbitration Act No. 140 of 2021, Civil Application (For Direction) No. 1 of 2021
Decided On : 28-01-2022

Advocates:
Advocate Appeared:
For the Petitioners: Anshin Desai, Jay M. Thakkar.
For the Respondents: Digant B. Kakkad, Mrugen K. Purohit, Mitul K. Shelat.

Headnote:

Arbitration - Appointment of Arbitrator - Section 11 & 12 of the Arbitration and Conciliation Act - [Arbitration] - [Section 11, Section 12] - The court dismissed the petition challenging the appointment of the arbitrator, finding that the petitioner had not raised any justifiable reason to intervene in the proceedings. The court emphasized that the petitioner was not remedy-less under the statute and that the Act provided sufficient protection to ventilate the grievance. The court also highlighted recent Supreme Court decisions, emphasizing that judicial intervention should be limited, especially when the arbitration process is already set in motion.

Fact of the Case:

The petitioner and respondent No. 2 formed a partnership firm for purchasing land and developing residential and commercial properties. The partnership agreement contained an Arbitration Clause 13. A dispute arose, and respondent No. 2 appointed respondent No. 1 as an arbitrator without adhering to the requirements of Section 11 of the Act. The petitioner challenged the appointment, alleging a close professional relationship between respondent No. 1 and the advocate for respondent No. 2. The petitioner sought the appointment of a new arbitrator.

Finding of the Court:

The court found that the petitioner had not raised any justifiable reason to intervene in the proceedings. The court emphasized that the petitioner was not remedy-less under the statute and that the Act provided sufficient protection to ventilate the grievance. The court also highlighted recent Supreme Court decisions, emphasizing that judicial intervention should be limited, especially when the arbitration process is already set in motion.

Issues: The main issue was the challenge to the appointment of the arbitrator, alleging a close professional relationship between the arbitrator and the advocate for the respondent. The petitioner sought the appointment of a new arbitrator.

Ratio Decidendi: The court held that the petitioner had not raised any justifiable reason to intervene in the proceedings. The court emphasized that the petitioner was not remedy-less under the statute and that the Act provided sufficient protection to ventilate the grievance. The court also highlighted recent Supreme Court decisions, emphasizing that judicial intervention should be limited, especially when the arbitration process is already set in motion.

Final Decision: The petition challenging the appointment of the arbitrator was dismissed by the court.

JUDGMENT :

ASHUTOSH J. SHASTRI, J.

1. By way of this Arbitration Petition, the petitioner has prayed for following reliefs:

    “8..... (A) THIS HON’BLE COURT may kindly be pleased to admit and allow this Application.

(B) THIS HON’BLE COURT may be pleased to issue writ of mandamus or any other appropriate writ, order or direction and thereby be pleased to quash and set aside the appointment of respondent no. 1 as Arbitrator in Arbitration Case No. 1/2020 between petitioner and respondent no. 2 & 3 as being in breach of provisions of section 11 & 12 of the Arbitration and Conciliation Act, in the interest of justice.

(C) THIS HON’BLE COURT may be pleased to appoint any appropriate person as arbitrator in terms of procedure for appointment of arbitrator laid down in Clause 13 of agreement dated 04.09.2008 for adjudication of dispute between the parties, in interest of justice.

(D) Pending the admission and final hearing of this petition, this Hon’ble Court may be pleased to stay the further proceedings of Arbitration Case No. 1/2020 pending before respondent no. 1, in the interest of Justice.

(E) THIS HON’BLE COURT may be pleased to grant such other and further relief/s as may deem fit, just and proper in the facts and circumstances of the case, in the interest of justice.”

2. The case of the petitioner is that petitioner and respondent No. 2 formed a partnership firm on 01.08.2008 in the name and style of “Ronak Developers.” The said partnership business was for purchasing of land and developing residential houses as well as commercial complex. In connection with aforesaid partnership, the petitioner and respondent No. 2 entered into a Deed of Partnership dated 04.09.2008. According to the petitioner, the said Deed is containing an Arbitration Clause 13, which is reproduced hereunder:

    “13. Any dispute or difference of opinion which may arise between the partners of their representatives with regards to the constitution meaning and effect of this deed or any part thereof effecting the accounts profits or losses of the business or the right and liabilities of the partnership under this deed or any other matter relating to the firm shall be referred to the arbitrator and the decision of a sole arbitrator if the partners in dispute so agree upon or otherwise two or more arbitrators according to the members of partners of the firm are to be nominated by each partners and in case of difference of opinion between them by the umpire selected by them at the commencement of reference and this clause shall be deemed to be submission within the meaning of the arbitration Act 1940 including its statutory modification and reenactment.”

3. During the passage of time, the dispute arose between petitioner and respondent No. 2 and then respondent No. 2 invoked an Arbitration Clause, as referred to above. By issuance of notice to the petitioner on 23.08.2019 inter-alia informing the petitioner that respondent No. 2 is appointing respondent No. 1 as an Arbitrator and also called upon the petitioner to appoint his Arbitrator. It is the case of the petitioner that without ad-hearing to the requirements of Section 11 of the Act, respondent No. 2 straightaway referred the matter to the Arbitrator, namely, respondent No. 1 by filing statement of claim. Such appointment of respondent No. 1 is unilateral and is in apparent breach of Section 11 of the Arbitration Act and as such the very initiation of arbitration proceedings gets vitiated. On the contrary, it is the case of the petitioner that after initiation of arbitration proceedings by the Sole Arbitrator i.e. respondent No. 1, the petitioner became aware that learned advocate for the claimant i.e. present respondent No. 2 and the learned Arbitrator had worked together in one office as advocates in various cases. It was further inquired by the petitioner that the petitioner could find one vakalatnama filed in one civil suit before learned Civil Court at Anand wherein there is a signature of learned advocate for cla

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