Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2020 Supreme(Mad) 1964

IN THE HIGH COURT OF JUDICATURE AT MADRAS
N. SATHISH KUMAR, J.
Flywheel Logistics Solutions Pvt. Ltd. – Appellant
Versus
M/s. Hinduja Leyland Finance Ltd. – Respondent
C.M.A. Nos. 25 to 28, 30, 66 to 88 of 2020, C.M.P. Nos. 271, 273, 275, 277, 289, 617 to 621, 623 to 640 of 2020
Decided On : 17-09-2020

Advocates:
Advocate Appeared:
For the Appellant : Abishek Jebaraj.
For the Respondents: V. Balasubramani, Sharath Chandar.

The arbitrator has to follow the well-established principles while passing any order under Section 17 of the Arbitration and Conciliation Act, 1996. The arbitrator cannot pass orders mechanically without following the procedures established under law.

Headnote:
ARBITRATION - SUBJECT - APPOINTMENT OF ARBITRATOR - ACT/SECTION - ARBITRATION AND CONCILIATION ACT, 1996, SECTION 9, 17 - SUMMARY - The Court set aside the impugned orders passed by the learned arbitrator under Section 17 of the Arbitration and Conciliation Act, 1996, to seize the vehicles. The Court held that the arbitrator has to follow the well-established principles while passing any order under Section 17 of the Act. The Court also held that the arbitrator cannot pass orders mechanically without following the procedures established under law.
Fact of the Case:

The appellant, by various loan agreements dated 30.01.2017, availed a loan to purchase vehicles from the respondent. As there was a default in repayment of the instalments, the respondents invoked the arbitration clause provided under the agreement. Accordingly, a notice has been sent invoking arbitration dated 14.09.2019 indicating various nature of contract entered between the parties and default committed by the respondent and the amount due thereon. The respondent has also nominated Mr. Samuel, Advocate as an Arbitrator and the respondent has also requested the appellant to settle the dues in an amicable manner. Pursuant to the above notice, the so-called arbitrator issued notice dated 23.11.2019 fixing the hearing dated of arbitration on 09.12.2019. While issuing notice indicating the hearing date on 09.12.2019, the learned arbitrator appears to have received a claim petition on 23.11.2019 and an application under section 17 of the Arbitration and Conciliation Act and passed interim Orders to seize the vehicles on the same day.
Finding of the Court:

The Court held that the arbitrator has to follow the well-established principles while passing any order under Section 17 of the Act. The Court also held that the arbitrator cannot pass orders mechanically without following the procedures established under law.
Issues: Whether the arbitrator can pass orders mechanically without following the procedures established under law.
Ratio Decidendi: The Court held that the arbitrator has to follow the well-established principles while passing any order under Section 17 of the Act. The Court also held that the arbitrator cannot pass orders mechanically without following the procedures established under law.
Final Decision: The Court set aside the impugned orders passed by the learned arbitrator under Section 17 of the Arbitration and Conciliation Act, 1996, to seize the vehicles.

JUDGMENT :

N. SATHISH KUMAR, J.

Prayer: Appeals filed under Section 37 of the Arbitration and Conciliation Act, 1996, to set aside the impugned/interim order dated 23.11.2019 passed by Sole Arbitrator, Mr. S. Samuel, Advocate at Chennai, in Application No. 1 of 2019 in Arbitration Case Nos. ACP No. HLF-FLY Nos. 3/2019, 4/2019, 5/2019, 1/2019, 2/2019, 20/2019, 19/2019, 21/2019, 26/2019, 10/2019, 6/2019, 13/2019, 18/2019, 27/2019, 9/2019, 7/2019, 16/2019, 23/2019, 14/2019, 28/2019, 11/2019, 25/2019, 17/2019, 8/2019, 12/2019, 15/2019, 22/2019 and 24/2019 respectively.

1. These Civil Miscellaneous Appeals have been filed challenging the interim Orders passed by the learned arbitrator to seize the vehicles.

2. Since, the dispute is said to have been arisen in hire purchase agreements, in respect of around 28 trucks, entered between the parties on 30.09.2017 and the fact that in all the appeals, similar disputes have arisen out of the hire purchase agreements, though styled as a different contract, as the matter involves one and same and similar to each other, this Court is inclined to dispose of all the appeals in a Common Judgment.

3. These Civil Miscellaneous Appeals have been filed challenging the Order of the learned arbitrator under section 17 of the Arbitration and Conciliation Act to seize the vehicle.

4. Brief facts leading to filing of these appeals are as follows:

The appellant by various loan agreements dated 30.01.2017 has availed loan to purchase vehicles from the respondent. As there was default in repayment of the instalments, the respondents invoked arbitration clause provided under the agreement. Accordingly, a notice has been sent invoking arbitration dated 14.09.2019 indicating various nature of contract entered between the parties and default committed by the respondent and the amount due thereon. The respondent has also nominated Mr. Samuel, Advocate as an Arbitrator and the respondent has also requested the appellant to settle the dues in an amicable manner. Pursuant to the above notice, the so called arbitrator issued notice dated 23.11.2019 fixing the hearing dated of arbitration on 09.12.2019. While issuing notice indicating the hearing date on 09.12.2019, the learned arbitrator appears to have received a claim petition on 23.11.2019 and an application under section 17 of the Arbitration and Conciliation Act and passed interim Orders to seize the vehicles on the same day.

5. It is to be noted that the arbitration hearing date has been fixed on 09.12.2019. In all the matters, a cyclostyle order has been passed by the learned arbitrator appointing an employee of the respondent as a receiver to seize the vehicles. Pursuant to the said Order, it appears that more than 26 trucks were said to have been seized and kept idle from 02.12.2019. Challenging the interim Orders passed by the learned arbitrator, the present appeals have been filed.

Heard the learned counsel appearing for the appellant and the respondents and Mr. Sharath Chandar, Amicus Curie.

6. It is appropriate to set out the framework of Sections 9 and 17 of the Act and to examine their scope, object and purpose, for consideration of the following interim measures:

(A) Interim Injunctions

(B) Appointment of Receiver

(D) Power to order sale

(E) Furnishing Security pending arbitral proceedings

7. Ideally, the handling of arbitral disputes should resemble a relay race. In the initial stages, before the arbitrators are seized of the dispute, the baton is in the grasp of the court; for at that stage there is no other organisation which could take steps to prevent the arbitration agreement from being ineffectual. When the arbitrators take charge they take over the baton and retain it until they have made an award. At this point, having no longer a function to fulfil, the arbitrators hand back the baton so that the court can in case of need lend i

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Judicial Analysis

2020 Supreme(Mad) 1964

The arbitrator has to follow the well-established principles while passing any order under Section 17 of the Arbitration and Conciliation Act, 1996. The arbitrator cannot pass orders mechanically without following the procedures established under law.

Cases Referred (25)

Judicial Analysis