Madras High Court
M/S.Sri Mutharamman Travels And ... vs Hinduja Leyland Finance Limited on 5 August, 2025
Author: Abdul Quddhose
Bench: Abdul Quddhose
Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and A. Nos.2736 & 2845 of 2025
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 05.08.2025
CORAM
THE HONOURABLE MR JUSTICE ABDUL QUDDHOSE
Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and
A. Nos.2736 & 2845 of 2025
1.M/s.Sri Mutharamman Travels and Transport,
represented by its Sole Proprietor P.Sivakumar
2.Shunmuga Devi S. .. Petitioners in both cases
vs
1.Hinduja Leyland Finance Limited,
rep. by its Authorised Signatory
2.A.Celine .. Respondents in both cases
Prayer in both cases: Arbitration Original Petitions (Commercial Division) filed
under Section 14(2) of the Arbitration and Conciliation Act, 1996 to terminate the
mandate of the second respondent in Arbitration Case Nos.ACP.425 & 426 of 2024
as being void ab initio.
For Petitioners in both cases : Mr.Kishore Balasubramanian
For Respondents in both cases : Mr.A.Rajavel
COMMON ORDER
These petitions have been filed under Section 14 of the Arbitration and Conciliation Act seeking for termination of the mandate of the Arbitrator.
2.The petitioners have raised the following grounds for seeking termination 1/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/08/2025 08:09:14 pm ) Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and A. Nos.2736 & 2845 of 2025 of the mandate of the Arbitrator:
a)The Arbitrator, who is proceeding with the arbitration, was appointed unilaterally by the first respondent in contravention of the decision rendered by the Hon'ble Supreme Court in Perkins Eastman Architects DPC and another vs. HSCC (India) Limited reported in (2020) 20 SCC 760;
b)The Arbitrator is a Stock Arbitrator for the first respondent as she herself has admitted that she has acted as an Arbitrator for the first respondent in 160 cases out of which 120 cases are still pending;
c)Since the Arbitrator, who is adjudicating the dispute between the parties, is ineligible to be appointed as an Arbitrator as she has been appointed as an Arbitrator by the Managing Director of the first respondent, who is an interested party to the dispute, the second respondent/arbitrator's mandate has to be terminated under Section 14 of the Arbitration and Conciliation Act;
(d)Since the Arbitrator, who is adjudicating the dispute, has herself admitted that she has been appointed as an Arbitrator by the first respondent in 160 matters, out of which, 120 cases are still pending, it raises justifiable doubt about the impartiality of the Arbitrator, thereby falling under Fifth Schedule of the Arbitration and Conciliation Act.
3.A Counter affidavit has been filed by the first respondent denying the contentions of the petitioners. As seen from the counter affidavit, it has been stated 2/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/08/2025 08:09:14 pm ) Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and A. Nos.2736 & 2845 of 2025 as follows:
a)The petitioners, having participated in the arbitral proceedings, are estopped from raising a plea that the Arbitrator was appointed unilaterally by the first respondent;
b)The petitioners before the Arbitrator only sought time for arriving at an amicable settlement, without raising any objection with regard to the appointment of the Arbitrator by the first respondent;
c)The Hon'ble Supreme Court in Quippo Construction Equipment Ltd.
vs. Janardan Nirman Pvt. Ltd. reported in 2020 18 SCC 277 has held that if a party does not raise any objection and proceed with the arbitration, they are deemed to have waived their right to object under Section 4 of the Arbitration and Conciliation Act, 1996;
d)The petitioners had also filed an injunction suit before the VIII Assistant Judge, City Civil Court, Chennai in O.S. No.6533 of 2024 and the same was dismissed on 05.04.2025;
e)Therefore, the objections raised by the petitioners with regard to the appointment of the Arbitrator by the first respondent are un-sustainable;
f)The Arbitrator, who is presently adjudicating the dispute between the parties, had also passed an order in an application filed by the first respondent under Section 17 of the Arbitration and Conciliation Act, 1996 authorising seizure 3/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/08/2025 08:09:14 pm ) Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and A. Nos.2736 & 2845 of 2025 of the hypothecated vehicles and the said order was passed only after hearing the petitioners;
g)The Arbitration and Conciliation Act provides for a procedure to challenge the appointment of an Arbitrator under Section 13 of the Arbitration and Conciliation Act, 1996. The petitioners have not availed the said remedy, but, instead they have directly approached this Court by filing these petitions under Section 14 of the Arbitration and Conciliation Act seeking for termination of the mandate of the Arbitrator on the ground that the Arbitrator was appointed unilaterally by the first respondent, which is impermissible under law.
4.Learned counsel for the petitioners drew the attention of this Court to a judgment of the Hon'ble Supreme Court in the case of Bharat Broadband Network Limited vs. United Telecoms Limited reported in 2019 (5) SCC 755 and in particular, he relied upon paragraph No.17 and would submit that if an Arbitrator is found ineligible to be appointed as an Arbitrator, the mandate of the said Arbitrator can be terminated under Section 14 of the Arbitration and Conciliation Act, 1996. Therefore, he would submit that the present petition is maintainable. He also relies upon Sl.No.22 of the Fifth Schedule to the Arbitration and Conciliation Act and would submit that the Arbitrator who is adjudicating the dispute between the parties has herself admitted through her communication dated 23.09.2024 to the petitioners that she has acted as an Arbitrator for the first 4/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/08/2025 08:09:14 pm ) Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and A. Nos.2736 & 2845 of 2025 respondent in 160 matters out of which presently, 120 matters are still pending. Learned counsel for the petitioners would also submit that since the petitioners, having satisfied this Court that there are justifiable doubts as to the independence or impartiality of the Arbitrator, who is presently adjudicating the dispute between the parties, the mandate of the said Arbitrator has to be terminated under Section 14 of the Arbitration and Conciliation Act.
5.On the other hand, the learned counsel for the first respondent would reiterate the contents of the counter affidavit filed by the first respondent before this Court and would submit that the petitioners, having participated in the arbitral proceedings and having agreed to settle the claim of the first respondent, are estopped from raising the plea of unilateral appointment of the Arbitrator by the first respondent through these petitions filed under Section 14 of the Arbitration and Conciliation Act, 1996 seeking for termination of the mandate of the Arbitrator. Learned counsel for the first respondent would also submit that the procedure contemplated under the Arbitration and Conciliation Act for challenging the appointment of the Arbitrator as per Section 13 of the Arbitration and Conciliation Act, 1996 has not been followed by the petitioners. Learned counsel for the first respondent also drew the attention of this Court to the judgment of the Hon'ble Supreme Court in the case of Quippo Construction Equipment Ltd. vs. Janardan Nirman Pvt. Ltd. reported in 2020 18 SCC 277 and would submit 5/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/08/2025 08:09:14 pm ) Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and A. Nos.2736 & 2845 of 2025 that since the petitioners had participated in the arbitral proceedings by seeking time to settle the claim of the first respondent, they are deemed to have waived their right to object to the unilateral appointment of the Arbitrator by the first respondent as per the provisions of Section 4 of the Arbitration and Conciliation Act, 1996. Learned counsel for the first respondent would also submit that in the Section 17 application filed by the first respondent before the Arbitrator, wherein the Arbitrator has authorised the first respondent to re-possess the vehicles from the petitioners, the said order was passed by the Arbitrator only after hearing the petitioners.
6.However, the aforesaid contention of the learned counsel for the first respondent is disputed by the learned counsel for the petitioners, who would submit that the petitioners were never granted an opportunity to file their counter in the Section 17 application. He would also submit that aggrieved by the order passed by the Arbitrator under Section 17 of the Arbitration and Conciliation Act, 1996, a Civil Miscellaneous Appeal has been filed by the petitioners under Section 37 of the Arbitration and Conciliation Act, 1996 and the same is pending before the Division Bench of this Court. The said fact is also not disputed by the learned counsel for the first respondent.
7.The law is now well settled by the decision of the Hon'ble Supreme Court 6/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/08/2025 08:09:14 pm ) Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and A. Nos.2736 & 2845 of 2025 in Perkins Eastman Architects DPC and another vs. HSCC (India) Limited reported in (2020) 20 SCC 760 that unilateral appointment of an Arbitrator by a party to the dispute without obtaining the consent of the other is impermissible under law.
8.Admittedly, in the instant case, the Arbitrator was appointed by the Managing Director of the first respondent as per the arbitration clause contained in the contract. The Managing Director of the first respondent is an interested party to the dispute. He cannot appoint an Arbitrator on behalf of the first respondent without obtaining consent of the petitioners. The said appointment is contrary to the settled law as laid down by the Hon'ble Supreme Court in Perkins' case (cited supra). Hence, the Arbitrator appointed by the Managing Director of the first respondent without obtaining consent of the petitioners is ineligible to be appointed as an Arbitrator to adjudicate the dispute between the parties, falling under Section 12(5) of the Act read with Seventh Schedule of the Arbitration and Conciliation Act.
9.Admittedly, in the case on hand, the petitioners are yet to file their statement of defence before the Arbitrator though they may have taken time before the Arbitrator for arriving at an amicable settlement with the first respondent. Only when the Arbitrator decides to adjudicate the dispute between the parties, on 7/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/08/2025 08:09:14 pm ) Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and A. Nos.2736 & 2845 of 2025 merits and in accordance with law, the necessity for the petitioners to raise objections with regard to the unilateral appointment of the Arbitrator by the first respondent will arise. When the petitioners have decided to contest the matter, on merits and in accordance with law at the first time, they have raised an objection before the Arbitrator questioning her authority to act as an Arbitrator on account of the fact that she was appointed as an Arbitrator by the first respondent unilaterally, without the consent of the petitioners.
10.It is also an admitted fact that the consent of the petitioners were never obtained before the Arbitrator, who has acted upon the reference and was appointed by the first respondent. Even though the first respondent may claim that the Arbitrator was appointed from the panel of Arbitrators maintained by the so called Arbitral Institution and therefore, it cannot be treated to be an unilateral appointment, the said contention has to be rejected by this Court in view of the fact that even the so called Arbitral Institution, which has appointed the Arbitrator, never obtained the consent of the petitioners before appointing the Arbitrator from their panel of Arbitrators. Further the institution, which has appointed the Arbitrator from their panel, who has acted upon the reference, is also not a notified institution. Unless and until the institution is a notified institution, the question of appointing an Arbitrator by the said institution, without obtaining the consent of the petitioners will not aid the contention of the first respondent that the Arbitrator 8/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/08/2025 08:09:14 pm ) Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and A. Nos.2736 & 2845 of 2025 was not appointed unilaterally. The Arbitrator has herself admitted in her communication dated 23.09.2024 to the petitioners that she has been regularly acting as an Arbitrator for the first respondent. She has disclosed that she has acted as an Arbitrator in which the first respondent is a party in 160 matters out of which, presently 120 matters are still pending.
11.The Fifth Schedule of the Arbitration and Conciliation Act, 1996 lists the grounds, which gives rise to justifiable doubts as to the independence or impartiality of the Arbitrators. Sl.No.22 makes it clear that if an Arbitrator has within the past three years been appointed as an Arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties, the said ground also raises justifiable doubts as to the independence or impartiality of the said Arbitrator.
12.Section 12(5) of the Arbitration and Conciliation Act, 1996 makes it clear that any person, whose relationship with the parties or counsel or the subject matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an Arbitrator. Though Section 12(5) of the Arbitration and Conciliation Act, 1996 deals with Seventh Schedule, the decision rendered by the Hon'ble Supreme Court in Perkins makes it clear that Section 12(5) of the Arbitration and Conciliation Act, 1996 applies to Seventh Schedule as well which deals with cases including appointment of Arbitrators which raises justifiable doubts as to the independence or impartiality of the 9/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/08/2025 08:09:14 pm ) Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and A. Nos.2736 & 2845 of 2025 Arbitrators.
13.When it has been clearly established and also admitted by the Arbitrator that she has been acting as an Arbitrator for the first respondent in several matters and she has also disclosed that as on date, she has acted as an Arbitrator for the first respondent in 160 matters out of which 120 matters are still pending, this Court is of the considered view that the petitioners have been able to establish before this Court that the Arbitrator appointed by the first respondent unilaterally without obtaining the consent of the petitioners will fall under Sl.No.22 of the Fifth Schedule of the Arbitration and Conciliation Act, 1996, which reads as follows:
'22. The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties.'
14.Therefore, certainly, the appointment of the named Arbitrator, whose appointment has been challenged through these petitions, rises justifiable doubts as to her independence or her impartiality to act as an Arbitrator. The decision of the Hon'ble Supreme Court in Bharat Broadband Network Limited vs. United Telecoms Limited case, referred to supra and relied upon by the learned counsel for the petitioners also supports the case of the petitioners as in the said decision also, it has been held that once an Arbitrator is found to be ineligible to act as an 10/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/08/2025 08:09:14 pm ) Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and A. Nos.2736 & 2845 of 2025 Arbitrator, a petition filed under Section 14 of the Arbitration and Conciliation Act, 1996 seeking for termination of the mandate of the Arbitrator is maintainable.
15.In the case on hand, the Arbitrator is found to be ineligible by this Court due to the reasons stated supra. Though the first respondent contends that the petitioners, having participated in the arbitration and having sought time to settle the claim of the first respondent, are estopped from raising the plea that has been raised in these petitions, the said contention has to be rejected by this Court for the following reasons:
a)The petitioners have not filed their statement of defence before the Arbitrator;
b)Though the petitioners had sought time to settle the claim of the first respondent, they never agreed for the adjudication of the dispute by the Arbitrator appointed by the first respondent unilaterally, without the consent of the petitioners;
c)The decision of the Hon'ble Supreme Court in Perkins makes it clear that the appointment of an Arbitrator unilaterally by a party to the dispute, without obtaining the consent of the other party is impermissible under law;
d)The institution, which has appointed the Arbitrator on a request made by the first respondent, is not a notified institution under the Arbitration and 11/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/08/2025 08:09:14 pm ) Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and A. Nos.2736 & 2845 of 2025 Conciliation Act, 1996. Further the said institution also did not obtain consent of the petitioners before appointing an Arbitrator from its panel;
e)The decision rendered in Quippo Construction, relied upon by the learned counsel for the first respondent has no bearing for the facts of the instant case since in the instant case the petitioners have never waived their right to object to the appointment of the Arbitrator on account of the fact that the Arbitrator was appointed by the first respondent unilaterally as they are yet to file their statement of defence before the Arbitrator.
16.Mere participation in the arbitral proceedings and seeking time to arrive at an amicable settlement will not amount to waiver falling under Section 4 of the Arbitration and Conciliation Act, 1996. Only in cases where the petitioners have already filed their pleadings before the Arbitrator acquiescing for the arbitral proceedings, the question of the petitioners having waived their right to object under Section 4 of the Arbitration and Conciliation Act, 1996 will arise. Admittedly, in the case on hand, there is no pleading of the petitioners available before the Arbitrator to point out that they have agreed to participate in the arbitral proceedings and that they have also agreed to the appointment of the Arbitrator by the first respondent unilaterally, without obtaining the consent of the petitioners.
17.For the foregoing reasons, since the petitioners have satisfied the 12/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/08/2025 08:09:14 pm ) Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and A. Nos.2736 & 2845 of 2025 requirements of Section 14 of the Arbitration and Conciliation Act, 1996 and in view of the fact that the Arbitrator has been appointed unilaterally by the first respondent, without obtaining the consent of the petitioners and since there arises justifiable doubts with regard to the impartiality or independence of the Arbitrator, this Court has to necessarily allow these petitions. Accordingly, these petitions are allowed as prayed for by terminating the mandate of the second respondent as an Arbitrator. The first respondent is granted liberty to initiate fresh arbitration against the petitioners in accordance with law. The time spent by both the parties 13/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/08/2025 08:09:14 pm ) Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and A. Nos.2736 & 2845 of 2025 ABDUL QUDDHOSE,J.
vga before the Arbitrator whose mandate has been terminated shall stand excluded for the purpose of saving limitation under Section 14 of the Limitation Act. Consequently, connected applications are closed. No costs.
05.08.2025 vga Arb.O.P. (Com.Div.) Nos.302 & 317 of 2025 and A. Nos.2736 & 2845 of 2025 14/14 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/08/2025 08:09:14 pm )