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2026 Supreme(Mad) 2547
IN THE HIGH COURT OF JUDICATURE AT MADRAS
P. VELMURUGAN, K. GOVINDARAJAN THILAKAVADI, JJ.
Mrs. B. Anubhama - Appellant
Versus
S. Baskaran – Respondent
OSA No. 87 of 2019 And CMP No. 8575 of 2019
Decided On : 16-07-2026
For the Appellant :Mr. S.R. Rajagopal, Senior Advocate for Mrs. R. Balambigai Gowri
For the Respondent:Mrs. Chitra Sampath, Senior Advocate for Mr. V.R. Anna Gandhi.
An arbitral award passed ex parte without providing fair and effective opportunity to present evidence, including a material plea of discharge of liability, is patently illegal and violates natural justice, warranting its setting aside rather than modification by the supervisory court under Section 34.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 18, 24, 25(c), 34(2)(a)(iii) and 34(2-A) - Arbitral proceedings - Ex parte award - Setting aside of award - Principles of natural justice - Failure to provide reasonable opportunity of hearing - Arbitral Tribunal proceeding ex parte after single notice - Mandatory duty to ensure fair and effective opportunity - Non-consideration of plea of discharge of liability renders award patently illegal - Section 34 Court has no power to modify award to exonerate parties - Jurisdiction of Section 34 court is supervisory, not appellate - Matter remanded for fresh adjudication.
Facts of the case:
The appeal arose from an arbitral award where the appellant was ordered to pay a significant sum based on a Memorandum of Understanding regarding real estate facilitation services. The appellant alleged that proceedings were conducted in violation of natural justice, as the arbitrator proceeded ex parte after only one notice, depriving her of the opportunity to prove the discharge of debt through payments made to other partners. The Single Judge upheld the award but modified it to exonerate the respondent/agent under the Indian Contract Act, 1872.
Findings of Court:
The court found that the arbitrator failed to ensure a fair opportunity for the appellant to present her case. Furthermore, the court held that the Single Judge exceeded the supervisory jurisdiction under Section 34 by attempting to modify the award to exonerate a party, which was legally impermissible at the relevant time and outside the scope of such proceedings.
Issues: The main issues involved the breach of natural justice in ex parte arbitral proceedings, the scope and power of the Court to modify an arbitral award under Section 34, and the personal liability of a Power Agent under the Indian Contract Act.
Ratio Decidendi: The court established that Section 34 of the Act confers only limited supervisory jurisdiction and does not empower the Court to re-appreciate evidence, decide fresh issues, or modify an award. The denial of reasonable opportunity to address the plea of discharge of liability at the arbitral stage vitiates the award as being patently illegal.
Result: Original Side Appeal allowed; Impugned order and arbitral award set aside; matter remanded for fresh adjudication.
JUDGMENT :
K. Govindarajan Thilakavadi, J.
This appeal is filed praying to set aside the order dated 09.11.2017 passed in OP No.19 of 2015.
2. For the sake of convenience the parties are referred to as per their ranking in the Tribunal.
3. Facts leading to invoke arbitral proceedings are as follows:
3.1. The claimant, namely, M.V, Salai Abarama, is in Real Estate Business and offers his services on service charge basis by identifying prospective buyers for any offer of sale of land by any third party. The 1st respondent in the Arbitral proceeding and appellant herein, namely,Mrs.S.Anubama is doing Real Estate business under the name and style M/s. Sameera Associates. The 2nd respondent, namely, Mr.S.Baskaran is the husband and Power Agent of the 1st respondent. The 1st respondent is engaged in purchasing and organising purchase of pieces of land from various third parties, consolidate the same, prepare layout and offer it for sale to prospective buyers through her Power of Attorney. The 2nd respondent for and on behalf of the 1st respondent approached the claimant and respondents 3 and 4, namely, R. Kalanjiam and K. Venkatraman to fix and nominate buyer in 1170 acres in villages such as Thirumangalam, Vasanapattur, Thirupandiyur, Mampakkam, Kaliyamanikkam and other villages in Sripeumbudur Taluk. Respondents 1 and 2 promised to pay service charge of Rs.1,500/- per cent jointly to the claimant and respondents 3 and 4, which was to be shared by them in equal share. The service charges had to be paid at the time of registration of every sale deed. A Memo of understanding was entered into on 19.05.2006 incorporating the clauses relating to offer of payment of service charges and the same was accepted and signed by the parties. The Memo of Understanding also provides for Arbitration to resolve disputes arising between the parties.
3.2. M/s. ETA Star Properties Developers purchased through respondents 1 and 2, 500 acres in the above villages identified by the claimant. Hence, the respondents 1 and 2 are liable to pay Rs.7,50,00,000/- jointly to the claimant and the respondents 3 and 4, out of which the claimant is legally entitled to a sum of Rs.2,50,00,000/- towards his share. The respondents 1 and 2 have paid only Rs.27,00,000/- to the claimant leaving a balance of Rs.2,23,00,000/-. Hence, the claimant filed a Claim before the Arbitral Tribunal claiming that he is entitled to interest at the rate of 24% till the date of Claim Petition in a sue of Rs.1,60,56,000/- and future interest and costs.
3.3. The respondents were served with notice. Respondents 1 and 2 represented by counsel and though took several adjournments for filing their counter, remained absent. Respondents 3 and 4 also remained absent.
3.4. The learned Arbitrator, having found that the respondents did not evince any interest to appear, passed the Award with the available material in favour of the claimant by directing the respondents 1 and 2 to pay a sum of Rs.2,57,92,000/- with interest at the rate of 12% from 02.12.2010 till the date of realisation within a period of six months from the date of Award and further directed the respondents 1 and 2 pay a sum of Rs.6,04,000/- to the claimant towards cost of the claim.
3.5. Aggrieved over the same, petitions were filed by the respondents 1 and 2 under Section 34 of the Arbitration and Conciliation Act, 1996 (in short A&C Act, 1996) in O.P. Nos.19 and 18 of 2015 respectively. The learned Single judge while allowing the Petition in O.P. No.18 of 2015 filed by the 2nd respondent (Power Agent of the 1st respondent) on the ground that for any action or inaction relatable to the Principal, the agent cannot be made liable, dismissed O.P. No.19 of 2015.
4. Aggrieved over the same, the 1st respondent has filed the present appeal.
5. The present appeal challenges the order dismissing the petition filed by the appellant under Section 34 of the A&C Act, 1996, in O.P. No.19 of 2015. By the same impugned order, the petition filed by the 2nd res
