Madras High Court
Consolidated Civil Constructions ... vs Coimbatore Stock Exchange Ltd on 21 October, 2021
Author: Abdul Quddhose
Bench: Abdul Quddhose
C.M.A. No. 2567 of 2017
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 21.10.2021
CORAM:
THE HON'BLE MR. JUSTICE ABDUL QUDDHOSE
C.M.A. No. 2567 of 2017
Consolidated Civil Constructions (India) Ltd.,
2G, Lakshmi Bhavan,
609, Anna Salai,
Chennai - 600 006. ... Appellant
Vs.
1. Coimbatore Stock Exchange Ltd.,
Stock Exchange Building,
Trichy Road,
Coimbatore - 5.
2. H.B.N. Shetty (Sole Arbitrator)
17/4, 1st Cross Street,
Indira Nagar, Adyar,
Chennai - 20. ...Respondents
Civil Miscellaneous Appeal filed under Section 37 of the
Arbitration and Conciliation Act, 1996 against the Order of the Hon'ble
Principal District Judge, Coimbatore dated 07.08.2016 passed in Arb.
O.P. No. 420 of 2005 (Impugned Order).
For Appellant : Mr. Prahalad Bhat
For Respondents : Mr. Aashish
for M/s. Samvidhaan for R1.
https://www.mhc.tn.gov.in/judis/
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C.M.A. No. 2567 of 2017
JUDGMENT
This Appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996 challenging the order dated 07.06.2016 passed in A.O.P. No.420 of 2005 by the learned Principal District Judge, Coimbatore under Section 34 of the Arbitration and Conciliation Act.
2. Under the impugned order, the learned Principal District Judge, Coimbatore has allowed the application filed by the first respondent under Section 34 of the Arbitration and Conciliation Act, 1996 by setting aside the Arbitral Award dated 18.06.2003 passed in favour of the Appellant on the ground that the Arbitrator has not decided the application filed by the first respondent under Section 16 of the Arbitration and Conciliation Act, 1996 questioning the Jurisdiction of the Arbitral Tribunal before passing of the impugned Arbitral Award. In the grounds raised by the respondents along with Section 34 application challenging the Arbitral Award dated 18.06.2003 apart from raising the ground under which the Arbitral Award has been set aside by the learned Principal District Judge, Coimbatore, they have raised several other https://www.mhc.tn.gov.in/judis/ 2/12 C.M.A. No. 2567 of 2017 grounds also questioning the Arbitral Award. However, as seen from the impugned order passed by the learned Principal District Judge, Coimbatore under Section 34 of the Arbitration and Conciliation Act, the learned Principal District Judge, Coimbatore has considered only one ground viz., whether the Arbitrator ought to have decided the application under Section 16 filed by the first respondent before passing of the Arbitral Award. Apart from the aforementioned ground under which the Arbitral Award has been set aside by impugned order, the first respondent have raised the following grounds in A.O.P. No. 420 of 2005:
A) The Award of the 2nd Respondent is absolutely without jurisdiction and is based on a totally erroneous assumption of jurisdiction in so far as he is not the Arbitrator appointed in conformity with clause 33 of the Agreement dated 15.07.95 and it is Mr. Kumaravel, who is the properly appointed Arbitrator in accordance with said clause. The impugned Award is grossly unconscionable in having disregarded the proceeding pending before Sub Court, Coimbatore in O.S. No 77 of 2002 and in District Court, Coimbatore in A.S. No. 77 of 2002 and in having proceeded with the Arbitration without awaiting final out-come in the Appeal and in the Suit.
B) The impugned Award and specifically the finding of the https://www.mhc.tn.gov.in/judis/ 3/12 C.M.A. No. 2567 of 2017 Arbitrator on the issue of jurisdiction is grossly perverse and unconscionable inasmuch as the Arbitrator overlooked the fact that the instant case was one where there were two Arbitrators each contending himself to have jurisdiction to decide on his own jurisdiction, that accordingly it was not open to the 2nd Respondent to assume himself to be the Arbitrator competent to decide on his own jurisdiction, and that in the instant case who is to exercise jurisdiction even under Section 16 of the Arbitration and Conciliation Act was under dispute.
D. The impugned award is grossly unconscionable in having concluded that the appointment of Mr. Kumaravel as Arbitrator is not valid merely on the basis that the communication dated 12.09.2001 giving the panel of names of Arbitrators has been sent only by Certificate of Posting and not by RPAD by relying on Clause (i)(e) of the Agreement between the parties. The Arbitrator attempted to be hyper technical in this regard. Applying the same hypertechnical yardstick, the Arbitrator ought to have seen that Clause (1) (e) warrants an RPAD only in cases of “Notice in writing” or ''Written Notice”, that such expressions are used in several places in the Agreement itself, that communication of panel of names is not contemplated as a ''notice in writing'' or ''Written Notice'' in the Agreement and that therefore there was no requirement in the Agreement that the communication dated 12.09.2001 was to be sent by RPAD. The Learned Arbitrator acted perverse in not even applying his mind to this Argument of the Petitioner which was pleaded exhaustively in their pleadings. https://www.mhc.tn.gov.in/judis/ 4/12 C.M.A. No. 2567 of 2017 E. The Arbitrator acted perverse in ignoring the specific finding of the Sub Court, Coimbatore in I.A. 53 /2002 that the factum as to whether the communication dated 12.09.2001 was in fact served on the 1st Respondent could be gone into only at the time of trial of the Suit. Therefore, the Arbitrator ought to have seen that even the Court had not accepted the plea of the 1st Respondent that the communication dated 12.09.2001 is to be rejected merely because it was sent by Certificate of Posting but that the Court had only taken in view that the factum as to whether the communication was actually received by the 1st Respondent or not could factually be decided only in trial.
F. The Arbitrator grossly erred in deciding to decide the issue as to whether the letter dated 12.09.2001 was in fact received by the 1st Respondent, summarily and without any trial, not-withstanding the observation of the Civil Court that the determination of the said issue requires trial. The Arbitrator has assumed himself to be capable of -18- determining the issue without any trial whatsoever even though, the Civil Court itself felt incapacitated in determining the issue without a trial.
G. The Arbitrator ought to have seen that Certificate of posting having been produced, the presumption under Law is that the letter sent under Certificate of Posting ought to have been received by the Addressee. The Arbitrator ought to have therefore seen that the burden of proving non- receipt of the letter dated 12.09.2001 was only on the 1st Respondent and https://www.mhc.tn.gov.in/judis/ 5/12 C.M.A. No. 2567 of 2017 that the 1st Respondent has not dislodged this presumption by any positive evidence from their side. In fact, the Arbitrator has even deliberately overlooked the fact that the only evidence available in respect of the preliminary issue was the evidence of the Petitioner's Witness in the form of proof affidavit and that there was no contra evidence let in by the 1st Respondent in this regard.
H. The Arbitrator approached the issue of jurisdiction from the beginning with a pre-conceived mind and with bias. This is apparent from the reluctance of the Arbitrator to go through a fair trial in respect of the said issue and to give a finding on the said issue in the first instance before proceeding with the merits of the case. This aspect has come out most glaringly in the order of the Arbitrator dated 16.04.2003 rejecting the challenge to Arbitrator wherein the Arbitrator has in one breadth stated that the issue of jurisdiction would be decided along with merits and in another breadth stating in the same order that he was “fully satisfied about his competence as regard his jurisdiction”.
I. The Arbitrator acted unconscionably in rejecting the application of the Petitioner challenging the Arbitrator. The Arbitrator ought to have accepted the challenge and withdrawn from the Arbitration Proceedings having regard to the following grounds on which the challenge was based:
a) The Arbitrator had been deliberately selective and had shown partiality in the matter of adjourning the hearings. For his own convenience and at the request of the 1st Respondent herein, adjournments https://www.mhc.tn.gov.in/judis/ 6/12 C.M.A. No. 2567 of 2017 have been granted, even without regard to the fact that the Petitioner and their Advocate travel all the way from Coimbatore. While so, request of the Petitioner herein for adjournment, that too based on bonafide reason of forthcoming hearing of the Appeal before the District Court on same issue, is turned down and important proceedings such as recording of evidence are conducted in the absence of the Petitioner.
b) The Arbitrator had consciously and deliberately failed to comply with the mandatory procedure prescribed under Section 16 (5) of the Arbitration and Conciliation Act, 1996 and has proceeded to record evidence on merits, without deciding the issue of jurisdiction.
c) The Arbitrator has refused to await final outcome of proceedings pending before the Court regarding jurisdiction.
d) The Arbitrator had refused to acknowledge receipt of pleadings and other submissions filed by the Petitioner at the hearing on 25.02.2003 giving room for ambiguity later on as what were the written submissions made by the Petitioner from time to time before the Arbitrator.
e) The Arbitrator has been selective in the matter of maintenance of attendance records and Minutes of proceedings of hearings held before him. While at earlier hearing, there was a record of proceeding and attendance maintained by the Arbitrator, at the hearing on 25.02.2003, the Arbitrator has failed to record any attendance sheet and also refused to make a record of proceedings that had transpired at the said hearing giving room for ambiguity later on as to what transpired at the https://www.mhc.tn.gov.in/judis/ 7/12 C.M.A. No. 2567 of 2017 hearing on 25.02.2003.
J. The impugned Award shows grave perversity even in the matter of decision on merits. The Arbitrator has in toto failed to apply his mind to the exhaustive pleadings of the Petitioner on merits including counter claim as also the exhaustive documentary evidence that was placed on record. The Arbitrator has proceeded as though there was no pleading or documentary evidence placed on record by the Petitioner in respect of the merits of the case. It is submitted that there has been no appreciation whatsoever of the defence of the Petitioner or the Counter Claim of the Petitioner or the documents filed in support thereof. The Award on merits is accordingly perverse in toto and is liable to be set aside.
K. The Arbitrator acted unconscionably in awarding interest of 15% p.a. after having specifically noted the falling interest rates ignoring that even interest rate of 15% per annum is unconscionably high in the prevailing economic scenario.
L. The Arbitrator by his overall conduct totally incapacitated the Petitioner from putting forth their case on the issue of jurisdiction and on merits effectively, motivated by his bias in favour of the 1st Respondent. The award is totally opposed to public policy and is unconsionable to any judicial mind and deserves to be set aside.
3. Since the learned Principal District Judge, Coimbatore under https://www.mhc.tn.gov.in/judis/ 8/12 C.M.A. No. 2567 of 2017 the impugned order has not considered the other grounds raised by the first respondent, this Court is of the considered view that the matter will have to be remanded back to the very same Court for fresh consideration on merits and in accordance with law.
4. It is the contention of the Appellant before this Court that there is no necessity for the learned Principal District Judge, Coimbatore to decide the application filed under Section 16 questioning the jurisdiction of the Arbitral Tribunal even before passing of the Arbitral Award.
5. Learned Counsel for the Appellant, in support of his submissions relies upon the judgments of the High Courts which is reflected in the Arbitral Award viz., Kailash S. Mantry v Indraprastha Holding Ltd., petition No.114 of 1997 decided on 1.10.97 by Bombay High Court and relied on in Scan Organics Ltd. V. Mukesh Babu Financial Services Ltd., 1998 (3) RAJ 240 (Bom). However, the learned Principal District Judge under the impugned order has not considered the aforementioned decisions relied upon by the learned counsel for the appellant, which is also reflected in the impugned Arbitral Award.
https://www.mhc.tn.gov.in/judis/ 9/12 C.M.A. No. 2567 of 2017
6. Since the learned Principal District Judge has not considered the applicability of the aforementioned decisions in the impugned order and has also not considered the other issues raised by the first respondent, this Court is of the considered view that the matter will have to be decided afresh by the learned Principal District Judge. Otherwise one of the aggrieved party will lose the benefit of filing an effective appeal arising out of an order where the learned Principal District Judge has considered all the issues raised by the first respondent. As in the case on hand admittedly, the learned Principal District Judge has decided only the issue whether it is mandatory for the Arbitral Tribunal to decide the Section 16 application before passing of the arbitral award. Admittedly, the other issues have not been answered by the learned Principal District Judge under the impugned order passed under Section 34 of the Arbitration and Conciliation Act, even though those issues were raised by the first respondent in its application challenging the Arbitral award.
7. For the foregoing reasons, the impugned order dated 07.06.2016 passed by the learned Principal District Judge in A.O.P. https://www.mhc.tn.gov.in/judis/ 10/12 C.M.A. No. 2567 of 2017 No.420 of 2005 is hereby set aside and the matter is remanded back to the learned Principal District Judge, Coimbatore for fresh consideration. The learned Principal District Judge, Coimbatore is directed to pass final orders on merits and in accordance with law in the Section 34 application in AOP No.420 of 2005, within a period of three months from the date of receipt of copy of this Judgment after considering all the grounds raised by the first respondent and also after affording a fair hearing to both the parties to the dispute.
8. With the aforesaid directions this Civil Miscellaneous Appeal is disposed of . No Costs.
21.10.2021 Index: Yes/No Internet: Yes/No Speaking Order/Non-Speaking Order ab/vsi2 To The Principal District Judge, Coimbatore.
https://www.mhc.tn.gov.in/judis/ 11/12 C.M.A. No. 2567 of 2017 ABDUL QUDDHOSE, J.
ab C.M.A. No. 2567 of 2017 21.10.2021 https://www.mhc.tn.gov.in/judis/ 12/12