Delhi District Court
Aakash Automobiles vs Kotak Mahindra Bank Ltd on 22 November, 2022
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (COMM.) No. 132/2022
1. Aakash Automobiles
Shop No. 2, Dham Complex, Hoshangabad Road,
Obedullaganj, Raisen, Bhopal,
Madhya Pradesh
Through Shaily Hajela
Partner of Aakash Automobiles
2. Shaily Hajela
Partner Aakash Automobiles
A509, Opel Regency Bawadiya Kalan,
Opp Danapani Restaurant,
Gulmohar, Huzur-Bhopal,
Madhya Pradesh-462026
3. Neha Hajela
Partner Aakash Automobiles
129/21, Maliya Road, George Town,
Allahabad, Uttar Pradesh-211002 ....Petitioners
versus
Kotak Mahindra Bank Ltd
Having Its Registered Office At
27BKC, C-27, G Block, Bandra Kurla Complex,
Bandra(E), Mumbai400051
Having Its Regional Office At
STH Floor, Metro Tower, Vijay Nagar,
Indore, Madhya Pradesh-452010
And Having One of It's Branch Offices At
F-19/12, Rohini Sector-8, Delhi-110085
And B-1, Gujarawalan Town Part-1,
Model Town, New Delhi-110019 ....Respondent
OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 1 of 37
Date of Institution : 24/08/2022
Arguments concluded on : 14/10/2022
Decided on : 22/11/2022
Appearances : Sh. Abhijit Sinha, Ld. Counsel for petitioners.
Sh. S.P. Dass and Sh. Saurav Kumar, Ld. Counsel
for respondent.
JUDGMENT
1. Petitioners had filed the present petition under Section 34 of The Arbitration and Conciliation Act, 1996 (herein after referred as the Act) seeking setting aside of the arbitral award dated 07/05/2022, passed in Arbitration Case No. TFE/MP/NPA/LOT- 18/20/2322 titled "Kotak Mahindra Bank Ltd. vs Aakash Automobiles & Ors" by Sh. Anilendra Pandey, Ld. Sole Arbitrator. Ld. Sole Arbitrator awarded Rs. 24,66,764/- with simple interest @ 10% from 24/07/2020 till the date of award and future interest @ 10% interest per annum on award amount from the date of award till realization with cost of Rs. 7,000/- payable by present petitioners and Sh. Manish Hajela to respondent/claimant, besides the directions to Mahindra & Mahindra to refund the unused amount/unbilled amount/credit amount available, up to the total amount of Rs. 25,00,000/- to respondent/claimant/bank.
2. I have heard Sh. Abhijit Sinha, Ld. Counsel for petitioners; Sh. S.P. Dass and Sh. Saurav Kumar, Ld. Counsel for respondent; and perused the record of the case, reply on behalf of respondent, arbitral proceedings record, brief written submissions of the parties, relied upon precedents and given my thoughtful consideration to the rival contentions put forth.
OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 2 of 373. Following is the brief factual matrix of the case of petitioners as well as the arguments set up by the petitioners through Ld. Counsel. Petitioners applied for Trade Advance Facility for purchase of vehicle/farm equipment/tractors from respondent/ claimant Kotak Mahindra Bank Ltd. being authorized dealer of Mahindra & Mahindra Ltd. Petitioners executed Master Facility Agreement in the month of February, 2020 with several other documents for providing of loan based on which respondent/ claimant sanctioned Trade Advance Facility of Rs. 25,00,000/- in the loan account dated 27/02/2020. Due to Covid 19 pandemic in the month of March, 2020, suddenly nationwide lock down was imposed by Government of India. Thereafter, Mahindra & Mahindra Company changed it's policy; resultantly no vehicle was billed to petitioners, leading huge financial losses to petitioners. Petitioners thereafter tried their level best to restart their business. However, again State- wise lock-down was imposed from April 2021 to May, 2021. The same was followed by locality/area-wise lock-down which continued for several months even after May, 2021. Petitioner no. 3 and her husband; husband of petitioner no. 2 also got infected with Covid 19 in April/May, 2021 along with other family members resulting in huge monetary losses and petitioners could not revive their business. Petitioners were struggling to keep afloat. Respondent/ claimant meanwhile seemingly initiated the arbitration proceedings before Ld. Sole Arbitrator contending default in payment of installments. Ld. Sole Arbitrator passed the impugned arbitral award. Petitioners were never issued any notice by Ld. Sole Arbitrator. Petitioners did not have knowledge of passing of arbitral award. Petitioners were not given OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 3 of 37 appropriate notice of appointment of arbitrator or of the arbitral proceedings and were unable to present their case. Only on 21/06/2022 petitioner no. 1 received copy of impugned ex parte arbitral award.
4. Petitioners have impugned the arbitral award mainly on the following grounds. Impugned award was passed on alleged loan agreement, which was never executed and was not in existence. Impugned award was passed by Ld. Sole Arbitrator unilaterally appointed by respondent/claimant, who is a party and having interest in subject matter of the dispute. The adjudicatory authority must be independent and impartial. Ld. Sole Arbitrator was solely appointed by the respondent, therefore, the same lacks independency and impartiality. The appointment of Ld. Sole Arbitrator was solely by a party to the agreement having interest in the subject matter which was in violation of principle of natural justice. Impugned award suffers from illegality and is against the fundamental principle of natural justice. Appointment of Arbitrator by the party itself on its own is not proper. Appointment of Arbitrator by a party to arbitration agreement is not valid. Petitioners were not given proper notice of the appointment of Ld. Sole Arbitrator and of arbitral proceedings and were unable to present their case. Ld. Sole Arbitrator was appointed by respondent/claimant unilaterally and without the consent of the petitioners. Ld. Sole Arbitrator failed to serve the disclosure to petitioners, as per mandate under Section 12 of the Act. Ld. Sole Arbitrator passed the impugned arbitral award mechanically devoid of arbitration agreement thereby exceeded his jurisdiction. Ld. Sole Arbitrator failed to consider that there OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 4 of 37 was no cause of action for initiating arbitration proceeding against the petitioners. Impugned award was erroneously passed ex parte without compliance of provisions of the Act. Ld. Sole Arbitrator passed the impugned arbitral award in a mechanical manner without appreciation that (i) no Master Facility was executed on 11/03/2019; (ii) details of loan agreement/existence of alleged arbitration clause was not mentioned/disclosed in the award; (iii) petitioners were based at Bhopal, respondent/ claimant/bank was having one of the branch at Bhopal and impugned award fails to address the issue of present arbitration proceedings at Delhi; (iv) address of respondent/claimant/bank in Delhi is shown at Rohini whereas the copy of award was sent to the address of respondent/claimant/bank at Noida; (v) directions were issued to Mahindra & Mahindra which was not a party to the arbitral proceedings/award. Impugned arbitral award was passed without any arbitration agreement, which is illegal and improper. Impugned award is in conflict with the public policy of India and is vitiated by patent illegality appearing on the face of award. Petitioners never received mandatory notices of (i) invocation of arbitration; (ii) appointment of Arbitrator seeking consent from petitioners; (iii) disclosure of Arbitrator under Section 12 of the Act and (iv) proceedings. Impugned arbitral award did not even mention delivery of (i) notice of invocation of arbitration; (ii) notice of appointment of Arbitrator seeking consent from judgment debtor and (iii) notice of disclosure under Section 12 of the Act upon petitioners. The reference number of the impugned arbitral award indicated that arbitral proceedings in question were bearing no. 2322 before Ld. Sole Arbitrator instituted by same respondent/ claimant in year 2020 and it gives OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 5 of 37 justifiable doubt as to the independence and impartiality of Ld. Sole Arbitrator in backdrop of Section 12 of the Act read with Fifth Schedule of the Act. Ld. Sole Arbitrator adjudicated the matter despite knowing that his appointment is illegal and he does not have the jurisdiction and power to deal with the arbitration matter referred to him by the respondent/claimant. Impugned arbitral award was passed ex parte by Ld. Sole Arbitrator against petitioners without serving proper notices to petitioners. Petitioners have prayed for setting aside of the impugned arbitral award and their Ld. Counsel argued on the premise of above said grounds of challenge to arbitral award, relying upon the following precedents:-
1. Perkins Eastman Architects DPC & Anr. vs HSCC (India) Limited, (2020)20 SCC 760;
2. TRF Limited vs Energo Engineering Projects Limited, (2017) 8 SCC 377;
3. HRD Corporation (Marcus Oil & Chemical Division) vs Gail (India) Limited (Formerly Gas Authority of India Limited), (2018) 12 SCC 471;
4. Proddatur Cable TV Digi Services vs Siti Cable Network Limited, 2020 SCC OnLine Del 350.
5. Following are the relevant material averments in the filed reply of respondent through Ld. Counsel as well as arguments set up by respondent through Ld. Counsel. Allegations levelled by petitioners and contents of petition were denied by respondent/claimant saving the contents that are matter of record.
Petition is an abuse of process of law as it is devoid of merits and liable to be dismissed. Petitioners deliberately came up with frivolous, unplausible and irrelevant facts to impugn the arbitral award. No grounds to impugn the award under Section 34(2); 13(5) and 16(6) of the Act are made out. Even the equity of convenience in support of the petition does not lie in favour of OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 6 of 37 petitioners. Petition is not maintainable under Section 34 of the Act. Petitioners have preferred the petition as like an appeal against the impugned arbitral award or to review on the merit in dispute. This Court has limited jurisdiction in present dispute. Petitioners have attempted to mislead the Court. Ld. Counsel for respondent/ claimant relied upon the case of MMTC Ltd. vs M/s Vedanta Ltd., Civil Appeal No. 1862 of 2014 decided by Supreme Court on 18/02/2019 and argued that it is settled law that the court does not sit in appeal over the abitral award and can only interfere on merits on the limited grounds provided under Section 34(2) of the Act and also if the award is against the public policy of India. Petitioners have not disclosed any premise for seeking indulgence of the Court. The Impugned arbitral award is not in conflict with public policy nor is induced nor affected by fraud and corruption as such the award does not patently violate public policy or any erroneous application of substantive as well as procedure laws. The petition does not hold merit. Petition is suffering from the vices of suppressio veri and suggestio falsi; in as much as the petitioners have deliberately, intentionally and consciously concealed the real material facts and tried to frustrate the interest of justice suggesting wrong and frivolous facts. Petitioners avoided the proceedings conducted by Ld. Arbitrator despite the service of the notices issued from the Tribunal. Even the pre suit notice was also served upon the petitioners. The constitution of Arbitration Tribunal was well in the knowledge of the petitioners and pre suit notice was sent to last known address of petitioner as per the record maintained by respondent. In such event the petitioners are deemed to have waived of right to object the subsequent proceedings. Right to OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 7 of 37 object no longer survived with the petitioners due to deliberate lapses of the petitioners. Arbitral proceedings were conducted as per law and as per mandate of the Act by Ld. Sole Arbitrator. Petitioners waived off their right to object for such appointment of Ld. Sole Arbitrator. Ld. Sole Arbitrator gave various opportunities to petitioners to appear before Arbitral Tribunal. Petitioners miserably failed to protect their right and interest during the pendency of arbitration case before Arbitral Tribunal despite ample opportunities and cannot agitate against well reasoned and speaking award with malafide intention to stall the proposed execution of arbitral award to be initiated by respondent/claimant. The conduct of the petitioners leads to invocation of Section 4 of the Act and by not putting forth any objection with appointment of Arbitrator or arbitral proceedings, petitioner waived off their right whatsoever under the Act with respect to arbitral proceedings and appointment of Arbitrator. Petitioners have tried to mislead the Court by concealing the material facts. Despite service of notices and pre suit letter, petitioners suppressed the relevant information with an ulterior motive to get the benefit of innocence and the fictitious material facts were brought before the Court. Petitioners failed to clear outstanding loan amount, as per terms of agreement and for which the arbitral proceedings were initiated within the period as prescribed under the law. Notices, letters were duly served on their last known addresses. Once the service of award was admitted by petitioners, the notices and pre-suit letters must have been served at the same addresses. No one can be allowed to take advantage of their own wrongs. Despite service of notices effected upon the petitioners on their last known addresses, OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 8 of 37 petitioners intentionally and deliberately chose not to appear before Ld. Sole Arbitrator. So petitioners are estopped to raise the frivolous objections. Petitioners availed the credit facilities in form of loan and were in default in paying the loan amount as per the terms and conditions. Ld. Sole Arbitrator carefully examined the relevant documents on record and passed well reasoned and speaking award. Ld. Counsel for respondent/claimant argued that unless and until the award is manifestly illegal or is opposed to public policy, no interference can be made by the court, as per law laid in the cases of (i) Swan Gold Mining Ltd. vs Hindustan Copper Ltd., MANU/ SC/0849/2014; (ii) Ravi Mittal vs Pankaj Aggarwal, (2014) DLT 6; (iii) Bharat Lal Maurya vs Godrej & Boyce Manufacturing Company Ltd., 208(2014) DLT 680; (iv) Anglo American Metallurgical Coal PTY. Limited vs MMTC Limited, MANU/SC/0953/2020. Petitioners have not put forth any reason to show as to how impugned award is illegal as apparent from the face of award nor petitioners have been able to expressly point out the violation of public policy in specific manner. Per contra, petitioners have raised their averments in conventional manner. Ld. Sole Arbitrator duly followed the doctrine of audi alteram partem to hear both the parties in dispute with a prospect to provide justice to them. Ld. Sole Arbitrator followed the correct mechanism not to make the arbitration proceedings lifeless, absurd, stultifying, self- defending, plainly contradictory to common sense and same may be touchstone for pragmatic realism for which Ld Sole Arbitrator left the door open for petitioners to participate in proceedings to avoid the procedural impediment and only after affording various opportunities, petitioners were proceeded ex parte. Petitioners OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 9 of 37 rejected the opportunities provided by Arbitral Tribunal with bad intent to defeat the justice and encouraged the endless litigation. Respondent through Ld. Counsel prayed for dismissal of the petition with costs. Ld. Counsel for respondent also relied upon the case of Associate Builders vs Delhi Development Authority, (2015) 3 SCC 49.
6. An arbitral award can be set aside on the grounds set out in Section 34 (2) (a), Section 34 (2) (b) and Section 34 (2A) of the Act in view of Section 5 of the Act and if an application for setting aside such award is made by party not later than 3 months from the date from which the party making such application had received the signed copy of the arbitral award or if a request had been made under Section 33 of the Act, from the date on which that request had been disposed of by the Arbitral Tribunal. If the Court is satisfied that the applicant was prevented by sufficient cause from the making the application within the said period of three months it may entertain the application within further period of 30 days, but not thereafter.
7. Supreme Court in the cases of State of Maharashtra & Ors. vs ARK Builders Private Limited, (2011) 4 SCC 616; Benarsi Krishna Committee & Ors. vs Karmyogi Shelters Pvt. Ltd., (2012) 9 SCC 496 as well as in the case of Dakshin Haryana Bijli Vitran Nigam Ltd. vs M/s Navigant Technologies Pvt. Ltd., Civil Appeal No. 791 of 2021 [Arising out of SLP (C) No. 10372/2020] decided on 02/03/2021 by Supreme Court inter alia held that limitation period for setting aside an arbitral award is to be reckoned from the date the copy of the award duly signed OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 10 of 37 by arbitrator is delivered to/received by the objector and not otherwise.
8. The impugned arbitral award is of date 07/05/2022. It is the averment of the petitioners inter alia that copy of impugned ex parte arbitral award dated 07/05/2022 was received by petitioners on 21/06/2022 in an envelope which is placed at page no. 38 of paper book of petitioners having speed post no. RD612945392IN with respect to which at page no. 37 is the tracking report depicting its delivery on 21/06/2022. Accordingly, the present petition filed on 24/08/2022 is within the period of limitation.
9. Section 34 (1) (2), (2A) and (3) of The Arbitration and Conciliation Act, 1996 read as under:-
"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) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(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
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 11 of 37 the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 12 of 37 made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter."
10. Supreme Court in case of Associate Builders vs. Delhi Development Authority (supra) has held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
Also was held therein that:
"33. "...when a court is applying the 'public policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award....
Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts.."
11. Supreme Court in case of Ssangyong Engineering & Construction Company Limited vs National Highways Authority of India (NHAI), (2019) 15 SCC 131 has held that under Section 34 (2A) of The Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. A finding based on the OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 13 of 37 documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse. It is held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
12. Section 3 of The Act reads as under:-
"3. Receipt of written communications.-- (1) Unless otherwise agreed by the parties,--
(a) any written communication is deemed to have been received if it is delivered to the addressee personally or at his place of business, habitual residence or mailing address, and
(b) if none of the places referred to in clause (a) can be found after making a reasonable inquiry, a written communication is deemed to have been received if it is sent to the addressee's last known place of business, habitual residence or mailing address by registered letter or by any other means which provides a record of the attempt to deliver it.
(2) The communication is deemed to have been received on the day it is so delivered.
(3) This section does not apply to written communications in respect of proceedings of any judicial authority."
13. Section 4 of The Act provides that a party who knows that any provision of Part-I of the Act from which parties may derogate or any requirement under the arbitration agreement has not been complied but still proceeds with the arbitration without stating his objection to such non-compliance without undue delay or if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object.
OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 14 of 3714. Section 11 of The Act is with respect to the appointment of the arbitrators by the Supreme Court or as the case may be, by the High Court only.
15. Under Section 12 of The Act, when a person is approached in connection with his possible appointment as an arbitrator, he is bound to disclose in writing any circumstances, such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months. Various grounds are set out in the Fifth Schedule as a guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. The disclosure shall be made by such person in the form specified in the Sixth Schedule. An arbitrator may be challenged by the parties only if any circumstances referred to in Section 12 (3) of The Act subject to Section 13 (4) of The Act exist which provide for an agreement between the parties for such procedure for challenge. If such challenge is unsuccessful, the party may make an application for setting aside an arbitral award in accordance with Section 34 of The Act.
16. Section 14 of The Act provides that the mandate of an arbitrator shall terminate and he shall be substituted by another OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 15 of 37 arbitrator if he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay and he withdraws from his office or the parties agree to the termination of his mandate.
17. Section 15 of The Act provides that the mandate of arbitrator is also terminated if he withdraws from office for any reason or by or pursuant to agreement of the parties. In such an event, the substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. If such an arbitrator is replaced, any hearing previously held may be repeated at the discretion of the arbitral tribunal unless otherwise agreed by the parties. The earlier order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator shall not be invalid unless otherwise agreed by the parties.
18. Under Section 16 of The Act, the arbitral tribunal is empowered to rule on its own jurisdiction including ruling on any objection with respect to the existence or validity of arbitration agreement. Such plea shall be raised not later than the submission of the statement of defence. If such plea is rejected by the arbitral tribunal, it has to proceed with the arbitral proceedings and declare an award. If plea of jurisdiction is accepted by the arbitral tribunal, the respondent may file an appeal under section 37 of The Act. If plea of jurisdiction is not accepted, the respondent may challenge such ruling along with award under section 34 of The Act.
OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 16 of 3719. Supreme Court in case of TRF Ltd. vs Energo Engg. Projects Ltd., (2017) 8 SCC 377 has held that by virtue of section 12(5) of The Act, if any person, who falls under any of the category specified in the Seventh Schedule shall be ineligible to be appointed as an Arbitrator. It is held that the amended law under Section 11(6-A) of The Act requires the Court to confine examination of the existence of an arbitration agreement notwithstanding the judgment of the Supreme Court or the High Court while considering an application under section 11(6) of The Act. The designated arbitrator whose ineligibility to act as an arbitrator by virtue of amendment to Section 12 of The Act by the Arbitration and Conciliation (Amendment) Act, 2015, does not have power even to nominate any other person as arbitrator. The Supreme Court and High Court in certain circumstances have exercised jurisdiction to nullify the appointments made by the authority in such situation.
20. Supreme Court in case of Bharat Broadband Network Ltd vs United Telecoms Ltd, (2019) 5 SCC 755 after construing Section 12(5) of The Act read with Fifth, Sixth and Seventh Schedule held that the Managing Director of the party, who was a named arbitrator, could not act as arbitrator nor could be allowed to appoint another arbitrator. The disclosure of a prospective arbitrator has to be made in the form specified in the Sixth Schedule and the ground stated in the Fifth Schedule are to serve as a guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. Any prior agreement to the contrary is wiped out by the non-obstante clause in Section 12(5) of The Act the moment OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 17 of 37 any person whose relationship with the parties or the counsel or the subject matter of the dispute falls under the Seventh Schedule. The sub-section then declares that such person shall be ineligible to be appointed as arbitrator. Such ineligibility can be removed by an express agreement in writing. It was held that learned arbitrator had become de jure ineligible to perform his function as an arbitrator.
21. Supreme Court in the case of Perkins Eastman Architects DPC vs HSCC (India) Ltd. (supra) has held that in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. The person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015. Supreme Court had set aside the appointment of an arbitrator appointed by one of the parties having exclusive right to appoint and appointed an independent arbitrator in the application filed under Section 11(6) of The Act.
22. Sub-section (1) of Section 29-A of The Act (as amended by Act 33 of 2019) provides that the award shall be made within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23 of the Act. Sub- section (2) of Section 29-A of The Act provides that if the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 18 of 37 entitled to receive such amount of additional fees as the parties may agree. Sub-section(3) of Section 29-A of The Act provides that the parties may, by consent, extend the period specified in subsection (1) for making award for a further period not exceeding six months. Subsection (4) of Section 29-A of The Act provides that if the award is not made within the period specified in sub-section (1) or the extended period specified under sub- section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period. If the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, the Court may pass an order for reduction of fees of arbitrator(s) by not exceeding five per cent for each month of such delay. Sub-section (5) of Section 29-A of The Act provides that the extension may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.'
23. In the case of Proddatur Cable TV Digi Services vs. Siti Cable Network Ltd. (supra), it was inter alia held that following ratio of the judgment in the case of Perkins (supra), it is clear that a unilateral appointment by an authority which is interested in the outcome or decision of the dispute is impermissible in law. When the Arbitration Clause empowers the Company to appoint Sole Arbitrator, it can hardly be disputed that the Company acting through its Board of Directors will have an interest in the outcome of the dispute. The appellant had filed the petition under Section 14 and 15 of The Act seeking declaration that the mandate of the arbitrator appointed by the respondent be OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 19 of 37 terminated and an arbitrator be appointed by High Court in the provisions of The Act. Following ratio of the judgments in Perkins (supra) and Bharat Broadband Network Limited (supra), the mandate of the Arbitrator was found terminated de jure and since the present arbitrator had become unable to perform her functions as an arbitrator, her mandate was terminated and another independent Sole Arbitrator was appointed to substitute the previous arbitrator.
24. In the case of M/s Omcon Infrastructure Pvt. Ltd. Vs India Bulls Investment Advisors Ltd, OMP (T) (Comm.) 35/2020 and IA 6153/2020 decided on 01/09/2020 by Hon'ble Ms. Justice Rekha Palli, wherein petition was filed under Section 14 and 15 of The Act, seeking termination of the mandate of Ld. Arbitrator unilaterally appointed by the respondent and also quashing of order passed by Ld. Arbitrator, deciding the application of petitioner under Section 12 of The Act, the ratio of the decision in case of Perkins (supra) was applied and held that once the Managing Director of the respondent Company was ineligible to appoint the arbitrator, the same would also bar the Company itself from unilaterally appointing the sole arbitrator and reference was also made to the decision of Proddatur Cable TV Digi Services (supra). Therein also the mandate of the Ld. Arbitrator was terminated and new independent Sole Arbitrator was appointed.
25. I now advert to arbitral proceedings record filed by Ld. Sole Arbitrator. Copy of Statement of Claim/claim petition of respondent/claimant filed before Ld. Sole Arbitrator is at page OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 20 of 37 nos. 1 to 58 of arbitral proceedings record. Annexure B to claim petition of respondent/claimant before Ld. Sole Arbitrator is the copy of Master Facility Agreement along with Guarantee Deed for loan account bearing no. 1213829266 which as per Index of claim petition is at page nos. 9 to 47 and is at page nos. 10 to 48 of arbitral proceedings record; whose bare perusal reveals that referred Schedule I of Master Facility Agreement is not placed therein and before Ld. Sole Arbitrator. Said Master Facility Agreement finds mention that the person(s) specified as the borrower(s) and co-borrower(s) in Schedule I to said agreement are collectively referred as Borrower. Since Schedule I of Master Facility Agreement is not filed with said Master Facility Agreement before Ld. Sole Arbitrator nor in arbitral proceedings before this Court; there is no material to infer who all are borrower(s) and who all are co-borrower(s) for Master Facility Agreement entered into with respondent/claimant/bank. Copy of Guarantee Deed is at page nos. 39 to 48 of arbitral proceedings record whereas at page no. 48 at the end the names of guarantors mentioned in hand are petitioner no. 2, petitioner no. 3 and one Sh. Manish Hajela but even with the Guarantee Deed though at the outset it mentions about Schedule appended with it but in fact has no copy of Schedule is appended with the Guarantee Deed, placed in arbitral proceedings record to depict (i) on what place the deed was made; (ii) names and particulars of guarantors. It is pertinent to mention that on page no. 48 of arbitral proceedings record which is last page of the copy of Guarantee Deed, as aforesaid, only the names of three guarantors are mentioned and their purported signatures are there and neither addresses nor email id nor mobile phone numbers of such guarantors are there OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 21 of 37 with further description of their parentage or particulars of husband or otherwise. Copy of Master Facility Agreement in arbitral proceedings record from page nos. 10 to 39 also similarly reveals in the column of borrower at page no. 38 the name of petitioner no. 2 and in the next column of signature is purported stamp impression of petitioner no. 1 and signatures of petitioner no. 2 as partner whereas even therein there is no depiction of petitioner no. 1 as borrower for loan in question from respondent/claimant and said copy of Master Facility Agreement is not having any copy of its Schedule placed on arbitral proceedings record. Finding it an important fact, it has been again repeated at the cost of repetition, Master Facility Agreement inter alia contains following Clause 11.3:-
"11.3 NOTICES:
(a) Notice and / or other communication provided for in this Agreement shall be in writing and shall be transmitted (a) by postage prepaid, registered airmail or by courier service or (b) telex, cable, or facsimile transmission, or (c) e-mail transmission or (d) personal delivery to the Parties as follows, as elected by the party giving such notice.
i. In the case of notice or payments to the Bank, to the Bank's Branch Address as per the Schedule;
ii. In the case of notice to the Borrower(s), to the Borrower(s) address as per Schedule or as mentioned in the records of the Bank.
(b) All notices and/or other communications shall be deemed to have been validly given on (a) the expiry of 3 (three) days after posting if transmitted by airmail, courier, post or the date of receipt if earlier (b) the date of transmission with confirmed answer back or transmitted by cable, telex or facsimile transmission, (c) in the case of communication by e-mail on successful dispatch of the same, (d) immediately upon delivery in case of personal delivery; whichever shall first occur."
26. Notice/communication was to be addressed by lender/ respondent/claimant to borrower(s) at addresses of borrower(s) as per Schedule of Master Facility Agreement or as mentioned in OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 22 of 37 the records of lender/respondent/claimant/bank in terms of Clause 11.3 of said Master Facility Agreement.
27. As has been above said, there was neither any material placed before Ld. Sole Arbitrator in terms of copy of the Schedule of Master Facility Agreement with said agreement; nor other records of the bank to ascertain the address(s) of the borrower(s) or the guarantor(s); excepting following address mentioned in the Statement of Account of petitioner no. 1 in books of respondent/ claimant; whose copy is placed at page nos. 49 and 50 of arbitral proceedings record and reflected at page nos. 48 and 49 in the Index of claim petition of respondent/claimant/lender, which is as follows:-
"AAKASH AUTOMOBILES Shop No 02 Dham CompleX Hoshangabad Road Obedullaganj RAISEN-464993 MADHYA PRADESH, INDIA"
28. Copy of Loan Recall Notice dated 31/07/2020 Ex CW1/D (Colly) before Ld. Sole Arbitrator has only dim impression of speed post receipts (five in numbers) and said dim impression is not putting forth any clarity of dispatch of said notice to addressees on addresses given in said notice. However, on said notice dated 31/07/2020 the addresses mentioned of addressees of notice are as follows:-
" 1.AAKASH AUTOMOBILES SHOP NO. 2, DHAM COMPLEX, HOSHANGABAD ROAD, OBEDULLAGANJ, RAISEN, BHOPAL, MADHYA PRADESH OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 23 of 37 ALSO AT :-
NEAR MITTAL PETROL PUMP BHOPAL ROAD, OBEDULLAGANJ TEHSIL GOHARGANJ DIST RAISEN MADHYA PRADESH
2.SHAILY HAJELA W/O MANISH HAJELA PARTNER OF AAKASH AUTOMOBILES AND ALSO PERSON GUARANTOR OF LOAN A509, OPEL REGENCY BAWADIYA KALAN, OPP DANAPANI RESTRONT, GULMOHAR, HUZUR-BHOPAL, MADHYA PRADESH-462026
3.NEHA HAJELA W/O APOORV HAJELA PARTNER AAKASH AUTOMOBILES AND ALSO PERSON GUARANTOR OF LOAN 129/21, MALIYA ROAD, GEORGE TOWN, ALLAHABAD, UT PRADESH-211002
4.MANISH HAJELA (Guarantor) S/O - PRADEEP KUMAR HAJELA A509, OPEL REGENCY BAWADIYA KALAN, OPP DANAPANI RESTRONT, GULMOHAR, HUZUR-BHOPAL, MADHYA PRADESH-462026"
29. Original speed post receipts or their tracking reports of Loan Recall Notice dated 31/07/2020 were not placed before Ld. Sole Arbitrator by respondent/claimant/lender nor before this Court to put forth the factum of service of such notice upon petitioners/ borrowers. Even otherwise said Loan Recall Notice dated 31/07/2020 only contains demand of respondent/claimant of payment of Rs. 24,66,764/- from addresses of said notice within seven days from the receipt of said notice, otherwise respondent/claimant/lender shall be compelled and constrained to initiate appropriate criminal proceedings as well as Civil proceedings, arbitration proceedings for recovery of said sum. By no figment of imagination said Loan Recall Notice dated 31/07/2020 can be considered to be an appropriate notice under OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 24 of 37 Section 21 of the Act incorporating the request of respondent/ claimant/lender for dispute to be referred to arbitration in accordance with law.
30. At page nos. 55 and 56 of arbitral proceedings record is a Corrigendum Notice dated 07/08/2020 on which are pasted five speed postal receipts having following description:-
" RL A RH405436080IN Counter No:1, OP-Code:01 To:AAKASH, Bhopal G.P.O., PIN:462001 From:RANJAN COMPANY , DELHI Wt:20grms, Amt:22.00 , 08/08/2020 , 13:54 RL A RH405436120IN Counter No:1, OP-Code:01 To:NEHAR MITTAL, Raisen H.O, PIN:464551 From:RANJAN COMPANY , DELHI Wt:20grms, Amt:22.00 , 08/08/2020 , 13:54 RL A RH405436164IN Counter No:1, OP-Code:01 To:SHAILY, Bhopal G.P.O.,PIN:462001 From:RANJAN COMPANY , DELHI Wt:20grms, Amt:22.00 , 08/08/2020 , 13:55 RL A RH405436204IN Counter No:1, OP-Code:01 To:NEHA, Allahabad H.O, PIN:211001 From:RANJAN COMPANY , DELHI Wt:20grms, Amt:22.00 , 08/08/2020 , 13:55 RL A RH405436249IN Counter No:1, OP-Code:01 To:MANISH, Bhopal G.P.O., PIN:462001 From:RANJAN COMPANY , DELHI Wt:20grms, OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 25 of 37 Amt:22.00 , 08/08/2020 , 13:55"
31. At page nos. 53 and 54 of arbitral proceedings record is the Corrigendum Notice dated 19/10/2020 on which are pasted five postal receipts having following particulars:-
" RL A RH405234140IN Counter No:1, OP-Code:01 To:AAKASH, Bhopal G.P.O., PIN:462001 From:RANJAN COMPANY , DELHI Wt:20grms, Amt:22.00 , 21/10/2020 , 14:39 RL A RH405234184IN Counter No:1, OP-Code:01 To:AAKASH, Bhopal G.P.O., PIN:462001 From:RANJAN COMPANY , DELHI Wt:20grms, Amt:22.00 , 21/10/2020 , 14:39 RL A RH405234224IN Counter No:1, OP-Code:01 To:SHILY, Bhopal G.P.O., PIN:462001 From:RANJAN COMPANY , DELHI Wt:20grms, Amt:22.00 , 21/10/2020 , 14:39 RL A RH405234269IN Counter No:1, OP-Code:01 To:NEHA, Bhopal G.P.O., PIN:462001 From:RANJAN COMPANY , DELHI Wt:20grms, Amt:22.00 , 21/10/2020 , 14:39 RL A RH405234309IN Counter No:1, OP-Code:01 To:MANISH, Bhopal G.P.O., PIN:462001 From:RANJAN COMPANY , DELHI Wt:20grms, Amt:22.00 , 21/10/2020 , 14:39"
Above said Corrigendum Notices dated 07/08/2020 and 19/10/2020 also contain reference of alleged inadvertence/ OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 26 of 37 typographical error of (i) name of manufacturer of vehicle; (ii) account id number of loan in question. All above said preceding paras makes it abundant clear of non sending of these notices by respondent/claimant/lender to petitioner no. 1 at above elicited given address of petitioner no. 1 in ledger account in books of respondent/claimant/lender.
32. At page no. 57 of arbitral proceedings record is the copy of following notice:-
"REF NO. TFE/MP/NPA/LOT-18/20/2322 Dated:24/10/2020 To, SH. ANILENDRA PANDEY C-32, VIKAS NAGAR EXTENSION, VIKAS NAGAR, DELHI 110059 Sub. :-Reference For initiation of Arbitration Proceedings against AAKASH AUTOMOBILES & ORS in respect of Loan Agreement No. 1213829266.
Sir, We Kotak Mahindra Bank Ltd, having the office at 5th Floor Metro Tower Vijay Nagar, Indore (MP)-452010 & Lending Office at F-19/12. Rohini Sector-8, Delhi-110085 and B-1, Gujrawalan Town Part-1, Model Town, New Delhi-110019. had entered into a TRACTOR AND FARM EQUIPMENT LOANS contract bearing Account No. 1213829266 With AAKASH AUTOMOBILES & ORS. The contract, inter alia, provides for settlement of any dispute arising under the contract by arbitration of a sole arbitrator. A dispute has arisen under the contract between the parties with regard to the terms and conditions of the agreement.
That a notice dated 31/07/2020 was sent to the borrower/s to repay the outstanding amount of Rs. 2466764/- together with interest accured thereupon and penalty charges within 7 days from the date of receipt of the notice but despite receiving the said notice, borrower/s did not complied with the terms of notice.
That, we would like to appoint you as the sole arbitrator for adjudication of the dispute in the captioned loan account, wherein AAKASH AUTOMOBILES & ORS, the party to the contract have already concurred in your appointment and designation as sole arbitrator in the loan agreement aforesaid. The contract provides for the settlement of disputes in accordance with the Arbitration and Conciliation Act, 1996. If you are willing to accede to our request, kindly confirm acceptance in writing to AAKASH AUTOMOBILES & ORS and to us.OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 27 of 37
That the Decision/Award of The Sole Arbitrator Shall Be Final and Conclusive And Binding On The Parties.
Thanking you.
-Sd-
Yours Faithfully, For KOTAK MAHINDRA BANK LTD.
Kotak Mahindra Bank Ltd Plot No. 7, Sector 125, Noida-201313, Contact-120-6173358"
Above-said notice is addressed to Ld. Sole Arbitrator by respondent/claimant/lender with the text inter alia that respondent/claimant/lender would like to appoint the addressee Sh. Anilendra Pandey as Sole Arbitrator for adjudication of the dispute for vehicle loan account with petitioner no. 1 and others. Neither the copy of said notice dated 24/10/2020 for initiation of arbitration proceeding was depicted or marked to be sent to any of the petitioners nor in the arbitral proceedings record nor before this Court respondent/claimant/lender placed on record any proof of sending of said notice dated 24/10/2020 to any of the petitioners with a request that dispute is to be referred to arbitration so as to infer any date of service of said notice as commencement of arbitral proceeding in terms of Section 21 of the Act.
33. Section 21 of The Act provides that unless and otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which the request for that dispute to be referred to the arbitration is received by the respondent. Limitation in respect of which a request is made by one party to other party to refer such dispute to the arbitration stops when such notice is received by other party.
OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 28 of 3734. Delhi High Court in the case of Alupro Building Systems Pvt Ltd vs Ozone Overseas Pvt Ltd, O.M.P 3/2015 decided on 28/02/2017 inter alia held that where a notice under Section 21 of the Act invoking arbitration clause is not served upon the other party by the party invoking the said clause and the arbitration proceedings are held then in absence of any agreement by the petitioner for waiving of requirement of notice under Section 21 of the Act, the impugned arbitral award would be opposed to the fundamental policy of Indian law since the mandatory requirement of the Act stands not complied and ground under Section 34 (2)(b) (ii) of the Act is attracted and such impugned award could be set aside on this ground.
35. Bombay High Court in the case of Bhanumati J. Bhuta vs Ivory Properties & Hotels Pvt. Ltd., 2020 SCC Online Bombay 157 has held that the arbitral proceedings commence in respect of dispute when notice invoking of arbitration agreement is received by other side and not when such notice is only served upon the Arbitral Tribunal. The onus is on the applicant who had issued such notice to prove the delivery of such notice upon the other side.
36. In the case of International Nut Alliance LLC vs Beena Cashew Company, 2014 SCC Online Mad 425, it was inter alia held that before composition of arbitrators, a notice to the other party is very much essential.
37. The onus was on the respondent/claimant/lender who had OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 29 of 37 issued the notice dated 24/10/2020 Ex CW1/F before Ld. Sole Arbitrator to prove the delivery of such notice upon petitioners. Respondent/claimant/lender failed to discharge its onus of delivery of such notice Ex CW1/F upon petitioners. In terms of law laid down in the cases of (i) Alupro Building Systems Pvt Ltd vs Ozone Overseas Pvt Ltd (supra), (ii) Bhanumati J. Bhuta vs Ivory Properties & Hotels Pvt. Ltd. (supra) and (iii) International Nut Alliance LLC vs Beena Cashew Company (supra), the notice under Section 21 of the Act invoking arbitration clause having not been served upon the petitioners by respondent/claimant/lender, the party invoking the said clause; the arbitration proceedings held then in the absence of any agreement by petitioners for waiving of requirement of notice under Section 21 of the Act; the impugned arbitral award is opposed to be fundamental policy of Indian law since the mandatory requirement of the Act stands not complied and ground under Section 34 (2)(b) (ii) of the Act is attracted and impugned arbitral award is liable to be set aside on this ground alone.
38. At page nos. 103 and 104 of arbitral proceedings record is notice of appearance dated 29/10/2020 purportedly sent by Ld. Sole Arbitrator, which is having five pasted speed post receipts bearing following particulars:-
" RL A RH465359601IN Counter No:1, OP-Code:01 To:AAKASH, Bhopal G.P.O., PIN:462001 From:IIFL HOME FINANCE LTD , DELHI Wt:20grms, Amt:22.00 , 31/10/2020 , 11:43 RL A RH465359615IN OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 30 of 37 Counter No:1, OP-Code:01 To:AAKASH, Bhopal G.P.O., PIN:462001 From:IIFL HOME FINANCE LTD , DELHI Wt:20grms, Amt:22.00 , 31/10/2020 , 11:43 RL A RH465359650IN Counter No:1, OP-Code:01 To:SAHILY, Bhopal G.P.O., PIN:462001 From:IIFL HOME FINANCE LTD , DELHI Wt:20grms, Amt:22.00 , 31/10/2020 , 11:43 RL A RH465359663IN Counter No:1, OP-Code:01 To:NEHA, Bhopal G.P.O., PIN:462001 From:IIFL HOME FINANCE LTD , DELHI Wt:20grms, Amt:22.00 , 31/10/2020 , 11:43 RL A RH465359677IN Counter No:1, OP-Code:01 To:MANISH, Bhopal G.P.O., PIN:462001 From:IIFL HOME FINANCE LTD , DELHI Wt:20grms, Amt:22.00 , 31/10/2020 , 11:43"
Over the text "IIFL HOME FINANCE LTD, DELHI"
printed on the above said speed post receipts, there is a cutting in black ink and overwriting of "ANILENDRA PANDAY" in said speed post receipts.
39. At page nos. 101 and 102 of arbitral proceedings record is notice of appearance dated 21/11/2020 purportedly issued by Ld. Sole Arbitrator and on it are pasted five postal receipts, which bear following text:-
" RL A RH445150258IN Counter No:1, OP-Code:01 To:AKASH, Bhopal G.P.O., PIN:462001 OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 31 of 37 From:ANILENDRA PANDEY , DELHI Wt:20grms, Amt:22.00 , 24/11/2020 , 09:44 RL A RH445150244IN Counter No:1, OP-Code:01 To:AAKASH, Bhopal G.P.O., PIN:462001 From:ANILENDRA PANDEY , DELHI Wt:20grms, Amt:22.00 , 24/11/2020 , 09:44 RL A RH445150235IN Counter No:1, OP-Code:01 To:SHAILYA, Bhopal G.P.O., PIN:462001 From:ANILENDRA PANDEY , DELHI Wt:20grms, Amt:22.00 , 24/11/2020 , 09:44 RL A RH445150227IN Counter No:1, OP-Code:01 To:NEHA, Bhopal G.P.O., PIN:462001 From:ANILENDRA PANDEY , DELHI Wt:20grms, Amt:22.00 , 24/11/2020 , 09:45 RL A RH445150213IN Counter No:1, OP-Code:01 To:MANISH, Bhopal G.P.O., PIN:462001 From:ANILENDRA PANDEY , DELHI Wt:20grms, Amt:22.00 , 24/11/2020 , 09:45"
40. At page nos. 98 to 100 of arbitral proceedings record is notice of appearance dated 16/06/2021 purportedly sent by Ld. Sole Arbitrator and on it are pasted five postal receipts, which bear following text:-
" RL A RH506948573IN Counter No:1, OP-Code:01 To:SHAILY, Bhopal G.P.O., PIN:462001 From: SH. ANLENDRA PANDEY , DELHI Wt:15grams, Amt:22.00 , 18/06/2021 , 09:06 OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 32 of 37 RL A RH506948587IN Counter No:1, OP-Code:01 To:NEHA, Allahabad H.O, PIN:211001 From: SH. ANLENDRA PANDEY , DELHI Wt:15grams, Amt:22.00 , 18/06/2021 , 09:07 RL A RH506948595IN Counter No:1, OP-Code:01 To:MANISH, Bhopal G.P.O., PIN:462001 From: SH. ANLENDRA PANDEY , DELHI Wt:15grams, Amt:22.00 , 18/06/2021 , 09:08 RL A RH506948560IN Counter No:1, OP-Code:01 To:AAKASH AUTO, Goharganj S.O, PIN:464990 From: SH. ANLENDRA PANDEY , DELHI Wt:15grams, Amt:22.00 , 18/06/2021 , 09:05 RL A RH506948556IN Counter No:1, OP-Code:01 To:AAKASH, Hoshangabad H.O, PIN:461001 From: SH. ANLENDRA PANDEY , DELHI Wt:15grams, Amt:22.00 , 18/06/2021 , 09:04"
41. At page no. 97 of arbitral proceedings record is a copy of Declaration of Ld. Sole Arbitrator in terms of Section 12(1)(b) (Schedule Sixth). Said Declaration does not bear any date. Even otherwise the text of said declaration finds mention of more than 3 ongoing arbitrations within past three years with the respondent/claimant/lender company. Neither complete particulars of the ongoing arbitrations presided by present Ld. Sole Arbitrator wherein respondent/claimant/lender was a party have been given in such declaration nor even their exact number has been so given but it has been vaguely mentioned, as above said, that such number was more than three.
OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 33 of 3742. Supreme Court in the case of M/s Voestalpine Schienen GMBH Vs. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665 has construed Section 12(5) of The Act (as amended) and also the Seventh Schedule to The Act and has held that under Section 12(5) of The Act, notwithstanding any prior agreement to the contrary, 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. It is held that in such an eventuality, when the arbitration clause finds foul with the amended provisions i.e. Section 12(5) of The Act, the appointment of an arbitrator would be beyond pale of arbitration agreement, empowering the Court to appoint such arbitrator(s), as may be permissible. Other party cannot insist for appointment of an arbitrator in terms of the arbitration agreement. In such situation, that would be the effect of non-obstante clause contained in Section 12(5) of The Act.
43. Supreme Court in case of HRD Corporation (Marcus Oil and Chemical Division) vs. Gail (India) Limited (Formerly Gas Authority of India Ltd.), 2017 SCC OnLine SC 1024 has held that if the learned arbitrator fails to file appropriate disclosure in terms of section 12(1) of The Act read with Fifth Schedule of The Act, the remedy of the party aggrieved in that event would also be to apply under section 14(2) of The Act to the court to decide about the termination of the mandate of the arbitral tribunal on that ground.
OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 34 of 3744. Above said makes it abundant clear that requisite notice in prescribed form specified in the Sixth Schedule read with Fifth Schedule of The Act was not given by Ld. Sole Arbitrator to present petitioners/borrowers and secondly the exact number and complete particulars of ongoing arbitrations of respondent/ claimant/lender with Ld. Sole Arbitrator were not detailed. Accordingly, there is non compliance of the elicited mandate of Section 12 of The Act by Ld. Sole Arbitrator by not sending the disclosure in prescribed form specified in the Sixth Schedule read with Fifth Schedule of The Act to petitioners/borrowers embodying existence of grounds giving rise to justifiable doubts as to independence or impartiality of arbitrator including arbitrator's relationship with the claimant/Counsel for claimant. Per contra it is own version of Ld. Sole Arbitrator in said declaration, elicited above, that he has been appointed as Arbitrator in more than three cases by respondent/ claimant/lender.
45. As has been elicited above, none of the purported notices sent by Ld. Sole Arbitrator were so sent to the complete address and pin code "AAKASH AUTOMOBILES, Shop No 02 Dham CompleX, Hoshangabad Road, Obedullaganj, RAISEN-464993 MADHYA PRADESH, INDIA"; the address recorded in the Statement of Account of petitioner no. 1 in books of respondent/ claimant/lender company, elicited above whereas the respondent/ claimant/lender neither placed before Ld. Sole Arbitrator nor before this Court Schedule I of Master Facility Agreement entered with borrower(s) and any records of guarantors with claimant/lender company incorporating addresses and other OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 35 of 37 particulars of guarantors; so as to infer appropriate service of notices upon the borrower(s) in terms of Clause 11.3 of The Master Facility Agreement and in consonance with Section 3 of the Act.
46. No tracking reports with respect to sending of purported notices dated 29/10/2020; 21/11/2020 and 16/06/2021 by Ld. Sole Arbitrator to borrowers/petitioners have been placed on record of arbitral proceedings and/or by respondent/ claimant/lender to prove the delivery of the same upon petitioners/borrowers.
47. The facts and circumstances embodied in the precedents relied upon by Ld. Counsel for respondent are entirely different and distinguishable to the facts and circumstances of the case in hand, so they are of no help to respondent for dismissal of the present petition.
48. In view of law laid down in the cases of (i) TRF Ltd. (supra); (ii) Bharat Broadband Network Limited (supra); (iii) Perkins Eastman Architects DPC (supra); (iv) HRD Corporation (supra); (v) Proddatur Cable TV Digi Services (supra) and (vi) M/s Omcon Infrastructure Pvt. Ltd. (supra), no arbitrator can be unilaterally appointed by the respondent/ claimant/lender and in this case at the outset vide the letter dated 24/10/2020 Ex CW1/F (which also has been signed by someone whose name, designation or power has not been disclosed in said letter as to what powers were vested or conferred to such person nor are described therein); self proclaimed authorized signatory OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 36 of 37 of respondent/claimant/lender had appointed Ld. Sole Arbitrator unilaterally. Petitioners were not given proper notice of the appointment of Ld. Sole Arbitrator. Petitioners were not given proper notice of the arbitral proceedings. Petitioners were unable to present their case before Ld. Sole Arbitrator. Even the appropriate mandatory disclosure in terms of Fifth and Seventh Schedule of The Act in the format of Sixth Schedule of The Act was not conveyed by Ld. Sole Arbitrator to the petitioners. The impugned award is accordingly liable to be set aside under Section 34(2)(a)(iii); Section 34(2)(a)(v) of The Act; Section 34 (2)(b) (ii) of The Act and also under Section 34 (2-A) of The Act as the impugned award is vitiated by patent illegality appearing on the face of the award, as elicited in detail herein above. Reliance placed upon the cases of Associate Builders (supra) and Ssangyong Engineering & Construction Co. Ltd. (supra).
49. For the foregoing reasons, the petition is allowed and the impugned award is set aside.
50. The parties are left to bear their own costs.
51. File be consigned to record room.
Digitally signed by GURVINDER PAL GURVINDER SINGH
PAL SINGH Date: 2022.11.22
14:28:28 +0530
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
nd
on 22 November 2022.Patiala House Court, New Delhi.
(DK) OMP (COMM.) No. 132/2022 Aakash Automobiles & Ors. vs Kotak Mahindra Bank Ltd Page 37 of 37