Gujarat High Court Has Set Aside Three Arbitral Awards, As The Process Was Impaired From The Inception by Respondent-NBFC’s Unilateral Appointment Of Sole Arbitrator
Title: M/S RICH AND ROYAL v. HINDUJA LEYLAND FINANCE LTD.
Decided on: 7th october 2023
R/SPECIAL CIVIL APPLICATION NO. 728 of 2023 With R/SPECIAL CIVIL APPLICATION NO. 6844 of 2022 With R/SPECIAL CIVIL APPLICATION NO. 8468 of 2021 With R/SPECIAL CIVIL APPLICATION NO. 17868 of 2022
Coram: HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Introduction
High court of Gujarat has set aside the three awards of an arbitral tribunal which was impaired from the very beginning of the arbitration and directed the respondent to initiate fresh and valid proceedings.
Facts of the Case
It is the case of the petitioners where they availed financial assistance from the respondent NBFC. The petitioners could not repay the outstanding dues and therefore the respondent NBFC invoked the arbitration by appointment of the Sole Arbitrator respondent no.2 to adjudicate the dispute between the parties. The respondent no.2 arbitrator passed ex parte award in Special Civil Application no.728 of 2023, Special Civil Application no.6844 of 22 and Special Civil Application no.8468 of 2021, whereas notice issued by the Sole Arbitrator is under challenge in Special Civil Application no.17868 of 2022. As the common issue regarding the jurisdiction of the Sole Arbitrator is arising in all these petitions, the same were heard analogously and were disposed of by common order.
A petition under Article 226 of the Constitution of India was filed by petitioners challenging the awards passed by the Sole Arbitrator appointed by the respondent no.1- Non Banking Finance Company, on the ground that the arbitration awards are passed ex parte by the Sole Arbitrator and Sole Arbitrator could not have been unilaterally appointed by the respondent no.1 as per the settled legal position.
Court Analysis and Decision
Upon court’s observation, it was evident that from the stage of appointment of the sole arbitrator, the proceedings were vitiated redering the impugned ex parte arbitral awards as unsustainable. Therefore the impugned awards deserved to be quashed and set aside with a chance to the NBFC to initiate fresh proceedings in accordance with the settled legal position as held by the Hon’ble Division Bench of this Court in case of Pahal Engineers, by appointing the arbitrator either with the consent of the petitioners or by approaching Court under Section 11 of the Act. Hence, the Special Civil Application Nos.6844 of 2022, 8468 of 2021 and 728 of 2023 were allowed and Special Civil Application No.17868 of 2022 regarding the composition of the Arbitral Tribunal was quashed and set aside.
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Written by- K R Bhuvanashri