Arbitration

ORDINARY ORIGINAL CIVIL JURISDICTION ou

ARBITRATION PETITION NO. 1178 OF 2012 1 The Loot (India) Pvt. Ltd.

having its office at 001A/002B,

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Poonam Chambers, B Wing,

Plot No. G of Shivsagar Estate,

Dr. Annie Basant Road,

Worli, Mumbai 400 018.

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2 Jay Prakash Pannalal Gupta, ig

Director of The Loot (India) Pvt. Ltd. having its office at 001A/002B,

Poonam Chambers, B Wing,

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Plot No. G of Shivsagar Estate,

Dr. Annie Basant Road,

Worli, Mumbai 400 018.

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3 Mr. Raj Kishore B. Gupta,

Director, The Loot (India) Pvt. Ltd. ba

having its office at 001A/002B,

Poonam Chambers, B Wing,

Plot No. G of Shivsagar Estate,

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Dr. Annie Basant Road,

Worli, Mumbai 400 018. .....Petitioners. Vs.

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1 Reliance Capital Limited,

a Company registered and

incorporated under the

Companies Act, 1956, having

its Registered office at 1st Floor, H Block, Dhirubhai Ambani

Knowledge City, Kopar Khairane,

Navi Mumbai and its Corporate

::: Downloaded on - 24/06/2013 20:15:09 ::: ssm 2 arbp1178.12 Head Consumer Finance Division

office at 570, Radipir House,

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Naigam X Road, Wadala,

Mumbai 400 031.

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2 Shri B.A. Shelar,

Sole Arbitrator, Additional Chief Metropolitan Magistrate,

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Mumbai (Retd.), having his

office at 105, B Wing,

1st Floor, Ramji House,

Jambhulwadi, Dhobi Talao,

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Mumbai 400 002. ....Respondents. ig

Mr. Subhash Jha a/w Ms. Anisha Singh i/by Law Global for the Petitioners.

Mr. P.N. Modi, Senior Advocate with Ms. Mamta Sadh with Mr. H

Ravi Goenka with Mr. Ramesh Dube-Patil i/by M/s. Ajay Misar & Co. for Respondent No.1.

CORAM : ANOOP V. MOHTA, J.

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JUDGMENT RESERVED ON : 13 JUNE 2013. JUDGMENT PRONOUNCED ON : 17 JUNE 2013. ba

ORAL JUDGMENT :-

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By consent the matters were heard finally on 12 and 13 June 2013 and as the common parties and issues are involved, heard accordingly and therefore this common B

Judgment.

2 The Petitioners-original Respondents, Borrowers- Guarantors, have invoked Section 34 of the Arbitration and ::: Downloaded on - 24/06/2013 20:15:09 ::: ssm 3 arbp1178.12 Conciliation Act, 1996 (for short, the Arbitration Act), and rt

thereby challenged an ex-parte award dated 15 June 2012 ou

passed by the sole Arbitrator, (Respondent No.2) and in favour of the Financer Company-Respondent No.1. (for short, "the C

financer").

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3 The operative part of the Award is as under:- ig

"a) The Respondents do jointly and/or severally pay to the Claimants a sum of Rs.2,19,28,031.84/- (Rupees Two Crore Nineteen Lakhs Twenty Eight H

Thousand Thirty One and paise Eighty Four only), together with the interest thereon @ 15.25% p.a. from 10th April, 2012, as per the foreclosure statement, till payment or realization y

thereof.

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b) It is hereby declared that the property to viz.,-Unit No. 002/B at Ground Floor & Unit No. 001/A at Basement, Building No. B, Poonam Chambers, om

Poonam Chambers Commercial Premises CHS Limited, Dr. Annie Besant Road, Near Ceejay House, Worli, Mumbai-400 018, is validly and equitably mortgaged by the Respondents with Claimants towards repayment of aforesaid loan; B

c) In the Event of default or failure of the Respondents to pay the aforesaid claim amount within a period of three months from the date of Award, the Claimants are allowed to attach and sale the said mortgaged property to viz;- Unit No.002/B at Ground Floor & Unit No. 001/A at Basement, Building No. B, Poonam Chambers, ::: Downloaded on - 24/06/2013 20:15:09 ::: ssm 4 arbp1178.12 Poonam Chambers Commercial Premises CHS Limited, Dr. Annie Besant Road, Near Ceejay rt

House, Worli, Mumbai-400 018.

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d) The Respondents are hereby restrained by permanent injunction from selling and/or creating third party interest in respect of said mortgaged property to viz.; Unit No.002/B at C

Ground Floor & Unit No.001/A at Basement, Building No.B, Poonam Chambers, Poonam Chambers Commercial Premises CHS Limited, Dr. Annie Besant Road, Near Ceejay House, Worli, h

Mumbai-400 018.

e)

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The Arbitration cost and the fees fixed at Rs.5,000/- shall be equally paid by the Claimants and the Respondents.

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f) Initially the Arbitration cost and the fees shall be paid by the Claimants and the Claimants may recover the same from the Respondents. y

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g) The parties shall bear their own cost incidental to the present Arbitration Proceedings." om

4 The Petitioners have also challenged in the other two Petitions viz. Arbitration Petition No. 1179 of 2012 and 1180 of 2012 the similar ex-parte awards passed by the same B

Arbitrator, based upon the mortgaged/loan documents and on the similar grounds.

5 Respondent No.1 has also invoked Section 9 of the ::: Downloaded on - 24/06/2013 20:15:09 ::: ssm 5 arbp1178.12 Arbitration Act against the Petitioners on 10 December 2012. rt

(Arbitration Petition No. 175 of 2013). The Court has passed ou

the order in Section 9 Petition on 20 December 2012, which has been in force till this date. The said order reads as under:- C

"By this petition filed under section 9 of the Arbitration & Conciliation Act, the petitioner seeks injunction in respect of the property described in Exh.A to the petition against the respondents. The learned counsel h

appearing for the petitioner submits that the learned arbitrator has already declared the award in favour of ig

the petitioner and has declared that the said property was mortgaged to the petitioner. It is not in dispute that the petition under section 34 filed by respondent is H

already pending in this court. None appears for the respondents though served. The property which is subject matter of mortgage is required to be protected till disposal of the petitions filed under section 34 by the y

respondent in this court bearing Arbitration Petition Nos. ba

1178 of 2012, 1179 of 2012 and 1180 of 2012. In the meantime, there shall be interim order in terms of prayer clause (a) of this petition till the above petitions are disposed off. Place this matter along with Arbitration om

Petition No. 1178 of 2012, 1179 of 2012 and 1180 of 2012 on 3rd January, 2013."

6 Respondent No.2 is an Arbitrator who is normally B

not a necessary party in Section 34 Petition, but considering the averments made and the reasons so given in the Award based upon the correspondences exchanged between the Petitioners and the Arbitrator, the matter proceeded by consent of the ::: Downloaded on - 24/06/2013 20:15:09 ::: ssm 6 arbp1178.12 parties finally for hearing.

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7 The basic case of the Petitioners is as under:- On 22 February 2011, the loan agreement (the C

agreement) entered into between the Petitioners and Respondent No.1. There were defaults. On 12 March 2012, h

Respondent No.1 issued legal notice to the Petitioners Company ig

after availing of the finance facility, committed defaults in payment of monthly EMI and also failed to regularize their H

account despite repeated requests and demands by them and nominated the Arbitrator in view of the following Arbitration y

Clause:-

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"17 ARBITRATION

In the event of any dispute or differences arising om

under this Agreement including any dispute as to any amount outstanding, the real meaning or purport hereof ("Dispute"), such Dispute shall be finally resolved by arbitration. Such arbitration shall be conducted in accordance with the B

provisions of the Indian Arbitration and Conciliation Act, 1996 or any amendment or reenactment thereof by a single arbitrator to be appointed by the Lender. The venue of arbitration shall be ____Mumbai__ and the arbitration shall be conducted in English language." On 11 April 2012 and 11 May 2012, Respondent No. 2 issued a ::: Downloaded on - 24/06/2013 20:15:09 ::: ssm 7 arbp1178.12 notice to the Petitioners to appear before him for hearing in rt

arbitration proceeding.

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8 On 2 May 2012, the Petitioners through their C

advocates' letter sought certain clarifications so as to ensure that the arbitration proceeding shall be conducted in a fair and h

impartial manner. On 5 May 2012, Respondent No.2 although ig

furnished information to some of the queries raised by the Petitioners, avoided to furnish vital information with regard to H

the number of matters where he acted as the sole Arbitrator for Respondent No.1 by terming them as 'irrelevant', as alleged. y

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9 On 23 May 2012, the Petitioners through their om

advocates responded to the letter and stated that the information sought from Respondent No.2 are absolutely relevant for the purpose of determining whether or not the B

Petitioners should submit themselves to the arbitral tribunal of Respondent No.2 or otherwise and until and unless all the necessary and requisite information as sought vide letter dated 2 May 2012 are furnished, the Petitioners shall not be ::: Downloaded on - 24/06/2013 20:15:09 ::: ssm 8 arbp1178.12 submitting themselves to the jurisdiction of Respondent No.2 as rt

an Arbitrator.

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10 On 15 June 2012, Respondent No.2 however, C

without responding to the letter dated 23 May 2012 of the advocates representing the Petitioners, proceeded with the h

arbitration proceeding and even passed the impugned ex-parte ig

award. On 21 June 2012, the Petitioners unaware of such award having been passed on 15 June 2012, requested H

Respondent No.2 to enlighten them on the subject matter of a reference being made to him by Respondent No.1 for y

adjudicating upon the alleged dispute and/or difference ba

between the company and Respondent No.1. On 13 September om

2012, the present Petition filed in this Court. 11 Admittedly, the awards are ex-parte. The learned B

Sole Arbitrator proceeded against the Petitioners by observing as under:-

"6 It is a matter of record that the respondents did not attend the proceeding on the first date of hearing ::: Downloaded on - 24/06/2013 20:15:09 ::: ssm 9 arbp1178.12 i.e. 11/05/2012 and did not file defence statement rt

challenging the claim. Even though the Respondents ou

failed to attend the proceeding and failed to file their defence statement, in the interest of justice, in order to C

give one more opportunity to the Respondents to attend the proceedings and to file their defence statement, final h

notice (Exh.24), came to be issued to the Respondents ig

calling upon them to attend the proceeding on the next date of hearing i.e. 13/06/2012 and to file their defence H

statement. It was specifically mentioned therein that if they fail to attend the proceeding and fail to file their y

defence statement, the matter would be decided ex-parte ba

against them. Thus by the said notice the intention of om

this arbitral tribunal to proceed ex-parte against the respondents was disclosed, if they fail to attend the proceeding on the said next date of hearing and fail to B

file their defence statement."

"7 It is a matter of record that the said final notice was duly received by the Respondents at one of their addresses. (Exh. 25, Exh. 26, Exh.27, respectively, ::: Downloaded on - 24/06/2013 20:15:09 ::: ssm 10 arbp1178.12 Regd. A.D. Acknowledgements). It is a matter of record rt

that the Respondents through their advocates again sent ou

letter dated 23/05/2012 (Exh. 28, The Original letter has been kept in the arbitration proceeding, in respect of loan C

account no. RLSLMUM000172898. For the said of convenience, Xerox copy of the said letter has been kept h

in this proceeding.), to this arbitral tribunal, specifically ig

stating therein that unless and until all the necessary and the requisites information as sought vide their earlier H

letter dated 02/05/2012 i.e. Exh. 20, are furnished the respondents shall not be submitting themselves to the y

jurisdiction of arbitral tribunal. In the said letter the ba

Respondents once again insisted for the said requisite om

information, which was not furnished to them being irrelevant, as specifically mentioned in the letter sent by this arbitral tribunal Exh. 22, in reply to the first letter of B

the Respondents, Exh. 20."

"11 In view of the above discussed facts, it is clear that the respondents are insisting for certain information from this arbitral tribunal, which was not furnished and ::: Downloaded on - 24/06/2013 20:15:09 ::: ssm 11 arbp1178.12 cannot be furnished to them being absolutely irrelevant. rt

The Respondents had chosen not to attend the ou

proceeding and not to challenge the claim by filing defence statement. It is thus apparent that inspite of C

sufficient opportunity granted to the Respondents as mentioned above, the Respondents failed and neglected h

to appear in the proceedings. I am of the opinion, that ig

the absence of the Respondents in the proceedings is deliberate with intention to avoid the proceedings. H

Considering the conduct and attitude of the Respondents in not appearing in the proceedings and not to file y

defence statement, inspite of sufficient opportunities ba

granted to them, there was no option but to proceed om

further Ex-parte against the Respondents and accordingly, the Ex-parte order was passed in the matter on 13/06/2012."

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"13 I have heard Shri. Vikas Salvi, Advocate for the Claimants, and perused the documents relied upon and filed in support of the claim. As pointed out above, Respondents remained absent in the proceedings & no ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 12 arbp1178.12 defence statement came to be filed. Thus, no evidence rt

either oral or documentary or any argument from the ou

side of the Respondents."

"14 Before proceeding with the merit of the case, C

I may mention here that the respondents have not chosen to prefer an application challenging the appointment of h

this arbitral tribunal alleging bias and partial attitude ig

towards the Claimants, as contemplated under Section 12, 13 of the Arbitration and Conciliation Act, 1996, H

Instead of having recourse to the said relevant provisions of the Arbitration and Conciliation Act, the respondents y

have been seeking irrelevant information from this ba

arbitral tribunal. It appears from the contents of the said om

letter that since the arbitral tribunal is being appointed by the Claimants so also by the other NBFCs as their arbitrator, this arbitral tribunal is bound to be biased B

favouring the Claimants Company. This contention of the Respondents has absolutely no merit. Only because this arbitral tribunal has been acted as a sole arbitrator, appointed by the Claimants, in several arbitration ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 13 arbp1178.12 proceedings, it can not be alleged that it is bound to be rt

biased."

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12 The learned counsel appearing for Respondent No.1 C

has supported the award on every count and cited various judgments on the most of the points to support the reasons even h

on merits of the matter. The learned counsel appearing for the ig

Petitioners, in view of the ground so raised and based upon the Judgments so cited, submitted to set aside the award itself and H

also prayed that no case is made out for any protective order. y

13 The power of the Arbitral Tribunal to decide the ba

issue of impartiality and/or bias and so also to decide its own om

jurisdiction is well settled. The power of the Arbitrator to pass ex-parte award, in a given case, is also well recognized. There is no bar that the Arbitrator cannot pass ex-parte order/award if B

the parties in spite of due notice and/or for no sufficient reasons, failed to appear on the given date/dates. It is also settled that if the case is made out, the Court is bound to consider non-appearance of the parties inspite of the service ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 14 arbp1178.12 and/or reasons for not attending the Arbitration proceedings rt

inspite of due notice, when the award is ex-parte, whereby the ou

learned Arbitrator has adjudicated even the merits of the matter. C

14 The procedural laws make or mar the rights of the parties. One may be benefited and other may be adversely h

affected. The Court or the Judicial Tribunal/Judicial Authority ig

needs to test it on the anvil of doctrines of "equal and fair opportunity" and "the natural justice". The important facet in all H

Arbitration matters is equal and fair opportunity at every stage in the Arbitration proceedings, this in my view, includes even y

from the date of issuance of first notice of appointment of the ba

Arbitrator by any one of the parties. om

15 The required opportunity and equal treatment, pending the Arbitration proceedings and/or before passing the B

final award, is also settled apart from Section 19 and other provisions of the Arbitration Act. The learned Arbitrator, even otherwise, needs to follow the basic principles of natural justice, at every stage of the proceedings. ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 15 arbp1178.12 rt

16 There is no dispute, under the Arbitration Act ou

and/or under its scheme, the parties have authority and/or entitled to appoint the Arbitrator and to follow the agreed C

procedure for further proceedings before the Arbitral Tribunal. In the present case, the parties have agreed that Respondent h

No.1 -the financer would appoint a sole Arbitrator to resolve the ig

disputes and accordingly Respondent No.2 Arbitrator was appointed by Respondent No.1 unilaterally and intimated the H

said appointment to the Petitioners. The question still remains is whether the Petitioners and/or other side is entitled to raise y

the objection to the appointment of the Arbitrator, at this stage ba

itself. Admittedly, as recorded above, the Petitioners did raise om

objection immediately after receipt of the notice from Respondent No.1 and so also notice from the Arbitrator. Therefore, in the present case, the Petitioners' objection even B

before constitution of the Arbitral Tribunal itself, cannot be compared with the situation as contemplated under Sections 12 and 13 of the Arbitration Act. It is relevant to note that as per Section 12 of the Arbitration Act when a person is approached ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 16 arbp1178.12 in connection with his possible appointment as an Arbitrator, rt

the person concerned should disclose in writing any ou

circumstances likely to give rise to the justifiable doubts at to his independence and/or impartiality. Therefore, there is no bar C

that immediately after receipt of such intimation, as there was no disclosure which even though not necessary about the h

independence or impartiality, the other side cannot ask for the ig

same before proceeding and/or before confirming the appointment. Section 12 nowhere contemplates the situation H

like this, where the other side has raised objection and inquired about the independence or impartiality of the Arbitrator y

immediately after receipt of first intimation about the ba

appointment. There is nothing on record to show that the om

Arbitrator had intimated and/or expressed and/or informed such independence or impartiality to both the parties. Normally, it is not necessary, but if objection is raised, in my B

view, the party one who appoints such Arbitrator including the Arbitrator needs to disclose about the independence and/or impartiality.

::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 17 arbp1178.12 17 To say that the Petitioners failed to file any rt

application under Section 12 before the Arbitral Tribunal and ou

therefore, the Arbitrator proceeded ex-parte, required to be tested on the basic principles and scheme of Arbitration C

proceedings and the facts of the case. The Arbitration Act and the scheme therewith though permits, and in the present case as h

agreed, Respondent No.1-Financer to appoint/nominate ig

Arbitrator, that itself is not sufficient to deny the rights of the Petitioners to raise objection to its appointment, referring to H

"justifiable doubts" & to inquire about the independence and/or impartiality. It is settled that mere allegations of independence y

and/or impartiality and/or raising doubts, itself is not sufficient. ba

The objection should be justifiable and/or sufficient to challenge om

the power of Respondents and/or other side to appoint Arbitral Tribunal, unilaterally. In the present case, as noted, the Petitioners did raise objection immediately. The learned B

Arbitrator, replied the same in detail. The copy was accordingly forwarded even to Respondent No.1. Admittedly, Respondent No.1, prior to consent the name and/or appointment of Arbitrator, never sought any consent and/or never intimated the ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 18 arbp1178.12 suggested name and/or name of possible appointment of the rt

Arbitrator.

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18 This is not the case where the Petitioners, after C

participating in the proceedings raised the objections in question. The inquiry and/or details so sought before h

appearing, is nowhere prohibited under the Arbitration Act. ig

The power to appoint the Arbitrator unilaterally, in no way, in my view, therefore, entitled the parties to appoint Arbitrator or H

not to intimate and/or inform and/or not to obtain consent before appointing the Arbitrator. The consent may be direct or y

implied. The clear disclosure of everything including the name ba

suggested, is necessary to avoid further complications of this om

nature. This is for the simple reason that the whole concept of Arbitration proceedings and/or Arbitration has a foundation of appointment of Arbitral Tribunal by consent of the parties. The B

power, though given to one party, in the present case the Financer, that itself is not sufficient to say that the aggrieved person and/or party can raise and/or challenge justifiable doubts about the Arbitrator's independence and/or impartiality ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 19 arbp1178.12 only after attending the Arbitration proceedings. That may be rt

the additional way of raising the objection. The point is, the ou

Petitioners objections so raised were not totally barred and/or impermissible.

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19 The Arbitration Act provides that the parties are free h

to agree on a procedure for appointing the Arbitrator and/or ig

Arbitrators. The parties in the present case, agreed and permitted Respondent No.1 to appoint the Arbitrator. If other H

party, for whatever may be the reason, if raised objection to the appointment of particular Arbitrator, this itself means there was y

no consent for the appointment of the Arbitrator. The ba

appointment of the Arbitral Tribunal without consent of the om

parties and in the present case, even at the initial stage of the nomination itself, should not have been overlooked by Respondent No.1 before confirming the said appointment. B

Respondent No.1 not contested the details sought by the Petitioners about the impartiality and/or independence. In the present case throughout, the learned Arbitrator replied and made correspondences with the Petitioners directly, though copy ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 20 arbp1178.12 was served and forwarded to Respondent No.1. rt

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20 The learned Senior counsel appearing for Respondent No.1 has also read and referred the Judgment of C

the Supreme Court in International AirPort Authority Vs. K.D. Bali & Anr. 1 Merely raising such averments and/or doubts h

about the impartiality and/or independence of the Arbitrator, ig

itself is not sufficient, as the intention was to frustrate the Arbitration proceedings. The Apex Court has observed as H

under:-

"No party should be allowed to throw out the y

arbitration proceeding by such tactics and if the arbitrator has not surrendered to pressure in our ba

opinion, the arbitrator cannot be faulted on that score nor the proceedings of the arbitrator be allowed to be defeated by such method."

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21 The other Judgments have also cited to show that the Arbitral Tribunal is empowered and/or entitled to pass ex- B

parte award and the Court in various matters upheld and/or confirmed such ex-parte award, basically by rejecting such objections/grounds about the impartiality and/or independence 1 AIR 1988 S.C. 1099

::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 21 arbp1178.12 and/or bias of the Arbitrator. On the facts and circumstances, rt

those cases are distinct and distinguishable. So far as the law ou

laid down by the Supreme Court and/or other Courts, no further detail discussion is necessary, as the Judgments cited C

even by the Petitioners in this regard are quite supportive so far as the law is concerned. However, it is necessary for the Court h

to consider the facts and circumstances of the case when the ig

Court required to consider for the first time the reasons so given by the learned Arbitrator before passing the ex-parte award. H

22 Admittedly, there is no procedure prescribed under y

the Arbitration Act, where the party can make application for ba

setting aside the ex-parte award before the same learned om

Arbitral Tribunal. The Code of Civil Procedure (for short, the CPC) provides and take care of such contingencies to deal with the situation and is also empowered to consider the case and/or B

reasonable grounds to set aside the ex-parte Judgment/order, in a given case, even by permitting the parties to lead evidence, to justify their sufficient reasons for not attending the case on particular date and/or dates. The Arbitration Act is silent even ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 22 arbp1178.12 with this regard. The aggrieved party, therefore, has no rt

choice/option but to invoke Section 34 of the Arbitration Act to ou

challenge such ex-parte award. The Court under Section 34, normally, is not empower to take note of the disputed facts and C

the submissions so raised for the first time revolving around, "the sufficient reasons and the circumstances", which prevented h

the aggrieved party from attending the Arbitration proceedings. ig

Section 34 of the Arbitration Act, nowhere permits the parties to lead the evidence in this regard for the first time in Court. H

23 In the present case admittedly, the learned y

Arbitrator, as recorded above, by referring to the ba

correspondences exchanged between the parties as details were om

sought to assist the justifiable doubts about the independence and impartiality of the learned Arbitrator, without giving further explanation and/or reply to letter dated 23 May 2012 of the B

Petitioners, and by observing that all the necessary and required information as sought for through earlier letter dated 2 May 2012 were furnished and as the Petitioners refused to submit the jurisdiction of the Arbitral Tribunal and proceeded and ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 23 arbp1178.12 passed the award, by treating the same as irrelevant. The first rt

date of hearing of 11 May 2012. The second date was 13 June ou

2012. The Petitioners' letter was dated 23 May 2012, where further details were sought which admittedly Respondent No.1 C

and/or Arbitrator never furnished and/or replied. There was no fresh intimation thereafter given to the Petitioners that the h

Arbitrator will proceed to pass ex-parte award on 15 June 2012. ig

The basic notice of hearing dated 13 June 2012, in the present facts and circumstances, ought not to have been proceeded H

without giving reply and/or details as sought for by the Petitioners. The relevancy of second reply to their letter dated y

23 May 2012 can be tested only by the Petitioners and not by ba

the Arbitrator or other side. The learned Arbitrator in my view, om

ought not to have proceeded without intimating and/or without replying to the letter dated 23 May 2012. B

24 The learned Arbitrator, read and referred and in fact reproduced all those letters on record to justify the ex-parte award. The Petitioners, admittedly insisted for further details and even pointed out that they would not be appearing before ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 24 arbp1178.12 the Arbitral Tribunal, unless those details are submitted. The rt

learned Arbitrator ought to have been taken cognizance of this ou

and so also Respondent No.1 before proceeding the matter ex- parte, for the simple reason that the objection was raised even C

before attending and/or participating before the learned Arbitrator, for the reasons so recorded in those letters of the h

Petitioners. This procedure, if not prohibited under the ig

Arbitration Act and considering the scheme of Arbitration on the decision of impartiality and/or independence of the learned H

Arbitrator, ought to have been considered before proceeding to constitute the Arbitral Tribunal and/or further hearing before y

the same Arbitrator.

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25 The Judgments so cited and referred by the learned counsel appearing for Respondent No.1 and so also cited and referred by the learned Arbitrator, in view of the present facts B

and circumstances, are not sufficient to accept the reasons so given by the learned Arbitrator to pass the ex-parte award and also the submissions, so made to support the same. ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 25 arbp1178.12 26 I am inclined to observe that in the present case the rt

Petitioners raised various objections before confirming the ou

appointment of the Arbitrator, though not necessary as per the agreed terms, but having once raised the objection, the learned C

Arbitrator and/or contesting party ought to have decided the issue first before passing the final ex-parte award. h

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The learned Arbitrator further proceeded to hold that the Petitioners failed to raise/file the application as H

contemplated under Sections 12 and 13 of the Arbitration Act. This means, the party one who has raised objection, even on the y

instructions of the constitution of the Arbitral Tribunal, needs to ba

appear before the same Tribunal and then to raise objection as om

contemplated. In the present case, as noted above, the objections were raised. Having once raised the objection, the learned Arbitral Tribunal ought to have treated those letters B

and/or correspondences as an Application as contemplated under Sections 12 and 13 and/or 16 of the Arbitration Act and ought to have decided the same first, before proceeding ex-parte against the Petitioners. The procedure of taking and/or passing ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 26 arbp1178.12 such orders relating to the jurisdiction of the Arbitral Tribunal rt

including as contemplated under Sections 12 and 13, could ou

have saved and/or could have given opportunity to the Petitioners to consider the decision on their objections so raised. C

The objections were frivolous and/or afterthoughts and/or intended to frustrate the Arbitration proceedings, ought to have h

been decided first by giving opportunity to both the parties. ig

The learned Arbitrator could have pass the same order upholding their rights and/or jurisdiction to proceed with the H

matter first and then should have proceeded to deal with the merits of the matter, as done in the present case, behind the y

back of the Petitioners.

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28 The principle of natural justice as settled, is not a strict jacket formula to be applied in every matter. The judgments so cited by the learned counsel appearing for B

Respondent No.1 in support of the reasons, nowhere expressed and/or prohibited and/or declared that the Court under Section 34 in no circumstances should hear and/or consider the case and/or sufficient reason and/or material available on record to ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 27 arbp1178.12 interfere with such ex-parte award. There are cases, as cited rt

even by the learned counsel appearing for the Petitioners, ou

thereby the ex-parte awards are quashed and set aside for the reasons so recorded. Therefore, the Court in the present case C

also considering the facts and circumstances as it is difficult for the Court under Section 34, for the first time, to give h

justification and/or reasons to decide the objections so raised ig

which was admittedly not considered by the learned Arbitrator. H

29 Admittedly, the Petitioners could not file any reply/defence to the claim so raised by Respondent No.1. The y

learned Arbitrator, as there was no reply, proceeded and passed ba

the ex-parte award, based upon the statement of claim and the om

documents placed on record by Respondent No.1. The submission that even otherwise, there was no merit and/or there could not have been any defence to the claim so raised in B

view of signed documents on record, is not sufficient to overlook the basic principle of natural justice and the law itself. The party, in a given case, may or may not file reply and/or specific reply, but still entitled to cross-examine the ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 28 arbp1178.12 parties/claimants one who wants to support the documents rt

and/or the claim so raised. There is nothing placed on record to ou

show that the parties have agreed to overlook the basic principles of CPC while passing the ex-parte award in such C

situation, specifically when the Petitioners admittedly refused to appear before the learned Arbitral Tribunal. As noted above, h

before the learned Arbitral Tribunal for want of specific ig

procedure, the aggrieved party may not be in a position to file application to set aside the ex-parte award. H

30 The Court proceedings and/or provisions available y

under the CPC including the power given to the Court, in my ba

view, just cannot be compared with the power of the privately om

appointed Arbitral Tribunal. Before the Court, there is no question of any consent of parties that particular court should hear and/or adjudicate the matter. In Arbitration scheme, B

under the Arbitration proceedings, the private Arbitrator, before whom both the parties agreed to appear and get their dispute resolved. The constitution of Arbitral Tribunal itself, as recorded above, was challenged by the Petitioners, since its ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 29 arbp1178.12 inception, just cannot be overlooked and distinguished the rt

present case from the cases so cited/referred by the learned ou

counsel appearing for Respondent No.1 and also the learned Arbitral Tribunal. Admittedly, no opportunity was given even to C

the Petitioners to test and cross-examine Respondent No.1's officers and/or to object and/or challenge to the documents, so h

placed and relied by the learned Arbitrator for passing the final ig

award. This, in my view, also additional factor which is impermissible and as definitely in breach of principle of natural H

justice apart from "the equal and fair opportunity" to both the parties, by the Arbitral Tribunal. y

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31 Strikingly, the learned Arbitrator for assigning any om

reason, pass the award in terms of prayer clauses (b), (c) and (d), also apart from directing the Petitioners to pay a sum of Rs.2,19,28,031=84/- with interest. Assume for a moment, the B

Arbitrator is entitled and/or empowered to give declaratory award, but to pass mandatory order and/or conditional order and/or attached and sale the mortgage property and so also the permanent injunction from selling and/or creating third party ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 30 arbp1178.12 interest in the property, as done in the present case in prayer rt

clauses (c) and (d), in my view, is totally impermissible. There ou

is nothing pointed out on record to show that there was such application and/or interim protective order was prayed by C

Respondent No.1, pending the Arbitration proceedings. The order, therefore so passed, which in my view, is impermissible h

and contrary to the law of Arbitration. Even otherwise, as the ig

learned Arbitrator exceeded its jurisdiction and thereby while passing the award, in fact, pass the order of enforcement of the H

same as the Arbitration Act. It is settled that the award once passed needs to be confirmed and/or supervise by the Court y

under Section 34 first and once the award attains finality, the ba

provisions for enforcement need to be invoked by treating the om

award as decreed. The impugned order so passed and basically the above operative order so referred above, in my view, therefore, is without jurisdiction and unsustainable. The B

learned senior counsel appearing for the Respondents fairly not contested further so far as this aspect about mandatory conditional order is rightly so. Therefore, the fact remains that the learned Arbitrator has passed the award, in view of above ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 31 arbp1178.12 by overlooking the basic provisions of law, equity, the principle rt

of natural justice, fair-play and therefore, deserves to be ou

interfered with.

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32 The learned counsel appearing for Respondent No.1 has strongly relied upon the Full Bench Judgment of State h

Bank of India Vs. Trade Aid Paper and Allied Products ig

(India) Pvt. Ltd. & Ors. 2, whereby the Full Bench of this Court has observed that:-

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"6 .....The Division Bench was also conscious of the fact that suits filed by Banks and financial institutions do not reach hearing for over several y

years for reasons which are beyond the control of the Courts and the litigants. The experience clearly ba

indicates that in almost all the suits instituted by Banks and financial institutions, there is hardly any defence. The usual defences are that the om

documents are signed in blank, that interest charged is excessive and the fact that the amount was secured from the Bank is never seriously disputed. Indeed, the suits are resisted with the knowledge that the date of the judgment will be B

postponed by few years and the monies secured from the Bank and which are really the monies of the depositors can be profitably used for some more years, The Division Bench was fully conscious of all these aspects and, therefore, observed that when the claim is in respect of public monies and the amount involved is large, then the Receiver should be 2 1995(4) Bom.C.R. 278

::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 32 arbp1178.12 appointed to protect the mortgaged property pending disposal of the suit. The view taken by the rt

Division Bench is correct and is consistently followed in this Court."

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"9 The suits instituted by Bank and financial institutions for realisation of loans advanced to borrowers form a class by itself. The amounts C

advanced by the Nationalised Banks or the financial institutions are out of the funds deposited by common citizens and the loans are advanced with a view to generate more employment and h

creation of additional wealth. Indeed, the amount is advanced with a view to further the cause of the ig

country and surely not for the benefit of an individual. The Banks and the financial institutions secure the requisite documents and the borrower H

prior to obtaining loans executes deeds of mortgages and hypothecation of moveables including raw materials and book debts. The refusal to return the amount compels the Bank to y

institute suits and in case the interim relief is ba

denied, the person who refuses to repay could continue to use the public money and make profits to the detriment of the financial institution." om

33 The submission is, therefore, also made to appoint the Receiver in the matter as prayed, as the protection so B

awarded by the Arbitrator, if held to be illegal and without jurisdiction. The protection and the security for the amount so due and payable, in the present facts and circumstances, in my view, also required to be secured/protected. In the present case, ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 33 arbp1178.12 the Court is interfering with the ex-parte award only for the rt

reason that no opportunity was given to the Petitioners to ou

contest the matter, without expressing anything on merits of the matter. The Petitioners themselves never appeared before the C

Arbitral Tribunal and therefore, there was no question of deciding the merits of the matter, without giving opportunity to h

Respondent No.1 in accordance with law. The learned ig

Arbitrator needs to re-consider the same, that definitely within reasonable time to avoid further delay in the matter. In my H

view, four months time is sufficient to adjudicate and decide the matter by giving opportunity to the parties in all respect. y

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34 It is already recorded that, this Court has already om

passed protective order in Arbitration Petition No. 175 of 2013 (Section 9 Petition) on 20 December 2012. That order is still intact.

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35 I have already observed that the Court under Section 34 of the Arbitration Act, is empowered to remand the matter. There is no bar. Considering the facts and circumstances and ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 34 arbp1178.12 for the reasons recorded above, I am inclined to quash and set rt

aside the impugned award with direction to the parties to ou

appear before the same learned Arbitrator and/or before other. The Arbitrator to proceed with the matter expeditiously. C

36 Resultantly, the following order:- h

ORDER

a)

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Award dated 15 June 2012 is quashed and set aside.

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b) The matter is remanded back for fresh hearing on all points.

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c) The Arbitral Tribunal, the same or other, to ba

dispose of the matter preferably within four om

months from the receipt of copy of the order. d) All the contentions/points are kept open. B

37 The learned counsel appearing for Respondent No.1 seeks stay of the present order. However, considering the fact that Respondent No.1 is protected and secured by the earlier order passed by this Court, and by this order also, as the Court ::: Downloaded on - 24/06/2013 20:15:10 ::: ssm 35 arbp1178.12 has granted prayer clause (a) and (b) in Arbitration Petition No. rt

175 of 2013, which is kept pending for further direction/order, ou

therefore, no case is made out to stay the Judgment passed in Arbitration Petition Nos. 1178 of 2012, 1179 of 2012 and 1180 C

of 2012. The request of both side to stay the judgment is rejected, as the Court has expedited even the Arbitration h

proceedings.

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(ANOOP V. MOHTA, J.)

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