Case Note & Summary
The petitioners, Mrs. Sheeba Jose and Mr. Jose Paramban Ouseph, filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an ex-parte arbitral award dated 29 September 2008 passed by the sole arbitrator, Mr. G. J. Kodwaney. The award directed the petitioners to pay Rs. 17,00,000 with interest to the claimant, Mr. Subramanian S. Iyer. The dispute arose from an agreement containing an arbitration clause (Clause 20) which stipulated that any dispute shall be referred to a sole arbitrator to be nominated jointly by the parties. However, the claimant unilaterally appointed the arbitrator by letter dated 13 August 2007, without obtaining the petitioners' concurrence. The arbitrator entered upon the reference and issued directives, but the directives addressed to the first petitioner were returned undelivered. The petitioners did not participate in the proceedings, and the award was passed ex-parte. The High Court held that the unilateral appointment of the arbitrator was contrary to the arbitration agreement, which required joint nomination. Additionally, the ex-parte award was passed without proper notice to the petitioners, violating principles of natural justice. Consequently, the court set aside the award and allowed the petition.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Unilateral Appointment - Section 34 Arbitration and Conciliation Act, 1996 - Where the arbitration clause requires joint nomination of a sole arbitrator, appointment by one party without the other's concurrence is invalid and contrary to the agreement - Held that such unilateral appointment vitiates the arbitral proceedings and the resultant award (Paras 2-4).
B) Arbitration Law - Natural Justice - Ex-Parte Award - Section 34 Arbitration and Conciliation Act, 1996 - An ex-parte award passed without ensuring proper service of notice on the respondents and without giving them an opportunity to be heard violates principles of natural justice - Held that the award is liable to be set aside on this ground as well (Paras 2-4).
Issue of Consideration
Whether an ex-parte arbitral award passed by a unilaterally appointed arbitrator, without proper notice to the respondents, is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.
Final Decision
The court allowed the petition and set aside the impugned arbitral award dated 29 September 2008.
Law Points
- Arbitration agreement requiring joint nomination
- unilateral appointment invalid
- natural justice
- Section 34 Arbitration and Conciliation Act
- 1996
Case Details
2012 LawText (BOM) (02) 62
Arbitration Petition No.533 of 2010
Mr. C. I. Motagi for Petitioners; None for Respondents
Mrs. Sheeba Jose and Mr. Jose Paramban Ouseph
Mr. Subramanian S. Iyer and Mr. G. J. Kodwaney (Sole Arbitrator)
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Nature of Litigation
Petition under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside an arbitral award.
Remedy Sought
The petitioners sought to set aside the ex-parte arbitral award dated 29 September 2008.
Filing Reason
The award was passed ex-parte by a unilaterally appointed arbitrator without proper notice to the petitioners.
Previous Decisions
The sole arbitrator passed an ex-parte award on 29 September 2008 directing the petitioners to pay Rs. 17,00,000 with interest.
Issues
Whether the unilateral appointment of the sole arbitrator by the claimant, contrary to the arbitration clause requiring joint nomination, renders the arbitral proceedings invalid.
Whether the ex-parte award passed without proper notice to the petitioners violates principles of natural justice and is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.
Submissions/Arguments
The petitioners argued that the arbitrator was appointed unilaterally by the claimant without their concurrence, contrary to the arbitration clause.
The petitioners contended that they were not given proper notice of the proceedings and the award was passed ex-parte, violating natural justice.
Ratio Decidendi
An arbitral award passed by a unilaterally appointed arbitrator, contrary to the arbitration agreement requiring joint nomination, and without proper notice to the respondents, is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 for violation of the agreed procedure and principles of natural justice.
Judgment Excerpts
The Petitioners have invoked Section 34 of the Arbitration and Conciliation Act, 1996 and thereby challenged the impugned Award dated 29th September, 2008 passed by the sole arbitrator and thereby directed the Petitioner to Pay Rs. 17,00,000/ and with interest.
Para No.2 of the Award mentioned as under itself shows that by letter dated 13/08/2007, Respondents appointed arbitrator unilaterally.
The arbitration clause No.20 which is reproduced below: 'Arbitration: In case of any dispute or difference arising at any time between the parties hereto as to the interpretation or effect of the Agreement or any clause or matter herein contained or the rights or liabilities of the Parties hereto or otherwise howsoever in relation to the Agreement, the same shall be referred to arbitration by a sole arbitrator, to be nominated jointly by the parties.'
Procedural History
The claimant appointed the sole arbitrator unilaterally on 13 August 2007. The arbitrator issued directives on 19 November 2007, but directives to the first petitioner were returned undelivered. The petitioners did not participate, and the arbitrator passed an ex-parte award on 29 September 2008. The petitioners filed Arbitration Petition No.533 of 2010 under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award. The petition was heard and allowed on 7 February 2012.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 34
