Delhi District Court
Yogesh Aggarwal And Ors vs Fittjee Limited on 24 November, 2023
IN THE COURT OF MS. PURVA SAREEN,
ADDITIONAL DISTRICT JUDGE-01,
SOUTH, SAKET COURT, NEW DELHI
OMP (Comm) No.29/2019
DLST01-007824-2019
1. Yogesh Aggarwal
2. Chitresh Aggarwal,
Both S/o Sh. L. N. Aggarwal,
Both R/o 453, 6th Lane, Rajender Nagar,
Lucknow-226004
.....Petitioner
Versus
M/s FIITJEE Limited
29A, Kalu Sarai Sarvapriya Vihar,
New Delhi-110016
Through its Director
.... Respondent
Date of institution : 26.11.2019
Date on which reserved for order : 21.10.2023
Date of order : 24.11.2023
ORDER
Objections under Section 34 of The Arbitration & Conciliation Act 1996 against the impugned award dated 22.12.2018 of Arbitrator Sh. P. C. Gupta.
The present petition has been filed under section 34 of Arbitration and Conciliation Act 1996 for setting aside the arbitration award dated 22.12.2018 passed by Arbitrator Sh. P. C. Gupta.
1. Brief facts of the present petition are that respondent company is an education institute having branches all over India and registered office OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.1 at 29A, Kalu Sarai, Sarvpriya Vihar, New Delhi. The petitioner no.1 joined the services of respondent as a Faculty Trainee in Chemistry department on 07.02.2016 at Delhi vide offer of appointment letter dated 22.01.2016. The petitioner no.1 was put on training after joining and he agreed to serve the respondent for three and half years w.e.f 07.02.2016 to 31.05.2019. Petitioner no.2 stood surety for petitioner no.1. Thereafter, petitioner no.1 completed his training and he was put on probation w.e.f 12.05.2016 for period of six months vide letter dated 17.06.2016. On 30.11.2016, petitioner no.1 tendered his resignation by way of advance notice of six months and on 31.05.2017, petitioner no.1 left the company in breach of terms and conditions of service manual.
2. It was averred in the petition filed by FIITJEE that as resignation was not after the expiry of academic sessions as well as the contract period, so the claimant company suffered losses due to failure of petitioners to fulfill their obligations and so Sh. P. C. Gupta was appointed as an arbitrator invoking clause 36 of the Service Manual vide letter dated 21.12.2017 by Sh. Mridul Pathak to whom the power was given vide authority letter dated 07.02.2017 to file the statement of claim, rejoinder as well as to lead evidence on behalf of respondent company. The respondent company filed the claim of Rs.1,38,981/- along with interest @ 18% per annum with cost of litigation against the petitioners. The petitioner no.1 filed his reply before the arbitrator. In his reply, petitioner no.1 stated that arbitrator is not a fit person to arbitrate the proceedings and Sh. Mridul Pathak, in whose favour the authorization was signed, had no power to appoint the arbitrator. The board of resolution also did not give any authority to Mridul Pathak, OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.2 the authorized representative, to file, defend or lead evidence on behalf of the claimant company. Petitioner no.1 further replied that he was not provided any documents of altered terms and conditions, rather a re- offer letter was issued and the petitioner was compelled to sign certain proformas which was never explained to him and he had never agreed to settle any dispute before the arbitrator.
3. Petitioner no.1 replied that he had resigned as per service manual and further that even after completion of six months of probation, he was not confirmed. He gave his resignation on 30.11.2016 but worked for six months till 31.05.2017 as required and he was not paid last month's salary with increment and other dues. The petitioner further replied that as he was not a confirmed employee, and hence he was not covered under the three and a half years clause. Moreover, his signatures were obtained on blank papers and he never signed on the documents stated by the plaintiff.
4. The petitioner no.2 had taken the objection that he had not signed any surety bond or any other document and never appeared before the claimant company at Delhi and Mr. Mridul Pathak had no right to appoint an Arbitrator.
5. Evidence by way of affidavit was given by petitioners. The proceedings were duly contested by the petitioners. After the arbitral proceedings, the claim of respondent was allowed by the arbitrator and an award dated 22.12.2018 was passed against the petitioners. By virtue of said award the petitioners were directed to pay an amount of Rs.1,38,981/- excluding sincerity fund together with interest @ 12% OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.3 per annum till payment and also Rs.30,000/- as cost of litigation.
6. Being aggrieved by the aforesaid award, the petitioner preferred the present proceedings u/s 34 Arbitration and Conciliation Act before this court. Reply to the petition was filed by the respondent raising various legal objections and it was stated that the award in question was a well reasoned award and deserved to be upheld.
7. It was argued on behalf the petitioners that the award deserved to be dismissed as:
(i) the Arbitrator was not a qualified one and did not fall within the definition of Section 43 read with Section 11 and 8, the Schedule of the Arbitration & Conciliation Act.
(ii) No issue was framed with respect to eligibility of the Arbitrator which is a mandatory requirement in case the appointment of the Arbitrator is challenged.
(iii) The award was void ab initio as the Arbitrator did not disclose the information as required under Section12 of the Arbitration & Conciliation Act.
(iv) The Arbitrator was appointed by Mridul Pathak who had no power to appoint him and there was no board of resolution giving power to the AR to appoint Arbitrator.
(v) As the power was not legal, the award could not stand.
(vi) All the clauses in the service manual were arbitrary and one sided.
In fact the respondent had failed to pay petitioner no.1 the amount of sincerity fund which was due on him amounting to Rs.2,38,125/-.
(vii) All the expenses while determining the claim were calculated as per whims and desires of the respondent.
OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.4(viii) The contract was totally one sided and against public policy which was reflected in clause 15 L of the service manual.
(ix) The Ld. Arbitrator failed to take into notice that the clauses constituted an unconscionable restrain on right of one of the party to seek legal redress which was clearly hit by Section 23 and 28 of the Indian Contract Act.
8. In view of above grounds, it was prayed that the award passed by the Ld. Arbitrator dated 22.12.2018 be set-aside and cost should be imposed upon the respondent for initiating frivolous litigation upon the petitioner.
9. Arbitral record was summoned and final arguments were addressed. Written arguments were filed by the petitioners.
10. I have heard the arguments advanced by Ld. counsels for both the parties and have also perused the Arbitral records and the other records carefully.
11. It is argued on behalf of the petitioner that the award deserves to be dismissed as the same has been passed ignoring the fact that the agreement entered into between the parties is against the fundamental policy of law. It is stated to be a one sided agreement and favours the respondent. No opportunity has been granted to the petitioner to read the same before signing it as it was handed over to him on the date of joining itself. Respondent was in a dominating position and the agreement was signed by the petitioner under undue pressure. The clauses in the agreement are onerous, unilateral and thus have no OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.5 sanctity in the eyes of law. It is also argued on behalf of petitioner that the agreement is hit by various provisions of The Indian Contract Act. Counsel for the petitioner has also argued that claim has not been filed by duly authorized person and the Arbitrator was also not appointed properly.
12. As far as the question of appointment of Arbitrator is concerned, ld. Counsel for petitioners has relied upon the judgment of Hon'ble Delhi High Court title as Ram Kumar and Anr. v. Sriram Transport Finance Co. Ltd., FAO (Comm.) 60/2021, dated 05.12.2022, wherein it has been held that " 20. In terms of Explanation 1 to Section 12(1) of the A&C Act - the grounds as stated in the Fifth Schedule of the A&C Act - the learned Sole Arbitrator was required to be guided by the grounds as stated in the Fifth Schedule of the A&C Act. Entry 22 of the Fifth Schedule of the A&C Act specifically provides circumstances where an arbitrator has, within the past three years, been appointed as an arbitrator on more than two occasions by either of the parties or their affiliates. This Court is unable to accept that such a disclosure is not mandatory and is merely at the discretion of the arbitrator. The onus for disclosing the number of matters in which the learned Sole Arbitrator had been appointed as such, at the instance of the respondent, rested with the learned Sole Arbitrator. The assumption that the burden to ascertain the circumstances that may give rise to justifiable doubts as to the independence and impartiality of the arbitrators is on the parties, is erroneous; this disclosure is necessarily required to be made by the person approached in connection with his appointment as an arbitrator.
22. It is necessary to note that the language of Section 12(1) of the OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.6 A&C Act does not leave it at the discretion of any person, approached in connection with being appointed as an arbitrator, to make the necessary disclosures. The use of the words "he shall disclose" in Section 12(1) of the A&C Act makes it mandatory for the person who is approached in connection with his possible appointment as an arbitrator, to make a disclosure of all circumstances that may give rise to justifiable doubts as to his independence and impartiality".
13.Even otherwise, the perusal of board of resolution shows that it did not empower Sh. Mridul Pathak to appoint any Arbitrator on behalf of the company to pass any award. The extract of board of resolution or minutes of board meeting noway prove that Mr. Mridul Pathak had been given power by Board of Directors or Articles of Associations to file the suit. The learned counsel has referred to the judgment of Hon'ble Delhi High Court titled Nibro Ltd Vs National Insurance Company Ltd, 1991 AIR (Del) 25. Similar proposition was held by hon'ble Supreme Court of India in State Bank of Travencore Vs Kingstone Computers (I) Pvt Ltd. 2011 Legal Eagle (SC) 177. It was held that in the absence of any resolution delegating its powers to the CEO to authorize another person to file the suit, letter of authority was nothing but a scrap of paper.
14. In the said case, it was held that the trial Court analyzed the pleadings and evaluated the evidence produced by the parties, referred to authority letter dated 2.1.2003 issued by Shri Raj K.Shukla in favour of Shri Ashok K.Shukla and observed:
"A perusal of the aforesaid authority letter shows that Shri Raj K.Shukla in his capacity as CEO of the plaintiff company had OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.7 authorised Shri A.K. Shukla to sign, verify and file the present suit. Apart from this authority letter, the plaintiff company has not filed on record any board resolution authorising Sh. A.K. Shukla to sign, verify and institute the present suit. The plaintiff has also not filed on record its memorandum/articles to show that Shri Raj Kumar Shukla had been vested with the powers or had been given a general power of attorney on behalf of the company to sign, verify and institute the suit on behalf of the company. The present suit, therefore, has been filed merely on the strength of the authority letter Ex.PW1/A............"
15.The trial Court then referred to the judgment of the Delhi High Court in M/s. Nibro Limited v. National Insurance Company Limited AIR 1991 Delhi 25, Shubh Shnati Services Limited v. Manjula S. Agarwalla and others (2005) 5 SCC 30, Delhi High Court (original side) Rules, 1967 and proceeded to observe:
"..............As already stated, it has not been averred in the plaint nor sought to be proved that any resolution had been passed by the Board of Directors of the plaintiff company authorising Shri A.K. Shukla to sign, verify and institute the suit. It has also not been averred that the memorandum/articles of the plaintiff company give any right to Shri A.K. Shukla to sign, verify and institute a suit on behalf of the plaintiff company. It, therefore, follows that the plaint has been instituted by Shri A.K. Shukla only on the authority of Sh. Raj K.Shukla, CEO of the plaintiff company. Such an authority is not recognized under law and, therefore, I held that the plaint has not been instituted by an authorised person. Issue No.1 is accordingly, decided against the plaintiff and in favour of the defendants."
In our view, the judgment under challenge is liable to be set OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.8 aside because the respondent had not produced any evidence to prove that Shri Ashok K.Shukla was appointed as a Director of the company and a resolution was passed by the Board of Directors of the company to file suit against the appellant and authorised Shri Ashok K.Shukla to do so. The letter of authority issued by Shri Raj K.Shukla, who described himself as the Chief Executive Officer of the company, was nothing but a scrap of paper because no resolution was passed by the Board of Directors delegating its powers to Shri Raj K.Shukla to authorise another person to file suit on behalf of the company.
16. Hence, in view of the above discussion, this court is of the considered opinion that neither the arbitrator was appointed properly nor the AR acted in accordance with the Act.
17. It has been further argued that petitioner was on deemed probation as his job was not confirmed as regular employee on the date of giving six months notice of resignation on 11.11.2016 which co-terminated with the end of academic session on 31st May as per clause 15(H) of alleged service manual. Hence, the petitioner was on probation from 12.05.2016 and was on probation only when he gave a notice of resignation of six months and left the institute only on 31.05.2017 which was on consonance with said clause of service manual, therefore, seemingly there is no cause of action or dispute.
18.Reliance is placed by the petitioner upon judgment "ONGC Ltd. Vs. Saw Popes Ltd. (2003) 5 SCC 705" on the point that an award contrary to substantive provisions of law or provisions of arbitration & Conciliation Act or terms of contract Act would be patently illegal, and OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.9 is open to interference by the court under Section 34 (2) of the Act.
19.The petitioner has mentioned various clauses of the agreement which are opposed to public policy i.e. clause 15(b), 15(l), 15(f), 15(g). Since the petitioner was on probation and was not a confirmed employee so the compulsory clause of serving for 3 ½ years was not applicable to him and the said contract was void. Further, as the probation period was not extended, there could be no reason for claiming the said amount from the petitioner.
20. Further the petitioner has also mentioned about Section 23 of Indian Contract Act and has placed reliance upon "Vivek Rai Vs. Aakash Institute 2015 III AD (Delhi) 712" on the point that the terms and conditions of the agreement which are opposed to public policy and are unconscionable. It was held in the said judgment that if the clauses constitute an unconscionable restrain on the right of one of the party and are oppose to public policy, the clauses are hit by section 28 and 23 of the Contract Act.
21.Per contra, it is argued on behalf of respondent that the award is a well reasoned award and the grounds raised by the petitioner do not fall within the ambit of Section 34 of Arbitration & Conciliation Act. It is further argued that while deciding the petition under Section 34 of the aforesaid Act the court cannot sit in appeal over the award passed by the arbitrator.
22.In order to counter the grounds raised by the petitioner it is argued that the terms and conditions of the agreement were made keeping in mind OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.10 the welfare of the students, who had joined the institute for obtaining special coaching for IIT-JEE. In case the faculty is permitted to leave at his own whims and fancies the studies of students would be adversely affected. It is further argued that none of the terms of the agreement are opposed to public policy. The point of extent of judicial intervention in arbitral award is again emphasised by the counsel for respondent during the oral arguments.
23.Undoubtedly as has been held in Kwality Manufacturing Corporation Vs. Central Warehousing Corporation (2009) 5 SCC 142 the court while considering challenge to arbitral award does not sit in appeal over the findings and decision of arbitrator, which is what the High court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so the decision of the umpire has to be accepted as final and binding. The same has been reiterated in Arosan Enterprise Ltd. Vs. Union of India AIR 1999 HC 3804. Hence the arbitral record cannot be interfered upon the factual finding except when it is opposed to the law.
24.Perusal of award would reveal that the arbitrator upon considering the claim of the respondent and reply of the petitioner passed the award solely on the basis of terms of the agreement. The arbitrator took the terms and conditions of the agreement as unimpeachable and went ahead to pass the award. The Ld. Arbitrator did not consider whether the said terms and conditions are opposed to public policy or whether the same are hit by Sections 23 and 28 of Indian Contract Act. The OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.11 various clauses of the agreement were required to be scrutinized before passing the award and not solely on the basis of fact that the terms and conditions were agreed by the petitioner herein. Relevant clause are reproduced as under:
15(b). The above initial period of service as per clause 15(a) shall be deemed to continue for another term of three years and subsequent terms of three years, unless the contract is terminated as per the provisions of this manual.
15(c) After successful completion of training i.e. during probation or after confirmation of service as stipulated herein above, you will be under a contractual obligation to serve the organization continuously and uninterruptedly as per the above clauses. It is made abundantly clear that you will be under similar contractual obligation to give continuous and uninterrupted service for subsequent terms of three years each time, unless the contract is terminated in letter and spirit of this agreement, meeting all the provisions of this manual.
This condition is imposed primarily to attain continuity of teaching/coaching to the students and to maintain and keep up the high standards maintained by our organization in imparting training and assistance to our students in taking up Advance Placement Tests, SAT reasoning and TOEFL, SAT Subject Tests for admission to US Universities and Colleges, IIT-JEE, Olympiads, NTSE, STSE & other engineering entrance exams. It is essential that in no manner the interests of the students be affected or jeopardized. A FIITJEE faculty must maintain highest level of ethics and value system so that he/she becomes an inspiration to the young students.
15(d) In the event you wish to quit FIITJEE before the expiry of the contract period, you are required to give notice in writing giving OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.12 clear 6 months time to FIITJEE so that such period co-terminates with expiry of the academic session. The said notice is required to be delivered through the Centre Director/Incharge or Head of the Department at the office of the Managing Director of FIITJEE at Delhi and obtain a valid receipt so that there would be no ambiguity regarding the contents of your notice and its serving upon FIITJEE.
If you are opting to leave before the completion of initial minimum contract period and once the notice is held to be valid and is accepted, by the FIITJEE management, you will be required to pay the training expenses on a pro-rata basis.
It is made clear that training expenses as stated above are payable only in case of leaving the FIITJEE during the initial period of contract but not in case of extended period of contract as stipulated above.
You will also be liable to pay 12 months gross salary of your probation salary as per the offer/calculation of salary sheet, towards a part discharge of your liabilities towards damages as per the relevant clause of this manual.
15(e). In case you are unable to adhere to the said mandatory notice period, you would be liable to pay FIITJEE a minimum pre-estimated & pre-determined damage to the tune of double the gross salary for each months of unexpired notice period or the remaining period of the academic year, whichever is higher e.g. if a person quits on 31st October, he/she will be required to pay 7 x 2x rupees as damages to FIITJEE (the value of x will be gross monthly salary). Such liability would be automatically incurred once the breach is committed by the employee & no notice in this regard would be served upon you or surety to claim the said pre-determined & pre-OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.13
estimated damages. You & your surety would be jointly & severally liable to pay the same within 7 (seven) days of your leaving.
The above 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 your quitting without completing the academic year & leaving the students in a lurch.
15(f). After the expiry of the initial & minimum contract period, this contract will continue subject to clause 15 (b) above and till the person attains the age of superannuation i.e. 60 years, subject to terms and conditions contained in this manual. After the superannuation the some people with extraordinary achievements may be given extension to continue for such period the candidate is capable of rendering effective services.
15(g) Corollary of clause 14 and 15(a) is that if in the last year of the contract period or extension thereof at FIITJEE, an employee does not submit his resignation by 30th November, it will be assumed that he/she is willing to continue for another term of 3 years subject to the conditions contained in this manual.
It is made abundantly clear that after completion of training i.e. during the probation as well as after confirmation a person cannot leave service at FIITJEE without giving 6 months notice in writing and without completing the remaining part of relevant academic year in which the notice period is to expire. The academic year shall commence from 1st June & concludes 31st May of subsequent year.
15 (l) In the event of your default, non-compliance or willful breach of the contract or sudden termination of the contract and/or leaving the institute without following the proper procedure, as laid down in this manual, and the employee's/surety's refusal to meet OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.14 his/her/their obligation towards FIITJEE in letter and spirit of the service rules, and the matter becoming subjudice, the employee and the surety, jointly and severally, 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.10,000/- per hearing either before the court or before the arbitrator apart from the other expenses as elucidated above.
25.A bare reading of the above clauses would reveal that they are one sided and are against the principle of equity. These clauses place the respondent in a dominating position without giving any choice to the petitioner to oppose the same. The damages have been stated to be as non punitive but only as a of part compensation. The compensation has been cited owing to loss of reputation, future business, brand equity etc. due to petitioner's leaving the job without completing the academic session and leaving the students in between. The said losses have not been quantified and have been claimed as a matter of right. Though on the face of it they are claimed to be non punitive but are definitely in the form of penalty and are accordingly opposed to the provisions of Indian Contract Act.
26.Perusal of the agreement has been cleverly drafted so that it appears to be one which gives a free will to the persons signing it but in reality the same has been drafted to suit the purpose of the respondent company. All the clauses in the agreement clearly depict the dominance of respondent. The terms and conditions are in violation of OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.15 the provisions of The Contract Act. The award could not have been passed ignoring the illegalities in the terms and conditions of the agreement which are clearly opposed to public policy. Clause 16 (e) stipulates that in case the employee does not submit his resignation by 30th November, it will be assumed that he/she is willing to continue for another term of 3 years. This clause clearly shows that the employee had been given no freedom of choice.
27.Learned counsel for the petitioner has also stated that there is mandatory requirement that a declaration should be given by the learned Arbitrator that he was having a continuous standing of 10 years as a lawyer or he must be a company secretary or an accountant as per schedule 8 of section 43 of the Arbitration Act, otherwise the personal shall not be qualified to act as an arbitrator. The award dated 22.12.2018 does not disclose the qualification as mandated, thus the whole award become void. Learned counsel has referred to the judgment of Rahul Jain Vs Atul Jain decided by hon'ble Delhi High Court on 17.11.2022 and judgment of Ram Kumar & Anr Vs Shri Ram Transport Finance Co Ltd decided by hon'ble Delhi High Court on 05.12.2022 wherein it was categorically held that "In terms of Explanation 1 to Section 12(1) of the A&C Act - the grounds as stated in the Fifth Schedule of the A&C Act - the learned Sole Arbitrator was required to be guided by the grounds as stated in the Fifth Schedule of the A&C Act. Entry 22 of the Fifth Schedule of the A&C Act specifically provides circumstances where an arbitrator has, within the past three years, been appointed as an arbitrator on more than two occasions by either of the parties or their affiliates. This Court is unable to accept that such a disclosure is not mandatory and OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.16 is merely at the discretion of the arbitrator. The onus for disclosing the number of matters in which the learned Sole Arbitrator had been appointed as such, at the instance of the respondent, rested with the learned Sole Arbitrator. The assumption that the burden to ascertain the circumstances that may give rise to justifiable doubts as to the independence and impartiality of the arbitrators is on the parties, is erroneous; this disclosure is necessarily required to be made by the person approached in connection with his appointment as an arbitrator.
In terms of Explanation 2 to Section 12(1) of the A&C Act, the arbitrator is also required to make the necessary disclosure as specified in the Sixth Schedule of the A&C Act.
It is necessary to note that the language of Section 12(1) of the A&C Act does not leave it at the discretion of any person, approached in connection with being appointed as an arbitrator, to make the necessary disclosures. The use of the words "he shall disclose" in Section 12(1) of the A&C Act makes it mandatory for the person who is approached in connection with his possible appointment as an arbitrator, to make a disclosure of all circumstances that may give rise to justifiable doubts as to his independence and impartiality.
In terms of Explanation 2 to Section 12(1) of the A&C Act, such disclosure is to be made in the form specified in the Sixth Schedule of the A&C Act. It may be sufficient compliance of the Explanation if the necessary particulars, as required to be disclosed in the Sixth Schedule, are disclosed but the disclosure is not in the format as provided. However, it would be erroneous to assume that the requirement of making a disclosure is not mandatory.
This Court is of the view that the requirement of making a OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.17 disclosure is a necessary safeguard for ensuring the integrity and Signature Not Verified Digitally Signed Signing Date:06.12.2022 2022/DHC/005313 efficacy of an arbitration as an alternate dispute resolution mechanism and is not optional.
28.In TRF Ltd. v. Energo Engineering Projects Ltd.: (2017) 8 SCC 377, the Supreme Court had referred to Section 12(5) of the A&C Act and noted that the Managing Director of a concerned party would be ineligible to act as an arbitrator. The Court had further held that being ineligible to act as an arbitrator, he was also ineligible to appoint an arbitrator. In Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd.: (2020) 20 SCC 760, the Supreme Court, following the earlier decision in TRF Ltd. v. Energo Engineering Projects Ltd. (supra), held that the Chairman-cum-Managing Director of a party was ineligible to appoint an arbitrator.
It is important to note that the decisions of the Supreme Court in TRF Ltd. v. Energo Engineering Projects Ltd. (supra) and Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd. (supra) were rendered in the context of Section 12(5) of the A&C Act. The said Section reads as under:
"12(5). 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:
Clearly, an award rendered by a person who is ineligible to act as an arbitrator would be of little value; it cannot be considered as an arbitral award under the A&C Act. While it is permissible for the OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.18 parties to agree to waive the ineligibility of an arbitrator, the proviso to Section 12(5) of the A&C Act makes it clear that such an agreement requires to be in writing. In Proddatur Cable TV Digi Services v. Siti Cable Network Limited: (2020) 267 DLT 51, the learned Single Judge of this Court, following the decision in TRF Ltd. v. Energo Engineering Projects Ltd. (supra) and Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd. (supra), held that unilateral appointment of an arbitrator by a party is impermissible.
29.Keeping in view the above discussion, the compliance of Section 12 of Arbitration and Conciliation Act has also not been done.
30. Above all, the terms and conditions of the agreement are on the face of it against the public policy and has also hit by various provisions of the Contract Act.
31.The Ld. Arbitrator completely ignored the said fact and passed the arbitral award only on the premise that the conditions were accepted by the petitioner without realizing the dominance of respondent and well as onerous terms of the agreement. In view of aforesaid discussion the award deserves to be set aside. The award is accordingly set aside. The petition under Section 34 of Arbitration & Conciliation Act is allowed.
32.File be consigned to Record Room after due compliance.
Digitally signedPurva by Purva Sareen Date:
Sareen 2023.11.28 15:31:21 +0530 Announced in the open court (PURVA SAREEN) th today i.e. on 24 November 2023 ADJ-01, SOUTH, SAKET COURT NEW DELHI OMP (Comm) No.29/2019 Yogesh Aggarwal & Anr Vs. FIITJEE Ltd. Page No.19