Mandatory requirement of consent in arbitrator appointments, absence of which leads to lack of jurisdiction and invalidity of the award.

ORDER :

1. This petition has been filed assailing the award passed by the Arbitral Tribunal dated 26.07.2016 under Section 34 of the Arbitration and Conciliation Act, 1996 (for brevity hereinafter referred to as "the Act").

2. The brief facts of the case is that the respondent Corporation called for dealership for retail outlet and the petitioner applied for the same and the petitioner was allotted with the dealership at Uthiramerur (SC) and Letter of Indent (LOI) was issued on 05.09.2005.

3. The necessary licenses and other no objection certificates were also granted in favour of the respondent for running the retail outlet.

4. The lease deed dated 30.06.2006 was also entered into with the land owner and the lease agreement was registered in the concerned Sub-Registrar Office as Document No.1157 of 2006. After the lease deed was registered, subsequent permissions were also granted. Ultimately, work order dated 20.11.2006 was issued with an altered design of two diesel tanks by changing the SAP CODE 4808 instead of SAP CODE 4804 which is a Mat raft Foundation.

5. The retail outlet was commissioned on 31.07.2007 and the petitioner was appointed as the dealer vide dealership agreement dated 13.08.2007. The retail outlet was made operational from 10.08.2007. The further case of the petitioner is that they started facing problems and the same was intimated to the respondent Corporation and on verification, it was found that there was leakage in the pipeline and this problem was solved only on 16.08.2007. As a result of this leakage, the petitioner also faced loss of stock.

6. The problems of the petitioner persisted and the petitioner stopped the operation of the retail outlet from 08.12.2008. As a result of the dispute between the parties, the petitioner requested the respondent to refer the dispute to the arbitrator by a communication dated 16.12.2008. A sole arbitrator was appointed but however the arbitral tribunal terminated the proceedings through order dated 10.08.2009.

7. The respondent Corporation thereafter issued a Show Cause Notice dated 16.11.2011 calling upon the petitioner to show cause as to why the Pump Dealership Agreement dated 13.08.2007 should not be terminated as per the provisions of the dealership agreement clauses.

8. A reply was given by the petitioner on 26.11.2011, however, the reply did not satisfy the Corporation and hence it resulted in the termination of dealership through a notice dated 08.01.2013.

9. Pursuant to the termination of the dealership agreement, the petitioner issued a notice dated 06.02.2013 for appointment of an arbitrator. While issuing this notice, the petitioner specifically took a stand that only a third party arbitrator should be appointed in this case since the petitioner does not have any confidence in having the officials of the respondent Corporation as the arbitrator.

10. In spite of the objections raised by the petitioner, one of the official belonging to the respondent Corporation, namely, the Director of Pipeline, IOCL was appointed as the Sole Arbitrator. Left with no other alternative, the petitioner filed the claim statement before the sole arbitrator by making the following claims:

“i) Directing the respondent herein to cancel the termination order dated 08.01.2013 and consequently direct the respondent to allot New retail outlet with all facilities as per law within a time frame fixed by this Hon’ble Internal Arbitrator.

ii) Directing the respondent to pay damages and compensation amounting to a sum of Rs.7,45,65,297/- (Ru