Delhi High Court - Orders
Kotak Mahindra Bank Ltd vs Narendra Kumar Arora & Ors on 15 May, 2023
Author: Prateek Jalan
Bench: Prateek Jalan
$~33 & 26
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ OMP (ENF.) (COMM.) 22/2020
KOTAK MAHINDRA BANK LTD. ..... Decree Holder
versus
NARENDRA KUMAR ARORA & ORS. ..... Judgement Debtors
+ O.M.P. (COMM) 343/2020
MR NARENDER KUMAR ARORA & ORS. ..... Petitioners
versus
KOTAK MAHINDRA BANK & ANR. ..... Respondents
Appearance:- Mr. Arun Aggarwal, Ms. Greeshma Beebi Reddy &
Mr. Shivam Saini, Advocates for Kotak Mahindra
Bank. [M:-9811087995, 011-23383514].
Mr. Pallav Saxena, Mr. Mohammad Nausheen Samar,
Mr. Diwaker Goel, Ms. Supreeti Chauhan & Mr.
Nipun Sharma, Advocates for Narender Kumar Arora
in Item Nos. 33 & 26
CORAM:
HON'BLE MR. JUSTICE PRATEEK JALAN
ORDER
% 15.05.2023
O.M.P. (COMM) 343/2020
1. By way of this petition under Section 34 of the Arbitration and Conciliation Act, 1996 ["the Act"], the petitioner challenges an award dated 26.09.2019 rendered by a sole arbitrator.
2. Two facts of the present case are undisputed, viz that the learned arbitrator was unilaterally appointed by the respondent-Kotak Mahindra OMP (ENF.) (COMM.) 22/2020 & Connected Matters Page 1 of 4 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/09/2023 at 08:54:21 Bank, and that, as recorded in the order dated 23.02.2022, the learned arbitrator did not furnish any declaration under Section 12 of the Act upon her appointment as an arbitrator.
3. The legal position that an award is a nullity on either of these grounds is settled by the judgments of the Division Bench of this Court in Ram Kumar vs. Shriram Transport Finance Co. Ltd., 2022 SCC OnLine Del 4268 and Govind Singh vs. Satya Group Pvt. Ltd., 2023 SCC OnLine Del 37.
4. On the disclosure provision, in Ram Kumar (supra), the Division Bench held as follows:-
"19. In terms of Explanation 1 to Section 12(1) of the A&C Act - the grounds as stated in the Fifth Schedule of the A&C Act - the learned Sole Arbitrator was required to be guided by the grounds as stated in the Fifth Schedule of the A&C Act. Entry 22 of the Fifth Schedule of the A&C Act specifically provides circumstances where an arbitrator has, within the past three years, been appointed as an arbitrator on more than two occasions by either of the parties or their affiliates. This Court is unable to accept that such a disclosure is not mandatory and is merely at the discretion of the arbitrator. The onus for disclosing the number of matters in which the learned Sole Arbitrator had been appointed as such, at the instance of the respondent, rested with the learned Sole Arbitrator. The assumption that the burden to ascertain the circumstances that may give rise to justifiable doubts as to the independence and impartiality of the arbitrators is on the parties, is erroneous; this disclosure is necessarily required to be made by the person approached in connection with his appointment as an arbitrator.
20. In terms of Explanation 2 to Section 12(1) of the A&C Act, the arbitrator is also required to make the necessary disclosure as specified in the Sixth Schedule of the A&C Act.
21. The learned Commercial Court found that the appellants were precluded from assailing the impugned award on the ground that they had not filed an application before the learned Sole Arbitrator to make the disclosure or challenge his appointment.
22. It is necessary to note that the language of Section 12(1) of OMP (ENF.) (COMM.) 22/2020 & Connected Matters Page 2 of 4 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/09/2023 at 08:54:21 the A&C Act does not leave it at the discretion of any person, approached in connection with being appointed as an arbitrator, to make the necessary disclosures. The use of the words "he shall disclose" in Section 12(1) of the A&C Act makes it mandatory for the person who is approached in connection with his possible appointment as an arbitrator, to make a disclosure of all circumstances that may give rise to justifiable doubts as to his independence and impartiality.
23. In terms of Explanation 2 to Section 12(1) of the A&C Act, such disclosure is to be made in the form specified in the Sixth Schedule of the A&C Act. It may be sufficient compliance of the Explanation if the necessary particulars, as required to be disclosed in the Sixth Schedule, are disclosed but the disclosure is not in the format as provided. However, it would be erroneous to assume that the requirement of making a disclosure is not mandatory.
24. This Court is of the view that the requirement of making a disclosure is a necessary safeguard for ensuring the integrity and efficacy of an arbitration as an alternate dispute resolution mechanism and is not optional."
[Emphasis supplied]
5. On the question of unilateral appointment, the Division Bench in Govind Singh (supra) followed the judgments of the Supreme Court in TRF Ltd. vs. Energo Engineering Projects Ltd. (2017) 8 SCC 377 and Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Ltd., (2020) SCC 760, and held as follows:-
"18. In view of the law as noted above, the learned Arbitrator unilaterally appointed by the respondent company was ineligible to act as an arbitrator under Section 12(5) of the A&C Act.
xxxx xxxx xxxx
21. 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 OMP (ENF.) (COMM.) 22/2020 & Connected Matters Page 3 of 4 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/09/2023 at 08:54:22 jurisdiction."
[Emphasis supplied]
6. Mr. Arun Aggarwal, learned counsel for the respondent, does not contend to the contrary.
7. In view of the above, the petition is allowed and the award dated 26.09.2019 is set aside.
8. It will be open to the respondent to take fresh steps for appointment of an arbitrator in accordance with law, if it is so advised.
9. The petition stands disposed of.
OMP (ENF.) (COMM.) 22/2020 In view of the order passed above in O.M.P.(COMM) 343/2020, the enforcement proceedings are disposed of.
PRATEEK JALAN, J MAY 15, 2023 'pv'/ OMP (ENF.) (COMM.) 22/2020 & Connected Matters Page 4 of 4 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/09/2023 at 08:54:22