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2023 Supreme(All) 2447

IN THE HIGH COURT OF ALLAHABAD
ROHIT RANJAN AGARWAL, J.
M/S Bharat Pumps And Compressors Limited and Others - Appellants
Versus
M/S Chopra Fabricators And Manufacturers Private Limited and Another - Respondents
APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 NO. 146 OF 2022 AND FIRST APPEAL FROM ORDER NO. 1514 OF 2022.
Decided On : 04-12-2023

Advocates appeared:
For the Appellant : Pradeep Kumar Sinha.
For the Respondent: Rahul Mishra.

Notice under Section 14(2) of the Old Arbitration Act must be properly served prior to confirming an arbitral award, or it renders the award and subsequent judgment invalid.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 37 - Old Arbitration Act, 1940 - Sections 9(b), 14, 17, and 41(a) - Appeals against order and ex-parte award - The appellant contended that the appointment of the arbitrator was not in accordance with the agreement; also raised issues regarding service of notice. The court observed that proper notice under Section 14(2) was not served before making the award rule of court, and that the lower court's findings on notice were not substantiated. The findings emphasized that the arbitrator lacked jurisdiction as the agreement had expired. The decisions of the lower court were set aside, and the matter was remitted back for fresh consideration. (Paras 48-49)

Facts of the case:
The parties entered an ancillary agreement with an arbitration clause in 1983. A dispute arose, leading the respondent to appoint an arbitrator despite the appellant already having appointed one. An ex-parte award was issued, which the appellant later challenged, claiming lack of notice.

Findings of Court:
The lower court's decisions were based on assumptions regarding service and failed to adequately address the jurisdictional questions.

Issues: Whether the appointment of the arbitrator was valid and whether proper notice was served under arbitration laws.

Ratio Decidendi: The court held that the proper procedure under the Arbitration Act was not followed, making the order invalid and emphasizing the need for specific findings on service.

Result: Orders set aside and matter remitted back for fresh consideration.

Table of Content
1. petitions filed under arbitration act 1996. (Para 1 , 2)
2. background of the arbitration agreement and disputes. (Para 3 , 4 , 5 , 6 , 10)
3. respondent's claims and arbitrator's decision. (Para 7 , 8 , 9)
4. civil court's involvement in arbitration enforcement. (Para 11 , 12 , 13)
5. connection of appeals and agreement to argue together. (Para 14 , 15)
6. arguments regarding appointment and service of notice. (Para 16 , 17 , 18 , 19 , 20 , 21 , 22)
7. allegations of non-service of notice and rights to challenge. (Para 25 , 26 , 28)
8. clarification on arbitration process and agreements. (Para 32 , 33 , 34 , 35 , 36 , 37)
9. court's obligations regarding notice and service. (Para 38)
10. court's obligation to ensure due process in arbitration. (Para 39 , 40 , 41 , 42 , 43 , 44 , 46 , 47)
11. order to set aside previous judgments. (Para 48)
12. final outcome: appeals partly allowed. (Para 49)

JUDGMENT

Rohit Ranjan Agarwal, J.

These are two connected appeals one being Arbitration Appeal No. 146 of 2022 filed under Section 37 of Arbitration and Conciliation Act, 1996 (hereinafter called as 'Act of 1996'), treating it to be under Section 39 read with Section 17 of ARBITRATION ACT , 1940 (hereinafter called as 'old ARBITRATION ACT ') against the order dated 28.04.2022 passed by Civil Judge (Senior Division) acting as Small Cause Court in Misc. Case No. 4 of 2004 and also arbitral award dated 01.01.1992 made by Kashi Nath, Advocate.

2. The other appeal being F.A.F.O No. 1514 of 2022 has been preferred against the judgment and order dated 27.04.2022 passed by Civil Judge (Senior Division)/ Judge Small Causes Court in Misc. Case No. 5 of 2004 arising out of Original Suit No. 57 of 1992, on the application filed under Order 9 Rule 13 CPC for setting aside the ex-parte decree against the defendant-appellant.

3. The brief facts leading to filing of these two appeals, are that appellant before this Court is a Government of India undertaking under the administrative control of Union Ministry of Heavy Industries and Public Enterprises and registered as Government Company under the Companies Act. The contesting plaintiff-respondent no. 1 is a private limited Company which was incorporated on 28.05.1985 under the provisions of Companies Act, at present, the name of the company has been struck off from Register of Companies maintained by Registrar of Companies, Kanpur, due to non-compliance of the provisions of Companies Act since 2006.

4. One Harindar Singh Chopra, a proprietorship firm entered into an agreement with the appellant on 05.07.1983 as its ancillary unit for manufacture of fabricated items and accessories. The ancillary unit of Harindar Singh Chopra was thereafter registered as a private limited Company in the year 1985, and he became Managing Director of the Company. Clause 19 (viii) of the agreement provides for the validity period which was seven years. Further, Clause 19 (ix) (a) and (b) provided for the matter being referred to an Arbitrator appointed by Executive of the appellant-Company in case of any dispute, and award/decision rendered by the Arbitrator to be final and binding on both the parties. At the time of execution of agreement, old ARBITRATION ACT was in operation.

5. Dispute arose between the parties, and on 05.05.1991, plaintiff-respondent no. 1 gave a notice to the appellant calling for appointing an Arbitrator. In para no. 5 of the notice, it was mentioned that ancillary agreement expired in July, 1990, which was not renewed. Thus, as per the condition of supply contract of appellant which is in print-agreement regarding unpaid bills, interest the notice was given for appointing Arbitrator from the appellant side and one Arbitrator to be appointed by respondent and in case of difference of opinion between Arbitrators, there was a clause of appointing an Umpire and in para no. 9, the names of four umpires were suggested.

6. The respondent on 30.10.1991 informed the appellant that they had appointed one

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