Delhi District Court
Shilpa Chawla vs Yes Bank Ltd. And Anr on 12 September, 2024
IN THE COURT OF SH. AMIT BANSAL
DISTRICT JUDGE (COMMERCIAL COURT)-03
SOUTH-WEST DISTRICT, DWARKA COURTS, NEW DELHI.
CS (COMM) 8/2022
CNR No. DLSW01-003363-2022
Shilpa Chawla
C/O: Abhishek Chawla
R/O: 125-D, GH-2, Ankur Apartments
LIG Flats, Paschim Vihar West Delhi
Delhi-110063.
Mobile Nos. 844751479, 8287008168
......Petitioner/Objector
VERSUS
1. YES Bank Limited
[A Company Incorporated under the provisions of the Companies
Act, 1956]
YES Bank Limited
Plot No. 1/9, Patel Nagar West
Delhi-110008.
2. Shri Rajesh Rai
(Sole Arbitrator)
696, Pocket 3, Sector 19
Dwarka, New Delhi.
......Respondents
OMP(COMM) 8/2022 Shilpa Chawla Vs. YES Bank Limited & Anr. Page No. 1 of 6
Date of institution : 27.04.2022
Date of arguments : 12.09.2024
Date of decision : 12.09.2024
ORDER
1. This is a petition under Section 34 of The Arbitration & Conciliation Act, 1996 (hereinafter referred to as 'the Act'), inter-alia, seeking setting aside of the Arbitral Award dated 30.11.2021 passed by the Sole Arbitrator/respondent no. 2 in Arbitration Case No. 664/2021 titled as 'Yes Bank Limited. vs. Shilpa Chawla.'
2. The Ld. Counsel for the petitioner has submitted that the Ld. Arbitrator having his office at 696, Pocket-3, Sector-19, Dwarka, New Delhi-110075 was unilaterally appointed by the respondent no. 1/Yes Bank Limited in the matter, who, later on passed the impugned Award dated 30.11.2021 in favour of respondent no.1 herein. He argued that the respondent no. 2 was not appointed as an Arbitrator in accordance with the law and he had no authority to pass any Award against the petitioner and the proceedings before him were a nullity. He further argued that an Award rendered by a person, who is ineligible to act as an arbitrator by virtue of Section 12(5) of the Act is a nullity and, therefore, cannot be enforced. He has also referred to Minutes of Arbitral Proceedings signed by the ld. Arbitrator wherein it has been inter-alia mentioned, "Clause 11.7 of subject agreement has been brought to my knowledge vide which power of appointment/nomination of arbitrator to adjudicate upon dispute OMP(COMM) 8/2022 Shilpa Chawla Vs. YES Bank Limited & Anr. Page No. 2 of 6 in the subject transaction has been arrogated to YES Bank Ltd. In exercise of the same undersigned has been nominated as Arbitrator vide nomination letter dated 16.06.2021." He further referred to letter of Nomination/Appointment as an Arbitrator dated 16.06.2021 issued by the AR of the respondent no. 1 herein in favour of the respondent no. 2/ld. Arbitrator wherein it has been inter-alia mentioned that, "............ The Sole arbitrator will be appointed by the YES Bank Ltd. The venue for such arbitration shall be Delhi." He further referred to Clause 11.7 of the Personal Loan Agreement wherein it was inter-alia mentioned that all claims and disputes arising out of or in connection with the said agreement or its performance shall be settled by arbitration by a single Arbitrator to be appointed by the bank. He submitted that no reply to the said petition has been filed by the respondent no. 1 and the right of the respondent no. 1 to file reply has already been closed by the ld. Predecessor of this court vide order dated 18.09.2023. He has, thus, prayed that the Award dated 30.11.2021 which was passed by an Arbitrator who was unilaterally appointed by the respondent no. 1 be set aside. He also referred to the judgment of The Hon'ble High Court of Delhi in the matter Kotak Mahindra Bank Ltd. Vs. Narendra Kumar Prajapat, EFA (COMM.) 3/2023, date of decision 17.05.2023.
3. The record would show that the respondent no.1/Yes Bank Limited has not filed any reply to the present petition and its right to file the reply was closed vide order dated 18.09.2023. The record would also show that the original arbitral proceedings OMP(COMM) 8/2022 Shilpa Chawla Vs. YES Bank Limited & Anr. Page No. 3 of 6 are on record which were filed by the ld. Counsel for the respondent no. 2/Arbitrator on 10.07.2023.
4. I have heard the arguments and perused the record.
5. It is now a settled law that unilateral appointment of arbitrator without consent of the other party is non-est in law.
6. Clause 11.7 of the Personal Loan Agreement would show that it was specifically mentioned that all claims and disputes arising out of or in connection with the said agreement or its performance shall be settled by arbitration by a single Arbitrator to be appointed by the Bank. The Minutes of Arbitral Proceedings dated 16.06.2021 signed by the respondent no. 2/Ld. Sole Arbitrator would also show that it has been inter-alia mentioned therein, "Clause 11.7 of subject agreement has been brought to my knowledge vide which power of appointment/nomination of arbitrator to adjudicate upon dispute in the subject transaction has been arrogated to YES Bank Ltd. In exercise of the same undersigned has been nominated as Arbitrator vide nomination letter dated 16.06.2021." The said letter dated 16.06.2021 also inter-alia mentions that the Sole Arbitrator will be appointed by the YES Bank Ltd. It thus seems from the record that the ld. sole arbitrator herein was unilaterally appointed and was ineligible to act as an arbitrator to render an arbitral award. The Hon'ble High Court of Delhi in the matter Kotak Mahindra Bank Ltd. Vs. Narendra Kumar Prajapat, EFA OMP(COMM) 8/2022 Shilpa Chawla Vs. YES Bank Limited & Anr. Page No. 4 of 6 (COMM.) 3/2023, date of decision 17.05.2023 has, inter-alia, held as follows:-
"13. The Learned Commercial Court has held that an award rendered by a person who is ineligible to act as an Arbitrator by virtue of the provisions of Section 12(5) of the A & C Act is a nullity and, therefore, cannot be enforced. It has accordingly dismissed the enforcement petition under Section 36 of the A&C Act with the cost quantified as ₹25,000/-.
14. This Court finds no infirmity with the aforesaid view. A person who is ineligible to act an Arbitrator, lacks the inherent jurisdiction to render an Arbitral Award under the A&C Act. It is trite law that a decision, by any authority, which lacks inherent jurisdiction to make such a decision, cannot be considered as valid. Thus, clearly, such an impugned award cannot be enforced."
7. The Hon'ble Delhi High Court in a recent judgment in matter titled as Mercedes Benz Financial Services India Pvt. Ltd. vs. M/s Khokher Enterprises, EFA (COMM) 5/2023, Date of Decision 16.01.2024 has, inter-alia, held as follows:-
"2. The learned Commercial Court found that the learned sole arbitrator was ineligible to act as an arbitrator by virtue of Section 12(5) of the A&C Act. Accordingly, the Court held that the Arbitral Award dated 10.11.2021 was a nullity and could not be enforced.
3. The issue involved in the present case is covered by the earlier decision delivered by this Court in Kotak Mahindra Bank Ltd. vs. Narendra Kumar Prajapat:EFA (COMM) 3/2023 dated 17.05.2023. This court had held that an award rendered by a person - who is ineligible to act as an arbitrator by virtue of Section 12(5) of the A&C Act - is a nullity, and, therefore, cannot be enforced. This Court is OMP(COMM) 8/2022 Shilpa Chawla Vs. YES Bank Limited & Anr. Page No. 5 of 6 informed that a Special Leave Petition preferred against the said decision (being SLP (Civil) No. 47322/2023) was dismissed by the Hon'ble Supreme Court by an order dated 12.12.2023."
8. It is thus a settled law that an award rendered by a person who is ineligible to act as an Arbitrator by virtue of provisions of Section 12(5) of The Arbitration and Conciliation Act, 1996 is a nullity and cannot be a enforced and that a decision by any authority which lacks inherent jurisdiction to make such a decision cannot be considered as valid.
9. As guided by the law laid down in the aforesaid judgments, the Arbitral Award in question cannot be enforced being nullity in the eyes of law. The arbitral award dated 30.11.2021 is accordingly set aside.
10. The petition under Section 34 of the Act stands disposed of accordingly.
11. File be consigned to record room after completion of necessary formalities.
Digitally
signed by
AMIT
AMIT BANSAL
Announced in open Court BANSAL Date:
2024.09.12
16:14:30
on 12.09.2024 +0530
(Amit Bansal)
District Judge (Commercial Court)-03,
South-West, Dwarka Courts, New Delhi
12.09.2024
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