Patiala House Courts, New Delhi: In a petition filed by petitioner under Section 34 of the Arbitration and Conciliation Act, 1996 seeking to set aside the award dated 9-04-2019 on the grounds that sole Arbitrator has misconstrued himself and carried out the proceedings without any jurisdiction with the view to extend favours to BMW India Financial Services Pvt. Ltd. (‘respondent no.1’) (‘hereinafter ‘BMW India’), Anurag Sain, J. has set aside ₹90 lakh arbitral award as the Sole Arbitrator was appointed by BMW India unilaterally without the consent of the Petitioner vitiating the entire arbitration proceedings.
Background
In the matter at hand, the petitioner has taken a loan of Rs. 94,15,000/- from BMW India but failed to clear the debt liability under the agreement making the BMW India to appoint the Sole Arbitrator as per the Loan -cum- hypothecation agreement for the adjudication of the disputes between the parties. When the petitioner failed to represent before the arbitrator, the arbitrator passed the impugned order Ex Parte making petitioner liable to pay a sum of Rs. 89,68,666/ along with the interest of 24% p.a. from 11.02.2019 till the payment and/or realization thereof along with all costs, charges and expenses in 60 monthly installments.
Submissions
The petitioner contended that Ld. Arbitrator has misconstrued himself and commenced the arbitration proceedings without jurisdiction with the view to extend some favours to BMW India and solely appointed the Arbitrator without his consent leading to the violation of principles of Natural Justice. On the other hand, the respondents contended that arbitrator has passed a reasoned award and no fault can be found with the case.
Observation
The Court referred to Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760 wherein it was held that the person who has any interest in the outcome of the proceedings must not have the power to appoint a sole arbitrator.
The Court also referred to Lite Bite Foods Pvt. Ltd. v. Airports Authority of India, 2019 SCC OnLine Bom 5163 in which the Court held that the appointment of the arbitral tribunal can be either with the consent of both the parties or by an order of the court.
Decision
In light of the facts and circumstances of the case, the Court held that the Sole Arbitrator was appointed without the consent of the petitioner which made the entire arbitral proceedings vitiated and nothing further survives.
The Court sets aside the Arbitral award given in favour of BMW India Financial Services Pvt. Ltd. as being patently illegal, in contravention to the principles of Natural Justice and settled principles of law provide under Section 34 of the Arbitration and Conciliation Act, 1996
[Piyush Jain v. BMW India Financial Services Pvt. Ltd, OMP (COMM) 83/2019, Order Dated 5-06-2023]