Madras High Court
Ms.Desetti L. Prasanna Kumari vs M/S.Cholamandalam Investment & ... on 23 August, 2021
Author: N. Sathish Kumar
Bench: N. Sathish Kumar
Arb.O.P.No.20 of 2021
THE HIGH COURT OF JUDICATURE AT MADRAS
Dated 23.08.2021
CORAM:
THE HONOURABLE MR.JUSTICE N. SATHISH KUMAR
Arb.O.P.No.20 of 2021 & 2323 of 2021
1. Ms.Desetti L. Prasanna Kumari
2. Mr.Desetti Nooka Raju
3. M/s.Sri Lakshmi Prasanna traders,
Door No.18335/3, Ayodhyarampuram,
Samarlokota East Godavi,
Kakinada – 533 440. . . . Petitioners
Versus
M/s.Cholamandalam Investment & Finance Co. Ltd.,
Represented by Mr.B.Muthukumar,
Deputy General Manager, Legal,
'Dare House' No.2, N.S.C. Bose Road,
Chennai – 600 001. . . . Respondent
PRAYER : Petition filed under Sections 34 [2] of the Arbitration and
Conciliation Act, 1996 to set aside the award dated 08.10.2020 passed by
the learned Arbitrator Mr.P.Ganesan in Arbitration Case No.
CIFCL/ARB/LXVIII/1608/2007 for costs of this petition.
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https://www.mhc.tn.gov.in/judis/
Arb.O.P.No.20 of 2021
For Petitioners : Mr.K.Sarveshwar
For Respondent : Mr.S.Namasivayam
ORDER
Challenge has been made to the award passed by the learned arbitrator dated 08.10.2020 in dispute arose between the parties in respect of the loan agreement dated 27.04.2016.
2. Brief facts leading to filing of this Original Petition is as follows :
The respondent has approached the claimant for an equity loan and availed a loan of a sum of Rs.50,00,000/- and it has to be repaid in 120 instalments and executed a loan agreement dated 27.04.2016. As the respondent failed to repay the instalments regularly in terms of the agreement, the matter has been referred to the sole arbitrator. Page 2 / 9 https://www.mhc.tn.gov.in/judis/ Arb.O.P.No.20 of 2021
3. The main challenge is the very appointment of the arbitrator and it is the contention of the learned counsel for the petitioner that the appointment of the arbitrator itself is not according to law. The sole arbitrator has been appointed by the company without the consent of the petitioner herein. It is his further contention that the parties have agreed in the contract itself to have fast track procedure. Such being the position, the arbitrator so appointed should have been chosen by both sides as per Clause 26 of the agreement. Hence, submitted that the award passed by the learned arbitrator, despite the objection raised with regard to the competency of the arbitrator, such an award cannot be sustained in the eye of law.
4. The learned counsel appearing for the respondent submitted that after the judgment in Perkins Eastman Architects DPC and another Vs. HSCC [India] Ltd. [2019 SCC Online SC 1517]. the Apex Court in a judgment in Organization of Railway Electrification Vs. ECI SPIC SMO MCMC[J] reported in [2020] 14 Supreme Court Cases 712 has held that there is no bar in law to appoint an arbitrator by the employer itself. Hence, Page 3 / 9 https://www.mhc.tn.gov.in/judis/ Arb.O.P.No.20 of 2021 submitted that on that ground, the award cannot be attacked. It is his further contention that since the respondent is also intended to proceed under SARFAESI Act, they may be permitted to proceed afresh under the SARFAESI Act. Hence, prayed for dismissal of this Original Petition.
5. I have perused the entire materials.
6. It is relevant to refer the arbitration clause in the agreement which reads as follows :
All disputes, differences, and/or claims arising out of the agreement whether during its subsistence or thereafter shall be settled by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and or any statutory amendments thereof and shall be referred to the sole arbitration of an arbitrator nominated by the Company. The award given by such arbitrator shall be final and binding on all parties to this Agreement. In the event of Page 4 / 9 https://www.mhc.tn.gov.in/judis/ Arb.O.P.No.20 of 2021 an appointed arbitrator dying or being unable or unwilling to act as arbitrator for any reason, the Company, on such death of the arbitrator or his inability or unwillingness to act as arbitrator, shall appoint another person to act as arbitrator. Such person shall be entitled to proceed with the reference from the stage it is left by his predecessor. The venue of arbitration proceedings shall be at Chennai at the Registered Office of the Company which is presently at 'DARE HOUSE', No.2, [Old No.234], NSC Bose Road, Parrys, Chennai – 600
001. The borrower agrees to a fast track arbitration to be disposed within 90 days from the date of reference.”
7. It is to be noted that the very clause provides for appointment of an arbitrator by the company itself. Further the procedure contemplated in clause 26 of the agreement is in a nature of fast track procedure. Since both the parties have agreed to fast tract procedure, the proceedings have to be completed within 90 days. As far as the first part of the clause is concerned, Page 5 / 9 https://www.mhc.tn.gov.in/judis/ Arb.O.P.No.20 of 2021 the same with regard to the nomination of the arbitrator by the company. It is to be noted that such an appointment or nomination by the company is bad in law in view of the law laid down by the Perkins Eastman Architects DPC and another Vs. HSCC [India] Ltd. case. It is submitted that subsequent to the Perkins Eastman Architects DPC and another Vs. HSCC [India] Ltd. case, in Organization of Railway Electrification Vs. ECI SPIC SMO MCMC[J] the Apex Court has held that nomination of the arbitrator from the panel of retired officers of Railways. It is to be noted that the above judgment has been passed in the context of amendment made in the General Conditions of the Contract of Railways, which provides for providing a panel of arbitrator from the retired railway officers and choice is given to the other side to chose the arbitrator from the panel submitted by the Railways. Such being the position, the same has been counter balanced in view of the choice given to the claimants. Hence, the above Apex Court judgment cannot be pressed into service in this case. Page 6 / 9 https://www.mhc.tn.gov.in/judis/ Arb.O.P.No.20 of 2021
8. Admittedly, in this case, no consent, whatsoever has been obtained from the petitioner. Therefore, nomination or appointment the arbitrator has to be as per law laid down in Perkins Eastman Architects DPC and another Vs. HSCC [India] Ltd. case. In this regard, the petitioner has also raised objection under section 16 of the Arbitration and Conciliation Act. The learned arbitrator has not decided the above objection in the line of the legal position. However, he has passed an order as if the award will be passed without any partiality and only on merits. Be that as it may.
9. The parties have agreed for fast track procedure as per the provisions contained under section 29 B of the Arbitration and Conciliation Act. When the parties have agreed for fast track procedure, then the arbitrator has to be appointed as chosen by both the parties. Otherwise, there must be consent by both sides for a common arbitrator. Section 29 B [2] of the Arbitration and Conciliation Act makes it very clear that when the parties have agreed to have fast track procedure, the arbitral tribunal consisting of a sole arbitrator shall be chosen by the parties. Whereas, in Page 7 / 9 https://www.mhc.tn.gov.in/judis/ Arb.O.P.No.20 of 2021 this case, when the parties have agreed in the contract for fast track procedure, nomination of the arbitator by the employer itself is not only against the statutory provisions, but also against the law laid down by the Apex Court in Perkins Eastman Architects DPC and another Vs. HSCC [India] Ltd case. In such view of the matter, this Court is of the view that when the very appointment of the arbitrator is not according to law, the award passed by such an arbitrator cannot be sustained in the eye of law and no sanctity can be attached to it.
10. Accordingly, this petition is allowed and the award passed by the learned abitrator dated 08.10.2020 is set aside. With regard to the submission of the learned counsel for the respondent that they may be given liberty to proceed under SARFAESI Act afresh, it is for them to take legal recourse according to law, not on the basis of the Award, which is already set aside. Consequently, connected application is closed.
23.08.2021 vrc Page 8 / 9 https://www.mhc.tn.gov.in/judis/ Arb.O.P.No.20 of 2021 N. SATHISH KUMAR, J.
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