Participation in arbitration without objection constitutes a waiver of the right to challenge the appointment of the arbitrator, as per Sections 4 and 12 of the Arbitration and Conciliation Act.

JUDGMENT :

THE CHIEF JUSTICE

Prayer : Appeals under Section 37 of the Arbitration and Conciliation Act, 1996 read with Clause 15 of the Letters Patent read with Order 36 Rule 1 of the Original Side Rules and Section 13(1) of the Commercial Courts Act, 2015 to set aside the common order dated 20.4.2023 made in Arb. O.P. (Com. Div) No.257 of 2021 and 209 of 2022.

Appellant, unhappy with the order dated 20.4.2023 passed by the learned Single Judge under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act), has preferred these appeals under Section 37 of the Act. The learned Single Judge, by the impugned order, set aside an award dated 22.3.2021 made by the Sole Arbitrator, Hon'ble Mr. Justice A.Ramamoorthy, a Former Judge of the Madras High Court, inter alia, on grounds of appointment of the Sole Arbitrator purportedly being foul of the Seventh Schedule read with Section 12 of the Act.

2. Appellant is engaged in the business of developing and operating commercial projects and malls. First respondent, which is engaged in the business of operating and running retail textile outlets in the State of Tamil Nadu, popularly known as “The Chennai Silks”, was inclined to open a store in the mall owned and operated by appellant in Chennai. The mall was called VR Chennai Mall (hereinafter referred to as “the Mall”).

3. Appellant and first respondent executed necessary documents, by which first respondent took on lease a space with a carpet area of 34,434 sq.ft. in mall that was owned and operated by appellant. A lease deed dated 12.9.2018 was executed and the same was also registered in the Sub Registrar Office, Anna Nagar. An addendum to the lease deed was executed between the parties on 25.9.2018. Appellant handed over possession of the premises to first respondent on 5.9.2018 and issued a possession notice in this regard. The lease deed was for a term of nine years, with a lock-in period of 36 months commencing from 30.11.2018.

4. First respondent, subsequently, vide email dated 14.12.2018, terminated the lease deed stating “due to unforeseen and unavoidable circumstances the Management of The Chennai Silks have decided not to proceed with the proposed store Nachaas at VR Mall, Chennai.” First respondent also sought refund of the security deposit of Rs.75,75,480/-.

5. Appellant, by a reply dated 23.1.2019, informed respondents that the lease deed provided a lock-in period of 36 months and that respondents had no unilateral right to terminate the lease deed before the expiry of the lock-in period. Respondents were also called upon to pay compensation of Rs.11,88,16,397/-. By the said letter dated 23.1.2019, appellant invoked the arbitration clause, i.e., Clause 17.7(b) of the lease deed read with Clause 20 of the Addendum. Clause 17.7 (b) reads as under:

“17.7(b) of the Deed of lease:

If any question of difference or claim or dispute shall arise between the parties herein touching these presents or the construction thereof to rights, duties or obligations of the parties hereto or as to any matter arising out of or connected with the subject matter of these presents, the same shall be referred to the arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and amendments. The seat of arbitration shall be Chennai. The reference shall be to a Sole Arbitrator to be appointed by the Lessor. The arbitrator shall render the award in English language and in writing. The Parties agree to abide by the decision of the arbitrator, which shall be final and binding." [emphasis supplied]

6. The Sole Arbitrator was nominated by appellant in accordance with the dispute resolution clause. The Arbitrator entered into reference and issued a preliminary notice dated 7.2.2019 to the parties. The Arbitrator fixed 27.2.2019 as the date for preliminary hearing.

7. Without any demur, protest or objection, respondents participated in the arbitration proceedings before the Sole Arbitrator. Admittedly, as submitted by learned co