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Anjuman Matriculation Higher ... vs Edusmart Services Private Limited on 1 May, 2018

      IN THE COURT OF PRAVEEN KUMAR: ADDITIONAL
    DISTRICT JUDGE­05 :NEW DELHI DISTRICT, PATIALA
               HOUSE COURTS, NEW DELHI.

Arbt. No.2258/16
In the matter of :
Anjuman Matriculation Higher Secondary School
(represented by A. Mohamed Ibrahim, Correspondent
The Ayyampet Thai Rahima Memorial Trust)
30E Station Road, Ayyampettai,
Papanasam Taluk­614201
Tamil Nadu                                                    ...................Petitioner

          Versus                                                                                       

1. Edusmart Services Private Limited
    L­74, Mahipalpur Extension
    New Delhi­110037

2. Educomp Solutions Limited
    1211 Padma Towers,
    1, 5 Rajendra Place,
    New Delhi­110008                                                               ................Respondents

JUDGMENT:

1.             The petitioner has filed petition u/S 34 of the Arbitration & Conciliation Act, 1996, (hereinafter referred to as "the Act"). The   same   is   preferred   against   the   award   in   Arb.   Case No.ARB/PRC/105/2015   dated   06.12.2016,   passed   by   Ld.   Sole Arbitrator, New Delhi whereby the petitioner was direted to pay to the respondents an amount of Rs.9,70,560.09 (Rupees Nine lakh, seventy thousands, five hundred and sixty and paise nine only) Arbt. No.2258/17 Anjuman Matriculation Higher Secondary School Vs. Edusmart Services Pvt. Ltd.

along with interest @ 18% per annum till realization. 

2. Briefly stating, the petitioner is a school run by the Ayyampet Thai Rahima Memorial Trust, Ayyampet, Papanasam Taluk, Tamil Nadu, which is a public charitable trust, and running the school under the name and style of Anjuman Metriculation Higher   Secondary   School.   The   school   has   approximately   1500 number   of   students   and   classes   starting   from   first   standard   to twelfth standard. The respondent no.1 is engaged in the sale of hardware,   server,   equipment,   networking   and   accessories.   The respondent no.1 is also providing support services and provision of   consumables   in   relation   to   smart   class   program   for   school children. The concept of smart class program is that a server is set up   inside   the   school,   loaded   with   digital   instruction   and assessment   materials   mapped   to   the   school   curriculum. Classrooms are wired to the server and are equipped with a digital system  comprising of  a versatile interactive white board and a projection   system.   Teachers   access   the   digital   content   in   their classrooms on an everyday basis, project it on the board during their classroom  sessions  and explain concepts with the help of animations, graphics, video etc., to the students. The respondent no.2   is   the   owner   of   the   proprietary   rights   of   the   repository, documents   and   data   received   from   respondent   no.1   by   the petitioner.   The   respondent   no.2   has   authorized   the   respondent no.1 for implementing its smart class program within the territory of India as per the standards specified by respondent no.2. the Arbt. No.2258/17 Anjuman Matriculation Higher Secondary School Vs. Edusmart Services Pvt. Ltd.

respondents approached the petitioner on 20th November 2011 to set   up   the   smart   class   program   for   the   school   children   at   the premises of the petitioner which comprises of sale of hardware and making available the repository of its digital content. IN this connection, the parties entered into a tripartite agreement dated 31th December 2011 and reduced the terms of the agreement into writing. The said agreement provided that the respondents shall provide   support   services   and   other   consumables   in   relation   to smart   class   program   and   in   case   of   disputes,   the   parties   have agreed that the disputes shall be referred to an acceptable sole arbitrator.

3. It is the case of the petitioner that after entering into an   agreement,   the   respondents   started   implementing   the   smart class   program   in   the   premises   of   the   petitioner.   From   the beginning,   the   petitioner   was   not   happy   with   the   services provided   by   the   respondents   and   was   orally objecting/complaining about the same to the representatives of the respondents.   Ignoring   the   complaints   of   the   Applicant,   the respondents carried on with their work. Regular bills were also raised by the respondent no.2 and the applicant refused to pay since the work carried out by the respondents was not meeting the standards set by the respondents themselves. It was decided by the applicant   to   cancel   the   agreement.   A   letter   dated   20.11.2013 cancelling   the   agreement   was   handed   over   personally   in   this connection   to   the   representative   of   the   respondents   when   they Arbt. No.2258/17 Anjuman Matriculation Higher Secondary School Vs. Edusmart Services Pvt. Ltd.

visited the school premises during the month of November 2013. Nearly after an year, on 28.10.2014, to the shock and surprise of the   petitioner,   a   legal   notice   was   issued   by   the   respondents through their legal counsel claiming an amount of Rs.5,20,000/­ (Rupees   five   lakhs,   twenty   thousands   only)   as   payable   by   the petitioner   till   September   10,   2014.   On   19 th  March,   2015,   the petitioner   received   a   notice   from   respondent   no.2   towards commencement of arbitration proceedings under Section 21 of the Act and notification towards appointment of Sole Arbitrator for adjudication   of   disputes   between   the   parties.   By   the  abovesaid notice, Mr. Janardan Singh, Retired Judge was appointed as the sole Arbirator for adjudication of disputes between the parties. On 30.11.2015 a notice was issued by one Mr. Pankaj Raj Chopra, Advocate claiming that he was appointed as the sole Arbitrator and   fixing   the  date   of   hearing   on  08.01.2016   at  245,   Lawyers Chambers   Block,  High Court of   Delhi for   hearing. As  per  the arbitration clause in the agreement if any dispute or difference of any kind whatsoever arise between the parties, then such dispute or difference shall be referred to an "acceptable sole Arbitrator". With   regard   to   the   appointment   of   second   sole   Arbitrator,   no notice  was  issued  to  the  petitioner   by  the  respondents   and  the respondents without any regard to the Act unilaterally appointed the second sole Arbitrator. The respondents failed to follow the procedure prescribed under the Act for the appointment of second sole Arbitrator. Hence, the appointment of second sole Arbitrator Arbt. No.2258/17 Anjuman Matriculation Higher Secondary School Vs. Edusmart Services Pvt. Ltd.

is also  ex­facie  illegal, contrary to law and liable to be quashed. Any action/order or any other direction issued by the Arbitrator is void  ab   initio  since   the   appointment   of   second   sole   Arbitrator itself   is   illegal   and   contrary   to   law.   With   regard   to   the appointment of second sole Arbitrator not only the respondents failed to give any intimation regarding the appointment of second sole Arbitrator but also the applicant was kept in dark with regard to the position of the firs sole Arbitrator who was appointed by the   respondent   no.2   on   19.03.2015.   To   the   utter   shock   and surprise   of   the   applicant,   the   second   sole   Arbitrator   without regard to due process of law in respect of his appointment and without   proper   verification   of   facts   passed   the   Award   on 06.12.2016. The petitioner has prayed that the Award is passed without any authority and jurisdiction under the Act and hence the same be set aside. 

4. Respondents   no.1   and   2   have   filed   reply   to   the petition raising preliminary objections ­ that petition is filed by Sh. A. Mohd. Ibrahim who does not have authority to file the present   petition  without   any  valid   resolution/GPA/SPA   and,   as such, the petition is liable to be dismissed; that petitioner has not come   with   clean   hands;   that   petition   has   been   filed   beyond limitation; that petitioner have falsely stated that petitioner were never served with notice of appointment of arbitrator or of arbitral proceedings. On merits, every allegation of the petitioners have been denied except which forms part of record.

Anjuman Matriculation Higher Secondary School Vs. Edusmart Services Pvt. Ltd.

5. Objections have been filed by the petitioner on the grounds:­(i) that the Award is opposed to 'Public Policy of India' and has been passed against the substantive laws in force in India.

(ii) that the Award dated 06.12.2016 passed by the Arbitrator is illegal, perverse and has been passed without application of mind and is liable to be set aside. (iii) that Award is bad, illegal and contrary to provisions of Section 11 and 34 of the Act as there was no appointment of the Arbitrator as per the Arbitration clause contained in the Agreement. It is stated that as per the Arbitration clause the dispute or difference shall be referred to an acceptable sole Arbitrator. (iv) that respondent no.2 unilaterally referred the dispute without appointment of Arbitrator as is evident from the Award dated 06.12.2016 and (v)that the Award being contrary to the principals of natural  justice   and   contrary   to   the   law   of   the country which stipulates that due and adequate opportunity has to be provided to every party, which has not been provided in the present case to the petitioner.

6. I have heard Sh. Radhakrishnan, ld. Counsel for the petitioner.   He   has   relied   upon   judgments   -  Dharma Prathishthanam Vs. M/s Madhok Construction Pvt. Ltd., Appeal (Civil) 7140 of 2004, decided by Apex Court on 02.11.2004 and National   Fertilizers   Ltd.   Vs.   Indo   Gulf   Industries   Ltd.,   CM (COMM)   No.143/2016,   decided   by   High   Court   of   Delhi   on 29.01.2018.   On   04.04.2018   an   opportunity   was   granted   to respondents to file written submissions on or before 15.04.2018.

Anjuman Matriculation Higher Secondary School Vs. Edusmart Services Pvt. Ltd.

However,   no   written   submissions   have   been   filed   by   the respondents. Therefore, I am proceeding to decided the present petition on the basis of reply of respondent on record.

7. I have gone through the file. I have also gone through the judgments cited before me.

8.  Though   not   referred   to   or   relied   upon,   in   recent judgment  -  Harbhajan Kaur  Bhatia Vs.  M/s  Aadya Trading & Investment Pvt. Ltd., FAO No.355/2016, decided on 18.07.2017, our High Court of Delhi speaking through Hon'ble Mr. Justice Valmiki J. Mehta has held as under:­ "This   Court   is   receiving   many   judgments   of   the   courts below   which   are   most   unfortunately   dismissing   the objections by simply stating that the Award is not against the public policy or the Award  does not violate the ratio of the judgment of the Supreme Court in  Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes  Ltd. (2003) 5 SCC 705 and the other connected judgments. In my opinion, this is an unacceptable practice. Since this Court has received a series of cases where objections under Section 34 of the Act are   being   decided   without   even   mentioning   what   the disputes   between   the   parties   are,   how   the   Award   has decided the same and how a court hearing objections under Section 34 of the Act cannot interfere because the Award, as   per   the   reasoning,   is   neither   illegal   or   perverse including not falling under the ingredients of Section 34 of the   Act,   therefore,   while   setting   aside   the   impugned judgment on the ground of complete absence of reasoning as also discussion as regards what were the issues involved and how they are decided, a copy of this Court's judgment along with the impugned judgment dated 10.12.2015 be put up   before   Hon'ble   the   Acting   Chief   Justice,   so   that appropriate directions can be issued, if Hon'ble the Acting Chief Justice so deems fit, to the District Courts that non­ speaking judgments cannot be passed while dealing with the objections which are filed under Section 34 of the Act".

Anjuman Matriculation Higher Secondary School Vs. Edusmart Services Pvt. Ltd.

9.  The petitioner has also raised the ground of the arbitral award being hit by 'Public Policy of India'. In the light of   the   objections,   before   this   Court   deal   with   these   pleas, though not referred to or relied upon, it will be desirable to refer   to   the   judgment   of   the   Apex   Court   in   the   matter   of Associate   Builders   vs.   DDA,   2015   (3)   SCC   49,   where   the term 'public policy of India' has been discussed and explained extensively. The award passed by the arbitrator was held in the said judgment to be against 'fundamental policy of Indian law' on the following grounds:

(a). When   it   is   not   in   compliance   with   statutes   or   judicial precedents

(b). When it violates the principles of judicial approach 

(c). When   it   is   not   in   compliance   with   principles   of   natural justice

(d). When it violates the principles of Wednesbury   Reasonableness i.e. that the award is perverse  

10. As   regards   the   objection   of   respondents   that   the petition has been filed beyond the period of limitation, the Award was received by the petitioner on 05.01.2017. As per Section 34 (3) of the Act, the petition for setting aside the Award shall be made within three months from the date of receipt of the arbitral Award. The present petition was filed on 23.03.2017 and, as such, the same is within the period of limitation.

11. As regard the objection taken by respondents that A. Arbt. No.2258/17 Anjuman Matriculation Higher Secondary School Vs. Edusmart Services Pvt. Ltd.

Mohd.   Ibrahim   has   no   authority   to   file   the   present   petition   is concerned, the same is without any merit in view of the judgment

- National Fertilizers Ltd. (supra). It is now a settled law in view of the judgment of the Supreme Court in the case of United Bank of India Vs. Naresh Kumar, 1996 (6) SCC 660, that a suit/petition filed by company should not be dismissed on technical grounds. 

12.  In  Dharma Prathisththanam  (supra), the Apex Court has observed as under :­ "An arbitrator or an Arbitral Tribunal under the Scheme of the 1940 Act is not statutory. It is a forum chosen by the consent of the parties as an alternate to resolution of disputes   by   the   ordinary   forum   of   law   courts.   The essence of arbitration without assistance or intervention of the Court is settlement of the dispute by a Tribunal of the own choosing of the parties. Further, this was not a case where the arbitration clause authorized one of the parties to appoint an arbitrator without the consent of the other. Two things are, therefore, of essence in cases like the present one: firstly, the choice of the Tribunal or arbitrator. Both should be based on consent given either at   the   time   of   choosing   the   arbitrator   and   making reference or else at the time of entering into the contract between   the  parties   in  anticipation   of  an occasion  for settlement of disputes arising in future"

*** *** *** "On a plain reading of the several provisions referred to herein­above,   we   are   clearly   of   the   opinion   that   the procedure followed and the methodology adopted by the respondent   is   wholly   unknown   to   law   and   the appointment of the sole arbitrator Shri Swami Dayal, the reference of disputes to such arbitrator and the ex­parte proceedings  and award given  by the  arbitrator  are all void ab initio and hence nullity, liable to be ignored. In case of arbitration without the intervention of the Court, the parties must rigorously stick to the agreement entered into between the two. If the arbitration clause names an Arbt. No.2258/17 Anjuman Matriculation Higher Secondary School Vs. Edusmart Services Pvt. Ltd.

arbitrator   as   the   one   already   agreed   upon,   the appointment  of  an arbitrator  poses  no difficulty.  If the arbitration   clause   does   not   name   an   arbitrator   but provides for the manner in which the arbitrator is to be chosen and appointed, then the parties are bound to act accordingly. If the parties do not agree then arises the complication which has to be resolved by reference to the provisions   of   the   Act.   One   partly   cannot   usurp   the jurisdiction of the Court and proceed to act unilaterally. A unilateral appointment and a unilateral reference /026 both will be illegal"

13. A perusal of the said letter dated 28.10.2014 reveals that   it   cannot   be   said   to   have   complied   with   requirement   of arbitration clause/agreement between the parties and of Section 21 of the Act of 1996. In the said letter/notice dated 28.10.2014 it has   only   been   mentioned   that   in   the   event   of   failure   to   make payment as demanded, matter would be referred to arbitrator. The arbitration clause between the parties is to the effect, "the dispute or difference shall be referred to an acceptable sole Arbitrator". Thus,   the   in   case   of   dispute,   matter   was   to   be   referred   to "acceptable" sole arbitrator. But in the notice dated 28.10.2014 there  is   no  mention  of  name  of   the  arbitrator   to  whom  matter would   be   referred   to   in   case   payment   was   not   made   by   the petitioner.

14. The use of word "acceptable" before the expression "Sole   Arbitrator"   itself   suggests   that   the   appointment   of   an arbitrator   would   be   made   by   the   parties   to   the   Arbitration Agreement after arriving at a consensus for the appointment of the Arbitration. This was one of the objective of enactment of Arbt. No.2258/17 Anjuman Matriculation Higher Secondary School Vs. Edusmart Services Pvt. Ltd.

Section   21   of   the   Act.   Therefore,   appointment   of   the   Sole Arbitrator is not in accordance with the procedure agreed to by the parties in the arbitration clause. Appointment of an arbitrator without following the procedure agreed interse would amount to being   against   the   public   policy   of   India.   Hence,   petitioner   has successfully made out the ground under Section 34(2)(a)(iii) of the Act for getting the award set aside.

15. In view of the above discussion, this court is of the view that the Award is not sustainable and the same is set­aside. No   order   as   to   costs.   File   along   with   arbitral   proceedings   be consigned to Record Room after necessary compliance. 

                                                                                      PRAVEEN                        PRAVEEN KUMAR

                                                                                      KUMAR                          Date: 2018.05.02
                                                                                                                     12:38:35 +0530

Dictated and announced in                             (PRAVEEN KUMAR)
open court today i.e. on 01.05.2018        Additional District Judge­05,
                                                    NDD, Patiala House Courts,
                                                             New Delhi.(R)




Arbt. No.2258/17

Anjuman Matriculation Higher Secondary School Vs. Edusmart Services Pvt. Ltd.