Bangalore District Court
) Biesse Manufacturing Pvt.Ltd vs ) M/S.Lakshmi Nirman (Bangalore) ... on 11 October, 2018
IN THE COURT OF THE VI ADDL. CITY CIVIL & SESSIONS JUDGE
AT BENGALURU CITY : (CCCH.11)
Dated this the 11th day of October, 2018
PRESENT: Sri. Rama Naik, B.Com., LL.B.,
VI Addl.City Civil & Sessions Judge,
Bengaluru City.
A.S.NO: 23/2013
PLAINTIFFS/ : 1) BIESSE MANUFACTURING PVT.LTD.
PETITIONERS A Company incorporated under the
provisions of the Companies Act, 1956,
Having its registered office at Sy.No.32,
No.469, Jakkasandra Village,
Sondekoppa Road, Nelamangala,
Bengaluru-562 123.
Reptd.by its Director.
2) Mr.Sergio Mina, Director
BIESSE Manufacturing Pvt.Ltd.,
A Company incorporated under the
provisions of the Companies Act, 1956,
Having its registered office at Sy.No.32,
No.469, Jakkasandra Village,
Sondekoppa Road, Nelamangala,
Bengaluru-562 123.
3) Mr.Sayeed Ahmed,
Chief Executive Officer,
BIESSE Manufacturing Pvt.Ltd.,
A Company incorporated under the
provisions of the Companies Act, 1956,
Having its registered office at Sy.No.32,
No.469, Jakkasandra Village,
Sondekoppa Road, Nelamangala,
Bengaluru-562 123.
2 AS.23/2013
/Vs/
DEFENDANTS/ : 1) M/s.Lakshmi Nirman (Bangalore) Pvt.Ltd.
RESPONDENTS Having its registered office at
Srikantan Layout, High Grounds,
Bengaluru-560 001.
Reptd.by its Managing Director -
Mr.G.R.Suresh.
2) Sri.Kukkaje Ramakrishna Bhat,
District & Sessions Judge (Retd.)
F-113, 4C,4th Floor, Central Chambers,
2nd Main Road, Gandhinagar,
Bengaluru-560 009.
---
JUDGMENT
This suit is filed by the PlaintiffS under Section 34 of the Arbitration and Conciliation Act, 1996, praying for setting aside the arbitration award dated 08.12.2012 passed by Defendant No.2 and for costs of the suit.
2) The brief facts of the Plaintiffs' case are that, the 1st Plaintiff is a Company incorporated under the provisions of the Companies Act, 1956 having its registered office at Bengaluru. The 2nd Plaintiff being the Director and 3rd Plaintiff being the Chief Executive Officer of the 1st Plaintiff have been wrongly impleaded as parties to the arbitration proceedings. 3 AS.23/2013
The 1st Defendant is also a Company incorporated under the Companies Act and its registered office is at Bengaluru.
The Plaintiffs state that, pursuant to a tender that was placed by the 1st Plaintiff for construction of the proposed factory building in Sy.No.32 of Jakkasandra Village, Nelamangala Taluk, Bengaluru District, the 1st Defendant offered a tender, which came to be accepted by the 1st Plaintiff in its letter dated 22.05.2007 and consequently an Agreement was entered into between the parties on 23.06.2007. The contract documents included Articles of Agreement, Letter of Intent, Work Order, as well as the Contract Letter that was executed between the parties. It is stated that the 1st Defendant was required to carry out construction as per agreement and was required to complete the project within the stipulated time of eight months from the date of commencement of the project. The total consideration for the Project was Rs.9,80,00,000/-. The Plaintiffs state that, the 1st Defendant failed to complete the project within the stipulated period and there were serious deficiencies in the quality of work. The Project got delayed and the defects in works executed were never rectified by the 1st Defendant. The 1st Defendant got issued 4 AS.23/2013 notice dated 24.04.2010 claiming a sum of Rs.1,30,70,325/- and Rs.80,10,612/- towards Supplementary Bill. The Plaintiffs replied to this on 27.05.2010 and 16.08.2010 stating that the bills were not properly scrutinized and that since the work was not completed as per specification, the 1st Plaintiff was entitled to deduct liquidated damages of Rs.45,00,000/- for delay. After taking into account all deductions, it is the 1st Defendant who is liable to pay the 1st Plaintiff a sum of Rs.6,76,816/-. The Plaintiffs further state that the 1st Defendant in a letter dated 30.09.2010 sought to invoke arbitration clause in the agreement and nominated Mr.Sridhar of M/s.Semac Ltd., as the Arbitrator. The 1st Plaintiff objected to this, since there was no dispute pertaining to payments and rejected the nominee. The 1st Defendant preferred CMP.No.44/2011 before the Hon'ble High Court of Karnataka for appointment of sole Arbitrator. Consequently, the Defendant No.2 was appointed as the sole Arbitrator to adjudicate the disputes. The 1st Plaintiff has challenged the impugned award passed by the 2nd Defendant on the following grounds.
(1) The award is manifestly illegal and patently opposed to principles of law and public policy. 5 AS.23/2013 (2) The award is contrary to law and is contrary to principles of natural justice; as well as Section 34(2)(a)(iii) of the Act and consequently, is in conflict with the Public Policy of India.
(3) The learned Arbitrator has not afforded the Plaintiffs with adequate opportunity to present its case, as a result of which, the Plaintiffs were unable to present their case before the Hon'ble Tribunal and in terms of Section 34(2)(a)(iii) of the Act, the award is liable to be set aside. Inter alia, the Plaintiffs state that they were not given opportunity to present their case.
(4) The award is wholly one sided and prays for setting aside the award.
3) The 1st Defendant in his objection states that, the Plaintiffs themselves chose not to appear before the Arbitrator and cannot now complain of lack of opportunity. The claim of the 1st Defendant is just and proper and backed by enough material evidence and any contention to the contrary is baseless. There are no contradictions in the award. 2nd and 3rd Plaintiffs are necessary parties. Hence, prays for dismissal of the suit with exemplary costs.
6 AS.23/2013
4) Heard. Perused the pleadings and records placed in this case.
5) That in view of the orders passed in W.P.No.33023/2016 and W.P.No.46048/2016 [GM-RES] by the Hon'ble High Court of Karnataka, wherein, the Plaintiffs were allowed to lead evidence in this case, the 3rd Plaintiff, the Chief Executive Officer of the 1st Plaintiff, Mr.Syeed Ahmed and the counsel for the Plaintiffs, Mr.Ramesh Ananthan, who is engaged by the Plaintiffs to appear before the learned Arbitrator have been examined as PWs.1 and 2 respectively and got marked Exs.P.1 to P.25.
6) The counsel for Plaintiffs has relied upon the following decisions :
1. MANU/SC/0657/2003: (2003)7 SCC 492 [Sohan Lal Gupta & Ors. Vs. Asha Devi Gupta & Ors.]
2. MANU/KE/0745/2007 : AIR 2000 KER 119 [Impex Corporation & Ors. V. Elejikal Acquamarine Exports Ltd.]
3. MANU/KE/2049/2015 : ILR 2015(4) Kerala 797 [Saju P.P & Ors. V. Muthoot Vehicle & Assets Finance Ltd.]
4. MANU/KA/0217/2005: AIR 2000 KANT 313 [Rudramuni Devaru Vs. Shrimad Maharaj Niranjan Jagadguru] 7 AS.23/2013
5. MANU/DE/0382/1983 : AIR 1983 DEL 413 [Lovely Benefit Chit Fund & Finance Pvt. Ltd., V. Puran Dutt Sood and Ors.]
6. MANU/SC/0225/2003 : AIR 2003 SC 2041 [Canara Bank & Ors. Vs. Debasis Das & Ors.]
7. MANU/SC/0772/2014 : AIR 2015 SC 363 [ Oil & Natural Gas Corporation Ltd., Vs. Western Geco International Ltd.]
8. MANU/SC/0242/2013 : (2013) 10 SCC 540 [ Sachin Gupta & Ors. Vs. K.S.Forge Metal Pvt. Ltd.
9. MANU/SC/8034/2007 : (2007)13 SCC 236 [The Security Printing and Minting Corporation of India Ltd. And Ors. Vs. Gandhi Industrial Corporation]
10. MANU/SC/1687/2011 : (2011) 1 SCC 101 [Satyanarayana Construction Co. V. Union of India & Ors]
11. MANU/SC/4328/2007: AIR 2008 sc 456 [ONGC Ltd., V. Garware Shipping Corpn. Ltd.]
12. MANU/SC/0440/2002: AIR 2002 SC 2221 [Sangamner Bhag Sahakari Karkhana Ltd. Vs. Krupp Industries Ltd.]
13. MANU/SC/8095/2006: 2007 (1) SCALE 1 [Hindustan Zinc Ltd. Vs. Friends Coal Carbonisation]
14. MANU/SC/8177/2006: 2006(6) SCALE 220 [McDermott International Inc. V Burn Standard Co.]
15. MANU/SC/1485/2009: (2009)17 SCC 796 [Fiza Developers & Inter-Trade P. Ltd. V. AMCI (I) Pvt.Ltd. & Anr.]
16. MANU/KA/1579/2011: Hon'ble High Court of Karnataka [Shankar v A.T. & S.Pvt. Ltd.]
17. MANU/UP/2820/2015-Hon;ble High Court of Allahabad 8 AS.23/2013 [Mahesh Kumar Agarwal & Ors. V. Suresh Chand Agarwal & Ors.]
18. MANU/KA/1999/2014- Hon'ble High Court of Karnataka [M.Shashikala V. Canara Nidhi Ltd.]
19. MANU/MP/1032/2014 - Hon'ble High Court of Madhya Pradesh [State of M.P. V. Som Datt Builders Pvt. Ltd.
7) The counsel for Defendant No.1 has relied upon the following decisions in support of its case :
(1) AIR 1961 PUN 206 [ Azad Hind Chemicals Ltd. Vs. Ram Lal of United Chemicals Works, Jullundur & Anr.] (2) MANU/MH/0341/2015 [Krishnabhagwan Rajaram Sharma Vs. Tata Motors Finance Ltd.] (3) 2011 (3) CTC 9 [ Saraswathi Chemials Proprietor, Saraswathi Leather Chem (P) Ltd., Vs. Balmer Lawrie and Company Ltd., and Justice G.Ramanujam.] (4) LAWS (DLH) 1997 778 [ Anil Jain Vs. Madhunam Appliances Pvt. Ltd.] (5) AIR 1954 ALL 244 [ Dori Lal Vs. Lal She.] (6) AIR 1963 Pat 407 [ Firm Pursottam Das Ganapati Rai Vs. Gulab Khan] (7) AIR 1960 AP 101 [ Agurchand Bhomraj Sowcar Vs. Deochand & Anr] 9 AS.23/2013
8) The points that arise for my consideration are :-_
1. Whether the Plaintiffs have made out ground under Section 34(2)(a)(iii) of Arbitration and Conciliation Act, 1996 to set aside the award?
2. Whether the Plaintiffs have made out ground under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996 to set aside the award?
3. What Order?
9) My answers to the above points are :-
Point No.1 - In the Affirmative;
Point No.2 - In the Affirmative;
Point No.3 - As per final order, for the
following :
REASONS
'Audi alteram partem'
"Opportunity of being heard is an indispensable part of judicial system and it is the duty of the court to see that as to whether parties are given reasonable opportunity to present their case in a particular matter. In the backdrop of this natural justice, which has been considered as commonsense justice, the present case is to be looked into."
10) Points No.1 and 2:- As these two points are inter related, they are taken together for discussion. 10 AS.23/2013
The first and foremost contention of the Plaintiffs is that, no adequate opportunity was accorded to the Plaintiffs to present their case, as a result of which, the Plaintiffs were unable to present their case before the Hon'ble Tribunal.
To substantiate its contention, Plaintiff No.3 got examined as P.W.1 and the Standing Counsel who represented the Plaintiffs before the Arbitral Tribunal viz., Sri.Ramesh Ananthan got examined as P.W.2 and got marked Exs.P.1 to P.25. Whatever may be the oral and documentary evidence that has been led by the Plaintiffs in this suit, Ex.P.7-the proceedings recorded by the learned Arbitrator in Arbitration Case No.25/2011 plays a vital role besides the grounds that urged by the Plaintiffs in their case.
11) P.W.1 reiterates the plaint averments in his examination-in- chief on oath. On perusal of Ex.P.7 it is clear that, the learned Arbitrator began to record the proceedings in AC.No.25/2011 on 03.11.2011. On that day, he records that the parties have been directed to appear before him on 11.11.2011 at 5.30 p.m in his chambers. On 11.11.2011, the learned Arbitrator records that the Claimant (Defendant No.1) and its Advocate were present and the Respondents (Plaintiffs) and their Advocate were absent. Hence, 11 AS.23/2013 the learned Arbitrator issued notice to the Plaintiffs for appearance on 12.12.2011 at 5.30 p.m. This is the first notice issued by the learned Arbitrator to the Plaintiffs for appearance.
On 12.12.2011 the learned Arbitrator records the proceedings that, M.D of the 1st Defendant Mr.G.R.Suresh, the CEO of the 1st Plaintiff Mr.Sayed Ahmed and Sri.Ramesh Ananthan, Advocate for Plaintiffs were present and Mr.Praveen Kumar, Advocate for 1st Defendant was present. It is also recorded that, the language during the proceedings shall be in English and the procedures to be followed shall be generally guided by principles of natural justice and Venue shall be the chambers of the Arbitrator till the pleadings are complete and thereafter the parties shall choose the venue at their cost and inform the Arbitrator. The Arbitrator's fees also fixed and case was adjourned for Claim Statement of the 1st Defendant on 21.01.2012 at 3-00 p.m. In the meanwhile, on 24.12.2011 the learned Arbitrator received a cheque for Rs.22,500/- from the Plaintiffs towards the arbitration fees.
12 AS.23/2013Proceedings recorded on 21.01.2012 :
On 21.01.2012 Sri.G.L.Ganesh, Advocate for 1st Defendant prays for further time of 3 weeks over telephone. The matter was adjourned to 14.02.2012 at 4.30 p.m with instruction to inform the Respondents' (Plaintiffs) counsel. Here, it is pertinent to note that the matter was adjourned to 14.02.2012 at 4.30 p.m at the request of the counsel for the 1st Defendant over telephone. The learned Arbitrator instructed the counsel for the 1st Defendant to inform the Plaintiffs' counsel.
The learned Arbitrator did not issue any notice in writing to the Plaintiffs or their counsel on that day so as to bring the knowledge of the next hearing date. The Plaintiffs in their plaint have taken a specific contention that no intimation was received either by the Plaintiffs or their counsel about the next date of hearing that was fixed by the Arbitral Tribunal.
12) P.W.1 in his examination-in-chief at para-14 reiterates that:
" .... In addition thereto, even though the Order dated 21.01.2012 directed the Counsel for the 1st Respondent to inform our Counsel about the next date of hearing, no such intimation was received; as a result of the same, the Petitioners as well as our Counsel were under 13 AS.23/2013 the bona fide impression that no hearing dates were fixed by the Learned Arbitrator."
The learned counsel for the 1st Defendant has cross- examined P.W.1 on this point. P.W.1 has deposed that:
" On 21.01.2012, I contacted my counsel through phone to know the update of that day's proceedings before the Arbitrator and he informed me that he did not appear before the Arbitrator. When I asked him about the next date, he told me that he has no information about the same."
P.W.2 is also cross-examined on this point. He has deposed that:
" ... I had exchanged my phone number to the other counsels and the learned Arbitrator. I did not appear before Arbitrator on 21-1-2012..."
Hence it is clear that, on 21.01.2012 the 1st Defendant as well as his counsel and the Plaintiffs as well as their counsel were absent. The counsel for the 1st Defendant sought three weeks time over telephone; accordingly, the learned Arbitrator adjourned the matter to 14.02.2012. However, no written notice was issued to the Plaintiffs or their counsel about the next date of hearing, nor did intimate the same over telephone. It is also established that the counsel for the 1st Defendant did not intimate the next 14 AS.23/2013 date of hearing to the Plaintiffs' counsel as instructed by the learned Arbitrator. The counsel for Plaintiffs i.e. P.W.2 in his cross-examination explained that why he did not appear before the learned Arbitrator on 21.1.2012. P.W.2 has deposed that, on 21.01.2012 he did not appear before the learned Arbitrator because the claim petition was not served on him and that the counsel for 1st Defendant informed him that he will be seeking an adjournment. P.W.2 has also deposed that he was not required to appear before the learned Arbitrator before service of claim statement. He has also substantiated that his statement that he was not required to appear before the learned Arbitrator is based on arrangement and principles of natural justice. At the beginning of the Arbitral proceedings i.e. on 12.12.2011, the learned Arbitrator recorded that 'the procedures to be followed shall be generally guided by principles of natural justice', which also justifies the statement of PW-2 that procedures being adopted in Arbitral Tribunal is based on arrangement and principles of natural justice.
13) On 14.02.2012 since the parties were absent, the case was adjourned for filing the claim statement of the 1st Defendant. 15 AS.23/2013 The learned Arbitrator recorded the late appearance of the counsel for 1st Defendant on that day. On the said day, no notice was issued to the Plaintiffs or their counsel about the next date of hearing. On 01.03.2012 and 20.03.2012, the counsel for the 1st Defendant sought for time for filing claim statement. On 06.04.2012 the counsel for 1st Defendant submitted that claim statement will be filed on next Monday. The learned Arbitrator records that the claim statement shall be filed on 09.04.2012 and a copy of the same shall be delivered to the Plaintiffs' counsel. On that day, the matter was posted on 09.05.2012 for statement of objections.
Here it is important to note that before filing the claim statement by the 1st Defendant, the learned Arbitrator posted the matter for statement of objection of the Plaintiffs. This time also, the learned Arbitrator did not intimate the Plaintiffs or their counsel the next date of hearing.
On 09.04.2012 the counsel for the 1st Defendant filed claim petition with documents and list. The Arbitrator directed him to furnish copy of the same to the Plaintiffs and matter was posted 16 AS.23/2013 to 09.05.2012. On 09.05.2012 the parties and their counsels were absent; hence, the matter was adjourned to 04.06.2012.
14) Proceedings recorded on 04.06.2012:
On 04.06.2012 the counsel for the 1st Defendant submitted that he had delivered the claim statement copy with documents to the counsel for the Plaintiffs. The Arbitrator recorded the absence of the Plaintiffs and their counsel and matter was adjourned for statement of objection of the Plaintiffs to 27.06.2012. Here it is important to note that, from 12.12.2012 to 09.04.2012, the case had been posted for claim statement of 1st Defendant in the absence of the Plaintiffs and their counsel. During that period, at least on any hearing date the learned Arbitrator could have issued the notice to the plaintiffs or their counsel. But, he did not do so.
Even after filing the claim statement by the 1st Defendant, the learned Arbitrator could have issued the notice to the Plaintiffs or their counsel for filing their statement of objection. However, no efforts were made to issue notice to the Plaintiffs or their counsel.
The PW-2 in his cross-examination has specifically deposed that :
" I was not required to appear before the learned Arbitrator before service of claim statement."17 AS.23/2013
This part of the evidence of P.W.2 has not been disputed by the 1st Defendant. Be it as it may. The learned Arbitrator should have issued notice to the counsel for Plaintiffs or Plaintiffs after filing of the claim statement of the 1st Defendant. However, he did not do so.
15) Proceedings recorded on 27.06.2012:
The learned Arbitrator records the acknowledgement produced by the counsel for the 1st Defendant for having served the copy of claim statement to the colleague of the Plaintiffs' counsel. On that day, the learned Arbitrator records the absence of the Plaintiffs and their counsel and also records that the statement of objection is not filed and that the proceedings shall continue in the absence of the defense statement. On that day, the learned Arbitrator posted the matter for evidence of the 1st Defendant on 14.07.2012 at 12 noon at "Trial Base" No.20, 2nd Cross, Judicial Officers' Layout, Sanjayanagara.
It is important to note that the learned Arbitrator directed the counsel for the 1st Defendant to deliver the copy of the claim 18 AS.23/2013 statement to the counsel for the plaintiffs on 06.04.2012. The claim statement of the 1st Defendant was filed on 09.04.2012.
Thereafter, the matter was posted on 09.05.2012 and 04.06.2012 for filing of statement of objection of the Plaintiffs. However, the counsel for the 1st Defendant produced the endorsement before the learned Arbitrator on 27.06.2012 for having served the copy of the claim petition to the counsel for Plaintiffs. On the very same day, the statement of objection of the Plaintiffs was taken as not filed.
The Plaintiffs state that, on 27.06.2012 the learned Arbitrator recorded the acknowledgment for having served the copy of the claim statement, but fails to see that while serving the claim statement, the next date of hearing of the arbitral proceedings was not intimated to the Plaintiffs or their counsel.
The P.W.2 has specifically deposed in his cross examination on this aspect of the matter:
"I do not remember the name of the counsel who called me on 21-1-2012 seeking adjournment. Since it is a preliminary stage, there was no objection from my side for adjournment. The claim statement was served upon by colleague, by name Mr.Ashok. The claim statement was served in the month of June 2012. My colleague by name Mr.Ashok informed me that he had received claim statement. I was 19 AS.23/2013 informed by Mr.Ashok that there was no communication regarding the next date of hearing.
Question: After Mr.Ashok informed you about the same, did you make any endeavour to contact the other side's Counsel for the Arbitrator about the next date of hearing?
Ans: There was no requirement for the same. As per the general practice, the intimation of next date of hearing comes from the learned Arbitrator's office."
As deposed by the counsel for the Plaintiffs, claim statement was served on his colleague in the month of June 2012, but he was not communicated the next date of hearing.
On the same day i.e. 27.06.2012 the learned Arbitrator after taking the statement of objection of the Plaintiffs as not filed, posted the matter for evidence of P.W.1 on 14.07.2012. The 1st Defendant states that the learned Arbitrator was not duty bound to give notice to the Plaintiffs to appear before the Arbitrator on the next date of hearing in view of Section 25(c) of the Arbitration and Conciliation Act.
16) The main grievance of the Plaintiffs is that, the next date of hearing of the arbitral proceedings was not intimated to them 20 AS.23/2013 or their counsel. Nowhere, it is stated by the counsel for the 1st Defendant that, he had informed to the counsel for Plaintiffs the next date of hearing. Even the learned Arbitrator also did not take the notice as to whether the next date of hearing was duly brought to notice of the Plaintiffs or their counsel by the counsel for the 1st Defendant. The learned counsel for the Plaintiffs was under the impression that the instruction of next date of hearing normally comes from the learned Arbitrator's office. The learned counsel for the 1st Defendant states that the learned Arbitrator was under no duty to give notice to the Plaintiffs to appear on the next date of hearing in view of Section 25(c) of the Arbitration and Conciliation Act. Section 25 (c) of the Act deals with default of a party, which reads thus :
" 25. Default of a party :
(a) xx xx xx xxx
(b) xx xx xx xxx
(c) a party fails to appear at an oral hearing or to produce documentary evidence, the Arbitral Tribunal may continue the proceedings and make the arbitral award on the evidence before it."
17) Section 24 (c) of the Act lays down the procedures to be followed by the learned Arbitrator when the parties fail to appear 21 AS.23/2013 before him. It never says that no prior intimation should be given to the parties to the proceedings to defend their case effectively. Here in this case, from 21.12.2011 to 27.06.2012 the Plaintiffs or their counsel were not brought to the notice the next date of hearing during the period in which the matter was posted for filing of claim statement of the 1st Defendant and even after filing the claim statement, no notice of next hearing date was given to the Plaintiffs or their counsel for filing their statement of objection.
On the same day i.e. 27.06.2012, the learned Arbitrator changed the Venue of the proceedings from his chambers at Gandhinagar, Bengaluru to 'Trial Base' No.20, 2nd Cross, Judicial Officers Layout, Sanjaynagar. At least, this fact could have been brought to the notice of the Plaintiffs or their counsel by the learned Arbitrator. The learned Arbitrator remained unchanged his mind from issuing notice to the Plaintiffs or their counsel, even though the Venue for proceedings was ordered to be changed by the learned Arbitrator.
22 AS.23/2013
18) Proceedings dated 14.07.2012:
On 14.07.2012 the M.D - Mr.Suresh of the 1st Defendant filed his affidavit and marked Exs.P.1 to P.52. The 1st Defendant then closed his evidence. The learned Arbitrator posted the matter for argument. Here also, the learned Arbitrator did not record as to whether the copy of the affidavit produced by the 1st Defendant was served to the Plaintiffs or their counsels. The Plaintiffs state that, during trial, approximately 51 documents were marked in their absence. The 1st Defendant nowhere stated that it had served the affidavit and documents to the Plaintiffs. Moreover, the learned Arbitrator after recording examination-in-chief of the 1st Defendant directly posted the matter for argument. No opportunity was given to the Plaintiffs for cross-examining the witness of the 1st Defendant and also denied their right to lead evidence. It is important to note that since the Plaintiffs were not placed ex-parte before the Abitral proceedings, mere absence or non-filing of objection, their right to have the copy of examination-in-chief affidavit with concerned documents relied upon by the 1st Defendant could not be taken away. More so, without giving sufficient opportunity, their right to cross-examine 23 AS.23/2013 the witness and to lead their evidence could not be taken as 'nil'. This is against law and against the natural justice which was agreed to be followed in this case. On 10.08.2012 the learned Arbitrator reserved the matter for passing of the award. On the same day, the learned Arbitrator deferred the matter for passing of award on the memo filed by the counsel for the 1st Defendant, since the counsel for the 1st Defendant intends to file an application for amendment. On that day, the matter was posted to 29.09.2012. On 29.09.2012 the case was adjourned to 30.10.2012 at the request of the counsel for 1st Defendant.
19) Proceedings of 30.10.2012:
On 30.10.2012 the counsel for 1st Defendant filed an application under Order 6 Rule 17 of CPC., for amendment of the prayer column of the claim statement. The learned Arbitrator recorded the absence of the Plaintiffs and their counsel and allowed the said application. At this point of time also, the learned Arbitrator did not think about sending notice to the Plaintiffs or their counsel to appear before him to answer the claim made in the amendment application. He did not direct the counsel for the 1st Defendant to serve copy of the amendment 24 AS.23/2013 application. Without calling for objection of the Plaintiffs on the amendment application, the learned Arbitrator allowed it. It is also important to note that on the same day, the MD of the 1st Defendant filed his further examination-in-chief affidavit and filed Memo of Calculation in the absence of the Plaintiffs and their counsel. Finally, the learned Arbitrator pronounced the award on 08.12.2012 allowing the claim of the 1st Defendant.
20) At this juncture, it is relevant to mention Section 18, 24(1), (2) and (3) and Section 34(1)(2)(iii) of the Arbitration and Conciliation Act, 1996, which reads as follows :
" 18. Equal treatment of parties:
The parties shall be treated with equality and each party shall be given a full opportunity to present his case."
" 24. Hearings and written proceedings :
(1) Unless otherwise agreed by the parties, the Arbitral Tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials.
PROVIDED that the Arbitral Tribunal shall hold oral hearings, at an appropriate stage of the proceedings, on a request by a party, 25 AS.23/2013 unless the parties have agreed that no oral hearing shall be held.
(2) The parties shall be given sufficient advance notice of any hearing and of any meeting of the Arbitral Tribunal for the purposes of inspection of documents, goods or other property.
(3) All statements, documents or other information supplied to, or applications made to the Arbitral Tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the Arbitral Tribunal may rely in making its decision shall be communicated to the parties."
" 34. Application for setting aside arbitral award :
(1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the court only if, -
(a) xx xx xx
(i) xxx xx xx
(ii) xx xx xx
(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 ...."26 AS.23/2013
21) Section 18 requires the Arbitrator to treat the parties with equality and give each party full opportunity to present their case. Section 24(2) and (3) clearly states that the parties shall be given sufficient advance notice of any hearing and of any meeting of the Arbitral Tribunal for the purposes of inspection of documents, goods or other property. Here in this case, no notice was issued to the Plaintiffs to inspect the documents produced by the 1st Defendant. Moreover, except the claim statement, no statements, affidavit, documents and application made to the tribunal by the 1st Defendant were served or communicated to the Plaintiffs. More so, the evidentiary documents which the Tribunal relied upon in making the decision were not communicated to the Plaintiffs. Section 24(2) and (3) of the Act are mandatory provisions and it is indispensable to comply with by the parties to the proceedings and the Arbitral Tribunal. Section 24(2) of Act specifically states that, the parties shall be given sufficient advance notice of any hearing and of any meeting of the Arbitral Tribunal. Here it has to be taken into consideration of the words "sufficient advance notice of any hearing" that too, particularly the word "any hearing" it does not mean any one of the hearings, it 27 AS.23/2013 means all hearings. When law is very specific in respect of giving opportunity of hearing, the same should and ought to have been followed by the learned Arbitrator, particularly, when the Plaintiffs were not placed ex-parte in this case. However, in this case the learned Arbitrator did not do so.
22) In this case, arbitral proceedings commenced on 11.11.2011. On that day notice was issued to the Plaintiffs. The Plaintiffs appeared before the learned Arbitrator on 12.12.2011. On that day, preliminary aspects were discussed; decided to adopt the procedures guided by the principles of natural justice during the arbitral proceedings and the case was posted for claim statement of the 1st Defendant. On 21.01.2012 the counsel for 1st Defendant sought further time over telephone to file claim statement. The Arbitrator granted time with instructions to inform the Plaintiffs counsel. However, the Arbitrator did not intimate the Plaintiffs or their counsel by way of written notice. It is also proved that after seeking adjournment on 21.02.2012, the 1st Defendant's counsel did not bring to the notice of the 28 AS.23/2013 Plaintiffs counsel the next date of hearing. In this regard, P.W.2 has been cross-examined in detail by the 1st Defendant, but nothing has been elicited from the mouth of P.W.2 as far as the knowledge of Plaintiffs' counsel regarding the next date of hearing after seeking adjournment by the 1st Defendant on 21.01.2012. The counsel for Plaintiffs deposed that the counsel for the 1st Defendant informed him that he will be seeking adjournment. Nowhere, it is stated by the counsel for the 1st Defendant that he had informed the next date of hearing after seeking adjournment by him on 21.01.2012 over telephone. Thereafter, on 14.02.2012 the matter was adjourned for claim statement of the 1st Defendant. The next date of hearing was not intimated to the Plaintiffs or counsel for the Plaintiffs. On 01.03.2012 again the matter was adjourned for claim statement of the 1st Defendant as the counsel for the 1st Defendant sought time without appearing before the Arbitrator. This time also, no notice was issued to the Plaintiffs or their counsel. On 06.04.2012, the counsel for the 1st Defendant sought time to 29 AS.23/2013 file his claim statement on next Monday. He was directed by the learned Arbitrator to serve the copy of the claim statement to the counsel for the Plaintiffs and on that day, before filing the claim statement by the 1st Defendant, the learned Arbitrator posted the matter for statement of objection to 09.04.2012. However, this date was not communicated to the Plaintiffs or counsel for Plaintiffs. The counsel for the 1st Defendant filed his claim statement and documents on 09.04.2012, but there is no mention that he had served the copy of the claim statement and documents to the counsel for the Plaintiffs. On 09.05.2012 the matter was adjourned since both the parties were absent. On 04.06.2012 the counsel for the 1st Defendant submitted before the learned Arbitrator that copy of the claim statement and copy of documents were delivered to the counsel for the Plaintiffs. At least, this time, the learned Arbitrator could have issued notice to the counsel for the Plaintiffs regarding the next date of hearing intimating the stage of the case. 30 AS.23/2013 However, the learned Arbitrator did not do so. The learned Arbitrator adjourned the matter for statement of objection.
23) On 27.06.2012, the counsel for 1st Defendant produced acknowledgment for having served the claim statement to the counsel for Plaintiffs Mr.Ashok Kumar, who is colleague of Sri.Ramesh Ananthan. In this regard, the learned counsel for the 1st Defendant has cross-examined P.W.2, which reads as follows :
" Question : After Mr.Ashok informed you about the same, did you make any Endeavour to contact the other side's Counsel for the Arbitrator about the next date of hearing?
Ans: There was no requirement for the same. As per the general practice, the intimation of next date of hearing comes from the learned Arbitrator's office."
The learned counsel for the 1st Defendant has put a suggestion to P.W.2 to the effect that P.W.2 had due knowledge of next date of hearing on 21.01.2012 and even on the day the claim statement was served, he was aware of the next date of hearing. These suggestions have been denied by P.W.2. 31 AS.23/2013
It has also been suggested to P.W.2 that he was aware of the next date of hearing and the same was mentioned in his e- mail written to the Company after receipt of claim statement. P.W.2 has emphatically denied this suggestion as false. It is further suggested to P.W.2 that he is intentionally not providing the e-mail. This suggestion is also denied by P.W.2.
The counsel for the 1st Defendant contends that since the e- mails are stored in the servers of the Company and in phone, the same did not in any manner prevent recovery of e-mails. It is the case of the 1st Defendant that the Plaintiffs counsel had sufficient knowledge of the next date of hearing. When the counsel for Plaintiffs stated that he had no notice of the next date of hearing and when he denied the suggestions put by 1st Defendant to the effect that he had due knowledge of the next date of hearing, it is the duty of the 1st Defendant to prove that P.W.2 had due knowledge of the next date of hearing. Assuming that the PW.2 intentionally withheld the e-mail communications, there could be no impediment for the 1st Defendant to get the e-mail information of P.W.2 sent to the Plaintiffs in a legal manner and get it produced in this case. However, the 1st Defendant did not do so. 32 AS.23/2013 Under such circumstances, it can be said that the Plaintiffs or their counsel had no due knowledge of the next date of hearing.
24) On 27.06.2012 the learned Arbitrator took the statement of objection of the Plaintiffs as not filed and matter was adjourned for evidence of the 1st Defendant on 14.07.2012. The Venue of further proceedings was fixed at 'Trial Base' No.20, 2nd Cross, Judicial Officers' Layout, Sanjayanagara. This change of Venue was also not intimated to the Plaintiffs or their counsel. The learned Arbitrator could have intimated this change of Venue to the counsel for the Plaintiffs, but did not do so.
On 14.07.2012, the MD of the 1st Defendant filed his examination-in-chief Affidavit and got marked Exs.P.1 to P.52. No such copy of examination-in-chief affidavit was served to the counsel for the Plaintiffs and no opportunity was given to the Plaintiffs to cross-examine the witnesses of the 1st Defendant. Instead, the learned Arbitrator posted the matter for argument on 10.08.2012.
On 10.08.2012, the matter was posted for passing of the award. In the meanwhile, on 10.08.2012 and 29.09.2012 the 33 AS.23/2013 counsel for 1st Defendant sought time to file amendment application. On 30.10.2012 the 1st Defendant filed amendment application. This amendment application was allowed and further examination-in-chief affidavit filed by the 1st Defendant's witness was recorded. No copy of the amendment application as well as further examination-in-chief affidavit and Memo of Calculation were served to the Plaintiffs or their counsel. Even no intimation was issued to the Plaintiffs or their counsel. All are done in the absence and without the knowledge of the Plaintiffs and their counsel. Ultimately, the award was passed on 08.12.2012.
25) It is crystal clear from the Ex. P.7 that, the award has been passed in sheer violation of the principles of natural justice, which was determined to follow in the arbitral proceedings, vide proceedings dated 12.12.2011 (Ex.P.7). Even the statutory provisions as laid down in Sections 18 and 24 of the Arbitration and Conciliation Act, 1996 have not been followed in this case. Ultimately, it is proved that no reasonable opportunities were given to the Plaintiffs to present their case before the learned Arbitrator.
34 AS.23/2013
The importance of natural justice has been ingrained in the following Judgments, which are relied upon by the Plaintiffs -
{Hon'ble Supreme Court of India in Civil Appeal No.7539/1999 decided on 12.03.2003 in Canara Bank and others vs. Debasis Das} " 15. Natural justice is another name for commonsense justice. Rules of natural justice are not codified canons. But they are principles ingrained into the conscience of man. Natural justice is the administration of justice in a commonsense liberal way. Justice is based substantially on natural ideals and human values. The administration of justice is to be freed from the narrow and restricted considerations which are usually associated with a formulated law involving linguistic technicalities and grammatical niceties. It is the substance of justice which has to determine its form.
16. The expressions "natural justice" and "legal justice" do not present a water-tight classification. It is the substance of justice which is to be secured by both, and whenever legal justice fails to achieve this solemn purpose, natural justice is called in aid of legal justice. Natural justice relieves legal justice from unnecessary technicality, grammatical pedantry or logical prevarication. It supplies the omissions of a formulated law. As Lord Buckmaster said, no form or procedure should ever be permitted to exclude the presentation of a litigants' defence." {The Hon'ble High Court of Karnataka in Misc. First Appeal No. 3742 of 2000, decided on 11-03- 2005 in Rudramuni Devaru Vs. Shrimad Maharaj Niranjan Jagadguru Dr.Gangadhar Rajayogendra Mahaswamigalu, Moorusaavira Math and Ors} 35 AS.23/2013 " 21. This takes us to the other contention of the appellant that the arbitral award is vitiated on account of utter violation of principles of natural justice and lack of fairness in the procedure adopted by the Arbitral Tribunal. It is needless to state that if the party making an application under Section 34 of the Act to set aside an arbitral award was not given proper notice of appointment of Arbitrator or of the arbitral proceedings or was otherwise unable to remain present in the arbitral proceedings before the Arbitral Tribunal an arbitral award may be set aside by the Court. The minimum requirements of a proper hearing should include : (i) each party must have notice that the hearing is to take place and of the date, time and place of holding such hearing; (ii) each party must have a reasonable opportunity to be present at the hearing along with his witnesses and legal advisers, if any, if allowed; (iii) each party must have the reasonable opportunity to present statements, documents, evidence and arguments in support of his own case; (v) each party must be supplied with the statements, documents and evidence adduced by the other side; (vi) each party must have a reasonable opportunity to cross- examine his opponent's witnesses and reply to the arguments advanced in support of his opponent's case. It is expected of an arbitral tribunal that it should ensure that the date for hearing is not so close that the case cannot be properly prepared. Equally, an Arbitral Tribunal while fixing the date of hearing, should try to accommodate any party who is placed in difficulty by his absence due to unavoidable circumstances such as illness or compelling engagement of himself elsewhere, etc. However, it is true that a party has no absolute right to insist of his convenience being consulted in every respect. The matter is very much within the discretion of the Arbitral Tribunal and the Court may intervene only in the cases of, positive abuse. Since each party has a right to remain present throughout the hearing, the Arbitral Tribunal is not to exclude either party even from a portion of hearing without the consent of such party. The Arbitral Tribunal is expected to give opportunity to both the parties to 36 AS.23/2013 present their respective cases and evidence in support thereof before it. Each of the parties is required to be apprised with statements, documents and evidence adduced by his opponent which are adverse to his case. Each party is also entitled to know any statements, documents, evidence or informations collected by the Arbitral Tribunal itself which are adverse to his interest, if they are not contested. The Arbitral Tribunal is neither to hear evidence nor arguments of one party in the absence of the other party, unless despite opportunity, the other party chooses to remain absent. So also, the Arbitral Tribunal is not to hear evidence in the absence of both the parties unless both the parties choose to remain absent despite proper notice. Each party to arbitration reference is entitled to advance notice of any hearing and of any meeting of the Arbitral Tribunal as provided under Section 24 of the Act. Section 18 of the Act mandates that the Arbitral Tribunal shall treat the parties to the arbitral reference with equality and that each party to the arbitral reference shall be given a full opportunity to present his case. Sections 23 and 24 of the Act deal with filing of statement of claim and statement of defence and hearings and written proceedings. It is of utmost importance to take note of the provisions of Sub-Section (3) of Section 24 of the Act in order to appreciate the contention of the appellant in this case. Sub-section (3) of Section 24 mandates that all statements, documents or other informations supplied to, or applications made to the Arbitral Tribunal by one party shall be communicated to the other party. The object behind the above prescription, to our mind, appears to be that the Arbitral Tribunal before making use of any such statements, documents and information against a party, that party should be apprised of these statements, documents and informations in consonance with the principles of natural justice. "
{The Hon'ble High Court of Kerala in
M.F.A.No.20/2002 in the case of Impex
37 AS.23/2013
Corporation and Ors. Vs. Elenjikal Aquamarine Exports Ltd., decided on 09.10.2007} " 7. Section 34 (2)(iii) of the Act reads as follows :
(2) An arbitral award may be set aside by the Court only if -
Xxx xxx xxx
(iii) the party making the application was not given proper notice of the appointment of Arbitrator or of the arbitral proceedings or was otherwise unable to present his case ;
The above provision is based in Article 34 of the UNICETRAL Report on Adoption of Model Law. Here copy of the claim statement was not given to the Appellants before he was declared ex parte. No notice of posting of the case was given before he was declared ex parte. When appellants were intimated the date of hearing, he was already declared ex parte and on that date there was no sitting and case was adjourned. Adjourned date was also not intimated. All these facts show that principles of natural justice wre vilated and opportunity of fair hearing was denied. It is fundamental to fair proceedings that both sides should be heard. The basic principle 'audi alteram partem' (Hear the other side') is accepted by all civilized counter (See Ridge V. Baldwin 1964 AC 40. In O'Reilly V. Mackman 1983 AC 237 Lord Diplock said in the House of Lords that the right of a man to be given 'a fair opportunity of hearing what is alleged against him and of presenting his own case is so fundamental to any civilized legal system that it is to be presumed that Parliament intended that a failure to observe it should render null and void any decision reached in breach of this requirement'. In Suresh Chandra Nanhorya V. Rajendra Rajak MANU/SC/8496/2006 Apex Court hold as follows :
8. Natural justice is an inseparable ingredient of fairness and reasonableness. It is even said that the 38 AS.23/2013 principles of natural justice must be read into unoccupied interstices of the statute, unless there is a clear mandate to the contrary.
9. In the celebrated case of Cooper V. Wandsworth Board of Works the principle was thus stated : (ER p.420) (E)ven God himself did not pass sentence upon Adam before he was called upon to make his defence.
"Adam' (says God), 'where art thou? Hast thou not eaten of the tree whereof I commanded the that 'thou shouldest not eat?
10. Since then the principle has been chiseled, honed and refined, enriching its content. In Malloch V. Aberdeen Corporation it was stated : (All ER p.1279e) The right of a man to be heard in his own defence was the most elementary protection ..........
11. Natural justice is the essence of fair adjudication, deeply rooted in tradition and conscience, to be ranked as fundamental. The purpose of following the principles of natural justice is the prevention of miscarriage of justice.
This principle is incorporated in Sections 18 and 24 of the Arbitration Act. Here in this case appellant was denied the right of fair hearing."
{The Hon'ble High Court of Kerala in Arb.A.No.11/2014, decided on 31-07-2015 in the case of Saju P.P. and others vs. Muthoot Vehicle and Assets Finance Ltd.} " Section 18 of the Act stipulates that the parties shall be treated with equality and that each party shall be given full opportunity to present his case. Section 24(3) of the Act stipulates that all statements, documents or other information 39 AS.23/2013 supplied to, or applications made to the Arbitral Tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the Arbitral Tribunal may rely in making its decision shall be communicated to the parties. Interpreting the aforesaid provisions, a Division Bench of this Court has in Impex Corporation V. Elenjikal Aquamarine Exports Ltd. (supra) held that though the Arbitrator has liberty to proceed ex parte he should give that party notice of his intention to proceed ex parte, if he is absent at the next hearing and if an ex parte decision is taken if one party is absent without sufficient reason, the decision will be valid. The Division Bench held that natural justice is the essence of fair adjudication, deeply rooted in tradition and conscience, to be ranked as fundamental, that the purpose of following the principles of natural justice is the prevention of miscarriage of justice and this principle is embodied in Sections 18 and 24 of the Act. The Division Bench held that if there is violation of the basic principles of natural justice and the statutory provisions contained in Sections 18 and 24 of the Act, the award of the Arbitrator is liable to be set aside under Section 34(2)(iii) of the Act. As stated earlier, in the instant case, the Arbitrator did not set the appellants ex parte. The Arbitrator had, even though the claimants had not filed proof affidavit in time, repeatedly adjourned the case to suit the claimant's convenience. The Arbitrator did not take up the case for hearing immediately after the proof affidavit of the claimant was filed. It was only four months after the proof affidavit of the claimant was filed that the Arbitrator heard the claimants. He did not in the interregnum issue notice to the appellants cautioning them that if they fail to appear, he will be constrained to set them ex parte. He did not also forward to the appellants a copy of the proof affidavit filed by the claimants and copies of the documents produced along with it. It is thus evidence that before the award which is the subject-matter of the instant appeal was passed, the appellants were not given 40 AS.23/2013 full opportunity to present their case and that the adjudication made by the Arbitrator was without proper notice to them. The award passed by the Arbitrator in the instant case is in our opinion liable to be set aside as one made and passed in gross violation of the principles of natural justice and Sections 18 and 24 of the Act. [12] and [13]"
26) The Hon'ble Supreme Court of India in Civil Appeal No.2809 and 2810 of 29179 decided on 01.09.2003 in the case of Sohan Lal Gupta (Dead) thr. L.Rs. and Ors. Vs. Asha Devi gupta and Ors., was pleased to explain what would constitute reasonable opportunity.
" 20. There cannot be any dispute with regard to the proposition of law that the parties would be entitled to a reasonable opportunity of putting their case. [See Montrose Cannel Foods Ltd. V. Eric Wells (Merchants) Ltd. [ (1965) 1 Lloyd's Report 597]. A reasonable opportunity would mean that a party must be given an opportunity to explain his arguments before the Tribunal and to adduce evidence in support of his case. However, under the old Act, an oral hearing would only be permitted if a party requested one, unless there was some agreement to the contrary [See Henry Southern Ltd. V. Norwich Union Life Insurance Society (1992) 31 E.G.70.
21. What would constitute a reasonable opportunity of putting case as also qualification, the right has been stated in 'Russell on Arbitration', on 22nd Edition, paragraphs 5-053 and 5-054 which are in the following terms :
" 5-053 A reasonable opportunity of putting case. Each party must be given a reasonable opportunity to 41 AS.23/2013 present his own case. This means he must be given an opportunity to explain his arguments to the tribunal and to adduce evidence in support of his case. Failure to comply with this requirement may render the award subject to challenge under Section 68 of the Arbitration Act 1996. It is also a ground for refusing enforcement of the resulting award under the New York Convention.
23. For constituting a reasonable opportunity, the following conditions are required to be observed :
1. Each party must have notice that the hearing is to take place.
2. Each party must have a reasonable opportunity to be present at the hearing, together with his advisers and witnesses.
3. Each party must have the opportunity to be present throughout the hearing.
4. Each party must have a reasonable opportunity to present evidence and argument in support of his own case.
5. Each party must have a reasonable opportunity to test his opponent's case by cross-examining his witnesses, presenting rebutting evidence and addressing oral argument.
6. The hearing must, unless the contrary is expressly agreed, be the occasion on which the parties present the whole of their evidence and argument."
27) The Hon'ble Supreme Court in ONGC Ltd. V. Saw Pipes Ltd was pleased to hold that the award, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest, which has been quoted by the Hon'ble Supreme Court of 42 AS.23/2013 India in Civil Appeal No.3415/2017 decided on 04.09.2014 in the case of Oil and Natural Gas Corporation Ltd., Vs. Western Geco International Ltd., wherein it was pleased to hold :
" 25. It is true that none of the grounds enumerated Under Section 34(2)(a) were set up before the High Court to assail the arbitral award. What was all the same urged before the High Court and so also before us was that the award made by the Arbitrators was in conflict with the "public policy of India' a ground recognized Under Section 34(2)(b)(ii) (supra). The expression "Public Policy of India" fell for interpretation before this Court in ONGC LTD. V. Saw Pipes Ltd. MANU/SC/0314/2003 : (2003) 5 SCC 705 and was, after a comprehensive review of the case law on the subject, explained in para 31 of the decision in the following words :"
31. Therefore, in our view, the phrase "public policy of India" used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term "public policy" in Renusagar case10 it is required to be held that the award could be set aside if it is patently illegal. The result would be- award could be set aside if it is contrary to :
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality, or
(d) in addition, if it is patently illegal.
43 AS.23/2013
Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void.
28. Equally important and indeed fundamental to the policy of Indian law is the principle that a Court and 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 one 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 disclosure 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."
28) The Hon'ble Supreme Court and the Hon'ble High Courts time and again were pleased to make it clear that principles of natural justice is indispensable part of judicial system and it must be adhered to, so as to give complete justice to the parties to the lis. The ratio laid down in the above decisions and facts stated in the Rudramuni Devaru, Impex Corporation and Saju P.P. as stated supra, are aptly applicable to the facts of the Plaintiffs' case. The 44 AS.23/2013 rest of the decisions relied upon by the learned counsel for the Plaintiffs lay down the same principles that laid down in the above decisions.
29) Per contra, the 1st Defendant has relied upon the following decisions :
(1) AIR 1961 PUN 206 [ Azad Hind Chemicals Ltd. Vs. Ram Lal of United Chemicals Works, Jullundur & Anr.] " It is the litigant who should approach the Court and no duty is cast on file Arbitrator to invite a recalcitrant party to be present when it has evinced its intention to remain absent and especially in a case when the entire ex parte evidence had already been recorded against such party. There is also no warrant for the proposition dial an Arbitrator is under any duty to inform a party about the time of announcement of the award when it has throughout absented itself from the proceedings and the Arbitrator cannot be said to be guilty of any judicial misconduct for not giving any such notice."
The facts stated in the above judgment, in which, the exparte proceedings are taken against a party. Under such circumstances, it was held that it is the party aggrieved which has to approach the Court to have these set aside and that no warrant for the proposition that an Arbitrator is under any duty to inform a party about the time of announcement of award when it has throughout absented itself from the proceedings. 45 AS.23/2013
(2) MANU/MH/0341/2015 [Krishnabhagwan Rajaram Sharma Vs. Tata Motors Finance Ltd.] " Arbitration - Arbitral award - Allowance of claims - Sections 24(2) and 34 of Arbitration and Conciliation Act, 1996 - Present petition under Section 34 of the Act filed for challenging order whereby, Respondents' claims regarding loan amount were allowed, on ground that proper opportunity of hearing was not given to Petitioner - Whether Respondents' claims were rightly allowed - Held, Section 24(2) of Act provides that parties shall be given sufficient advance notice of any hearing and of any meeting of arbitral tribunal for purposes of inspection of documents, goods or other property - Arbitrator had adjourned hearing from time to time to give sufficient opportunity to Petitioner to remain present and to file pleadings before Arbitrator - No grievance of alleged non-compliance of principles of natural justice - Petitioner had admittedly not responded to loan recall notice issued by Respondents - Under loan agreement, power to appoint Arbitrator vested in Respondents exclusively - Thus, no error was committed by Arbitrator - Therefore, claims of Respondents were rightly allowed - Petition dismissed."
The facts of the above judgment are that, no advance notice issued by the learned Arbitrator for hearing of the arbitral proceedings or that no notices were served upon the petitioner except notice dated 11.05.2012. In this case, notices were issued to the counsel for the Petitioner. Having regard to the facts, it was pleased to hold that once the Petitioner was represented through 46 AS.23/2013 an advocate, the notice served upon advocate on behalf of the Petitioner is also a proper notice deemed to have been received by the petitioner through his advocate.
(3) LAWS (DLH) 1997 7 78 [ Anil Jain Vs. Madhunam Appliances Pvt. Ltd.] " ....... I would beg to differ from the said view on this point. I feel it is of no use to go on serving a man who is not ready to co-operate and to participate in the proceedings despite the innumerable opportunities granted to him to appear and defend himself. If the Arbitrator is required to give a notice over again despite the previous notice given to a party then it would be tantamount to putting premium on his lapses. There is no rule or law which requires, an Arbitrator to serve a party with a notice before initiating the ex parte proceedings against him. I am supported in my above view by the observations of a Division Bench of the Allahabad high Court .........."
In this case, the learned Arbitrator issued quite a good number of notices to the appellant through registered post and all of them were returned with the report that the appellant was not available and the employees in his office refused to accept the notice. This fact has been narrated in Para-7 of the above judgment. In the back drop of the facts stated in the Para-7 of the judgment, the above ratio has been laid down. 47 AS.23/2013
(4) AIR 1954 ALL 244 [ Dori Lal Vs. Lal She.] " An Arbitrator, who has given due notice of the proceeding to the parties is entitled to proceed ex parte if one party does not choose to appear. There is no provision in the Arbitration Act requiring the Arbitrator to give a second notice of his intention to proceed ex parte against a person who is absent after service of notice. The fact, therefore, that the Arbitrator did not give a second notice of his intention to proceed ex parte cannot amount to legal misconduct."
In this case, the learned arbitrator proceeded exparte against the defendant, who did not appear before the arbitrator. Under such circumstances, it was pleased to hold that the fact, therefore, that the arbitrator did not give a second notice of his intention to proceed exparte cannot amount to legal misconduct. It is, however, urged that in the circumstances of the case the arbitrator was not justified in proceeding exparte; in other words, that the defendant had sufficient cause for non-appearance as his lawyer was not able to get into touch with him.
The judgments relied upon by the learned counsel for the 1st Defendant, have been delivered in the context of the facts laid down in the said judgments. Here is the case, in which it has been 48 AS.23/2013 established that sufficient opportunities were not given to the Plaintiffs to present their case before the learned Arbitrator.
30) For the foregoing reasons, I am of the opinion that, here is the case in which it is established that, no sufficient opportunities were given to the Plaintiffs to present their case before the learned Arbitrator. The mandatory provisions of law laid down in Sections 18 and 24 of the Arbitration and Conciliation Act, 1996 have not been followed. The principles of natural justice, which were determined to adopt in the arbitral proceedings before the learned Arbitrator were not followed. As held by the Hon'ble Supreme Court and the Hon'ble High Courts, the award passed in gross violation of natural justice and in violation of statutory principles of law can be set aside under section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996. For all these reasons, I am of the opinion that the award passed by the learned Arbitrator is liable to be set aside under section 34(2)(a)(iii) and section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996, accordingly, I answer the above points in the affirmative. 49 AS.23/2013
31) Point No.3 : For the foregoing discussions, without going to the merits of the case, I proceed to pass the following :
ORDER (1) The suit filed by the Plaintiffs under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the Award dated 08.12.2012 passed by the learned Arbitrator/Defendant No.2 (Arbitration Case No.25/2011) is hereby allowed.
(2) The Award, dated 08.12.2012 passed by the learned Arbitrator/Defendant No.2 (Arbitration Case No.25/2011) is hereby set aside.
(3) The parties are at liberty to approach either the learned Arbitrator/Defendant No.2 or to appoint a new Arbitrator on mutual consent for adjudication of the matter afresh.
(Dictated to the Judgment Writer, transcribed and computerized by her, transcript thereof corrected and then pronounced by me in open court, dated this the 11th day of October, 2018.) (RAMA NAIK) VI Addl.City Civil & Sessions Judge, Bengaluru City.
50 AS.23/2013ANNEXURE I. List of witnesses examined on behalf of :
a) Plaintiffs side :
P.W.1 - Mr.Syeed Ahmed, dtd.19.04.2018 P.W.2 - Mr.Ramesh Ananthan,dtd.19.04.2018
b) Defendants side : N I L II. List of documents exhibited on behalf of :
a) Plaintiffs side :
Ex.P.1 - Certified copy of Arbitral award dtd.08.12.2012 Ex.P.2 - Letter dtd.11.12.2012 issued by Defendant No.2/ Arbitrator to Plaintiff No.3 Ex.P.3 - Copy of Memorandum of claim petition in Arbitration Case No.25/2011 filed by 1st Defendant.
Ex.P.4 - RPAD envelop addressed to Plaintiff No.3 Ex.P.5 - Office copy of letter dated 22.01.2013 addressed to Defendant No.2 Ex.P.6 - Information letter dtd.22.01.2013 given by Defendant No.2 to Plaintiff No.1 Ex.P.7 - Certified copy of proceedings pertaining to AC.No.25/2011 Exs.P.8 to P.10 - Original of 3 incoming/RPAD registers maintained by 1st Plaintiff during the period from November, 2011 to December, 2012.51 AS.23/2013
Ex.P.11 - Board Resolution of 1st Plaintiff company authorizing CEO Mr.Sayeed Ahmed i.e. P.W.1.
Ex.P12 - Office copy of reply of 1st Plaintiff dtd.27.05.2010 to 1st Defendant's letter dtd.24.04.2010 Ex.P.13 - Postal acknowledgment Ex.P.14 - Print out of E-mail communication dtd.19.09.2008 sent by 1st Defendant to 1st Plaintiff.
Ex.Ps.15 to 21 - Photographs - 6 Nos.
Ex.P.22 - Print out of E-main dtd. 28.10.2012 Ex.P.23 - Print out of E-mail dtd.23.11.2012 Ex.P.24 - Print out of E-mail dtd.25.11.2012 Ex.P.25 - Certificate filed under Section 65(b)(4) of Indian Evidence Act.
b) Defendants side : NIL
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VI Addl.City Civil & Sessions Judge,
Bengaluru City.