C.M.A. No. 575 of 2011. Case: MIC Electronics Limited Vs International Techno Media Pvt. Ltd.. High Court of Andhra Pradesh (India)
| Case Number | C.M.A. No. 575 of 2011 |
| Counsel | For Appellant: Sri P. Vikram, Adv. and For Respondents: Sri B. Venkateswarlu for respondent No. 1 |
| Judges | N.V. Ramana and K.S. Appa Rao, JJ. |
| Issue | Arbitration and Conciliation Act, 1996 - Sections 5, 7, 8, 9, 11, 11(2), 11(3), 11(5), 11(6), 12, 13, 16, 16(1), 16(2), 16(3), 16(4), 16(5), 16(6), 17, 34, 34(2), 34(3), 37, 37(2); Specific Relief Act, 1963 - Section 41 |
| Citation | 2012 (3) ALD 180, 2012 (1) ALT 527, 2012 (3) ARBLR 313 (AP) |
| Judgement Date | November 11, 2011 |
| Court | High Court of Andhra Pradesh (India) |
Judgment:
N.V. Ramana, J.
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The short question that arises in the appeal is whether a party to an agreement can file a suit questioning the unilateral appointment of Arbitrator by the other party in the light of the provisions of the Arbitration and Conciliation Act, 1996.
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The relevant facts are briefly stated as under:
The appellant-plaintiff entered into agreement with respondent No. 1-defendant No. 1 on 26.08.2009 for operation of LED Screens at 50 locations for the purpose of displaying advertisements. Some disputes arose between the parties. Respondent No. 1 issued notice dated 15.03.2011 to the appellant for recovery of Interest Free Deposits, payments and damages to the tune of Rs. 90,23,93,191/-, with interest thereon at the rate of 24% per annum. Two days thereafter, respondent No. 1, while referring to their notice dated 15.03.2011, issued another notice dated 17.03.2011 invoking clause 22 of the agreement and appointing one Mr. H.C. Sharma, Superintendent Engineer (Retired) of Delhi Development Authority, as sole Arbitrator, for resolution of the disputes that arose between them, including their claims against the appellant. The Arbitrator was called upon to enter reference immediately without any further loss of time. On the very same day, respondent No. 1 informed the appellant about the invocation of arbitration clause by e-mail. The appellant, by reply e-mail dated 21.03.2011 informed respondent No. 1 that appointment of Arbitrator cannot be unilateral and must be with mutual consent and the Arbitrator appointed is not acceptable to them.
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However, even before the appellant gave his reply, the Arbitrator appointed by respondent No. 1, entered upon the reference on 19.03.2011. The Arbitrator while informing the appellant and respondent No. 1 about the commencement of the arbitration proceedings, noted that after a long wait for the appellant, he is fixing the next date of hearing on 22.04.2011 at 4.30 p.m., and if any party fails to submit statement of facts/counter statements of facts and/or fails to attend the hearing(s), he will be at liberty to conduct ex parte proceedings to decide the case. Even before the expiry of the appointed day, the Arbitrator on 06.04.2011 conducted the arbitration proceedings, wherein he recorded that the appellant neither informed verbally nor in writing nor any person attended the hearing on behalf of the appellant.
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On 22.04.2011 the appellant addressed a letter to the Arbitrator informing him that his very appointment by respondent No. 1 as Arbitrator and claim made by respondent No. 1, is illegal. The appellant stated that they objected to the appointment as Arbitrator, the proper course for respondent No. 1 was to seek appointment of Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Arbitration Act'). The appellant further informed the Arbitrator that he has no right whatsoever to conduct any arbitration proceedings and that he cannot call upon them to attend the hearing and that they will not participate in any unauthorized hearings. On 22.04.2011, it appears that the appellant filed letter objecting to the appointment of Arbitrator. The Arbitrator, while refusing to accept the said letter, adjourned the matter to 09.05.2011.
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While the proceedings before the Arbitrator were pending, the appellant on 05.05.2011 filed suit in O.S. No. 296 of 2011 on the file of the II Additional District Judge, Ranga Reddy District, L.B. Nagar, praying for the following relief:
(i) Declare the appointment of the 2nd defendant i.e. Mr. H.C. Sharma as Arbitrator as contrary to the procedure prescribed in Section 11 of the Arbitration and Conciliation Act, 1996 and consequently declare the proceeding being conducted by 2nd defendant as null and void.
(ii) To grant permanent injunction restraining the 2nd defendant herein, from proceeding with the arbitration on 09.05.2011 or any other future date; and
(iii) To award cost of the suit and pass such other order or orders as this Hon'ble Court may deem fit and proper in the interest of justice.
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In the said suit, the appellant filed the present application (being I.A. No. 1393 of 2011) seeking a permanent injunction restraining the 2nd respondent from proceeding with the arbitration proceedings. Respondent No. 1 filed counter to the said I.A. Even though as per the prayer in the I.A., the appellant is seeking the relief of permanent injunction, the Court below has corrected it and read it as temporary injunction. Thereafter, the Court below, having heard the rival contentions, by the order under appeal, dismissed the I.A. filed by the appellant and refused to grant temporary injunction as prayed for.
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This C.M.A. is directed against the said order dated 06.06.2011, passed by the Court below, dismissing the application in I.A. No. 1393 of 2011 in O.S. No. 296 of 2011, filed by the petitioner praying to grant permanent injunction restraining respondent No. 2/Arbitrator, from proceeding with the arbitration proceedings.
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The learned counsel for the appellant made the following submissions:
(1) The very scope and object of the Arbitration and Conciliation Act, 1996 is that "Arbitral Tribunal" must be constituted only with consensus and express consent of parties to the agreement. In the absence of consensus or express consent of any of the parties to the agreement, no Arbitrator can be appointed and the only course open to the parties to the agreement is to make a request under Section 11, to the Chief Justice of the concerned High Court to appoint an Arbitrator.
(2) Despite the appellant's objections to the unilateral appointment of respondent No. 2 as Arbitrator by respondent No. 1, respondent No. 1 appointed respondent No. 2 as Arbitrator. This is in gross violation of the provisions of the agreement between the parties and the provisions of the Arbitration Act. Therefore, the appellant is entitled to invoke the jurisdiction of the civil court and file civil suit to declare the appointment of respondent No. 2 as Arbitrator, for adjudication of the disputes between the parties, as null and void, and further seek the relief of injunction restraining respondent No. 2 from proceeding further in the matter.
(3) The appellant was justified in invoking the jurisdiction of the civil court challenging the appointment of Arbitrator since the prohibition imposed by Section 5 of the Arbitration Act on the judicial intervention in arbitration proceedings, is only with reference to Part I of the Arbitration Act, and not with respect to appointment of Arbitrator. The applicability of the prohibition in Section 5 depends upon the nature of proceedings. The grounds of challenge against appointment of arbitrator under Section 12 are very limited. Section 12 does not provide any ground for questioning the appointment of Arbitrator made in contravention of the provisions of the agreement between the parties or the provisions of Section 11(5). Since the appointment of Arbitrator is made in contravention of the provisions of the agreement and the provisions of Section 11(5), the same is not covered by the grounds of challenge prescribed in Section 12 and the challenge procedure prescribed in Section 13 is not applicable.
(4) The power of the arbitral tribunal under Section 16(1) to rule on...
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