Back
IN THE HIGH COURT OF JUDICATURE AT MADRAS
KRISHNAN RAMASAMY, J.
Anil Damodar Potdukhe & Others – Appellants
Versus
M/s. Kotak Mahindra Bank Ltd., Chennai – Respondent
Arb. O.P (Com.Div.) No. 14 of 2023 & A. No. 194 of 2023
Decided On : 08-03-2023
Arbitration - Unilateral Appointment of Arbitrator - Arbitration and Conciliation Act, 1996, Section 34(2)(a)(iii) - Section 12(5) - Section 34(2)(b) - Schedule VII - Appointment of Sole Arbitrator - Violation of Provisions - Public Policy of India
Fact of the Case:
The petitioners sought to set aside an arbitral award passed by the sole Arbitrator, alleging unilateral appointment of the Arbitrator by the respondent without proper notice to the petitioners. The petitioners contended that the appointment of the Arbitrator was non-est in law and in violation of the provisions of the Arbitration and Conciliation Act, 1996.
Finding of the Court:
The Court found that the unilateral appointment of the Arbitrator by the respondent was in violation of Section 12(5) of the Act, rendering the appointment ineligible and the resulting award unsustainable under law. The Court also held that the award suffered from a violation of principles of natural justice.
Issues: The main issues were the unilateral appointment of the Arbitrator without proper notice to the petitioners, the violation of Section 12(5) of the Act, and the sustainability of the award under the public policy of India and principles of natural justice.
Ratio Decidendi: The Court's decision was based on the finding that the unilateral appointment of the Arbitrator was ineligible under Section 12(5) of the Act, rendering the resulting award unsustainable and against the public policy of India. The Court also emphasized the violation of principles of natural justice in the arbitral proceedings.
Final Decision: The Arbitration Original Petition was allowed, and the Award dated 16.08.2022 passed by the learned Arbitrator was set aside. No costs were awarded, and the connected application was closed.
JUDGMENT
(Prayer: Arbitration Original Petition filed under Section 34(2)(a)(iii) of the Arbitration and Conciliation Act, 1996, to set aside the arbitral award dated 16.08.2022 passed by the sole Arbitrator in his proceedings in ACP No.KMBL/LCV/1347268/443 of 2022 and to direct the respondent to pay the costs.)
1. This Arbitration Original Petition has been filed by the petitioners seeking to set aside the arbitral award dated 16.08.2022 passed by the learned sole Arbitrator.
2. The 1st petitioner is the Honarary Secretary of the 3rd petitioner Soceity namely, Gyan Jyoti Shaikshanik Sasta, Nagpur. The said society runs and manages a school, namely, Shri Nithyanand Vidhya Niketan School, Napur. The 1st petitioner borrowed a sum of Rs.15,22,876/- by virtue of the Loan Agreement No. LCV1347268 dated 05.07.2019 from the respondent. The petitioners have admitted the fact about the disbursement of the said loan to purchase a commercial vehicle/school bus namely Mahindra Cosmo, registration No. MH40BL3729, engine No.4D85748 and chassis No.K3D13763 for the use of the 3rd petitioner society School. As per the terms and conditions of the aforesaid agreement, the petitioners have to pay a sum of Rs.15,22,876/- along with the interest in the form of equated monthly installments of Rs.34,133/-& Rs.36,062/- over a period of 58 months from July 2019. The 1st petitioner was regularly paying the monthly installments till September,2019. The 1st petitioner admitted the fact that after September,2019 he was unable to pay the EMIs because of Covid restrictions/lockdown, the schools in Nagpur were closed, due to which the operation of the said school bus was halted. So the petitioner could not pay the EMIs on time to the respondent due to his financial crisis. The petitioners were under impression that the respondent bank would be lenient to its customers who have availed loans because of the Government imposed National lockdown and the entire nation was facing financial strains. But suddenly out of the blue, without giving any notice, the respondent officials suddenly entered into the 3rd petitioner''s premises and coercively possessed the said vehicle, without following the due process of law on September,2020. After seizing the vehicle, the respondent demanded the 1st petitioner to pay atleast one installment in order to release the vehicle and to restructure the loan as requested by the 1st petitioner. Though the 1st petitioner paid EMI of Rs. 34,215/- on 30.01.2021, the respondent neither released the vehicle nor rescheduled the loan as promised by them till date.
3. Thereafter, all of a sudden, the 3rd petitioner received a notice on 07.09.2022 from the learned Arbitrator intimating the Award dated 16.08.2022, passed ex-parte against the petitioners. The petitioners were never intimated by the respondent for the appointment of Arbitrator and unilaterally appointed a sole Arbitrator by referring to arbitration clause contained in the said loan agreement. Though the 1st and 2nd petitioner had shifted their residences, the 3rd petitioner''s address remained the same throughout. The 3rd petitioner also never received any notice from the respondent, but they unilaterally appointed the sole Arbitrator. Further, the petitioners never received any notice from the learned Arbitrator as regards commencement of the arbitration proceedings which had been conducted in Chennai. The petitioners were completely unaware of the entire proceedings. They got to know only through the award that had been sent to the 1st petitioner''s former address and served on the 3rd petitioner. According to the petitioners, no notice has been duly served which prima facie made it clear from the fact that the learned Arbitrator only referred to “Proof of dispatch” of the Tribunal''s notice dated 03.03.2022 and another notice has been sent on 13.04.2022, but for both notices, there is no reference as to whether and when the notices were served upon the petitioners. The Tribunal sh
Unilateral appointment of an arbitrator without proper notice and in violation of statutory provisions renders the resulting award unsustainable and against the public policy of India.
The main legal point established in the judgment is that the appointment of the sole arbitrator unilaterally by one of the parties was improper and impermissible, violating the provisions of Section ....
Unilateral appointment of an arbitrator in violation of Section 12(5) of the Arbitration and Conciliation Act, 1996 renders the award unsustainable under law and against the public policy of India.
A unilateral appointment of an arbitrator by one party contravenes Section 12(5) of the Arbitration and Conciliation Act, rendering the arbitral award void ab initio and against public policy.
Unilateral appointment of an arbitrator in conflict with the provisions of the Arbitration and Conciliation Act, 1996 is non-est in law.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
