Delhi District Court
Angelique International Limited vs J & C Contractors Private Limited on 3 November, 2017
IN THE COURT OF SHRI SANJAY SHARMAI :
ADDL. DISTRICT JUDGE - 02 (EAST DISTRICT)
KARKARDOOMA COURTS : DELHI
Appeal No. 68/2016
Angelique International Limited
104107 , Hemkunt tower,
1st Floor, 98, Nehru Place,
New Delhi 110 019 ................Petitioner
Versus
1. J & C Contractors Private Limited,
155B , PocketI, Mayur Vihar PhaseI,
Delhi - 110 091
2. Shri Suryakant Singla
Sole Arbitrator having Office at
P10, South ExtensionII,
New Delhi - 110 049 ................ Respondents
Date of institution : 28.4.2016
Date of reserving judgment : 26.10.2017
Date of judgment : 03.11.2017
O R D E R :
This order shall dispose of a petition under Section 34 of the Arbitration and Conciliation Act, 1996 praying for setting aside the Award dt. 27.1.2016 passed by Shri Suryakant Singla - Sole Arbitrator in the arbitral proceedings between the parties.
2. In brief, the facts giving rise to the present petition are that the respondent herein filed a suit for recovery against the petitioner for a Arbitration No. 68/2016 1 of 9 sum of Rs.9,63,500/ alongwith pendente lite and future interest @ 18% per annum, being Civil Suit No. 684/2014, before this Court. The petitioner herein put in appearance and filed an application under Section 8 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the Act) for referring the matter to arbitration . The said application was allowed vide order dt. 09.7.2015 and the dispute was referred to Arbitration and Shri Suryakant Singla was appointed as the Sole Arbitrator for adjudicating the dispute between the parties.
3. Both the parties appeared before the Arbitrator. The respondent No. 1 herein filed his statement of claim and the petitioner filed his pleadings titled as 'reply to the statement of claim on behalf of the respondent'. Considering the pleadings, the Ld. Arbitrator framed a single issue on 07.2.2015 and after hearing both the parties, passed the impugned Award dt. 27.1.2016 in favour of the respondent No. 1 herein .
4. Notice of the petition was issued to the respondents and respondent No. 1 filed a reply to the petition . Respondent No. 2 was the Arbitrator and thus, only a proforma party.
5. I have heard Shri Tarun Singla - Ld. Counsel for the petitioner, Ms. Meenakshi Aggarwal - Ld. Counsel for the respondents and have carefully gone through the records of the case.
6. It was submitted by Ld. Counsel for the petitioner that he had not filed any reply on merits to the statement of claim before the Ld. Arbitrator in his "reply to the statement of claim" as aforesaid, but has only challenged the constitution and appointment of the Arbitral Tribunal in the said reply. In fact, it was only an application under Section 16 of the Act which was inadvertently captioned 'reply as statement of claim'. It Arbitration No. 68/2016 2 of 9 was further submitted that the Ld. Arbitrator failed to give any opportunity to the petitioner to refute the statement of claim on merits after deciding the issue regarding his constitution which he was duty bound to give. It was further submitted that the Award has not been passed on merits, meaning thereby Ld. Arbitrator did not ask the respondent No.1 to lead any evidence to prove the claim made by it before him and believing the statement of claim to be gospel truth , he passed the impugned Award. Thus, the petitioner did not had any opportunity to even crossexamine the witnesses of the respondent/claimant and as such , it is submitted that the principles of natural justice were not followed by the Ld. Arbitrator and the Award is also against public policy. It was also submitted that the impugned Award is also not in accordance with the agreement between the parties.
7. In reply, all the allegations have been denied by the contesting respondent submitting that the dispute was referred to the Arbitration only on the application of the petitioner and therefore, now he cannot challenge the authority. It was also submitted that since the petitioner failed to file any reply on merits to the statement of claim of the respondent despite sufficient opportunities granted, therefore Ld. Arbitrator was justified in believing the statement of claim filed by the respondent as true and correct and rightly passed the impugned Award. Lastly, it was submitted that since there was no issue framed on facts, therefore, there was no need for the respondent to lead any evidence and for taking the matter to trial.
8. I have considered the rival contention of Ld. Counsels for the parties.
Arbitration No. 68/2016 3 of 9
9. There is no dispute to the fact that there was an arbitration agreement between the parties and believing the same, the Court had referred the dispute to the Arbitration under Section 8 of the Act, that too on the application of the present petitioner. The Arbitrator was appointed by the Court and I find no wrong in it.
10. In Afcons Infrastructure Limited Vs. Cherian Varkey Construction Co. (P) Ltd. AIR 2007 (NOC) 233 Kerala , it has been observed that "power of Court to refer parties for arbitration would and must necessarily include, imply and inhere in it the power and jurisdiction to appoint Arbitrator also".
11. Though the petitioner challenged the jurisdiction of the Arbitrator under section 16 of the Act but it appears that it was so challenged on a wrong notion and on a wrong interpretation of Section 11(6) of the Act which comes into play only when a party fails to act as required or where the two appointed Arbitrators, one each by both parties, fail to reach an agreement expected of them or where a person fails to perform any function entrusted to him. It is only in that eventuality that a party may request the Chief Justice or any person or Institution designated by him to take necessary measure, unless the agreement on the appointment procedure provides other means for securing appointment. There was no such occasion in the present case as the application under Section 8 of the Act was filed by the petitioner which was not opposed by the respondent and even the Arbitrator was appointed by the Court to which no objection was raised by any of the parties, as is reflected from the order dt. 09.7.2015.
12. In any case, the proceedings conducted before the Ld. Arbitration No. 68/2016 4 of 9 Arbitrator which were summoned, have been scrutinized by this Court. The reply to the statement of claim as aforesaid, filed by the petitioner has been considered. A bare perusal of the same shows that it was only an objection under Section 16 of the Act on which the Ld. Arbitrator had also framed an issue. The issue was decided against the petitioner in the impugned Award, however the Ld. Arbitrator, without affording any opportunity to the petitioner to file his reply to the statement of claim after deciding the said issue, straight away passed the Award in favour of the respondent.
13. In my opinion , the procedure adopted by the Ld. Arbitrator was not in accordance with law. Section 16 (2) of the Act requires that the plea that the Arbitral Tribunal does not have the jurisdiction shall be raised not later than the submission of the statement of defence. Section 16(1) of the Act gives power to the Arbitral Tribunal to rule on its own jurisdiction . Once that has been done, i.e. once the Tribunal is of the opinion that it has the jurisdiction , it is required to continue with the Arbitral proceedings and make Award under subSection( 5) of Section 16 of the Act.
14. Hence, so far as the framing of the issue by the Ld. Tribunal on the point of jurisdiction is concerned, that was correct but after deciding it, it had to proceed with the arbitral proceedings which it failed to do so. The Ld. Arbitrator was required to give at least one opportunity to the petitioner to file reply to the statement of claim on merits after deciding the said issue which was not given . Even if no reply on merits was filed by the petitioner, the Ld. Arbitrator had to proceed in accordance with the procedure laid down in the Act, without treating the Arbitration No. 68/2016 5 of 9 failure of the petitioner to file reply, as admission of allegations. In this regard, Section 25 of the Act requires mention which is as under :
"Unless otherwise agreed by the parties, where, without showing sufficient cause
(b) the respondent fails to communicate his statement of defence in accordance with subSection (1) of Section 23 , the Arbitral Tribunal shall continue the proceedings without treating that failure in itself as an admission of the allegations by the claimant".
15. In para 10 of the Award (page 10 and 11), the Ld. Arbitrator observed as under :
"The respondent submitted his reply, which is supported by an affidavit sworn on 18.11.2015. The caption of the reply is 'reply to the statement of claim on behalf of the respondent'. However, the claims as raised by the claimant have not been repudiated by the respondent. Except for a bald denial in the opening sentence of the reply, there is no denial of the claims. Denial has to be specific. In the circumstances, I have no option but to take the claims set out in the Claim Statement to be admitted".
16. The Ld. Arbitrator was not a layman but a practicing advocate and therefore, it was expected that he should have gone through the provisions of the Arbitration Act and particularly, Section 25(b) of the Act, as quoted herein above. Thus, he should have given an opportunity, may be subject to cost, to the petitioner asking him to file reply or statement of his defence to the claim and even if the petitioner failed to do so, he had to proceed on merits, as required by Section 16 (5) of the Act, after deciding the issue under Section 16 of the Act. In any case, he could not have deemed the claims to have been admitted by the petitioner upon his failure to file any statement of defence.
Arbitration No. 68/2016 6 of 9
17. It was also rightly pointed out by Ld. Counsel for the petitioner that the Ld. Arbitrator failed to ask the respondent to lead evidence on the claims made by it in its statement of claim and without calling for any evidence and giving any opportunity to the petitioner to crossexamine the witnesses of the respondent, passed the Award.
18. Section 24 (1) of the Act provides that "unless otherwise agreed by the parties, the Arbitral Tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral arguments, or whether the proceedings shall be conducted on the basis of documents and other materials". The impugned Award and the proceedings of the Ld. Tribunal show that no such decision was taken by the Ld. Arbitrator. The statement of the claim of the respondent was based on documents and therefore, it was incumbent upon the Ld. Tribunal to have asked the respondent herein to lead evidence and prove the said documents. The record of the Ld. Arbitral Tribunal called for shows that the respondent herein had only filed photocopies of the documents relied upon by it which were relied upon by the Tribunal without calling for their original and without getting them proved and without even recording the statement of the claimant/respondent. Thus, the Award is based on absolutely no evidence.
19. In Associate Builders Vs. Delhi Development Authority (2015) 3 SCC 49, relied upon by Ld. Counsel for the petitioner, in para 31, it was held that :
"31.The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation . It is a Arbitration No. 68/2016 7 of 9 settled law that where :
(i) a finding is based on no evidence or ;
(ii) an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision , such decision would necessarily be perverse.
20. In another case relied upon by Ld. Counsel for the petitioner, State of Rajasthan & anr. Vs. Ferro Concrete Construction Pvt. Ltd. (2009) 12 SCC 1, in para 55 following observations were made :
55. While the quantum of evidence required to accept a claim maybe a matter within the exclusive jurisdiction of the Arbitrator to decide, if there was no evidence at all and if the Arbitrator makes an Award of the amount claimed in the claim statement, merely on the basis of claim statement without anything more, it has to be held that the Award on that account would be invalid. Suffice it to say that the entire Award under this head is wholly illegal and beyond the jurisdiction of the Arbitrator, and wholly unsustainable".
21. The impugned Award is merely based on the statement of claim made by the respondent herein and on absolutely no evidence, as is clear from the above discussion . Thus, in light of the provisions of the Act and the judgments of the Hon'ble Apex Court, referred to herein above, the impugned Award cannot be sustained in the eyes of law being perverse and also against the principles of natural justice.
22. The question arose whether the matter can be remitted back to the Arbitrator for a decision afresh . The answer appears in yet another judgment relied upon by the Ld. Counsel for the petitioner in Bhasin Associates Vs. NBCC ILR (2004) Delhi 88, wherein it was held that "the Arbitration No. 68/2016 8 of 9 power of the Court to set aside the Award under Section 34 of the Arbitration & Conciliation Act, 1996 also included to remit the matter back to Arbitrator for a fresh decision if just and proper, under given facts and circumstances of the case".
23. In the facts and circumstances of the present case, since no proper opportunity was given to the petitioner to present his defence nor any evidence was recorded by the Ld. Arbitrator, therefore, it appears just and proper that the matter be remitted back to the same Arbitral Tribunal for adjudication of the dispute afresh after giving proper opportunity to the petitioner to file his statement of defence and after recording evidence to be led by both the parties.
24. In view thereof, the present petition is allowed and the impugned Award dt. 27.1.2016 is set aside. It is directed that the matter be remitted to Shri Surya Kant Singla - Sole Arbitrator for a fresh decision in terms of the above findings.
25. A copy of this order be also sent to the Ld. Arbitrator alongwith the record of his proceedings. Both the parties are directed to appear before the Ld. Arbitrator on 08.12.2017. The petitioner shall file his statement of defence within 30 days of his first appearance before the Ld. Arbitrator.
Petition file be consigned to Record Room.
Digitally signed byANNOUNCED IN OPEN COURT SANJAY SANJAY SHARMA
Location: Delhi
ON the 3 day of November 2017
rd
SHARMA +0530 Date: 2017.11.06 12:26:10
(SANJAY SHARMAI)
Addl. District Judge02 (East)
Karkardooma Courts, Delhi
Arbitration No. 68/2016 9 of 9