Delhi District Court
Sunil Bist And Anr vs L And T Housing Finance Ltd on 7 September, 2024
IN THE COURT OF SH. SANJAY SHARMA-II : DJ (COMMERCIAL COURT)-11
(CENTRAL): TIS HAZARI COURTS, DELHI
OMP (Comm.) No. 96/2021
CNR No.: DLCT01-017025-2021
1. Sunil Bist
S/o Sh. S.S. Bist
2. Smt. Roopali Bist
W/o Sh. Sunil Bist
Both Residents of:
376-H, Pocket 2, Mayur Vihar
Phase-I, New Delhi-110091
..... Petitioners
VERSUS
L & T Finance Ltd.
(Erstwhile L & T Housing Finance Ltd.)
Plot No. 177, CST Road, Kalina
Santa Cruz (East), Mumbai-400 098
Also at:
5th Floor, DCM Building
16 Barakhamba Road
Connaught Place
New Delhi-110001
..... Respondent
Date of Institution : 09.12.2021
Date of Arguments : 06.08.2024
Date of Judgment : 07.09.2024
JUDGMENT
OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 1 of 16 THE CHALLENGE:
The petitioners challenged de jure ineligibility of appointment of sole arbitrator by the respondent. THE PETITION:
1. The petitioners filed the petition under Section 34 of 'The Arbitration and Conciliation Act, 1996' (Hereinafter referred to as 'the Act') seeking setting aside of arbitral award dated 04.04.2019 passed by Mr. Ashok Taneja, Advocate as a sole arbitrator in Arbitration Case No. L&T/ARB/LOT-4/2018/66 titled as 'L & T Housing Finance Ltd. vs. Sunil Bist & Anr.' whereby sole arbitrator awarded an amount of Rs. 56,24,542.74/- and Rs. 1,84,005.44/- alongwith interest @ 18% per annum w.e.f. 19.05.2018 till realization and cost of Rs. 15,000/- in favour of the respondent and against the petitioners. THE FACTS:
2. On 22.10.2015, the petitioners booked Flat No. A-807 in the building 'Sarvottam Shree' at Group Housing Plot No. SL-2, DPS Road, Kanawani, Indirapuram, Ghaziabad, U.P. in the project of 'M/s. Sarvottan Realcon Pvt. Ltd.' (builder), under 'Subvention Plan'.
3. On 28.12.2015, the petitioners applied to the respondent for housing loan of Rs. 60,00,000/-. The said flat was allotted to the petitioners, vide allotment letter dated 18.01.2016. The sale consideration of the said flat was Rs. 80,00,000/-. The petitioners entered into a Builder - Buyer Agreement and Tripartite Agreement on 18.01.2016. The petitioners entered into Home Loan Agreement and Supplementary Home Loan Agreement with the respondent on 30.01.2016. The respondent disbursed loan in the sum of Rs. 51,13,272/- and Rs. 1,80,309/- to the petitioners, vide Loan Agreement No. DELHI16000001 and Loan Agreement No. DELHI16000055 respectively.
OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 2 of 16
4. The said loan amount of Rs. 51,13,272/- was repayable by way of 204 Equal Monthly Installments (EMIs) of Rs. 59,950/-
each and Rs. 1,80,309/- was repayable by way of 204 EMIs of Rs. 1802/- each.
5. There is an issue regarding the nature of plan of home loan. According to the petitioners, the said loan was advanced under 'Subvention Plan'. The respondent contended that the said loan was advanced under 'Construction Linked Plan'. However, we are not concerned with the nature of plan of home loan.
6. The petitioners did not adhere to the re-payment schedule of loan. The respondent recalled the loan, vide notice dated 31.03.2018.
THE APPOINTMENT OF SOLE ARBITRATOR:
7. The respondent referred the dispute to sole arbitrator, vide letter dated 11.04.2018. Sole arbitrator, vide letter dated 12.04.2018, consented to act as 'sole arbitrator' and made statutory disclosure under 6th schedule read with Section 12 (1)
(b) of the Act.
THE ARBITRAL PROCEEDINGS:
8. Sole arbitrator entered into reference on 12.04.2018. He issued notice to the petitioners for 14.05.2018. He issued fresh notice to the petitioners for 17.07.2018. The petitioner No. 1 appeared before sole arbitrator on 17.07.2018 and sought copy of statement of claim and documents. The petitioner No. 1 did not appear on 07.08.2018. However, he appeared on 28.08.2018 and received copy of the statement of claim alongwith documents. Thereafter, the petitioners did not appear. Sole arbitrator proceeded ex-parte against the petitioners and passed the impugned award on 04.04.2019.
OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 3 of 16 THE GROUNDS OF THE CHALLENGE:
9. Ld. Counsel for the petitioners confined his contention to a sole ground that an ex-parte award passed by an unilaterally appointed sole arbitrator without consent of the petitioners is null and void and non-est. He contended that the respondent had not sent any notice to the petitioners for invoking arbitration agreement as provided under Section 21 of the Act. He contended that sole arbitrator was appointed as an arbitrator by the respondent in 75 cases and there are justifiable doubts as to independence, impartiality and neutrality of sole arbitrator. He contended that the petitioners did not waive their objection to appointment of sole arbitrator. He contended that mere appearance / participation of the petitioner No. 1 in the arbitral proceedings cannot be considered as waiver. He relied on judgments, as under:
(a) TRF Limited vs. Energo Engineering Projects Limited, (2017) 8 SCC 377;
(b) Perkins Eastman Architects DPC and Another vs. HSCC (India) Ltd., (2020) 20 SCC 760;
(c) Proddatur Cable TV Digi Services vs. SITI Cable Network Limited, O.M.P. (T) (Comm.) 109/2019 decided on 20.01.2020;
(d) Overnite Express Limited vs. Delhi Metro Rail Corporation, MANU/DE/2998/2022;
(e) Y.K. Gupta and Co. Through ITS Partners & Ors. vs. Capri Global Capital Limited, OMP (Comm.) 343/2021 decided on 20.05.2022;
(f) Ruia Exports & Anr. vs. Moneywise Financial Services Ltd. & Ors., OMP (Comm.) 16/2020 decided on 23.03.2022;
(g) Ruia Exports & Anr. vs. Moneywise Financial Services Ltd. & Ors., OMP (Comm.) 16/2020 decided on 01.09.2022;
(h) Kotak Mahindra Bank Ltd. vs. Narendra Kumar Prajapat, EFA (Comm.) No. 3/2023 decided on 17.05.2023; and
(i) Kotak Mahindra Bank Ltd. vs. Narendra Kumar Prajapat, SLP (Civil) Diary No. 47322/2023 decided on 12.12.2023.
OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 4 of 16 THE REPLY OF THE RESPONDENT:
10. Ld. Counsel for the respondent contended that there is delay of 28 days in filing of the petition. He contended that the petitioners did not disclose that they had filed OMP No. 148/2019 under Section 34 of the Act before the Commercial Court at Patiala House Courts, New Delhi which was disposed off, vide order dated 06.12.2021. He contended that the petitioners have not furnished any cogent or sufficient cause for non-filing of the petition within the statutory period. He contended that the petitioners have not filed any document pertaining to their non-availability during the said period. He contended that the petitioners have not stated the precise ground for setting aside the aribtral award, as required under Section 34 (2) of the Act. He contended that the petitioner No. 1 was duly served with the loan recall notice dated 31.03.2018 and corrigendum notice dated 04.05.2018. He contended that the petitioners neither replied nor paid the outstanding amount. He contended that the petitioners were served with reference letter dated 11.04.2018 and consent letter dated 12.04.2018 alongwith statutory disclosure. However, the petitioners did not challenge appointment of sole arbitrator. He contended that the petitioners did not attend arbitral proceedings despite service of notice issued by sole arbitrator. He contended that the petitioner No. 1 appeared before sole arbitrator on 17.07.2018 and received a copy of statement of claim alongwith documents on 28.08.2018.
However, the petitioners neither filed reply nor appeared thereafter. He contended that the petitioners did not challenge jurisdiction of sole arbitrator under Section 12 and / or 13 of the Act. He contended that the petitioners waived their right to challenge the constitution of arbitral tribunal.
OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 5 of 16 ANALYSIS AND DISCUSSION:
11. This Court is not delving into merits of contentions raised by Ld. Counsel for the respondent regarding the nature of plan of advancement of loan i.e. 'Subvention Plan' or 'Construction Linked Plan'.
12. The subject matter of the challenge is an ex-parte arbitral award passed by an unilaterally sole arbitrator.
(A) LEGALITY OF AN AWARD PASSED BY AN UNILATERALLY APPOINTED SOLE ARBITRATOR CAN BE CHALLENGED AT ANY STAGE:
13. In the grounds of challenge, mentioned in the petition, it is evident that the petitioners have not expressly challenged the legality of the impugned award passed by sole arbitrator.
However, Ld. Counsel for the petitioners contended that legality of the impugned award can be challenged at any stage.
14. 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". 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."
OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 6 of 16
15. 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."
16. The petitioners can challenge legality of an award and / or de jure ineligibility of unilaterally appointed sole arbitrator for the first time during the course of arguments, even in absence of such ground in the application under Section 34 of the Act. (B) AN AWARD PASSED BY AN UNILATERALLY APPOINTED SOLE ARBITRATOR IS NULL AND VOID:
17. The arbitration clause contained in Home Loan Agreement is, as under:
"ARTICLE - 12 : ARBITRATION 12.1 Without prejudice to any other rights available to the Lender under any other statute to enforce the Security Interest / take action against the Borrower / Property, any dispute or difference or claim that arises between parties or any of them touching or concerning this Agreement or any condition herein / therein contained or as to the rights, duties or liabilities of parties hereto or any of them either during the continuance of the Agreement or after the completion or termination or purported termination hereof shall be referred to Arbitration by a sole Arbitrator, to be appointed by the Lender, according to the provisions of Arbitration & Conciliation Act, 1996 and rules thereunder and any amendment thereto from time to time;
12.2 It is agreed between the parties hereto that nothing contained in Section 17 of Arbitration & Conciliation Act, 1996, shall in any way, affect the right of any of or preclude the parties to / from seek / seeking such interim relief/s in any Court of competent jurisdiction, including interim relief u/s 9 of the Arbitration & Conciliation Act, 1996, and the rules framed thereunder, if in the opinion of the party seeking relief, such application for interim relief/s is necessary in order to protect the assets/Assets and/or the rights of the party seeking relief and/or in aid of the arbitration;
OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 7 of 16 12.3 The award of the Arbitrator shall be a written award and shall be final, conclusive & binding on all the parties whether on question of law or of fact; 12.4 In the event of death, refusal, negligence, inability, incapability of the persons so appointed to act as the sole Arbitrator, a new arbitrator shall be appointed by the Lender;
12.5 The venue of arbitration shall be Mumbai/New Delhi or such other place as may be determined at the sole discretion of the Lender and courts in Mumbai/New Delhi or such other place shall have exclusive jurisdiction.
12.6 Notwithstanding anything contained hereinabove, in the event of the law being made or amended so as to bring the Lender under the Securitization Act or the DRT Act, or any other special legislation to enable the Lender to enforce the security under the Securitization Act or proceed to recover dues from the Borrower under the DRT Act, the arbitration provisions hereinbefore contained shall at the option of the Lender cease to have any effect and if arbitration proceedings are commenced but no Award is made, then at the option of the Lender, such proceedings shall stand terminated and the mandate of the Arbitrator shall come to an end, from the date of the making of the law or the date when amendment becomes effective or the date when the Lender exercises the option of terminating the mandate of Arbitrator the case may be."
18. In Vineet Dujodwala and Others vs. Phoneix ARC Pvt. Ltd. and Another, 2024 SCC OnLine Del 5940, Hon'ble High Court of Delhi held, as under:
"20. Perhaps the most damaging defect in the entire process is the fact that the appointment of the learned arbitrator was unilateral. A unilateral appointment, in an arbitral proceeding, is completely impermissible in law.
21. This is the position that has existed even prior to the amendment of the 1996 Act. The Supreme Court has, even in its decisions prior to the said amendment, clearly held that the very essence of arbitral proceedings is consensus ad idem and that, therefore, there can be no question of an arbitration by an arbitrator appointed by one of the parties without the consent of the other. One may refer, in this context, to the following passage from Dharma Prathishthanam v. Iwadhok Construction (P) Ltd.:
OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 8 of 16 "14. In Thawardas Pherumal v. Union of India a question arose in the context that no specific question of law was referred to, either by agreement or by compulsion, for decision of the arbitrator and yet the same was decided howsoever assuming it to be within his jurisdiction and essentially for him to decide the same incidentally. It was held that: (SCR p. 58) "A reference requires the assent of both sides.
If one side is not prepared to submit a given matter to arbitration when there is an agreement between them that it should be referred, then recourse must be had to the court under Section 20 of the Act and the recalcitrant party can then be compelled to submit the matter under sub-section (4). In the absence of either, agreement by both sides about the terms of reference, or an order of the court under Section 20(4) compelling a reference, the arbitrator is not vested with the necessary. exclusive jurisdiction."
(emphasis in original)
15. A Constitution Bench held in Waverly Jute Mills Co. Ltd. v. Raymon and Co. (India) (P) Ltd. that:
"[A]n agreement for arbitration is the very foundation on which the jurisdiction of the arbitrators to act rests, and where that is not in existence, at the time when they enter on their duties, the proceedings must be held to be wholly without jurisdiction. And this defect is not cured by the appearance of the parties in those proceedings, even if that is without protest, because it is well settled that consent cannot confer jurisdiction."
16. Again a three-Judge Bench held in Union of India v. A.L. Rallia Ram that it is from the terms of the arbitration agreement that the arbitrator derives his authority to arbitrate and in absence thereof the proceedings of the arbitrator would be unauthorised."
(Italics in original; underscoring supplied)
22. Admittedly, the appointment of the arbitrator in the present case was unilateral. That single factor, even without reference to any other infirmity, is sufficient to vitiate the award.
23. For all the aforesaid reasons, without entering into merits, the impugned award is set aside."
OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 9 of 16
19. In Ram Chander Aggarwal vs. Ram Kishan Aggarwal and Another, 2024 SCC OnLine Del 5606, Hon'ble High Court of Delhi held, as under:
"10. The impermissibility of arbitral proceedings at the hands of unilaterally appointed arbitrators, derived from the provisions of Section 12 of the Act, stands established as a result of the decisions of the Supreme Court in TRF Limited v. Energo Engineering Projects Limited and Perkins Eastman Architects DPC v. HSCC (India) Limited. The Court has held that, just as arbitral proceedings cannot be conducted by a person who is ineligible under Section 12 of the Act, so also, they cannot be conducted by a person nominated by an ineligible person or entity. This principle has been explained in several Division Bench decisions of this Court, including Ram Kumar v. Shriram Transport Finance Co. Ltd., Govind Singh v. Satya Group Pvt. Ltd., Kotak Mahindra Bank Ltd. v. Narendra Kumar Prajapat, and Babu Lal v. Cholamandalam Investment & Finance Co. Ltd., to hold that such proceedings are a nullity and void ab initio. In fact, even absent a challenge under Section 34 of the Act, an award rendered by a unilaterally appointed arbitrator has been held to be unenforceable. Further, as in the present case, the challenge can be taken even by the party which has unilaterally appointed arbitrator."
20. In S.K. Builders vs. CLS Construction Pvt. Ltd., 2024 SCC OnLine Del 5498, Hon'ble Delhi High Court held, as under:
"22. Unilateral arbitration is an oxymoron. Consent, to the arbitration as well as the arbitrator, is the very raisond'etre of the arbitral process. Unilateral appointment of an arbitrator is, therefore, completely proscribed.....
24. It is well settled that consent requires consensus ad idem. There must be positive consent on the part of the petitioner to the appointment of an Arbitrator. Absent such consent, the appointment becomes unilateral and ex facie illegal.
26. The appointment of the Arbitrator in the present case was, therefore, unilateral. The arbitral proceedings would, even on that score, stand vitiated ab initio.
OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 10 of 16
33. For all the aforesaid reasons, I am of the opinion that the learned Arbitrator had no jurisdiction to arbitrate on the disputes at hand, as his appointment was unilateral. The appointment of the Arbitrator, therefore, stands vitiated ab initio. The arbitral proceedings also, therefore, stand rendered a nullity. The impugned award, therefore, is liable to be set aside even on this sole ground."
21. 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. The petitioners had no choice in appointment of sole arbitrator. The ethos and first principle on which the arbitration mechanism function is party- autonomy i.e. freedom to choose an arbitrator acceptable to both the parties to the agreement, embedded in the principle of natural justice "no man can be a judge of his own cause i.e. Nemo judex in causa sua'. The offshoot of the aforesaid decisions 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.
22. It has almost crystallized into a rule of law that an award passed by an unilaterally appointed sole arbitrator is null and void. Such appointment and award are against the rules of natural justice. Such an appointment and award breach fairness, transparency and impartiality. The autonomy conferred on the parties must meet pre-requisite of neutrality and impartiality which are bedrock on which the foundation of arbitration rests.
23. 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. OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 11 of 16 (C) MERE APPEARANCE BEFORE SOLE ARBITRATOR IS NOT WAIVER OF RIGHT TO OBJECT APPOINTMENT OF SOLE ARBITRATOR:
24. Mere participation in arbitral proceedings would not amount to waiver of the right to object to ineligibility of sole arbitrator and illegality of the award.
25. In Airports Authority of India vs. TDI International India Pvt. Limited (supra), Hon'ble High Court of Delhi held, as under:
"6.....The judgment of the Supreme Court in Bharat Broadband Network Ltd. v. United Telecom Limited, (2019) 5 SCC 755 further held that waiver under the proviso to Section 12(5) of the Act requires an express agreement in writing to that effect, and that the conduct of the parties, including participation in the arbitral proceedings, would be insufficient to infer such waiver.
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. 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. In the judgment of a coordinate bench in Smaaash Leisure it has also been held that recording of consent in the order of an arbitral tribunal does not satisfy the requirement of the proviso to Section 12(5) of the Act."
26. Mere fact that the petitioner No. 1 appeared before sole arbitrator and received the statement of claim alongwith documents would not amount to waiver of his right to appointment of sole arbitrator. Such appearances would not amount to express waiver of the right to object appointment of sole arbitrator. Such waiver under Section 12(5) of the 1996 Act would be valid only if it is by an 'express agreement in writing'. Mere appearance of the petitioners without having knowledge of ineligibility of sole arbitrator and conscious waiver of right to object ineligibility is inconsequential. OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 12 of 16 (D) BREACH OF PROVISION OF SECTION 21 OF THE ACT:
27. The respondent invoked arbitration clause, vide letter dated 11.04.2018, and appointed sole arbitrator, as under:
"The Borrower(s) have defaulted in repayment of the said Loan despite repeated reminders and requests. Vide notice dated 31.03.2018 the Company called upon the borrower to pay a sum of Rs. 56,24,542.74/- (Rupees Fifty Six Lakh Twenty Four Thousand Five Hundred Forty Two and Seventy Four Paise Only) within seven days of receipts of notice. That since the above borrower(s) have failed to pay said outstanding, a dispute has arisen between the parties and therefore L&T Housing Finance Limited (LTHFL), is invoking the Arbitration Proceedings as per the terms of the Loan agreement which is already agreed between the parties and as per the clause mentioned in Loan agreement "that all disputes, differences and or claims arising out of or in terms of the agreement shall be settled by the Arbitration and shall be referred to the sole Arbitration of an Arbitrator nominated by L&T Housing Finance Limited (LTHFL), and there is a custom and practice in banking and finance sector to frequently appoint the same arbitrator in different cases. Pursuant to the Loan agreement, we hereby appoint you as sole arbitrator in the matter so as to adjudicate the disputes, which have arisen between L&T Housing Finance Limited (LTHFL) and Borrower(s).
You are requested to convey your concurrence to act as Sole Arbitrator in aforesaid matter and thereafter, issue notices to the parties in respect of arbitration proceedings."
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.
OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 13 of 16
30. 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.
31. 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. Thus, the inescapable conclusion on a proper interpretation of Section 21 of the Act is that in the absence of an agreement to the contrary, the notice under Section 21 of the Act by the claimant invoking the arbitration clause, preceding the reference of disputes to arbitration, is mandatory. In other words, without such notice, the arbitration proceedings that are commenced would be unsustainable in law."
32. In Kotak Mahindra Prime Ltd. vs. Manav Sethi and Another, 2024 SCC OnLine Del 4819, Hon'ble High Court of Delhi held, as under:
"6. It is clear, therefore, that no notice under Section 21 of the 1996 Act has been issued by the petitioner to the respondent, at any stage. Section 21 envisages the notice as being one of request by one party to the other, requesting the other party to refer the disputes to arbitration. A letter unilaterally addressed to the arbitrator appointing him as an arbitrator is not a notice under Section 21 by any stretch of imagination, the arbitrator does not acquire any jurisdiction or authority, on the basis of such a unilateral notice of appointment, to arbitrate. The only situation in which a Section 21 notice can be dispensed with, is if there is consensus ad idem between the parties to dispense with the said requirement. There is no such consensus between the parties in the said case."
OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 14 of 16
33. The respondent, vide letter dated 11.04.2018, appointed sole arbitrator to adjudicate the dispute. The respondent has not sent any notice to the petitioners disclosing their intent to refer the dispute to an arbitrator. The petitioners had no opportunity to refuse or consent to appointment and reference of dispute to sole arbitrator. 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.
34. Therefore, arbitral proceedings commenced in violation of requirement of Section 21 of the Act is invalid and unsustainable.
35. As regards contention qua delay in filing application under Section 34 of the Act, it can be stated that the impugned award is void ab initio, non-est and without jurisdiction. In fact, there is no award in the eyes of law. Dismissing an application under Section 34 of the Act on the ground of delay would amount to legalizing an illegal and invalid award.
CONCLUSION:
36. Therefore, the application under Section 34 of 'The Arbitration and Conciliation Act, 1996' is allowed. Consequently, the impugned award dated 04.04.2019 in Arbitration Case No. L&T/ARB/LOT-4/2018/66 titled as 'L & T Housing Finance Ltd. vs. Sunil Bist & Anr.' is set-aside. The arbitral record be sent back to the sole arbitrator. File be consigned to record room. Digitally signed by SANJAY SANJAY SHARMA SHARMA Date:
2024.09.09 09:44:47 +0530 Announced in the open Court SANJAY SHARMA-II on this 07 September, 2024 DJ (Commercial Court)-11 (Central) th Tis Hazari Courts, Delhi OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 15 of 16 Sunil Bist & Anr. vs. L & T Finance Ltd.
CNR No.: DLCT01-017025-2021 OMP (Comm.) No. 96/2021 07.09.2024 Proceedings convened through Video Conferencing.
Present : Mr. Mrinal Kumar Sharma, Ld. Counsel for the petitioners.
Mr. Puneet Bajaj, 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 04.04.2019 in Arbitration Case No. L&T/ARB/LOT-4/2018/66 titled as 'L & T Housing Finance Ltd. vs. Sunil Bist & Anr.' is set-aside. The arbitral record be sent back to the sole arbitrator.
Digitally
signed by
File be consigned to record room.SANJAY SANJAY
SHARMA
SHARMA Date:
2024.09.09
09:44:55
+0530
Sanjay Sharma-II
DJ (Commercial Court)-11
Central, THC, Delhi
07.09.2024
OMP (Comm.) No. 96/2021 Sunil Bist & Anr. vs. L & T Finance Ltd. Page No. 16 of 16