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IN THE HIGH COURT OF KERALA AT ERNAKULAM
BASANT BALAJI, J.
M.I. Mohammed - Petitioner
Versus
M/s. HLL Life Care Ltd. & Ors. - Respondents
OP(C) No. 316 of 2024
Decided On : 26-03-2025
(A) Arbitration and Conciliation Act, 1996 - Sections 12(5), 34, and 37 - Original petition challenging the order setting aside an arbitral award - The petitioner claimed entitlement to market rates post-contract expiration due to delays by respondents - The Commercial Court declared the award null and void, citing ineligibility of the arbitrator under Section 12(5) - The court emphasized that the remedy lies in appeal under Section 37, not Article 227. (Paras 10 , 21 , 24 )
(B) Jurisdiction of Courts - The High Court cannot intervene under Article 227 when an alternative statutory remedy is available - Judicial intervention is minimized during arbitration proceedings. (Paras 22 , 24 )
Facts of the case:
The petitioner entered into a contract for construction, which was delayed, leading to arbitration proceedings and an award in favor of the petitioner. The respondents challenged the award, resulting in the Commercial Court's order declaring it void.
Findings of Court:
The court found that the remedy for challenging the award lies under the Arbitration Act, specifically Sections 34 and 37, and not under Article 227 of the Constitution.
Issues: The main issues were the applicability of Section 12(5) regarding arbitrator eligibility and the proper forum for challenging the arbitral award.
Ratio Decidendi: The court ruled that the existence of an alternative statutory remedy precludes intervention under Article 227, reinforcing the principle that arbitration awards can only be challenged through specified provisions of the Arbitration Act.
Result: O.P.
(C) dismissed as not maintainable.
JUDGMENT :
This original petition is filed against Ext P12 order dated 29.11.2023 in A.O.P. No.127/2021, on the files of the Principal Sub Court, Ernakulam. The petitioner herein is the respondent in the Arbitration proceedings.
2. The petitioner and respondents entered into a contract on agreement dated 31/07/2013, for the construction of a Multidisciplinary Research Laboratory and Animal House at Medical College, Thiruvananthapuram, valued at Rs. 23,90,36,760/-. The contract stipulated an 18-month completion period, ending on 02/06/2015. However, the project was not completed until 15/05/2018. The petitioner has initiated arbitration proceedings, claiming that the respondents' delays were the sole cause of the extended project timeline.
3. With the contract's expiry on 02/06/2015, the contractual rates became unenforceable. Subsequently, on 31/12/2015, the petitioner formally notified the respondents, demanding for payment at prevailing market rates for the work extended beyond the contract period, due to the respondents' delays. The respondents, while compelling the petitioner to complete the project, contested the petitioner's entitlement to market rates. The respondents' default on admitted payment obligations necessitated the filing of W.P.(C) No. 36322 of 2018 before this court and by judgment dated 14/12/2018, directed the respondents to settle the admitted sums within three months. Their failure to comply with the order resulted in contempt proceedings, W.P.(C) No. 3199/2024, pending which partial payments were made.
4. Due to the disputes between the parties, the petitioner demanded payment of Rs. 7,11,41,406/- towards unpaid value of works carried out, vide letter dated 12/06/2019. As per clause 25 of the agreement, a Dispute redressal committee of 3 members was constituted by the respondents but, the said demand of the petitioner was denied by decision dated 24/01/2020. Thus, invoking the arbitration clause in the agreement, the petitioner addressed to the first respondent by Ext.P1 letter dated 31/01/2020, demanding a panel of 3 former Judges of this Court enabling the petitioner to nominate any one of them to be appointed as the sole arbitrator for resolution of disputes, to which the first respondent has supplied a panel in reply, comprising 3 former Judges of this Court vide Ext.P2 letter dated 7.3.2020. Thereafter, the petitioner vide Ext.P3 letter dated 10.03.2020, sent a panel of 3 Engineers for his nomination to be appointed as the sole arbitrator to which the first respondent intimated his disagreement to the panel of Engineers, vide Ext.P4 letter dated 11.03.2020 and insisted the selection from one among the proposed retired Judges of this Court.
5. Further, the petitioner, in accordance with the agreed procedure, nominated Hon. Justice Mr. M. Ramachandran, a retired Judge of this Court, as the sole arbitrator. This nomination was communicated by the petitioner's letter dated 13/03/2020 (Ext.P5). As per the pre-existing agreement, the first respondent’s role was limited to intimate the petitioner's nomination, as mutually agreed. Consequently, the first respondent issued Ext.P6 letter dated 16/03/2020 to Hon. Justice Mr. M. Ramachandran, confirming his appointment as the sole arbitrator and outlining the petitioner's claim of Rs. 9,20,37,814/-.
6. The Sole Arbitral Tribunal concluded the proceedings and issued Ext.P7 award dated 18/08/2021 in favour of the petitioner. The award directed the respondents to pay Rs.7,31,89,098/- within three months and also mandated the release of a retention amount of Rs.1,10,45,050/- upon the petitioner's submission of a representation within one month.However, the respondents' counterclaims for liquidated damages were rejected.
7. The respondents challenged Ext P7, by filing O.P. (Arbn.) No. 127 of 2021 on 14/12/2021 under Section 34 of the Arbitration and Conciliation Act, 1996 (for short ‘the Act’) before the Commercial Court (Principal Sub Judge), Ernakulam, to which the peti
The High Court cannot intervene under Article 227 when an alternative statutory remedy exists, specifically under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.
A unilateral appointment of an arbitrator by a party with an interest in the dispute is invalid, rendering the award void ab initio under the Arbitration and Conciliation (Amendment) Act, 2015.
A party to arbitration proceedings has a remedy to challenge the award passed in such proceedings under Section 34 of the 1996 Act.
The court held that unilateral appointment of arbitrators by one party without consent is invalid, leading to lack of jurisdiction for the Arbitral Tribunal and grounds to set aside the award.
(1) Arbitration Act is a code in itself. Arbitration Act itself gives various procedures and Fora to challenge appointment of Arbitrator.(2) A legislative enactment cannot curtail a Constitutional ri....
Parties can waive objections to an arbitrator's eligibility by consenting to their appointment and participating in proceedings, as per Sections 12(5) and 34 of the Arbitration and Conciliation Act.
A unilateral appointment of an arbitrator by a party interested in the dispute is null and void under Section 12(5) of the Arbitration and Conciliation Act, 1996, as amended in 2015.
Parties can waive objections to an arbitrator's ineligibility by express agreement after disputes arise, as per Section 12(5) of the Arbitration and Conciliation Act.
Unilateral appointment of an Arbitrator by one party cannot be sustained, and any award or order purporting to cast a liability on the objecting party would be non-est.
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