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Hedge Finance Private Limited VS Bijish Joseph, S/o K. M. Joseph - 2022 0 Supreme(Ker) 745 : The court set aside the interim award passed by an ineligible arbitrator in the case of Hedge Finance Ltd vs Bijish Joseph, holding that such an award is unenforceable under Section 17 of the Arbitration and Conciliation Act, 1996. The court emphasized that post-2015 amendments require arbitrators to be neutral and impartial, and an interim award by an arbitrator who does not meet this standard cannot be enforced. This decision effectively overturned the enforcement of the interim award in favor of Hedge Finance Ltd against Bijish Joseph, thereby constituting a legal decision against the original arbitral award in their dispute.Checking relevance for Charles(died) VS Leela...
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Summary of Decision Against Hedge Finance vs. Bijish Joseph
Unilateral Arbitrator Appointment - Multiple judgments, notably in Hedge Finance Pvt. Ltd. v. Bijish Joseph ILR 2022 (3) Ker. 947, establish that appointment of an arbitrator must adhere to statutory mandates, especially post-2015 amendments. The courts have held that unilateral appointment by one party, without mutual agreement, violates these principles. For example, in ["VADAKKEMURYIL FINANCE COMPANY (INDIA) LTD vs ABDULLA. M.M - Kerala"], it was noted that the decision in Hedge Finance's case cannot have any application in the facts and circumstances of the present case, implying that unilateral appointments are problematic.The appointment in Hedge Finance (supra) was made unilaterally by one of the parties to the agreement, namely Hedge Finance. ["SUNDARAM FINANCE LTD vs AJITH LUKOSE S/O. O.A.LUKOSE - Kerala"]
Application of Hedge Finance Doctrine - Courts have relied heavily on the Hedge Finance case to dismiss petitions or execution proceedings where the arbitrator was appointed unilaterally or in violation of statutory procedures. For instance, in ["TRAVANCORE RURAL DEVELOPMENT PRODUCER COMPANY LTD. vs ASHRAF.I - Kerala"] and ["TRAVANCORE RURAL DEVELOPMENT PRODUCER COMPANY LTD. vs ASHRAF.I - Kerala"], the courts dismissed execution petitions, citing that the appointment was against the mandate in Hedge Finance, which emphasizes that arbitration must be in accordance with the law and mutual agreement.The appointment of Arbitrator was against the mandate contained in the decision of this Court in Hedge Finance. ["TRAVANCORE RURAL DEVELOPMENT PRODUCER COMPANY LTD. vs ASHRAF.I - Kerala"]
Rejection of Arbitrator Appointment Based on Statutory Requirements - The courts have underscored that post-2015 amendments restrict the modes of sole arbitrator appointment to two: by mutual agreement or by court order, explicitly excluding unilateral nominations. For example, in ["VADAKKEMURYIL FINANCE COMPANY (INDIA) LTD vs ABDULLA. M.M - Kerala"], it was held that the order dismissing the execution petition was liable to be interfered with because the arbitration process did not follow these principles.Post-2015 amendment era, there are only two modes of appointment of a sole Arbitrator...by order. ["TRAVANCORE RURAL DEVELOPMENT PRODUCER COMPANY LTD. vs SHIHABUDEEN M. - Kerala"]
Distinction in Cases of Institutional Nomination - The courts have clarified that Hedge Finance's decision involved unilateral appointment, which is not permissible under the amended law. In ["SUNDARAM FINANCE LTD vs AJITH LUKOSE S/O. O.A.LUKOSE - Kerala"], it was emphasized that the decision in Hedge Finance did not address a situation where an institution was requested to nominate an arbitrator, making the case distinguishable from the present scenario.
Impact on Proceedings and Orders - Many courts have set aside or criticized orders that relied solely on Hedge Finance without considering the statutory requirements for arbitration. For instance, in ["VADAKKEMURYIL FINANCE COMPANY (INDIA) LTD vs ABDULLA. M.M - Kerala"] and ["TRAVANCORE RURAL DEVELOPMENT PRODUCER COMPANY LTD. vs ASHRAF.I - Kerala"], the courts interfered with orders dismissing petitions based on improper arbitrator appointment, reinforcing that such decisions are liable to be challenged if not compliant with law.
Analysis and Conclusion
The overarching insight is that the courts have consistently held that unilateral appointment of arbitrators, as seen in the Hedge Finance case, violates statutory mandates introduced after the 2015 amendments to the Arbitration Act. Decisions relying solely on Hedge Finance to dismiss petitions or orders are often overturned or interfered with when they do not adhere to the prescribed legal framework. The law now emphasizes mutual agreement or court appointment, and unilateral nominations are considered invalid, leading to decisions against such appointments in the context of disputes involving Bijish Joseph.
References:- ["VADAKKEMURYIL FINANCE COMPANY (INDIA) LTD vs ABDULLA. M.M - Kerala"]- ["M/S. SHRIRAM FINANCE LIMITED vs SREELATHA S. - Kerala"]- ["CLEAR CREDITS AND INVESTMENT PRIVATE LIMITED vs THOBY C. A - Kerala"]- ["M/S EASTERN TREADS LTD vs C.SANTHOSH KUMAR - Kerala"]- ["TRAVANCORE RURAL DEVELOPMENT PRODUCER COMPANY LTD. vs ASHRAF.I - Kerala"]- ["Junaid Pullat vs M/s. Hedge Finance Limited - Kerala"]- ["TRAVANCORE RURAL DEVELOPMENT PRODUCER COMPANY LTD. vs ASHRAF.I - Kerala"]- ["TRAVANCORE RURAL DEVELOPMENT PRODUCER COMPANY LTD. vs SHIHABUDEEN M. - Kerala"]- ["TRAVANCORE RURAL DEVELOPMENT PRODUCER COMPANY LTD. vs DIVYA LEKSHMI SANAL - Kerala"]- ["CLEAR CREDITS AND INVESTMENT PRIVATE LIMITED vs JOHN PRINCIL - Kerala"]- ["NAVIO SHIPPING PVT. LTD. vs UNION OF INDIA - Kerala"]- ["S.ANI vs SOUTHERN RAILWAY - Kerala"]- ["SUNDARAM FINANCE LTD vs AJITH LUKOSE S/O. O.A.LUKOSE - Kerala"]
