Award Passed By Ineligible Arbitrator Can Be Set Aside U/S 34 Of Arbitration Act: Jammu And Kashmir HC

The Jammu & Kashmir and Ladakh High Court bench of Justice Sanjay Dhar has held that award passed by an ineligible arbitrator is liable to be set aside under section 34 of the Arbitration Act. Brief Facts The present petition has been filed under section 34 of the Arbitration Act against an award passed by the Arbitrator by which the claimant has been has been held entitled to recover an amount of Rs.25,20,969/ along with interest @8% per annum. Petitioners started purchasing automotive accessories from the respondent company. It has been claimed that without the authorization of the petitioner company, its previous General Manager entered into an agreement on behalf of the petitioner company with the respondent company on 13th June, 2018. The agreement was valid for a period of two years from 1st October, 2017. According to the petitioners, the petitioner company continued to purchase the automotive accessories from the respondent company upto the year 2021. However, when the company did not make any profit on the goods and services supplied by the respondent company, they stopped doing business with it. Contentions: The petitioners through counsels Areeb Javed Kawoosa and Aatir Javed Kawoosa submitted that the impugned award has been passed by respondent No.2 in exparte without any authority or jurisdiction. It was further argued that agreement dated 13th June, 2018, which contains the arbitration clause, has not been validly executed by the petitioner company, inasmuch as it has not been executed by an authorized person. It was further submitted that as per Clause (16) of the said agreement, the disputes were required to be referred to the sole Arbitrator mutually agreed upon by the parties or appointed by the Court under Arbitration and Conciliation Act, 1996 and that the venue of arbitration would be at Srinagar, but in the instant case, respondent No.1 has unilaterally appointed respondent No.2 as the Arbitrator and the arbitration proceedings have been conducted at Greater Noida (UP). Per contra, the respondent submitted that agreement dated 13.06.2018 was executed by the General Manager of the petitioner company and there is nothing on record to show that he was not having authorization to do so. It was also argued that the petitioner company failed to clear the past dues, as a result of which the respondent company issued a legal notice of demand dated 31.08.2021 upon the petitioner company seeking recovery of any amount of Rs.25,20,969/ from it but in spite of receipt of the said notice, the petitioner company did not clear the outstanding dues. Finally, it was submitted that not only the notices issued by respondent No.1 to the petitioner company and the invocation letter were served upon the petitioner company but even the communications addressed by the Arbitrator to the petitioner company were duly received by it but the petitioner company failed to respond to the same. Therefore, the petitioners cannot now turn around and raise any grievance against the impugned award. Observations: The court after referring to section 34 of the Arbitration Act observed that “an application for setting aside of award passed by an Arbitral Tribunal can succeed if it is established that a party was under some incapacity or the arbitration agreement is not valid, or the party making the application was not given a proper notice of appointment of Arbitrator or of the arbitral proceedings, or the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration.” “ or it contains decisions on matters not submitted to arbitration or the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties. An arbitral award can also be set aside if the Court finds that the subject matter of the dispute is not capable of settlement by the arbitration or the arbitral award is in conflict with public policy of India.” While keeping the above position of law in mind, the court noted that in the present case, the agreement on behalf of the petitioner company has been signed by the General Manager only. Even if we interpret the 'internal controller' who is a permitted assign, to mean 'General Manager' of the petitioner company, still then one more assign had to put his signatures on the agreement, which is not the case here. Thus, the contention of learned counsel for the petitioners that agreement dated 13.06.2018 has not been signed by a proper authority on behalf of the petitioners, appears to be well founded. It further added that from the material on record, it is clear that the petitioner continued purchasing automative accessories from the respondent till September, 2021 which means that by their act of entering into the transactions in all these years with the respondent they had ratified the acts of...

Award Passed By Ineligible Arbitrator Can Be Set Aside U/S 34 Of Arbitration Act: Jammu And Kashmir HC

Mohd Malik Chauhan

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