Bangalore District Court
Sri.Gururaj Joshi vs M/S.Anand Rathi Share & on 24 August, 2020
IN THE COURT OF THE XX ADDL. CITY CIVIL &
SESSIONS JUDGE(CCH-32), BANGALORE CITY
Dated this the 24th day of August, 2020
Present:
Sri.Ningouda B.Patil, B.Sc., LL.M.,
XX Addl. City Civil & Sessions Judge,
Bengaluru.
A.S.No.70/2015
Plaintiff/ Sri.Gururaj Joshi,
Applicant: S/o.Mr.Prahalladacharya Joshi,
Aged about 54 years,
No.2, 9th Cross, Kumara Park
West, Bengaluru-20.
(By Sri.Eshwar Prasad B.,
Advocate.)
/VS/
Defendants: 1. M/s.Anand Rathi Share &
Stock Brokers Limited,
Regd. Office at:4th Floor, Silver
Metropolis, Jai Coach Compound,
Opp:Bimbsar Nagar, Near
Western Express Highway,
Goregaon (East)-Mumbai-400063.
Rep. by its Regional Office at:
M/s.Anand Rathi Share &
Stock Brokers Ltd.,
Regional Office:
4th Floor, Indian Express Building,
Queens Road, Bengaluru-560 001.
2. Sri.R.Mohan,
S/o Not known, Age: Major,
Sole Arbitrator in Arbitration
Matter (A.M.)No.F&O/B-0012/2014,
At the office of the National Stock
2 A.S.No.70/2015
Exchange of India Limited, No.101,
DBS House, 26, Cunningham
Road, Bengaluru-52.
(Deft.No.1:By Sri.G.Narayana Hebbar,
Advocate.
Deft.No.2:Absent.)
Date of institution of the 03.06.2015
suit :
Nature of the suit: Arbitration Suit under
Arbitration Act
Date of commencement of
recording of evidence:
-
Date on which Judgment
pronounced : 24.08.2020
Total Duration : Years Months Days
05 02 21
J U DG ME N T
Plaintiff instituted this suit under Section 34 of the
Arbitration and Conciliation Act, 1996 r/w High Court of
Karnataka Arbitration (Proceedings before the courts) Rules
2001 against defendants seeking for setting aside of
Arbitral award dated 25.03.2015 passed by the defendant
No.2, being Sole Arbitrator in an arbitration case bearing
Arbitration Matter (A.M.)No.F & O/B-0012/2014 between
plaintiff and defendant No.1.
2. The brief facts of the case of plaintiff are as under:
Defendant No.1 is a trader and broker in securities
and shares with National Stock Exchange of India (NSE), as
such NSE will act as nodal agency for defendant No.1; the
3 A.S.No.70/2015
Mysore branch manager of defendant No.1 induced plaintiff
to enroll himself as an investor with defendant No.1;
accordingly, under the said inducement plaintiff signed the
application form which was furnished and filled by the said
manager; thus, applicant opened a trading account with
defendant No.1 w.e.f. 9.2.2012; the said application form
was having arbitration clause.
3. Plaintiff further pleaded that, he deposited an
amount of Rs.1,00,000/- with the said trading account; he
also paid Rs.4,00,000/- two times on 7.5.2012 and
26.5.2012; he further also paid Rs.5,00,000/- thrice on
30.11.2012, 18.12.2012 and 30.1.2013; he also withdrawn
an amount of Rs.2,00,000/- on 20.6.2012; thus, he as on
25.3.2014 deposited a total amount of Rs.22,00,000/- in
his trading account with defendant No.1; the said amount
of Rs.22,00,000/- grown up to Rs.38,78,492-62 since May,
2012; as on 25.3.2013 the said amount was available to in
his trading account; as on 25.3.2013 he was not having
any deficit balance and he was not due for any amount.
4. Plaintiff further pleaded that, defendant No.1 being
the custodian of the said account went on debiting by
imposing wrong/illegal penalties for the period from
25.1.2012 to 15.4.2013; in all an amount of Rs.2,67,204-
36 has been illegally debited without giving any intimation
to him; in order to manage balance in the D-mat account,
he issued four cheques on 25.3.2013 and out of which two
cheques of Rs.1,00,000/- and Rs.2,00,000/- were
encashed; thus, the balance should be Rs.39,87,299-72 +
4 A.S.No.70/2015
Rs.3,00,000-00 (amount paid through two cheques)=
Rs.42,87,299-72 + Rs.2,67,204-36 (illegal penalty imposed
during 28.3.2013 to 15.4.2013) = Rs.45,54,504-08, that
which defendant No.1 is liable to pay. But, defendant No.1
furnished the accounts showing that plaintiff incurred loss
of Rs.13,37,045/- for the total period commencing from
1.4.2012 to 31.3.2014; even assuming the said accounts
are true and correct, the balance money available in the
account of the plaintiff should be Rs.25,00,000/- (total
amount deposited by the plaintiff from 9.2.2012 to
28.5.2013) - Rs.13,37,045/- (total loss incurred from
1.4.2012 to 31.3.2014) = Rs.11,62,955/-; thus, defendant
No.1 is liable for payment of Rs.45,54,504.08 to the
plaintiff, however she with a malafide intention started to
claim Rs.2,50,456/- from the plaintiff as due amount and
for that she moved to arbitration tribunal for adjudication
by filing a claim before the National Stock Exchange of
India Limited (NSE) on 15.9.2014. The NSE sent intimation
dated 29.9.2014 to the plaintiff at his Raichur address
naming three arbitrators viz. G.V.Krishnamurthy, B.P.Rao
and B.R.Sudhakar, for accepting an arbitrator out of three
chosen any one among them; the said intimation was also
communicated to the Bengaluru address of the plaintiff;
however, defendant No.2 brought defendant No.1 leaving
the above said three arbitrators as her arbitrator.
5. Plaintiff further also pleaded that, he appeared
before arbitration tribunal with applications under Section
12 demanding self certification by defendant No.2 about his
independency and impartiality and another under Section
5 A.S.No.70/2015
13 of the Act requesting defendant No.2 from desisting
himself; defendant No.2 recorded the applications in the
order sheet, however he continued as arbitrator without
deciding the applications.
6. Plaintiff furthermore also pleaded that, he on
2.1.2015 filed his defense with counter claim and also
explained the contents of defense and counter claim;
defendant No.1 not submitted her counter to the counter
claim even after expiry of two months; however, defendant
No.2 concluded the arbitration proceedings and without
informing the date of pronouncement of award, pronounced
the award on 25.3.2015 against the plaintiff directing him
for payment of Rs.1,07,415-23 with interest at the rate of
18% p.a. till the date of final settlement; the said award is
illegal, perverse, bad in law, the same is an outcome of bias
and nepotism and the result of misconduct of defendant
No.2, as such the same is liable to set aside and the matter
needs to be remanded for afresh arbitral proceedings for
the following among other main grounds of the application:
1. The award of the defendant No.2 is illegal, perverse,
bad in law, biased and out come of nepotism and
misconduct and hence, the same is liable for set
aside.
2. The impugned award is arbitrary and capricious and
hence, liable for set aside.
3. Defendant No.2 has not been appointed as arbitrator
as per the law and hence, the award passed by such
an arbitrator is liable to set aside.
4. Defendant No.1 never intimated his intention of
appointing defendant No.2 as arbitrator to the
6 A.S.No.70/2015
plaintiff. Thus, defendant No.2 cannot be considered
as an arbitrator properly appointed.
5. Plaintiff objected for appointment of defendant No.2
as arbitrator and in spite of his objections, the
arbitrator was appointed. Therefore, the award passed
by such an arbitrator is an illegal one.
6. Defendant No.2 not acted as independent and
impartial and he also not disclosed his qualifications.
Thus, the award passed by such an arbitrator is
illegal one.
7. Defendant No.2 without disposing the applications
filed before him passed the award and thereby
ventured to proceed with the proceedings, which
amounts misconduct.
8. The impugned award passed by Defendant No.2 is
biased one. Hence, the award is liable to be set aside.
9. Defendant No.1 himself purchased the stamp under
the instructions of defendant No.2 for drawing the
award which smacks the nature of nepotism and
favoritism. Therefore, the award is liable for set aside
as it has lost confidentiality.
10. Defendant No.1 and 2 played fraud in passing and
obtaining the impugned award and therefore, the
same is liable for setting aside.
11. Defendant No.2 without answering the counter claim
passed the award under challenge. Thus, the
impugned award is liable to set aside.
12. Defendant No.2 passed the award without framing
the issues, though there is a definite defense.
13. The conduct of defendant No.2 was in undue haste in
passing the award which amounts bias and
misconduct.
14. Defendant No.2 not applied the mind in passing the
impugned award.
7 A.S.No.70/2015
15. Defendant No.2 not at all considered the defense and
counter claim of the plaintiff in passing the impugned
award and therefore, there is an error apparent on
the face of the record.
16. Defendant No.2 not given any reasonings for passing
of the award in favour of defendant No.1 and he also
not followed the procedure as envisaged by the law.
There is a gross mistake on the part of the defendant
No.2 as he not looked towards defense and counter
claim in conducting the proceedings. There is also a
serious irregularity in passing the award, which
resulted miscarriage of justice.
17. As defendant No.2 not considered the defense and
counter claim while passing the award, substantial
injustice have been caused to the plaintiff and
therefore, the award is liable to set aside.
18. Defendant No.2 passed the impugned award ignoring
the law of arbitration and hence, there is a serious
illegality in passing the award.
19. Defendant No.2 exceeded his power in passing the
award and hence, the award passed is a perverse one.
20. Defendant No.2 in fact has no jurisdiction to proceed
with the proceedings as the claim amount exceeded
Rs.25,00,000/-.
21. Plaintiff though entitled for counter claim of
Rs.45,54,504/- with interest at the rate of 18% p.a.
from 28.5.2013 till realisation of entire amount,
defendant No.2 not dealt with the same.
22. The counter claim raised by the plaintiff was in time,
however defendant No.2 not at all considered the
same and passed the impugned award. Therefore, for
the reasons stated above and among other grounds,
the impugned award is liable for set aside.
8 A.S.No.70/2015
7. The plaintiff furthermore pleaded that the cause of
action for the suit arose on 25.3.2015 when defendant No.2
passed an illegal, perversed and biased award in Arbitration
Matter bearing No.F&O/B-0012/2014.
Accordingly plaintiff prayed to set aside the award
passed by Sole Arbitrator-defendant No.2 and remand the
matter for fresh adjudication.
8. In response to the summons issued by this court,
defendant No.2 remained absent and defendant No.1 made
her appearance through her counsel and defended the suit
by filing her statement of objections contending inter-alia
that, the petition of the plaintiff is not maintainable either
in law or on facts; the same is beyond the scope of Section
34 of Arbitration and Conciliation Act, 1996; plaintiff not
furnished any proof to substantiate the grounds urged; it
is false to state that, the arbitrator appointed was under
incapacity; plaintiff not made out any case to set aside the
award passed.
9. Defendant No.1 further contended that, this court
cannot re-appreciate the evidence led and cannot act as an
appellate court to decide the legality of award passed; it is
false and incorrect to state that the contentions of the
plaintiff have not been considered by the arbitrator while
passing the award; plaintiff made false allegations against
the arbitrator.
9 A.S.No.70/2015
10. Defendant No.1 further contended that, he
followed all the formalities in giving intimation to the
plaintiff for appointment of arbitrator; the petition of the
plaintiff falls outside the ambit of Section 34 of Arbitration
and Conciliation Act, 1996; it is false to state that
arbitrator not followed the prescribed procedure; it is false
to state that, arbitrator passed the award without
intimating the date of pronouncement of it; arbitrator
passed the award by following established rules and
procedure of NSE by giving sufficient opportunities to the
both parties; the award passed is a reasoned one; thus,
there is no necessity of setting aside of the award passed.
11. Defendant No.1 further contended that, she not
committed any errors, mistakes, illegalities which are
contrary to the rules, bye-laws and regulations of NSE;
therefore, she is not liable to pay claim of Rs.45,54,054/- to
the plaintiff; arbitrator passed the award on correct
appreciation of facts and evidence; plaintiff failed in
maintaining margin of amount in his account and
therefore, he sustained loss in share trading; she intimated
all the affairs of trade account to the plaintiff in due time;
therefore, she is not liable to pay any amount to the
plaintiff; arbitrator clearly observed that NSE levied the
penalty for maintaining short fall margin in the trade
account; thus, there is no any fault on her part.
12. Defendant No.1 further also contended that, the
arbitrator passed the award dated 25.3.2015 by
considering all the aspects, SEBI guidelines, NSE rules etc.;
10 A.S.No.70/2015
therefore, the question of setting aside of the award dated
25.3.2015 passed in arbitration matter bearing No.F&O/B-
0012/2014 does not arises; it is false to state that,
arbitrator passed the award under the absence of plaintiff
and hence, the same is illegal, perverse and bad in law; it is
false to state that, the award passed is a biased one, out
come of nepotism and favoritism; it is false to state that,
the award is a result of misconduct of the arbitrator; it is
false to state that the award passed is an arbitrary and
capricious and therefore, liable to set aside.
13. Defendant No.1 submitted that, NSE, Bengaluru
on 29.9.2014 sent communication to the plaintiff at his
Raichur address naming three persons viz.
(1) G.V.Krishnamurthy, (2) B.P.Rao and (3) B.R.Sudhakar
as arbitrators of their choice; therefore, it is false to state
that, defendant No.1 never given intimation of appointment
of defendant No.2 as arbitrator; it is incorrect to state that,
defendant No.2 has not been appointed with due process of
law; it is incorrect to state that, defendant No.2 cannot be
considered as a proper arbitrator; it is incorrect to state
that, defendant No.2 not disposed off two application filed
under Section 12 of Arbitration and Conciliation Act, 1996;
it is incorrect to state that defendant No.2 was not a
qualified arbitrator; it is incorrect to state that, defendant
No.2 not acted independently and impartially in handling
the arbitration proceedings; it is incorrect to state that,
defendant No.2 without passing any order under Section 16
of the Act, ventured to proceed with the arbitration
proceedings, which resulted miscarriage of justice; it is
11 A.S.No.70/2015
incorrect to state defendant No.2 was fully depending upon
defendant No.1 and his acts were biased; it is incorrect to
state that, defendant No.2 though not passed any award till
2.1.2015, but he asked defendant No.1 for purchasing
stamp paper on 25.3.2015; it is incorrect to state that,
defendant No.1 purchased the said stamp paper on the
instance of defendant No.2; it is incorrect to state that, the
nepotism and favoritism nature of defendant No.2 diluted
the confidentiality of the arbitration proceedings; it is
incorrect to state that, defendant No.2 passed the award
colluding with defendant No.1; it is incorrect to state that,
defendant No.2 committed fraud in passing the award and
therefore, the said award is liable to set aside.
14. Defendant No.1 further submitted that, it is
incorrect to state that, defendant No.2 not framed any
issues to decide the dispute after filing of the counter with
counter claim; it is incorrect to state that, defendant No.2
not provided any opportunity to the applicant for the
purpose of proving of his counter and counter claim; it is
incorrect to state that, defendant No.2 passed the award in
an undue-hasty manner without considering the statement
of defense and counter claim raised there; it is incorrect to
state that defendant No.2 passed the award ignoring the
counter and counter claim without application of mind; it
is incorrect to state that, there is an apparent error on the
face of the records committed by defendant No.2 in passing
the award as he not considered the counter and counter
claim of applicant; it is incorrect to state that, the non
consideration of counter claim of applicant resulted in
12 A.S.No.70/2015
miscarriage of justice; it is incorrect to state that, defendant
No.2 not given any reasoning in passing the award; it is
incorrect to state that defendant No.2 committed gross
mistake in passing the award as he passed the same
without considering the statement of defense and counter
claim of the applicant; it is incorrect to state that, the non
consideration of counter claim amounts misconduct on the
part of the defendant No.2.
15. Defendant No.1 further also submitted that, it is
incorrect to state that defendant No.2 committed serious
irregularity in passing the award; it is incorrect to state
that, defendant No.2 is the responsible for causing
substantial injustice to the applicant as he passed the
award without looking towards counter and counter claim;
it is incorrect to state, defendant No.2 committed serious
illegality in passing the award as he passed the same by
ignoring the counter and counter claim and other
materials/documents put forth by the applicant.
16. Defendant No.1 furthermore submitted that, it is
false to state that, the impugned award is perverse in
nature and hence, liable to set aside; it is false to state that,
arbitrator has no jurisdiction to decide the dispute as the
claimed amount was above Rs.25,00,000/-; it is false to
state that, defendant No.2 was having biased attitudes; it is
false to state that defendant No.1 failed to submit his
objections to counter claim of the applicant; it is false to
state that, defendant No.2 being arbitrator ought to have
admit and allow the counter claim of the applicant; it is
13 A.S.No.70/2015
false to state that the non consideration of counter claim of
applicant is violation of law of arbitration.
17. Defendant No.1 further submitted that defendant
No.2 clearly stated in the award that all the trade activities
are bound by the regulation of SEBI and the award is in
consonance with the rules and bye-laws of SEBI; defendant
No.2 passed the award after considering all the aspects,
documents and formed synopsis; therefore, there is no any
worth or water in the case of the plaintiff; defendant No.2
passed the award after reviewing of the facts and
statements submitted by both parties and concluded the
matters; plaintiff has not deposited any award amount
before NSE; there is no provision under law of arbitration
for remanding the matter to the arbitration; therefore, the
suit of the plaintiff is not maintainable and the same is
liable for dismissal. Accordingly, defendant No.1 prayed to
dismiss the suit of the plaintiff with exemplary costs in the
interest of justice and equity.
18. Perused the pleadings of plaintiff and defendant
No.1. Perused the Award passed and also perused the
other documents available on record. Heard the learned
counsels appearing for both parties.
19. The points that which arose for my consideration
are:
1. Whether the impugned Arbitral Award
passed by the Arbitrator is liable to be set
aside?
2. What order or decree?
14 A.S.No.70/2015
20. My answer to the above said point No.1 is in
affirmative and for point No.2 is as per the order passed for
the following
REASONINGS
21. Point No.1: The grievance of the plaintiff is that,
defendant No.2 not fit and qualified person to act as
Arbitrator and to decide the dispute. His acts are biased
and coupled with nepotism and favoritism. The said
Arbitrator not acted independently and impartially. Plaintiff
also took ground that the Arbitrator not decided all the
claims of the parties including his counter claim. Arbitrator
decided the dispute without framing the issues and without
looking towards his defense and counter claim. Plaintiff
further also took a ground that the Arbitrator in fact was not
having jurisdiction to entertain the claim petition as the
claimed amount was higher than Rs.25,00,000/-.
Therefore, the award dated 25.3.2015 in Arbitration Matter
bearing A.M. No.F & O/B-0012/2014 passed by the
defendant No.2 is against the provisions of Section 34(2) of
the Arbitration and Conciliation Act, 1996 and therefore, the
same requires to be set aside.
22. The defense of defendant No.1 is that, defendant
No.2 passed the award as per SEBI and NSE rules and there
is no any fault on the part of defendant No.2 in passing the
award. Plaintiff only in order to avoid the payment under
arbitral award, filed this suit and hence, there is no any
merit in the suit. Therefore, the suit requires to be
dismissed.
15 A.S.No.70/2015
23. Before proceeding to discussion about the
propriety or otherwise of impugned award passed by arbitral
tribunal constituted by sole arbitrator, it would be better to
understand the power of this court and scope of interference
with the award passed as envisaged under Section 34(2) of
the Arbitration and Conciliation Act, 1996, which empowers
to this court to set aside the award of Arbitrator in the
following circumstances.
Section 34(2) of Arbitration & Conciliation Act,
1996 provides that:
"(2) An arbitral award may be set aside by the Court
only if--
(a) the party making the application furnishes proof
that--
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under
the law to which the parties have subjected
it or, failing any indication thereon, under
the law for the time being in force; or
(iii) the party making the application was not
given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or
was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the
terms of the submission to arbitration, or it
contains decisions on matters beyond the
scope of the submission to arbitration:
Provided that, if the decisions on matters
submitted to arbitration can be separated
16 A.S.No.70/2015
from those not so submitted, only that part of
the arbitral award which contains decisions
on matters not submitted to arbitration may
be set aside; or
(v) the composition of the arbitral tribunal or the
arbitral procedure was not in accordance
with the agreement of the parties, unless
such agreement was in conflict with a
provision of this Part from which the parties
cannot derogate, or, failing such agreement,
was not in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not
capable of settlement by arbitration under
the law for the time being in force, or
(ii) the arbitral award is in conflict with the
public policy of India."
24. Keeping in mind of the above said provisions of
law, let us proceed to see whether the award passed is in
compliance with each of the said provisions. If the award
passed is not in accordance with any one of the above
provisions, then as per Section 34(2), it is liable to be set
aside.
25. Plaintiff not taken all the grounds mentioned in
the provisions of Section 34(2) of Arbitration and
Conciliation Act, 1996 as a base for setting aside of the
impugned award. Plaintiff pleaded that, defendant No.2 has
not been appointed as Arbitrator as per law of arbitration
and hence, the award passed by such an Arbitrator is liable
17 A.S.No.70/2015
to set aside. Plaintiff contended that, the Sole Arbitrator i.e.
defendant No.2 was not a qualified and fit person to act as
an Arbitrator. He further also contended that, defendant
No.2 not acted independently and impartially and his acts
were coupled with nepotism and favoritism favoring
defendant No.1. Therefore, he filed applications under
Section 12 of Arbitration and Conciliation Act, 1996 seeking
a declaration by the Arbitrator disclosing that he is not
related to defendant No.1 in any manner, but the Arbitrator
i.e. defendant No.2 not disposed off the said applications
and he not disclosed his relation with defendant No.1.
26. Law of Arbitration under Arbitration and
Conciliation Act, 1996 is an unique law, which has been
enacted for the specific purpose. The said law will play
important and vital role in mitigating the emerging
litigations in a speedy and effective manner, particularly the
litigations in which parties are having pecuniary interests.
The Central Act No.26 of 1996 is having enormous
provisions, which acts as supplementaries to each other to
strengthen law of arbitration. The said provisions will not
allow any room for suspect or doubt the lapses, lacunas and
mistakes in holding the arbitral proceedings. Section 12 is
one among them. The said provision provides the grounds
for challenging the appointment of arbitrator. In this case
plaintiff took a ground that very appointment of the
defendant No.2 as Arbitrator was not as per law. The
extracted part of Section 12 is as under:
18 A.S.No.70/2015
12. Grounds for challenge:
(1) When a person is approached in connection
with his possible appointment as an arbitrator,
he shall disclose in writing any circumstances
likely to give rise to justifiable doubts as to his
independence or impartiality.
(2) An arbitrator, from the time of his
appointment and throughout the arbitral
proceedings, shall, without delay, disclose to
the parties in writing any circumstances
referred to in sub-section (1) unless they have
already been informed of them by him.
(3) An arbitrator may be challenged only if--
(a) circumstances exist that give rise to
justifiable doubts as to his
independence or impartiality, or
(b) he does not possess the
qualifications agreed to by the parties.
(4) A party may challenge an arbitrator
appointed by him, or in whose appointment he
has participated, only for reasons of which he
becomes aware after the appointment has been
made.
Thus, as per the above said provision an Arbitrator
appointed shall disclose his relationship with the parties in
relation to subject matter in dispute. The said relations shall
not affect the ability of Arbitrator in holding the proceedings.
Further, the said disclosures by the Arbitrator shall not give
rise to justifiable doubts as to his independency and
impartiality or even his competency. In this case plaintiff
19 A.S.No.70/2015
filed two applications under Section 12 seeking a declaration
of disclosures by the defendant No.2 about his relationship
with the parties. Defendant No.1 also admitted about the
filing of the said applications. The proceedings of the
arbitration also confirms the filing of the applications. But
the award not speaking about disposal of the said
applications. The material on record discloses that, the said
applications were not disposed off by the Arbitrator. In fact,
defendant No.2 being the Sole Arbitrator ought to have
dispose off the same. But unfortunately defendant No.2
being the Sole Arbitrator not disposed off the said
applications. When the competency, impartiality and
independency of the Arbitrator has been challenged by filing
applications, the Arbitrator was under an obligation of
disposing off the said applications as he was the presiding
officer of the Arbitral Tribunal. The non-disposal of said
applications indicates that, Arbitrator was not competent,
impartial and independent. Thus, strong suspicion arises
about competency, impartiality and independency of
defendant No.2 in passing the award under challenge. In a
case reported in 1996(4) ALT 1067 in the matter of State
of Andhra Pradesh -Vs- G.Ananthaiah, it has been held
that,
"If the arbitrator appoint was not technically
qualified up to the mark, as contemplated, such
an appoint is not a justifiable one".
20 A.S.No.70/2015
27. In this case, arbitrator appointed not disclosed his
selection with parties and also not disclosed about his
competency. Thus, as per the dictum laid down in the above
said case, the proceedings of the Arbitrator are vitiated and
the award passed under such proceedings is liable to set
aside.
21 A.S.No.70/2015
28. The one more important ground that the plaintiff
raised before this court for setting aside of the impugned
arbitration award is that, defendant No.2 being Sole
Arbitrator not decided all the claims including his counter
claim, which were agitated in the Arbitration proceedings.
Admittedly respondent being applicant made a claim petition
for recovery of money of Rs.2,05,712/- against plaintiff. The
plaintiff being respondent in the said petition duly appeared
and filed his statement of objections on 2.1.2015. Plaintiff
made a counter claim for Rs.45,54,504/- against the claim
of respondent. Para No.11 of the statement of objections of
plaintiff is quite clear in this regard. Even defendant No.1 in
his pleadings also admitted that, plaintiff raised counter
claim before Arbitrator. The documents produced discloses
that, the arbitrator also recorded the said counter claim of
plaintiff in his arbitration proceedings. But, he passed the
award without looking towards the said counter claim. The
award under challenge not whispering about the counter
claim of the plaintiff. The ignorance of counter claim by the
defendant No.2 in dealing with arbitration proceedings is
nothing but a contravention of fundamental policy of Indian
law as the law of India recognizes, identifies and respects
the concept of counter claim. Under the contemplation of
Indian law and in Indian judicial system, the counter claim
is having equal status as that of the original claim. The
original claim if suggests the rights of the parties
approaching the court, counter claim suggests the rights of
the party against whom the original claim has been
asserted. Thus, claim and counter claim are requires to be
treated equally. In a case reported in AIR 2015 SC 363 in
22 A.S.No.70/2015
the matter of Oil and Natural Gas Corporation Ltd. -Vs-
Western Geco International Ltd., the Hon'ble Apex Court
of India held that,
"Equally important and indeed fundamental to
the policy of Indian law is the principle that a
court so also a quasi-judicial authority, must
while determining the rights and obligations of
parties before it, do so in accordance with the
principles of natural justice. Besides the
celebrated 'audi alteram partem' rule 1 of the
facets of the principles of natural justice is that,
the court/authority deciding the matter must
apply its mind to the attendant facts and
circumstances while taking a view one way or
the other. Non application of mind is a defect
that is fatal to any adjudication. Application of
mind is best demonstrated by disclosure of the
mind and discloser of mind is best done by
recording reasons in support of the decision,
which the court or authority is taking. The
requirement that an adjudicatory authority must
apply its mind is, in that view so deeply
embedded in our jurisprudence that it can be
described as a fundamental policy of Indian
law".
Thus, the above said dictum of the Supreme Court
says that the courts and quasi judicial forums being
adjudicative authorities shall decide the lis by applying the
mind in all corners and in all facets. It further also
23 A.S.No.70/2015
indirectly says that the adjudicative authorities shall dispose
all kinds of claims including counter claims which led before
them. The above said dictum of the Supreme Court re-
iterated in a recent case reported in AIR 2019 (NOC) 310
Madras, in the matter of Tamil Nadu Civil Supplies
Corporation -Vs- Al.Champadany Industries Ltd.,
Kolkatha and another. The Apex court in the said case
further held that,
"It is neither necessary nor proper for us to
attempt an exhaustive enumeration of what
would constitute the fundamental policy of Indian
law nor it is possible to place the expression in
the strait jacket of a definition. What is important
in the context of the case at hand is that if on
facts proved before them the arbitrators failed to
draw an inference which ought to have been
drawn or if they have been drawn an inference
which is on the face of it, untenable resulting in
miscarriage of justice, the adjudication even
made by an arbitrator tribunal that enjoys
considerable latitude and play at the joints in
making award will be opened to challenge and
may be cast away or modified depending upon
whether the offending part is or is not severable
from the rest".
29. In this case, the impugned award discloses the
arbitrator only decided the claim of the respondent. He not
drawn his attention towards the counter claim raised by the
24 A.S.No.70/2015
plaintiff. He ought to have drawn his attention towards the
defense and counter claim of the plaintiff. Without drawing
the attention towards the defense of the plaintiff, Arbitrator
decided the dispute, which is nothing but a miscarriage of
justice. The fundamental policy of each and every Indian
law is that, justice should be achieved completely,
conclusively and equally. But, arbitrator without looking
towards the defense and counter claim of plaintiff decided
the dispute in few words without giving any reasonings.
Thus, it can be concluded that, the Arbitrator not
comprehensively concluded the dispute and therefore, in
view of the dictum laid down in the above said cases, it can
be held that the award under challenge is against the
fundamental policy of Indian law. The same is also adversial
to the judicial norms of India. Hence, it can be held that,
the impugned award is in conflict with public policy of India.
Therefore, the same is liable for setting aside as per the
provisions of Section 34(2)(b)(ii) of the Arbitration and
Conciliation Act, 1996. Accordingly, my answer to the point
No.1 is in affirmative.
30. Point No.2: In view of my observations as
aforesaid, I pass the following
ORDER
Suit of the plaintiff is hereby decreed.
The arbitral award dated 25.3.2015 passed in Arbitration Matter bearing A.M. 25 A.S.No.70/2015 No.F & O/B-0012/2014 is hereby set aside.
Plaintiff and defendant No.1 are at liberty to agitate their respective claims as per clause 45 of client enrollment form dated 9.2.2012.
No order as to costs.
(Dictated to the Judgment Writer on computer, computerized by her, corrected and then pronounced by me in open court on the 24 th day of August, 2020.) (Ningouda B.Patil), XX ADDL.CITY CIVIL & SESSIONS JUDGE, BENGALURU.
24.8.2020 Judgment pronounced in the open court (vide separate judgment).
ORDER Suit of the plaintiff is hereby decreed.
The arbitral award dated 25.3.2015 passed in Arbitration Matter bearing A.M. 26 A.S.No.70/2015 No.F & O/B-0012/2014 is hereby set aside.
Plaintiff and defendant No.1 are at liberty to agitate their respective claims as per clause 45 of client enrollment form dated 9.2.2012.
No order as to costs.
XX Addl.C.C & S.J., Bengaluru.
27 A.S.No.70/2015