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2024 Supreme(J&K) 412
IN THE HIGH COURT OF JAMMU AND KASHMIR AND LADAKH (COMMERCIAL DIVISION) AT SRINAGAR
Sanjay Dhar, J.
Jamkash Vehicleads Kashmir Pvt. Limited & Anr. - Petitioners
Versus
M/s Wuerth India Pvt. Ltd. & Anr. - Respondents
Arb P. No.30 of 2023
Decided On : 20-12-2024
For the Petitioner:Mr. Areeb Kawoosa, Advocate, with Mr. Aatir Kawoosa, Advocate.
For the Respondent:Mr. A. R. Dhar, Advocate.
An arbitration award can be set aside if the arbitrator was appointed unilaterally, violating contract terms regarding authorization and venue.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34(2) - Challenge to arbitration award - Petitioners asserted that agreement was invalid due to lack of proper authorization; failed to respond to notices indicating ratification of the agreement - Arbitrator appointed unilaterally in violation of contract terms, proceedings held at incorrect venue - Award set aside. (Paras 1, 5, 11, 15, 19)
(B) Arbitration - Jurisdiction - Parties must mutually agree on the appointment of an arbitrator and the venue for arbitration, unilateral actions contravening these stipulations render the award invalid. (Paras 13, 18)
Facts of the case:
Petitioners contested an arbitration award favoring the respondents, claiming the underlying agreement was executed without proper authorization and that arbitration proceedings occurred at an improper venue.
Findings of Court:
The award was set aside as the arbitrator was not validly appointed and the arbitration proceedings were not conducted as per the terms of the agreement.
Issues: Whether the arbitrator's appointment was valid and whether the arbitration clause was violated.
Ratio Decidendi: The court reasoned that the arbitrator's unilateral appointment and improper venue contravened the agreed terms, rendering the award unsustainable.
Result: Petition allowed; award set aside.
| Table of Content |
|---|
| 1. challenge to arbitration award based on unauthorized agreement. (Para 1 , 2 , 3) |
| 2. contentions regarding the validity of the agreement and default. (Para 4 , 5) |
| 3. criteria for setting aside arbitral awards. (Para 6 , 7 , 8) |
| 4. authorization issues in the execution of the arbitration agreement. (Para 9 , 10 , 11 , 12) |
| 5. violation of arbitration clause regarding arbitrator appointment. (Para 13 , 14 , 15 , 16 , 17 , 18) |
| 6. order to set aside the arbitral award. (Para 19) |
JUDGMENT :
Sanjay Dhar, J.
1. The petitioners, through the medium of present petition under Section 34 of the Arbitration and Conciliation Act, have challenged award dated 10.04.2023 passed by the learned Arbitrator, whereby the respondent/claimant has been held entitled to recover an amount of Rs.25,20,969/ along with interest @8% per annum from 31.08.2021 till the date of its realization, from the petitioner company.
2. As per case of the petitioners, in the year 2015, they started purchasing automotive accessories from the respondent company. It has been claimed that without the authorization of the petitioner company, its previous General Manager entered into an agreement on behalf of the petitioner company with the respondent company on 13th June, 2018. The agreement was valid for a period of two years from 1st October, 2017. According to the petitioners, the petitioner company continued to purchase the automotive accessories from the respondent company upto the year 2021. However, when the company did not make any profit on the goods and services supplied by the respondent company, they stopped doing business with it. It has been claimed that in the year 2021, it came to the knowledge of the petitioner company that its previous General Manager had unauthorizedly executed an agreement with the respondent company.
3. On 18.04.2023, the petitioner company is stated to have received the impugned award dated 10.04.2023, which has been passed by respondent No.2-Arbitrator. It has been submitted that the impugned award has been passed by respondent No.2 in exparte without any authority or jurisdiction.
4. The petitioners have challenged the impugned award on the ground that agreement dated 13th June, 2018, which contains the arbitration clause, has not been validly executed by the petitioner company, inasmuch as it has not been executed by an authorized person. It has been further contended that as per Clause (16) of the said agreement, the disputes were required to be referred to the sole Arbitrator mutually agreed upon by the parties or appointed by the Court under Arbitration and Conciliation Act, 1996 and it was further provided that the venue of arbitration would be at Srinagar, but in the instant case, respondent No.1 has unilaterally appointed respondent No.2 as the Arbitrator and the arbitration proceedings have been conducted at Greater Noida (UP). It has been further contended that as per Clause (18) of the agreement, the arbitration venue and courts in Srinagar were alone given jurisdiction to decide the unresolved disputes or differences between the parties but in the instant case, the aforesaid clause stands contravened. On these grounds, the petitioners have sought setting aside of the impugned award.
5. Respondent No.1 has filed its reply to the petition, in which it has been submitted that agreement dated 13.06.2018 was executed by the General Manager of the petitioner company and there is nothing on record to show that he was not having authorization to do so. It has been further submitted that the respondent company fulfilled all its obligations towards the petitioner company. It has also been submitted that after May, 2019, the petitioner company discontinued to procure the products from the respondent company. It has been contended that the petitioner company failed to clear the past dues, as a result of which the respondent company issued a legal notice of demand dated 31.08.2021 upon the petitioner company seeking recovery of
