Delhi District Court
Rps Management And Consultancy Pvt. Ltd vs M/S Moneywise Financial Services Pvt. ... on 8 June, 2022
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (Comm.) No. 03/2022
1. RPS Management and Consultancy Pvt. Ltd.
Through its Authorized Signatory
Rahul Kumar
Having its registered office at:-
1256 SF, Dayanand Colony,
Gurugram, Haryana-122001
2. Rahul Kumar
S/o R.B. Sharma
R/o H. No. 501, Sushant Lok 1, Maple Heights
Gurgaon, Galleria DLF-IV
Haryana
3. Salil Kumar
S/o Ram Sharan Prasad
R/o RT-603, Royal Tower, Shipra Suncity
Indirapuram, Ghaziabad, Uttar Pradesh-201014
4. Sushma Kumari
R/o H. No. 501, Sushant Lok 1, Maple Heights
Gurgaon, Galleria DLF-IV
Haryana ...Petitioners
versus
1. M/s Moneywise Financial Services Pvt. Ltd.
Through its Managing Director
Having its office at:
11/6B, Shanti Chamber,
Pusa Road, New Delhi-110005
2. M/s Edgecraft Solutions Private Limited
Through its Managing Director
3rd Floor, Churchgate House,
32 Veer Nariman Road, Hutatma Chowk,
Mumbai City MH 400001 IN
OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 1 of 39
3. Sh. Arif Mohammed Madani (Ld. Sole Arbitrator),
Retired District Judge
302, 3rd Floor, Felicity Tower,
Near Mahanagar Times
Sahkar Marg, Jaipur ...Respondents
Date of Institution : 04/01/2022
Arguments concluded on : 21/05/2022
Decided on : 08/06/2022
Appearances : Sh. Rit Arora, Ld. Counsel for petitioners.
Sh. Amit Kumar Sinha, Ld. Counsel for respondent no. 1
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 impugned arbitral award dated 14/09/2021 passed by Sh. Arif Mohammed Madani, Ld. Sole Arbitrator in Arbitration Case ID: A002767 titled 'Moneywise Financial Services Private Limited vs RPS Management and Consultancy Private Limited & Ors.' Ld. Sole Arbitrator awarded Rs. 5,80,792/- with simple interest @ 18% from 25/07/2021 till realization with cost of Rs. 7,500/- in favour of respondent no. 1/claimant payable by petitioners, jointly and severally.
2. I have heard Sh. Rit Arora, Ld. Counsel for petitioners; Sh. Amit Kumar Sinha, Ld. Counsel for respondent no. 1 and perused the record of the case, replies of respondent nos. 1 and 2 to petition, the arbitral proceedings record, relied upon precedents, filed brief written arguments on behalf of petitioners as well as on behalf of respondent nos. 1 and 2 and given my thoughtful consideration to the rival contentions put forth.
OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 2 of 393. Shorn of unnecessary details, the relevant facts of the case of petitioners as well as arguments set up by petitioners through Ld. Counsel are as follows. Respondent no. 1 company/claimant approached petitioners to provide business loans claiming to be reputed Non Banking Financial Company (in short NBFC). Being impressed with the assurances of customer friendly services by respondent no. 1/claimant, petitioners entered into Loan Agreement dated 27/07/2020 with claimant/respondent no. 1 wherein petitioner no. 1 was the main borrower and petitioner nos. 2 to 4 were co-borrowers to the loan agreement. Business of petitioner no. 1 company was hit hard in Covid-19 pandemic and it faced severe hardship in its business and could not generate enough cash flow. Petitioner no.1 company had borrowed Rs. 5,02,000/- vide loan agreement, above said but defaulted on few installments. Instead of appreciating the difficult circumstances and providing petitioner no. 1 company with some time to make installments and/or regularize its account; claimant/respondent no. 1 decided to proceed with impugned arbitral proceedings. Multiple requests were made by petitioner no. 1 to claimant/ respondent no. 1 to restructure the loan availed by it and provide some time to it to repay the installments. Petitioner no. 1 was disturbed by the unprecedented scale of the pandemic which had practically shut down everything. Petitioners never received any notice for arbitration from claimant/respondent no. 1 company. Rather respondent no. 2 alleged ADR service provider company issued notice dated 13/07/2021 styled as Notice of Arbitration issued on its letter head and displaying the name of Ld. Sole Arbitrator at the end whereas said notice did not bear signatures of anyone and appeared to have been issued by respondent no. 2.
OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 3 of 39No notice prior to commencement of arbitral proceeding was issued by respondent no.1 company and straightaway respondent nos. 2 and 3 had entered reference. Respondent no. 1 even filed its Statement of Claim on 26/07/2021 which further made it apparent that respondents were acting in connivance. Petitioner no. 1 company through its Counsel issued a strong response vide notice dated 27/07/2021 categorically refusing the consent to the unilateral proceedings commenced on behalf of respondent no. 3. Vide said response notice 27/07/2021 petitioner no. 1 conveyed that the consent of the petitioners was not obtained by respondent no. 1 company before commencing the arbitration and even no notice of such arbitration was ever served upon petitioner. Also was stated that the proceedings were unilateral in nature; constitution of Arbitral Tribunal was biased in nature as no prior intimation was served upon petitioners. It was also stated that Ld. Sole Arbitrator may have been engaged by other respondents in several other cases which gives justifiable doubts as to the independence or impartiality of the arbitrators. Respondent no. 1 responded to the objections filed by petitioner no. 1 vide reply dated 14/08/2021. Without providing any hearing to the petitioners, respondent nos. 2 and 3 proceeded with the deciding of objections of the petitioners and passed the order dated 20/08/2021 whereby respondent no. 3 dismissed the objections of the petitioners and decided to proceed with the arbitral proceedings and it further held that it was expedient to direct respondent no. 2 platform to provide a list of arbitrators to petitioners to choose an arbitrator. It made no sense since the respondent no. 3, Ld. Sole Arbitrator could not have passed such order which is without jurisdiction from the inception itself.
OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 4 of 39Instead of withdrawing from the proceedings as no consent was afforded to the Ld. Sole Arbitrator by petitioners; Ld. Sole Arbitrator proceeded ex parte and passed the impugned award which made clear to petitioners that the respondent nos. 2 and 3 are acting in connivance to help the respondent no. 1 obtain impugned award against borrowers and help it in recovery.
4. Petitioners have impugned the arbitral award mainly on the following grounds. The impugned award is bad, irrational, arbitrary and unfair and is liable to be set aside. The impugned award suffers from patent illegality and is perverse as Ld. Sole Arbitrator has not followed the due process of law. Arbitration proceedings were conducted in an unfair and biased manner, thereby rendering the impugned award as being against the public policy of India. As per Clause 10.1 of the agreement inter se petitioners and respondent no. 1/claimant, the arbitration seat was at New Delhi and petitioners never gave any consent for virtual arbitration. The arbitration proceedings were in fact not even virtual, and rather, online in nature as no hearing ever took place. Such a procedure in arbitration proceedings is unheard of. Even respondent no. 2 company is a Mumbai based company, hence, having no jurisdiction to constitute arbitration proceeding per contra to Clause 10 of the agreement inter se petitioners and respondent no. 1. Petitioners through notice dated 27/07/2021 had categorically refused to submit to the jurisdiction of the respondent no. 2 company (so called facilitator company) in the name of Presolv360 ODR and Ld. Sole Arbitrator respondent no.
3. Yet, Respondent no. 3 proceeded with the proceedings and passed the award. The proceedings were held in complete OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 5 of 39 defiance of the loan agreement and per contra to the provisions of the Act. The consent of the parties to arbitration is of a paramount importance. No notice was received from the respondent no. 1 for invoking arbitration clause 10.1 of loan agreement dated 27/07/2020. No opportunity was provided to the petitioner to give his choice of the arbitrator by respondent no. 1 and straightway the Arbitral Tribunal was constituted by the respondent no. 1 alone. The proceedings were completely sham in nature as no notices of hearing were ever served upon the petitioners. First notice was received by petitioners on 13/07/2021 and the award was even passed on 14/09/2021 itself in a haphazard manner. Petitioners never consented to the procedure and manner of the arbitral proceedings. There was no hearing or meeting where the petitioners were given opportunity to argue or defend their case. The proceedings and its nature were in complete defiance of the public policy, the arbitration agreement and the statutory provisions. Issuance of the notice under Section 21 of the Act is mandatory in nature and it was incumbent upon the claimant/respondent no. 1 company to have served the notice invoking arbitration clause upon the petitioners. Without issuance of such notice the arbitral proceedings become bad in law and the impugned award is liable to be set aside. Respondents were hand in gloves and in connivance passed such illegal and arbitrary orders. Respondent no. 2 had no authority under law to form any such institution. Petitioners never consented to refer their dispute to any such institution at the time of the execution of the agreement dated 27/07/2020. Arbitral procedure was not in accordance with the agreement of the parties. Claimant/respondent no. 1 ought to have taken the OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 6 of 39 consent of the petitioners before referring the dispute to respondent no. 2 institution. The procedure adopted was contrary to the agreement and the award was illegal and liable to be set aside. Presolv360 is a private company and there exists every justifiable doubt in the mind of petitioner no. 1 company that respondent nos. 2 and 3 were acting in connivance with the respondent no. 1 to pass instant awards against its borrowers. Respondent no. 2, which was a private company, in fact was helping respondent no. 1 in passing of illegal and arbitrary awards and helping it recover money from its borrowers. The entire front of the independent platform has been created to defy the authorities and had no sanction from any authority. If the corporate veil is lifted it will become very clear that few private parties are forming corporate to defy the public policy. Despite categorical refusal from petitioner to appointment of Ld. Sole Arbitrator, Ld. Sole Arbitrator could not have acted as Arbitrator to the dispute between the parties. The proceedings were completely unilateral in nature. The impugned ex parte award is illegal, unfair and arbitrary in nature and liable to be set aside. The impugned award is based on surmises and conjectures and without appreciating/considering the submissions of the petitioner as a whole and the documents placed on record as well as the true factual position. Petitioners prayed for setting aside of the impugned arbitral award.
5. Ld. Counsel for the petitioners argued in terms of the grounds to impugn the arbitral award. Ld. Counsel for petitioner also argued that Section 2 (1) (ca) of the Act, inserted by The Arbitration and Conciliation (Amendment) Act, 2019 (Act 33 of OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 7 of 39 2019) defines arbitral institution as designated by the Supreme Court or High Court under The Act. It was also argued by Ld. Counsel for petitioner that respondent no. 2 is not designated as the 'arbitral institution' either by the Supreme Court or High Court under this Act and hence reference to it for arbitration is without jurisdiction and contrary to law. Ld. Counsel for petitioners also argued that any award thus passed by Ld. Sole Arbitrator appointed by respondent no. 2 institution is illegal, arbitrary and liable to be set aside. Also was argued by Ld. Counsel for petitioners that impartiality and independence of the Arbitral Tribunal is of paramount nature. Same has also to be seen in the manner of its constitution and appointment. The process followed by the Arbitral Tribunal is illegal, unilateral and arbitrary in nature. Also Section 11 (3A) of the Act inserted by The Arbitration and Conciliation (Amendment) Act, 2019 (Act 33 of 2019) embodies that the Supreme Court and the High Court have powers to designate the arbitral institutions, from time to time, which have been graded by the Council under Section 43-I of the Act, for the purposes of this Act. Ld. Counsel for petitioners relied upon the following precedents:-
1. Score Information Technologies Limited vs GR Infra Projects Limited, 2021 SCC OnLine Del 3547 and
2. Alupro Building Systems Pvt. Ltd. vs Ozone Overseas Pvt. Ltd., 2017 SCC OnLine Del 7228.
6. Respondent no. 1 in its reply has averred and was argued through Ld. Counsel that petitioners admitted of having availed the loan facility from claimant/respondent no. 1 and also admitted of their default in making payment, as per Schedule for payment. It was also averred by respondent no. 1 and argued through Ld. Counsel that claimant/respondent no. 1 was OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 8 of 39 constrained to recall the entire loan by issuing Loan Recall Notice dated 10/06/2021 which was received by petitioners and even petitioners issued reply dated 18/06/2021 for said Loan Recall Notice admitting the default and undertook to pay regularly, however, they did not pay. As dispute arose between the parties in terms of loan agreement, claimant/respondent no. 1 invoked arbitration clause 10.1 of Loan Agreement. It was argued by Ld. Counsel for respondent no. 1 that to maintain the fairness and impartiality, the dispute was referred to the Arbitral Tribunal through the online ADR platform namely www.presolv360.com and said platform was recognized and enlisted by the Department of Justice, Government of India and was neutral institution that provides complete administrative and technical support to the parties for conducting the arbitral proceedings online and had no interest in the outcome of the dispute. Petitioners were duly informed, communicated and made aware of the initiation of the arbitral proceedings vide notice of arbitration dated 13/07/2021 issued to the petitioners. Copy of the notification issued by Ministry of Law and Justice was placed on record by the respondent no. 1 through Ld. Counsel. It was argued by Ld. Counsel for respondent no. 1 that petitioners have not approached this Court with clean hands as the petitioners had already contested the said matter before Ld. Arbitrator and had even raised their objections/contentions before Ld. Arbitrator whereas award was passed by Ld. Arbitrator after careful perusal and considerations of documents available on record; so it cannot be said that the award was passed ex parte. It was argued by Ld. Counsel for respondent no. 1 that as petitioners had raised certain objections, filed representations before Ld. Sole Arbitrator who OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 9 of 39 passed order dated 20/08/2021; so dispute of petitioners with respect to impugned award being ex parte passed by Ld. Sole Arbitrator was wholly misconceived. Also was argued by Ld. Counsel for respondent no. 1 that impugned award was duly passed by Ld. Sole Arbitrator after the appearance by the petitioners, however, petitioners chose not to contest and as such the application/petition filed by petitioners is nothing but an abuse of process of law for delaying the proceeding for recovery of dues from petitioners and is liable to be dismissed with exemplary cost. It was argued by Ld. Counsel for respondent no. 1 that sub section (2) of Section 34 of the Act contemplates the conditions/grounds under which an arbitral award can be impugned whereas sub section (3) of Section 34 of the Act also embodies the statutory period of limitation of three months for making an application/petition impugning the award from the date on which the party making application/petition had received the award. Neither the application/petition of petitioners comes within the ambit of sub section (2) of Section 34 of the Act nor application/petition impugning the arbitral award has been filed within the period of limitation and being time barred is liable for dismissal. It was argued by Ld. Counsel for respondent no. 1 that petitioners had raised their objections/representations before Ld. Sole Arbitrator who passed the arbitral award in accordance and compliance of the rule of law and principles of natural justice and petitioners were given opportunity of being heard and said right was appropriately exercised by petitioners and so any interference in execution of the arbitral award shall cause hindrance to the interests of respondent no. 1. It was also argued by Ld. Counsel for respondent no. 1 that impugned award OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 10 of 39 is absolutely legal, valid and stands good in the eyes of law and application/petition is liable to be dismissed whereas in the instant matter, public money is on stake and respondent no. 1 being custodian of public money is answerable to public at large for the recovery of said money.
7. Respondent no. 2 had also sent written submissions which were limited to its administrative role. It is averred therein that respondent no. 2 is a company incorporated and registered under the Companies Act, 2013, having its registered office in Mumbai and it runs Presolv360, an independent institution and online software platform developed by respondent no. 2, providing electronic Alternative Dispute Resolution (in short ADR) also referred to as Online Dispute Resolution (in short ODR) services.
It is also averred that respondent no. 2 administers disputes through mechanisms like negotiation, mediation, conciliation and arbitration on its platform (https://presolv360.com) through its Mediation 360 (covers negotiation, mediation and conciliation) and Arbitration 360 (covers arbitration) module, and empanels independent, qualified neutrals with the required competence, knowledge and expertise on its panel. Respondent no. 2 provides a complete case management system and integrates various tools like email and WhatsApp for electronic communication and transmission, audio/video application integration, etc., and also provides technical and administrative support to all the parties concerned for conducting the proceedings online and has no interest in the outcome of the dispute or any conflict of interest. It is also averred that respondent no. 2 plays no role whatsoever in determination of any dispute but only provides an online OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 11 of 39 platform along with all support services where disputing parties can resolve their disputes quickly, economically and conveniently from the comforts of their homes or offices, thereby reducing the burden on our Court infrastructure on one hand and on the other, provide parties a full and fair chance of participating in their matter without having to expose themselves or their families to the dangers of the Covid-19 pandemic. It is also averred that Department of Justice, Ministry of Law & Justice, Government of India acknowledged the need for settlement of disputes through alternate methods like mediation, arbitration, conciliation, online or otherwise so that litigation is reduced, and government and organization are encouraged not to go to Courts for their disputes. Accordingly, said department enlisted Presolv360 as one of the ODR service providers in the country. Respondent no. 2 with its written submissions placed on record as Annexure-R/2-A, copy of the list published by the Department of Justice, Ministry of Law & Justice, Government of India. It is averred that Presolv360 has also been empaneled as Mediation Institution for Court annexed and pre-institution mediation by the Main Mediation Committee, Hon'ble Bombay High Court and Hon'ble Bombay City Civil and Sessions Court, which is detailed in copies of empanelment letter and email annexed as Annexure- R/2-B Colly. It is also averred that the Department of Legal Affairs, Ministry of Law & Justice, Government of India vide notification dated 18/09/2020 addressed to all ADR Institutions including Presolv360 for hosting of list of institutions offering Alternative Dispute Resolution Mechanisms (including ODR) on the website of Department of Legal Affairs, copy of said letter was annexed as Annexure-R/2-C. It is also averred that the OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 12 of 39 judiciary, the legislature and the executive have not only made provisions for institutional arbitration but have also encouraged the use of technology in ADR for resolution of disputes in the country. It is also averred that the complete arbitral record with index and pagination with covering letter dated 02/02/2022 was filed on behalf of respondent no. 2. It was also averred that claimant/respondent no. 1 vide request letter dated 09/07/2021 addressed to respondent no. 2 requested respondent no. 2 to administer arbitration on the platform online for the dispute in question and arbitration was registered and case ID A00267 was assigned thereto. It is also averred that notice of arbitration dated 13/07/2021 was supplied to the parties by respondent no. 2 containing the details therein seeking response of the respondents within 7 days thereof. It is also averred that considering the nature of dispute, availability, independence, capability and expertise, vide appointment letter dated 13/07/2021, Ld. Sole Arbitrator i.e., respondent no. 3 was appointed by respondent no. 2 to act as an Arbitrator from the panel of Arbitrators and was requested to submit his acceptance and consent along with necessary disclosures in accordance with law. It is further averred that both parties were made aware of the presiding arbitrator at the same time, thereby, eliminating influence of any party over the appointment of the arbitrator whereas neither party had played any role whatsoever in the appointment of the arbitrator. It is further averred that Ld. Sole Arbitrator i.e., respondent no. 3 submitted acceptance and consent to act as an arbitrator along with statutory disclosures under Section 12 of the Act read with Fifth and Sixth Schedule thereto in respect of independence, impartiality, ability and availability to complete the entire OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 13 of 39 arbitration within the prescribed time limits. Parties were notified of the consent and disclosures made along with the procedure to be followed for the said proceedings. It is also averred that directions issued to respondent no. 2 by respondent no. 3 were complied with, including providing a list along with experience of available arbitrators from the panel of arbitrators with a request to the petitioners to choose an arbitrator of their choice in compliance with order dated 20/08/2021 passed by Ld. Sole Arbitrator, respondent no. 3. Throughout the proceedings all communications, documents, orders/directions etc. e-filed on the platform were also supplied electronically through email and WhatsApp via technology integrated with the platform to ensure that the parties are apprised of the updates in their matter immediately upon happening of any event or action. Even Ld. Sole Arbitrator i.e., respondent no. 3 published the arbitral award on 14/09/2021 and signed copy of the award was transmitted electronically to the concerned parties in the manner described herein above. It is also averred that Presolv360 supplied certificate under Section 65-B of The Indian Evidence Act, 1872 with complete details of delivery through email and WhatsApp and award delivery report to the concerned parties. It is also averred that respondent no. 2 played no role in adjudication or determination of the dispute, which role is played by the Arbitral Tribunal of Ld. Sole Arbitrator, respondent no. 3. It was also averred that respondent no. 2 empanels independent, qualified neutrals with the required competence, knowledge and expertise on its panel. It is further averred that respondent no. 3 is one such distinguished, independent and qualified arbitrator having no ties or connection with either parties and is an Officer of the Indian OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 14 of 39 Legal Service. It is also averred that respondent no. 3 is a Retired District Judge with 25 years of judicial experience and it was incorrect to say that respondent nos. 2 and 3 were acting in connivance with respondent no. 1 to pass instant awards. It is further averred that petitioners incorrectly stated that respondent no. 2 is helping respondent no. 1 in passing of illegal and arbitrary awards and helping it recovery money from its borrowers and it was also incorrect that the entire front of independent platform has been created to defy authorities and has no sanction from any authority.
8. 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.
9. Supreme Court in Suo Moto Writ Petition (Civil) no. 3 of 2020, In Re: Cognizance For Extension Of Limitation vide order dated 10/01/2022 has excluded the period from 15/03/2020 till 28/02/2022 for computing the period of limitation for any suit, appeal, application or proceedings and the petition under OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 15 of 39 Section 34 of The Act is also eligible for the same. Accordingly, present petition filed on 04/01/2022 is within the period of limitation.
10. 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 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 OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 16 of 39
(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 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."
11. Supreme Court in case of Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 has held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 17 of 39 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.."
12. Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, 2019 SCC OnLine SC 677 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 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.
OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 18 of 3913. I advert to the Master Loan Agreement dated 27/07/2020 (hereinafter referred as the agreement) inter se petitioners and claimant/respondent no.1. The agreement embodies stipulation that the person(s) with name and description as borrower(s)/ co-borrower(s) in Schedule I will be collectively referred as the 'Borrower'. Following are the relevant clauses in the agreement:-
"10. MISCELLANEOUS 10.1 Arbitration: Any disputes, differences, controversies and questions directly or indirectly arising at any time hereafter between the Parties or their respective representatives or assigns, arising out of or in connection with this Agreement (or the subject matter of Agreement), including, without limitation, any question regarding its existence, validity interpretation, construction, performance, enforcement, rights and liabilities of the Parties, or termination ("Dispute"), shall be referred to a sole arbitrator duly appointed by the Lender. The language of the arbitration shall be English. The seat of the arbitration shall be at New Delhi and the language of proceedings shall be English. The award rendered shall be in writing and shall set out the reasons for the arbitrator's decision. The costs and expenses of the arbitration shall be borne equally by each Party, with each Party paying for its own fees and costs including attorney fees, except as may be determined by the arbitration tribunal. Any award by the arbitration tribunal shall be final and binding. 10.2 Notices:
10.2.1 Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Agreement shall be in writing and signed by or on behalf of the Party giving it.
Such notice shall be served by sending it by Contact to the number or delivering by hand, mail or courier to the address of the Borrower/Guarantor mentioned in the Schedule 1 to this Agreement. In each case it shall be marked for the attention of the relevant Party. Any notice so served shall be deemed to have been duly given (a) in case of delivery by hand, when hand delivered to the other Party; or (b) when sent by facsimile, upon receipt of a confirmation receipt and provided that the notice has been sent to correct facsimile numbers; or (c) when sent by post, where 5 Business Day(s) have elapsed after deposit in the post; or (d) when delivered by courier on the second Business Day after deposit with an OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 19 of 39 international overnight delivery service, postage prepaid, with next Business Day delivery guaranteed, provided that the sending Party receives a confirmation of delivery from the delivery service provider. Any notice or communication to the Borrower shall be deemed to be a notice or communication to all the Borrower and the Guarantor (s)."
14. Following are the addresses of borrowers i.e., petitioners in Schedule I of the agreement:-
Borrower(s) Name RPS Management And Consultancy Private Limited Correspondence H.No. 1256, SF Dayanand Colony, Address Haryana Gurgaon, Haryana-122001 Registered address H.No. 1256, SF Dayanand Colony, Haryana Gurgaon, Haryana-122001 Co-Borrower(s) Name Mr. Rahul Kumar Permanent Address H-501, Sushant Lok 1, Maple Heights Gurgaon, Galleria, DLF-IV, Amukhnagar, Gurgaon, Haryana-
122009
Permanent Address Kaiga Nuclear Project, Unit 3 & 4,
Karwar, N K Karnataka-581400
Name Mr. Salil Kumar
Correspondence RT-603, Royal Tower, Shipra
Address Suncity, Indirapuram, Ghaziabad-
201014
Permanent Address S/o Mr. Ram Sharan Prasad,
Pokharia Begusarai, Bihar-851101
Name Ms. Sushma Kumari
Correspondence H-501, Sushant Lok 1, Maple
Address Heights Gurgaon, Galleria, DLF-IV,
Amukhnagar, Gurgaon, Haryana-
122009
Permanent Address H-501, Sushant Lok 1, Maple
Heights Gurgaon, Galleria, DLF-IV,
Amukhnagar, Gurgaon, Haryana-
OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 20 of 39
122009
15. 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.
16. Delhi High Court in the case of Dewan & Sone Investment Pvt. Ltd. vs New Delhi Municipal Committee, MANU/DE/0882/1996 inter alia held that any act which is required to be done under law either should be done in accordance with law or not at all. Reliance was placed upon the decision of Privy Council in case of Nazir Ahmad vs King-
Emperor, MANU/PR/0020/1936.
17. I now advert to the copy of Loan Recall Notice dated 10/06/2021 placed at page nos. 59 & 60 of the arbitral proceedings record which is addressed to the following three addressees with following addresses:-
"1. RPS MANAGEMENT AND CONSULATNCY PRIVATE LIMITED H NO 1265, SF, DAYANAND COLONY, GURGAON HARYANA 122001
2. RAHUL KUMAR H NO 501, MAOLE HEIGHTS, BLOCK-C, SUSHANT LOK, PHASE-1, GURGAON GALLERIA DLFIV HARYANA 122009
3. SALIL KUMAR OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 21 of 39 RT-603, ROYAL TOWER, SHIPRA SUNCITY, INDIRAPURAM, GAZIABAD UTTAR PRADESH 201014"
18. At page no. 60 of arbitral proceedings record at the bottom of above said Loan Recall Notice dated 10/06/2021 is the photocopy impression of three speed post postal receipts purportedly dispatched to above said three addressees named in said notice on said addresses. Above elicited facts make it clear that (i) no Loan Recall Notice was sent to petitioner no. 4, co- borrower by claimant/respondent no. 1; (ii) said Loan Recall Notice was not sent at correct address of petitioner no. 1 as given in Schedule I of the agreement, above elicited, since said Loan Recall Notice dated 10/06/2021 records of it being sent to House No. 1265 and not the given address at House No. 1256 in Schedule I of the agreement; (iii) said Loan Recall Notice dated 10/06/2021 was not sent to given address in Schedule I of the agreement of House No. 501, Sushant Lok 1, Maple Heights Gurgaon, Galleria, DLF-IV, Amukhnagar, Gurgaon, Haryana- 122009 of petitioner no. 2, co-borrower Rahul Kumar but was sent to address House No. 501, Maole Heights, Block C, Sushant Lok, Phase-1, Gurgaon, Galleria, DLF-IV, Haryana-122009. The addresses given of petitioner no. 2, co-borrower Rahul Kumar in Schedule I of the agreement and on Loan Recall Notice dated 10/06/2021 are at variance.
19. Similarly, the alleged notice dated 05/07/2021 under Section 21 of the Act alleged to have been sent by claimant/respondent no. 1 to petitioners find mention of following addresses of petitioners:-
"RPS Management and Consultancy Private Limited OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 22 of 39 (Borrower) H No 1265, SF, Dayanand Colony, Gurgaon, Haryana-122001 Rahul Kumar (Co-Borrower) H No 501, Maole Heights, Block-C, Sushant Lok, Phase-1, Gurgaon Galleria Dlfiv Haryana 122009 Salil Kumar (Co-Borrower) Rt-603, Royal Tower, Shipra Suncity, Indirapuram, Gaziabad Uttar Pradesh 201014 Sushma Kumari (Co-Borrower) H. No. 501, Maole Heights, Block-C, Sushant Lok, Phase-1, Gurgaon Galleria Dlfiv Haryana 122009"
20. It also makes it clear that the alleged notice under Section 21 of the Act dated 05/07/2021 was not sent to correct addresses of borrowers/petitioner nos. 1, 2 and 4 at their recorded addresses in Schedule I of the agreement.
21. Section 3 of the Act inter alia embodies deeming provision for receipt of written communications if they are delivered to the addressees at their place of business, residence or mailing address. In accordance with the clause 10.2.1 of the agreement, the lender/claimant/respondent was required to send notices to borrowers/petitioners at the addresses given in Schedule I of the agreement. Notices viz. (i) Loan Recall Notice dated 10/06/2021 sent by claimant/respondent/lender to borrowers petitioner nos. 1, 2 and 4; (ii) notice under Section 21 of the Act dated 05/07/2021 sent by claimant/respondent/lender to borrowers petitioner nos. 1 and 2; at addresses which were at variance from their recorded addresses in the Schedule I of the agreement and accordingly, OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 23 of 39 these notices cannot be deemed to be served upon these borrowers/petitioners by any figment of imagination as these were not sent at their correct given addresses in the Schedule I of the agreement.
22. 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.
23. 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.
24. In the case of International Nut Alliance LLC vs Beena Cashew Company, 2014 SCC Online Mad 425, it was inter alia OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 24 of 39 held that before composition of arbitrators, a notice to the other party is very much essential.
25. In the case of Impex Corporation & Others vs Elenjikal Aquamarine Exports, 2007 SCC Online Ker 125, it was inter alia held that where no proper and sufficient notice is given to a party by the arbitrator, there is violation of principle of natural justice and these are also violation of Section 18 and 25 of The Act.
26. Notice dated 05/07/2021 under Section 21 of the Act invoking the arbitration clause alleged by respondent no. 1 to have been sent to borrowers/petitioners embodies unilateral reference for arbitration to Presolv360 i.e., respondent no. 2 without any consent/agreement of borrowers/petitioners.
27. Since on record is the material that requisite notice under Section 21 of the Act invoking arbitration clause was not served appropriately upon borrowers/petitioner nos. 1, 2 and 4 by claimant/respondent no. 1, the party invoking the said clause and in absence of any agreement by petitioner nos. 1, 2 and 4 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 for the same impugned arbitral award is liable to be set aside on this ground alone.
28. Sections 2(1)(ca), 11 (3A), 29B of The Act read as under:-
OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 25 of 39"2 Definitions.
(1) In this Part, unless the context otherwise requires,-- .................................................................................................. (ca) "arbitral institution" means an arbitral institution designated by the Supreme Court or a High Court under this Act;
......................................................................................................
11. Appointment of arbitrators ......................................................................................................
(3A) The Supreme Court and the High Court shall have the power to designate, arbitral institutions, from time to time, which have been graded by the Council under section 43-I, for the purposes of this Act:
PROVIDED that in respect of those High Court jurisdictions, where no graded arbitral institution are available, then, the Chief Justice of the concerned High Court may maintain a panel of arbitrators for discharging the functions and duties of arbitral institution and any reference to the arbitrator shall be deemed to be an arbitral institution for the purposes of this section and the arbitrator appointed by a party shall be entitled to such fee at the rate as specified in the Fourth Schedule:
PROVIDED FURTHER that the Chief Justice of the concerned High Court may, from time to time, review the panel of arbitrators.
..........................................................................................................
29B. Fast track procedure (1) Notwithstanding anything contained in this Act, the parties to an arbitration agreement, may, at any stage either before or at the time of appointment of the arbitral tribunal, agree in writing to have their dispute resolved by fast track procedure specified in sub-section (3).
(2) The parties to the arbitration agreement, while agreeing for resolution of dispute by fast track procedure, may agree that the arbitral tribunal shall consist of a sole arbitrator who shall be chosen by the parties.
(3) The arbitral tribunal shall follow the following procedure while conducting arbitration proceedings under sub-section (1):
(a) The arbitral tribunal shall decide the dispute on the basis of written pleadings, documents and submissions filed by the parties without any oral hearing;
(b) The arbitral tribunal shall have power to call for any further information or clarification from the parties in addition to the pleadings and documents filed by them;
(c) An oral hearing may be held only, if, all the parties make a request or if the arbitral tribunal considers it necessary to have oral hearing for clarifying certain issues;
(d) The arbitral tribunal may dispense with any OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 26 of 39 technical formalities, if an oral hearing is held, and adopt such procedure as deemed appropriate for expeditious disposal of the case.
(4) The award under this section shall be made within a period of six months from the date the arbitral tribunal enters upon the reference.
(5) If the award is not made within the period specified in sub-section (4), the provisions of sub-sections (3) to (9) of section 29A shall apply to the proceedings.
(6) The fees payable to the arbitrator and the manner of payment of the fees shall be such as may be agreed between the arbitrator and the parties."
29. No material has been placed on record either by respondent no. 1 or by respondent no. 2 that Supreme Court or any High Court had designated Presolv360 as an arbitral institution and/or Presolv360 had been graded by the Arbitration Council of India under Section 43-I, for the purposes of the Act and in terms of Section 11(3A) of the Act. Ld. Counsel for petitioners had also drawn my attention towards Annexure-R/2-A of written submissions of respondent no. 2, claimed by respondent no. 2 to be the copy of list published by the Department of Justice, Ministry of Law & Justice, Government of India in terms of which Presolv360 was enlisted as one of the ODR service providers in the country. In above said Annexure-R/2-A of written submissions of respondent no. 2, it is mentioned therein that following services are rendered by Presolv360:-
"Services rendered • Dispute Prevention & Protection • Online Dispute Management • Negotiation (online and offline) • Neutral Evaluation(online and offline) • Mediation (online and offline)"
Even therein there is no mention of arbitration, either online or offline, as service rendered by Presolv360.
OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 27 of 3930. Above elicited sub section (1) of Section 29B of the Act with respect to fast track procedure embodies the mandate of legislature that before or at the time of appointment of Arbitral Tribunal, parties to an arbitration agreement have to agree in writing to have their dispute resolved by fast track procedure specified in sub section (3) of Section 29B of the Act. No material in arbitral proceedings record or by claimant/respondent no. 1 has been placed on record containing any fact of petitioners having agreed in writing either before or at the time of appointment of the Arbitral Tribunal to have their dispute resolved by fast track procedure so specified in sub section (3) of the Act. Accordingly, application of the fast track procedure as laid in sub section (3) of Section 29B of the Act by the Arbitral Tribunal was bad in law and contrary to the above elicited terms of the Act as well as the arbitration agreement between the petitioners on one hand and respondent no. 1/claimant on the other hand.
31. Section 24 (1) of the Act reads as under:-
"24. Hearings and written proceedings.-- (1) Unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials:
Provided that the arbitral tribunal shall hold oral hearings, at an appropriate stage of the proceedings, on a request by a party, unless the parties have agreed that no oral hearing shall be held.
Provided further that the arbitral tribunal shall, as far as possible, hold oral hearings for the presentation of evidence or for oral argument on day-to-day basis, and not grant any adjournments unless sufficient cause is made out, and may impose costs including exemplary costs on the party seeking adjournment without any sufficient cause."OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 28 of 39
32. Following is the conclusion of Delhi High Court in interpretation of Section 24 (1) of the Act in the case of Sukhbir Singh vs M/s Hindustan Petroleum Corporation Ltd., 266 (2020) DLT 612:-
"(d)Conclusion:
44. From the aforesaid materials, and upon an interpretation of Section 24 consistent with the requirements of natural justice, I am of the view that the first proviso to Section 24(1) requires a party's request for oral hearings at the stage of evidence or arguments to be granted. Unless the right to require oral evidence or oral arguments has been waived by a prior agreement to the contrary between the parties, the proviso to Section 24(1) expresses a legislative preference for the grant of oral hearing at the request of either party. The judgment in V. Tulasamma (supra) [V. Tulasamma & Ors. vs. Sasha Reddy, (1977) 3 SCC 99], cited by Mr. Srivastava, holds that a proviso carves out an exception to the main provision, but cannot destroy the effect of the main provision itself. In my view, this interpretation of the proviso to Section 24 does not fall foul of this principle - the proviso provides for an exception to the general provision, that the arbitrator has discretion on the question of whether or not to permit oral hearings.
45. Some guidance in this regard can also be found in the recent judgment of the Supreme Court in Jagjeet Singh Lyallpuri (Dead) Through Lrs. & Ors. v. Unitop Apartments & Builders Ltd., 2019 SCC OnLine SC 1541 [Civil Appeal No. 692/2016, decided on 03.12.2019]. The High Court, in that case, had set aside an award on the ground that parties were not given adequate opportunity to lead evidence and cross-examine witnesses. The Supreme Court set aside that decision on the finding that the parties had expressly agreed that cross-examination of witnesses was not required. The challenge was therefore repelled (in paragraph 15 of the judgment) on the grounds of estoppel, rather than on a finding that the party did not otherwise have a right to lead evidence or cross-examine witnesses.
46. Having so held, a word of caution is necessary. The right granted in Section 24 does not require an Arbitral Tribunal to countenance unending cross-examination or oral arguments. It is always open to the arbitrator to determine the length and scope of oral hearings, which would necessarily depend upon the facts and circumstances of each case. If a party seeks oral evidence, for example, the Tribunal may be able, after hearing the parties, to determine the points on which evidence is to be led. Similarly, arbitrators can set appropriate time limits for oral arguments.
The arbitrators can require an application to be filed by the concerned party, setting out the necessary material to enable the Tribunal to determine these matters. Further, the second proviso to Section 24 (1) expressly provides for hearings on a day-to-day OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 29 of 39 basis without unnecessary adjournments. The specific insertion of the second proviso to Section 24 (1) in our law, which goes beyond the framework of the Model Law, indicates a legislative direction to litigants and arbitrators in the interests of expeditious adjudication. Paragraph 8 of the Analytical Commentary, paragraph 203 of the UNCITRAL Report on Adoption of the Model Law, and paragraph 32 of the Explanatory Note to the Model Law make the limits of Section 24 quite clear - a party's rights do not extend to determining procedural issues, such as the length or timing of oral hearings. These matters remain squarely in the domain of the Arbitral Tribunal. In an appropriate case, a request for oral hearing may be found to have been unreasonable or unnecessary, and to have been made for collateral purposes, such as to delay the proceedings. In such a case, Section 31 (8) read with Section 31A of the Act empowers the Arbitral Tribunal to make an order of costs in favour of the innocent party. Sections 31A(3)(a) and 31A(4)(e) and (f) in particular permit the Tribunal to make a specific order of costs in relation to a particular stage of proceedings, having regard inter alia to the conduct of the parties. Recourse to these safeguards will check strategic requests for oral hearing, intended only to delay proceedings, without denying parties the fundamental protections of natural justice."
33. It is borne out of record that principle of natural justice of audi alteram partem was put to winds, as in absence of applicability of fast track procedure laid in Section 29B of the Act; the procedure for hearing and written proceedings as laid in Section 24 of the Act was not followed by Ld. Sole Arbitrator in the case in hand.
34. Immediately on receipt of communication dated 13/07/2021 above said regarding unilateral arbitral proceedings initiated by claimant/respondent no. 1 against petitioners; Ld. Counsel for petitioners namely Sh. Rit Aroraa, Advocate by his communication dated 27/07/2021 sent the detailed written challenge to the appointment of the Arbitral Tribunal inter alia with the mention of (i) non receipt of notice under Section 21 of the Act; (ii) raising of reasonable, justifiable doubts as to the independence and impartiality of the Arbitrator on the premise OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 30 of 39 of Ld. Sole Arbitrator having been engaged by respondent no. 2 in present as well as several other cases filed by claimant/respondent no. 1; (iii) respondent no. 2 having no authority, expertise or qualification for conducting arbitral proceedings; (iv) petitioners having never consented either to appointment of Ld. Sole Arbitrator or constitution of the arbitral tribunal, least to the present online arbitration and (v) respondent no. 2 being not requisite arbitral institution, as per law. Yet, Ld. Sole Arbitrator proceeded with the arbitral proceedings and did not recuse himself from the arbitral proceedings. The case in hand is a case whereby there is unilateral appointment of respondent no. 2 by claimant/respondent no. 1 and in turn later, there is unilateral appointment of Ld. Sole Arbitrator, respondent no. 3 by respondent no. 2; which per se is bad in law as per the law laid in the case of Score Information Technologies Limited vs GR Infra Projects Limited (supra).
35. 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.
36. 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 OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 31 of 39 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.
37. Section 14 of The Act provides that the mandate of an arbitrator shall terminate and he shall be substituted by another 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.
38. 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 OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 32 of 39 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.
39. 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.
40. Sub-section (1) of Section 29A of The Act provides that the award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference. The explanation to the said provision provides that an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment. Sub- section (2) of Section 29A 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 entitled to receive such amount of additional fees as the parties may agree. Sub-section (3) of Section 29A of The Act provides OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 33 of 39 that the parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months. Subsection (4) of Section 29A 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 29A 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.
41. 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 OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 34 of 39 Supreme Court and High Court in certain circumstances have exercised jurisdiction to nullify the appointments made by the authority in such situation.
42. 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 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.
43. Supreme Court in the case of Perkins Eastman Architects DPC vs HSCC (India) Ltd., 2019 SCC Online SC 1517 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 OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 35 of 39 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 has 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.
44. In the case of Proddatur Cable TV Digi Services vs. Siti Cable Network Ltd., 2020 SCC Online Del 350, it was inter alia held by Delhi High Court 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 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 his functions as an arbitrator, his mandate was terminated and another independent Sole Arbitrator was appointed to substitute the previous arbitrator.
OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 36 of 3945. 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 of Delhi High Court, 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.
46. 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) Proddatur Cable TV Digi Services (supra) and (v) M/s Omcon Infrastructure Pvt. Ltd. (supra), no arbitrator can be unilaterally appointed by the respondent no. 1/claimant and in this case at the outset as above said, respondent no. 1 had got unilateral appointment of Ld. Sole Arbitrator/respondent no. 3 through unilateral appointment of respondent no. 2 without any acceptability of petitioner of such appointment for adjudicating the dispute between the parties to the lis, which was per contra to above elicited arbitration clause in the agreement between the parties, OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 37 of 39 elicited herein above. Notice under Section 21 of the Act was also not appropriately served upon petitioner nos. 1, 3 and 4 for invoking the arbitration clause. Respondent no. 2 is not designated as the 'arbitral institution' either by the Supreme Court or High Court as per Section 2 (1) (ca) of the Act and hence reference to it for arbitration is bad and contrary to law. Petitioners never consented to refer their dispute to any such institution, i.e., respondent no. 2 or to Ld. Sole Arbitrator, respondent no. 3 at the time of the execution of the agreement dated 27/07/2020 or later. Arbitral procedure was not in accordance with the agreement of the parties. Claimant/ respondent no. 1 ought to have taken the consent of the petitioners before referring the dispute to respondent no. 2 institution. At the earliest possible opportunity, vide communication dated 27/07/2021, petitioners through counsel sent the detailed written challenge to the appointment of the Arbitral Tribunal inter alia with the mention of (i) non receipt of notice under Section 21 of the Act; (ii) raising of reasonable, justifiable doubts as to the independence and impartiality of the Arbitrator on the premise of Ld. Sole Arbitrator having been engaged by respondent no. 2 in present as well as several other cases filed by claimant/respondent no. 1; (iii) respondent no. 2 having no authority, expertise or qualification for conducting arbitral proceedings; (iv) petitioners having never consented either to appointment of Ld. Sole Arbitrator or constitution of the arbitral tribunal, least to the present online arbitration and (v) respondent no. 2 being not requisite arbitral institution, as per law. Yet, Ld. Sole Arbitrator proceeded with the arbitral proceedings and did not recuse himself from the arbitral OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 38 of 39 proceedings. The fast track procedure adopted by Ld. Sole Arbitrator, as per Section 29B of the Act, was contrary to the agreement inter se parties, and also without written consent of petitioners. In absence of applicability of fast track procedure laid in Section 29B of the Act; the procedure for hearing and written proceedings as laid in Section 24 of the Act was not followed by Ld. Sole Arbitrator. The impugned arbitral award is accordingly liable to be set aside, under Section 34(2)(a)(iii) of The Act; Section 34(2)(a)(v) of The Act; Section 34 (2)(b) (ii) of the Act and also under Section 34 (2A) 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), Ssangyong Engineering & Construction Co. Ltd. (supra), Alupro Building Systems Pvt Ltd vs Ozone Overseas Pvt Ltd (supra), International Nut Alliance LLC (supra) and Impex Corporation & Others (supra).
47. For the foregoing reasons, the petition is allowed and the impugned award is set aside.
48. The parties are left to bear their own costs.
49. File be consigned to record room.
Digitally signed by GURVINDER PAL GURVINDER SINGH
PAL SINGH Date: 2022.06.08
11:23:47 +0530
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
On 08th June, 2022. Patiala House Court, New Delhi.
(DK) OMP (Comm.) No. 03/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd. &Ors Page 39 of 39