Delhi District Court
Sahil City Sports vs Cricket Academy Of Pathans Pvt. Ltd on 24 December, 2020
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (COMM.) No. 146/2019
1. Sahil City Sports,
A Sole Proprietorship Firm
Having its office at:-
Near Millenium Plaza, Banstall, Raipur,
Chattisgarh
Through its sole proprietor Mr. Ajaz Bhinsara
2. Mr. Ajaz Bhinsara
S/o Shri Samsuddin
R/o Sandeep Bhawan, Shriram Nagar,
Shankar Nagar, Raipur, Chhatisgarh ...Petitioners
vs
Cricket Academy of Pathans Pvt. Ltd.
11A, First Floor, Lane No. 3, Kh. No. 258, Westend Marg,
Saidullajab,Delhi-110092 ....Respondent
Date of Institution : 03/08/2019
Arguments concluded on : 09/12/2020
Decided on : 24/12/2020
Appearances : Sh. Vineet Dwivedi, Ld. Counsel for petitioner.
Sh. Sanat Tokas, Ld. Counsel for respondent.
JUDGMENT
1. Petitioner Company has filed the present petition under Section 34 of The Arbitration and Conciliation Act, 1996 (herein after referred as the Act) for setting aside the ex parte Arbitral Award dated 03/04/2019 passed by Arbitral Tribunal comprising of Ld. Sole Arbitrator Ms. Simran Brar, Advocate, titled Cricket Academy of Pathans Pvt Ltd vs Sahil City Sports & Anr. Vide impugned award dated 03/04/2019, petitioner no. 1 was directed to pay Rs. 5,82,270/- alongwith interest @ 18% per annum on sum of Rs. 87,870/- from 01/12/2017 till the date of such payment to the claimant/respondent within three months failing which claimant was also held entitled to interest @ 6% OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 1 of 31 per annum on Rs. 4,94,400/- from the date of award till payment. Also the Arbitral Tribunal granted permanent injunction in favour of the Claimant and the respondent no. 1 was permanently restrained from using the Claimant's brand name i.e., "Cricket Academy of Pathans" "CAP" or any trademark, service mark, copyright, internet domain names or any other intellectual property right which belonged to and was owned by the Claimant, in any manner or at any place, whatsoever; and the respondent no. 1 was also directed to forthwith remove trademarks from; including but not limited to; premises of the Academy of respondent no. 1 as well as all marketing and social media.
2. Factual Matrix of the case of petitioners is that petitioner no. 1 is a sole proprietorship firm and petitioner no. 2 is the sole proprietor of petitioner no.
1. The petitioner no. 1 was set up with intent to develop a cricket training infrastructure and provide cricket training and facilities to youth and budding cricketers. Respondent carried out its business of exceptional quality cricket coaching facilities/amenities and other services under the brand name/logo Cricket Academy of Pathans. The respondent was incorporated on 10/02/2014 and had commenced operations of its first cricket training centre in March 2017. The respondent had adopted Franchise Owned Franchise Operated (FOFO) model for its business. The petitioners through Franchise India Brands Ltd., which was a part of Franchise India Group and was one of the leading business brokerage firm, got introduced to the respondent. Franchise India Brands Ltd. brought the respondent and petitioners together to create synergy and explore possibility of doing business together. Both the parties carried out respective due diligence and pursuant to discussion decided to enter into a contractual relationship. On 14/10/2016, respondent entered into a Franchise Agreement with the petitioners for an initial period of five years alongwith a lock-in period of two years as stipulated in Article XIII Clause 1 and 3. The respondent was doing business on a Franchise Owned and Franchise Operated (FOFO) model whereby entire investment OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 2 of 31 and funding was the responsibility of the Franchisee (the petitioners herein). The petitioners had paid a sum of Rs 5,00,000/- plus 15% taxes to the respondent at the time of signing of Agreement towards Franchise Fees as per the Article VIII Clause 1 of the Agreement. Further the petitioners were paying monthly royalties @ 20% plus taxes out of total gross revenue generated from the cricket academy including royalties @ 10% from the tie- ups with the schools in terms of the Article VIII Clause 2 of the Agreement besides paying marketing costs and all other expenses including expenses towards purchase of cricket equipments, outfits, nutrition, accounting software etc., as per the instructions and directions of the respondent. The petitioners made considerable investment towards the cricket academy/Franchise and followed several directions, instructions and requirements of the respondent concerning purchase of equipments, outfits, accounting software, travel, accommodation, marketing, royalty fee etc and the mode and manner thereof. The respondent was newly incorporated entity and had no prior experience in the field running and managing the cricket academy except the fact that the Directors of the respondent happened to be national players of Indian cricket team. Respondent and its officials were only interested in collecting franchise fee, monthly royalties, earning profits and extracting money on several pretexts and requirements. Officials of the respondent demanded money from the petitioners and when the petitioners refused to accede to illegal demand of money by the officials of the respondent, they started creating problems, troubles and hindrances in the running and operations of the cricket academy run by the petitioners and also threatened the petitioners and their academy of dire consequences. The officials of the respondent stopped cooperating in the running and operation of the Franchise /cricket academy and started writing baseless and frivolous e- mails and communications of alleged violations and breach of the Agreement. Ld. Sole Arbitrator recorded at para c of the Part II of the award that the material breach was non payment of dues besides several other repeated breaches of the Agreement which led to termination of the Agreement vide the OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 3 of 31 notice of termination dated 19/12/2017. Upon perusal of the notice of termination, it was discernible that the same was very cryptic and references had been made to several past communications pertaining to alleged breaches but nothing had been pointed out as to material breach of non payment of dues as recorded by Ld. Sole Arbitrator except raising claims of penalty and damages for breach of terms of Article VI Clause 6, Article X Clause 12 and Article XIII Clause 3 of the Agreement. The petitioners had refused to participate in the arbitration proceedings and submit to the jurisdiction of the Ld. Sole Arbitrator due to strong apprehension of the bias and non adherence to the provisions and scheme of the Act in constitution of the Arbitral Tribunal. The petitioner in its reply dated 29/12/2017 to the notice of termination dated 19/12/2017 had refuted the allegations of violations and breach of the Agreement and had specifically denied charges of non payment of dues. Ld. Sole Arbitrator though had noted the fact of issuance of the reply by the petitioners to the notice of termination but interestingly, the version of the petitioners were not recorded at all by the Ld. Sole Arbitrator and the same were completely suppressed and ignored for the obvious reasons. The petitioners have been duly making payments to the respondents as per the Agreement and the same was apparent from the fact that various bills were admittedly paid by the petitioners and only few of them were alleged to be outstanding. There were instances of wrong, incorrect and inaccurate issuance of bills/invoices by the respondents which were subject to reconciliation and settlement of accounts, however, the Ld. Sole Arbitrator chose to ignore to verify the veracity of the bills/invoices presented by the respondent by calling for the records of all the bills and ledger statement of account. The notice of termination was issued with malafide intention during the lock-in period of two years to coerce and compel the petitioners to comply with illegal and unreasonable demands of money by the officials of respondent. Thereafter respondent issued two notices dated 27/02/2018 and 26/03/2018 invoking arbitration. The respondent appointed Ld. Sole Arbitrator to adjudicate the alleged dispute between the parties in terms of Article XXX OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 4 of 31 of the Agreement. The second notice invoking arbitration was received by the petitioners on 05/04/2018. Before the petitioners could have responded to the contents of the notice invoking arbitration dated 26/03/2018, they received another letter dated 17/04/2018 (received on 20/04/2018) from Ld. Sole Arbitrator whereby it was apprised to the petitioners about the date of preliminary hearing of arbitration proceedings as 19/04/2018, which was already passed. The fixing of hearing within two days of issuance of notice especially when the party resides in another State shows ample biasness against the petitioner and apparently, the issuance of notice was mere a formality on papers. Petitioners issued reply dated 24/04/2018 to notice invoking arbitation dated 26/03/2018 and the notice dated 17/04/2018 whereby expressed their objection to the appointment of Ld. Sole Arbitrator and refused to submit to the jurisdiction as the constitution and appointment of the arbitrator was not in conformity with the provisions and scheme of the Act and amendments thereof. The petitioners also expressed their strong apprehension of bias and lack of faith on independent, neutral and impartial arbitration proceedings by the Ld. Sole Arbitrator appointed by the respondent. The petitioners also clarified that they had not received any of the alleged previous notice/letter dated 07/04/2018. Despite the above non acceptance of appointment of the Ld. Sole Arbitrator and constitution of Arbitral Tribunal, Ld. Sole Arbitrator proceeded with the arbitration and failed to consider the objections of the petitioners concerning non adherence/breach of the provisions/scheme of the Act and amendment thereof. As the petitioner no. 2 kept receiving notices/ orders of the arbitration proceedings, he visited the place of arbitration on 03/07/2018 out of curiosity and bewilderment about ongoing arbitration in absence of the petitioners. Petitioner no. 2 was not accompanied by any lawyer/advocate during the hearing dated 03/07/2018. Petitioner no. 2 neither accepted the appointment and constitution of the Arbitral Tribunal nor submitted to the jurisdiction of the Ld. Sole Arbitrator. Thereafter, Ld. Sole Arbitrator proceeded ex parte as the petitioner no. 2 did not appear in any further proceedings. The petitioner no. 2 had no trust and OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 5 of 31 faith in the arbitration proceedings as the proceedings lacked independence, neutrality and impartiality. The petitioners however stopped using the name of the respondent brand thereafter. Petitioner had made considerable investment in the Franchise/Cricket Academy in view of the long term association promised by the respondent. The Franchise Agreement even contained a lock-in period of two years which had been breached by the respondent by terminating the Agreement before the expiry of lock-in period and hence it was the respondent who had breached the terms of the Agreement and due to which the petitioners had suffered immensely leading to huge loss and closure of the cricket academy of the petitioners. Thus, respondent is liable for the counter claim and loss caused and suffered by the petitioners on various counts. Ld. Sole Arbitrator passed the impugned award dated 03/04/2019 whereby several baseless, frivolous and sham claims of the respondent were allowed and direction for payment of money on several counts amounting to Rs 7,00,000/- approximately alongwith interest was passed erroneously against the petitioner no. 1. Copy of the impugned award dated 03/04/2019 was received by the petitioners sometime around 15/05/2019 which gives an impression that the impugned award was made on back date in order to make it fall within a statutory prescribed period of adjudication of one year from the stated dated of commencement of the arbitration i.e., 04/04/2018. Nonetheless, as proof of courier/registered post had been misplaced to substantiate the same and thus, it was requested that the respondent may be directed to furnish the proof of dispatch and delivery thereof for the purposes of record. Since, the petitioners have misplaced the proof of receipt of the impugned award, the date of receipt of impugned award was being taken notionally as 06/04/2019 to show bonafide, strictly, for the purposes of calculation of period of limitation as prescribed under Section 34 (3) of the Act. Petitioner no. 2 is not technology savvy person and had limited understanding and knowledge of e-mails, computers and electronic media. The petitioner no. 2 preferred verbal exchange/dialogs with the officials of the respondent concerning running and operation of the Franchise and reposed OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 6 of 31 trust on the name of Pathans.
3. Petitioners challenged the legality and validity of the impugned award on the following grounds:
a) Ld. Sole Arbitrator has passed the impugned award ex parte and the legality and validity of the impugned award ought to be tested on the touchstone of the statutory provisions and principles of law enunciated by Hon'ble Supreme Court.
b) The impugned ex parte award was ex facie illegal, bad and perverse. The arbitration proceedings undertaken by Ld. Sole Arbitrator were nothing but mere eyewash and an abuse of the process of adjudication by way of arbitration. It is paramount to have independent and impartial adjudication of dispute beyond reproach and judicial neutrality and impartiality is central and necessary theme of the Act and amendment thereof. However, in the instant ex parte award had been passed in violation of aforesaid cardinal principle and suffered from bias and predisposition. Thus, the same was patently illegal, null, and void and opposed to the public policy of India. The impugned ex parte award lacks judicious approach which was a basic tenet of public policy and as such liable to be set aside for grave legal infirmities.
c) The appointment of Ld. Sole Arbitrator and constitution of Arbitral Tribunal was sham and fraud played upon the petitioners and the provisions of the Act. The appointment of Ld. Sole Arbitrator was bad, perverse and illegal as the same falls under the prohibited categories specified under the Fifth and Seventh Schedule appended to the Act. Ld. Sole Arbitrator was ineligible to act as an arbitrator in terms of Sections 12(1)(b) and 12 (5) of the Act. Ld. Sole Arbitrator had also not furnished the form of disclosure as specified under OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 7 of 31 the Sixth Schedule in terms of Section 12 of the Act. Despite the above material lacuna, objections of the petitioners, circumstances indicating to apparent bias and ineligibility of the Sole Arbitrator, she continued as the Sole Arbitrator and proceeded to adjudicate the disputes for obvious reasons.
The impugned award is nothing but a fraud played upon the petitioners by the respondent for its vested interest and same is contrary to the above provisions of the Act and thus liable to set aside on this count only.
d) The petitioners did not submit to the jurisdiction of the Sole Arbitrator to adjudicate the dispute between the parties which is reflective from para 4(b) of the award. The petitioners had also communicated its non acceptance to appointment of the Sole Arbitrator as the same was violative of spirit of impartiality and neutrality of the arbitrator as enshrined under Section 12 of the Act for adjudication of dispute and same had been the object, purpose and scheme of the Act.
e) The petitioners had no trust and faith in the arbitration proceedings as the proceedings lacked independence, neutrality and impartiality. Independent, neutral and impartial adjudication is central and necessary theme of arbitration process. Biasness strikes at the core of the independent and impartial adjudication. Such patent illegality goes to the root of the matter and the award which replete with biasness is liable to be set aside for being perverse, irrational and contrary to the public policy of India.
f) The impugned award is liable to be set aside as the same is bad in law, untenable and against the public policy of India in as much as the same suffers from perversity, inconsistency and illegality. The award is patently illegal, perverse and opposed to public policy of India and a fit case for judicial OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 8 of 31 intervention to set right the illegality and perversity apparent on the fact of the record and is liable to be set aside, in terms of Section 34 of the Act. The ex parte award passed by Ld. Sole Arbitrator is contrary to the law and null and void.
g) The impugned award is contrary to and inconsistent with its own finding and perverse and patently illegal.
h) Ld. Sole Arbitrator erred is not giving any finding in regard to the claim of biasness and lack of independence and impartiality of the Ld. Sole Arbitrator made by the petitioners vide its letter dated 24/04/2018. Ld. Sole Arbitrator vide its order dated 02/05/2018 simply skirted the issue of terming the said letter as merely a tactic to delay the pending arbitration proceedings. Further the Ld. Sole Arbitrator failed to apply its mind to legality of objection concerning the provision of Section 12 of the Act and ignored the same by simply recording that the Agreement empowers the respondent to appoint the sole arbitrator. More so, the response to the non issuance of disclosure form by the Ld. Sole Arbitrator was evasive and no copy of such disclosure form was provided to the petitioners even after their specific objection and denial regarding the receipt thereof.
i) Despite non acceptance of appointment of Ld. Sole Arbitrator and constitution of Arbitral Tribunal, Ld. Sole Arbitrator proceeded with the arbitration and failed to consider the objections of the petitioners concerning non adherence/breach of the provisions/scheme of the Act and amendment thereof. The petitioners had neither accepted the appointment and constitution of the Arbitral Tribunal nor submitted to the jurisdiction of Ld. Sole Arbitrator.
j) Ld. Sole Arbitrator had ignored that the respondent had not produced entire bills/invoices and only produced selected OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 9 of 31 invoices which were false and frivolous. The ledger statement of account had also not been examined to arrive at the veracity and correctness of the invoices/bills produced by the respondent, as allegedly outstanding. Thus, Ld. Sole Arbitrator did not examine the documents in its entirety to arrive at the correct conclusion and instead chose to blindly accept the bills/invoices produced by the respondent as true and correct for the reasons best known to her.
k) The impugned ex parte award is vitiated by the fraud and corruption as Ld. Sole Arbitrator was ineligible to act as an arbitrator in the instant case in view of express bar under the provisions of the Act. Thus, the instant award is liable to be set aside in this count as well.
l) Ld. Sole Arbitrator had failed to appreciate that the respondent had failed to discharge burden of proof on its claims and yet the same had erroneously been allowed by Ld. Sole Arbitrator. Ld. Sole Arbitrator ought to have applied judicial mind and examined the veracity of claims of the respondent before blindly granting the claims/reliefs, prayed for by the respondent.
m) The impugned award passed by Ld. Sole Arbitrator lacks cogent reasons for grant of claims of the respondent herein and hence the impugned award is liable to be set aside for the being patently illegal and against the public policy.
n) The termination of the Agreement was malafide and illegal as petitioners stopped using the brand name of the respondent during the pendency of the arbitration proceedings. The petitioners had made considerable investment in the Franchise/Cricket Academy in view of the long term association promised by the respondent. The Franchise Agreement even contained a lock-in period of two years OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 10 of 31 which had been breached by the respondent by terminating the Agreement before expiry of lock-in period in malafide and illegal manner and hence, it is the respondent who had breached the terms of the Agreement and due to which the petitioners have suffered immensely leading to huge loss and closure of the cricket academy of the petitioners.
o) The copy of the Arbitral Award dated 03/04/2019 was received by the petitioners sometime around 15/05/2019, which gives an impression that the impugned award is made on back date in order to make it fall within a statutory prescribed period of adjudication of one year from the stated date of commencement of the arbitration i.e., 04/04/2018.
p) The respondent herein had played fraud upon the petitioners by appointing Ld. Sole Arbitrator for adjudication of dispute between the parties herein. The Counsel for the respondent and the Ld. Sole Arbitrator had known to each other for several years and had been working together as colleagues. The petitioners had no faith in the arbitration proceedings conducted by Ld. Sole Arbitrator as despite objections of the petitioners to neutrality and impartiality of arbitration, Ld. Sole Arbitrator continued with arbitration proceedings with predisposed mindset.
It was prayed to set aside of the impugned Arbitral Award dated 03/04/2019.
4. On the application, seeking condonation of delay, petitioners had averred that the impugned ex parte award dated 03/04/2019 was received by the petitioners sometime around 15/05/2019, which gives an impression that the impugned award was made on back date in order to make it fall within a statutory prescribed period of adjudication of one year from the stated dated of commencement of the arbitration i.e., 04/04/2018. Nonetheless, as proof of OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 11 of 31 courier/registered post had been misplaced to substantiate the same and thus, it was requested that the respondent may be directed to furnish the proof of dispatch and delivery thereof for the purposes of record. Since, the petitioner had misplaced the proof of receipt of the impugned award, the date of receipt of impugned award was being taken notionally as 06/04/2019 to show bonafide, strictly, for the purposes of calculation of period of limitation as prescribed under Section 34 (3) of the Act. It is further averred that the petitioner was prevented by the sufficient cause from making the application/petition within the period of limitation of three months and the delay caused is beyond the control of petitioners. The petitioner could approach his Advocate at Delhi only after summer vacations and had a meeting during first week of July 2019. Thereafter petitioners handed over certain documents to their Advocate which they gathered and considered relevant for the purposes of case. However, upon perusal of the case file, it was found that several communications which have been referred in the impugned award had not been provided to the petitioners and accordingly Counsel of the petitioners requested for those document as the same were relevant for the purposes of preparation of accompanied petition. Further certified copy of the impugned award was also not provided due to ignorance of the petitioners. However, considerable delay had been caused in identifying and compiling the requisite documents as in the meantime there was bereavement in the family of petitioner no. 2 on 14/07/2019. Accordingly, documents were handed over to Advocate on 26/07/2019. Thereafter, it took time to prepare and draft the accompanying petition and application and confirmation to the contents thereof. It is averred that the instant case is a fit case, where the Hon'ble Court may, in exercise of its discretion, condone the delay in terms of Section 34 (3) of the Act. The cut off date for the purposes of calculation of the period of limitation has notionally been taken as 06/04/2019 and thus, three months time of limitation for filing of accompanying petition expired on 05/07/2017. Accordingly, there is delay of 28 days in filing of instant petition. It is submitted that if the delay is not OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 12 of 31 condoned, the petitioner would suffer irreparable loss. It is prayed to condone the delay of 28 days in filing of the instant petition under the Act.
5. In filed reply to the petition, respondent denied all the averments made and contentions raised by the petitioners in the petition as being false and without basis. It is averred by respondent that the present petition has been filed beyond the period of limitation prescribed under Section 34(3) of the Act. It is further averred that the petitioners have not elucidated any "sufficient cause from making the application" as enshrined in the proviso of Section 34(3) of the Act to condone the delay of three months by allowing filing the same by an extented 30 days. It is further averred that petitioners were not faced with any "sufficient cause" for delay in filing the present petition within the limitation period, as the affidavit filed alongwith the present petition was dated 06/07/2019 and that the present petition was filed only on 03/08/2019. The contents of the said affidavit clearly stated that the petitioner had "read and understood the contents of the accompanying Petition/application which has been drafted by my counsel under my instruction."
6. In filed reply respondent averred that vide the Procedural Order No. 1 of the preliminary hearing held on 19/04/2018, Ld. Sole Arbitrator stated that inspite of the letters being served on the respondents therein, none was present on their behalf as on that day. Ld. Sole Arbitrator further added that since the respondents therein resided in Raipur, Chhattisgarh, in her opinion another opportunity ought to have been granted to enter appearance in the matter and adjourned the Tribunal to 03/05/2018 at 5 pm. It is further averred by respondent that vide the Procedural Order No. 2 dated 02/05/2018, replying to the petitioners objection to submitting to the arbitration dated 25/04/2018 inter alia Ld. Sole Arbitrator stated that since the matter was up for first hearing, she decided to grant one more opportunity and adjourned the matter in order to enable the petitioners to attend the hearing and accordingly, an e-mail dated 23/04/2018 was sent to all parties including the OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 13 of 31 petitioners herein. Therefore, Ld. Sole Arbitrator again adjourned the hearing scheduled on 03/05/2018 and scheduled it for 11/05/2018 at the same venue. Vide the procedural order no. 3 dated 11/05/2018, in the light of the submissions made by the Counsel for the respondent herein requesting the Tribunal to lay down the schedule for the arbitration proceedings and the letter dated 25/04/2018, received from the Advocate for the petitioners, wherein the petitioners had refused to submit to the arbitration between the parties, despite there being an arbitration clause as well as despite being given several opportunities to appear on several dates, Ld. Sole Arbitrator decided that she had no option but to proceed with laying down the schedule for hearing since the Tribunal had only one year to conclude the proceedings under the new Arbitration Act. The matter was further listed for 15/06/2018 at 12.30 pm. Further, Procedural Order No. 4 dated 16/06/2018, stated that the Advocate on behalf of petitioners herein requested an adjournment by way of e-mail dated 13/06/2018 on the ground of the festival of Eid. Accordingly, Ld. Sole Arbitrator granted the same and directed the petitioners in the meantime to comply with the Procedural Order No. 3 dated 11/05/2018 with respect to filing its reply as was directed therein. The matter was further listed for 03/07/2018 at 5 pm. Further, on the next date of hearing i.e., 03/07/2018, petitioner no. 2 herein entered his appearance. Ld. Sole Arbitrator vide Procedural Order No. 5 dated 03/07/2018 stated that the claimant filed the Statement of Claim as well as an application under Section 17 of the Act on 02/06/2018. It is further averred by respondent that as per the earlier orders, petitioners were directed to file their statement of defence within two week thereafter, but failed to do so even though they had received copies of the same. Ld. Sole Arbitrator granted an extension of two weeks time to the petitioners to file their statement of defence and reply to the application and 10 days to the claimant therein to file its rejoinder to the statement of defence. The matter thus stood listed on 21/07/2018 at 3 pm. Vide the Procedural Order No. 6 dated 21/07/2018, Ld. Sole Arbitrator recorded that the petitioners have still failed to file their reply to the application OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 14 of 31 under Section 17 filed by the claimant and that an effective hearing could not take place on 21/07/2018. It was stated in the said order that this was the 6 th Procedural Order wherein petitioners herein had repeatedly failed to cooperate in the arbitration proceedings barring the last date on which petitioner no. 2 appeared. Vide the said order, Ld. Sole Arbitrator stated that there is no reason why the proceedings must not proceed ex parte, but in the interest of fairness and justice, one more opportunity is being granted to the petitioners herein to file their reply and appear on 02/08/2018 at 4.30 pm for arguments on the application under Section 17. Vide the Procedural Order No. 7 dated 03/08/2018, Ld. Sole Arbitrator observed that once again, none appeared on behalf of the petitioners. Furthermore, it was stated that vide the last order dated 21/07/2018, the petitioners had once again been directed to file its reply to the application under Section 17 so that an effective hearing could take place on 03/08/2018. Despite the same, petitioners failed to appear and file the reply for arguments., Ld. Sole Arbitrator added that no further opportunity could have been granted to the petitioners for filing of reply of aforesaid application, since they had shown scant regard of the arbitral process. The petitioners had also failed to file their statement of defence and failed to seek an extension. Therefore, Ld. Sole Arbitrator struck off the petitioner's right to file their reply for the claimant's application under Section 17. Furthermore, Ld. Sole Arbitrator granted the petitioners one more opportunity to file their statement of defence within two weeks and directed the respondent herein to file their rejoinder 10 days thereafter. Vide the Procedural Order No. 8 dated 24/08/2018, Ld. Sole Arbitrator noted that once again, none appeared on behalf of the petitioners. Even after being given several opportunities and extensions, the petitioners failed to comply and thus, Ld. Sole Arbitrator closed the petitioner's right to file their statement of defence in addition to closure of their right to file reply for the application under Section 17, filed by the respondent herein. Thus, the claim of the petitioners that the Ld. Sole Arbitrator passed the alleged impugned order ex parte and in absence of any representation and pleadings on behalf of the OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 15 of 31 petitioners herein are completely false and baseless as the Ld. Sole Arbitrator had on various instances time and again provided the petitioners multiple opportunities despite of which, no action/representation was taken by them. It is further averred by respondent that the petitioners had shown scant regard of the arbitration process and refused to appear despite receiving all communications from Ld. Sole Arbitrator. It is denied that the alleged impugned award dated 03/04/2019 was passed contrary to the terms of Section 34(2)(a)(ii) of the Act. The arbitration Clause under clause XXX of the said Agreement was read and thereafter the said Franchise Agreement was signed by all the parties herein. The said arbitration clause complied with all the provisions laid down under the Act and any amendment thereto and is in no way, invalid under law. It was further denied that the alleged impugned award dated 03/04/2019 passed was contrary to the terms of Section 34(2)
(a)(v) of the Act as Clause XXX sub Clause 4 of the Franchise Agreement between the parties states that the sole arbitrator shall be appointed by the franchiser only. It is further averred that the petitioner's claims are baseless and do not coincide with Explanation 1 of Section 34 of the Act. Vide the arbitral proceedings between the parties, the petitioners herein were given sufficient and multiple opportunities to represent and defend their side of the matter, which they did not accede to. It is further averred by respondent that Ld. Sole Arbitrator e-mailed the petitioners a scanned copy of the original signed Arbitral Award on the same day of passing the award, i.e., on 03/04/2019. It is further averred by respondent that after receiving procedural order dated 16/06/2018, respondent no. 2 therein entered his appearance on 03/07/2018. The petitioners herein have further conveniently and frivolously, on account to show their false bonafide have taken the date of receipt of the alleged impugned award as 06/04/2019, whereas Ld. Sole Arbitrator had e- mailed the petitioners a scanned copy of the original signed Arbitral Award on the same day of passing the award, i.e., on 03/04/2019. The same had been done in order to fall under the purview of the Limitation set forth by Section 34(3) of Act, which is 3 months from the date of receipt of the Arbitral OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 16 of 31 Award that too when the petitioners have not provided with any justifiable cause for seeking extention of 30 days as provided by the Act. It is prayed for dismissal of the application for condonation of delay filed by the petitioners herein on the ground of it being time barred as according to Section 34 (3) of the Act. It was also prayed to dismiss the petition with costs.
7. I have heard Sh. Vineet Dwivedi, Ld. Counsel for petitioners; Sh. Sanat Tokas, Ld. Counsel for respondent and perused their relied upon precedents as well as written arguments and records of the case as well as arbitral proceedings record.
8. Ld. Counsel for petitioner argued in terms of the grounds of the petition. It was also argued that the petitioners were prevented by sufficient cause from making the petition within period of 3 months of receipt of the signed copy of the award and prayed for condonation of delay. It was also argued that independence and impartiality are indispensable for the purpose of appointment of arbitrator and the Supreme Court had held the appointment of arbitrator as illegal and bad in law in several of its decisions where neutrality of arbitrator was in doubt. It was argued that the unilateral appointment of Ld. Sole Arbitrator by respondent in the present case was arbitrary, illegal and bad in law. Reliance was placed upon the cases of:
i. M/s Voestalpine Schienen Gmph vs Delhi Metro Rail
Corporation Ltd., (2017) 4 SCC 665;
ii. TRF Ltd. vs Energo Engineering Projects Ltd., (2017) 8
SCC 377;
iii. Bharat Broadband Network Limited vs United Telecom Ltd (2019) 5 SCC 755;
iv. HRD Corporation vs Gail (India) Ltd. (2018) 12 SCC 471; v. Perkins Eastman Architects DPC & Anr. Vs HSCC (India) Ltd. 2019 SCC Online SC 1517 and vi. Proddatur Cable TV Digi Services vs Siti Cable Network OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 17 of 31 Limited (2020 SCC Online Del 350 : (2020) 267 DLT 51.
It was also argued that vide reply dated 25/04/2018 of petitioner to the letter invoking arbitration issued by the respondent, it was categorically objected and challenged to unilateral appointment of Ld. Sole Arbitrator for being against the principle of neutrality as envisaged under Section 12 of the Act and the law laid down in the precedents post amendment in the Act with effect from 23/10/2015. Despite noting the challenge and objection of the petitioner, Ld. Sole Arbitrator summarily rejected the objection and proceeded with the arbitration proceedings in the absence of petitioner vide order dated 02/05/2018 and such rejection was done in mechanical manner on the pretext of extraneous consideration that the petitioner intended to delay the proceeding without considering the objections on merits. It was argued that Ld. Sole Arbitrator ignored the contention of non receipt of declaration as mandated under Section 12 (1) of the Act. It was argued that Ld. Sole Arbitrator did not make full disclosure of her past relationship with the Counsel of respondent and infact concealed that the law firm/office representing the respondent is run by Sh. Vedanta Varma Advocate who used to work with Ld. Sole Arbitrator in the past. It was argued that the petitioner had bonafide and justifiable apprehension of bias in view of high handed, arbitrary and malafide termination of the Franchise Agreement by the respondent coupled with fact of unilateral appointment of Ld. Sole Arbitrator. It was argued that petitioner had no faith and confidence on the neutrality of the Ld. Sole Arbitrator appointed by the respondent, so refused to submit to the jurisdiction of the Ld. Sole Arbitrator. It was also argued that as per Section 12(5) of the Act, the appointment of Ld. Sole Arbitrator was invalid in law and the ineligibility of the arbitrator goes to the root of the arbitration process and in the present case there was no waiver of applicability of provision of Section 12 of the Act by the parties. It was prayed to set aside the impugned award. Ld. Counsel for petitioner also relied upon the cases (I) Union of India vs Tecco Trichy Engineers & Contractors, (2005) 4 SCC 239 and (ii) State of Maharashtra OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 18 of 31 & Ors vs ARK Builders Private Ltd., (2011) 4 SCC 616, submitting that the limitation for filing the objections/petition under Section 34 of the Act begins from the date of delivery of duly signed copy of award to the aggrieved party.
9. Ld. Counsel for the respondent argued that the Franchise Agreement dated 14/10/2016 in question had arbitration clause that the place and jurisdiction of the Arbitration was set to New Delhi. It was argued that arbitral proceedings were initiated between the parties on 07/04/2018 and preliminary hearing was held on 19/04/2018, which the petitioners did not attend despite the service of letters upon them by Ld. Sole Arbitrator. Despite several opportunities granted by Arbitral Tribunal, the petitioners did not join the arbitral proceedings and lastly when no statement of defence and reply to application under Section 17 of respondent was filed by the petitioner, Ld. Sole Arbitrator closed the right of petitioners to file the statement of defence on 24/08/2018 and the arbitral proceedings were conducted ex parte, resulting in the impugned arbitral award. It was argued that the application of petitioner for condonation of delay was devoid of sufficient cause and was also filed one day later to the extended period of 30 days after statutory 3 months period to file the petition under Section 34 of the Act. It was argued that the limitation and timelines under the Act being special legislature are to be strictly followed. Reliance was placed upon the case of Union of India vs Popular Construction Co., (2001) 8 SCC 470. It was also argued that neither the arbitral proceedings were against the public policy nor against Section 12 of the Act nor were contrary to law. It was argued that Ld. Sole Arbitrator had furnished the form of disclosure as specified under the Sixth Schedule in terms of under Section 12 of the Act which was sent to both the parties. It was argued that the award of the Arbitral Tribunal can be set aside only on the grounds specified under Section 34 of the Act and on no other ground and the Court cannot act as an Appellate Court to examine the legality of the award nor it can examine the merits of claim by entering in OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 19 of 31 factual arena like an Appellate Court. It was argued that no case is made out strictly as per Section 34(2) of the Act in the present case against the appointment of the Arbitrator and the impugned award cannot be held to be against public policy. Ld. Counsel for respondent relied upon the cases of (i) Venture Global Engineering LLC and Ors. Vs Tech Mahindra Ltd. & Ors. (2017) 13 SCALE 91 (SC) and (ii) Sutlej Construction vs The Union Territory of Chandigarh (2017) 14 SCALE 240 (SC), where it was so held. It was prayed that the petition/objections of petitioners to be dismissed.
10. An Arbitral Award can be set aside on the grounds set out in Section 34(2)(a), (b) and (2A) of the Act.
11. Section 34 (1) (2) and (2A) of The Arbitration and Conciliation Act, 1996 read as under:
"34. Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3).
(2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 20 of 31
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
12. Normally, the general principles are that Arbitrator is a Judge of the OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 21 of 31 choice of the parties and his decision, unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even by the Court as a Court of law could come to a different conclusion on the same facts. The Court cannot reappraise the evidence and it is not open to the Court to sit in appeal over the conclusion of the Arbitrator. It is not open to the Court to set aside a finding of fact arrived at by the Arbitrator and only grounds on which the award can be set aside are those mentioned in the Arbitration Act. Where the Arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the Court in exercise of the power vested in it. Where the Arbitrator is a qualified technical person and expert, who is competent to make assessment by taking into consideration the technical aspects of the matter, the Court would generally not interfere with the award passed by the Arbitrator.
13. Supreme Court in case of Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 has held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
14. Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, 2019 SCC OnLine SC 677 has held that under Section 34 (2A) of the Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 22 of 31 parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse. It is held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
15. I advert to the impugned award. Para 1 of the impugned award records that the present arbitral tribunal was constituted on 04/04/2018 pursuant to the claimant appointing the Ld. Sole Arbitrator by way of letter dated 26/03/2018 to adjudicate the disputes between it and the respondents. Ld. Sole Arbitrator had filed the arbitral proceedings record in three files with an Index, as per which in file 3 at page no. 250 is the original envelope containing the letter of appointment dated 26/03/2018 sent by claimant to arbitrator and from page numbers 251 to 257 is the copy of aforesaid letter of appointment. Bare perusal of the aforesaid document dated 26/03/2018 reveals that it is not sent by the claimant/respondent Cricket Academy of Pathans Private Limited but by Sh. Vedanta Varma Advocate claiming to be acting for or on behalf of client namely Cricket Academy of Pathans Pvt. Ltd. (respondent) and under instructions of respondent and is addressed to petitioner nos. 1 and 2 in the form of Registered AD notice bearing signatures of Sh. Vedanta Varma Advocate and at the bottom of page no. 257 i.e., end page of said notice is a copy i.e., cc to Ms. Simran Brar Advocate, Ld. Sole Arbitraror. In para 14 of aforesaid notice dated 26/03/2018 is mentioned as follow:
"14. A copy of this notice is being sent to Ms. Simran Brar for her kind perusal and information."
Para 13 of aforesaid notice dated 26/03/2018 reads as under:
13. Thus, in terms of the Article XXX of the said Agreement, our Client hereby nominates Ms. Simran Brar Advocate, having her office at 7, Factory Road, near Safdarjung Hospital, Safdarjung Enclave, New Delhi-110029, as the Sole Arbitrator for the purpose of adjudication of all disputes having arisen between you, the Addressee and our Client, after obtaining consent from the Learned Arbitrator."OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 23 of 31
16. The aforesaid envelope containing original letter dated 26/03/2018 finds mention on top of it "By hand". The notice dated 26/03/2018 of Sh. Vedanta Varma Advocate addressed to petitioners no where finds mention which authorized representative of respondent company had authorized or given instructions to Sh. Vedanda Verma Advocate to act for and on behalf of respondent company or instructed him to serve notice upon the petitioners and to send copy to Ld. Sole Arbitrator appointing her. Notice of preliminary hearing at page nos. 258 and 259 of arbitral proceedings record bears the date 07/04/2017. At page no. 260 of arbitral proceedings record is the disclosure under Section 12(1)(b) read with Sixth Schedule of the Arbitration and Conciliation Act bearing signatures of Ld. Sole Arbitrator with the date 07/04/2018 wherein with respect to Ld. Sole Arbitrator, there is simply an averment of her name, her contact details and mention of fact of Advocate with over 13 years of legal and arbitration practice in District Courts, High Court and the Hon'ble Supreme Court of India. The said disclosure does not find mention of the Arbitrator's relationship with the Counsel for the claimant or any past or present relationship with the Counsel for the claimant, as described in the Fifth Schedule of the Act.
17. Under Section 12 of the Act, when a person is approached in connection with his possible appointment as an arbitrator, he is bound to disclose in writing any circumstances, such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months. Various grounds are set out in the Fifth Schedule as a guide in determining whether circumstances exist which give rise to justifiable doubts as to the OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 24 of 31 independence or impartiality of an arbitrator. The disclosure shall be made by such person in the form specified in the Sixth Schedule. An arbitrator may be challenged by the parties only if any circumstances (including those giving rise to justifiable doubts as to his independence or impartiality) referred to in Section 12 (3) of the Act subject to Section 13 (4) of the Act exist which provide for an agreement between the parties for such procedure for challenge. If such challenge is unsuccessful, the party may make an application for setting aside an arbitral award in accordance with Section 34 of the Act. The Fifth Schedule of the Act embodies the grounds giving rise to justifiable doubts as to the independence or impartiality of Arbitrator and it includes Arbitrator's relationship with the Counsel for party.
18. Section 14 of the Act provides that the mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator if he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay and he withdraws from his office or the parties agree to the termination of his mandate.
19. Supreme Court in the case of M/s Voestalpine Schienen GMBH Vs. Delhi Metro Rail Corporation Ltd.- (2017) 4 SCC 665 has construed Section 12(5) of the Act (as amended) and also the Seventh Schedule to the Act and has held that under Section 12(5) of the Act, notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator. It is held that in such an eventuality, when the arbitration clause finds foul with the amended provisions i.e. Section 12(5) of the Act, the appointment of an arbitrator would be beyond pale of arbitration agreement, empowering the Court to appoint such arbitrator(s), as may be permissible. Other party cannot insist for appointment of an arbitrator in terms of the arbitration agreement. In such situation, that would be the effect of non-
OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 25 of 31obstante clause contained in Section 12(5) of the Act.
20. Supreme Court in case of HRD Corporation (Marcus Oil and Chemical Division) vs. Gail (India) Limited (Formerly Gas Authority of India Ltd.), 2017 SCC OnLine SC 1024 has held that if the learned arbitrator fails to file disclosure in terms of section 12(1) of the Act read with Fifth Schedule of the Act, the remedy of the party aggrieved in that event would also be to apply under section 14(2) of the Act to the court to decide about the termination of the mandate of the arbitral tribunal on that ground.
21. Supreme Court in case of TRF Ltd. vs Energo Engg. Projects Ltd., (2017) 8SCC 377 has held that by virtue of section 12(5) of the Act, if any person, who falls under any of the category specified in the Seventh Schedule shall be ineligible to be appointed as an Arbitrator. It is held that the amended law under Section 11(6-A) of the Act requires the Court to confine examination of the existence of an arbitration agreement notwithstanding the judgment of the Supreme Court or the High Court while considering an application under section 11(6) of the Act. The designated arbitrator whose ineligibility to act as an arbitrator by virtue of amendment to Section 12 of the Act by the Arbitration and Conciliation (Amendment) Act, 2015, does not have power even to nominate any other person as arbitrator. The Supreme Court and High Court in certain circumstances have exercised jurisdiction to nullify the appointments made by the authority in such situation.
22. Supreme Court in case of Bharat Broadband Network Ltd vs United Telecoms Ltd (2019) 5 SCC 755 after construing Section 12(5) of the Act read with Fifth, Sixth and Seventh Schedule held that the Managing Director of the party, who was a named arbitrator, could not act as arbitrator nor could be allowed to appoint another arbitrator. The disclosure of a prospective arbitrator has to be made in the form specified in the Sixth Schedule and the ground stated in the Fifth Schedule are to serve as a guide in determining OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 26 of 31 whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. Any prior agreement to the contrary is wiped out by the non-obstante clause in Section 12(5) of the Act the moment any person whose relationship with the parties or the counsel or the subject matter of the dispute falls under the Seventh Schedule. The sub- section then declares that such person shall be ineligible to be appointed as arbitrator. Such ineligibility can be removed by an express agreement in writing. It was held that learned arbitrator had become de jure ineligible to perform his function as an arbitrator.
23. Supreme Court in the case of Perkins Eastman Architects DPC (supra) has held that in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. The person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015. Supreme Court has set aside the appointment of an arbitrator appointed by one of the parties having exclusive right to appoint and appointed an independent arbitrator in the application filed under Section 11(6) of the Act.
24. In the case of Proddatur Cable TV Digi Services (supra), it was inter alia held that following ratio of the judgment in the case of Perkins (supra), it is clear that a unilateral appointment by an authority which is interested in the outcome or decision of the dispute is impermissible in law. When the Arbitration Clause empowers the Company to appoint Sole Arbitrator, it can hardly be disputed that the Company acting through its Board of Directors will have an interest in the outcome of the dispute. The appellant had filed the petition under Section 14 and 15 of the Act seeking declaration that the mandate of the arbitrator appointed by the respondent be terminated and an OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 27 of 31 arbitrator be appointed by High Court in the provisions of the Act. Following ratio of the judgments in Perkins (supra) and Bharat Broadband Network Limited (supra), the mandate of the Arbitrator was found terminated de jure and since the present arbitrator had becomes unable to perform her functions as an arbitrator, her mandate was terminated and another independent Sole Arbitrator was appointed to substitute the previous arbitrator.
25. In the case of M/s Omcon Infrastructure Pvt. Ltd. Vs India Bulls Investment Advisors Ltd, OMP (T) (Comm.) 35/2020 and IA 6153/2020 decided on 01/09/2020 by Hon'ble Ms. Justice Rekha Palli, wherein petition was filed under Section 14 and 15 of the Act, seeking termination of the mandate of Ld. Arbitrator unilaterly appointed by the respondent and also quashing of order passed by Ld. Arbitrator, rejecting the application of petitioner under Section 12 of the Act, the ratio of the decision in case of Perkins (supra) was applied and held that once the Managing Director of the respondent Company was ineligible to appoint the arbitrator, the same would also bar the Company itself from unilaterally appointing the sole arbitrator and reference was also made to the decision of Proddatur Cable TV Digi Services (supra). Therein also the mandate of the Ld. Arbitrator was terminated and new independent Sole Arbitrator was appointed.
26. It is the fact of the matter that Ld. Sole Arbitrator was appointed by letter/notice dated 26/03/2018, signed by Sh. Vedanta Varma Advocate acting for and on behalf of respondent company. When disputes and differences arise between the parties, a party to the Arbitration Agreement as defined under Section 2 (1) (h) of the Act has to issue a notice invoking Arbitration Agreement and has to call upon the opponent to appoint an arbitrator in accordance with the Arbitration Agreement. A party who invokes the arbitration can suggest the name of few arbitrators and may call upon the opponent to agree to one of the names suggested by that party or to suggest any other names if the names suggested by that party is not agreeable by the other OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 28 of 31 party within thirty days from the date of receipt of said notice. Section 43 (2) of the Act provides that for the purposes of Section 43 of the Act and The Limitation Act 1963, the arbitration proceedings shall be deemed to have commenced on the date referred in Section 21 of the Act.
27. Section 21 of the Act provides that unless and otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which the request for that dispute to be referred to the arbitration is received by the respondent. Limitation in respect of which a request is made by one party to other party to refer such dispute to the arbitration stops when such notice is received by other party.
28. Disclosures of Ld. Sole Arbitrator, as they are at page nos. 260 and 263 of the arbitral proceedings record, are bereft of the necessary information as contained in Fifth Schedule of the Act with respect to relationship of the Arbitrator with the Counsel for the claimant.
29. Supreme Court in case of State of Maharashtra vs. M/s Ark Builders Pvt. Ltd.(supra), has held that the period of limitation prescribed under section 34(3) of the Act would start running only from the date of a signed copy of award is delivered to/received by a party making the application for setting aside the award under section 34(1) of the Act. Reliance was placed on the case of Union of India vs Tecco Trichy Engineers and Contractors (supra), wherein also was so held.
30. Bombay High Court in case of E-square Leisure Pvt. Ltd. vs. K.K. Jani Consultants and Engineering Company -- (2013) 2 Bom.C.R. 689, has held that the limitation for making an application under section 34(3) of the Act for setting aside an arbitral award would commence only after a signed copy of the award is received by a party from the arbitral tribunal under section 31(5) of the Act.
OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 29 of 3131. Arbitral proceedings record also reveals of dispatch of signed copy of original arbitral award dated 03/04/2019 with letter of Ld. Sole Arbitrator dated 04/04/2019 addressed to petitioner 1, which is at page 317 of the arbitral proceedings record, sent by speed post on 05/04/2019 whose original receipts are page no. 319 of the original arbitral proceedings record; in respect of these sent speed post articles, the tracking report is at page no. 320, which finds mention of delivery of the speed post article on 11/04/2019 at Raipur. So the signed copy of the arbitral award was received by the petitioners on 11/04/2019. Three months statutory period for filing the petition/objection under Section 34 of the Act of the arbitral award accordingly completed on 11/07/2019. This petition was filed on 03/08/2019 i.e., within the further period of 30 days after expiry of statutory period of 3 months available for filing the present petition. The application seeking condonation of delay of petitioners finds mention that only after summer vacations petitioner could approach his Advocate at Delhi and had meeting during first week of July 2019 and handed over certain documents to his Advocate, which he could gather for the purposes of case but after perusal of the case file, his Advocate found several communications referred in the impugned award to have not been provided, so on the asking of Advocate of petitioners and since those documents were relevant for the purposes of preparation of the petition, later to which there was bereavement in the family of petitioner no. 2 on 14/07/2019, so documents could be handed over to Advocate on 26/07/2019. All aforesaid cumulatively resulted in the aforesaid delay in preparing and drafting the petition and the applications. Accordingly, in view of the fact of the matter, for the aforesaid reasons narrated, the delay in filing the petition is condoned finding therein the element of sufficient cause having prevented the petitioners in filing the petition within the statutory period of three months. Otherwise, petition has been filed well within further period of 30 days after expiry of statutory period of three months from the date of receipt of signed copy of the impugned award from Ld. Sole Arbitrator.
OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 30 of 3132. In view of law laid down in the cases of (i) TRF Ltd. (supra); (ii) Bharat Broadband Network Limited (supra); (iii) HRD Corporation (supra); (iv) Proddatur Cable TV Digi Services (supra) and (v) M/s Omcon Infrastructure Pvt. Ltd. (supra), no arbitrator can be unilaterally appointed by the respondent or even by the Counsel for the respondent and in this case at the outset vide the letter dated 25/04/2018, Counsel for petitioners had challenged and objected to unilateral appointment of Ld. Sole Arbitrator being against the principle of impartiality as envisaged under Section 12 of the Act. Even the mandatory disclosure in terms of Fifth and Seventh Schedule of the Act in format of Sixth Schedule of Act was not conveyed by Ld. Arbitrator to the petitioners. Accordingly, the impugned arbitral award is liable to be set aside.
33. For the foregoing reasons, the petition is allowed and the impugned award is set aside.
34. The parties are left to bear their own costs.
35. File be consigned to record room.
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
on 24th December, 2020. Patiala House Court, New Delhi.
(Deepika) OMP (COMM.) No. 146/2019 Sahil City Sports & Anr. Vs Cricket Academy of Pathans Pvt. Ltd. Page 31 of 31