Delhi District Court
Ashoka Metal Works And Co vs Clix Capital Services Pvt. Ltd on 22 August, 2024
IN THE COURT OF SH. SANJAY SHARMA-II : DJ (COMMERCIAL-11)
(CENTRAL): TIS HAZARI COURTS, DELHI
OMP (Comm.) No. 50/2024
CNR No.: DLCT01-010065-2024
1. M/s. Ashoka Metal Works & Co.
B-17, DB Gali No. 9
Anand Parbat Industrial Area
Anand Parbat, New Delhi-110008
2. Rachit Gupta
Prop.: M/s. Ashoka Metal Works & Co.
R/o H. No. 13, UGF, Road No. 71
West Punjabi Bagh, New Delhi-110026
..... Petitioners
VERSUS
M/s. Clix Capital Services Pvt. Ltd.
Aggarwal Corporate Tower, Plot No. 23
5th Floor, Govind Lal Sikka Marg
Rajendra Place, New Delhi-110008
..... Respondent
Date of Institution : 06.07.2024
Date of Arguments : 13.08.2024
Date of Judgment : 22.08.2024
JUDGMENT
1. The petitioner filed an application under Section 34 of 'The Arbitration and Conciliation Act, 1996' (Hereinafter referred to as 'the Act') for setting aside arbitral award dated 30.04.2024 (Hereinafter 'the impugned award') in Arbitration Case No. CC/NK/9/2024 titled as 'M/s. Clix Capital Services Pvt. Ltd. vs. M/s. Ashoka Metal Works & Co. & Ors.' whereby Ld. sole arbitrator passed an ex-parte award in the sum of Rs. 12,09,092/- alongwith interest @ 18% per annum w.e.f. 14.12.2023 till realization and Rs. 20,000/- as costs in favour of the respondent and against the petitioners. OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 1 of 16 STATEMENT OF CLAIM:
2. On 21.09.2022, the petitioner No. 2, as proprietor of the petitioner No. 1 and Ms. Radhika Gupta applied for working capital in the sum of Rs. 25,00,000, vide Application No. 5001065931. The respondent sanctioned loan amount of Rs.
15,06,708/- to the petitioners, vide letter dated 01.10.2022. The said loan amount alongwith interest @ 19.5% per annum was repayable by way of 36 Equal Monthly Installments (EMIs) of Rs. 55,612/- each. On 01.10.2022, the respondent had disbursed loan amount of Rs. 14,62,832/-, after deducting Rs. 43,876/- as processing fee (including BPI amount) and insurance premium, vide Loan Account No. SDEBUSI000142544. The petitioners alongwith Ms. Radhika Gupta executed loan agreement in favour of the respondent. The petitioners did not adhere to the repayments schedule. As per foreclosure letter, an amount of Rs. 12,09,092.75/- was due as on 14.12.2023. The respondent recalled the loan facility, vide notice dated 18.12.2023. Thereafter, the respondent invoked arbitration agreement, vide notice dated 03.01.2024.
APPOINTMENT OF LD. SOLE ARBITRATOR:
3. The respondent nominated sole arbitrator to adjudicate disputes arising between them, vide letter dated 15.01.2024. ARBITRAL PROCEEDINGS:
4. The proceedings conducted by sole arbitrator are, as under:
DATE PROCEEDINGS 17.01.2024 Sole arbitrator consented to act as sole arbitrator. 22.01.2024 Sole arbitrator made disclosure of his independence and
neutrality in the prescribed format under 6 th schedule of 'The Arbitration and Conciliation Act, 1996' and issued notice to the petitioners for 21.02.2024. He also sent copy of disclosure to the petitioners.
OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 2 of 16 21.02.2024 There was no appearance on behalf of the petitioners. Sole arbitrator issued fresh notice to the petitioners for 22.03.2024. 20.03.2024 There was no appearance on behalf of the petitioners. Sole arbitrator listed the case for the respondent's evidence. 27.03.2024 Sole arbitrator passed an order on an interim application under Section 17 of the Act and freezed A/c. No. 920020067810137 in the name of the petitioner No. 1 with Axis Bank, Shakti Nagar Branch, Delhi to the extent of Rs. 12,09,092/.
17.04.2024 The respondent examined its AR Mr. Ayush Gupta as CW1. 24.04.2024 Sole arbitrator heard arguments. 30.04.2024 Sole arbitrator passed the impugned award.
GROUNDS OF THE PETITION:
5. The petitioners impugned the arbitral award on the grounds, as under:
(a) The respondent did not serve any notice under Section 21 of the Act for invoking arbitration clause;
(b) The respondent unilaterally appointed sole arbitrator without following the procedure prescribed under Section 11 of the Act;
(c) The petitioners were not served with the statement of claim and they did not have opportunity to file a statement of defence;
(d) Sole arbitrator had not issued any notice of hearing in breach of Section 24 of the Act; and
(e) The arbitral award was passed in breach of principles of natural justice and / or public policy.
APPEARANCE:
6. The Court has heard arguments of Mr. Pranchal Pawar, Ld. Counsel for the petitioners and Ms. Shivali Sharma, Ld. Counsel for the respondent and examined the pleadings and documents and perused the written arguments filed by Ld. Counsel for the petitioners.
OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 3 of 16 CONTENTION OF THE PETITIONERS:
7. Ld. Counsel for the petitioners contended that the respondent could not have unilaterally appointed sole arbitrator.
He contended that the petitioners never received any notice under Section 21 of the Act nor any notice of hearing from sole arbitrator. He contended that the impugned award was passed in breach of principles of natural justice and public policy of India. He contended that the petitioners could not deposit two EMIs qua December, 2023 and January, 2024. However, the petitioners deposited the said EMIs and there was no arrear of any EMI. He contended that the respondent procured an order from sole arbitrator and he freezed their bank account and thereby caused unjustifiable hardship to the petitioners. He contended that the respondent abused and misused the arbitration proceedings and there was no occasion for making demand of the principal amount alongwith interest. He relied upon judgments in Perkins Eastman Architects DPC vs. HSCC (India) Ltd., (2020) 20 SCC 760 and Mittal Pigments Pvt. Ltd. vs. Gail Gas Limited, OMP (Comm.) 509/2020 decided by Hon'ble High Court of Delhi on on 01.02.2023. He prayed for setting aside of the impugned award and defreezing of the bank account of the petitioner No. 1. CONTENTION OF THE RESPONDENT:
8. Ld. Counsel for the respondent contended that the respondent sent a notice under Section 21 of the Act, vide notice dated 03.01.2024, to the petitioners that it intended to invoke arbitration clause and appoint sole arbitrator to adjudicate the dispute. She contended that the petitioners neither replied nor raised any objection to the appointment of sole arbitrator.
OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 4 of 16
9. Ld. Counsel for the respondent contended that the respondent referred the dispute to sole arbitrator, vide letter dated 15.01.2024 and sent a copy thereof to the petitioners. However, the petitioners did not raise any objection regarding appointment of sole arbitrator. She contended that sole arbitrator sent notices to the petitioners. However, the petitioners did not appear before sole arbitrator. She contended that the petitioners had reasonable opportunity to join arbitral proceedings. She contended that the petitioners filed an application before sole arbitrator on 05.06.2024 to provide them certified copy of the complete file of arbitral proceedings. She contended that the petitioners were aware of the arbitral proceedings and they did not raise any objection against initiation and appointment of sole arbitrator.
She relied upon judgments of Hon'ble High Court of Delhi in Kanodia Infratech Ltd. vs. Dalmia Cement (Bharat) Ltd., OMP (Comm.) No. 297/2021 decided on 08.11.2021 and Arjun Mall Retail Holdings Private Limited & Ors. vs. Gunocen Inc, FAO (Comm.) 31/2021 on 23.01.2024. She contended that loan recall notice, letter of invocation, notices of arbitration proceedings and copy of the impugned award were sent at the addresses provided by the petitioners in their application for loan. She contended that Section 3 of the Act provides that any communication sent at the last known address is deemed served upon the petitioners. She contended that the petitioners did not serve a prior notice of the petition as required under Section 34 (5) of the Act. She contended that the petitioners cannot dispute existence of arbitration agreement as loan agreement was duly signed by them. In that regard, she relied upon judgment in Corporation Bank vs. Sushil Enterprises & Ors., 106 (2003) DLT 187.
OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 5 of 16
10. Ld. Counsel for the respondent contended that the petitioners did not raise any objection against appointment of sole arbitrator and initiation of arbitration proceedings under Section 13 (2) of the Act and therefore, they waived their right to object appointment of sole arbitrator. In that regard, she relied upon judgment in Quippo Construction Equipment Ltd. vs. Janardan Nirmal Pvt. Ltd., AIR 2020 SC 2038. She contended that the respondent rightly appointed sole arbitrator pursuant to arbitration clause in loan agreement as the parties are free to agree on a procedure for appointment of arbitrator under Section 11 (2) of the Act. She contended that sole arbitrator passed the impugned award in accordance with law.
ANALYSIS AND DISCUSSION:
11. The petitioners challenged de jure ineligibility of appointment of sole arbitrator by the respondent.
(a) Objection to unilateral appointment of sole arbitrator can be raised at any stage:
12. An objection to unilateral appointment of sole arbitrator can be raised at any stage.
13. In Airports Authority of India vs. TDI International India Pvt. Limited, 2024 SCC OnLine Del 4016, Hon'ble High Court of Delhi held, as under:
"22. The final point for consideration, which emerges from the arguments of Mr. Mohan, is whether the award ought to be set aside in the absence of an objection having been raised by AAI before the Arbitral Tribunal, or even in the petition filed under Section 34 of the Act.
23. The question as to whether this ground can be raised for the first time in the course of oral arguments in a petition under Section 34 of the Act, has been decided in AAI's favour, specifically in the judgment of a coordinate bench in Man Industries. In paragraph 27 of the judgment, the Court held that the question was one of jurisdiction and de jure ineligibility to act, which can be raised "by way of an amendment and even without the same".
OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 6 of 16 In reaching this conclusion, this Court relied inter alia upon the judgments of the Supreme Court in Lion Engineering Consultants v. State of M.P. and Hindustan Zinc Ltd. v. Ajmer Vidyut Vitran Nigam Ltd., which emphasise that challenges to the jurisdiction of an arbitrator can be raised for the first time in Section 34 proceedings, and even in collateral proceedings."
(emphasis added)
14. In Sriram Cables Pvt. Ltd. vs. Union of India, 2024 SCC OnLine Del 3074, Hon'ble High Court of Delhi held, as under:
"65. Further it has been held in the case of Hindustan Zinc Ltd. v. Ajmer Vidyut Vitran Nigam Ltd., (2019) 17 SCC 82 that an objection to the unilateral appointment can be taken for the first time at any stage or in the collateral proceedings, including an Appeal under Section 37 of the Act, 1996."
15. Therefore, the petitioners can raise the ground of de jure ineligibility of unilaterally appointed sole arbitrator for the first time in the application under Section 34 of the Act.
(b) Reg. waiver of right to object due to participation during arbitral proceedings:
16. As regards contention that the petitioners did not challenge initiation of arbitration proceedings and appointment of sole arbitrator, as provided under Section 13 (2) of the Act, the petitioners waived their right to object appointment of sole arbitrator, it can be stated that such waiver must be express and in writing.
17. In Airports Authority of India vs. TDI International India Pvt. Limited (supra), Hon'ble High Court of Delhi dealt with an issue whether appointing authority can challenge eligibility of an arbitrator appointed by it. Hon'ble High Court of Delhi held, as under:
"21. This argument does not commend to me, as the requirements of an express agreement in writing have been emphasised by the Supreme Court in Bharat Broadband and by the Division Bench of this Court in Govind Singh.
OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 7 of 16 Participation in arbitration proceedings, even filing of claims or counterclaims, thus submitting to jurisdiction without objection or demur, have been held to be insufficient for the purposes of the proviso to Section 12(5) of the Act....."
18. In Smaaash Leisure Ltd. vs. Ambience Commercial Developers Pvt. Ltd., 2023 SCC OnLine Del 8322, Hon'ble High Court of Delhi held, as under:
"32. Coming to the argument of the Respondents that Petitioner's participation in the arbitral proceedings constituted waiver by conduct, suffice would it be to state that this issue is no longer res integra. The Supreme Court in the case of Bharat Broadband Network Limited (supra), has held that waiver under Section 12(5) of the 1996 Act would be valid only if it is by an 'express agreement in writing'.....
34. The aforesaid view was reiterated by this Court in the case of Score Information Technologies Limited (supra), Larsen and Toubro Limited (supra), A.K. Builders (supra) and Saroj Pandey v. Aaryavrat Products India Pvt. Ltd., 2023 SCC OnLine Del 6629. Recently, a Division Bench of this Court in Govind Singh (supra) has held that once the Arbitrator becomes disabled and ineligible to act under Section 12(5) of the Act, 1996, it is not even necessary to examine the question whether the party in disagreement with the appointment had raised an objection to the appointment and even if it is assumed that the said party had participated in the arbitral proceedings, without raising any objection to the appointment, it is not open to hold that it had waived its rights under Section 12(5)....."
(emphasis added)
19. Such waiver under Section 12(5) of the 1996 Act would be valid only if it is by an 'express agreement in writing'. Want of challenge to invocation of arbitration agreement and appointment of sole arbitrator cannot be deemed as waiver of right to object appointment of sole arbitrator.
(c) Reg. Unilateral appointment of sole arbitrator:
20. From perusal of the arbitration clause, it is evident that it is at the absolute discretion of the respondent to nominate a sole arbitrator for resolution of the disputes.
OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 8 of 16
21. The arbitration clause contained in 10.5 of Business Loan - Sanction cum Facility Agreement is, as under:
"10.5. Arbitration: In case of any dispute arising out of or in relation to the Facility Documents, the Parties shall settle the dispute through arbitration under the Indian Arbitration and Conciliation Act, 1996 (as amended or restated from time to time). The arbitration shall be referred to a sole arbitrator appointed by the Lender. The seat of arbitration proceedings shall be New Delhi, India. All proceedings shall be in English. The award of the arbitrator shall be final and binding on the Parties and the expenses of the arbitration shall be borne in such manner as the arbitrator may determine."
(emphasis added)
22. In Kotak Mahindra Bank Ltd. vs. Narendra Kumar Prajapat, 2023 SCC Online Del 3148 (DB), an issue relating to enforcement of an ex-parte award passed by an unilaterally appointed sole arbitrator by the finance company without consent of the borrower was considered by Hon'ble High Court of Delhi. Hon'ble High Court of Delhi held, as under:
"6. The learned counsel appearing for the appellant does not seriously dispute that the arbitrator unilaterally appointed by the claimant was ineligible to be appointed as an arbitrator by virtue of Section 12(5) of the Act. He has largely focused his contentions on assailing the decision of the learned Commercial Court to award costs. It was also contended that the respondent was aware of the appointment of the arbitrator and had not raised any objection to such appointment; therefore the respondent is now precluded from challenging the impugned award.
7. We find little merit in the aforesaid contentions. The proviso to Section 12(5) of the A&C Act is unambiguous. A party can waive its right to object to the ineligibility of an arbitrator under Section 12(5) of the A&C Act but the same is subject to two conditions. First, that the waiver is required to be by and done by an express agreement in writing; and second, that such agreement is entered into after the disputes have arisen. Unless both the aforesaid conditions are satisfied, there can be no waiver of the ineligibility of an arbitrator.
OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 9 of 16
10. The award rendered by an arbitrator who is ineligible to be appointed as such cannot be enforced.
12. In Govind Singh v. Satya Group Pvt. Ltd. :
2023/DHC/000081 this court held as under: "In view of the above, the remaining question to be addressed is whether an arbitral award rendered by a person who is ineligible to act as an arbitrator is valid or binding on the parties. Clearly, the answer must be in the negative. The arbitral award rendered by a person who is ineligible to act as an arbitrator cannot be considered as an arbitral award. The ineligibility of the arbitrator goes to the root of his jurisdiction. Plainly an arbitral award rendered by the arbitral tribunal which lacks the inherent jurisdiction cannot be considered as valid. In the aforesaid view, the impugned award is liable to be set aside as being wholly without jurisdiction.
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."
23. Special Leave Petition (Civil) Diary No(s). 47322/2023 against the judgment in Kotak Mahindra Bank Ltd. vs. Narendra Kumar Prajapat was dismissed on 17.05.2023. The relevant part of the judgment of Hon'ble Supreme Court of India is, as under:
"From paragraph 6 of the impugned order, it appears to be an admitted position that the Arbitrator unilaterally appointed by the petitioner was ineligible to be appointed as an arbitrator by virtue of Section 12(5) of the Arbitration and Conciliation Act, 1996."
24. In Smaaash Leisure Ltd. vs. Ambience Commercial Developers Pvt. Ltd. (supra), Hon'ble High Court of Delhi held, as under:
"38. .....It is no longer res integra that an arbitral award rendered by an Arbitrator, who is ineligible to act as an Arbitrator cannot be termed as an arbitral award and thus not binding on the parties.....
OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 10 of 16
39. From the aforesaid judgment, it is clear that the ineligibility of the Arbitrator goes to the root of the jurisdiction and vitiates the award. Such is the threshold of this disability that in a recent judgment in Kotak Mahindra Bank Ltd. (supra), the Division Bench of this Court had interfered at the stage of execution of the arbitral award and upheld the order of the learned Commercial Court, holding that an award rendered by a person who is ineligible to act as an Arbitrator by virtue of Section 12(5) is a nullity and cannot be enforced. In view of these judgments, in my considered view, the impugned awards cannot be sustained in law, solely on the ground of ineligibility of the learned Arbitrator and are accordingly set aside."
25. In Babu Lal and Another vs. Cholamandalam Investment and Finance Company Ltd. and Another, 2023 SCC OnLine Del 7239, Hon'ble High Court of Delhi held, as under:
"8. It is an admitted position that the respondent Company nominated a Sole Arbitrator on its own without recourse to Court. Supreme Court in Perkins Eastman Architects DPC. (supra) has held that there cannot be a unilateral appointment or nomination of an Arbitrator by a party interested in the dispute. Reference has to be to an independent person.
9. In the instant case, admittedly, nomination of the Sole Arbitrator was done by the respondents on their own without any concurrence from the appellant. Letter dated 18.10.2021 is merely an intimation to the appellant of nomination of the Sole Arbitrator. Said nomination was without reference to the Court in terms of Section 11 of the Arbitration & Conciliation Act, 1996.
10. Clearly, an award rendered by an ineligible Arbitrator would be a nullity as has been held by a Coordinate Bench of this Court in Kotak Mahindra Bank Ltd. v. Narendra Kumar Prajapat, 2023 SCC OnLine Del 3148.
11. In the instant case since the appointment of an Arbitral Tribunal was unilateral and without recourse to Court, the Award rendered by the Arbitral Tribunal would also be a nullity. The Trial Court has clearly erred in not appreciating that the appointment was unilateral and consequently, the Award was a nullity."
OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 11 of 16
26. Such unilateral appointment of a sole arbitrator without consent of the petitioners affects 'party autonomy' and 'freedom of the parties'. Ineligibility to appointment of a sole arbitrator goes to the root of the jurisdiction of such arbitrator. An arbitration award passed by an ineligible arbitrator is without jurisdiction and non-est.
(d) Reg. legality of invocation notice under Section 21 of the Act:
27. The respondent invoked arbitration clause, vide notice dated 03.01.2024, as under:
"Sub:- Invocation Notice U/s 21 of Arbitration & Conciliation Act regarding initiation of Arbitration Proceeding.
Dear Sir, Needless to mention here that, you have taken the loan i.e. Business Loan of Rs. 15,06,708/- vide agreement account no. SDEBUSI000142544 from M/s Clix Capital Services Private Limited, however you have failed to adhere the financial discipline and made continuous default in making the payment of installments, therefore we have recall your loan facility vide loan recall notice dated 18.12.2023. Despite receiving of the loan recall notice, you have not clear the outstanding loan amount of Rs. 12,09,092/-, therefore as per the Clause No. 10.5 of the facility/Loan agreement, we hereby intimated you that we are going to initiate, the arbitration proceeding by invoking the arbitration clause as well as by appointmenting a sole arbitrator for adjudication of the disputes and now hereby proposing to appoint any of the below mentioned persons, having considerable experience being judicial officer and as an Advocate, as Sole Arbitrator in the present dispute, out of the list of arbitrators mentioned below. Please note that the seat of arbitration shall be at New Delhi as per the terms and conditions of the loan agreement.
That accordingly we hereby propose the names of following arbitrators to adjudicate upon the disputes:-
(a) Sh. Mithilesh Jha, Advocate (Additional District & Sessions Judge, Retd.) OR
(b) Sh. M.S Rohilla, Advocate (Additional District & Sessions Judge, Retd.) OR OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 12 of 16
(c) Sh. Nirmal Kr. Agarwal, Advocate (Additional District & Sessions Judge, Retd.) OR
(d) Sh. L.D Mual, Advocate (Additional District & Sessions Judge, Retd.) You are called upon to provide your consent/dissent (if any) and choose any one of mentioned person as sole arbitrator within 7 days from the date of receipt of this notice, failing which, it shall be presumed that you have consented to the appointment of any one of the proposed Arbitrator(s) and for conducting the proceedings. Alternatively, you may also note that in case of any dissent on the names of arbitrators as proposed herein, you may approach the competent court to seek appointment of Arbitrator U/s 11 of Arbitration and Conciliation Act, 1996 within 30 days hereof and company shall participate in any such proceedings. However, after commencement of arbitration proceeding (post expiry of 7 days as stated above), it shall be presumed that you have expressly acquiesced with absolutely no objection whatsoever with respect to appointment of arbitrator from the list of proposed arbitrators herein.
Take necessary action please.
Thanking you, For M/s CLIX CAPITAL SERVICES PRIVATE LIMITED Through its Authorized Representative"
28. Section 21 of 'The Arbitration and Conciliation Act, 1996' is, as under:
"21. Commencement of arbitral proceedings Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent."
29. Section 21 of the Act specifically envisages commencement of arbitral proceedings from the date on which a notice under Section 21 is issued by one party to the other, unless the parties agree otherwise. There is, admittedly, no agreement ad idem between the parties for the arbitration proceedings to commence without the notice being issued under Section 21 of the Act in the first instance.
OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 13 of 16
30. In Alupro Building Systems Pvt. Ltd. vs. Ozone Overseas Pvt. Ltd., 2017 SCC OnLine Del 7228, Hon'ble High Court of Delhi held, as under:
"30. Considering that the running theme of the Act is the consent or agreement between the parties at every stage, Section 21 performs an important function of forging such consensus on several aspects viz. the scope of the disputes, the determination of which disputes remain unresolved; of which disputes are time-barred; of identification of the claims and counter-claims and most importantly, on the choice of arbitrator......"
31. The respondent, vide notice dated 03.01.2024, informed the petitioners that it was proposing to appoint any of the aforesaid persons for adjudication of the dispute. The petitioners had no choice in the matter of appointment of arbitrator. The arbitration clause as well as notice under Section 21 of the Act, so far as authority of the respondent to appoint a sole arbitrator is ex-facie invalid.
32. In Kamladityya Construction Pvt. Ltd. vs. Rail Land Development Authority, 2024 SCC OnLine Del 5182, Hon'ble High Court of Delhi held, as under:
"10. The offshoot of the afore-noted decisions of the Supreme Court is that any clause which enables one of the parties to the dispute to unilaterally appoint an arbitrator is ex facie invalid and incapable of implementation. Unlike the clause which was in consideration in CORE, which envisaged the Railways providing a panel of suggested Arbitrators to the contractor who had with him the option to choose a name out of the said panel, Clause 26.3 does not contemplate providing of any choice by the Railways to the contractor in the matter of choosing the arbitrator. Rather, the clause envisages the unilateral appointment of the Arbitrator, by the respondent, from the panel of arbitrators maintained by it. The clause is, therefore, squarely hit by Perkins, Bharat Broadband and TRF."
33. Therefore, notice under Section 21 of the Act seeking consent of the petitioners to anyone of the arbitrators is invalid.
OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 14 of 16
(e) Judgment in Arjun Mall Retail Holdings Pvt. Ltd. case:
34. The judgment in Arjun Mall Retail Holdings Pvt. Ltd. case came up for consideration in S.K. Builders vs. CLS Construction Pvt. Ltd., 2024 SCC OnLine Del 5498 wherein Hon'ble High Court of Delhi observed that Hon'ble Supreme Court of India left the question of law open, as under:
"31. It is also significant that even while dismissing the SLP preferred against the judgment of the Division Bench in Arjun Mall Retail Holdings, the Supreme Court left the question of law open. This clearly indicates that, even in the opinion of the Supreme Court, the question of whether an arbitration which proceeds following the unilateral appointment of the Arbitrator, can at all sustain, deserved consideration."
35. In Airports Authority of India (supra), Hon'ble High Court of Delhi dealt with this issue, as under:
"27. This, in fact, appears also to be the procedure which has been followed by a coordinate bench in Upper India Trading Co. Pvt. Ltd. v. Hero Fincorp Ltd. An award was set aside on the ground of unilateral appointment, following the judgments in TRF Limited and Perkins Eastman and the Single Bench judgment in Geeta Poddar v. Satya Developers Private Limited even though a similar objection was raised by the respondent therein on the basis of Arjun Mall."
RELIEF
36. Therefore, the application under Section 34 of 'The Arbitration and Conciliation Act, 1996' is allowed. Consequently, the impugned award dated 30.04.2024 in Arbitration Case No. CC/NK/9/2024 titled as 'M/s. Clix Capital Services Pvt. Ltd. vs. M/s. Ashoka Metal Works & Co. & Ors.' is set-aside. Manager, Axis Bank, Shakti Nagar Branch, Delhi is directed to defreeze A/c. No. 920020067810137 (IFSC:
UTIB0000054) in the name of 'M/s. Ashoka Metal Works & Co.'. The arbitral record be sent back to the sole arbitrator. File be consigned to Digitally signed by SANJAY SANJAY SHARMA record room.
SHARMA Date: 2024.08.22 16:12:45 +0530 Announced in the open Court SANJAY SHARMA-II on this 22nd August, 2024 DJ (Commercial-11) (Central) Tis Hazari Courts, Delhi OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 15 of 16 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s. Clix Capital Services Pvt. Ltd.
CNR No.: DLCT01-010065-2024 OMP (Comm.) No. 50/2024 22.08.2024 Present : Mr. Pranchal Pawar, Ld. Counsel for the petitioners.
Ms. Shivali Sharma, Ld. Counsel for the respondent.
Vide separate judgment, the application under Section 34 of 'The Arbitration and Conciliation Act, 1996' is allowed. Consequently, the impugned award dated 30.04.2024 in Arbitration Case No. CC/NK/9/2024 titled as 'M/s. Clix Capital Services Pvt. Ltd. vs. M/s. Ashoka Metal Works & Co. & Ors.' is set-aside. Manager, Axis Bank, Shakti Nagar Branch, Delhi is directed to defreeze A/c. No. 920020067810137 (IFSC: UTIB0000054) in the name of 'M/s. Ashoka Metal Works & Co.'. The arbitral record be sent back to the sole arbitrator.
Digitally
signed by
File be consigned to record room. SANJAY
SANJAY SHARMA
SHARMA Date:
2024.08.22
16:12:55
+0530
Sanjay Sharma-II
DJ (Commercial-11)
Central, THC, Delhi
22.08.2024
OMP (Comm.) No. 50/2024 M/s. Ashoka Metal Works & Co. & Anr. vs. M/s Clix Capital Services Pvt. Ltd. P. No. 16 of 16