Madras High Court
Ms.Amirthaa vs M/S.Karismaa Foundations Private ... on 21 March, 2024
Author: C.Saravanan
Bench: C.Saravanan
Arb.O.P.(Com.Div.) No.477 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 21.03.2024
CORAM :
THE HONOURABLE MR.JUSTICE C.SARAVANAN
Arb.O.P.(Com.Div.) No.477 of 2023
and
A.No.5767 of 2023
1.Ms.Amirthaa
2.Deepa Mohan Kumar ... Petitioners
vs.
1.M/s.Karismaa Foundations Private Limited,
Having its office at No.340,
1st South Main Road, Kapaleeswar Nagar,
Neelankarai, Chennai – 600 115.
2.R.Sathyam ... Respondents
Prayer: Original Petition is filed under Section 34(2) of the Arbitration and
Conciliation Act, 1996, praying to set aside the Arbitral Award dated
22.03.2023 passed by the learned Sole Arbitrator, received by the
petitioners on 23.03.2023 to the extent to which it is challenged and to
direct the respondents to pay the costs.
For Petitioners : Mr.P.R.Raman
Senior Counsel
for Mr.Gautam S.Raman
for M/s.Raman & Associates
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Arb.O.P.(Com.Div.) No.477 of 2023
For Respondents :
For R1 : Mr.Nithyaesh Natraj
for Mr.Vaibhav R.Venkatesh
ORDER
This petition has been filed to set aside the Arbitral Award dated 22.03.2023 passed by the learned Sole Arbitrator, received by the petitioners on 23.03.2023 and to direct the respondents to pay the costs. The challenge to the impugned award is only on the ground that the Arbitrator was appointed by the respondent.
2. The learned counsel for the first respondent submits that the challenge to the impugned Award dated 22.03.2023 on the ground that appointment of the Arbitrator on 03.06.2019 by the first respondent is not available at this distant point of time in the light of the fact that the petitioners' mother Late Subha Gopalakrishna had filed SLP(C).No.30404 of 2019 against the order passed by this Court in O.P.No.711 of 2017.
3. It is submitted that the said SLP was withdrawn on 08.01.2020 and no leave was granted by the Hon'ble Supreme Court to the petitioners' 2/15 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com.Div.) No.477 of 2023 mother Late Subha Gopalakrishna to reagitate the issue either before the Arbitral Tribunal or before this Court.
4. It is therefore submitted that the issue regarding unilateral appointment of the Arbitrator in terms of Clause 29.2 of the Joint Venture Agreement dated 15.03.2015 is no longer questionable. Clause 29 of the Joint Venture Agreement dated 15.03.2015 reads as under:-
“29. Dispute Resolution:-
29.1. In case of any disputes as to the design and specifications of the plans and quality of material the decision of the qualified architect shall be final.
29.2. In the event of any dispute arising between the Parties hereto with regard to this Agreement or the interpretation of the terms hereof the same shall be resolved amicably by the Parties hereto failing which such differences or claims arising between the Parties under or in relation to this Agreement shall be referred to the arbitration of a Sole Arbitrator to be appointed by the Developer. The provisions of the Indian Arbitration & Conciliation Act, 1996 or any statutory modification or re-enactment thereof for the time being in force shall apply to the arbitration proceedings under this clause. The venue of Arbitration shall be Chennai, Tamil Nadu.”
5. That apart, the learned counsel for the first respondent would draw attention to the minutes of the proceedings before the learned Arbitrator on 01.10.2019 after dismissal of O.P.No.711 of 2017 on 3/15 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com.Div.) No.477 of 2023 06.09.2019 and prior to dismissal of SLP(C).No.30404 of 2019 on 08.01.2020. It is further submitted that the Arbitral Tribunal on 01.10.2019 has categorically observed that none of the parties had any objection to the constitution of the Arbitral Tribunal or raised any objection as to the Arbitration Clause or the arbitrability of the matter by the Arbitral Tribunal and therefore, fixed the date of hearing and time lines for completion of the arbitration proceedings.
6. The learned counsel for the first respondent would further submit that the petitioner had filed A.No.8 of 2020 under Section 16 of the Arbitration and Conciliation Act, 1996 on 10.01.2020 before the Arbitral Tribunal which came to be disposed by the Arbitral Tribunal vide order dated 19.01.2020. It is further submitted that the learned Arbitrator has carefully considered the above facts and has come to a fair conclusion that he had jurisdiction to resolve the dispute between the parties.
7. The learned counsel for the first respondent has placed reliance on the decision of the Hon'ble Calcutta High Court in McLeod Russel India Limited and another Vs. Aditya Birla Finance Limited and others, 4/15 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com.Div.) No.477 of 2023 2023 SCC Online Cal 330. Specifically, a reference was made to Paragraph 45 from the said decision. It reads as under:-
“45. Unilateral appointments being impermissible in law must be read to mean an unilateral appointment made by a person who himself is disqualified to act as an arbitrator under the Seventh Schedule and not each and every unilateral appointment made by one of the parties to the arbitration. Treating these situations as one and the same would amount to conflation of two different and distinct scenarios which is not what the Act mandates.”
8. The learned counsel for the first respondent would also draw attention to the decision of the Hon'ble Supreme Court rendered in SBP and Company Vs. Patel Engineering Limited, (2005) 8 SCC 618. It is therefore, submitted that there is no scope for interfering with the impugned Award on the ground of arbitrability of the issue in the light of the decision of the Hon'ble Supreme Court in Perkins Eastman Architects DPC and another Vs. HSCC (INDIA) Limited, (2020) 20 SCC 760. It is further submitted that if at all it was open for the petitioners to argue the case on merits and therefore, submits that on this primary issue/primary ground alone, this Original Petition filed by the petitioners may be answered against the petitioners.
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9. By way of re-joinder, the learned counsel for the petitioner would submit that the order that was passed by the Arbitral Tribunal on 01.10.2019 was categorical inasmuch as the expression used “at this stage”. A reference was made to Paragraph No.1 of the minutes of the second proceedings held on 01.10.2019 at 11.00 a.m. at Nani Palkhivala Arbitration Centre, Mylapore. It reads as under:-
“1. Learned counsels for the parties on either side had briefly appraised this Tribunal of the matter of the nature of the dispute between the parties resulting in this reference. None of the parties expressed any objection to the constitution of the present Tribunal or raised any objection to the arbitration clause or the arbitrability of the matter, by this Tribunal, at this stage, pursuant to the order passed by the Hon'ble High Court, dated 6.9.2019, made in O.P.No.711/2017.”
10. It is submitted that in the light of the decision of the Hon'ble Supreme Court in Perkins case (referred to supra), the Award has to go as there is a patent bias. The learned Arbitrator has proceeded to overrule the objection of the petitioner filed under Section 16 of the Arbitration and Conciliation Act, 1996 vide its order dated 19.01.2020 and has now passed the impugned Award dated 22.03.2023.6/15
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11. I have considered the arguments advanced by the learned senior counsel for the petitioners and the learned counsel for the first respondent.
12. There are at least 5 decisions of this Court wherein the Award passed under Section 34 of the Arbitration and Conciliation Act, 1996 have been set aside on the ground of violation of the provisions of Section 12(5) of the Arbitration and Conciliation Act, 1996.
13. That apart, the following decisions of the Hon'ble Supreme Court, Hon'ble Delhi Court, Hon'ble Calcutta High Court, Hon'ble Bombay High Court and that of this Court were cited in another case i.e., in Arb.O.P.(Com.Div.) No.574 of 2023 arising out of the similar issue:
i. S.N.Prasad, Hitek Industries (Bihar) Limited Vs. Monnet Finance Limited and others, 2010 SCC Online SC 1202.
ii. Sushil Kumar Agarwal Vs. Meenakshi Sadhu and others, (2019) 2 SCC 241.
iii. M/s.Kailash Nath Associates Vs. Delhi Development Authority and another in Civil Appeal No.193 of 2015 (SLP (Civil) No.32039 of 2012) dated 09.01.2015.
7/15 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com.Div.) No.477 of 2023 iv. Sudhir Gopi Vs. Indira Gandhi National Open University and another in O.M.P.(Comm).No.22/2016 dated 16.05.2017. v. Umaxe Projects Private Limited Vs. AIR Force Naval Housing Board in O.M.P.(Comm).No.469/2023 dated 01.12.2023. vi. MAN Industries (India) Limited Vs. Indian Oil Corporation Limited in O.M.P.(Comm).No.252/2018 and I.A.No.13103/2022 dated 01.06.2023.
vii. Cholamandalam Investment and Finance Company Limited Vs. Amrapali Enterprises and another in E.C.No.122 of 2022 dated 14.03.2023.
viii. Naresh Kanayalal Rajwani and others Vs. Kotak Mahindra Bank Limited and another in Comm.Arbitration Petition (L) No.1444 of 2019 dated 23.11.2022.
ix. Prime Store, Represented by its Partner, S.Kaarthi and others Vs. Sugam Vanijya Holdings Private Limited and others, 2023 SCC Online Mad 2898.
x. SCM Silks Private Limited, Represented by its Director, K.Sivalingam and another Vs. Sugam Vanijya Holdings Private Limited and others, 2023 SCC Online Mad 2898.
8/15 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com.Div.) No.477 of 2023 xi. K.K.S.Travels, Represented by its Proprietor and another Vs. M/s.Indus Ind Bank Limited, Represented by its Executive- Legal, T.Nagar, Chennai in Arb.O.P.(Com.Div.) No.66 of 2023 dated 13.06.2023.
xii.Moniva Sarkar Vs. M/s.Kotak Mahindra Bank Limited, Represented by its Authorised Signatory, Egmore, Chennai in Arb.O.P.(Com.Div.) No.84 of 2023 dated 21.06.2023. xiii.Mrs.L.Thirupurasundari, Represented by her Power Agent Vs. Mrs.A.Devi in Arb.O.P.No.1 of 2023 dated 03.01.2024.
14. There are at least equal number of decisions which were cited, wherein, the Court under Section 34 of the Arbitration and Conciliation Act, 1996 has set aside the Award on the ground that appointment of the Arbitrator was unilateral and contrary to the decision of the Hon'ble Supreme Court in Perkins case (referred to supra) violating the decision of the Hon'ble Supreme Court in TRF Limited Vs. Energo Engineering Projects Limited, (2017) 8 SCC 377.
15. This is a case where the petitioners' Mother namely Late Subha 9/15 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com.Div.) No.477 of 2023 Gopalakrishna had taken a categorical stand that the unilateral appointment of the Arbitrator by the first respondent was not acceptable. Merely because O.P.No.711 of 2017 filed by the petitioners' Mother namely Late Subha Gopalakrishna was dismissed on 06.09.2019 as previously an arbitrator was appointed by the first respondent on 25.04.2017 had recused on 02.06.2019 and a new arbitrator was appointed by the first respondent on 03.06.2019, ipso facto would not cure the defect in the appointment of the Arbitrator.
16. This was also an unilateral appointment of the Arbitrator contrary to the decision of the Hon'ble Supreme Court in Perkins case (referred to supra) which was decided on 26.11.2019. Therefore, the fresh appointment of the Arbitrator on 03.06.2019 will not present itself as a fait accompli against the petitioner, as the petitioner has questioned the appointment all through.
17. The submission of the first respondent that SLP(C).No.30404 of 2019 filed by the petitioners mother Late Subha Gopalakrishna was dismissed and no leave was granted and therefore, the issue had attained 10/15 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com.Div.) No.477 of 2023 finality also cannot be countenanced as the issue had not attained finality before the Hon'ble Supreme Court.
18. The only way in which this ineligibility can be removed, again, in law, is that parties may after disputes have arisen between them, waive the applicability of this Section 12(5) of the Arbitration and Conciliation Act, 1996 by an “express agreement in writing .
19. The petitioner's mother namely Late Subha Gopalakrishna merely withdrew the SLP on 08.01.2020. Even if the SLP was dismissed as withdrawn, it would not amount to finality regarding the jurisdiction of the learned Arbitator . Such issue can be agitated even under Section 34 of the Act, in the light of the observation of the Hon'ble Supreme Court in Bharat Broadband Network Ltd. v. United Telecoms Ltd., (2019) 5 SCC
755. The Court observed as under :-
“ 18..... It will be noticed that the facts in the present case are somewhat similar. The APO itself is of the year 2014, whereas the appointment by the Managing Director is after the Amendment Act, 2015, just as inTRF Ltd. [TRF Ltd.v.Energo Engg. Projects Ltd., 11/15 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com.Div.) No.477 of 2023 (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] Considering that the appointment in TRF Ltd. [TRF Ltd.v.Energo Engg. Projects Ltd., (2017) 8 SCC 377 :
(2017) 4 SCC (Civ) 72] of a retired Judge of this Court was set aside as being non est in law, the appointment of Shri Khan in the present case must follow suit.
20. In para 15 of the decision in the case of Bharat Broadband Network Ltd referred supra, which reads as under :-
“15. Section 12(5), on the other hand, is a new provision which relates to the de jure inability of an arbitrator to act as such. Under this provision, any prior agreement to the contrary is wiped out by the non obstante clause in Section 12(5) 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. The only way in which this ineligibility can be removed is by the proviso, which again is a special provision which states that parties may, subsequent to disputes having arisen between them, waive the applicability of Section 12(5) by an express agreement in writing. What is clear, therefore, is that where, under any agreement between the parties, a person falls within any of the categories set out in the Seventh Schedule, he is, as a matter of law, ineligible to be appointed as an arbitrator. The only way in which this ineligibility can be removed, again, in law, is that parties may after disputes have arisen between them, waive the applicability of this sub-section by an “express agreement in writing .......”.12/15
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21. Considering the fact that although I am inclined to conclude that since the appointment of the Arbitrator was unilateral and contrary to the decision of the Hon'ble Supreme Court in Perkins case (referred to supra), the continuance of the arbitration proceedings by the learned Arbitrator was bad in law and was susceptible to challenge at the stage of Sections 14, 16 or under Section 34 of the Arbitration and Conciliation Act, 1996.
22. Having considered the decisions referred by this Court as also by the Hon'ble Delhi High Court, Hon'ble Calcutta High Court and the Hon'ble Bombay High Court mentioned above, I conclude that the impugned Award has to go in the present case as there is a patent bias. It primarily is contrary to the decision of the Hon'ble Supreme Court in Perkins case (referred to supra).
23. In the light of the above discussion, the impugned Award dated 22.03.2023 is set aside leaving open the parties to work out their remedy in accordance with Clause 29.2 of the Joint Venture Agreement dated 15.03.2015. The Arbitration Original Petition stands disposed of with the 13/15 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com.Div.) No.477 of 2023 above observations.
24. The time taken before this Court in the earlier round and in this round and before the Hon'ble Supreme Court till the date of receipt of a copy of this order shall stand excluded for the purpose of computation of limitation for restarting the arbitration proceedings afresh. No costs. Consequently, connected miscellaneous application is closed.
21.03.2024 Index : Yes/No Internet : Yes/No Speaking Order/Non-Speaking Order Neutral Citation : Yes/No arb C.SARAVANAN, J.
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