Delhi District Court
Rps Management And Consultancy Pvt. Ltd vs M/S Moneywise Financial Services Pvt. ... on 20 October, 2022
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (Comm.) No. 62/2022
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, Maole Heights,
Block-C, Sushant Lok, Phase-1,
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
W/o Rahul Kumar
R/o H. No. 501, Maole Heights,
Block-C, Sushant Lok, Phase-1,
Gurgaon Galleria DLF-IV
Haryana ...Petitioners
versus
M/s Moneywise Financial Services Pvt. Ltd.
Through its Managing Director
Having its office at:
11/6B, Shanti Chamber,
Pusa Road, New Delhi-110005 ...Respondent
Date of Institution : 18/04/2022
Arguments concluded on : 12/09/2022
Decided on : 20/10/2022
OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 1 of 35
Appearances : Sh. Rit Arora, Ld. Counsel for petitioners.
Sh. Aditya Prasad and Sh. Sriram Kamal, 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 impugned arbitral award dated 20/11/2021 passed by Sh. Shiv Singh, Ld. Sole Arbitrator in Arbitration Case ID: A003097 titled 'Moneywise Financial Services Private Limited vs RPS Management and Consultancy Private Limited & Ors.' Ld. Sole Arbitrator awarded Rs. 26,58,568/- with simple interest @ 18% per annum from 29/09/2021 till realization with cost of Rs. 7,500/- in favour of respondent/claimant payable by petitioners, jointly and severally.
2. I have heard Sh. Rit Arora, Ld. Counsel for petitioners; Sh. Aditya Prasad and Sh. Sriram Kamal, Ld. Counsel for respondent and perused the record of the case, the arbitral proceedings record, relied upon precedents, filed brief written arguments on behalf of petitioners as well as on behalf of respondent and given my thoughtful consideration to the rival contentions put forth.
3. 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/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/ claimant, petitioners entered into Loan Agreement dated OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 2 of 35 29/02/2020 with claimant/respondent 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 on account of 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. 25,10,219/- 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 decided to harass the petitioners and started recalled the loan amount. 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, one company, namely M/s Edgecraft Solutions Private Limited, alleged ADR service provider Company issued notice dated 29/09/2021 styled as Notice of Arbitration issued on its letter head and displaying the name of Ld. Sole Arbitrator Sh. Shiv Singh (Retired District & Sessions Judge) at the end whereas said notice did not bear signatures of anyone and appeared to have been issued by the said company. No notice prior to commencement of arbitral proceeding was issued by respondent and straightaway the alleged company had entered reference. Respondent even filed its Statement of Claim on 08/10/2021 which further made it apparent that respondents were acting in connivance. The OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 3 of 35 statement of claim, alleged notice of arbitration issued by the M/s Edgecraft Solutions Private Limited and the award all the documents are either unsigned or inappropriately verified. Nevertheless, Ld. Sole Arbitrator had not taken any note of this. No proceedings were conducted by Ld. Sole Arbitrator as no notice for hearing was ever issued by Ld. Sole Arbitrator. Further, no notice proceeding ex parte was passed by Ld. Sole Arbitrator and no evidence was obtained by him. The proceedings were conducted in a complete sham manner and were set completely against the principles of natural justice. While the company M/s Edgecraft Solutions Private Limited had issued alleged unsigned and unverified notice of arbitration on 29/09/2021 the award had been passed by 20/11/2021 within days itself. No opportunity to either challenge the proceedings or file appropriate application was given by Ld. Sole Arbitrator. No hearing took place that petitioner could have presented its case. Instead of withdrawing from the proceedings as no consent had been afforded to Ld. Sole Arbitrator by the petitioners, Ld. Sole Arbitrator proceeded ex parte and passed the impugned arbitral award. Respondent in connivance with the company i.e., M/s Edgecraft Solutions Private Limited and Ld. Sole Arbitrator are conducting such sham proceedings and obtaining such awards which have no sanctity under law. The impugned arbitral award is illegal, arbitrary and unilateral in nature and liable to be set aside.
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 OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 4 of 35 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. No hearings of the matter ever took place in reality. No notice for hearing was ever served upon the petitioner. As per the principles of natural justice and accepted practice and procedures, it was incumbent upon Ld. Sole Arbitrator to call the parties to present and lead arguments in the case. Neither virtual nor physical arguments/hearings had taken place before Ld. Sole Arbitrator. No document, either it is the impugned ex parte award or the Statement of Claim or the alleged arbitration notice dated 29/09/2021 was signed or executed. The award dated 29/09/2021 which bears the signatures appears to be the case where the image of the signature of Ld. Sole Arbitrator is affixed on the award. It may very well be the case of forgery as no original award has been prepared. The notice dated 29/09/2021 has no sanctity under law as it is unsigned and unexecuted. The Statement of Claim filed by respondent is also unsigned and unexecuted and unverified. No evidence was called by Ld. Sole Arbitrator. Respondent had not filed any evidence by way of affidavit and this defect goes to the root of the case. The Statement of Claim is unsigned and unverified and in the absence of any verified document, Ld. Sole Arbitrator ought not to have passed any award in the favour of the respondent. No agreement was reached between the parties to the subject procedure adopted by the alleged arbitral institution. The proceedings are completely sham, arbitrary and unilateral in nature. Ld. Sole Arbitrator ought to have given opportunity to the OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 5 of 35 petitioner before passing of the award. No physical or virtual proceedings took place nor any arguments were heard. Without giving any party any opportunity to present oral or written arguments, the passing of the award is liable to be set aside. As per Clause 10.1 of the agreement inter se petitioners and respondent/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 in fact ever took place. Such procedure in arbitration proceedings is unheard of. Clause 10 of the agreement inter se parties to the lis states the governance of law and dispute between the parties is subject to the jurisdiction of Delhi Courts, and the Presolv360 ODR is a Mumbai based company, hence having no jurisdiction to constitute arbitration proceeding. No opportunity was provided to the petitioner to give his choice of the arbitrator by the respondent and straightway, the Arbitral Tribunal was constituted by the respondent unilaterally. The proceedings in arbitration were completely sham in nature as no notices of hearing were ever served upon petitioners. No notice under Section 21 of the Act was served upon the petitioners and petitioners were not given opportunity to object to the appointment of Ld. Sole Arbitrator. Unilateral appointment of Ld. Sole Arbitrator and the alleged arbitration institution is liable to be set aside. M/s Edgecraft Solutions Private Limited has no authority under law to form any such institution. Petitioners had never consented to refer their dispute to any such institution or specifically M/s Edgecraft Solutions Private Limited or Presolv360 ODR at the time of the execution of the Agreement dated 29/02/2020. Presolv360 ODR or M/s OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 6 of 35 Edgecraft Solutions Private Limited is not designated by High Court or the Supreme Court of India and had no power to appoint any Ld. Sole Arbitrator. Arbitral procedure was not in accordance with the agreement of the parties. Respondent/claimant ought to have taken the consent of the petitioner before referring the dispute to such private institution. The procedure adopted was contrary to agreement and the award is illegal and liable to be set aside. Presolv360 is a private company and there exists every justifiable doubt in the mind of petitioner company that respondent is acting in connivance with the institution to pass instant awards against 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.
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 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 M/s Edgecraft Solutions Private Limited or Presolv360 ODR are not designated as the 'arbitral institution' either by the Supreme Court or High Court under this Act and hence reference to them 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 the company/institution is illegal, arbitrary and OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 7 of 35 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. The appointment was also without the consent of the petitioner thus being unilateral and arbitrary in nature. The petitioner had not consented for the adoption of fast-track procedure. Sub Section (1) of Section 29 B 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 29 B of the Act. Accordingly, application of the fast-track procedure by the Arbitral Tribunal was bad in law and contrary to the above elicited provisions of the Act as well as the arbitration agreement between the petitioners on one hand and respondent no. 1/ claimant on the other hand. 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 therefore, bad in law is accordingly liable to be set aside. 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. Despite opportunities no reply was filed by respondent to OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 8 of 35 petition under Section 34 of the Act.
7. In filed written submissions, respondent through Ld. Counsel averred and argued that petitioners had obtained a term loan facility of Rs. 25,10,219/- from respondent, which factum has not been denied in the petition. Petitioners were irregular and eventually defaulted in making the payment towards their loan account despite issuance of various reminders and resultantly respondent/claimant was constrained to recall the entire loan by issuing Loan Recall Notice dated 10/06/2021 upon last known addresses of petitioners as mentioned in the loan documents. Petitioners did not issue any reply nor raised any objection to said Loan Recall Notice dated 10/06/2021. Petitioners also miserably failed to repay any outstanding amount towards their loan account. Dispute had arisen inter se parties in terms of Loan Agreement. Respondent/claimant invoked arbitration Clause 10.1. Respondent was constrained to refer the dispute for arbitration as per Clause 10 of Loan Agreement. However, before referring the dispute for arbitration, the respondent/claimant had issued a notice dated 31/08/2021 under Section 21 of the Act inviting the representations from petitioners but appointment/ reference of Ld. Sole Arbitrator was not challenged and accordingly was registered. Hence, it cannot be disputed at this stage. The dispute was referred to Arbitral Tribunal through the online platform namely www.presolv360.com which was recognized and enlisted by the Department of Justice, Government of India and were neutral institutions that provide complete administrative and technical support to the parties for conducting the arbitral proceedings online and had no interest in OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 9 of 35 the outcome of the dispute. Presolv360 is an ODR platform providing ADR mechanisms to resolve dispute between the parties and Presolv360 is just an intermediatory platform which provides technical as well as online support to both the parties to conduct arbitration proceedings smoothly. As such, no prejudice is likely to be caused to any of the party if the arbitration proceedings are administered in such manner, and on the contrary, provides each party to fully, fairly and conveniently participate in the arbitration proceedings. Petitioners were duly informed, communicated and made aware of the initiation of the arbitral proceedings vide Notice of Arbitration dated 29/09/2021 which was also duly served vide email issued to the petitioners. The purpose of service is to put the other party to notice and where an alternative mode (email and Whatsapp) is used and service is shown to be effected of the notice, and is acknowledged, then surely it cannot be suggested that there was no notice. Accordingly, notice issued under Section 21 of the Act as well as Notice of Arbitration were duly served upon the petitioners vide emails and same cannot be disputed for being matter of record. Petitioners were given several opportunities to file statement of defence and represent themselves in the arbitral proceedings. Petitioners chose to remain silent and absent from the proceedings and consequently a notice of ex parte dated 25/10/2021 was passed by Ld. Sole Arbitrator. An interim order dated 02/11/2021 was passed by Ld. Sole Arbitrator and consequently the arbitral award was passed after careful perusal by Ld. Sole Arbitrator of all the facts and circumstances on record and as such the present petition is nothing but an abuse of process of law, which has been filed to derail and delay the OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 10 of 35 proceedings for recovery of the dues from the petitioners. Petition does not come in the ambit of sub Section (2) of Section 34 of the Act whereas it was filed beyond the period of limitation and is liable to be dismissed. It was argued by Ld. Counsel for respondent that petitioners did not raise any objections/ representations before Ld. Sole Arbitrator. Impugned arbitral award has been passed in accordance and compliance of the rule of law and principles of natural justice. Petitioners were given the opportunity of being heard and said right has been waived off by the petitioners in the instant matter. Any interference in execution of the arbitral award can cause hindrance to the interest of the respondent/claimant and justice may not be duly served. Arbitral award is absolutely legal, valid and stands good in the eyes of law. Petition is liable to be dismissed. The Act was duly constituted in the light of pendency of disputes and over burdening of Courts aiming at speedy and expeditious trial of disputes. Ld. Sole Arbitrator had duly passed the impugned arbitral award in the light of the same. It is apposite to mention here that just as independence and impartiality of the arbitrator are the hallmarks of any arbitration process, party autonomy and speedy disposal of disputes too are the fundamental aspects of arbitration. Even though the arbitral proceedings were expeditiously conducted but the same has not hampered the interest of petitioners as they were given ample opportunities on several occasions to represent their objections. It cannot be inferred that the expeditious arbitral proceedings have caused prejudice to petitioners. Ld. Counsel for respondent argued that in the instant matter, huge public money is on stake and respondent being custodian of public money is answerable to OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 11 of 35 public at large for the recovery of said money. Ld. Counsel for respondent prayed for dismissal of the present petition and relied upon the order of Bombay High Court dated 23/03/2017 in case of Kross Television India Pvt Ltd & Anr vs Vikhyat Chitra Production & Ors., Suit (L) No. 162 of 2017.
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 Section 34 of The Act is also eligible for the same. Accordingly, present petition filed on 18/04/2022 is within the period of limitation.
10. Section 34 (1) (2), (2A) and (3) of The Arbitration and OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 12 of 35 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
(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 OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 13 of 35 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 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 OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 14 of 35 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.
13. I advert to the Master Loan Agreement dated 29/02/2020 (hereinafter referred as the agreement) inter se petitioners and claimant/respondent. 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 OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 15 of 35 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 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 OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 16 of 35 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-
122009
15. Section 21 of The Act provides that unless and otherwise agreed by the parties, the arbitral proceedings in respect of a OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 17 of 35 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. 44 & 45 of the arbitral proceedings record which is addressed to the following three addressees with following addresses:-
"1. RPS MANAGEMENT AND CONSULTANCY PRIVATE LIMITED H NO 1265 SF DAYANAND COLONY GURGAON HARYANA 122001
2. RAHUL KUMAR H NO 501 MAPLE HEIGHTS C BLOCK SUSHANT LOK PH 1 GURGAON HARYANA 122009
3. SURYAMANI SHARMA H NO 501 MAPLE HEIGHTS C BLOCK SUSHANT LOK PH 1 GURGAON HARYANA 122009"
18. At page no. 45 of arbitral proceedings record at the bottom of above said Loan Recall Notice dated 10/06/2021 is the OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 18 of 35 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 Notices were sent to petitioner nos. 3 and 4, co-borrowers by claimant/respondent; (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 Maple Heights C Block Sushant Lok, Phase-1, Gurgaon 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 31/08/2021 under Section 21 of the Act alleged to have been sent by claimant/respondent to petitioners find mention of following addresses of petitioners:-
"RPS Management and Consultancy Private Limited (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 DLF IV, Haryana 122009 OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 19 of 35 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 31/08/2021 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 and 2; (ii) notice under Section 21 of the Act dated 31/08/2021 sent by claimant/respondent/lender to borrowers petitioner nos. 1, 2 and 4 were sent at addresses which were at variance from their recorded addresses in the Schedule I of the agreement; whereas no Loan Recall Notice dated 10/06/2021 was sent by respondent/ claimant/lendor to co-borrowers petitioner nos. 3 and 4; accordingly, 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 OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 20 of 35 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 held that before composition of arbitrators, a notice to the other party is very much essential.
OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 21 of 3525. 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 31/08/2021 under Section 21 of the Act invoking the arbitration clause alleged by respondent to have been sent to borrowers/petitioners embodies unilateral reference for arbitration to Presolv360 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:-
"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;OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 22 of 35
......................................................................................................
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 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 OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 23 of 35 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 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 filed on record on 12/09/2022 copy of written submissions filed earlier with Annexure R/2-A by Presolv360 in case OMP (Comm.) No. 03/2022 before this Court. Ld. Counsel for petitioners had drawn my attention towards aforesaid Annexure R/2-A of written submissions of Presolv360 in OMP (Comm.) No. 03/2022; claimed by Presolv360 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. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 24 of 3530. 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 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. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 25 of 35
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. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 26 of 35 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. The case in hand is a case whereby there is unilateral appointment of Presolv360 by claimant/respondent and in turn later, there is unilateral appointment of Ld. Sole Arbitrator by Presolv360; 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 OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 27 of 35 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 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 OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 28 of 35 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 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 OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 29 of 35 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 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 OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 30 of 35 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.
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 OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 31 of 35 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 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 OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 32 of 35 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.
45. 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.
OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 33 of 35(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/claimant and in this case at the outset as above said, respondent/claimant had got unilateral appointment of Ld. Sole Arbitrator through unilateral appointment of Presolv360 without any acceptability of petitioners 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, elicited herein above. Notice under Section 21 of the Act was also not appropriately served upon petitioner nos. 1, 2 and 4 for invoking the arbitration clause. Presolv360 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., Presolv360 or to Ld. Sole Arbitrator Sh. Shiv Singh at the time of the execution of the agreement dated 29/02/2020 or later. Arbitral procedure was not in accordance with the agreement of the parties. Claimant/respondent ought to have taken the consent of the petitioners before referring the dispute to Presolv360. 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 OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 34 of 35 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 GURVINDER PAL
SINGH
PAL SINGH Date: 2022.10.20
12:28:12 +0530
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
th
On 20 October, 2022. Patiala House Court, New Delhi.
(DK) OMP (Comm.) No. 62/2022 RPS Management and Consultancy Pvt. Ltd. & Ors vs M/s Moneywise Financial Services Pvt. Ltd . Page 35 of 35