Skip to main content

Sole arbitrator cannot be appointed by one party without explicit waiver from the other party

Cause Title : Cholamandalam Investment And Finance Company Ltd. Vs Amrapali Enterprises And Anr, EC 122 of 2022, Calcutta High Court

Date of Judgment/Order : 14/03/2023

Corum : Shekhar B. Saraf, J

Citied: 

  1. HRD Corporation vs GAIL 12 SCC 471, 2018
  2. TRF Limited vs Energo Engineering Projects Limited, 7 S.C.R. 409, 2017
  3. Perkins Eastman Architects DPC vs HSCC (India) Ltd.,17 S.C.R. 275, 2019
  4. Bharat Broadband Network Limited vs United Telecoms Limited reported 6 S.C.R. 97, 2019
  5. Yashovardhan Sinha and Ors. vs Satyatej Vyapaar Pvt. Ltd. CHN (CAL) 305, 2022(3)
  6. B.K. Consortium Engineers Private Limited vs Indian Institute of Management, Calcutta, (2023 SCC OnLine Cal 124)
  7. Ram Kumar and Ors. vs Shriram Transport Finance Co. Limited, MANU/DE/4941/2022
  8. JV Engineering Associate, Civil Engineering Contractors vs General Manager, CORE, 2020 SCC OnLine Mad 4829
  9. Naresh Kanyalal Rajwani vs Kotak Mahindra Bank,2022 SCC OnLine Bom 6204
  10. Sunder Dass vs Ram Prakash, 1977 AIR 1201
  11. Hiralal Moolchand Doshi vs Barot Raman Lal Ranchhoddas,(1993) 2 SCC 458
  12. Sushil Kumar Mehta vs Gobind Ram Bohra, (1990) 1 SCC 193

Background

This application was filed by the applicant/lender seeking execution of an arbitral award passed by a sole arbitrator against the respondent/borrower.

The question before the court was whether an award passed ex-parte by a sole arbitrator appointed unilaterally by the lender is legally valid or not.

Judgment

The court looking into a catena judgements concluded that the appointment of the arbitrator, the entire arbitration process and consequently the award are bad in the eye of the law. 

The court declared that a unilaterally appointed arbitrator is de jure ineligible to perform his functions and that his mandate is automatically terminated under Section 14(1)(a) of the Act. Further, any prior agreement to do away with this ineligibility would be wiped out by the non-obstante clause contained in Section 12(5), and the same can be cured only through an express waiver and therefore the impugned award is unsustainable and non-est in the eyes of law and the present execution petition has no legs to stand on for the reasons that the award sought to be enforced is not a legal decree. 

The court further went on to highlight some basic point relating to the arbitrator’s relationship with the parties or counsel :-
  • arbitrators falling under Schedule VII of the The Arbitration and Conciliation Act, 1996 are ineligible as they lack inherent jurisdiction. 
  • Similarly, persons appointed by persons falling under Schedule VII of the Act are ineligible
  • Finally, persons who are unilaterally appointed by one of the parties to the arbitration are also ineligible
  • It is a settled principle of law that compliance with Section 12(5) read with Schedule VII is sine qua non for any arbitral reference to gain recognition and validity before the Courts. An arbitral reference which begins with an illegal act vitiates the entire arbitral proceedings from its inception and the same cannot be validated at any later stage. Thus, it would be a logical inference to consider such arbitral proceedings as void ab initio.
  • Awards passed by a unilaterally appointed arbitrator are non- est in the eyes of law. While Section 47 of the CPC is not directly applicable, guidance has to be sought from the jurisprudence of the Apex Court vis-à-vis decrees passed while lacking inherent jurisdiction. Such decrees do not exist in the eyes of law and similarly awards passed while lacking inherent jurisdiction can be said to have never existed. Therefore, the parties would be free to re-agitate the matter.

Comments

Post a Comment

Most viewed this month

Appellate authorities under Special Statutes cannot be asked to condone delay

Madras High Court in R.Gowrishankar vs. The Commissioner of Service Tax has held that Appellate authorities cannot be asked to condone the delay, beyond the extended period of limitation A Division Bench comprising of Justices S. Manikumar and D. Krishnakumar, made this observation while considering an appeal filed against Single Bench order declining to set aside the order made in the condone delay petition filed by the petitioner to condone 223 days in filing the appeal before the Commissioner of Service Tax (Appeals). Article referred: http://www.livelaw.in/appellate-authorities-special-statutes-cannot-asked-condone-delay-beyond-extended-period-limitation-madras-hc/
Post a Comment
Read more

'Seize assets to pay damages to accident victim'

Her story might be an inspiration for the physically challenged but justice has remained elusive for her. In 2008, a bus accident left research engineer S Thenmozhi, 30, paraplegic. In April 2013, the motor accident claims tribunal directed the Tamil Nadu State Transport Corporation (TNSTC) to provide her a compensation of 57.9 lakh. However, TNSTC refused to budge and on Tuesday a city court ordered attaching of movable assets of the transport corporation. Thenmozhi was employed in C-DOT, a telecom technology development centre in Bangalore. On July 21, 2008, she was coming to Chennai in a private bus. Around 2am, the bus had a flat tyre and the driver parked it on the left side of the road near Pallikonda in Vellore district on the Bangalore-Chennai highway. While the tyre was being changed, a TNSTC bus of Dharmapuri division hit the stationary bus. The rear part of the bus was smashed and passengers were injured. Thenmozhi who had a seat at the back of the bus suffered...
Post a Comment
Read more

Mumbai ITAT rules income of offshore discretionary trust is subject to tax in India

The Mumbai Income Tax Appellate Tribunal (ITAT) has recently determined the following issue in the affirmative in the case of Manoj Dhupelia: Should the income of an offshore discretionary trust be subject to tax in India, if no distributions have been made to beneficiaries in India? The question arose from appeals filed by individual beneficiaries in relation to a Lichtenstein-based trust, the Ambrunova Trust and Merlyn Management SA (the Trust) with the ITAT. It is important to note that the individuals in this case were amongst those first identified by the Government of India (GOI) as holding undeclared bank accounts in Lichtenstein. The ITAT ruling raises the following issues: Taxation of Trust Corpus: ITAT classified the corpus of the trust as "undisclosed income" and declared it taxable in the hands of the beneficiaries. Taxation of Undistributed Income: ITAT refused to draw a distinction between the corpus and undistributed income from the trust and declared i...
Post a Comment
Read more