Arbitration Petition No. 980 of 2009

17th April, 2013

Petitioner Counsel: Mr. VAIBHAV JOGALEKAR, Mr. NITIN MULYE
Respondent Counsel: Mr. SIMIL PUROHIT

Cases Cited:
Patel Engineering Company Ltd. Vs. Konkan Railway Corporation, 2009(5) Bom.C.R. 256 [Para 10]

JUDGMENT

JUDGMENT :- The Petitioner has challenged award dated 20 April 2009 passed by the sole Arbitrator, by invoking Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act).

2. 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. The other sides submission is that no specific ground/grounds raised by the Petitioner with this regard. The Petitioner has pointed out ground Nos. (a) and (b) and contended that these grounds are sufficient to consider their submissions so raised. The learned counsel appearing for the Respondent also resisted the same based upon the various authorities and contended that in every such matter these two principles should not be the reason to revoke and/or set aside award so passed, considering the limited scope and campus of present Petition. I am inclined to accept the Petitioner's case.

3. It is necessary to note the following events:-

On 25 June 2008, the Respondent made claim under Form No.I, thereby, it is clearly stated that they want a hearing from the Arbitrator. The amount of claim was Rs.17,23,895.06. On 26 June 2008, the Respondent made no demand from the Petitioner. No notice to the Petitioner was issued. The Respondent directly filed claim against the Petitioner before the National Stock Exchange of India Limited (for short, NSEIL). On 26 December 2008, the Petitioner filed his written statement. On 17 February 2009, the Respondent filed its rejoinder. On 27 February 2009, the Petitioner filed his sur-rejoinder. On 20 April 2009, the award passed by the learned Arbitrator directing the Petitioner to pay a sum of Rs.17,23,893.06 with interest @ 12% p.a.

4. Admittedly, 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 relevant Rules are as under:-

"5.10 REQUIREMENT FOR HEARING

(a) No hearing shall be required to be given to the parties to the dispute if the value of the claim, difference or dispute is Rs.25,000/- or less. In such a case the arbitrator shall proceed to decide the matter on the basis of documents submitted by both the parties provided however the arbitrator for reasons to be recorded in writing may hear both the parties to the dispute.

b) If the value of the claim, difference or dispute is more than Rs.25,000/-, the Arbitrator shall offer to hear the parties to the dispute unless both parties waive their right for such hearing in writing."

5. The Petitioner never agreed to waive their rights as referred above. On the contrary, even while filing the sur-rejoinder dated 27 February 2009 submitted that "then in that event evidence be led by the parties and the issue be decided on merits and on the evidence as led". The Respondent also never waive their rights. On the contrary, they also submitted that they also be heard by the Arbitrator.

6. The learned Arbitrator has observed as under:-

"2.2 The First Hearing was fixed on October 22, 2008 by notice dated September 29, 2008 issued to both parties by the Arbitration Department of the Exchange. Subsequently the adjourned hearings were held on November 21, 2008, December 26, 2008, January 21, 2009 and February 20, 2009."

7. The Petitioner was not present on 20 February 2009. The matter was immediately closed for orders without giving any personal hearing and/or opportunity to the Petitioner as sought for. The Arbitrator, based upon the material available in spite of the request of the petitioner to give opportunity to lead evidence and hearing, proceeded and pass the impugned award.

8. This, in my view, is in breach of principle of natural justice, equal opportunity and fair play. The bye-laws if provides and contemplates and if asked for and if those rights are not waived, the Arbitrator required to give hearing and opportunity to the parties as prayed for. The learned Arbitrator in a given case considering the scope and purpose of the value, may pass the order by rejecting those and/or such application, but closing of matter in such fashion and then relying upon the documents placed on record without giving opportunity to the Petitioner, is impermissible/illegal.

9. We are not concern, at this stage, with reasoning given on merits of the matter based upon the material available on record, but the procedure in which the award was passed. Therefore, the case is made out to set aside the award to give opportunity to the Petitioner/parties in every aspect.

10. The Judgment so relied (Patel Engineering Company Ltd. Vs. Konkan Railway Corporati on) 2009(5) Bom.C.R. 256 by the learned counsel appearing for the Respondent to oppose the contentions, is of no assistance in view of distinguishable facts and circumstances. So far as the law is concerned, there cannot be any discussion, as it is settled, but the principle of natural justice has always a foundation of facts and circumstances of the case. I am convinced in the present case that the principle of natural justice, equal and fair opportunity as contemplated under Section 18 and 19 of the Arbitration Act itself, are controverted.

11. However, as recorded above, the order is quashed only for the above reasons. I am inclined to observe that the Arbitral Tribunal, based upon the same material and after giving opportunity to both the parties to pass appropriate order, in accordance with law. The matter is expedited. All points are kept open.

12. The whole order is required to be quashed and set aside as it is difficult to dissect any particular claim and/or issue. Therefore, remand is the only remedy to avoid further delay, for re-adjudication on the merits of the matter, as noted above.

13. Resultantly, impugned award dated 20 April 2009 is quashed and set aside. The matter is remanded back for fresh consideration. The Arbitral Tribunal to pass order after giving an opportunity to both the parties, as expeditiously as possible. There shall be no order as to costs.

Ordered accordingly.