Delhi District Court
Pratibha Vidyalayam vs . M/S. Educomp Solutions Ltd. & Ors. on 10 April, 2019
Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
IN THE COURT OF SH. ARUN SUKHIJA,
ADDITIONAL DISTRICT JUDGE - 07, (CENTRAL DISTRICT)
TIS HAZARI COURTS, DELHI.
ARBN. NO. : 02/2018
UNIQUE CASE ID NO. : 59/2018
IN THE MATTER OF :
Pratibha Vidyalayam
Near Bus Stand, Sabbavaram,
Andhra Pradesh - 531035. ....Petitioner
VERSUS
1. M/s. Educomp Solutions Ltd.,
Having its office at:
1211, Padma TowerI,
5, Rajendra Place,
New Delhi - 110008.
2. Edu Smart Service Pvt. Ltd.
Having its office at
L74, Mahipalar Extension,
New Delhi - 110037. ....Respondents
3. Mr. Arun Batta (Advocate), Sole Arbitrator 385, Lawyers Chamber, BlockII, Delhi High Court, New Delhi - 110003. ....Performa Respondent Arbt. No. 02/2018 Page 1 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
APPLICATION/OBJECTIONS FILED ON BEHALF OF PRATI BHA VIDYALAYAM UNDER SECTION 34 OF THE ARBITRA TION AND CONCILIATION ACT, 1996 FOR SETTING ASIDE THE EXPARTE AWARD PASSED ON 10.1.2017 BY THE SOLE ARBITRATION AGAINST THE PETITIONER.
Date of institution of the Petition : 10/01/2018 Date on which Judgment was reserved : 20/03/2019 Date of Judgment : 10/04/2019 :: J U D G M E N T ::
By way of present judgment, this court shall conscien tiously adjudicate upon the application/ objections filed on behalf of Pratibha Vidyalayam under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the exparte Award passed on 10/01/2017 filed by the applicant/ objector against the respon dents.
CASE OF THE APPLICANT/ OBJECTOR AS PER PETITION Succinctly, the necessary facts for just adjudication of the present petition, as stated in the petition, are as follows:
(a) The petitioner is a school in a rural area of the backward dis trict of Vizag District, Andhra Pradesh. This institution was lured by Respondents no. 1 and 2 to start a Smart Class Pro gramme. Petitioner and Respondents no. 1 and 2 entered into an Agreement under which Respondents no. 1 and 2 were to Arbt. No. 02/2018 Page 2 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
provide service of smart class programme to the petitioner school and accordingly, hardware was supplied and payment was also made to Respondents no. 1 and 2. The respondents provided service for 6 months and petitioner made final pay ment. The Agreement contained no clause with regard to con sideration and there was no agreement in law. The clauses in Agreement at 5.1.2 and 5.2.3 are not stipulated. There is no period prescribed but a vague clause is inserted with regard to termination of the Agreement. They also provided the option for termination with Respondents no. 1 and 2 only and this petitioner was made dump and num party and was subjected to imposition of unfair practice and had no proper role. The Agreement is one sided and opposed to contract act.
(b) The petitioner has paid a sum as per agreed amount by way of cheque and cash to Respondents no. 1 and 2. The Respon dents no. 1 and 2 raised untenable and illegal claims for a sum of Rs.20,97,998.21p with interest without adjusting the payment made.
(c) Respondents no. 1 and 2 unilaterally had appointed respon dent no.3 as an Arbitrator in defiance. The appointment of Ar bitrator itself is opposed to the terms of Contract. No notice was served in accordance with law i.e. Section 21 of Arbitra tion & Conciliation Act, 1996 and no intimation was delivered to the present petitioner regarding the appointment of Arbitra Arbt. No. 02/2018 Page 3 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
tor. The Ld. Arbitrator has also not served any notice as to communication of arbitral proceedings to the petitioner school.
(d) The exparte Award dated 10.01.2017 was passed by Ld. Sole Arbitrator behind the back of the petitioner school. Signed copy of the Award was also not served by respondent no.3 on the petitioner school. Petitioner school came to know about the passing of the impugned Award only in the second week of December 2017 i.e. 18.12.2017.
(e) The petitioner school was approached in the last week of De cember, 2017 by Sh. Narayana, Revenue Assurance - Divi sional Manager of respondents no. 1 and 2 alongwith their Counsel and they asked the petitioner school to make the payment of the alleged amount of Rs.20,97,998.21p in terms of impugned arbitration Award dated 10.01.2017. When the petitioner school told them that they had no knowledge of any alleged arbitration proceedings and also any alleged Award dated 10.01.2017, then only they supplied copy of the alleged Award dated 10.01.2017 and also informed the petitioner school that they have already filed execution petition seeking execution of the Award dated 10.01.2017 in the Court of Hon'ble District Judge, Kurnool.
(f) The petitioner school has not received any original signed Award by the Ld. Arbitrator and has received only a copy of Arbt. No. 02/2018 Page 4 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
the same on 18 December, 2017 and thus, the present objec tion petition is within time in terms of Section 34 of the Arbi tration & Conciliation Act, 1996.
(g) The petitioner school is only having a copy of impugned Award dated 10.01.2017 without any copy of documents and Claim Petition filed by respondents no. 1 and 2 before respondent no.3, therefore, the petitioner school reserves its rights to amend the present petition after receiving the arbitration pro ceedings by the Ld. Arbitrator in this Court.
(h) Feeling aggrieved from the above exparte arbitral Award dated 10.01.2017, the applicant preferred the application/ ob jection interalia on the following grounds:
(i) The impugned Award is opposed to principle of natural justice, in so far as no intimation with regard to the ap pointment of Arbitrator and hearing of Ld. Arbitrator was ever given to the petitioner school.
(ii) The respondents have not properly served the notice with regard to the commencement of proceedings in terms of Section 21 of Arbitration & Conciliation Act, 1996 to the petitioner school. The impugned Award is li able to be set aside since the petitioner school is put to financial incapacity since petitioner school is located at far away from Andhra Pradesh State in rural area.
Arbt. No. 02/2018 Page 5 of 34Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
(iii) There was no dispute contemplated on the terms of ref erence were unilaterally placed before the Arbitrator without any prior notice with regard to the settlement of the terms of reference.
(iv) Absolutely false, imaginary, wrong, distorted and mis leading facts were placed before the Ld. Arbitrator re sulting into passing of exparte Award, not only the ser vice of summons has been manipulated in connivance with Ld. Arbitrator in as much as the Ld. Arbitrator adopted biased attitude qua the petitioner and miserably failed to appreciate and analyze the correct facts.
(v) Ld. Arbitrator has no jurisdiction to initiate the proceed ing and pass exparte Award. Agreement dated 08.03.2012 was entered into, executed, signed and con cluded at VIZAG, Andhra Pradesh. The services, under the Agreement, were provided at Vizag and final pay ment was made at Vizag District.
(vi) The Award dated 10.01.2017 is passed by respondent no.3 accepting the claim of Respondents no. 1 and 2. The impugned Award has been passed against the prin ciples of natural justice. The impugned Award has been passed in a mechanical manner and without applying the mind and law of land. The respondents had manip ulated the documents.
Arbt. No. 02/2018 Page 6 of 34Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
(vii) As per contents of the Award, the notice was sent for hearing on 19.11.2015 was never received. The notice sent for hearing on 10.12.2015 was also never received.
(viii) With regard to the service of notice, the Ld. Arbitrator has heavily relied upon Section 3 of Arbitration & Con ciliation Act, 1996. In case Section 3 is read carefully, the impugned Award is illegal and against the provisions of this Section. As per Section 3, any communication is deemed to have received if it is delivered to the ad dressee personally or at his place of business, habitual residence or mailing address. In the present case, Ld. Arbitrator himself has admitted the receiving back of the notices. Hence, there was no proper service.
(ix) There were various deficiencies in the services of the re spondents as throughout the period of their function in the school, due to technical problem, the respondents were unable to provide uninterrupted service to the stu dents, which the respondents did not improve in spite of repeated requests and reminders and then, it was de cided to terminate the arrangements. It was acknowl edged by the respondents thereafter no service of re spondents availed.
(x) The Marketing Executive of the claimant misrepresented about the pricing of the material to be supplied for im Arbt. No. 02/2018 Page 7 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
plementation of the so called Smart Class Program. Af ter getting the assurance from them regarding the rea sonable pricing of 50 per month/ per student. The peti tioner was duped to sign the blank agreement to be duly filled by the respondents and thereafter, to be formu lated to the petitioner for confrontation. Copy of the Agreement in possession of the petitioner entails blank at various places, to be filled in by the respondents with the information essential to the formation of the valid contract. The place of agreement is not mentioned any where in the Agreement, therefore, there was no tripar tite Agreement. There was only an offer by the respon dents and the same was never consented to the peti tioner in the manner it is pleaded.
(xi) The said tripartite agreement is not valid and enforce able. The respondent having barraging power kept on pressurized the petitioner with respect to installation of smart class program at highly exorbitant rates. The pe titioner had established a small institution aiming to serve the poor in view of adopting and rendering good education service in the economically backward area. The petitioner is running the institution in a nonprofit motive with limited resources and lowest fees, which can be affordable by poor parents. The petitioner asked the Arbt. No. 02/2018 Page 8 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
respondents to arrange a demonstration class in the school in the presence of parents and after the positive consent of the parents only, the petitioner could order the Smart Class Rooms because in any manner, the ad ditional burden shifts on the parents only. Due to poor performance of the respondents, the reputation of the petitioner school was damaged.
(xii) The connivance of respondents is clear as the Ld. Arbi trator has awarded the interest @ 18% p.a. from 10.12.2015. The respondent no.1 has already added in the claim amount the interest upto 10.01.2017. Under which law and how the Ld. Arbitrator has awarded the interest on the amount @ 18% p.a. from 10.12.2015. Even according to the Award, when the claim was filed, the respondents no. 1 and 2 have already added interest upto 10.01.2017. The entire claim is usurious.
(xiii) If the petitioner school was exparte, it was the duty of the Arbitrator to look into the genuineness of the claim, at what rate interest and other expenses have been claimed, what amount for OD of delay installment and at what rate the same has been charged. The award of the other interest @ 18% p.a. is usurious, illegal and prix of conscience of any prudent person. In an era when the prime lending rate of commercial bank is Arbt. No. 02/2018 Page 9 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
around 11% p.a., interest @ 18% p.a. cannot be awarded. Even in the case of Commercial Bank, the Hon'ble Supreme Court has held that simple interest @ 6% is justified and fair.
CASE OF THE RESPONDENTS AS PER REPLY Notice of the petition was issued to the Respondents no.1 and 2 and they have filed reply to the objections. Succinctly, the Respondents no.1 and 2 have made the following averments:
(a) The purported challenge to the Award dated 10.01.2017 is neither maintainable in law nor on the facts of the present case. None of the grounds, on which the arbi tral Award can be challenged in accordance with the provisions of the Act, have even been pleaded.
(b) Arbitration proceedings were conducted as per arbitra tion clause provided in the Agreement between the par ties. The Award is in accordance with most basic no tions of morality and justice. The Award is passed with reasons and justification and it does not in any way shocks the conscience of the Court, which is paramount condition for setting aside of the Award.
(c) The petition stated to have been filed under the provi sions of Section 34 of Arbitration & Conciliation Act, 1996 for setting aside of an Arbitral Award dated 09.12.2016 is not maintainable and is liable to be dis Arbt. No. 02/2018 Page 10 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
missed as the petition is barred by limitation. There is a delay of 373 days (approximately) in filing the petition.
(d) The Award has been passed after due procedure pre scribed under the Act and appreciation of judicial mind.
(e) In the parawise, reply, the contents of the petition have been denied. It has been submitted that petitioner con tinued to avail the services and hardware of the respon dents without paying installments to the respondents and continued to do so. Several notices were sent by the respondents to the petitioner for appointment and commencement of arbitral proceedings but the peti tioner choose to ignore the notices and abstained itself from arbitration proceedings.
(f) It has been denied that no dispute had arisen between the respondents and the petitioner whereas, the dis putes had arisen from the time when petitioner had stopped to pay installments towards the respondents.
(g) The petitioner with its own choice and will, entered in the Agreement with the respondents for its own profit.
PRINCIPLES OF SETASIDING OF AWARD UNDER SECTION 34 OF THE ARBITRATION AND CONCILIATION ACT On a panoramic appreciation of the earlier existing judi cial thought on the issue, as manifested by decisions ranging from Renu Sagar Power Company Ltd. v. General Electric Company Arbt. No. 02/2018 Page 11 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
1994 Supp. (1) SCC 644 to Associated Builders v. DDA (2015) 3 SCC 49, the Hon'ble High Court in its decision in NHAI v. Hindus tan Construction Company Ltd. MANU/DE/2699/2017 delineated the following propositions:
(i) The four reasons motivating the legislation of the Act, in 1996, were
(a) to provide for a fair and efficient arbitral proce dure,
(b) to provide for the passing of reasoned awards,
(c) to ensure that the arbitrator does not trans gress his jurisdiction, and
(d) to minimize supervision, by courts, in the arbi tral process.
(ii) The merits of the award are required to be examined only in certain specified circumstances, for examining whether the award is in conflict with the public policy of India.
(iii) An award would be regarded as conflicting with the public policy of India if
(a) it is contrary to the fundamental policy of In dian law, or
(b) it is contrary to the interests of India,
(c) it is contrary to justice or morality,
(d) it is patently illegal, or Arbt. No. 02/2018 Page 12 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
(e) it is so perverse, irrational, unfair or unreason able that it shocks the conscience of the court.
(iv) An award would be liable to be regarded as contrary to the fundamental policy of Indian law, for example, if
(a) it disregards orders passed by superior courts, or the binding effect thereof, or
(b) it is patently violative of statutory provisions, or
(c) it is not in public interest, or
(d) the arbitrator has not adopted a "judicial ap proach", i.e. has not acted a fair, reasonable and objective approach, or has acted arbitrarily, capri ciously or whimsically, or
(e) the arbitrator has failed to draw an inference which, on the face of the facts, ought to have been drawn, or
(f) the arbitrator has drawn an inference, from the facts, which, on the face of it, is unreasonable, or
(g) the principles of natural justice have been vio lated.
(v) The "patent illegality" had to go to the root of the mat ter. Trivial illegalities were inconsequential.
(vi) Additionally, an award could be set aside if
(a) either party was under some incapacity, or Arbt. No. 02/2018 Page 13 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
(b) the arbitration agreement is invalid under the law, Or
(c) the applicant was not given proper notice of ap pointment of the arbitrator, or of the arbitral pro ceedings, or was otherwise unable to present his case, or
(d) the award deals with a dispute not submitted to arbitration, or decides issues outside the scope of the dispute submitted to arbitration, or
(e) the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties, or in accordance with Part I of the Act, or
(f) the arbitral procedure was not in accordance with the agreement of the parties, or in accor dance with Part I of the Act, or
(g) the award contravenes the Act, or
(h) the award is contrary to the contract between the parties.
(vii) "Perversity", as a ground for setting aside an arbitral award, has to be examined on the touchstone of the Wednesbury principle of reasonableness. (A reasoning or decision is Wednesbury unreasonable (or irrational) if it is so unreasonable that no reasonable person acting reasonably could have made it (Associated Provincial Picture Houses Ltd v Wednesbury Corpora tion (1948) 1 KB 223).
It would include a case in which Arbt. No. 02/2018 Page 14 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
a) the findings, in the award, are based on no evi dence, or
(b) the Arbitral Tribunal takes into account some thing irrelevant to the decision arrived at, or
(c) the Arbitral Tribunal ignores vital evidence in arriving at its decision.
(viii) At the same time,
(a) a decision which is founded on some evidence, which could be relied upon, howsoever compen dious, cannot be treated as "perverse",
(b) if the view adopted by the arbitrator is a plausi ble view, it has to pass muster,
(c) neither quantity, nor quality, of evidence is open to reassessment in judicial review over the award.
(ix) "Morality" would imply enforceability, of the agree ment, given the prevailing mores of the day.
"Immorality", however, can constitute a ground for inter fering with an arbitral award only if it shocks the judi cial conscience.
(x) For examining the above aspects, the pleadings of the parties and materials brought on record would be rele vant.
(xi) The court cannot sit in appeal over an arbitration award. Errors of fact cannot be corrected under Section
34. The arbitrator is the last word on facts."Arbt. No. 02/2018 Page 15 of 34
Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
FINDINGS AND CONCLUSIONS OF THE COURT The Ld. Counsel for the respondent has strenuously argued that the Award was passed by the Ld. Sole Arbitrator on 10.01.2017 and the present petition has been filed in January, 2018 after a delay of 260 days (approximately); which itself is barred by limitation, as prescribed in the Arbitration & Conciliation Act. Ld. Counsel for the Respondent has relied upon the Judgment of Union of India vs. Popular Construction Co., (2001) 8 SCC 470 and M/s. Simplex Infrastructure Ltd. Vs. Union of India [Civil Appeal No.11866 of 2018 @ Special Leave Petition (C) No 17521 of 2017], the Hon'ble Supreme Court of India has held that: "As far as the language of Section 34 of the 1996 Act is concerned, the crucial words are "but not thereafter" used in the proviso to subsection (3). In our opinion, this phrase would amount to an express exclusion within the meaning of Section 29(2) of the Limitation Act, and would therefore bar the application of Section 5 of that Act. Parliament did not need to go further. To hold that the court could entertain an application to set aside the award beyond the extended period under the proviso, would render the phrase "but not thereafter" wholly otiose. No principle of interpretation would justify such a result.
...Here the history and scheme of the 1996 Act support the conclusion that the timelimit prescribed under Section 34 to challenge an award is absolute Arbt. No. 02/2018 Page 16 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
and unextendible by court under Section 5 of the Limitation Act..."
The prime requirement for running of the period limitation for filing the objection under Section 34 of the Arbitration and Conciliation Act, 1996 is receipt of signed copy of the Arbitration Award. The Respondent has to first of all satisfy to this Court, when the signed copy of the Arbitration was served upon the Petitioner. The perusal of the Arbitration record reveals that there is postal receipt dated 13.02.2017 annexed on the top of the Award and it mentions as RLA and the same appears to be Registered Letter with Acknowledgment but there is no AD Card. Moreover there is also no tracking report to reflect whether the said Article was delivered to the Petitioner or not. There is no conclusive or authentic record on the record to show that the signed copy of the Arbitration Award dated 10.1.2017 was served upon the Petitioner/Objector and when was it was served upon the Petitioner/Objector.
The Petitioner/Objector has categorically stated to the following effect: "that the petitioner school was approached in the last week of December, 2017 by Sh. Narayana, Revenue Assurance - Divisional Manager of respondents no. 1 and 2 alongwith their Counsel and they asked the petitioner school to make the payment of the alleged amount of Rs.20,97,998.21p in terms of impugned arbitration Award dated Arbt. No. 02/2018 Page 17 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
10.01.2017. When the petitioner school told them that they had no knowledge of any alleged arbitration proceedings and also any alleged Award dated 10.01.2017, then only they supplied copy of the alleged Award dated 10.01.2017 and also informed the petitioner school that they have already filed execution petition seeking execution of the Award dated 10.01.2017 in the Court of Hon'ble District Judge, Kurnool."
The respondent has failed to rebut the aforesaid aspect pleaded by the Petitioner/Objector in the present petition by any cogent or convincing document. The Petitioner/Objector has filed the present petition within period prescribed period of limitation as envisaged and postulated in Section 34(3) of the Arbitration and Conciliation Act and there is no delay in filing the present petition. The Judgment cited by the Respondent does not come to the rescue of the Respondent. Accordingly, the aforesaid arguments of the Respondent regarding non filing of the petition within prescribed period of limitation sans merit and the same are hereby rejected.
The Ld. Counsel for the Petitioner has strenuously argued that there is noncompliance of Section 21 of the Arbitration and Conciliation Act and in this respect the Ld. Counsel for the Petitioner has placed heavy reliance upon Judgment passed by the Hon'ble High Court passed in Alupro Building Systems Pvt. Ltd.
Vs. Ozone Overseas Pvt. Ltd OMP.3/15 decided on 28.2.2017. It is further argued that the Hon'ble High Court has categorically held Arbt. No. 02/2018 Page 18 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
that issuance of notice U/s 21 of the Act is mandatory and in case no notice is issued, the arbitration proceeding are nonest. It was further observed that requirement of receipt of notice/invocation by the Respondent in terms of Section 21 of the Act is a condition precedent to the commencement of the arbitration proceeding.
The paras no.23 to 30 of the Alupro Building Systems (supra) is reproduced herein for the ready reference: "Is the notice under Section 21 mandatory?
23. While the above ground is by itself sufficient to invalidate the impugned Award, the Court proposes to also examine the next ground whether the Re spondent could have, without invoking the arbitra tion clause and issuing a notice to the Petitioner un der Section 21 of the Act filed claims directly before an Arbitrator appointed unilaterally by it?
"24. Section 21 of the Act reads as under: "21. Com mencement of arbitral proceedings.--Unless other wise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be re ferred to arbitration is received by the respondent."
"25. A plain reading of the above provision indi cates that except where the parties have agreed to the contrary, the date of commencement of arbitra tion proceedings would be the date on which the re cipient of the notice (the Petitioner herein) receives from the claimant a request for referring the dispute to arbitration. The object behind the provision is not Arbt. No. 02/2018 Page 19 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
difficult to discern. The party to the arbitration agreement against whom a claim is made, should know what the claims are. It is possible that in re sponse to the notice, the recipient of the notice may accept some of the claims either wholly or in part, and the disputes between the parties may thus get narrowed down. That is one aspect of the matter. The other is that such a notice provides an opportu nity to the recipient of the notice to point out if some of the claims are time barred, or barred by any law or untenable in fact and/or that there are counter claims and so on.
"26. Thirdly, and importantly, where the parties have agreed on a procedure for the appointment of an arbitrator, unless there is such a notice invoking the arbitration clause, it will not be possible to know whether the procedure as envisaged in the arbitration clause has been followed. Invariably, ar bitration clauses do not contemplate the unilateral appointment of an arbitrator by one of the parties. There has to be a consensus. The notice under Sec tion 21 serves an important purpose of facilitating a consensus on the appointment of an arbitrator.
"27. Fourthly, even assuming that the clause per mits one of the parties to choose the arbitrator, even then it is necessary for the party making such ap pointment to let the other party know in advance the name of the person it proposes to appoint. It is quite possible that such person may be 'disquali fied' to act an arbitrator for various reasons. On re ceiving such notice, the recipient of the notice may be able to point out this defect and the claimant may be persuaded to appoint a qualified person. This will avoid needless wastage of time in arbitra Arbt. No. 02/2018 Page 20 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
tion proceedings being conducted by a person not qualified to do so. The second, third and fourth rea sons outlined above are consistent with the require ments of natural justice which, in any event, govern arbitral proceedings.
"28. Lastly, for the purposes of Section 11 (6) of the Act, without the notice under Section 21 of the Act, a party seeking reference of disputes to arbitration will be unable to demonstrate that there was a fail ure by one party to adhere to the procedure and ac cede to the request for the appointment of an arbi trator. The trigger for the Court's jurisdiction under Section 11 of the Act is such failure by one party to respond.
"29. Of course, as noticed earlier, parties may agree to waive the requirement of such notice under Sec tion 21. However, in the absence of such express waiver, the provision must be given full effect to. The legislature should not be presumed to have in serted a provision that serves a limited purpose of only determining, for the purposes of limitation, when arbitration proceedings commenced. For a moment, even assuming that the provision serves only that purpose viz. fixing the date of commence ment of arbitration proceedings for the purpose of Section 43 (1) of the Act, how is such date of com mencement to be fixed if the notice under Section 21 is not issued? The provision talks of the 'Respon dent' receiving a notice containing a request for the dispute "to be referred to arbitration". Those words have been carefully chosen. They indicate an event that is yet to happen viz. the reference of the dis putes to arbitration. By overlooking this important step, and straightaway filing claims before an arbi Arbt. No. 02/2018 Page 21 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
trator appointed by it, a party would be violating the requirement of Section 21, thus frustrating an important element of the parties consenting to the appointment of an arbitrator.
"30. Considering that the running theme of the Act is the consent or agreement between the parties at every stage, Section 21 performs an important func tion of forging such consensus on several aspects viz. the scope of the disputes, the determination of which disputes remain unresolved; of which dis putes are timebarred; of identification of the claims and counterclaims and most importantly, on the choice of arbitrator. Thus, the inescapable conclu sion on a proper interpretation of Section 21 of the Act is that in the absence of an agreement to the contrary, the notice under Section 21 of the Act by the claimant invoking the arbitration clause, preced ing the reference of disputes to arbitration, is mandatory. In other words, without such notice, the arbitration proceedings that are commenced would be unsustainable in law."
The arbitration clause, which is mentioned in the agree ment of the parties, is reproduced herein for apt understanding: "9.1 ARBITRATION If any dispute or difference of any kind whatsoever arise between the parties in connection with or arising out of this agreement or any part thereof, such dispute or dif ference shall be referred to an acceptable sole Arbitrator under the provisions of the Indian Arbitration and Concil iation Act, 1996, or any enactment or modification there under. The sole Arbitrator shall be appointed by Party A. The venue for arbitration shall be at New Delhi and the Arbt. No. 02/2018 Page 22 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
language shall be English. The courts in New Delhi shall have jurisdiction to entertain all disputes between the parties."
The first part of the aforesaid clause reveals that the dispute shall be referred to an acceptable arbitrator. The acceptable arbitrator means that there should be consensus ad idem between the parties for appointment of the Sole Arbitrator. The appointment of the arbitrator could have been made only on basis of consent of the parties. However, in the later part aforesaid clause it is written that the Sole Arbitrator shall be appointed by Party A i.e. respondent. Both the parts are oxymoron i.e. they both cannot stand against each together and they are totally contradictory to each other. Even if, the harmonious construction of the said parts would be done i.e. Arbitrator has to be appointed which are acceptable to the parties but the Party A will nominate the name of the Arbitrator then also in both the cases it was the incumbent duty of the respondent No.1 to inform the name of the Arbitrator to Petitioner. The perusal of the Arbitration Record clearly reveals that no such Notice was given by the Respondent No.1. There is no notice on the Arbitration Record that the aforesaid Arbitration clause was invoked in its letter and spirit and moreso whereby the names of the Arbitrator was suggested to the Petitioner and the Petitioner has accepted the name of the sole Arbitrator. There is legal notice dated 8.06.2014, whereby, the amount of Rs.1,00,000/ was demanded with interest @ 18% p.a. on the said amount by Arbt. No. 02/2018 Page 23 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
respondents No.1 and 2 and it is further stated in the said notice that in the event, the petitioner/objector fails to make the payment of the aforesaid amount within 15 days from the date of receipt of the notice, the respondents no.1 and 2 would presume that a dispute has arisen between the parties and the respondents shall invoke the arbitration clause of the Agreement. Although, in the said notice it is written on the top "By Courier or Registered Post A/D" but said notice is not supported by any Courier or Registered Postal receipt or acknowledgement or tracking reports. There is no proof on the record to show that the said Notice was served upon the Petitioner/Objector. As per version of the respondent No.1 the dispute was to arise, if the Petitioner/Objector fails to pay the said amount within 15 days from the receipt of the said Notice. When there is no proof of service of the notice then there was no question of beginning of aforesaid 15 days and dispute of the parties. The respondents No.1 and 2 have categorically stated that they will invoke the Arbitration clause in terms of the Agreement. However, there is nothing on the Arbitration Record to suggest that the respondents No.1 had any point of time given the Notice for invocation of Arbitration Clause not to speak of the invocation in terms of Agreement between the parties. The perusal of entire Agreement, it clearly reveals that the parties have nowhere exempted or the parties nowhere agreed that no notice under Section 21 is required to be given to the parties for invocation of the Arbitration Clause. The present case squarely falls in the precincts Arbt. No. 02/2018 Page 24 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
and parameters of the aforesaid Judgment passed by the Hon'ble High Court and there is apparent violation of mandatory provision of Section 21 of the Arbitration and Conciliation Act,1996 and on this sole ground the Arbitration Award is required to be setaside.
I am also considering the further grounds of the Petitioner regarding nonservice of notice in the Arbitration proceedings. The Ld. Counsel for the Petitioner has argued that in all the orders sheets dated 16.9.2016, 5.8.2016, 20.5.2016, 12.2.2016, 10.12.2015, 28.10.2015 as passed by the Sole Arbitrator, there was no postal receipt annexed to it. Further in the Notice dated 19.11.2015 passed by the Sole Arbitrator and the Postal Receipt dated 21.11.2015 which was clearly rewritten on the postal receipt of the Petitioner's address but from the original postal receipt, clearly show different address. The order dated 15.10.2015 for notice of appearance to the Petitioner School has not been received by the Petitioner and the postal receipt annexed to it bears the wrong address and tracking report filed by the Respondent no. 3 in the arbitral record nowhere indicates that it was delivered and further the tracking report mentions that "booking not available and delivery not available".
Admittedly, during the entire arbitral proceedings, only three postal receipts are there in the Arbitral record, one is dated 13.2.2017, other is 21.11.2015 & third one is 15.10.2015. It is submitted that notices were not sent to the Petitioner at its Arbt. No. 02/2018 Page 25 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
complete address as the same only mention the name of the school and the locality. It is also noted that no acknowledgement card was received for all the three notices which were sent by registered post hence clearly exhibiting that the proceeding was not properly conducted by the Arbitrator as per the provisions of the Act.
In G.E. Money Financial Services pvt Ltd Vs. Subhadra Devi 2012 Law Suit (Del) 4200 wherein Hon'ble Delhi High Court set aside the exparte award on the ground that no notice was served upon the parties, therefore the arbitration proceeding cannot be sustained.
I am fully in agreement with arguments of the Ld. Counsel for the Petitioner. The perusal of the Arbitration record reveals that Ld. Arbitrator had issued the Notice to the Petitioner/Objector for the date of hearing of 28.10.2015 vide speed post postal receipt dated 16.10.2015. The order dated 28.10.2015 of the Ld. Arbitrator reflects that despite issuance of notice for appearance to that date, none has appeared on behalf of the respondent. The Ld. Arbitrator has failed to mention that in what manner the Ld. Arbitrator was satisfied that respondent was served as the tracking report of the said postal receipt is inconclusive and which clearly reveals that "booking not available and delivery not available" and further there was no A.D. Card on the record to show that the Petitioner/Objector was served. However, the Ld. Arbitrator has not proceeded the Petitioner/Objector exparte on Arbt. No. 02/2018 Page 26 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
the said date and the Ld. Arbitrator has issued the fresh Notice for the date of hearing of 10.12.2015 in terms of order dated 28.10.2015. The Ld. Arbitrator has issued the Notice dated 19.11.2015 for the date of hearing of 10.12.2015 and the postal receipt of the same reflects date of 21.11.2015. The said postal receipt dated is overwritten by hand although underneath the same there was printed material and in the material it does not reflect the name of Petitioner or address of the Petitioner/Objector. The Ld. Arbitrator in order dated 10.12.2015, submitted that despite service the petitioner/objector has not appeared but the Ld. Arbitrator has failed to reflect in the said order that how he is satisfied that the Petitioner/Objector was served as neither there is any AD Card nor any Tracking Report and moreover, the receipt appears to manipulated by overwriting. There was no service proof on the record to show that Petitioner/Objector was served at any point of time in Arbitration proceedings and the entire proceedings had been done at the back of the Petitioner/Objector. The impugned award is passed without following the due process of law and principles of natural justice were not followed in the present case. The impugned Award is liable to be setaside on this ground also.
The Ld. Counsel for the Petitioner has also strenuously and assiduously argued as under:
(a) that the respondents raised untenable and illegal claims for a sum of 20,97,998.21 / with interest without adjusting the Arbt. No. 02/2018 Page 27 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
payment made. It is further submitted that from the bare perusal of the Claim petitioner it can be easily seen that no details of arriving at the figure of Rs. 20,97,998.21/ was given by the respondents and admittedly as per legal notice dated 8.6.2014 of the Arbitral record of the respondents, the amount due and payable is shown as Rs. 1,00,000/ payable by the Petitioner till 31.3.2014 but when the Claim petition was filed after a period of one month, the amount Claimed is Rs. 20,97,998.21/. Everything is crystal clear from para 5 of the Award where claimant is alleging that as on 8.6.2014 total amount due from petitioner is shown as Rs. 20,97,998.21/ without giving any break up.
(b) The Ld. Arbitrator never ever sent any order sheets to the petitioner school and lastly no details have been given in the Claim petition by the respondents to arrive at the Claim of Rs. 20,97,998.21/ when admittedly they vide their Legal Notice dated 08.06.2014 is asking only for Rs. 1,00,000/. Thus, from the facts and circumstances it can be easily seen through that the impugned award is liable to be setaside as the same being against the law and also against the public policy.
The Ld. Counsel for the Respondents No.1 and 2 has ar gued with forensic tenacity as under: Arbt. No. 02/2018 Page 28 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
(a) The Hon'ble Delhi High Court has in the case of Govt. of NCT of Delhi Versus Khem Chand reported in AIR 2003 Delhi 314, by relying upon the ruling of the Hon'ble Apex Court in AIR 1963 SC 677 has observed that: "...... the jurisdiction of the Court when called upon to decide the objections raised by a party against an arbitral award is limited, as expressly indicated in the Arbitration and Conciliation Act, 1996. The court has no jurisdiction to sit in appeal and examine the correctness of the award on merits with reference to the material produced before the arbitrator, it cannot sit in appeal over the views of the Arbitrator by reexamining and reassessing the materials......"
(b) In the case of India Tourism and Development Corporation vs. T.P. Sharma reported in 2002 SCC online Del 634, wherein it was observed that: "......findings of the arbitrator on the factual matrix, need not be interfered with as the Court does not sit in appeal and the Courts are also refrained from re appreciating or reevaluating the evidence or the material before the arbitrator unless perversity is writ large on the face of the award or the award suffers from the vice of jurisdictional error, sanctity of award should always be maintained...... "
(c) Similar view was taken by Hon'ble Delhi High Court in Sh.
M.C. Katosh Vs. Union of India &Ors., reported in 2004 SCC Online Del. 1039, wherein it was held that Arbt. No. 02/2018 Page 29 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
"arbitrator being sole and final judge of fact and the Court is bound by the findings of arbitrator and cannot review them unless unsupported by evidence or unless it appears from award itself that there was no evidence to support findings."
(d) In U.P. State Electricity Board Vs. Searsole Chemicals Ltd.
(2001) 3 SCC 397, it was held that "where the Arbitrator had applied his mind to the pleadings, considered the evidence adduced before him and passed an award the court could not interfere by reappraising the matter as if it were an appeal......"
(e) In Indu Engineering & Textiles Ltd. Vs. Delhi Development Authority (2001) 5 SCC 691, it was held that :
"An Arbitrator is a judge appointed by the parties and as such the award passed by him is not be lightly interfered with."
(f) It is a settled law that Court cannot substitute its own decision in place of Arbitrator's award and that the award of the arbitra tor both on facts and law is final. In this regard the observa tions of the Mumbai High Court in the case of Laxmi Mathur Vs. the Chief General Manager, MTNL reported in 2000 (3) Arb. L.R. 684 is very clear: "...... Arbitral award is not invalid merely because on the basis of some inferences and some arguments it may be alleged that Arbitral Tribunal Arbt. No. 02/2018 Page 30 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
has committed some mistake in arriving at its conclusion on merits of the dispute referred to it for adjudication.
When the court is called upon to decide the objections raised by a party against the arbitral award, the jurisdiction of the court is limited as expressly indicated in Section 34 of the Act and it has no jurisdiction to sit in appeal and to examine the correctness of the award on merits with reference to the material produced before the Arbitral Tribunal. The court cannot sit in appeal over the view of the Arbitral Tribunal by re examining and reappreciating the material....."
(g) In case of Municipal Corporation of Delhi Vs. M/s Jagan Nath Ashok Kumar reported in AIR 1987 SC 2316, it has been observed that : "...... when the reasons given by the arbitrator are germane, relevant and have rational nexus with the conclusions arrived at by him, the reasonableness of the reasons cannot be challenged and it cannot be said to be unreasonable. The word "reasonable" has in law the prima facie meaning of reasonable in regard to those circumstances of which the actor called on to act reasonable knows or ought to know. Reasons vary in its conclusions according to the idiosyncrasy of the individual and the times and circumstances in which he thinks........"
(h) In view of the aforementioned, it is humbly submitted that the Objection Petition is liable to be dismissed.
Arbt. No. 02/2018 Page 31 of 34Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
The aforesaid Judgments, as relied upon by the Respondent, are not at all applicable to the facts and circumstances of the case. This Court is not adjudicating the claims of the petitioner on the merits of the case but on the aspect of service of notice under Section 21 of the Arbitration and Conciliation Act on the Petitioner/Objector and service of the notice in the Arbitration proceedings before Ld. Arbitrator and both the issues/points of consideration are held to be in favour of the Petitioner/Objector on discussions and findings as adumbrated above.
The Full Bench of Hon'ble Supreme Court of India in Civil Appeal No. 5172 of 2017 titled as Kinnari Mullick and Another Versus Ghanshyam Das Damani decided on April 20, 2017 has held that the Court has no power to remand the case to the Arbitrator after decision of Section 34 of the Arbitration and Conciliation Case and it is party who has to apply under Section 34(4) of the Arbitration and Conciliation Act to adjourn the proceedings so that the party would apply before the Ld. Arbitrator. The said view was also endorsed by the Hon'ble Supreme Court in the latest Judgment passed in Civil Appeal No. 10386 of 2018 titled as Radha Chemicals Versus Union of India decided on October 10, 2018. In the case of Kinnari Mullick and Anr. (Supra), the Ld. Single Bench of Hon'ble Kolkata High Court has passed the following order: Arbt. No. 02/2018 Page 32 of 34 Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
"6..............The learned Single Judge was pleased to allow the said application on the finding that the impugned award did not disclose any reason in support thereof. The impugned award was accord ingly set aside and the parties were left to pursue their remedies in accordance with law. The relevant portion of the decision of the learned Single Judge reads thus:
"Since the present award is completely lacking in reasons and is littered with the unacceptable ex pressions like "I feel that the claim is justified", "I find no basis" and the like which cannot be supple ment for reasons that the statute demands, A.P. No.1074 of 2013 is allowed by setting aside the award dated June 18, 2013. The parties are left free to pursue their remedies in accordance with law."
The Hon'ble Division Bench of Kolkata High Court has changed the operative order whereby the matter was remanded back to Ld. Arbitrator. However, the Hon'ble Supreme Court has allowed the Appeal and setaside the order of the Division Bench whereby the matter was remanded back to the Ld. Arbitrator and endorsed aforesaid view of the Hon'ble Single Bench. Para No.18 of the said Judgment is reproduced hereunder: "18. As the Respondent has not challenged the de cision of the Division Bench, we are left with the sit uation where the award has been set aside, and as observed by the learned Single Judge, with liberty to the parties to pursue their remedies in accor dance with law."
Arbt. No. 02/2018 Page 33 of 34Pratibha Vidyalayam Vs. M/s. Educomp Solutions Ltd. & Ors.
RELIEF:
Accordingly, in view of the discussions, as adumbrated above, I hereby pass the following :: FINAL ORDER ::
1. The Petition /Application/Objection under Section 34 of the Arbitration and Conciliation Act is hereby allowed.
2. The impugned Award dated 10.01.2017 is hereby setaside.
3. The parties are left free to pursue their remedies in accordance with law.
4. No order as to costs in the present petition. The parties shall bear their own respective costs.
File be consigned to Record Room after due compliance. Announced in the open court on this 10th Day of April, 2019.
(ARUN SUKHIJA) ADJ07 (Central) Tis Hazari Courts, Delhi Arbt. No. 02/2018 Page 34 of 34