IN THE HIGH COURT OF ALLAHABAD
Neeraj Tiwari, J.
The Kisan Sahkari Chini Mills Limited and Another – Petitioners
Versus
M/s Sumac International Limited – Respondent
Matters Under Article 227 No. 2887 of 2022
Decided On : 25-04-2022
Arbitration - Appointment of Arbitrator - Act, 1940, Act, 1956 - Sections 8 and 9 of Act, 1940, Section 446(2) of the Company Act, 1956 - U.P. Cooperative Societies Act, 1965 - Section 70
Fact of the Case:
The petitioners challenged the appointment of an arbitrator under Sections 8 and 9 of Act, 1940, following the death of previous arbitrators. The respondent opposed the challenge, citing compliance with the appointment process and the inapplicability of U.P. Cooperative Societies Act, 1965.
Finding of the Court:
The court found that the appointment of the arbitrator was in accordance with the legal provisions and that the U.P. Cooperative Societies Act, 1965 was not applicable to the present case. The court concluded that no interference was warranted under Article 227 of the Constitution of India.
Issues: Challenge to appointment of arbitrator under Act, 1940, applicability of U.P. Cooperative Societies Act, 1965
Ratio Decidendi: Compliance with appointment process under Act, 1940, inapplicability of U.P. Cooperative Societies Act, 1965
Final Decision: The petition lacked merit and was dismissed with no order as to costs.
JUDGMENT :
1. Heard Sri Ravindra Singh, learned counsel for the petitioners through video conferencing and Sri Shashi Nandan, learned senior counsel assisted by Sri Ashish Malhotra, learned counsel for the respondent.
2. Present petition has been filed challenging the impugned order dated 08.03.2022 passed by Civil Judge (Senior Division), Bulandshahar in Misc. Case No. 151 of 2021, arising out of OS No. 827 of 1993.
3. Learned counsel for the petitioners submitted that there was an agreement between the petitioners and opposite party dated 18.04.1990 for certain work. The said agreement was also having arbitration clause and ultimately, some dispute arose and under provisions of Section 8 and 9 of Arbitration Act, 1940, as then it was applicable (hereinafter referred to as “Act, 1940”), Mr. Justice B.L. Loomba (Retired) was appointed as sole arbitrator in Arbitration Case No. 827 of 1993 (M/s Sumac International Limited Vs. State of U.P. and others) vide order dated 24.01.2000. He died on 03.05.2000 and thereafter, Hon'ble Mr. Justice Pradeep Kant (Retired) was appointed sole arbitrator under section 446(2) of the Company Act, 1956 (hereinafter referred to as “Act, 1956”). However, his appointment was set aside by this Court vide order dated 14.01.2016 passed in Special Appeal Defective No. 583 of 2015. Thereafter, Justice Vijay Manohar Sahai (Retired) was appointed as sole Arbitrator under Sections 8 and 9 of Act, 1940 and he also died on 11.05.2021. He next submitted that after his death, vide impugned order dated 08.03.2022, Justice R.N. Kakkar (Retired) was appointed as sole Arbitrator under Sections 8 and 9 of Act, 1940.
4. Learned counsel for the petitioners assailing the impugned order on three grounds; first ground is that Section 8 of Act, 1940 provides for notice to other side as well as opportunity to provide proposed list of Arbitrator, which has never been provided. Further, Justice R.N. Kakkar (Retired) has been appointed without his consent. About second ground, he next submitted that Section 70 of U.P. Cooperative Societies Act, 1965 (hereinafter referred to as “Act, 1965”) provides for disputes, which may be referred to arbitration. The present matter is pertaining to cooperative societies, therefore, Arbitrator would have been appointed under provisions of Act, 1965. He next submitted that as it is legal submission, therefore, it can be raised at any stage of proceeding. For third ground, he submitted that appointment of Justice Vijay Manohar Sahai (Retired) as Arbitrator has also been obtained by playing fraud for which criminal case is pending and in light of judgement of Apex Court in the matter of Abdul Kadir Shamsuddin Bubere Vs. Madhav Prabhakar Oak. 1962; AIR SC 406, no Arbitrator should have been appointed in such matters. Lastly, he submitted that under such facts and circumstances, impugned order is bad and liable to be set aside.
5. Sri Shashi Nandan, learned senior counsel opposed the submissions raised by learned counsel for the petitioners and submitted that so far as first ground of challenging the impugned order is concerned, after death of Justice Vijay Manohar Sahai (Retired), opposite party has filed Arbitration Case No. 151 of 2021 before Civil Judge (Senior Division), Bulandshahar for appointment of Arbitrator giving three names of proposed Arbitrator having name of Justice R.N. Kakkar (Retired) at Serial No. 1. Upon which, petitioners have filed detail objection and never raised any objection against the proposed Arbitrators. Case was heard on 4.3.2022 in presence of counsel for both sides and telephonic consent was taken from Hon'ble Mr. Justice R.N. Kakkar (Retired) on mobile phone. Further, time was granted to provide list of Arbitrator as provided in Sections 8 and 9 of Act, 1940 and date of 7.3.2022 was fixed. As petitioners have never provided any list, therefore, Court proceeded to pass impugned order appointing Mr. Justice R.N. Kakkar (Retired) as Arbitrator, therefore, ground of not
The main legal point established in the judgment is the significance of parties' consent in appointing arbitrators and the consequences of their conduct in adhering to the arbitration agreement.
The unilateral appointment of a Sole Arbitrator by one party, without proper invocation under the Act, is invalid and constitutes an abuse of the process of law.
The petitioner must first seek termination of the existing Arbitrator's mandate through the appropriate civil court before requesting a new Arbitrator, as the existing proceedings had commenced.
The interpretation of Section 15(2) of the Arbitration and Conciliation Act, 1996 is that where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the ru....
Technical dismissals/withdrawals do not bar Section 15 application for substitute sole arbitrator post prior death; mandate terminates under Act only for specified reasons, courts must facilitate res....
The court affirmed that statutory arbitration procedures were followed, and the appellants could not challenge the arbitrator's appointment after agreeing to arbitration in the loan agreement.
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