Gauhati High Court
Sri Amit Kumar Agarwala vs M/S Maa Saarda And Company And Anr on 9 May, 2019
Equivalent citations: AIR 2019 GAUHATI 145, AIRONLINE 2019 GAU 270 (2019) 4 GAU LT 275, (2019) 4 GAU LT 275
Author: Suman Shyam
Bench: Suman Shyam
Page No.# 1/9
GAHC010026332015
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : Arb.A. 22/2015
1:SRI AMIT KUMAR AGARWALA,
S/O SRI NIRANJAN KUMAR AGARWALA, R/O LALA LAJPATH ROY ROAD,
ASHRAMPARA, P.O. and P.S. SILIGURI-734001, DIST. DARJEELING, WEST
BENGAL
VERSUS
1:M/S MAA SAARDA and COMPANY and ANR.
A PARTNERSHIP FIRM, REPRESENTED BY MADAN SAHA, S/O LATE
NIRANJAN KUMAR SAHA, HAVING ITS OFFICE AT DURGA DAS ROAD,
WARD NO. 5, POST OFFICE, POLICE STATION AND DIST. DHUBRI, ASSAM.
2:M/S MAA SAARDA and CO.
A PARTNERSHIP FIRM
BEING RESPONDENT NO. 1
HAVING ITS BRANCH OFFICE
WORKING FOR GAIN
HAVING OFFICE AT CARE OF SHARDA BUILDER
RAMAKRISHNA SAMITY BUILDING
PANITANKI MORE
P.O. and P.S. SILIGURI
DIST. DARJEELING
REPRESENTED BY SHRI JAGANNATH SAHA
Advocate for the Petitioner : MR.H GUPTA
Advocate for the Respondent : MD.ASLAMR- 1and2
BEFORE
HONOURABLE MR. JUSTICE SUMAN SHYAM
Page No.# 2/9
JUDGMENT & ORDER (ORAL)
Date : 09-05-2019 Heard Mr. H. Gupta, learned counsel for the appellant. I have also heard Mr. D. Senapati, learned counsel representing the respondents.
2. This appeal has been preferred against the judgment and order dated 06-08-2015 passed by the court of learned District Judge, Dhubri in Misc. (Arb.) Case No. 01/2012 rejecting the application filed by the appellant under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the Act of 1996), refusing to set aside the arbitral award dated 15-01-2012 passed by the sole arbitrator, viz. Sri Anupam Ghosh in Arb. Case No. 01/2011.
3. The facts of the case, in a nutshell, are that the appellant herein had entered into a hire purchase agreement with the respondent No. 1 for purchasing a vehicle, viz. TATA truck bearing registration No. WB-73B-4778 with the financial assistance provided by the respondent No. 1. Sri Dilip Acharjee and Sri Ashok Kundu were two guarantors to the hire purchase agreement. According to the respondent No. 1, the appellant had failed to repay the installments falling due as a result of which, a notice was issued to the appellant on 26-06-2011 demanding payment of the outstanding dues. By issuing the notice dated 26- 06-2011, the appellant was called upon to make payment of the outstanding dues along with penal interest within 07 days from the date of issuance of the notice, failing which, the dispute would be referred to the sole arbitrator. When the appellant failed to respond to the notice dated 26-06-2011, the respondent No. 1 had appointed Sri Anupam Ghosh, Advocate of the Dhubri Bar Association to act as the sole Arbitrator. The arbitrator so appointed by the respondent No. 1 had thereafter, issued a notice dated 03-09-2011 to Page No.# 3/9 the appellant and the respondent No. 1 herein and the two guarantors, notifying the date of appearance before him for the purpose of adjudication of the claims and counter claims in the arbitration proceeding. Upon receipt of the notice dated 03-09-2011, the appellant had filed an application questioning the jurisdiction of the sole arbitrator to adjudicate upon the dispute arising out of the hire purchase agreement. Thereafter, the appellant had filed his written statement of defence on 10-12-2011, once again taking the plea of want of jurisdiction of the sole arbitrator, by questioning the process through which he was appointed. However, by ignoring such objection raised by the appellant, the sole arbitrator had passed the award dated 15-01-2012 allowing the claim of the respondent No. 1 for recovery of an amount of Rs. 8,63,594/- along with interest @ 12% per annum on the said amount.
4. Being aggrieved by the arbitral award dated 15-01-2012, the appellant had approached the court of learned District Judge, Dhubri by filing an application under section 34 of the Act of 1996, numbered and registered as Misc. (Arb.) Case No. 01/2012, praying for setting aside the impugned arbitral award. By the judgment and order dated 06-08-2015, the learned District Judge, Dhubri had dismissed the said application. Hence, this appeal.
5. The primary contention of Mr. Gupta, learned counsel appearing for the appellant is that the respondent No. 1 did not issue any notice to the appellant before appointing the arbitrator nor was the dispute ever referred to arbitration as per law. According to Mr. Gupta, the notice dated 26-06-2011 is a notice demanding payment of the outstanding dues. Since no notice, as contemplated under Section 21 of the Act of 1996, was ever Page No.# 4/9 issued to the appellant nor was the consent of the appellant sought in the matter of appointment of sole arbitrator, the arbitration proceeding, submits Mr. Gupta, was non-est and the impugned award a nullity in the eye of law.
6. It is also the submission of Mr. Gupta that although the validity of the impugned arbitral award was specifically challenged by the appellant by taking the plea of want of jurisdiction, the learned District Judge had failed to consider the same in accordance with law and thereby, committed manifest illegality by rejecting the application filed under Section 34 by holding that the same was not one of the grounds available under Section 34 of the Act of 1996 for setting aside an arbitral award.
7. Responding to the arguments advanced by the appellant's counsel, Mr. Senapati, learned counsel for the respondents, has fairly submitted that in this case, no notice was issued to the appellant by his client before appointment of Sri Anupam Ghosh as the sole arbitrator. The learned counsel has, however, argued that the appellant also did not pursue the plea regarding want of jurisdiction of the sole arbitrator and, therefore, has waived his right to assail the impugned arbitral award on such ground. It is also the submission of Mr. Senapati that the basic contention of the appellant regarding lack of jurisdiction of the arbitrator was with reference to the pendency of a civil suit by and between the parties and therefore, has to be understood as an objection raised within the meaning of Section 8 of the Act of 1996 and not one coming under Section 16(2) of the Act of 1996.
8. Referring to a decision of the Hon'ble Supreme Court in the case of MSP Infrastructure Ltd. Vs. M.P. Road Development Corpn. Ltd. reported in (2015) 13 Page No.# 5/9 SCC 713, Mr. Senapati submits that the settled position of law is that objection as to jurisdiction is different in case of arbitration proceeding as compared to a civil suit and therefore, in the absence of the plea having been pursued by the appellant in accordance with the provision of the Act of 1996, the said plea cannot be entertained by this Court at this distance point of time.
9. I have bestowed my thoughtful considerations to the arguments advanced by the learned counsel for both the parties and have also carefully gone through the materials available on record.
10. It is to be noted herein that the signing of the hire purchase agreement with the respondent No. 1 (financer) has not been disputed by the appellant nor has the existence of the arbitration agreement denied by him. The dispute arising in the present proceeding pertains to the procedure followed by the respondent No. 1 while appointing the sole arbitrator.
11. As per arbitration agreement contained in the hire purchase agreement, an Advocate of Dhubri Bar would competent to act as a sole arbitrator so as to adjudicate any dispute arising by and between the parties. As noticed above, the legal advisor of the respondent No. 1 had issued a notice dated 26-06-2011 to the appellant and the two guarantors demanding payment of the outstanding dues. From a perusal of the notice dated 26-06-2011, it is clear that the same was not a notice by means of which the dispute was referred to arbitration. In the notice dated 26-06-2011, there is also no mention about appointment of any person as sole arbitrator. There was no other notice issued by the respondent No. 1 to the appellant. It is, therefore, apparent that the Page No.# 6/9 respondent No. 1 had unilaterally appointed the sole arbitrator without intimating or obtaining the consent of the appellant. Moreover, there was also no notice issued by the respondents within the meaning of Section 21 of the Act of 1996 notifying the commencement of the arbitration proceeding.
12. Section 21 of the Act of 1996 provides that an arbitral proceeding shall be deemed to have been commenced on the date on which a request for that dispute to be referred to arbitration is received by the respondent, unless otherwise agreed by the parties. In this case, there is no agreement between the parties contrary to the mandate of Section 21 of the Act of 1996. Therefore, a valid arbitration proceeding under the arbitration agreement can be said to have commenced only after a notice referring the dispute to arbitration issued by the respondent No. 1 was received by the appellant. However, there is no dispute in the case about the fact that no such notice was ever issued by the respondent No. 1 to the appellant.
13. In the case of Alupro Building Systems Pvt. Ltd. Vs. Ozone Overseas Pvt. Ltd. reported in 2017 SCC OnLine Del 7228 it has been held by the Delhi High Court that in the absence of an agreement between the parties to waive the requirement of a notice under Section 21, the provision must be given full effect to. In the said decision it has further been observed that the arbitration proceeding held without a notice by the respondent under Section 21 invoking arbitration clause was invalid. The only exception to the said rule would be that there is an agreement to the contrary between the parties. I am in respectful agreement with the views expressed by the learned Single Judge of the Delhi High Court on the above issue. What, therefore, follows is that unless otherwise Page No.# 7/9 agreed to by the parties, issuance of notice under Section 21 would be sine quo non for commencement of an arbitral proceeding within the meaning of the Act of 1996 and any departure there-from would be at the cost of invalidation of the arbitration proceeding and any award passed there-under.
14. It is also to be noted herein that Section 11 of the Act of 1996 deals with "Appointment of Arbitrator". Section 11(2) of the Act of 1996 provides that the parties are free to agree on a procedure for appointment of arbitrator. However, as per Sub-section 5 of Section 11, if the parties fail to agree on the arbitrator within 30 days from the date of receipt of a request from one of the parties to the other party to so agree, the appointment shall be made upon request of a party, by the Supreme Court or as the case may be, by the High Court or any person or institution designated by such court as per the procedure laid down in Sub-Section 6 of Section 11.
15. From the above, it is clear that one of the parties to the contract agreement seeking to refer the dispute for adjudication by a sole arbitrator must issue notice to the respondent not only conveying its decision to refer the dispute to arbitration but also proposing the name of the arbitrator, giving 30 days time to the respondent to agree on the same. If no such agreement is arrived at by and between the parties on the choice of the arbitrator, the only other option left open to the other party would be to approach the appropriate forum under Section 11(6) of the Act of 1996.
16. In the present case, the respondent No. 1 had never issued any notice calling upon the appellant to agree with the appointment of Sri Anupam Ghosh as the sole arbitrator, nor did the appellant ever communicated his consent on the choice of the sole arbitrator Page No.# 8/9 made by the respondents. Therefore, the appointment of Sri Anupam Ghosh as the sole arbitrator by the respondent No. 1 was in clear violation of Section 11(2) of the Act of 1996. It is also to be noted herein that the appellant has all along challenged the jurisdiction of the sole arbitrator. In such view of the matter, the unilateral appointment of Sri Anupam Ghosh by the respondent No. 1 to act as the sole arbitrator cannot be held to be valid in the eye of law.
17. In the case of MSP Infrastructure (Supra), relied upon by the learned counsel of the respondents it has been observed that the right to object to the jurisdiction of Arbitral Tribunal after the statement of defence is filed would not be available to a party. But in the present case, it is apparent from the record, that the plea of lack of jurisdiction of the Arbitral Tribunal was raised by the appellant at the earliest point of time and certainly before filing the written statement of defense. Moreover, the objection raised by the appellants regarding lack of jurisdiction of the arbitrator not only falls within the domain of the Act of 1996 but the same also goes into the root of the matter. The Act of 1996 is a special legislation and hence, any proceeding conducted under the said Act must strictly adhere to the provisions contained therein. Therefore, the plea of want of jurisdiction taken by the appellant in this case, in the considered opinion of this Court, cannot be equated with a routine objection as the want of jurisdiction in a civil suit. Moreover, in the decision of the Hon'ble Supreme Court rendered in the case of Lion Engg. Consultants Vs. State of M.P., reported in (2018) 16 SCC 758, it has been held that a plea regarding want of jurisdiction being a legal plea can be raised at the stage of challenging the award under Section 34. Therefore, the learned District Judge Page No.# 9/9 had erred-in-law in holding that the plea raised by the appellant could not be entertained under Section 34 of the Act of 1996 for setting aside the award.
18. For the reasons stated herein above, I am of the view that the arbitral award dated 15-01-2012 is a nullity in the eye of law and is accordingly declared so. Consequently, the impugned order dated 06-08-2015 passed by the learned District Judge, Dhubri also stands interfered with.
It is, however, made clear that since the arbitral award dated 15-01-2012 has been interfered with not on merits but purely on a technical ground, the respondent No. 1 would be at liberty to initiate fresh proceedings for recovery of its dues, in accordance with law, if so advised.
The appeal stands allowed to the extent indicated above.
JUDGE GS Comparing Assistant