Delhi District Court
Omp (Comm) No. 111/19 vs Aakash Educational Services Pvt. Ltd on 3 March, 2022
DLCT010150842019
IN THE COURT OF DISTRICT JUDGE (COMMERCIAL
COURT)-01,
CENTRAL, TIS HAZARI COURTS, DELHI
PRESIDED BY: MR. BHARAT PARASHAR
IN THE MATTER OF:
OMP (COMM) NO. 111/19
AMIT DWIVEDI
S/O SH K.C DWIVEDI,
R/O C-610, SHAKUN ELEGANCE,
ANANTPURA, KOTA, RAJASTHAN
...PETITIONER
VERSUS
1. AAKASH EDUCATIONAL SERVICES PVT. LTD.
(A COMPANY INCORPORATED UNDER THE
PROVISIONS OF THE COMPANIES ACT, 1956)
HAVING ITS REGISTERED OFFICE AT :
AAKASH TOWERS, PLOT NO. 4,
SECTOR-11, DWARKA, NEW DELHI-110075
2. SH. S.C. RAJAN
(DELHI)/ SOLE ARBITRATOR
AAKASH EDUCATIONAL SERVICES PVT. LTD.
CHAMBER NO. 488, CIVIL WING, TIS HAZARI COURTS
DELHI-110054.
.........RESPONDENTS
OMP(Comm) No. 111/19 Page No. 1 of 50
DATE OF INSTITUTION : 11.11.2019
DATE OF RESERVING JUDGMENT : 09.02.2022
DATE OF PRONOUNCEMENT OF : 03.03.2022
JUDGMENT
JUDGEMENT
1. Petitioner Amit Dwivedi has filed the present petition under Section 34 of the Arbitration & Conciliation Act, 1996 (herein after referred to as "Arbitration Act") against respondent no. 1 Aakash Educational Services Pvt. Ltd. (hereinafter referred to as AESL) seeking setting aside of arbitral award dated 07.08.2019 passed by respondent no. 2 i.e. Ld. Sole Arbitrator Sh. S.C. Rajan.
2. Briefly stated the facts as stands emanated from the petition are as under: -
Respondent no. 1 company AESL is stated to be engaged in the business of running coaching institute through its various branches/centers, imparting coaching to students preparing for various competitive examinations. Petitioner Amit Dwivedi joined the services of respondent no. 1 company as an Assistant Professor Grade-II in Physics Department on 11.02.2014 for a period of two years. At the time of joining the service with AESL, the petitioner was made to sign a contract i.e. "Service Rules Manual for Faculty Members" (hereinafter referred to as Service Manual) as the same was containing various terms and conditions regulating his services with the respondent no. 1 company.OMP(Comm) No. 111/19 Page No. 2 of 50
3. It has been however stated that the said Service Manual was drafted in such a manner that it only favoured the respondent company by imposing harsh, unfair and unjust conditions on the petitioner. It has been further stated that the terms of contract of service were also grossly unreasonable, arbitrary and unfair towards the petitioner. It has been further stated that the said Service Manual also provided for auto renewal of contract of service for another period of two years without seeking any fresh consent of the faculty members unless the contract is terminated by either parties to the agreement as per the provisions of manual. There was thus no termination of contract through efflux of time. The said condition is thus stated to be against the public policy of India and also hampering the capacity of a person to work by making the work environment too restricted.
The various clauses of Service Manual have been thus stated to be in violation of Section 23 of the Indian Contract Act, 1872.
4. It has been further stated that as per the terms and conditions of the said Service Manual as contained in clause 14(b) if a faculty intended to leave the company then he was supposed to serve a notice of three months and that too when the said notice period coincides with the completion of academic year. It has been thus submitted that except for submitting his resignation during the period 15th February to 28th February of any given year, the petitioner could not have submitted his intention to leave the company by serving a three months' notice period, for otherwise the petitioner would have to wait for the OMP(Comm) No. 111/19 Page No. 3 of 50 academic session to be over on 31st May in the next year. The said condition was also stated to be violative of Section 28 of Indian Contract Act.
5. It has been further stated that the said Service Manual also restrained the petitioner from joining the services of any competitive entity for a period of one year after he resigns from the services of AESL. It has been thus stated that not only the petitioner was not permitted to leave the services of respondent company at any time other than by serving a three months' notice during the period 15th February to 28th February of any given year but a restraint was also put upon him by restricting his right to obtain any other employment in the field of education by joining the services of any entity who was engaged in a competitive business as that of respondent no. 1. It has been thus stated that an unreasonable and unjustified illegal condition was put by the respondent no. 1 company upon the petitioner and thereby jeopardizing the entire future career of the petitioner. It has been stated that petitioner being a teacher thus could not be expected to remain jobless for a period of one year and in fact no employer would have waited for an employee to join its services after a period of one year.
6. It has been further stated that as per the Service Manual, the respondent company in the event of any dispute between the parties was empowered to appoint its own Arbitrator with petitioner having no say in the appointment of the Arbitrator.
OMP(Comm) No. 111/19 Page No. 4 of 507. It has been further stated that on 06.12.2016, the petitioner was informed that he has been deputed to Mumbai (Kalyan Branch) and was asked to join there on 09.12.2016. However, after two and a half months i.e. on 28.02.2017 the petitioner was transferred to Kota. It has been thus stated that by adopting such tactics the respondent no. 1 company is harassing its employees.
8. It has been further stated that while at the time of joining the service of respondent no. 1 company the petitioner was made to sign the Service Manual but he was never provided the copy thereof. It has been further stated that not only the said Service Manual for the employees was got signed from the petitioner in a hasty manner but being an employee, the petitioner was not in a position to question the employer i.e. the respondent company at the time of signing the same. It has been also stated that the said Service Manual further provided that in case the petitioner is found to have joined any competitive entity in violation of the conditions mentioned therein, he will be liable to pay a sum of Rs. 2 lakhs as compensation to AESL.
9. It has been further stated that the said Service Manual also stated that in case of any dispute arising between the parties the entire litigation expenses including that of arbitration proceedings will be borne by the faculty i.e. the petitioner.
10. It has been further stated that subsequently when the petitioner left the services of respondent no. 1 company then the respondent company on its own appointed respondent no. 2 as an OMP(Comm) No. 111/19 Page No. 5 of 50 Arbitrator without either providing names of any panel of arbitrator to the petitioner to choose one such arbitrator but also did not ensure that the arbitrator is an independent arbitrator. It has been further stated that the Ld. Arbitrator without giving any declaration under Section 12 in terms of Arbitration and Conciliation (Amendment) Act, 2015 accepted the reference and passed the impugned award in an entirely and arbitrary manner.
11. It has been further stated that the Ld. Arbitrator did not disclose any circumstances which were likely to affect his ability to devote sufficient time to the arbitration or even as regard the circumstances, if any, existing in terms of Fifth Schedule to the Arbitration & Conciliation Act, 1996. It has been further stated that the appointment of Ld. Arbitrator is clearly hit by Rule 22 and 24 of the Fifth Schedule of the Amendment Act, 2015, for the reason that he had served the respondent company in a number of similar matters as an Arbitrator. It has been also stated that though the impugned award states that on 08.03.2018 an intimation was sent by the claimant company to respondent i.e. petitioner herein, but the award is completely silent as to whether the said alleged intimation was served upon the respondent, or not. It has been further stated that during the course of arbitration proceedings the petitioner also raised objections under Section 13(2) of the Act challenging the procedure of adopting the arbitrator, as no consent of petitioner was obtained for appointment of the Ld. Arbitrator, but the said application was dismissed by the Ld. Arbitrator in a mechanical manner by way of a non-reasoned order dated 29.09.2018.
OMP(Comm) No. 111/19 Page No. 6 of 5012. It has been further stated that subsequently petitioner also filed an application under Section 16 of the Act challenging the jurisdiction of arbitral tribunal but the same was not decided till the passing of the arbitral award.
13. The impugned arbitral award is thus prayed to be set aside on the following grounds as are mentioned in para 47 of the application under Section 34 of the Arbitration and Conciliation Act, 1996: -
"47. That being constrained, the petitioners have approached this Hon'ble Court seeking setting aside of the Arbitration Award dated 07.08.2019 on the following grounds: -
GROUNDS A. BECAUSE the offer letter and the appointment letter as well as "Service Rules Manual for the employees" was also signed on the same day but never provided to the petitioner, meaning thereby that the petitioner had no time to think and therefore, there was no consent with regard to the clauses of the "service Rules Manual".
B. BECAUSE the respondent no.1 is a company carrying on its business of running coaching institute with the sole purpose of profit making and the plea taken by the company that the absence of the faculty in the mid stream would hamper the career of the students is of no consequence.
C. BECAUSE the blank undated security cheques were taken from the petitioner which amounts to extortion and to blackmail or threaten the petitioner if they left the respondent company without complying the Service Rules Manual. The undated signed cheque kept by the claimant OMP(Comm) No. 111/19 Page No. 7 of 50 company, it is stated that this is one of the blackmailing tactics by the claimant company. Every time a faculty wants to resign and quit his job he is threatened by the claimant company that they will use the pre deposited undated but signed cheques. It is further stated that as per the Service Rules Manual it is imperative for the faculty and the surety to keep the minimum balance equal to the amount mentioned on the undated cheques being kept with the claimant company. The amount so mentioned on the cheques are exorbitant and even more than the monthly salary earned by the faculty. How is it possible to keep such huge amount in the bank when the faculty does even earn that much.
D. BECAUSE the Ld. Arbitrator has failed to appreciate that the clause 14 of the service rules manual which says that the said notice for two months can be given only between 15th February to 28th February in any year. If a faculty wants to leave the company on 2nd June (for instance), he will have to wait for a period of 1 year till May 31 st of the next year to resign. Also the period of notice of six months has to co- terminate with the expiry of the academic session, meaning thereby if a faculty serves a notice period any time after November in a year, then his notice period cannot co terminate with the expiry of the academic session. Therefore, he cannot leave the company till the expiry of next academic i.e. 1 ½ years. No employer can wait for a new employee for a time period which is more than one year.
E. BECAUSE the impugned award is based on conjectures and surmises which have no nexus with the trade practice or the facts of the case.
F. BECAUSE the respondent has never issued any notice seeking consent for appointment of arbitrator or for referring the matter before the Arbitral Tribunal. It is important for the reason to ensure impartiality of the arbitrator and also both the parties then have faith and confidence regarding the appointment of the arbitrator and arbitration proceedings pursuant thereof.
OMP(Comm) No. 111/19 Page No. 8 of 50G. BECAUSE the respondent has proceeded one sided by appointing the sole arbitrator completely by itself. No list of persons from whom arbitrator could be appointed was ever given/served upon the petitioner/non-claimant.
H. BECAUSE the award is absolutely contrary to the laws of India and therefore, is against the public policy.
I. BECAUSE the impugned award has been passed in violation of the principles of natural justice.
J. BECAUSE the impugned award is an act of fraud and collusion on the part of the Respondents.
K. BECAUSE the motive behind initiating the arbitration proceedings and filing claim by the Claimant Company/Respondent No. 1 was to illegally enrich itself at the cost of the Petitioner through the medium of arbitration proceedings and the Arbitrator/Respondent No. 2 allowed the forum to be used for that purpose.
L. BECAUSE no Panel of Arbitrators was prepared by the Claimant Company/Respondent No. 1 in consultation with the Petitioner for the adjudication of the dispute. The Arbitrator was appointed by the Respondent No. 1 as per his choice and liking.
M. BECAUSE the Petitioner had no say in the appointment of the Arbitrator as they were not given any option or opportunity to finalize the name of the Arbitrator.
N. BECAUSE the Respondent No. 2 has been engaged by the Respondent No. 1 in many arbitration proceedings and thus, the Arbitrator was de facto on the pay-rolls of the Company and he behaved as an employee of the Company.
OMP(Comm) No. 111/19 Page No. 9 of 50O. BECAUSE the appointment of the Respondent No. 2 as an Arbitrator in so many cases involving the Respondent No. 1 gives rise to justifiable doubts as to his independence or impartiality.
P. BECAUSE non-disclosure of such an important fact amounts to misconduct on the part of the Respondents and prejudicially affected the rights and interests of the Petitioners in the arbitration proceedings.
Q. BECAUSE the impugned award is the result of complete non-application of mind on the part of the Arbitrator. Such non application of mind is writ large on the face of the impugned award and more particularly from the fact that the Arbitrator/Respondent No.2 did not even care about the contentions put forwarded by the Petitioners during the course of the proceedings.
R. BECAUSE the perusal of the impugned award shall show that it is an unreasonable Award. It is submitted that Section 31(3) of the Arbitration & Conciliation Act, 1996 has cast an obligation to state the reasons of the award. However, the Arbitrator has failed to observe the said mandate of law as such the award is liable to be rejected at the outset.
S. BECAUSE the Ld. Arbitrator has failed to appreciate that the interest @ 8%, which is per-se punitive in nature, is violative of Section 74 of the Contract Act. However, while passing the impugned award, the Arbitrator has failed to consider this aspect and has simply awarded the sum claimed by the Respondent No. 1. Therefore, the impugned award is against the public policy and laws of India.
T. BECAUSE the Ld. Arbitrator has wrongly held that the terms of the Service Rules Manual or other documents are not against the public policy and the award passed by the Arbitrator in this regard is non-speaking and unreasoned.
OMP(Comm) No. 111/19 Page No. 10 of 50U. BECAUSE as per section 12 of the Arbitration and Conciliation (Amendment) Act, 2015 which says that "An arbitrator shall disclose in writing any circumstances
(b) 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.
V. BECAUSE Explanation 1 - the grounds stated in Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartibility of an arbitrator.
W. BECAUSE as per Rule 22 and Rule 24 of the fifth schedule which says that:
Rule 22: the arbitrator has within the past three years been appointed as arbitrator on TWO or more occasions by one of the parties or an affiliate of one of the parties; and Rule 24: the arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties or an affiliate of one of the parties.
X. BECAUSE the appointment of arbitrator is hit by Rule 22 and Rule 24 of the fifth schedule of the (Amendment) Act, 2015 for the reason that the Arbitrator has served the respondent company in more than 25 matters as an arbitrator.
Y. BECAUSE the main objective of the respondent company is to earn profit and in their entire service rules manual, they are talking about the business of their company and the profit and loss of the company. Moreover, no proof of loss occurred to the respondent company attached by the respondent.
Z. BECAUSE the Ld. Arbitrator failed to appreciate in its impugned order that the respondent company transferred their employees within 24-48 hours without any prior OMP(Comm) No. 111/19 Page No. 11 of 50 intimation to their faculties, at that time the respondent company forget the interest of students of that branch whose faculty is transferred to other branch.
AA. BECAUSE the Ld. Arbitrator failed to appreciate that the terms and conditions of the Service Rules Manual of the respondent company has been already declared against Public Police in the Judgment of ViveK Rai vs. Aakash Institute passed by Hon'ble High Court of Delhi. Moreover, in more than ten matters, the arbitral award has been set aside by the Courts relying upon the Vivek Rai and other judgments.
BB. BECAUSE the impugned award is silent about how Vivek Rai's Judgment is not applicable in the present case. The Ld. Arbitrator failed to distinguish the aforesaid judgment.
CC. BECAUSE the Arbitration Agreement is not valid under the law and the composition of the Arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties. Moreover, it is in contravention with the fundamental policy of Indian Law. For all the aforesaid reasons/grounds the award is stated to be bad in law and has thus been prayed to be set aside.
14. Ld. Counsel for petitioner in support of her arguments placed reliance upon the following case law:
Sr. Name of the case Citation Paras No. 1. Vivek Rai Vs. Aakash 2015 SCC OnLine 11,12 Institute Del 7814 to 17 2. TRF Ltd. Vs. Energo 2017 (8) SCC 377 5,15, Engineering Projects 57 Ltd. and 58 OMP(Comm) No. 111/19 Page No. 12 of 50 3. HRD Corporation Vs. 2018 (12) SCC 471 31 Gail India 4. Proddatur Cable TV 2020 SCC OnLine Digi Service Vs. Siti Del 350 Cable Network
5. Omcon Infrastructure MANU/DE/1664/202 Pvt. Ltd. Vs. Indiabulls 0 Investment Advisors Ltd.
6. Alupro Building 2017 SCC OnLine Systems Pvt. Ltd. Vs. Del 7228 Ozone Overseas Pvt.
Ltd.
7. Dream Valley Farms 2016 SCC OnLine Pvt. Ltd. Vs. Religare Del 5584 Finvest Limited
8. M/s FIITJEE Ltd. Vs. FAO No. 582/2016 & Hemant Kumar & Anr. CM Nos. 46149-
46151/2016 of
Hon'ble Delhi High
Court
Proceedings before the Court
15. After notice of the petition was issued to the respondent company then a detailed reply thereto was filed wherein the various allegations levelled by the petitioner regarding the hostile or unstable working conditions in respondent company or the award having been passed with a biased mind or it being without any reasons, were vehemently denied. The submission that the Ld. Arbitrator was not an independent person or that he did not act fairly was also refuted.
16. In support of his submissions Ld. Counsel for respondent OMP(Comm) No. 111/19 Page No. 13 of 50 no. 1 company has placed reliance upon the following case law:
Sr. Name of the case Citation Par
No. as
1. Dyna Technologies Pvt. 2019 SCC OnLine 27 Ltd. Vs. Crompton SC 1656 Greaves Ltd.
2. State Trading (2014) SCC OnLine 18 Corporation of India Del 3426 Limited Vs. Toepfer International Asia Limited
3. Mahanagar Telecom FAO (OS) (Comm) 18 Nigam Ltd. Vs. M/s no. 175 of 2018 Gaurav Enterprises decided on 25.09.2018 by Hon'ble Delhi High Court
4. HRD CORPORATION 2018 (12) SCC 471 vs. GAIL INDIA
5. Sudesh Prabhakar & Ors. [2018 (2) Arb. LR 11 Vs. EMAAR 538 (Delhi)] Constructions Pvt. Ltd.
17. The detailed response submitted to the various averments made in the petition, shall be however referred to at a later stage of the present order when the various issues/grounds raised by the petitioner shall be discussed in detail.
18. During the course of aforesaid proceedings, Arbitral record was also received.OMP(Comm) No. 111/19 Page No. 14 of 50
19. I have heard the arguments and carefully perused the record.
Appreciation of Arguments
20. Before proceeding to discuss the various grounds/ issues as have been raised in the petition, it will be appropriate to first briefly discuss the scope of section 34 Arbitration Act, especially in the light of arguments raised in this regard by Ld. Counsel for respondent.
Limited scope of interference u/s 34 Arbitration Act
21. It has been submitted by Ld. counsel for respondent that the Hon'ble Supreme Court of India in umpteen number of cases has time and again repeated that the scope of judicial interference in deciding a petition u/s 34 Arbitration Act is very narrow and the Court must take the approach towards protecting the Award rather than setting it aside and that the Courts must respect the finality of award and party autonomy. Reference in this regard has been made to the following observations of the Hon'ble Court as were made in the case Dyna Technologies Pvt. Ltd. Vs. Crompton Greaves Ltd (supra).
"26. There is no dispute that Section 34 of the Ar- bitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of OMP(Comm) No. 111/19 Page No. 15 of 50 the award goes to the root of the matter without there being a possibility of alternative interpreta- tion which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative fo- rum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolu- tion would stand frustrated.
27. Moreover, umpteen number of judgments of this Court have categorically held that the Courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The Courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays per- versity unpardonable under Section 34 of the Arbi- tration Act."
22. Reference was also made to the case State Trading Corporation of India Limited vs. TOEPFER International Asia Limited (supra) wherein it was observed in para 18 as under:
18. If we were to start analyzing the contract between the parties and interpreting the terms and conditions thereof and which will necessarily have to be in the light of the contemporaneous conduct of the parties, it will be nothing else than sitting in appeal over the arbitral award and which is not permissible.
23. The following observations of Hon'ble High Court of Delhi in the case Mahanagar Telecom Nigam Ltd. v/s M/S Gaurav Enterprises (supra) were also referred to:
OMP(Comm) No. 111/19 Page No. 16 of 50"18. Also, the scope of this court is limited with re- gard to Section 34 and 37 of The Arbitration and Conciliation Act, 1996. The position of law stands crystallized today, that findings, of fact as well as of law, of the arbitrator/Arbitral Tribunal are ordi- narily not amenable to interference either under Sections 34 or Section 37 of the Act. The scope of interference is only where the finding of the tri- bunal is either contrary to the terms of the con- tract between the parties, or, ex facie, perverse, that interference, by this Court, is absolutely nec- essary. The Arbitrator/ Tribunal is the final arbiter on facts as well as in law, and even errors, factual or legal, which stop short of perversity, do not merit interference under Sections 34 or 37 of the Act..."
24. It was also submitted that Explanation 2 to Section 34(2) itself provides that the Courts shall not entail a review on the merits of dispute.
25. While submitting that this court cannot look into the merits/demerits of the claims of the two parties, Ld. Counsel for respondent also laid great emphasis on the nature of work/business being undertaken by the respondent company. It was submitted that the respondent is an educational institute and is engaged in the service of providing quality education to the students aspiring for various competitive examinations, which are conducted on yearly basis. The respondent institute was stated to be having one of the largest student base in India with students from far-flung areas of the country approaching the respondent institute to obtain quality education. The remuneration paid by the respondent was also stated to be one of the best in the industry. It was submitted that the respondent OMP(Comm) No. 111/19 Page No. 17 of 50 engages specialized faculties and pay them handsome salary.
26. It has been further submitted that immediate resignation of any member of the faculty during the mid-session, without even serving the notice period, disastrously affects the interest of innocent students as the respondent has to arrange another qualified faculty member and which naturally takes some time and the interest of students is largely affected. Thus, in order to protect the interest of the students, it was submitted that the respondent institute had earlier imposed the condition that a faculty member can resign only during a particular window which would be co-terminus with the academic session.
27. It was thus submitted that in the case in hand, the petitioner left the service of respondent institute with immediate effect from 20.10.2017 without any prior notice and without even serving the notice period of three months. Immediate resignation of the petitioner was thus stated to have caused massive loss to the respondent in terms of education to the students and reputation of the respondent.
28. It has also been submitted on behalf of the respondent that though the petitioner has raised an argument during oral submissions that Section 34(2)(a)(ii) mentions about the term Arbitration Agreement, hence, this Court has jurisdiction to interfere with the Contract but it was submitted that such an argument of petitioner is totally misconceived as Arbitration Agreement as defined under section 7 of the Act merely means an Arbitration Clause in an agreement or a separate Arbitration OMP(Comm) No. 111/19 Page No. 18 of 50 Agreement and not the entire contract between the parties.
My Discussion
29. Certainly, there cannot be any dispute with the well settled position of law as put forth by Ld. Counsel for respondent that the court has limited jurisdiction U/s 34 Arbitration Act to interfere with an arbitral award and the said power can be exercised only if any of the grounds mentioned in the section are found to be existing.
30. However, I may state that in the present proceedings this court is not required to examine as to whether the entire Service Manual is in consonance with law or whether the business model of respondent company necessitated the same or not. It is also equally true that petitioner did not raise any eyebrow during the period of two years nine months when he continued his employment with the respondent company and it is only thereafter when petitioner chose to resign from the services of respondent company that the disputes arose and the various clauses of the manual have been challenged. Thus, this Court is neither required to examine the entire Service Manual of respondent company which govern the services of its faculty members nor the circumstances which compelled the petitioner to resign from the services of respondent company. However, what is required to be seen is whether the impugned arbitral award can withstand the challenge under Section 34 of Arbitration and Conciliation Act,1996 or not. It is in that context only that the proceedings conducted by Ld. Arbitrator or the OMP(Comm) No. 111/19 Page No. 19 of 50 award finally passed is to be seen.
31. At the same time this Court is also not required to look into as to whether the terms and conditions so laid down in the Service Manual for regulating the services of its employees were justified, or not, but what is actually required to be seen is whether any such terms and conditions are contrary to the public policy of India or not.
32. Thus, with the aforesaid narrow scope of Section 34 Arbitration & Conciliation Act, 1996 that I propose to examine the present petition as to whether the grounds/issues raised therein warrants setting aside of the impugned arbitral award, or not.
RAISING DOUBTS AS TO THE INDEPENDENCE OF ARBITRATOR
33. While referring to the nature of declaration made by the Ld. Arbitrator u/s 12 of the Arbitration & Conciliation Act, 1996, Ld. Counsel for petitioner has raised doubts about the independence of the arbitrator stating that his appointment in the instant case was clearly hit by Rule 22 and 24 of the Fifth Schedule of the (Amendment) Act, 2015. It has been submitted that the Ld. Arbitrator has served the respondent company in a number of matters and even a list of thirteen such cases has been submitted wherein Sh. S C Rajan had acted as an Arbitrator on behalf of respondent company in almost similar nature of disputes with other faculty members. It has been also submitted that in all such arbitration proceedings the Ld. Arbitrator has OMP(Comm) No. 111/19 Page No. 20 of 50 passed the award in favour of Claimant company AESL only. It has been further stated that from a bare perusal of the proceedings conducted by the Ld. Arbitrator in the present matter, it is clearly evident that he was merely completing a formality at the dictates of the respondent company and that too without any application of mind. A number of glaring mistakes and contradictions have been also pointed out in the proceedings and also in the award finally passed to show that the Ld. Arbitrator acted in a mechanical manner without any application of mind.
34. In response thereto Ld. Counsel for respondent submitted that in the case HRD CORPORATION vs. GAIL INDIA (supra), Hon'ble Supreme Court has held that mere appointment of an Arbitrator in more than three cases does not render subsequent appointment as void and rather it merely raises a justifiable doubt which can be adjudicated by the previous conduct of the Arbitrator and the Arbitration material placed on record. The Court further said that Schedule V of the Act merely raises doubts and does not make Arbitrator ineligible ipso facto.
35. It was also submitted that the Ld. Arbitrator retired as an Additional District and Sessions Judge and that all allegations against the arbitrator qua his impartiality and unbiased approach are completely unwarranted. It was submitted that from a bare perusal of the award it was evident that the Ld. Arbitrator has not allowed the entire claim of the Respondent and even though the Respondent had claimed a sum of Rs.13,78,992/- along with OMP(Comm) No. 111/19 Page No. 21 of 50 interest @ 12 percent p.a. but the Ld. Arbitrator awarded a claim of Rs. Rs.5,65,050/- only and that too with an interest of 8% p.a beside awarding a sum of Rs. 35000/- only towards costs and litigation charges. It has also been submitted that the claim of Rs. 2,00,000/- towards damages as was claimed by the respondent company was completely rejected by the Ld. Arbitrator.
36. Ld. Counsel for respondent in this regard also relied upon the following observations of Hon'ble Delhi High Court made in the case Sudesh Prabhakar and Ors. vs. EMAAR Constructions Pvt. Ltd. (supra) (Para 11):
11. A reading of the above judgment would show that the Supreme Court has held that the disquali-
fication contained in item 22 and 24 is not abso- lute and even an Arbitrator who has been ap-
pointed on two or more occasions by the parties or affiliates in the past three years, may yet not to be disqualified on showing that he was independent and impartial on the earlier two occasions. In any case, distinction has to be drawn between ineligi- bility to be appointed as an Arbitrator for the rea- son contained in the Seventh Schedule of the Act and the reasons which may give rise to justifiable doubts as to their independence or impartiality as contained in Fifth Schedule of the Act. Where Sev- enth Schedule gets attracted, party may straight- way approach the Court under Section 14 of the Act, however, in cases of Fifth Schedule, such doubts as to independence or impartiality have to be determined as a matter of fact in the facts of the particular challenge made by the Arbitral Tribunal under Section 13 of the Act. If a challenge is not successful, and the Arbitral Tribunal decides that there are no justifiable doubts as to the indepen- dence or impartiality of the arbitrator/arbitrators, the Tribunal must then continue the arbitral pro-
OMP(Comm) No. 111/19 Page No. 22 of 50ceedings under Section 13(4) and make an award. It is only after such award is made, that the party challenging the arbitrator's appointment on grounds contained in the Fifth Schedule may make an application for setting aside the arbitral award in accordance with section 34 on the grounds on which such party had sought to challenge the au- thority of the arbitrator.
This ground of challenge to the arbitral award was thus stated to be completely devoid of any merits and was accord- ingly prayed to be rejected.
My Discussion
37. The purpose of the declaration as envisaged under section 12 of the Act is to grant an opportunity of introspection to the ar- bitrator to dwell into his consciousness and to fathom out any cir- cumstance which may give rise to any justifiable doubts as to his impartiality. Such information may not be available in the public domain and thus the Legislature in its wisdom has put the onus on the Arbitrator himself. He is thus the fountainhead of this dec- laration and generator of the relevant information. As the bias is a state of mind and only the Arbitrator best knows his state of mind and the factors that influence the same. Bias is subtle and direct evidence of the same cannot ordinarily be found. The disclosure, therefore, ought to be as much and as fair as possible. It must be such that the parties concerned can inquire or investigate into the same.
38. However, in the present case Ld. Arbitrator has completely failed to mention at all that he has been handling any number of OMP(Comm) No. 111/19 Page No. 23 of 50 arbitration(s) on behalf of the respondent company despite an ap- plication having been moved by non-claimant raising the same very issue.
39. In this regard, it will be also pertinent to refer to the nature of declaration made by the Ld. Arbitrator and also the nature of proceedings carried out by the Ld. Arbitrator.
40. The arbitral record shows that vide letter dated 11.04.2018 (available at page 80-81), the respondent company requested Sh. S.C.Rajan to arbitrate upon the disputes as have arisen between the parties and in response thereto the Ld. Arbitrator as men- tioned in the award gave his concurrence to the respondent com- pany to act as a sole arbitrator, vide communication dated 23.04.2018. Subsequently on 20.06.2018 Ld. Arbitrator recorded the first proceedings in the matter (available at page 36) and wherein also he recorded the aforesaid fact of having received letter dated 11.04.2018 from the claimant company offering to nominate him as the sole Arbitrator to adjudicate upon the dis- putes as made in the claim by the claimant company against re- spondent Amit Dwivedi. He also mentioned that the claimant also placed before him an agreement executed between the par- ties containing the arbitration clause. Ld. Arbitrator thereafter proceeded to record his concurrence to act as a sole Arbitrator and also recorded the mandatory declaration as required under Section 12 of the Arbitration and Conciliation Act, 1996. A pe- rusal of the said proceedings further shows that the same seems to have been given in a mechanical manner by merely reiterating OMP(Comm) No. 111/19 Page No. 24 of 50 the language of the impugned section by stating that there are no circumstances which are likely to disqualify him to act as a sole arbitrator or that he is independent of each of the parties and in- tend to remain so.
41. It is further stated by the Ld. Arbitrator that to the best of his knowledge there are no circumstances, past or present, that might be of a such a nature which may call into question his in- dependence or impartiality in the eyes of the parties. He also stated that he has no relationship with or interest in any of the parties or in relation to the subject matter in dispute, whether fi- nancial business, professional or other kind in the outcome of the award. Ld. Arbitrator further proceeded to issue notice to the par- ties to appear before him on 10.07.2018 at 12.30 p.m in his Chamber at Tis Hazari Courts.
42. Strangely enough the Ld. Arbitrator did not disclose as to how many other arbitrations involving respondent company, he was already conducting or has conducted in the past.
43. The record further shows that vide communication dated 29.06.2018 (available at page 84-85) Ld. Arbitrator directed re- spondent Amit Dwivedi to appear before him on 10.07.2018. The said communication though also reiterates the language of Sec- tion 12 of Arbitration and Conciliation Act, 1996 as was men- tioned in the proceedings dated 20.06.2018 but was again com- pletely silent as to whether any other arbitration(s) involving claimant company have been earlier dealt with by him or not or OMP(Comm) No. 111/19 Page No. 25 of 50 are being dealt with by him.
44. The aforesaid issue becomes all the more important when the subsequent proceedings conducted by Ld. Arbitrator are seen. A perusal of the subsequent order sheets recorded by Ld. Arbitra- tor from 04.08.2018 onwards shows that eight other arbitration proceedings involving claimant company and various other fac- ulty members were being conducted simultaneously by the Ld. Arbitrator in as much as he recorded common order sheets in all those matters including the arbitration proceedings related to non-claimant Amit Dwivedi. Various order sheets available from page 22-33 also shows that Ld. Arbitrator merely mentioned at the top numbers of different arbitration cases in which he was conducting simultaneous proceedings. It is in this light that the list of 13 other cases cited by Ld. Counsel for petitioner Amit Dwivedi also becomes important as in all those matters involving similar disputes between AESL and various other faculty mem- bers the arbitration proceedings were conducted by Ld. Sole Ar- bitrator Mr. S.C. Rajan only.
45. Ld. Counsel for petitioner Amit Dwivedi submitted the list of following 13 other cases where Sh. S C Rajan acted as a sole arbitrator in similar nature of disputes involving respondent com- pany and various other faculty members: -
S. No. Name of the Case in which OMP COMM.
the Arbitrator had acted as No.
an Arbitrator
OMP(Comm) No. 111/19 Page No. 26 of 50
1 Aakash Educational Services 107/2019
Pvt. Ltd. Vs. Vinay Kumar
Pandey
2 Aakash Educational Services 112/2019
Pvt. Ltd. Vs. Pawan Kumar
Saini
3 Aakash Educational Services 122/2020
Pvt. Ltd. Vs. Ravi Bohra
4 Aakash Educational Services 109/2019
Pvt. Ltd. Vs. Kaveti Nagaraju
5 Aakash Educational Services
Pvt. Ltd. Vs. Rajendra
Kumar Upadhyay
6 Aakash Educational Services
Pvt. Ltd. Vs. Parul Khurana
7 Aakash Educational Services
Pvt. Ltd. Vs. Promod Kumar
Pandey
8 Aakash Educational Services
Pvt. Ltd. Vs. Sanjay Kumar
Jha
9 Aakash Educational Services 93/2019
Pvt. Ltd. Vs. Avneesh Singh
10 Aakash Educational Services 110/2019
Pvt. Ltd. Vs. Himanshu
Varshney
11 Aakash Educational Services
Pvt. Ltd. Vs. Prateek Jain
OMP(Comm) No. 111/19 Page No. 27 of 50
12 Aakash Educational Services 79/2019
Pvt. Ltd. Vs. Prashant
Gautam
13 Aakash Educational Services 106/2019
Pvt. Ltd. Vs. Mohammad
Khwaja
46. In fact, this court has also earlier dealt with a similar peti- tion under section 34 filed by one other Faculty member namely Ms Nikita Duggal challenging a similar nature of award passed by Ld. Sole Arbitrator Mr. S. C. Rajan.
47. Ld. Counsel for respondent company has also not disputed the said list of cases or the fact that same arbitrator has adjudi- cated upon similar nature of disputes between respondent com- pany and other faculty members.
48. Thus, from the aforesaid nature of proceedings conducted by Ld. Arbitrator, it is crystal clear that the impugned declaration made by Ld. Arbitrator under Section 12 of the Arbitration Act is in fact no declaration and the arbitration proceedings appear to have been conducted in a mechanical manner without any appli- cation of mind. The fact that Ld. Arbitrator was actually involved in 13 other similar nature of arbitration proceedings involving claimant company and other faculty members involving almost similar nature of disputes clearly strikes at the very root of the is- sue and the Ld. Arbitrator by no stretch of imagination can be said to be independent or having conducted the proceedings in an unbiased manner.
OMP(Comm) No. 111/19 Page No. 28 of 5049. In fact, immediately after appearing before the Ld. Arbitra- tor, Ld. Counsel for non-claimant Amit Dwivedi moved an appli- cation under Section 13 (2) of the Arbitration and Conciliation Act, 1996 pointing out these very facts and thereby challenging the very procedure adopted by the claimant company in the ap- pointment of Ld. Arbitrator. A list of eight cases wherein Ld. Ar- bitrator was currently serving as an Arbitrator was also men- tioned and thereby the independence of the Ld. Arbitrator in con- ducting the proceedings was questioned. The record further shows that similar objection to the very appointment of Ld. Arbi- trator was raised in all the other arbitration proceedings also which were being conducted simultaneously by the Ld. Arbitra- tor. However, Ld. Arbitrator dismissed the said objections vide order dated 29.09.2018(available at page 87 to 93), but a perusal of the said order shows that the same was also passed in a me- chanical manner without any application of mind. Though at the top of the said order mentions the arbitration case number as 111 of 2018 i.e. the number of the present case, but the title men- tioned alongside is of some other case i.e. M/s Aakash Educa- tional Services Pvt. Ltd. Vs. Kaveti Nagaraju. A perusal of the facts recorded in the said order also shows that the Service Man- ual being referred to in the said order is not the one which was signed by respondent Amit Dwivedi at the time of joining the ser- vice in as much as is it talks of Arbitration Clause as mentioned in Clause 50 of the Service agreement. However, the copy of the agreement which was relied upon by the Ld. Arbitrator during the course of arbitration proceedings conducted against Amit Dwivedi contained only 49 clauses.
OMP(Comm) No. 111/19 Page No. 29 of 5050. Moreover, the Ld. Arbitrator though seemingly passed a lengthy order but the same is completely bereft of any reasons in as much as the grounds raised in the application challenging the declaration under Section 12 made by the Ld. Arbitrator, as being not proper, were not dealt with. Even in the said order Ld. Arbi- trator did not mention as to whether in the past he has dealt with any other arbitration proceedings involving AESL or he is at present dealing with any similar arbitration proceeding. A bare perusal of the order clearly shows that the same has been passed in a mechanical manner without any application of mind and that too with a preconceived mind of dismissing the same.
51. The record further shows that respondent Amit Dwivedi subsequently moved an application under Section 16 of the Arbi- tration and Conciliation Act, 1996 challenging the jurisdiction of arbitration tribunal to arbitrate in the matter. Vide order dated 27.10.2018 claimant company was directed by the Ld. Arbitrator to file reply to the said application and on 01.12.2018 the reply was filed by the claimant company. The Arbitral award though at page 3 mentions that the parties by way of oral submissions de- cided that the said application under Section 16 be decided at the final stage, but a perusal of the various order sheets recorded by the Ld. Arbitrator does not reflect any such submission having been made by the parties or even Ld. Arbitrator having recorded that the application shall be decided at the final stage. What is however more strange is that even after recording in the award that the application under section 16 shall be decided at the final OMP(Comm) No. 111/19 Page No. 30 of 50 stage, the Ld. Arbitrator did not deal with same at all much less deciding the same.
52. The mechanical nature of proceedings conducted by the Ld. Arbitrator also stands reflected from the subsequent proceed- ings as were recorded by the Ld. Arbitrator. Order dated 12.01.2019 available at page 22 shows that after filing of replica- tion by the claimant, the case was adjourned to 16.02.2019 for recording of the evidence of claimant. The claimant accordingly led his evidence on 16.02.2019 and Ld. Arbitrator thereafter ad- journed the matter to 09.03.2019 for evidence of the respondent. Accordingly, on 09.03.2019 (available at page 20) the respondent evidence affidavit was filed and matter was adjourned for tender- ing & cross examination to 30.03.2019. However, on 30.03.2019 (available at page 19) Ld. Arbitrator recorded that as per tele- phonic discussion, Ld. Counsel for respondent has sought ad- journment and the matter is adjourned to 11.04.2019 for final ar- guments. Strangely enough there is no explanation at all as to when the matter was initially listed for recording of evidence of respondent than under what circumstances the Ld. Arbitrator ad- journed the same for final arguments. On the other hand, Ld. Ar- bitrator in the award at page 4 as under:
"In the evidence of the respondent an affidavit of respondent/non-claimant Sh. Amit Dwivedi filed but it is very as- tonishing for me to see that the said affidavit has not been ten- dered in the evidence of the respondent."
53. The aforesaid proceedings thus per se shows that the Ld. Arbitrator was conducting the proceedings in a mechanical man-
OMP(Comm) No. 111/19 Page No. 31 of 50ner without any application of mind. The award also thus con- tains per se wrong facts.
54. In the case Alupro building System Pvt. Ltd. Vs. Ozone Overseas pvt. Ltd. 2017 SCC Online DEL 7228, it was ob- served by Hon'ble Delhi High Court that the fact that one other arbitration of the party was also taken up by the Arbitrator and the same was not disclosed in the declaration, was sufficient in it- self to set aside the award. Thus, not only the appointment of Ld. Arbitrator in 13 other similar arbitrations involving claimant company and other faculty members gives rise to justifiable doubts as to his independence or impartiality but the said conclu- sion further gets fortified from the mechanical nature of proceed- ings conducted by the Ld. Arbitrator which in fact is also indica- tive of a preconceived notion in the mind of Ld. Arbitrator in somehow decide the matter in favour of claimant company, irre- spective of nature of objections raised by the non-claimant. Non- disclosure of his earlier association with claimant company in conducting similar other arbitration proceedings, by the Ld. Arbi- trator clearly amounts to misconduct and raises doubts about the fairness, integrity and impartiality of the Ld. Arbitrator.
55. At this stage, it would be also pertinent to mention that though the Ld. Arbitrator has attempted to frame the impugned arbitral award in such a manner that it may appear that he has passed a reasoned award considering the case of both the parties before arriving at the conclusion towards the end, but a bare pe- rusal of the award shows that it is completely bereft of any rea-
OMP(Comm) No. 111/19 Page No. 32 of 50sons whatsoever and merely reiterates the averments made by the claimant. Strangely enough at page 8 of the award Ld. Arbitrator has again mentioned as follows:
"I have also gone through the evidence led by the claimant and the exhibited documents placed on record but I found that there is no evidence on be- half of the respondent Simply filing an affidavit which has not been tendered in the evidence."
56. Once again, the said fact recorded in the award by the Ld. Arbitrator before proceeding to give his findings on various claims is not only contrary to the record of arbitration proceed- ings but is also illustrative of the mechanical nature of proceed- ings conducted by the Ld. arbitrator.
From the aforesaid discussion it is thus clear that the impunged award is not only contrary to the basic notions of justice but is also vitiated by patent illegality appearing on the face of award.
In my considered opinion, the aforesaid circumstances/grounds are thus sufficient in themself for set- ting aside the impugned arbitral award.
Unilateral Appointment of Arbitrator by Respondent Company
57. Another objection raised against the impugned award is that the Ld. Arbitrator was unilaterally appointed by the respon- dent company and thus the procedure so followed was against the substantive law of the land. Though Ld. Counsel for the respon- dent company while relying upon the case Central Organiza- tion for Railway Electrification Vs. M/s. EVI-SPIC-SMO- MCML,2019 SC 1635 has submitted that in the said case Hon'ble Supreme Court upheld the arbitration clause allowing OMP(Comm) No. 111/19 Page No. 33 of 50 one party to nominate arbitrator and also held that it being the condition in the agreement between the parties and general con- ditions of the contract so the High Court is not justified in ap- pointing an independent sole arbitrator ignoring clauses of gen- eral conditions. It was also submitted that in the light of the con- flicting decisions passed in Central Organization for Railway Electrification case(supra), Perkins Eastman Architects DPC Vs. HSCC (India) Ltd., 2019 SCC Online SC 1517 and Bharat Boardband Network Vs. United Telecoms Ltd., (2019) 5 SCC 755, the Hon'ble Apex Court has referred the issue of unilateral appointment to the larger bench and the same is pending adjudi- cation.
My discussion
58. In order to appreciate the aforesaid issue, it would be ap- propriate to first refer to the relevant arbitration clause-49 as is mentioned in the "Service Manual". The same read as under: -
49. In case of any dispute or difference between you and the company regarding payment or non payment of any claim(s), tenure of services, transfer of employees, termination of services, compensation and any other dispute arising out or relating to the contract whether arising during the services or thereafter shall be referred to sole arbitrator appointed by the chairman of M/s. Aakash Educational Services Pvt.Ltd.
If the arbitrator to whom the matter is originally referred becomes dejure or defacto, unable to perform his duties or refuses to act for any reason whatsoever the chairman AESPL as aforesaid at the time of such inability to act shall OMP(Comm) No. 111/19 Page No. 34 of 50 appoint any other person to act as an arbitrator in accordance with the term and conditions of the agreement. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor, if both the parties consent to this effect, failing which the arbitrator will be entitled to proceed denovo.
The proceedings shall be conducted at New Delhi subject to the provisions of Arbitration & Conciliation Act 1996 and the courts at Delhi only shall have the jurisdiction over the matter.
59. A bare reading of the aforesaid clause-49 clearly shows that the same is contrary to the fundamental principles of public policy that no one can be a judge in his own case. The respondent no.1 cannot be allowed to override considerations of fairness im- partiality, neutrality and unbiasedness. In this regard it will be ap- propriate to refer to the following observations of Hon'ble Supreme Court in the case Perkins Eastman Architects Vs. HSCC (India) 2019 (9) SCC Online SC 1517:
'a person having an interest in the dispute or in the outcome or decision thereof must not only be ineligible to act as an arbitrator but must also not be eligible to appoint any one else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint a sole arbitrator'.
60. Reliance in this regard is also placed upon the case TRF Ltd. Vs. Energo Engineering Projects Ltd (2017) 8 SCC 377.
61. Ld. Counsel for the respondent no.1 has contended that the OMP(Comm) No. 111/19 Page No. 35 of 50 autonomy of the parties to choose the procedure is the foundation pillar of arbitration. It was thus submitted that the parties are at liberty to choose the procedure for appointment of arbitrator and the petitioner by agreeing to the terms of 'Service Rules Manual' of his own will and without coercion agreed for appointment of the arbitrator as per terms of clause 49. It was thus submitted that respondent no.1 in appointing the arbitrator has accordingly acted in terms of the agreement between the parties.
62. Certainly, Ld. Counsel for respondent no.1 is correct in stating that the autonomy of parties to the choice of procedure is the foundational pillar of arbitration. However, in this regard it will be also appropriate to refer to the following observations of Hon'ble Delhi High Court made in the case Proddatur Cable TV Digi Services Vs. Siti Cable Network Ltd. O.M.P (T) (COMM.) 109/2019 and I.A. 17896/2019 delivered on 20.01.2020:
24. ........The underlying principle in arbitration no doubt is party autonomy but at the same time fairness, transparency and impartiality are virtues which are equally important. If the Authority appointing an Arbitrator is the Head or an employee of a party to the agreement then its interest in its outcome is only natural. It goes without saying that once such an Authority or a person appoints an Arbitrator, the same ineligibility would translate to the Arbitrator so appointed. The procedure laid down in the Arbitration Clause cannot be permitted to override considerations of impartiality and fairness in arbitration proceedings.OMP(Comm) No. 111/19 Page No. 36 of 50
25. Insofar as the reliance by the respondent no.1 on the judgments permitting unilateral appointment by the Authority designate of one party to the agreement is concerned, in my view, the same will have no relevance in view of the judgment of the Supreme Court in the case of Perkins (supra). The argument of the respondent no.1 that in the Arbitration Clause before the Supreme Court in the case of Perkins was with regard to the power of a Managing Director to appoint an Arbitrator whereas in the present case it is the Company only merits rejection.
First and foremost, one has to see the rationale and the reasoning behind the judgment in the case of Perkins (supra). The Supreme Court held that the Managing Director was ineligible from appointing an Arbitrator on the simple logic that a Managing Director of a Company would always have an interest in the outcome of the arbitration proceedings. The interest in this context takes the shape of bias and partiality. As a natural corollary, if the Managing Director suffers this disability, even if he was to appoint another person as an Arbitrator, the thread of biasness, partiality and interest in the outcome of the dispute would continue to run. Seen in this light, it can hardly be argued that the judgment in Perkins (supra) will not apply only because the designated Authority empowered to appoint an Arbitrator is other than a Managing Director.
29. Lastly, the reliance of the respondent no.1 on the judgment of the Supreme Court in the case of Central Organisation (supra) is also of no avail to the respondent no.1. In the said case, the Supreme Court was dealing with an arbitration clause which required a panel of Arbitrators to be provided by the Railways to the other party to the contract, in terms of clause 64.3(a)(ii) of the GCC. The Court held that since one party was to provide a panel and the other party had the OMP(Comm) No. 111/19 Page No. 37 of 50 choice to short list the Arbitrator of its choice from the panel and only from the shortlisted names, Railways was bound to appoint at least one Arbitrator to constitute the Arbitral Tribunal, the parties had a level playing field. The Arbitrator appointed by the Railways of its choice was balanced by the second Arbitrator being of the choice of the other party. Thus, the elements of fairness, transparency and impartiality were taken care of.
63. Accordingly in view of the aforesaid observations, the contentions raised by Ld. Counsel for respondent company cannot be sustained. The arbitration clause empowering the respondent company to unilaterally appoint the sole arbitrator clearly stands vitiated in light of the pronouncements made by the Hon'ble Supreme Court in Perkins case and by the Hon'ble High Court in Proddatur case. Consequently, the ineligibility of the respondent company to appoint a sole arbitrator unilaterally would clearly percolate to the arbitrator so appointed by it and therefore, the Ld. Sole Arbitrator was ineligible to arbitrate in the matter.
64. As regard the case of Central Organization for Railway Electrification Vs. ECI (supra) as relied upon by Ld. Counsel for respondent company, I may state that the same in the light of peculiar nature of facts and circumstances of the said case is not at all applicable to the present case. In this regard, it would be worthwhile to refer to a very recent judgment of Hon'ble Delhi High Court in the case City Life Line Travels Pvt.Ltd. Vs. Delhi Jal Board Arb. P. 1/2021 and I.A. 31/2021 decided on OMP(Comm) No. 111/19 Page No. 38 of 50 27.01.2021.
21. The reliance placed by Mr. Singh on the decision in the case of Central Organization for Railway Electrification v. ECI (supra) is misplaced. In that case, the Arbitration Clause provided for the Arbitral Tribunal to be constituted by Gazetted Railway Officers or three retired Railway Officers above a certain rank. The petitioner (Railways) was required to send names of four empanelled retired Railway Officers and the contractor was required to suggest two names out of the said panel for appointment as its nominee. The General Manager was required to appoint one of the names out of the two names as suggested by the contractor as the contractor's nominee and the remaining Arbitrator from the panel or outside the panel. The Supreme Court noted that the procedure adopted also took into account the option of the contractor. The Court was of the view that since the agreement provided for the appointment of an Arbitral Tribunal out of the panel of serving/retired officers, the procedure as agreed by the parties ought to have been followed. In the present case, the Clause does not entail any such procedure for suggesting any names out of the panel of Arbitrators maintained by the DJB. Therefore, the contention that the decision of the DJB to nominate an Arbitrator must be sustained since the Arbitrator appointed was one from the panel maintained internally, is unpersuasive. The question whether the DJB maintains a panel of Arbitrators is its internal matter. The Arbitration Clause does not contemplate the appointment of any Arbitrator from the panel of Arbitrators maintained by the DJB and therefore, the decision in the case of Central Organization for Railway Electrification v. ECI (supra) is, wholly inapplicable in the facts of the present case.
OMP(Comm) No. 111/19 Page No. 39 of 5022. It is also relevant to mention that in Union of India v. M/s Tantia Constructions Limited: SLP (C) 12670/2020 decided on 11.01.2021, a three judge bench of the Supreme Court upheld the decision of the High Court to appoint an independent Arbitrator and had dismissed the Special Leave Petition. However, since reliance had been placed by the petitioner on the decision in Central Organization for Railway Electrification v. ECI (supra), the Supreme Court had requested the Chief Justice of India to constitute a larger Bench to look into the correctness of the said decision. The said order is reproduced below:-
"Having heard Mr. K.M. Nataraj, learned ASG for sometime, it is clear that on the facts of this case, the judgment of the High Court cannot be faulted with. Accordingly, the Special Leave Petition is dismissed. However, reliance has been placed upon a recent three-Judge Bench decision of this Court delivered on 17.12.2019 in Central Organisation for Railway Electrification vs.M/s ECI-SPIC-SMO-MCML (JV) A Joint Venture Company, 2019 SCC OnLine 1635. We have perused the aforesaid judgment and prima facie disagree with it for the basic reason that once the appointing authority itself is incapacitated from referring the matter to arbitration, it does not then follow that notwithstanding this yet appointments may be valid depending on the facts of the case.
We therefore request the Hon'ble Chief Justice to constitute a larger Bench to look into the correctness of this judgment.
Pending application stands disposed of."
65. In view of the above pronouncement by Hon'ble Apex Court and Hon'ble Delhi High Court, I am thus of the considered view that unilateral appointment of Ld. Sole Arbitrator by the re-
OMP(Comm) No. 111/19 Page No. 40 of 50spondent company is invalid and is again a substantive ground for setting aside the impugned arbitral award in itself.
NON-APPLICABILITY OF JUDGMENT OF VIVEK RAI Vs. AAKASH INSTITUTE ; 2015 SCC OnLine Del 7814 CASE:
66. It has been submitted by Ld. counsel for respondent that though the petitioner has attempted to rely upon the observations of Hon'ble Delhi High Court in the Vivek Rai Judgment but the said observations are not at all applicable to the facts of the present case. It has been submitted that in the Vivek Rai case (supra) the Hon'ble High Court observed that the Ld. Arbitrator has simply gone by the clauses in the agreement without even scrutinizing the same and awarded the claim in toto. The Hon'ble High Court in fact also observed that the clauses appear to be unconscionable and opposed to public policy and an award based on above clauses would be clearly opposed to public policy. However, Ld. Counsel submitted that in the present matter the Ld. Arbitrator who is a retired ADJ allowed the claim only partially and also gave his findings along with reasoning in the award from Page 8 onwards.
67. It was also pointed out that under Claim 1 Ld. Arbitrator has clearly observed that the judgement in Vivek Rai's case is not applicable to the facts and circumstances of the present case and he further awarded only a sum of Rs.5,65,050/- only to Respondent and that too for the mandatory notice period of three months and rejected the claim of respondent for higher damages.
OMP(Comm) No. 111/19 Page No. 41 of 5068. It was also pointed out that the respondent-institute had also sought penal damages of Rs.2,00,000/- which is claim no. 2, but the same was also completely rejected by the Ld. Arbitrator.
69. On the other hand, Ld. Counsel for petitioner has submitted that from a bare perusal of the terms and conditions contained in the Service Manual, as was got signed from the petitioner, it is clear that the same are identical to the one which were under consideration in the Vivek Rai's case (Supra) and thus the observations of Hon'ble Delhi High Court squarely apply to the present case also.
My Discussion
70. In this regard, I may state at the outset that a bare reading of the award goes to reflect that the learned Arbitrator has taken the Service Manual signed between the parties as sacrosanct, unimpeachable and hallowed. The learned Arbitrator has not cared to test as to whether the various clauses of the manual stand the scrutiny of law. The learned Arbitrator has simply gone by the clauses in the agreement without going into the question whether they are ex facie opposed to public policy or are hit by sections 23 and 28 of the Contract Act, 1872, or not.
71. Before proceeding further, it will be however appropriate to have a brief glance over some of the clauses of the said "Service Manual"
"14(b) In the event an employee wishes to leave OMP(Comm) No. 111/19 Page No. 42 of 50 'Aakash Educational Services Pvt. Ltd.' after completion of two years, is required to give notice in writing giving clear 3 months time to AESL so that such period co−terminates with expiry of the academic session. The said notice is required to be delivered through the Central Director /Incharge or your Head of the Department at the office of the Managing Director of AESPL at Delhi and obtain a valid receipt so that there would be no ambiguity regarding the contents of your notice and it's serving upon AESPL. The notice for 3 months can be given only between 15th February to 28the February in any year after completion of two years. If any employee gives notice at any time other than specified, it will not be accepted and will be treated as invalid as per the terms and conditions of appointment. If any faculty member does not submit notice between 15th February to 28th February, it will be assumed he/she is going to complete the coming next session. .................................... 14(d) In case you are unable to adhere to the said mandatory notice period, you would be liable to pay to AESP-
(i) A minimum pre−estimated & pre−determined damage to the tune of gross salary for the unexpired notice period or the remaining period of the academic year/contract period of two years, whichever is higher or as per discretion of Chairman/Managing Director/Director of the Company e.g. if a person quits 31st October, he/she will be required to pay 7 x (x) rupees as damaged to AESPL (the value of (x) will be gross monthly salary). The damages are not punitive but only a part compensation for the huge loss of face, reputation, brand equity, mind equity, future business losses due to yor're quitting without completing the academic year & leaving the students in a lurch.
(ii) It is made clear that training expenses as stated above are payable only in case of leaving the AESPL during the initial period of contract of two years but not in case of extended period of contract as OMP(Comm) No. 111/19 Page No. 43 of 50 stipulated in clause 13(b) of this manual.
Such liability mentioned under clause 14(d)(i) & (ii) would be automatically incurred once the breach is committed by the employee & no notice in this regard would be served upon you to claim the said pre- determined & pre-estimated damages. You would be severally liable to pay the same within 7 (seven) days of your leaving. If AESPL does not receive the payments within 7 days of leaving towards the damages as stated above, AESPL shall have the right to recover the same along with interest @ x p.a. through legal process (x=PLR + 3% ; where PLR is Prime Lending Rate of AESPL Bankers].
14(e) After the expiry of the initial & minimum contract period, this contract will continue subject to clause 13(b) above and till person attains the age of superannuation i.e. 58 yrs, subject to terms and conditions contained in this manual. After the superannuation, some people with extraordinary achievements may be given extension to continue for such period with candidate is capable of rendering effective services solely at the discretion of Managing Director.
14(f) Corollary of clause (13) and (14) if in the last year of the contract period or extension thereof at AESPL, an employee does not submit his resignation between 15th February to 28th February, it will be assumed that he/she is willing to continue his/her job for another term of two years subject to the conditions contained in this manual.
14(g) It is agreed and undertaken by you that the present service manual is meant to be complied with and the terms and conditions stated there in are towards compliance, to ensure continuity of coaching to the students, upholding AESPL tradition in high ethics & values, rather than committing breach of any of its terms.
You will submit two undated cheques in favour of OMP(Comm) No. 111/19 Page No. 44 of 50 'Aakash Educational Services Ltd." The first cheque submitted by you shall be towards the total training expenses incurred by the company on you as explained under clause (4) & 14 (d) (ii) and the second cheque equivalent to 3 months gross salary of confirmed employee if appointed on confirmed services as per the offer / calculation of salary sheet, towards a part discharge of your liabilities towards damages as per clause 14 (d) of this agreement.
You hereby authorize AESL for filling up of the date on the cheques and thereafter to encash the said cheques. In case of non compliance of the contract terms contained in this manual, the cheque become payable immediately. That the said cheques shall not be treated as security cheques for legal or any other purpose as it is issued by you in order to discharge of your liability which may occur on account of damages as mentioned under clause 14(d) of the agreement.
I, Amit Dwivedi undertake to keep sufficient balance in my bank account on which the above mentioned cheques are drawn to ensure the encashment of the cheques. Cheque nos are 061441 and .............. drawn on Union Bank of amount Rs 375900 and Rs. ................. Signature...-sd-............ In case, the above said cheque(s) gets/dishonored on its presentation to the banker for the reason of insufficient funds, a/c closed, stop payment or any other reason, you shall be deemed to commit an offence u/s 138 NI Act and the appropriate proceedings shall be initiated against you before the appropriate courts of law.
AESL is further authorized to take appropriate legal action to recover the balance amount if any. Willful & intentional breach of this contract would attract liability upon the employee for compensatory & exemplary damages in addition to contractual OMP(Comm) No. 111/19 Page No. 45 of 50 liabilities mention in clause 14(d) and 14(k) and under any other provision of this manual.
14(h) In the event of your default, non−compliance or willful breach of the contract or sudden termination of the contract and/or your leaving the institute without following the proper procedure, as laid down in this manual, and the employee's refusal to meet his/her obligation towards AESPL in letter and spirit of the service rules, and the matter becoming subjudice, the employee shall be responsible for the entire litigation expenses including, arbitration proceedings, organizing hearing in the arbitration and other legal proceedings if any required to be initiated to facilitate arbitration proceedings. Needless to say, litigation expenses are subjective. However, such expenses cannot be less than Rs.10000/− per hearing either before the Court or before the arbitrator apart from the other expenses as elucidated above. 14 (j) After leaving the company for any reason whatsoever, you shall not complete in any manner directly or indirectly with AESPL or shall not accept any employment or association with any organization i.e. competitors of AESPL for a period of not less than one year from the date of your leaving the company.
14(k) If employee commits any act in violation to the provision of clause 14(j) of the agreement, with in- tend to cause wrongful loss to AESL, shall be held li- able to pay a fixed sum of Rs.2 lacs to AESL towards damages besides other demand raised by the com- pany."
72. A bare reading of the above clauses goes to show that they are lopsided, lacks any equity and show that the dice is loaded in favour of respondent company. The damages have though been OMP(Comm) No. 111/19 Page No. 46 of 50 sought to be claimed as non-punitive and only as compensation but in actuality it is not so. The compensation has been claimed on the basis of huge loss of face, reputation, brand equity, mind equity, future business losses due to the petitioner's quitting the job without completing the academic year and leaving the students in a lurch. However, no estimate of such damages has been given in the claim petition and they have ostensibly been claimed as a matter of right without establishing any basis or cause for the same. Thus, it is crystal clear that though they are shown to be non-punitive, but in their sum-and-substance they are ex-facie punitive.
73. A bare reading of the terms and conditions is an indicator that though the language of the agreement is intended to reflect that there is free will of the petitioner while entering the contract but in practice it is not so. The freedom of the petitioner even to serve a notice to quit has been severely restricted and exists only on papers. The petitioner has been pushed against the wall to serve a quit notice only during a period of 15 days i.e. between 15th February to 28th February. Thus, the dominance of respondent company is writ large on the face of record. The basic test, whether the terms of the agreement are in compliance with the Contract Act, has been clearly bye-passed by the Ld. Arbitrator, albeit such an exercise was the sine-qua-non. The limited scope of interference in an arbitration award does not mean that the same should be to perpetuate the gross illegalities which are per-se opposed to the public policy.
74. Clause 14 (b) provides that in case the petitioner does not OMP(Comm) No. 111/19 Page No. 47 of 50 submit his resignation between 15th February to 28th February, it will be presumed that he is willing to complete the coming next session. This also stipulates a condition where the petitioner has been pushed against the wall and has no freedom of choice. The choice of the respondent company has been superimposed upon him.
75. Another obnoxious condition which has been heaped upon the petitioner is to submit two undated cheques, as mentioned in clause 14(g), in favour of the respondent company towards training expenses incurred by the company. There is nothing on record to exhibit any such training expenses incurred by respondent company. It also provides that in case of non- compliance of the contract terms contained in the manual, the cheques shall become payable immediately. It has further been stipulated that the said cheques shall not be treated as a security cheque(s) for legal or any other purposes and that they shall be deemed to be in discharge of petitioners' liability which may occur on account of damages as mentioned under clause 14(g) of the "Service Manual".
76. A further condition has been imposed upon the petitioner that he shall keep sufficient balance in his bank account on which the said cheques are drawn to ensure encashment of the said cheques. A deemed liability of the offence under section 138 of the Negotiable Instruments Act has thus been imposed upon the petitioner. This stipulation is also obnoxious and against the intent of the Negotiable Instruments Act, where an offence gets committed only when a cheque is dishonoured for want of OMP(Comm) No. 111/19 Page No. 48 of 50 sufficient funds in the account or when it exceeds the arrangement, and thereafter when the drawer fails to pay the amount of cheque within 15 days of the receipt of a demand notice. It is at that point that the offence is deemed to have taken place. The stipulation in clause 14(g) is thus clearly an attempt to overreach the law.
77. In the same vein there is restraint on the future employment of the petitioner once he leaves the services of respondent company. The litigation expenses have been given a minimum value @ Rs. 10,000/- per hearing in total disregard of the fact as to what actual expenses are incurred. This is again an attempt of unjust enrichment which cannot be permitted under the law.
78. These clauses, on the face of it, appear to be wholly unconscionable and per se opposed to public policy. As such they are hit by section 23 and various other provisions of the Contract Act.
79. It thus goes without saying that an award based on such clauses has been ostensibly imposed upon the petitioner in order to impose upon him an unconscionable liability and which is in direct clash with the public policy of India.
80. Thus, a bare reading of the impugned award clearly goes to show that the Ld. Arbitrator has ostensibly proceeded on the premise that he is under no obligation to cull out if the terms of the agreement are per se opposed to the law of contract or public policy.
OMP(Comm) No. 111/19 Page No. 49 of 50CONCLUSION
81. From the aforesaid discussion, it is thus clear beyond any doubts, that the Ld. Arbitrator was acting in a mechanical manner without any application of mind simply with a view to put a seal of approval on the claim of respondent company while taking the terms of the agreement at face value without any demur as a rule of thumb.
82. While passing the impugned award even a bare minimum scrutiny of the clauses of the agreement or statement of claim has not been done. Ld. Arbitrator mechanically proceeded to pass the impugned award in favour of the respondent no. 1, banking upon the various terms and conditions, which are patently illegal.
83. In these circumstances, I am thus of the considered opinion that there are sufficient grounds to set aside the impugned award and that judicial interference in the matter is warranted.
84. Accordingly, the impugned Award is hereby set aside and the petition stands allowed. In the facts and circumstances of the case the parties are however left to bear their own costs.
85. File be consigned to Record Room.
Pronounced in open Court on 03.03.2022 (Bharat Parashar) District Judge (Commercial Court)-01, Central, Tis Hazari Courts,Delhi.
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