The Gauhati High Court has held that dismissal of the claim on the ground of locus standi without the opportunity to bring necessary documents on merit and hearing the claims on merit is violation of Section 18 of the A&C Act that provides for equal treatment for parties.
The Bench of Justice Devashis Baruah was hearing an appeal against the order of the lower court passed under Section 34 of the A&C Act whereby the Court rejected the challenge petition of the appellant.
The parties entered into an agreement in the year 1989-90. A dispute arose between the parties, consequently, an arbitrator was appointed.
The appellant filed its statement of claim on 14.04.2011 and the respondent filed its defence statement on 21.04.2011. Thereafter, the respondent raised an issue regarding the locus standi of the appellant to file the claim statement. Consequently, the appellant furnished two POAs issued in its favour, however, the respondent questioned the authority of the persons who issued the POA in favour of the appellant.
In the meantime, an application was filed before the High Court on the ground that there was a delay in the completion of the arbitral proceeding and the Court directed the arbitrator to conclude the proceedings on or before 31.01.2013.
The arbitrator passed an award and dismissed the claim of the appellant on the ground that it did not have the locus standi to initiate the arbitration proceedings.
Aggrieved by the award, the appellant challenged the award under Section 34 of the A&C Act, however, the Court rejected its challenge. Thus, the appellant filed the appeal under Section 37 of the A&C Act.
The Contention of the Parties
The appellant preferred the appeal on the ground that the lower court failed to appreciate the fact that the arbitrator did not give equal hearings to both the parties but merely heard the respondent on the objection it raised qua the locus of the appellant to file the claim before it.
The appellant submitted that the arbitrator has deprived it of its opportunity to present its case. It stated that it requested the arbitrator to provide it the opportunity to bring on record the necessary documents, however, the arbitrator was in a hurry to dispose the arbitration without taking on record the necessary documents and hearing the claims on merit.
The respondent countered the submissions of the appellant by stating that despite various opportunities being given to the appellant, it failed to bring on record the documents which could prove that it had the locus to file the arbitration claim. Further, the High Court itself had set a time-limit for the arbitrator to conclude the arbitration, therefore, the appellant was bound to bring on record all the necessary judgment in a time-bound manner.
The Court observed that on the basis of the material on record, it becomes apparent that the arbitrator did not decide the claims of the petitioner on merit and the petition was dismissed for want of locus standi.
The Court held that when the issue of locus was pivotal, the arbitrator ought to have permitted the appellant to bring on record the documents that could prove that it was duly authorized to file the claim petition but the arbitrator was in a haste to dispose the arbitration proceedings, therefore, it deprived the appellant of its right to equal treatment resulting in the violation of Section 18 of the A&C Act.
Accordingly, the Court allowed the appeal and set aside the arbitral award.
Case Title: S.R. Engineering Construction v. The Commander Works Engineer, Arb. A. No. 7 of 2018
Counsel for the Appellant: Mr. G.D. Dhiman (Party-in-Person)
Counsel for the Respondent: Ms. M. Bhattacharjee
Citation: 2022 LiveLaw (Gau) 56