Case Note & Summary
The petitioner, Milaan C. Jhaveri, challenged an arbitral award dated 20 April 2009 passed by a sole arbitrator under Section 34 of the Arbitration and Conciliation Act, 1996. The respondent, Venture Securities Ltd., had filed a claim before the National Stock Exchange of India Limited (NSEIL) for Rs.17,23,895.06 without issuing any prior notice to the petitioner. The petitioner filed a written statement, and the respondent filed a rejoinder, followed by a surrejoinder by the petitioner. The arbitrator then passed an award directing the petitioner to pay Rs.17,23,893.06 with interest at 12% per annum. The petitioner contended that the award was in breach of natural justice as no hearing was offered, violating Rule 5.10 of the NSEIL (Futures & Options Segment) Trading Regulations, which mandates that if the claim exceeds Rs.25,000, the arbitrator must offer a hearing unless both parties waive the right in writing. The court noted that the respondent had initially sought a hearing in its claim form, but no hearing was ever conducted. The court found that the arbitrator failed to offer a hearing, and the petitioner had not waived his right. The court held that this violation of Rule 5.10 and principles of natural justice was a sufficient ground to set aside the award under Section 34 of the Arbitration Act. The court allowed the petition, set aside the award, and directed the arbitrator to decide the matter afresh after giving an opportunity of hearing to both parties.
Headnote
A) Arbitration - Natural Justice - Right to Hearing - Section 34 Arbitration and Conciliation Act, 1996 - Rule 5.10 National Stock Exchange (Futures & Options Segment) Trading Regulations - The arbitrator passed an award without offering a hearing to the petitioner despite the claim exceeding Rs.25,000, and the petitioner had not waived the right to hearing in writing. The court held that the failure to offer a hearing violated the mandatory requirement of Rule 5.10 and principles of natural justice, rendering the award liable to be set aside. (Paras 4-6)
Issue of Consideration
Whether the arbitral award passed without offering a hearing to the petitioner, in violation of Rule 5.10 of the NSEIL Trading Regulations and principles of natural justice, is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.
Final Decision
The court allowed the petition, set aside the arbitral award dated 20 April 2009, and directed the arbitrator to decide the matter afresh after giving an opportunity of hearing to both parties.
Law Points
- Arbitration
- Natural Justice
- Right to Hearing
- Section 34 Arbitration and Conciliation Act
- 1996
- Rule 5.10 NSEIL Trading Regulations
Case Details
2013 LawText (BOM) (04) 80
Arbitration Petition No. 980 of 2009
Mr. Vaibhav Jogalekar i/by Mr. Nitin Mulye for the Petitioner, Mr. Simil Purohit i/by M/s. Purohit & Co. for the Respondent
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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 petitioner sought to set aside the arbitral award dated 20 April 2009.
Filing Reason
The petitioner alleged that the award was passed in breach of principles of natural justice and without offering a hearing as required by Rule 5.10 of the NSEIL Trading Regulations.
Previous Decisions
The sole arbitrator passed an award on 20 April 2009 directing the petitioner to pay Rs.17,23,893.06 with interest at 12% per annum.
Issues
Whether the arbitral award was passed in violation of the principles of natural justice and Rule 5.10 of the NSEIL Trading Regulations.
Whether the award is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.
Submissions/Arguments
The petitioner argued that the award was in breach of natural justice as no hearing was offered, violating Rule 5.10 of the NSEIL Trading Regulations.
The respondent contended that the grounds raised were insufficient to set aside the award given the limited scope of Section 34.
Ratio Decidendi
The arbitrator's failure to offer a hearing to the petitioner, despite the claim exceeding Rs.25,000 and no written waiver by the petitioner, violated Rule 5.10 of the NSEIL Trading Regulations and principles of natural justice, constituting a valid ground to set aside the award under Section 34 of the Arbitration and Conciliation Act, 1996.
Judgment Excerpts
The learned counsel appearing for the Petitioner restricted the arguments and contended that the award so passed is in breach of principle of natural justice, equal and fair opportunity as provided under the law.
Rule 5.10 of the National Stock Exchange (Futures & Options Segment) Trading Regulations provides that if the value of the claim, difference or dispute is more than Rs.25,000/- the Arbitrator should offer to hear the parties to the dispute unless both parties waive their rights for such hearing in writing.
The Arbitrator has not offered any hearing to the Petitioner. The Petitioner has not waived his right for hearing in writing.
Procedural History
The respondent filed a claim before NSEIL on 25 June 2008. The petitioner filed a written statement on 26 December 2008. The respondent filed a rejoinder on 17 February 2009, and the petitioner filed a surrejoinder on 27 February 2009. The arbitrator passed the award on 20 April 2009. The petitioner filed the present petition under Section 34 of the Arbitration Act on an unspecified date.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 34
