Delhi District Court
Canberg Global Sourcing Private ... vs M/S Bmw India Financial Services Pvt Ltd on 19 February, 2022
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (Comm.) No. 67/2021
Canberg Global Sourcing Private Limited
Through its Director Ms. Neetu Aggarwal,
C/o Shree Nagar Residential Complex,
Flat-6C, Block-2, Teghoria, VIP Road,
North 24, Parganas, Kolkata,
West Bengal ..Petitioner
versus
M/s BMW India Financial Services Pvt Ltd.
Registered Office: The Oberoi Corporate Tower,
Building No. 11, 1st Floor, DLF Cyber City, Phase-II,
Gurugram, Haryana-122002.
Branch Office:
H-5/B-1, Mohan Coop Industrial Area,
Mathura Road,
New Delhi-110044 ..Respondent
Date of Institution : 13/07/2021
Arguments concluded on : 20/01/2022
Decided on : 19/02/2022
Appearances : Sh. Harshit Kedawat, Ld. Counsel for petitioner.
Sh. Ankur Katyal, Ld. Counsel for respondent.
JUDGMENT
1. Petitioner has filed the present petition/application 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 29/08/2020 of Ld. Sole Arbitrator Sh. Sanjay Aggarwal (Advocate) in arbitration case no. M/S BMW/RB:5899/LOT-100/22 New LOT-101/20. Ld. Sole OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 1 of 27 Arbitrator awarded Rs. 35,45,985/- with interest @ 24% per annum from 09/12/2019 with cost of Rs.10,000/- in favour of respondent/claimant payable by petitioner besides direction to petitioner to handover the vehicle in question in case it is in possession of petitioner and in the alternative if respondent/ claimant has already repossessed it then liberty is granted to respondent/claimant to dispose it off after giving notice to petitioner and sale proceeds to be adjusted in the award amount.
2. I have heard Sh. Harshit Kedawat, Ld. Counsel for petitioner; Sh. Ankur Katyal, Ld. Counsel for respondent and perused the record of the case including reply of respondent/ claimant, the arbitral proceedings record, filed brief written arguments on behalf of parties as well as relied upon precedents and given my thoughtful consideration to the rival contentions put forth.
3. Factual matrix of case of petitioner in brief is as follows. In order to purchase luxury car, petitioner came across a dealer namely OSL Prestige of the BMW Group and also associated with respondent and said dealer suggested petitioner to purchase BMW 3 series 320D luxury line and assured the petitioner about the quality, performance and services. Petitioner booked a BMW 3 series 320D on 18/03/2019 at an authorized dealer of BMW Group i.e., OSL Prestige having its showroom at Silver Arcade, 5JBS Haiden Evenue, Kolkata-700105 and subsequently proforma invoices were issued upon an advance payment of Rs. 5,94,292/- paid towards the booking of the said car. As per directions of petitioner, said car was to be registered in the name OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 2 of 27 of petitioner and was so clearly mentioned in the proforma invoices as well. Rest of the amount i.e., Rs.35,00,000/- was financed by respondent. On 26/03/2019, loan was approved by respondent in the name of petitioner. Said loan amount was for the period of 60 months @ 8.99% per annum interest. On 11/04/2019 petitioner received the invoices issued by the dealer and was shocked to see them in the name of Ms. Neetu Aggarwal, Director of petitioner and not in the name of petitioner company, though invoices were supposed to be issued in the name of petitioner company as loan was required and sanctioned in the name of petitioner company only. Correspondences were exchanged between the parties and the dealer with respect to grievances of petitioner including for the wrong name of its Director in the invoices and with respect to certain defects noticed in the vehicle. Disputes arose between the parties. Petitioner through Counsel sent legal notice on 06/12/2019 highlighting the defects, asking for replacement of the vehicle. Respondent issued demand notice dated 11/12/2019 for repayment of loan amount and surrendering of said car, although it was in the custody of respondent. Petitioner received a letter on 26/12/2019 from respondent having mention that the matter has been referred to Sole Arbitrator Sh. Sanjay Aggarwal, Advocate to arbitrate the disputes arisen between the parties. Petitioner filed consumer complaint titled as Canberg Global Sourcing Pvt. Ltd. vs BMW India Pvt. Ltd. & Ors. before the State Consumer Dispute Redressal Commission, Kolkata on being aggrieved by the alleged acts of respondent. Petitioner alleged that it was not served with any notice for initiation of arbitral proceedings, appointment of Arbitrator, consent of the Arbitrator or OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 3 of 27 continuance of arbitral proceedings. Therefore, petitioner was unable to make any representation before Ld. Sole Arbitrator so that their interests could also be weighed in before passing of an arbitral award. On 02/09/2020, impugned award was received by petitioner.
4. Arbitral award has been impugned by petitioner mainly on the following grounds. Impugned award is bad in the eyes of law, in excess of the authority conferred upon the arbitrator under the Act. Impugned arbitral proceedings commenced without giving proper notice and opportunity to petitioner to choose and/or appoint Ld. Sole Arbitrator or even raise any objection against the appointment of Ld. Sole Arbitrator, which was done unilaterally by respondent. Impugned award becomes suspect as the necessary traits of independence and fairness could not be ascertained about Ld. Sole Arbitrator nor is the process of invocation and appointment of arbitrator being compliant with the Act and the rules. Whole arbitral proceedings were nonest and void ab initio as petitioner did not receive any notice of arbitral proceedings. Petitioner never received the letter of intent for appointment of Sole Arbitrator dated 20/12/2019, disclosure dated 20/12/2019, consent to act as Sole Arbitrator dated 21/12/2019; neither any information regarding acknowledgment of the same was noted in the arbitral award. Since proper notice of appointment of Arbitrator or arbitral proceeding was not issued, so impugned arbitral award is liable to be set aside. Impugned arbitral proceedings were conducted ex parte. The interesting thing to note is that the impugned arbitral award could later be served on the same address quite conveniently, while the OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 4 of 27 rest allegedly sent communications were apparently 'lost' during the service. The whole scheme of non service of notice seems to serve respondent too well and indicates of non observance of procedure to avoid getting any representation from petitioner. Impugned award is bereft of dates on which hearings were conducted and the minutes of hearing and it is impossible to ascertain whether the arbitral proceedings were actually conducted before Arbitral Tribunal or not; whether Sole Arbitrator was impartial or not. Petitioner was never informed of any arbitral proceeding that took place nor were any order sent to them mentioning about the business of the particular proceeding or any next date of arbitration. Impugned award was passed in an arbitrary, unfair and unjust manner by Ld. Sole Arbitrator, that too ex parte after acknowledging that the notice for the same had not been received by the party concerned. Ld. Sole Arbitrator violated the basic principle of natural justice while undertaking these proceedings. The impugned award is a clear violation of the principle of natural justice namely audi alteram partem. There was no application of mind of Ld. Sole Arbitrator before passing the order against petitioner and impugned award was completely biased and unjust and amount awarded to respondent was considered justified by him solely on the basis of non availability of documents to refuse or rebut the claims so submitted by respondent. Impugned award is bereft of any reasoning whatsoever for justifying such claims of respondent/claimant. Respondent had even previously engaged/appointed present Ld. Sole Arbitrator to handle arbitrations involving respondent company. The manner of appointment of arbitrator, serving notices and conducting proceedings ex parte is exactly the same OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 5 of 27 as was done in other case titled Sh. Narender vs Shriram Transport Finance Co. Ltd., [Arbitration No. 584901/16 (Old Arbitration No. 317/16)] and it points at a collusionary practice between respondent and Ld. Sole Arbitrator. The neutrality and independence of Ld. Sole Arbitrator becomes questionable and there is every possibility of Ld. Sole Arbitrator being biased against petitioner as also within the past three years Ld. Sole Arbitrator was appointed on more than two occasions by respondent/claimant as an arbitrator to adjudicate the disputes for respondent/claimant. Impugned award is in direct conflict with public policy of India. Ld. Sole Arbitrator was not chosen with the free consent of petitioner. Impugned award is in direct contravention of the most basic tenets of justice and morality and smacks of malafide and non application of free and fair mind. Ld. Sole Arbitrator while passing the impugned award has failed to record any legal or valid reason in support of its finding. Without giving any reason and opportunity to petitioner, Ld. Sole Arbitrator levied exorbitant 24% rate of interest on the arbitral award which was totally arbitrary and against the terms of the contract. Impugned award was passed in prejudice, partial manner and in complete avoidance of the actual facts of the case. Findings of Ld. Sole Arbitrary are wholly arbitrary, capricious and whimsical and are devoid of any legal basis. Petitioner was not treated equally as no opportunity was provided to contest the case in violation of Section 18 of the Act. Copies of the claim petition and documents of respondent/claimant were not served upon petitioner either by respondent/claimant or even by Arbitral Tribunal. Petition was within the period of limitation as Supreme Court had extended the period of limitation vide orders in the OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 6 of 27 case of Suo Moto Writ Petition (Civil) No. 03/2020. Petitioner through Counsel prayed for setting aside of the Impugned arbitral award for which in the course of arguments Ld. Counsel for petitioner relied upon the above said grounds and the cases (i) Perkins Eastman Architects DPC vs HSCC (India) Ltd., 2019 SCC Online SC 1517; (ii) TRF Ltd. vs Energo Engg. Projects Ltd., (2017) 8SCC 377; (iii) Alupro Buildings Pvt Ltd vs Ozone Overseas Pvt Ltd., O.M.P. 3/2015, decided by Delhi High Court on 28/02/2017 and (iv) SREI Equipment Finance Limited vs MARG Limited, IA No. GA/1/2021 in EC/74/2021, decided by Calcultta High Court on 30/06/2021.
5. In the filed reply respondent through Counsel at the outset averred that objections/petition are time barred and have been filed with sole intention to harass respondent and to avoid making payment of awarded amount which respondent was entitled to recover from petitioner. No bonafide grounds were made out to set aside the impugned award, which is well reasoned and petitioner is liable to make the payment to respondent in terms of award. It has been averred that respondent is a financier company and has nothing to do with the issues of petitioner relating to invoice raised in the name of Director of the company rather than the company and/or the product suffering from multiple defects as these issues are between petitioner, dealer and the manufacturer whereas respondent is not privy to the same. Ms. Neetu Aggarwal being proprietor of petitioner had signed the loan agreement as co-borrower and bound herself for all the terms and conditions. Baseless reason/excuse given by petitioner for not making the payment of the loan availed from OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 7 of 27 respondent is not admissible and petitioner cannot refrain from paying the dues payable to respondent. It has been averred that as per Clause 3.6(f) of The Retail Finance Agreement inter se parties to the lis, the payments of the installments were to commence and continue as per Schedule I irrespective of any non delivery/delayed delivery of the product(s) and whether or not the product(s) are defective or not working or under repair and any dispute/difference whatsoever between the parties in relation to the product(s) shall not entitle the borrower to withhold or delay payment of any installment or any other sum. It has been averred that once the loan was sanctioned and disbursed by respondent financier, petitioner borrower becomes liable to repay the same as per terms of The Retail Finance Agreement and it was immaterial whether the product was defective or not. It has been averred that the vehicle in question has already been sold by respondent after it was repossessed on 25/09/2020 in accordance to interim order under Section 9 of the Act and amount recovered thereof has been adjusted against the account of petitioner whereas after such adjustment, as on date approximately INR 22 lakhs is still to be recovered from petitioner. It has been averred that petitioner was well aware that the dispute has arisen between the parties and has been referred to arbitration but petitioner intentionally avoided the arbitration proceeding whereas letter dated 26/12/2019 of respondent was received by petitioner, as has been accepted by petitioner. It has been averred that all notices were duly served to petitioner to appear before Arbitrator but neither petitioner made appearance nor her Counsel nor any objections were raised by petitioner against arbitral proceedings and fair opportunity was given to petitioner to participate in the OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 8 of 27 arbitration proceedings. Mandate in Section 3 of the Act was complied with and communications were addressed to the address of petitioner mentioned in the loan agreement and communications were deemed to have been received. It was averred that petitioner has no right to file the present petition which is not maintainable. Merits of the award are not to be examined by this Court as arbitral award is not open to challenge on the ground that arbitrator has reached the wrong conclusion or has failed to appreciate the facts. This Court is bound by the findings of facts by Arbitrator and cannot review them unless they are supported by evidence. It has been averred that there is no violation of principle of natural justice and the provisions of the Act. Ld. Counsel for respondent argued in terms of above said averments in the reply; also relied upon the cases of (i) Union of India vs Ogilvy & Mather Ltd. & Anr., IA No. 6734/2008 in OMP No. 291/2008, decided by Delhi High Court on 13/03/2009 and (ii) State Bank of Travancore vs Vasantha Kumari, MANU/KE/2286/2012 and further argued that the petition is hopelessly barred by time and that once the documents were executed and acted upon by petitioner through Director Ms. Neetu AggarwaL, also being co-borrower to repay the loan amount as co-obligant, Ms. Neetu Aggarwal, Director of petitioner also stood at par with the borrower petitioner. Ld. Counsel for respondent/claimant prayed for dismissal of the petition.
6. An arbitral award can be set aside on the grounds set out in Section 34 (2) (a), Section 34 (2) (b) and Section 34 (2A) of the Act in view of Section 5 of the Act and if an application for OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 9 of 27 setting aside such award is made by party not later than 3 months from the date from which the party making such application had received the signed copy of the arbitral award or if a request had been made under Section 33 of the Act, from the date on which that request had been disposed of by the Arbitral Tribunal. If the Court is satisfied that the applicant was prevented by sufficient cause from the making the application within the said period of three months it may entertain the application within further period of 30 days, but not thereafter.
7. Supreme Court vide order dated 10.01.2022 in Suo Moto Writ Petition (Civil) no. 3 of 2020, In Re: Cognizance For Ex- tension Of Limitation 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.
8. In view of above order of Supreme Court, present petition filed on 13/07/2021 is accordingly not barred by limitation and well within the period of limitation.
9. Section 34 (1) (2), (2A) and (3) of The Arbitration and Conciliation Act, 1996 read as under:-
"34. Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3).
(2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 10 of 27 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 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.
OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 11 of 27(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."
10. 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 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.."
OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 12 of 2711. 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.
12. Supreme Court in the case of Patel Engineering Ltd. vs North Eastern Electric Power Corporation Ltd., MANU/SC/ 0447/2020 inter alia held that wherein the findings of Ld. Arbitrator are arrived at by taking into account irrelevant facts and by ignoring the vital clauses, the same suffers from the vice of irrationality and perversity and that the award will be liable to be set aside when while interpreting the terms of the contract, no reasonable person could have arrived at such a conclusion and the award passed by the arbitrator suffers from the vice of irrationality and perversity.
13. 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.
OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 13 of 2714. 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.
15. 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 OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 14 of 27 termination of his mandate.
16. 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.
17. 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.
18. I now advert to arbitral proceedings record filed on 10/01/2022 by Ld. Sole Arbitrator. Ex CW/3 is the copy of Retail Finance Agreement dated 26/03/2019 inter se parties to the lis OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 15 of 27 wherein Ms. Neetu Agarwal, Director of petitioner is co- borrower and following is the address of petitioner mentioned therein "CANBERG GLOBAL SOURCING PVT. LTD.
having its registered Office at SHREE NAGAR RESIDENTIAL COMPLEX, FLAT-6C, BLOCK-2,
TEGHORIA, VIP ROAD, KOLKATA" and address of co- borrower Neetu Agarwal mentioned as "SHREE NAGAR COMPLEX FLAT-6C, BLOCK-2, TEGHARIA, VIP ROAD, NORTH 24 PARGANAS". It is admitted case of the parties that Ms. Neetu Aggarwal, Director, co-borrower in the said Retail Finance Agreement is not a party in arbitral proceedings before Ld. Sole Arbitrator. Also the above said Retail Finance Agreement does not find mention the PIN CODE of the address of either the borrower petitioner or of the co-borrower Director. Said copy of Retail Finance Agreement is Annexure-C to the Statement of Claim filed by respondent/claimant before Ld. Sole Arbitrator wherein also there is no mention of any PIN CODE of the address of the borrower petitioner as respondent therein in arbitral proceedings. Notice dated 26/12/2019 of respondent/ claimant addressed to borrower petitioner with reference to Loan Agreement dated 26/03/2019 and with subject 'Arbitration Reference Notice' is admitted to have been received by petitioner and its copy is Annexure-E to the Statement of Claim filed by respondent/ claimant before Ld. Sole Arbitrator. Above said notice dated 26/12/2019 find mentions that vide Loan Recall Notice dated 10/12/2019, the loan agreement was terminated by respondent/claimant and in furtherance of the same respondent/ claimant has referred the matter to Sole Arbitrator Mr. Sanjay Aggarwal to arbitrate the disputes which had arisen between OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 16 of 27 them and pass an award accordingly.
19. Section 21 of the Act envisages that arbitral proceedings in respect of a particular dispute commence on the date on which request of party invoking arbitration, for that dispute to be referred to arbitration is received by the other party. Arbitral proceedings record is bereft of any material disclosing any requisite notice under Section 21 of the Act having been sent by any respondent to the petitioner.
20. 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.
21. 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.
22. At page no. 6 of arbitral proceedings record is a copy of letter dated 20/12/2019 addressed by respondent/claimant to Ld. Sole Arbitrator with the subject of Letter of Intent for Appointment of Sole Arbitrator and in the body of said letter there is mention that respondent/claimant intends to appoint Sh. Sanjay Aggarwal (Advocate) as Sole Arbitrator to adjudicate the OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 17 of 27 disputes between the present petitioner and present respondent with respect to the agreement in question. At page no. 7 of the arbitral proceedings record is a letter dated 20/12/2019 of Sh. Sanjay Aggarwal (Advocate) Sole Arbitrator addressed to respondent/claimant with copy to petitioner having subject:
Disclosure under the Act in respect of agreement in question with reference to above said letter dated 20/12/2019 of respondent/ claimant intending to appoint Sh. Sanjay Aggarwal as Ld. Sole Arbitrator. With above said letter dated 20/12/2019 of Ld. Sole Arbitrator, at page no. 8 of arbitral proceedings record is the copy of disclosure provided under Section 12(1)(b) read with Sixth Schedule finding mention that "There are no such Circumstances disclose 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 of any other kind. There are no such Circumstances which is likely to give rise to justifiable doubts as to my independence or impartiality." Also is mentioned that number of on-going arbitrations are 64 whereas there is no mention/whisper at all that any of the above said 64 on-going arbitrations were having respondent/claimant as a party in it. At page no. 9 of arbitral proceedings record is a letter dated 21/12/2019 of Ld. Sole Arbitrator addressed to respondent/ claimant and copy to petitioner containing the consent of Sh. Sanjay Aggarwal, Advocate to act as Sole Arbitrator besides confirming his appointment is well within the terms of agreement between the parties and under the provisions of the Act.
23. Elicited facts in preceding paras clearly reflect that the letter dated 20/12/2019 of respondent/claimant to Ld. Sole Arbitrator OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 18 of 27 intending to appoint him as Sole Arbitrator for the dispute in question and Ld. Sole Arbitrator consenting vide letter dated 21/12/2019 for being appointed as Sole Arbitrator for dispute in question; had preceded in fact above said notice dated 26/12/2019 of respondent/claimant addressed to petitioner with the subject of 'Arbitration Reference Notice'. No notice in accordance with Section 21 of the Act was sent by respondent/ claimant to petitioner communicating the request for dispute to be referred to arbitration to infer commencement of arbitral proceedings prior to appointment of Ld. Sole Arbitrator.
24. By no figment of imagination the notice dated 26/12/2019 of respondent/claimant addressed to petitioner can be said to be in compliance with the mandate laid in Section 21 of the Act. By letter dated 20/12/2019 addressed to Ld. Sole Arbitrator, above said and having received consent of Ld. Sole Arbitrator on 21/12/2019 by letter above said addressed by Ld. Sole Arbitrator to respondent/claimant; unilateral appointment of Ld. Sole Arbitrator had already been done by respondent/claimant without any compliance of mandate laid in Section 21 of the Act. Later notice dated 26/12/2019 of respondent/claimant sent to petitioner accordingly cannot be termed as compliant of Section 21 of the Act.
25. 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 OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 19 of 27 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.
26. Mandate of Section 12 of the Act was put to winds and mandatory disclosure was not appropriately made by Ld. Sole Arbitrator to petitioner giving in writing any circumstances likely to give rise to justifiable doubts as to independence or impartiality of Ld. Sole Arbitrator. When after several requests made to Ld. Sole Arbitrator for sending the arbitral proceedings record were not acceded and arbitral proceedings record were not sent to this Court earlier, then vide order dated 11/11/2021 authorized representative of respondent was directed to file affidavit disclosing as to in how many cases Ld. Sole Arbitrator was unilaterally appointed by respondent/claimant. Sh. Sayan Sammadar, Authorized Representative of respondent filed duly sworn affidavit disclosing that present Ld. Sole Arbitrator Sh. Sanjay Aggarwal was appointed in 72 cases by respondent/ claimant for determining the disputes vide reference letters. This fact of the matter is not borne out in the above said disclosure under Section 12(1)(b) read with Sixth Schedule of the Act wherein Ld. Sole Arbitrator did not mention any fact that he had been appointed as an arbitrator in the past by the respondent/ claimant to adjudicate the disputes involving respondent/claimant and if so appointed, then in how many cases.
OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 20 of 2727. Arbitral proceedings record also reveals of there being speed post receipt dated 20/12/2019 stapled at the bottom of the above said disclosure provided under Section 12(1)(b) read with Sixth Schedule of the Act of Ld. Sole Arbitrator finding mention of communication purportedly sent addressed to 'CANBERG, KOLKATA, PIN:700001' by Ld. Sole Arbitrator. Said receipt does not contain the particulars of the remaining address of petitioner.
28. Notice dated 02/01/2020 for arbitration proceedings at page nos. 11 and 12 of arbitral proceedings record has at the bottom a stapled speed post receipt dated 08/01/2020 of speed post article sent to 'CANBERG GLOBLE, KOLKATA, PIN:700011 from Sh. Sanjay Aggarwal'. Said notice dated 02/01/2020 contained averments asking petitioner to appear for arbitration proceedings before Ld. Sole Arbitrator on 25/01/2020. Said receipt does not contain the particulars of the remaining address of petitioner.
29. At page nos. 38 and 39 of the arbitral proceedings record is a notice dated 25/01/2020 for arbitration proceedings with stapled speed post receipt addressed to 'CANBERG GLOBLE, KOLKATA, PIN:700001 from Sanjay Aggarwal' and finds mention of Ld. Sole Arbitrator calling upon petitioner to attend arbitration proceedings on 14.02.2020. Said receipt does not contain the particulars of the remaining address of petitioner.
30. In the entire arbitral proceedings record there is no tracking report placed to depict service of the communications purportedly sent to petitioner via speed post.
OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 21 of 2731. At page no. 37 of the arbitral proceedings record is a Tax Invoice of financed vehicle depicting co-borrower Neetu Agarwal as buyer with address 'NEETU AGARWAL SHREERAM NAGAR COMPLEX, FLAT 6C, BLOCK 2 TEGHARIA, VIP ROAD, NORTH 24 PARGANAS, KOLKATA-700052'. Above said copy of Tax Invoice was enclosed with the Statement of Claim by respondent/claimant before Ld. Sole Arbitrator. PIN CODE 700052, as above said, was so mentioned in above said Tax Invoice of vehicle in question. There is no other material laid before Ld. Sole Arbitrator for disclosing any other PIN CODE address of petitioner much less PIN CODE 700001 and PIN CODE 700011. Any communication dispatched to incomplete address or wrong PIN CODE address cannot be deemed to be served upon the addressee, in terms of Section 3 of the Act.
32. Arbitral proceedings record clearly depicts that petitioner was not treated with equality with respondent/claimant in the arbitral proceedings and was not given full opportunity to present its case, per contra to Section 18 of the Act which provided that parties shall be treated with equality and each party shall be given a full opportunity to present its case. Also the copy of Statement of Claim with Annexures and relied upon documents of respondent/claimant were neither provided to petitioner by respondent nor by Ld. Sole Arbitrator.
33. Supreme Court in case of TRF Ltd. vs Energo Engg. Projects Ltd. (supra) has held that by virtue of section 12(5) of The Act, if any person, who falls under any of the category OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 22 of 27 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.
34. 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. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 23 of 27 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.
35. Supreme Court in the case of Perkins Eastman Architects DPC vs HSCC (India) Ltd. (supra) has held that in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. The person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015. Supreme Court 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.
36. In the case of Proddatur Cable TV Digi Services vs. Siti Cable Network Ltd., 2020 SCC Online Del 350, it was inter alia held that following ratio of the judgment in the case of Perkins (supra), it is clear that a unilateral appointment by an authority which is interested in the outcome or decision of the dispute is impermissible in law. When the Arbitration Clause empowers the Company to appoint Sole Arbitrator, it can hardly be disputed that the Company acting through its Board of Directors will have an interest in the outcome of the dispute. The appellant had filed the petition under Section 14 and 15 of The Act seeking OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 24 of 27 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 becomes unable to perform her functions as an arbitrator, her mandate was terminated and another independent Sole Arbitrator was appointed to substitute the previous arbitrator.
37. In the case of M/s Omcon Infrastructure Pvt. Ltd. Vs India Bulls Investment Advisors Ltd, OMP (T) (Comm.) 35/2020 and IA 6153/2020 decided on 01/09/2020 by Hon'ble Ms. Justice Rekha Palli, wherein petition was filed under Section 14 and 15 of The Act, seeking termination of the mandate of Ld. Arbitrator unilaterally appointed by the respondent and also quashing of order passed by Ld. Arbitrator, rejecting 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.
38. In terms of law laid down in the cases of (i) TRF Ltd. (supra); (ii) Bharat Broadband Network Limited (supra); (iii) OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 25 of 27 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, which has been so done in the case in hand and vide aforesaid letter dated 20/12/2019 respondent through authorized signatory appointed Ld. Sole Arbitrator unilaterally without even sending arbitration reference notice to petitioner under Section 21 of the Act; whereas the later communication dated 26/12/2019, above said, of respondent/ claimant to petitioner has been held to be not an appropriate notice under Section 21 of the Act, being non compliant of mandate of said section.
39. Mandatory disclosure compliant of Section 12 of the Act was not made by Ld. Sole Arbitrator to petitioner in a prescribed form in writing any circumstances which was likely to give rise to justifiable doubts as to his independence or impartiality disclosing large number of arbitrations being held by him wherein respondent was a party. Even petitioner was not treated with equality with respondent in arbitral proceedings as per record and was not given full opportunity to present its case, per contra to Section 18 of the Act and also the copy of Statement of Claim with Annexures and relied upon documents of respondent were neither provided to petitioner by respondent nor by Ld. Sole Arbitrator. Impugned award is accordingly liable to be set aside as per Section 34(2)(a)(iii), Section 34(2)(b)(ii) and Section 34(2A) of the Act, as elicited in detail herein above. Precedents relied upon by the Ld. Counsel for respondent embody facts and circumstances which are entirely different and distinguishable to OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 26 of 27 the facts and circumstances of the case in hand and are of no help to respondents for getting this petition dismissed. 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), Bhanumati J. Bhuta vs Ivory Properties & Hotels Pvt. Ltd. (supra) and International Nut Alliance LLC (supra).
40. For the foregoing reasons, the petition is allowed and the impugned award is set aside.
41. The parties are left to bear their own costs.
42. File be consigned to record room.
Digitally signed by GURVINDER GURVINDER PAL
SINGH
PAL SINGH Date: 2022.02.19
12:42:05 +0530
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
th
On 19 February, 2022. Patiala House Court, New Delhi.
(DK) OMP (Comm.) No. 67/2021 Canberg Global Sourcing Private Limited vs M/s BMW India Financial Services Pvt Ltd. Page 27 of 27