H.D.F.C Bank Ltd. vs Ramesh Kumar and Others

Valmiki J Mehta, J.—These appeals are being disposed of by this common judgment because parties and issues are same and they arise from identical impugned judgments of the trial court.

By means of these appeals u/s 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "said Act") challenge is laid to the impugned order dated 5.5.2010 whereby the objections u/s 34 of the Act, of Respondent herein, Petitioner in the trial court, were allowed and the Award was set aside. The Award has been set aside on the sole ground that the arbitration clause did not appoint an Arbitrator by name and therefore it was necessary to issue a notice to the Petitioner for appointment of an arbitrator and thereafter approach the court for appointment of an arbitrator u/s 11 of the Act and which was not done.

In order to appreciate the controversy, the language of the arbitration clause would be relevant, and therefore, the same is reproduced as under:

All disputes, differences and/or claim arising out of or touching upon this Agreement whether during its subsistence or thereafter shall be settled by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996, or any statutory amendments thereof and shall be referred to the sole Arbitration of an Arbitrator nominated by the Bank. The award given by such an Arbitrator shall be final and binding on the Borrower and Guarantor to this Agreement.

The reference of the aforesaid Clause leaves no manner of doubt that though there was no arbitration by a named Arbitrator, however, the procedure for appointment of an arbitrator was clearly laid down by the clause, and, which was that the arbitrator will be appointed by the Petitioner. The arbitrator was in fact appointed by the Petitioner and who conducted the arbitration proceedings. Since there is a prescribed procedure as per agreement, there does not arise any issue of issuing notice to the opposite party for appointment of an arbitrator by the Petitioner bank and thereafter approaching the court for appointment of an arbitrator.

The impugned order is thus clearly violative of the provision of Section 11 of the Act along with its Sub-sections, more particularly Sub-section (2), which specifies that parties can have an agreed procedure for appointment of an arbitrator. In the present case, the agreed procedure is the appointment of an arbitrator by the Petitioner. Since the impugned order does not otherwise deal with the objections on merits, I would therefore remand the case back to the trial court for decision on merits with regard to the objections which have been filed to the Award. The only finding which has been given by this Court is that it cannot be said that the arbitration proceedings are liable to be set aside because arbitrator was not appointed in accordance with the arbitration clause. Parties to appear before the trial court on 24th May, 2011. Copy of this order be given dasti to counsel for the parties. The trial court is directed to dispose of the objections u/s 34 of the Act in accordance with law.