Delhi District Court
Sumit Jawahar Lal Jain vs M/S Bmw India Financial Services Pvt. ... on 15 May, 2021
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (COMM.) No. 55/2019
Sumit Jawahar Lal Jain
R/o Flat No. 401/402, 4th Floor, Sumer Saraswati Buildings,
Lebhurnum Road, near Manni Bhawan,
Gamdevi, Mumbai-400007 ...Petitioner
vs
M/s BMW India Financial Services Pvt. Ltd.
Registered Office at:
The Oberoi Corporate Tower,
Building No. 11, 1st Floor,
DLF Cyber City, Phase-II,
Gurugram, Haryana-122002
Also at: The Branch Manager
M/s BMW India Financial Services Pvt. Ltd.
Office: H-5/B-1, Mohan Co-operative Industrial Area,
Mathura Road, New Delhi-110044 ...Respondent
Date of Institution : 11/03/2019
Arguments concluded on : 18/03/2021
Decided on : 15/05/2021
Appearances : Sh. Shashindra Tripathi, Ld. Counsel for
petitioner.
Sh. Sachin Kumar, Ld. Counsel for respondent.
JUDGMENT
1. Petitioner has filed the present petition under Section 34 of The Arbitration and Conciliation Act, 1996 (herein after referred as The Act) for setting aside the impugned ex parte arbitral award dated 28/11/2018 passed by Sh. Sanjay Aggarwal, Ld. Sole Arbitrator in M/S BMW/RB:4878/LOT-77/27. Ld. Sole Arbitrator awarded sum of Rs. 5,65,949/- with further interest OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 1 of 29 24% per annum from 11/05/2018 till recovery in favour of claimant/respondent and against the petitioner.
2 I have heard Sh. Shashindra Tripathi, Ld. Counsel for petitioner; Sh. Sachin Kumar, Ld. Counsel for respondent and perused the relied upon precedents and records of the case including written arguments of Ld. Counsel for parties as well as arbitral proceedings record and given my thoughtful consideration to the rival contentions put forth.
3. Factual matrix of the case of petitioner in brief is as follows:
Petitioner availed loan of Rs 20,00,000/- from respondent to purchase BMW car in the year 2014 vide Agreement dated 18/04/2014 at the rate of interest of 10% per annum for the period of 36 months. Out of total price of the car Rs 29,75,000/-, petitioner paid sum of Rs. 9,75,000/- as down payment and rest of Rs. 20,00,000/- was given by the respondent as loan, as aforesaid. Few blank signed and undated cheques were given by petitioner to respondent for ECS purposes. As the date of installment was neither specified in the Loan Agreement nor in payment schedule, petitioner requested the respondent to present the cheque for ECS on 10th day of every month and respondent agree to do that. Petitioner kept on paying installment regularly to the respondent and on several occasions made the payment through NEFT according to its convenience and the said NEFT payments were duly acknowledged by the respondent. Due to personal reasons on 12/06/2016, petitioner asked the respondent to change the ECS option from his existing banker to his AXIS Bank account maintained in the name of M/s Poonam Lifestyle.OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 2 of 29
But respondent did not change ECS option and continued to submit cheques through ECS clearance with old banker itself where the petitioner had already closed his account, because of which ECS was declined resulting into heavy penalties on petitioner imposed by respondent. Respondent sent legal notice dated 08/12/2016 through Advocate Sh. Rahul Bhardwaj, asking petitioner to clear the pending dues including the penalties. In reply dated 17/12/2016 to aforesaid notice, petitioner requested the Counsel for respondent to ask the respondent to sort out the matter at the earliest. As asked by respondent, petitioner paid Rs.2,50,000/- vide cheque dated 31/03/2017 to respondent. Petitioner received e-mail dated 05/04/2017 from respondent mentioning details of same old account which was previously closed by respondent long back, informing him that the EMI has bounced and the interest and penalty would be charged on bounce of EMI. Petitioner got issued legal notice dated 05/04/2017 to the respondent to pay Rs. 25,00,000/- for harassment and mental agony. Since respondent did not pay the amount asked in the legal notice, aforesaid, petitioner filed complaint case dated 10/06/2017 before State Consumer Disputes Redressal Commission, Maharastra, Mumbai, which case was admitted vide order dated 21/09/2017 and is pending adjudication therein. To put pressure on petitioner, respondent issued legal notice dated 18/04/2018 terminating/foreclosing the loan facility and asked the petitioner to pay Rs 5,65,949/- against the loan in question, failing which it will proceed for arbitration proceedings as agreed between the parties under the Loan Agreement. Vide reply dated 03/05/2018, petitioner informed respondent that he has been regularly paying the installments OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 3 of 29 against the loan but it was the respondent who had forced the petitioner to stop the payment of installment to justify its wrong done by it has deliberately continued to deduct the ECS from the old account of the petitioner despite repeated request for change of account for ECS purposes. Petitioner informed the respondent of having filed aforesaid case before State Consumer Disputes Redressal Commission, Maharastra, Mumbai, asking the respondent to not to take any coercive action till the disposal of matter. Respondent vide letter dated 04/05/2018 informed the petitioner that in terms of agreement it has already referred the matter to Sole Arbitrator Mr. Sanjay Aggarwal. Respondent filed its Statement of Claim dated 11/05/2018 before Ld. Sole Arbitrator for recovery of Rs. 5,65,949/- with interest. Vide notice dated 11/05/2018 Ld. Sole Arbitrator called upon petitioner to appear in person or through Advocate on 29/05/2018. On receipt of said notice dated 11/05/2018, petitioner engaged Advocate Mr. Vivek Kumar Singh to represent his case before Ld. Sole Arbitrator. Mr. Vivek Kumar Singh, Advocate for the petitioner appeared before Ld. Sole Arbitrator on 29/05/2018 and prayed for adjournment to file his Vakalatnama and reply to the Statement of Claim filed by the claimant/respondent. Ld. Sole Arbitrator adjourned the matter for 04/07/2018. On 04/07/2018 Mr. Vivek Kumar Singh, Advocate for respondent appeared before Ld. Sole Arbitrator and filed his Vakalatnama on behalf of petitioner and prayed for adjournment for filing reply to the Statement of Claims. Ld. Sole Arbitrator on the request of Ld. Counsel for petitioner, adjourned the matter for 10/08/2018 for filing reply to the Statement of Claim and arbitration fees by the petitioner herein. It is averred by petitioner OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 4 of 29 that as was apparent in the impugned award, Mr. Vivek Kumar Singh did not appear in the arbitration proceeding on 10/08/2018 before Ld. Sole Arbitrator and thereafter for the reasons best known to him but had given the impression to the petitioner that he was continuously representing the petitioner in the arbitration proceeding. It was averred by petitioner that aforesaid fact was apparently clear from the fact that the petitioner as asked by his Counsel sent the arbitration fees Rs 10,000/- vide cheque dated 13/07/2018 in favour of Ld. Sole Arbitrator drawn on Axis Bank but his Advocate returned the said cheque to the petitioner vide speed post, which was received by petitioner in Mumbai on 10/10/2018 citing the reason that the cheque is valid only for three months, whereas the matter is listed on 23/10/2018 as such fresh cheque is required. Petitioner on the next day i.e., 11/10/2018 as per telephonic conversation between him and his Advocate sent the new cheque dated 11/10/2018 in favour of Sole Arbitrator and requested his Advocate Mr. Vivek Kumar Singh to do the needful in the matter. It is the averment of petitioner that as transpires to petitioner, Advocate Mr. Vivek Kumar Singh in connivance of respondent, abstained from appearing in arbitration proceedings before Ld. Sole Arbitrator but had given the impression to petitioner that he is representing petitioner in the proceeding. It is also averment of the petitioner that despite paying fees to the Advocate, he remained unrepresented, which had resulted into miscarriage of justice and against the public policy of India. It is the averment of petitioner that Ld. Sole Arbitrator ignored the fact that the petitioner, who had already engaged Advocate, who had filed Vakalatnama on behalf of petitioner but despite that he had abstained from OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 5 of 29 appearing in the proceedings. Instead of issuing fresh notice to the petitioner under the circumstances providing the petitioner as opportunity to defend himself, Ld. Arbitrator proceeded to decide the matter ex-parte against the petitioner and wrongly stated in impugned award that he has failed to appear again and again, though it was the first time when the petitioner was not represented. It is also averment of petitioner that Ld. Sole Arbitrator also changed the venue of the arbitration proceeding without any notice to the petitioner or his Counsel, which casts a shadow on the arbitration proceedings and gave a clear impression to petitioner that the whole of the arbitration proceeding was just to name sake and resulted into the miscarriage of justice. It is also averred that respondent had concealed material fact of pendency of aforesaid complaint case before State Consumer Disputes Redressal Commission, Maharastra, Mumbai and apparently to obtain the impugned award and respondent had colluded with the Advocate Mr. Vivek Kumar Singh engaged by petitioner. It is also averred that the impugned award dated 28/11/2018 was dispatched to the petitioner on 01/12/2018, which was received on 10/12/2018 by the petitioner and the petition was filed within period of limitation. Petitioner has impugned arbitral award in question on following grounds:
A. The impugned award passed by Ld. Sole
Arbitrator is patently illegal, perverse, biased,
inconsistent and has been obtained playing fraud upon the Ld. Sole Arbitrator and consequently being in conflict with the public policy of India.
B. The respondent has concealed the material and OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 6 of 29 important fact of pendency of complaint case no. CC/17/875 before the State Consumer Disputes Redressal Commission, Maharashtra, Mumbai from the Ld. Sole Arbitrator wherein the Hon'ble Commission has admitted the said complaint filed by the petitioner herein against the respondent claiming compensation of Rs. 25,00,000/- for deficiency in service on the part of respondent for the same set of facts concealing which the impugned award has been obtained from Ld. Sole Arbitrator.
C. The impugned award is in conflict with the public policy of India as the respondent appears to have connived with the Advocate Mr. Vivek Kumar Singh engaged by the petitioner herein for defending his case before Ld. Sole Arbitrator but despite taking his fee from the petitioner herein and seeking adjournment, the said Advocate did not appear in the arbitration proceedings because of which respondent could get the opportunity to conceal the material facts and obtained the impugned award in his favour from the Ld. Sole Arbitrator.
D. Ld. Sole Arbitrator while proceeding ex- parte against the petitioner herein has wrongly held that the petitioner herein has failed to appear again and again. Though as apparent from the facts stated by Ld. Sole Arbitrator himself on 10/08/2018 it was for the very first time when the Advocate for the petitioner failed to appear in the matter and Ld. Sole Arbitrator decided on the very same date to proceed ex-parte against the OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 7 of 29 petitioner without issuing any further notice to the petitioner herein.
E. Ld. Sole Arbitrator has committed the error of law in shifting the place of arbitration without any information to the petitioner herein particularly when the petitioner herein was unrepresented on the said date as such has violated the principle of natural justice which is fundamental policy of Indian Law.
F. Due to connivance of respondent with the Advocate Mr. Vivek Kumar Singh engaged by the petitioner herein for defending his case before Ld. Sole Arbitrator, petitioner was prevented from presenting his case before Ld. Sole Arbitrator and as a result of that he was incapable in defending himself and proceeded ex-parte in the matter.
G. Due to active connivance of respondent with the Advocate Mr. Vivek Kumar Singh, petitioner herein has been fraudulently deprived of his right to defend himself and taking advantage of the situation respondent deliberately concealed the material facts and perusuaded the Ld. Sole Arbitrator to pass the impugned award in its favour, hence the act of respondent is in conflict with basic notions of morality. H. Ld. Sole Arbitrator has failed to appreciate that the petitioner is not liable to pay any amount to the respondent and on the contrary respondent because of deficiency is service is liable to pay the compensation to the petitioner herein.
I. From the bare reading of impugned award, it is OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 8 of 29 apparently clear that the impugned award reveals the non application of judicial mind in the given facts and circumstances of the case.
J. The findings recorded by Ld. Sole Arbitrator in the impugned award are inconsistent and contrary to each other.
It was was prayed for setting aside of of arbitral award.
4. Respondent in filed reply denied and controverted the averments of the petitioner, terming the petition to be not maintainable, liable to be dismissed based on incorrect version of the facts and petitioner having not come to this Court with clean hands. It is also averred that petition is devoid of any reasonable ground for setting aside of the impugned award and the petition has been filed by the petitioner with some oblique motives in an endeavor to force the respondent company to accept its illegal and unlawful demands. It is also averred that application under Section 9 of the Act for interim relief/appointment of receiver for taking custody of the subject vehicle was filed before the Court of Sh. Praveen Kumar, Additional District Judge, Patiala House Courts, New Delhi, wherein respondent obtained the ex- parte receiver order dated 04/05/2018 and thereafter proper service of notices to the petitioner, said Court disposed off the said petition on 04/08/2018. It is also averred that present petition has been filed beyond the period of limitation. Respondent also averred that in view of arbitration Clause no. 24 in the agreement inter se parties, the arbitration was invoked by the respondent for the adjudication of the dispute in question. It is also averred that as petitioner failed to maintain the financial discipline of the loan OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 9 of 29 agreement and willfully neglected to repay the loan EMI, so respondent through its Advocate got issued a legal notice dated 18/04/2018 to petitioner, whereby he was called upon to pay the entire outstanding loan amount but petitioner failed to clear their legally payable debt/liability under the agreement in question. It was also averred that petitioner was represented by his Counsel holding Vakalatnama before Ld. Arbitrator. On 10/08/2018 and on later dates of hearings, before Ld. Sole Arbitrator, the duly appointed Counsel by the petitioner did not appear. For non appearance of petitioner/Counsel before Ld. Sole Arbitrator on 10/08/2018, petitioner was proceeded ex parte. It is also averred that for change of venue of arbitration, Ld. Sole Arbitrator had duly intimated the authorized Counsel for the petitioner. It is also averred that after appreciating the evidences on record before Ld. Sole Arbitrator, the impugned award in accordance with the agreement terms and conditions was rightly awarded. It is also averred that State Consumer Disputes Redressal Commission had not served the respondent any stay or any restraining order against the respondent to stop the arbitration proceedings. It is also averred that petitioner absented from the arbitral proceedings without intimation to respondent and Ld. Sole Arbitrator decided to proceed ex parte. It is also averred that there was no connivance of respondent with duly authorized Counsel of petitioner namely Mr. Vivek Kumar Singh, Advocate. It was prayed to dismiss the petition.
5. It was argued by Ld. Counsel for petitioner that impugned award has been obtained by the respondent playing fraud upon the petitioner and the law as petitioner, a resident of Mumbai had OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 10 of 29 paid hefty fees to his Advocate Sh. Vivek Kumar Singh for defending his case before Ld. Sole Arbitrator and from the facts of the case it is apparently clear that the respondent colluded with Advocate Sh. Vivek Kumar Singh and managed Sh. Vivek Kumar Singh to abstain from the proceedings before Ld. Sole Arbitrator without any information to the petitioner herein. It was also argued that just after appearing on two dates before Ld. Sole Arbitrator, said Sh. Vivek Kumar Singh abstained for the first time on 10/08/2018 before Ld. Sole Arbitrator, who on that day itself instead of sending any notice to the petitioner, proceeded ex parte against the petitioner and on the other hand, changed the venue of arbitration without any notice to the petitioner or his Counsel. Counsel for petitioner argued in terms of grounds of petition. It was also argued that petitioner's only grievance is that he should be afforded a fair opportunity to produce his case before the Arbitrator from which petitioner has been deprived due to undeclared abstinence of Advocate from the arbitral proceedings which has incapacitated the petitioner to defend himself and has resulted into the miscarriage of justice. It was prayed that case of petitioner be allowed and remanded back to Sole Arbitrator for disposal afresh.
6. Ld. Counsel for respondent argued in terms of filed reply. It was argued that the petition has been filed beyond period of limitation. It was argued that petitioner approached to the respondent for change of bank accounts details for EMI payment in November, 2016 and the respondent provided to the petitioner request form on that day and requested the petitioner to fill up the same and submit alongwith necessary documents as required OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 11 of 29 but the petitioner failed to provide one month statement and cancelled cheque. Moreover, the stamp of the company was missing on the ECS form and the petitioner was informed about the same but no action was taken by the petitioner in this regard. Also furthermore, respondent offered for waiver of penal and bounce charges from November 2016 to March 2017, amounting to Rs. 21,210.56 provided the petitioner makes payment of the EMI overdue amount of Rs. 4,47,979/-. It was argued that petitioner did not make any such payment to the respondent and when respondent got to know that the petitioner made incomplete request to change bank account, offer of waiver of penal and bounce charges so communicated was withdrawn by the respondent. It was argued that as per Clause 3.8 of the Agreement inter se parties petitioner was under obligation and responsibility to ensure prompt and regular payment of EMI on the due dates, whereas for delay in repayment, petitioner was liable to pay additional interest and dishonor charges as per Schedule-I of the agreement. It was argued that petitioner became irregular to repay and delayed in repayment of EMIs from the month of October 2014 and the charges were imposed upon the petitioner because of the delay in EMI payment. It was argued that the grounds raised by the petitioner do not fall under any of the grounds provided under Section 34 of the Act, particularly public policy of India, as contended by the petitioner. It was argued that contentions of the petitioner of connivance between respondent and Counsel of the petitioner is baseless and unsustainable. Also was argued that petitioner has not placed on record any material which shows that petitioner has taken any legal action against his duly authorized/appointed Counsel for non appearance before OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 12 of 29 Ld. Sole Arbitrator which resulted in the impugned award. It was argued that the change of venue of arbitration was intimated to the Counsel for the petitioner. It was argued that petition is liable to be dismissed. Reliance was placed upon the case of Dyna Technologies Pvt Ltd vs Crompton Greaves Limited, MANU/SC/1765/2019.
7. An Arbitral Award can be set aside on the grounds set out in Sections 34(2)(a), (b) and (2A) of The Act in view of Section 5 of the Act.
8. Section 34 (1), (2) and (2A) of The Arbitration and Conciliation Act, 1996 read as under:
"34. Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3).
(2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 13 of 29 from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
9. Normally, the general principles are that Arbitrator is a Judge of the choice of the parties and his decision, unless there is an error apparent on the face of the award which makes it OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 14 of 29 unsustainable, is not to be set aside even by the Court as a Court of law could come to a different conclusion on the same facts.
The Court cannot reappraise the evidence and it is not open to the Court to sit in appeal over the conclusion of the Arbitrator. It is not open to the Court to set aside a finding of fact arrived at by the Arbitrator and only grounds on which the award can be set aside are those mentioned in the Arbitration Act. Where the Arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the Court in exercise of the power vested in it. Where the Arbitrator is a qualified technical person and expert, who is competent to make assessment by taking into consideration the technical aspects of the matter, the Court would generally not interfere with the award passed by the Arbitrator.
10. Supreme Court in case of Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 has held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
11. Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 15 of 29 India, 2019 SCC OnLine SC 677 has held that under Section 34 (2A) of The Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse. It is held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
12. Section 11 of The Act is with respect to the appointment of the arbitrators by the Supreme Court or as the case may be, by the High Court only.
13. Under Section 12 of The Act, when a person is approached in connection with his possible appointment as an arbitrator, he is bound to disclose in writing any circumstances, such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months. Various grounds are set out in the Fifth Schedule as a guide in determining whether OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 16 of 29 circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. The disclosure shall be made by such person in the form specified in the Sixth Schedule. An arbitrator may be challenged by the parties only if any circumstances referred to in Section 12 (3) of The Act subject to Section 13 (4) of The Act exist which provide for an agreement between the parties for such procedure for challenge. If such challenge is unsuccessful, the party may make an application for setting aside an arbitral award in accordance with Section 34 of The Act.
14. Section 14 of The Act provides that the mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator if he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay and he withdraws from his office or the parties agree to the termination of his mandate.
15. Section 15 of The Act provides that the mandate of arbitrator is also terminated if he withdraws from office for any reason or by or pursuant to agreement of the parties. In such an event, the substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. If such an arbitrator is replaced, any hearing previously held may be repeated at the discretion of the arbitral tribunal unless otherwise agreed by the parties. The earlier order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator shall not be invalid unless otherwise agreed by the parties.
OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 17 of 2916. Under Section 16 of The Act, the arbitral tribunal is empowered to rule on its own jurisdiction including ruling on any objection with respect to the existence or validity of arbitration agreement. Such plea shall be raised not later than the submission of the statement of defence. If such plea is rejected by the arbitral tribunal, it has to proceed with the arbitral proceedings and declare an award. If plea of jurisdiction is accepted by the arbitral tribunal, the respondent may file an appeal under section 37 of The Act. If plea of jurisdiction is not accepted, the respondent may challenge such ruling along with award under section 34 of The Act.
17. I now advert to arbitral poceedings record.
18. Arbitral agreement includes Dispute Resolution Clause 24, which finds mention that Arbitral Tribunal shall be composed of one arbitrator to be appointed by the respondent for adjudication of dispute inter se parties to the lis and arbitration shall be conducted in Delhi/New Delhi.
19. In arbitral proceedings record is Disclosure under Section 12(1)(b) read with Sixth Schedule of the Act sent by speed post letter dated 30/04/2018 to petitioner vide speed post receipt dated 01/05/2018 to the two addresses of petitioner. It is admitted case of the petitioner of receipt of first arbitration notice dated 11/05/2018 for date of hearing 29/05/2018 before Ld. Sole Arbitrator at Chamber No. 513, New Chamber Block, Lawyers Chambers, Patiala House Court, New Delhi-110001. Attendance sheet of 29/05/2018 before Ld. Sole Arbitrator on record reveals OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 18 of 29 the signatures of Sh. Vivek Kumar Singh, Advocate for present petitioner. The proceeding sheet (also mentioned as attendance sheet) of Ld. Sole Arbitrator dated 29/05/2018 also records inter alia the presence of Sh. Vivek Kumar Singh, Counsel for the respondent, who sought time for filing the Vakalatnama on next date of hearing and requested for providing of Statement of Claim with all annexures and then claimant was directed by Ld. Sole Arbitrator to provide the same within a week and respondent was directed to file reply. Then matter was adjourned by Sole Arbitrator to 04/07/2018 for filing of reply by the respondent. Proceeding sheet (mentioned as attendance sheet) of 04/07/2018 before Ld. Sole Arbitrator records presence of Counsel for the respondent, who filed Vakalatnama and requested to provide some more time to file reply as the documents (Statement of Claim and Annexures) were received two-three days back; so request was allowed by Ld. Sole Arbitrator and matter was adjourned for 10/08/2018 and then claimant had deposited the arbitration fees. Attendance sheet of 04/07/2018 finds mention of signatures of Sh. Yashvir Kumar, Advocate and date 04/07/2018 before Sole Arbitrator. In the arbitral proceedings record is the Vakalatnama given by present petitioner in favour of two Advocates namely Sh. Vivek Kumar Singh and Sh. Yashvir Kumar with address Chamber No. 575, Lawyer Chamber Block, Saket Court, New Delhi as well as mobile no. 8860456420 and said Vakalatnama bears date 02/07/2018 and signatures of present petitioner and the said two named Counsel. Proceeding sheet (named as Attendance Sheet) of 10/08/2018 before Ld. Sole Arbitrator is as under:-
"BEFORE THE HON'BLE ARBITRATOR SH. SANJAY AGGARWAL OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 19 of 29 At Chamber No. 480, New Chamber Block, Lawyers Chambers, Patiala House Court, New Delhi-110001 HEARING ON 10.08.2018 ATTENDANCE SHEET CASE NO._BMW/RB:4878/LOT-77/27 BMW INDIA FINANCIAL SERVICES INDIA LTD ..... CLAIMANT Vs SUMIT JAWAHARLAL JAIN ... RESPONDENTS Present: Counsel for the claimant along with AR None for the Respondent The venue of Arbitration Court is changed to at Ch. No. 480, New Chamber Block, Lawyers Chambers, Patiala House Court, New Delhi-110001 None has appeared on behalf of the Respondent. After providing sufficient opportunity to the respondent, none has appeared, now, the respondent proceeded Ex-parte. Claimant is directed to post the present order sheet to the respondent's counsel.
Matter is fixed for 25.08.2018 for Ex-parte Evidence.
Sd/-
SANJAY AGGARWAL (ADVOCATE) Sole Arbitrator"
20. Arbitral proceedings record reveals the proceedings conducted prior to 10/08/2018 by Ld. Sole Arbitratir were so conducted at Chamber No. 513, New Chamber Block, Lawyers Chambers, Patiala House Court, New Delhi-110001. The proceedings conducted on 10/08/2018 and later by Ld. Sole Arbitrator find mention of the fact that such proceedings were so conducted by Ld. Sole Arbitrator at Chamber No. 480, New Chamber Block, Lawyers Chambers, Patiala House Court, New Delhi-110001. The petitioner was proceeded ex parte by Ld. Sole OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 20 of 29 Arbitrator on 10/08/2018 at the venue viz., Chamber No. 480, New Chamber Block, Lawyers Chambers, Patiala House Court, New Delhi-110001. On record of arbitral proceedings there is no material by which it can be inferred that any notice was either sent to petitioner or his duly authorized Counsel Sh. Vivek Kumar Singh that on 10/08/2018 the proceeding will be so conducted at Chamber No. 480, New Chamber Block, Lawyers Chambers, Patiala House Court, New Delhi-110001 and not at the previous venue of arbitration where the proceedings were conducted before 10/08/2018 i.e., at Chamber No. 513, New Chamber Block, Lawyers Chambers, Patiala House Court, New Delhi-110001. Even in the proceeding sheet (recorded as attendance sheet) of date 04/07/2018 where next date of hearing 10/08/2018 was given, there is no mention of change of venue for the proceeding to be conducted on 10/08/2018 at new venue i.e., Chamber No. 480, New Chamber Block, Lawyers Chambers, Patiala House Court, New Delhi-110001. Neither petitioner nor his duly authorized Counsel were put to notice of the change of venue of arbitral proceeding by the Ld. Sole Arbitrator.
21. Below afore elicited proceeding sheet (mentioned as attendance sheet) of hearing 10/08/2018 is stapled a speed post receipt dated 20/08/2018 of dispatch of the article by speed post by the Sole Arbitrator addressed to Sh. Vivek Kumar Singh, at PIN CODE 110001. As afore elicited address of Counsel for petitioner mentioned in the Vakalatnama filed before Ld. Sole Arbitrator as Counsel for respondent therein is of Chamber No. 575, Lawyer Chamber Block, Saket Court, New Delhi and said place has PIN CODE 110017 and not PIN code 110001. Any OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 21 of 29 article dispatched vide speed post to wrong PIN CODE address cannot be deemed to be delivered to the recipient having address of different PIN CODE than what PIN CODE is mentioned in the receipt of speed post. Even the copy of tracking report of aforesaid speed post receipt of article booked on 20/08/2018 finds mention destination PIN CODE 110001; delivery location New Delhi GPO and delivered on 23/08/2018, whereas in the same tracking report there is mention of item delivered at Malviya Nagar SO South Delhi. The contents of tracking report are inter se contrary but it no where mentions of delivery of the article so booked to the named recipient. It cannot be presumed for want of proof by cogent evidence that the copy of the proceeding sheet (given name attendance sheet) for hearing before Ld. Sole Arbitrator on 10/08/2018 having been dispatched and served upon even to Sh. Vivek Kumar Singh, Ld. Counsel for petitioner. True that on record there is no material with respect to any complaint having been preferred by petitioner before any competent forum for alleged misconduct on part of his duly engaged/authorized Counsel Sh. Vivek Kumar Singh. Fact also remains that there is no material on record of arbitral proceeding that for change of venue the petitioner was ever communicated. It was so despite the fact that two addresses of petitioner were available with Sole Arbitrator and even e-mail id of petitioner was available with the respondent. Without informing the petitioner or his duly appointed and authorized Counsel, in abrupt manner, the venue of arbitral proceeding, conducted on 10/08/2018, was changed by Ld. Sole Arbitrator and such proceeding was conducted at Chamber No. 480, New Chamber Block, Lawyers Chambers, Patiala House Court, New Delhi-
OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 22 of 29110001 and for non appearance of petitioner or his Counsel there, on single date, the petitioner was proceeded ex parte by Ld. Sole Arbitrator, even without putting the petitioner/Counsel to notice for change of venue. The arbitral proceedings record is bereft of any material of intimation given to claimant/respondent/Counsel for change of venue of arbitral proceeding before 10/08/2018.
22. Section 18 of the Act provides for equal treatment of the parties and enjoins upon Ld. Sole Arbitrator to treat the parties with equality and each party is to be given a full opportunity to present his case.
23. Section 20 of the Act in sub-section (1) embodies that parties are free to agree on the place of arbitration. Sub-section (2) of Section 20 of the Act provides that failing any agreement referred to in sub Section (1), the place of arbitration shall be determined by the Arbitral Tribunal having regard to the circumstances of the case, including the convenience of the parties. True that in sub section (3) of Section 20 of the Act, it is mandate of legislature that notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal, unless otherwise agreed by the parties, may meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of the documents, goods or other property. Fact remains that with respect to place of arbitration, the parties to the lis are to be given advance notice. For change of venue of arbitration, appropriate notice was not given by Ld. Sole Arbitrator to petitioner or duly authorized/appointed Counsel of the petitioner by the Ld. Sole Arbitrator. The OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 23 of 29 impugned arbitral award is accordingly liable to be set aside under Section 34(2)(a)(iii) of the Act.
24. Supreme Court in case of TRF Ltd. vs Energo Engg. Projects Ltd., (2017) 8SCC 377 has held that by virtue of section 12(5) of The Act, if any person, who falls under any of the category specified in the Seventh Schedule shall be ineligible to be appointed as an Arbitrator. It is held that the amended law under Section 11(6-A) of The Act requires the Court to confine examination of the existence of an arbitration agreement notwithstanding the judgment of the Supreme Court or the High Court while considering an application under section 11(6) of The Act. The designated arbitrator whose ineligibility to act as an arbitrator by virtue of amendment to Section 12 of The Act by the Arbitration and Conciliation (Amendment) Act, 2015, does not have power even to nominate any other person as arbitrator. The Supreme Court and High Court in certain circumstances have exercised jurisdiction to nullify the appointments made by the authority in such situation.
25. Supreme Court in case of Bharat Broadband Network Ltd vs United Telecoms Ltd (2019) 5 SCC 755 after construing Section 12(5) of The Act read with Fifth, Sixth and Seventh Schedule held that the Managing Director of the party, who was a named arbitrator, could not act as arbitrator nor could be allowed to appoint another arbitrator. The disclosure of a prospective arbitrator has to be made in the form specified in the Sixth Schedule and the ground stated in the Fifth Schedule are to serve as a guide in determining whether circumstances exist which give OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 24 of 29 rise to justifiable doubts as to the independence or impartiality of an arbitrator. Any prior agreement to the contrary is wiped out by the non-obstante clause in Section 12(5) of The Act the moment any person whose relationship with the parties or the counsel or the subject matter of the dispute falls under the Seventh Schedule. The sub-section then declares that such person shall be ineligible to be appointed as arbitrator. Such ineligibility can be removed by an express agreement in writing. It was held that learned arbitrator had become de jure ineligible to perform his function as an arbitrator.
26. Supreme Court in the case of Perkins Eastman Architects DPC vs HSCC (India) Ltd., 2019 SCC Online SC 1517 has held that in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. The person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015. Supreme Court has set aside the appointment of an arbitrator appointed by one of the parties having exclusive right to appoint and appointed an independent arbitrator in the application filed under Section 11(6) of The Act.
27. In the case of Proddatur Cable TV Digi Services vs. Siti Cable Network Ltd., 2020 SCC Online Del 350, it was inter alia held that following ratio of the judgment in the case of Perkins (supra), it is clear that a unilateral appointment by an authority OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 25 of 29 which is interested in the outcome or decision of the dispute is impermissible in law. When the Arbitration Clause empowers the Company to appoint Sole Arbitrator, it can hardly be disputed that the Company acting through its Board of Directors will have an interest in the outcome of the dispute. The appellant had filed the petition under Section 14 and 15 of The Act seeking declaration that the mandate of the arbitrator appointed by the respondent be terminated and an arbitrator be appointed by High Court in the provisions of The Act. Following ratio of the judgments in Perkins (supra) and Bharat Broadband Network Limited (supra), the mandate of the Arbitrator was found terminated de jure and since the present arbitrator had becomes unable to perform her functions as an arbitrator, her mandate was terminated and another independent Sole Arbitrator was appointed to substitute the previous arbitrator.
28. In the case of M/s Omcon Infrastructure Pvt. Ltd. Vs India Bulls Investment Advisors Ltd, OMP (T) (Comm.) 35/2020 and IA 6153/2020 decided on 01/09/2020 by Hon'ble Ms. Justice Rekha Palli, wherein petition was filed under Section 14 and 15 of The Act, seeking termination of the mandate of Ld. Arbitrator unilaterally appointed by the respondent and also quashing of order passed by Ld. Arbitrator, rejecting the application of petitioner under Section 12 of The Act, the ratio of the decision in case of Perkins (supra) was applied and held that once the Managing Director of the respondent Company was ineligible to appoint the arbitrator, the same would also bar the Company itself from unilaterally appointing the sole arbitrator and reference was also made to the decision of Proddatur Cable TV OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 26 of 29 Digi Services (supra). Therein also the mandate of the Ld. Arbitrator was terminated and new independent Sole Arbitrator was appointed.
29. In this case letter dated 30/04/2018 of intent for appointment of Ld. Sole Arbitrator was given by respondent to Ld. Sole Arbitrator. On record there is no proof of sending copy of aforesaid letter to petitioner. Copy of letter dated 30/04/2018 was dispatched vide speed post on 01/05/2018 to petitioner by Ld. Sole Arbitrator with afore elicited disclosure under Section 12 (1) (b) read with sixth schedule of The Act. Ld. Sole Arbitrator on 02/05/2018 itself gave his consent to respondent to act as Sole Arbitrator without even waiting for response from the petitioner. By no figment of imagination the speed post letter dispatched on 01/05/2018 from New Delhi can be presumed to have been received by petitioner at Mumbai the very next day. It so appears that Ld. Sole Arbitrator was in a hurry to give his consent to act as Sole Arbitrator on 02/05/2018. Also on record is an arbitration reference notice dated 04/05/2018 dispatched vide speed post receipt dated 04/05/2018 to petitioner intimating to petitioner that respondent has referred the matter to Sole Arbitrator Sh. Sanjay Aggarwal to arbitrate the disputes which had arisen between them. Letter of intent for appointment of Sole Arbitrator was issued on 30/04/2018 by respondent to Ld. Sole Arbitrator prior to issuance of arbitration reference notice dated 04.05.2018.
30. Bombay High Court in the case of Bhanumati J. Bhuta vs Ivory Properties & Hotels Pvt. Ltd., 2020 SCC Online Bombay OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 27 of 29 157 has held that the arbitral proceedings commence in respect of dispute when notice invoking of arbitration agreement is received by other side and not when such notice is only served upon the Arbitral Tribunal. The onus is on the applicant who had issued such notice to prove the delivery of such notice upon the other side.
31. In the case of International Nut Alliance LLC vs Beena Cashew Company, 2014 SCC Online Mad 425, it was inter alia held that before composition of arbitrators, a notice to the other party is very much essential.
32. Before dispatch of arbitration reference notice dated 04/05/2018, as per arbitral proceeding record, there is no material of any notice/letter/request dispatched by respondent that dispute between the parties will be referred to arbitration in accordance with Section 21 of the Act. Legal notice dated 18/04/2018 dispatched on 19/04/2018 by the Advocate on behalf of respondent contained the demand of payment of the total outstanding dues (unquantified) within 7 days of receipt of notice failing which respondent will be constrained to proceed against petitioner for recovery of its dues, as per terms of agreement and would inter alia initiate arbitration proceedings. By said notice dated 18/04/2018, aforesaid, there was no commencement of arbitral proceedings, as per Section 21 of the Act. So in the fact of the matter, letter of intent for appointment of Ld. Sole Arbitrator dated 30/04/2018 sent by respondent to Ld. Sole Arbitrator preceded the arbitration reference notice dated 04/05/2018 sent by respondent to petitioner.
OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 28 of 2933. In terms of law laid down in the cases of (i) TRF Ltd. (supra); (ii) Bharat Broadband Network Limited (supra); (iii) Perkins Eastman Architects DPC (supra); (iv) Proddatur Cable TV Digi Services (supra) and (v) M/s Omcon Infrastructure Pvt. Ltd. (supra), no arbitrator can be unilaterally appointed by the respondent/claimant, which has been so done in the case in hand and vide afore elicited letter dated 30/04/2018 respondent appointed Ld. Sole Arbitrator unilaterally without even sending arbitral reference notice to petitioner under Section 21 of the Act which was subsequently sent on 04/05/2018 to the petitioner. The impugned award is accordingly liable to be set aside, as per Section 34 (2)(a)(iii) of the Act and also under Section 34 (2A) of the Act as the impugned award is vitiated by patent illegality appearing on the face of record, as elicited in detail herein above. Reliance placed upon the cases of Associate Builders (supra), Ssangyong Engineering & Construction Co. Ltd. (supra), International Nut Alliance LLC (supra), and Bhanumati J. Bhuta (supra).
34. For the foregoing reasons, the petition is allowed and the impugned award is set aside.
35. The parties are left to bear their own costs.
36. File be consigned to record room.
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
th
on 15 May, 2021. Patiala House Court, New Delhi.
(Deepika) OMP (COMM.) No. 55/2019 Sumit Jawahar Lal Jain vs. M/s BMW India Financial Services Pvt. Ltd. Page 29 of 29