Delhi District Court
Tellichery Public School vs M/S Edusmart Services Pvt. Ltd on 19 March, 2021
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
ARBTN No. 1778/2018
Tellichery Public School
Kundoormala, PO West Ponniem,
Kannur, Kerala State.
Represented by its
Managing Committee Member ...Petitioner
vs
1. M/s Edusmart Services Pvt. Ltd.
L-74, Mahipalpur Extension,
New Delhi-110037
2. M/s Educomp Solutions
1211, Padma Tower-1, 5 Rajendra Place,
New Delhi-110008 ....Respondents
Date of Institution : 16/05/2018
Arguments concluded on : 17/02/2021
Decided on : 19/03/2021
Appearances : Ms Raji Joseph, Ld. Counsel for petitioner.
Sh. Dhruv Verma, Ld. Counsel for respondent nos. 1 and 2.
JUDGMENT
1. Petitioner 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 impugned arbitral award dated 08/12/2016 passed by Ld. Sole Arbitrator Ms. Rekha Gupta, Advocate in Arb. Case No. RG/ARB 08.12.15/LOT-1/610 titled M/s Edu Smart Services Pvt Ltd. & Anr vs Tellichery Public School. Ld. Sole Arbitrator awarded sum of Rs. 11,44,099.66 with interest @ 18% per annum from 22/12/2015 till payment by present petitioner in favour of claimants/respondents with cost of Rs 20,000/- and Rs. 1145/- towards expenses incurred in stamp duty.
2. I have heard Ms Raji Joseph, Ld. Counsel for petitioner; Sh. Dhruv ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 1 of 18 Verma, Ld. Counsel for respondent nos. 1 and 2 and perused the records of the case as well as copy of arbitral proceedings record sent by Ld. Sole Arbitrator and given my thoughtful consideration to the rival contentions put forth.
3. Adumbrated in brief, the case of petitioner is as follows:
Petitioner entered into a tripartite agreement dated 31/12/2011 with respondents containing obligations of the parties in the agreement, which was for the period of 60 months from the date of completion of installation. The petitioner acting in good faith decided to perform its part of contract and earmarked the classrooms which were converted into smart classrooms. The consideration for the smart class programme was in three heads i.e., for sale of hardware Rs. 4,73,825/-, for provision of digital content Rs. 6,51,175/- and for support services in relation to smart class programme Rs. 3,75,000/- and all these payments were scheduled to 20 installments covering 60 months. Being not satisfied with the performance of the contract by respondents, petitioner sent complaint to the respondents to rectify the defects as the system had stopped functioning though the initial payment was made by the petitioner after installation of devices in the class rooms. Respondent did not provide assistance for the smooth functioning of the class, which resulted in entire smart class programme standing still. All the installation work was not properly done by respondents and as a result the entire system was struck and not functioning and as a result the implementation of smart class programme stood still because of the irresponsible hostile attitude of the respondents. Number of times petitioner requested the respondent but their request were not heard by the respondents. Finally the petitioner was forced to stop the smart class from the school. The hardware, server equipments, networking and accessories sold by respondents to school were of defective quality and in contravention of the standard required to be complied with. Petitioner made payment of Rs 1,50,000/- to respondents in two installments on 08/06/2012 and 08/09/2012 respectively only to finally settle the accounts.ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 2 of 18
Respondents sent legal notice to petitioner, which was duly replied. Petitioner received a notice on 08/12/2015 from the arbitrator, which was duly replied by petitioner on 15/12/2015, requesting for an accommodation as petitioner was far from Delhi but thereafter no communication was received from Ld. Sole Arbitrator. Petitioner filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 before District Court Thalassery on 05/07/2016 as O.P No. 193/1996, where respondents appeared and filed reply. Meantime both parties communicated through email and respondent issued a settlement letter dated 27/12/2016. Petitioner issued two cheques on 30/12/2016 and 15/01/2017 respectively. Petitioner received notice of Execution Petition no. EP No. 274/2017 from District Court, Thalassery and petitioner came to know of ex parte award passed by Ld. Sole Arbitrator. Despite request to Ld. Sole Arbitrator by the petitioner and their Counsel, they were not provided with the signed copy of the award and only on 04/04/2018 petitioner obtained the certified copy of the award from the Executing Court. The present petition was filed impugning the arbitral award in question on following grounds:
A. No proper notice was given to the petitioner except notice dated 08/12/2015 of Ld. Sole Arbitrator. The appointment of arbitrator was without the knowledge of the petitioner. Statement of claim was not provided to the petitioner. The impugned award was not communicated to the petitioner as signed copy of award was not delivered to the petitioner. The arbitral proceedings were vitiated by fraud as there is no mention in the award with respect to Section 9 application or email communication between the parties. B. No notice was issued by the arbitrator to the petitioner after letter dated 15/12/2015 was sent by petitioner to arbitrator. No proper notice as per Section 34(2)(a)(iii) of the Act was served upon the petitioner.
C. Basic rights of the party were denied by Ld. Sole Arbitrator as petitioner was not informed about the proceedings by Ld. Sole ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 3 of 18 Arbitrator.
D. The arbitration proceedings were not concluded within the permissible time period under Section 29A of the Act. E. Equal treatment was not given to the petitioner by Ld. Sole Arbitrator as petitioner was not heard and kept away from arbitration proceedings.
F. Ex parte award is without any proper reasons as in the legal notice allegedly sent by petitioner claimed sum was of Rs. 5,25,000/- on 28/10/2014 whereas award amount is much more.
G. Present arbitrator was a permanent arbitrator of the respondent's company in several matters and there is non disclosure of requisite information in terms of Section 12 of the Act.
H. The award was obtained by respondents by fraud and suppression of material facts in arbitration proceedings. Section 9 application filed by petitioner, as aforesaid, and settlement letter for Rs 3,25,401/- find no mention in the award.
I. The arbitrator was not appointed with consensus of petitioner in violation of clause 9.1 of the agreement. No notice was received by petitioner from arbitrator after reply was filed by petitioner against first notice sent by Ld. Sole Arbitrator. Unilateral appointment of the arbitrator was against the terms of the agreement.
J. This is clear case of bias as Ld. Sole Arbitrator was appointed in many matters as arbitrator by the respondents and in this case without notice to the petitioner, which is also against public policy of India.
It was prayed to set aside the impugned award.ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 4 of 18
4. Ld. Counsel for petitioner argued in terms of the filed objections. Also was argued that there is no appointment of arbitrator in the present case as per agreement as there is nothing on arbitration record regarding the appointment of arbitrator as per agreement and arbitrator acted without any valid appointment. It was further argued that Ld. Sole Arbitator was appointed without any consensus between the parties. It was further argued that if arbitrator was appointed, it was in violation of Section 12(5) of the Act. It was further argued that non disclosure as provided under Section 12(5) of the Act vitiates the entire arbitration proceedings. It was further argued that arbitrator failed to issue proper notice of arbitral proceedings, award was liable to be set aside under Section 34(2)(a)(iii) of the Act. Also was argued that failure of effecting proper service, was a proper reason to set aside the ex parte arbitral award. It was further argued that Ld. Sole Arbitator failed to send the copy of the award to the petitioner, which is in violation of Section 31(5) of the Act. It was further argued that there is no notice invoking arbitration clause sent by the claimant/respondent to the petitioner. It was further argued that award is non speaking award. It was further argued that Ld. Sole Arbitator has not served the notice intending to proceed ex parte to the petitioner and did not serve the daily proceedings including final award to the petitioner.
5. Ld. Counsel for petitioner has relied upon the following precedents:
1. Bharat Broadband Network Limited vs United Telecoms Limited, MANU/SC/0543/2019;
2. TRF Limited vs Energo Engineering Projects Limited, MANU/SC/0755/2017;
3. Perkins Eastman Architects DPC & Ors. vs HSCC (India) Ltd., MANU/SC/1628/2019;
4. Assignia-VIL JV vs Rail Vikas Nigam Limited, MANU/DE/1025/2016;
5. Dulal Poddar vs Executive Engineer, Dona Canal Division & Ors., MANU/SC/0937/2003;
6. Tamil Nadu Electricity Board vs Bridge Tunnel Constructions and Ors., MANU/SC/0321/1997.
6. Ld. Counsel for respondent argued that grounds taken by the petitioners in the petition under Section 34 of the Act are frivolous, baseless and without ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 5 of 18 any proof. It was further argued that the petitioner has made vague averments against the award as passed by Ld. Sole Arbitrator on baseless grounds. Further, the grounds as considered by the petitioner in the present case do not fall within the scope of Section 34(2)(a), (b) and (2A) of The Act. It was further argued that the general principles as to arbitration proceedings are that the arbitrator is Judge of the choice of the parties and his/her decision, unless there is an error apparent on the fact of the award, cannot be interfered. The court while deciding objection petition under Section 34 of the Act is not sitting in appeal over the conclusion of the arbitrator. It was further argued that the petition is liable to be dismissed with imposing heavy cost upon the petitioner for wasting the judicial time of the Court by making such false, fabricated and time barred petition. It was further argued that the petition is not maintainable and is liable to be dismissed as the same is barred by limitation. It was further argued that the arbitral award is detailed and well reasoned , so there is no question of impartiality or injustice in passing the award. It was further argued that the delay caused by petitioner in filing the present petition, deprived the respondents of their legal right to recover the amount due to them vide the arbitral award. The petitioner has not preferred any application under Section 5 of the Limitation Act for condonation of delay in filing of the present petition even though there is an inordinate delay of approximately 447 days in filing the present petition. It was further argued that provisions of Section 29A of the Act are not attracted in the present proceedings as the date of reference to the arbitration proceedings is 08/12/2015 and the present arbitral award was passed on 08/12/2016 i.e., exactly after one year from the institution of the Arbitral Tribunal.
7. Ld. Counsel for respondent no. 1 and 2 relied upon the following precedents:
1. Union of India (UOI) vs Popular Construction Co., MANU/SC/0613/2001;
2. Simplex Infrastructure Ltd. vs Union of India (UOI), MANU/SC/1417/2018 and
3. Consolidated Engg. Enterprises & Ors. Vs Principal Secy.ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 6 of 18
Irrigation Deptt. & Ors., MANU/SC/7460/2008.
8. An Arbitral Award can be set aside on the grounds set out in Sections 34(2)(a), (b) and (2A) of The Act in view of Section 5 of the Act.
9. Section 34 (1), (2) and (2A) of The Arbitration and Conciliation Act, 1996 read as under:
"34. Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3).
(2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 7 of 18 which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
10. Normally, the general principles are that Arbitrator is a Judge of the choice of the parties and his decision, unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even by the Court as a Court of law could come to a different conclusion on the same facts. The Court cannot reappraise the evidence and it is not open to the Court to sit in appeal over the conclusion of the Arbitrator. It is not open to the Court to set aside a finding of fact arrived at by the Arbitrator and only grounds on which the award can be set aside are those mentioned in the ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 8 of 18 Arbitration Act. Where the Arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the Court in exercise of the power vested in it. Where the Arbitrator is a qualified technical person and expert, who is competent to make assessment by taking into consideration the technical aspects of the matter, the Court would generally not interfere with the award passed by the Arbitrator.
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 drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
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.
ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 9 of 1813. 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.
14. 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 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 ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 10 of 18 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. Supreme Court in case of TRF Ltd. vs Energo Engg. Projects Ltd., (2017) 8SCC 377 has held that by virtue of section 12(5) of The Act, if any person, who falls under any of the category specified in the Seventh Schedule shall be ineligible to be appointed as an Arbitrator. It is held that the amended law under Section 11(6-A) of The Act requires the Court to confine examination of the existence of an arbitration agreement notwithstanding the judgment of the Supreme Court or the High Court while considering an application under section 11(6) of The Act. The designated arbitrator whose ineligibility to act as an arbitrator by virtue of amendment to Section 12 of The Act by the Arbitration and Conciliation (Amendment) Act, 2015, does not have power even to nominate any other person as arbitrator. The Supreme Court and High Court in certain circumstances have exercised jurisdiction to nullify the appointments made by the authority in such situation.
ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 11 of 1819. Supreme Court in case of Bharat Broadband Network Ltd vs United Telecoms Ltd (2019) 5 SCC 755 after construing Section 12(5) of The Act read with Fifth, Sixth and Seventh Schedule held that the Managing Director of the party, who was a named arbitrator, could not act as arbitrator nor could be allowed to appoint another arbitrator. The disclosure of a prospective arbitrator has to be made in the form specified in the Sixth Schedule and the ground stated in the Fifth Schedule are to serve as a guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. Any prior agreement to the contrary is wiped out by the non-obstante clause in Section 12(5) of The Act the moment any person whose relationship with the parties or the counsel or the subject matter of the dispute falls under the Seventh Schedule. The sub- section then declares that such person shall be ineligible to be appointed as arbitrator. Such ineligibility can be removed by an express agreement in writing. It was held that learned arbitrator had become de jure ineligible to perform his function as an arbitrator.
20. 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.
21. Sub-section (1) of Section 29-A of The Act provides that the award shall be made within a period of twelve months from the date the arbitral ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 12 of 18 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 29-A of The Act provides that if the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree. Sub-section(3) of Section 29-A of The Act provides that the parties may, by consent, extend the period specified in subsection (1) for making award for a further period not exceeding six months. Subsection (4) of Section 29-A of The Act provides that if the award is not made within the period specified in sub-section (1) or the extended period specified under sub- section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period. If the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, the Court may pass an order for reduction of fees of arbitrator(s) by not exceeding five per cent for each month of such delay. Sub-section(5) of Section 29-A of The Act provides that the extension may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.
22. 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 declaration that the mandate of the arbitrator appointed by the respondent be terminated and an arbitrator be appointed by ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 13 of 18 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.
23. 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.
24. 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.
25. 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.
ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 14 of 1826. I now advert to arbitral proceedings record whose copy was again sent by Ld. Sole Arbitrator by email to the dedicated email id of the Court on 02/03/2021. Reader of the Court had stated that even earlier by email the e- copy of arbitral proceedings record was received on 19/09/2020 to the dedicated email id of the Court which was sent by Ld. Sole Arbitrator.
27. Copy of demand notice dated 28/10/2014 purportedly sent by respondents through Ms. Jyotsna Sharma Advocate does not bear any speed post/registered post/courier receipt or proof of service of said notice upon present petitioner. In second page of said notice, Advocate for respondents mentioned that in case the petitioners failed to make the payment demanded within 15 days of receipt of said notice, then the respondents would presume that dispute has arisen between the parties and they shall invoke the arbitration clause of the agreement or other incidental proceedings as deemed proper in law for recovery of the amount including the remaining entire installments towards the sale of hardware and the content, as per the agreement. Copy of letter of respondent no. 2 dated 04/12/2015 to Ld. Sole Arbitrator is in the arbitral proceedings record, in terms of which Sh. Kshitij Aggarwal (Executive Legal) invoking the arbitration clause inter se parties proposed appointment of Ld. Sole Arbitrator, asking her consent and at the foot of said letter is typed matter of Ld. Sole Arbitrator having accepted appointment as Sole Arbitrator and returning the duly signed letter. Below the acceptance of Ld. Sole Arbitrator to the proposal of appointment for Sole Arbitrator is the mention in typing as Copy to petitioner school and thereafter is the impression of pasted speed post receipt bearing date 21/12/2015 for sending of said letter to petitioner school. If said letter of appointment of Ld. Sole Arbitrator dated 04/12/2015 is dispatched on 21/12/2015, as per speed post receipt to petitioner school, then it is improbable of receipt of said letter before issuance of notice dated 08/12/2015 of Ld. Sole Arbitrator for arbitration proceedings. Petitioner claimed of having sent letter dated 15/12/2015 to Ld. Sole Arbitrator showing inability to appear on 22/12/2015 ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 15 of 18 seeking some other future date to appear. At the foot of copy of notice dated 17/03/2016 of Ld. Sole Arbitrator addressed to petitioner, is the impression of pasted speed post receipt dated 21/03/2016 to "Tellichery P School Kerala, PIN: 670001." Aforesaid notice in its body bears PIN code of petitioner as 670641. Notice sent at wrong PIN code address cannot be deemed to be served upon petitioner accordingly. There is no proof of service of notice dated 17/03/2016 upon petitioner at its correct address and PIN code by Ld. Sole Arbitrator with intention to proceed ex-parte, fixing date for arbitration for 28/04/2016, as per submitted e-copy of arbitral proceedings record. Also in the received e-copy of arbitral proceedings record, there is no proof of service of signed copy of impugned arbitral award upon the petitioner. No proceeding sheet of Ld. Sole Arbitrator is in record of arbitral proceedings finding mention of the noting or order of dispatch of impugned arbitral award to the petitioner school. At the bottom of the last page of copy of impugned arbitral award dated 08/12/2016, there is impression of speed post/registered post receipt bearing date 04/02/2017 addressed to TELLICHERY PUB SCH PONNIAM, PIN:670641. Per se from said impression of the receipt it cannot be presumed of signed copy of arbitral proceedings record having been sent by Ld. Sole Arbitrator to petitioner on 04/02/2017 in absence of mention of any noting or order sheet of such dispatch of signed copy of award dated 08/12/2016 on 04/02/2017 by Ld. Sole Arbitrator to the present petitioner.
28. Petitioner claimed of having received the certified copy of impugned award on 04/04/2018. Petition was filed on 16/05/2018, within three months of receipt of the certified copy of the award from the District Court Thalassery and thus the petition is within time. Precedents relied upon by the Ld. Counsel for respondents are of no help to respondents accordingly for getting the petition dismissed as barred by limitation.
29. No proof is on record with respect to service of any requisite notice by respondents under Section 21 of the Act upon the petitioner containing the ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 16 of 18 request that dispute is to be referred to the arbitration. Petitioner was neither served with the statement of claim of claimants/respondent no. 1 and 2 nor was informed appropriately of hearing before Arbitral Tribunal nor was given equal treatment with full opportunity to present its case before Ld. Sole Arbitrator. Ld. Sole Arbitrator did not send appropriate disclosure in the form specified in Sixth Schedule in terms of Section 12 of the Act disclosing in writing circumstances, if any in 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 her independence or impartiality; and which are likely to affect her ability to devote sufficient time to the arbitration and in particular her ability to complete the entire arbitration within a period of twelve months; in terms of various grounds set out in the Fifth Schedule of the Act as a guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.
30. Ld. Sole Arbitrator received letter for her appointment as Sole Arbitrator on 04/12/2015 from respondent no. 2 through Sh. Kshitij Aggarwal, Executive Legal and is deemed to have entered upon the reference on said date. The impugned arbitral award was made on 08/12/2016, which is beyond period of 12 months from the date the Arbitral Tribunal entered upon the reference. There is nothing on record for providing of extension of the term of Ld. Sole Arbitrator by the parties or by the competent Court after expiry of period of 12 months from the date of Arbitral Tribunal having entered upon the reference. Accordingly, the impugned award is beyond the period of 12 months from the date when arbitral tribunal entered upon the reference, which is beyond the maximum period of twelve months so provided under Section 29A of the Act.
31. In view of law laid down in the cases of (i) TRF Ltd. (supra); (ii) Bharat Broadband Network Limited (supra); (iii) Perkins Eastman Architects ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 17 of 18 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 respondents/claimants and in this case at the outset vide letter dated 04/12/2015 of Sh. Kshitij Aggarwal, Executive Legal, of respondent no. 2, Ld. Sole Arbitrator was appointed. Even the mandatory disclosure in terms of Fifth and Seventh Schedule of The Act in the format of Sixth Schedule of The Act was not conveyed by Ld. Arbitrator to the petitioner. Also the award was not made within period of 12 months from 04/12/2015, the date the arbitral tribunal entered upon reference. In the fact of matter there existed no extension of period for making award as per Section 29A of The Act either by the consent of parties or by the order of competent Court. The impugned award is accordingly liable to be set aside, also as per Section 34(2)(a)(iii) 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), International Nut Alliance LLC (supra), and Bhanumati J. Bhuta (supra).
32. For the foregoing reasons, the petition is allowed and the impugned award is set aside.
33. The parties are left to bear their own costs.
34. File be consigned to record room.
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
on 19th March, 2021. Patiala House Court, New Delhi.
(Deepika) ARBTN No. 1778/2018 Tellichery Public School vs M/s Edusmart Services Pvt. Ltd. & Anr. Page 18 of 18