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2019 Supreme(Mad) 767
IN THE HIGH COURT OF JUDICATURE AT MADRAS
M. SUNDAR, J.
S. Sivakumar - Petitioner
Versus
M/s. Sundaram Finance Limited, Chennai & Others - Respondents
O.P. No. 154 of 2016
Decided On : 23-04-2019
For the Petitioner:K. Suresh Babu, Advocate.
For the Respondents:T. Srinivasa Raghavan for M/s. T. Srinivasa Raghavan & Associates Assisted by E. Tamizharasan, Advocate.
The violation of Section 21 of the Arbitration and Conciliation Act, 1996 would vitiate an arbitral award and become a ground for setting it aside.
Headnote:
Section 34 - Arbitration and Conciliation Act, 1996 - 21
Fact of the Case:
The case involved an 'Original Petition' filed under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award made by an Arbitral Tribunal. The central theme of the case was a loan agreement and a guarantee deed executed by the petitioner. The Arbitral Tribunal passed an ex-parte award directing the respondents to pay a sum of Rs. 17,70,796.03 with interest and costs. The petitioner raised three main grounds, including the lack of notice within the meaning of Section 21 of the A & C Act.
Finding of the Court:
The Court found that the petitioner, as a guarantor, was a party to the arbitration agreement between the parties, and the arbitration agreement was in the form of a clause in the loan agreement. The Court also found that the provisions of the Contract Act raised by the petitioner did not carry the campaign against the impugned award any further. The Court held that the notices sent to the petitioner did not qualify as communications within the meaning of Section 21 of the A & C Act. The Court also held that the arbitration clause did not exempt the requirement of notice under Section 21. The Court further held that the violation of Section 21 of the A & C Act would vitiate the impugned award, leading to its setting aside.
Issues: The issues involved the petitioner's status as a party to the arbitration agreement, the applicability of the Contract Act provisions, and the requirement of notice within the meaning of Section 21 of the A & C Act.
Ratio Decidendi: The Court held that the petitioner, as a guarantor, was a party to the arbitration agreement. The Court also held that the Contract Act provisions raised by the petitioner did not affect the impugned award. The Court further held that the notices sent to the petitioner did not qualify as communications within the meaning of Section 21 of the A & C Act. The Court also held that the violation of Section 21 of the A & C Act would vitiate the impugned award.
Final Decision: The impugned award was set aside, and the Original Petition was allowed.
1. Instant ‘Original Petition’ (‘OP’ for brevity) has been filed under Section 34 of ‘The Arbitration and Conciliation Act, 1996’ (‘A & C Act’ for brevity) assailing an ‘arbitral award dated 30.11.2015’ (‘impugned award’ for brevity) made by an ‘Arbitral Tribunal’ (‘AT’ for brevity) constituted by a sole Arbitrator, who is a former District Judge.
2. Section 34 in the scheme of A & C Act finds its slot under Chapter VII of A & C Act, which is captioned ‘RECOURSE AGAINST ARBITRAL AWARD’. A perusal of Section 34 of A & C Act also reveals that recourse to Court against an arbitral award may be made by an ‘application’. Also to be noted, the very caption to Section 34 of A & C Act reads ‘APPLICATION FOR SETTING ASIDE AN ARBITRAL AWARD’ (underlining made by Court to supply emphasis and highlight). Be that as it may, such recourse against an arbitral award is being assigned the nomenclature ‘Original Petition’ in this Registry. Therefore, I shall refer to the instant proceedings as ‘OP’ for the sake of convenience and clarity.
3. Before this Court proceeds further, it is necessary to extract earlier proceedings of this Court dated 01.04.2019, which reads as follows :
‘Vide separate orders made in the aforesaid ‘Original Petitions’ (‘OPs’ for brevity), my predecessor learned judge has directed the Registry to requisition the arbitration records. The earlier proceedings dated 15.06.2016 in each of the OP reads as follows :
“Order dated 15.06.2016 in O.P.No.154 of 2016
1. It is noticed that the learned Arbitrator has been arrayed as second respondent to the present proceeding.
2. To my mind, the arbitrator is neither a necessary nor a proper party to the present proceeding. Accordingly, the second respondent is deleted from the array of parties. An amended memo of parties would be filed within a period of two weeks.
3. At request, re-notify on 17.08.2016.
4. The Registry will requisition the arbitration record, in the meanwhile.
Order dated 15.06.2016 in O.P.No.155 of 2016
1. It is noticed that the learned Arbitrator has been arrayed as second respondent to the present proceeding.
2. To my mind, the arbitrator is neither a necessary nor a proper party to the present proceeding. Accordingly, the second respondent is deleted from the array of parties. An amended memo of parties would be filed within a period of two weeks.
3. At request, re-notify on 17.08.2016.
4. The Registry will requisition the arbitration record, in the meanwhile.”
2. Learned counsel for petitioner Mr. K. Suresh Babu, submits that memo for amendment pursuant to paragraph 2 of the orders dated 15.06.2016 have not been filed and undertakes to file the same within one week from today.
3. With regard to requisitioning of arbitral records, Registry is directed to send a communication to the Sole Arbitrator in both OPs i.e. Mr. M. Sowundrapandian, Arbitrator, Former District & Sessions Judge, No.55/38, Teachers Colony, Venkataratnam Nagar, Adyar, Chennai-600 020, requesting him to send to this Court the entire records of the Arbitral Tribunal pertaining to Arbitration Case Nos.MS/SF/102 of 2014 and MS/SF/101 of 2014 in which arbitral awards dated 30.11.2015 and 05.11.2015 respectively have been passed.
4. Registry to send the aforesaid communication to second respondent at the aforementioned address by the end of this week i.e. on or before 05.04.2019. Registry to send this communication through a mode where Registry will have acknowledgment for the communication. In the communication, learned arbitrator shall be requested to produce the records within one week from the date of receipt of the communication. It shall also be made clear that records shall be delivered by the Arbitral Tribunal to the Office of the Registrar General of this Court in a sealed cover, who in turn shall have the same put up along with the case file before the next listing. If the second respondent S
