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Judgment
Chitra Venkataraman, J.—The respondent in the arbitration proceedings is the petitioner in this Petition u/s 34 of the Arbitration and
Conciliation Act, 1996. The petitioner challenges the award dated 6.9.2005 granting the first respondent a sum of Rs. 4,59,206/- with interest at
36% per annum from 10.1.2004 till the date of realisation. The Arbitrator rejected the claim of the petitioner herein for a sum of Rs. 4,10,499/-.
The facts giving rise to the filing of this Petition are as follows:
The first respondent herein carries on the business of hire purchase of vehicles, leasing of equipment and machineries. The first petitioner herein,
entered into a Hire Purchase Finance Agreement for the hire purchase of vehicle on 9.5.2001. The total finance facility offered was Rs. 6,00,000/-
with finance charges of Rs. 3,24,000/-, thus totalling to a sum of Rs. 9,24,000/-. Petitioners-2 and 3 were the guarantors for the due compliance
of the terms of agreement. On the same day, the first petitioner, along with the other two petitioners, entered into an arbitration agreement marked
as Ex. A2. In terms of the Hire Purchase Agreement, the first petitioner was to repay the amount in 36 monthly instalments i.e., at Rs. 25,700/- for
the first 30 instalments starting from 8.6.2001 to 8.11.2003 and at Rs. 25,500/- for the remaining 6 instalments starting from 8.12.2003 to
8.5.2004.
Clause 6 of the Hire Purchase Agreement stipulated that in the event of a default, the first petitioner was to liable pay additional finance charges
at 36% per annum. It is stated that, apart from delaying the payment of monthly instalments on due dates, the first petitioner herein committed
default; thus in terms of the hire purchase agreement, attracted the additional finance charges on the defaulted amount. In view of the default thus
committed and in terms of the agreement on arbitration, the first respondent sent a notice on 27.8.2003 to the first and second petitioners and on
24.12.2003 to the third petitioner-guarantor. Notice on the appointment of the Arbitrator was sent to the first and second petitioners on 19.9.2003
by Registered Post with Acknowledgment Due which evidenced the receipt of the notice by the first petitioner on 25.9.2003. The
acknowledgment as regards the service of the notice on the second petitioner was stated as not received by the first respondent. As regards the
third petitioner, notice was sent on 7.1.2004 by Registered Post with acknowledgment due.
It is admitted by the petitioners that the vehicle was surrendered on 19.7.2003 and subsequently sold by the first respondent on 14.8.2003 for
Rs. 3,50,000/-. In terms of the Hire Purchase Agreement, after adjusting the sale proceeds on the amount due from the petitioner, the first
respondent made a claim for a sum of Rs. 5,02,175/-.
On notice, the petitioners herein filed their defence statement. The petitioners took the stand that the claim was not properly verified and
presented and that no authorisation whatsoever was produced by Om Prakash Sandu, who filed the Claim Petition and who is stated to be
working as Field Officer of the first respondent-Company. The petitioners contended that on this ground, the Petition was liable to be dismissed.
Apart from denying the liability to pay the sum of Rs. 5,02,175/- with interest at 36% per annum till the date of realisation, the petitioners
contended that the claim was liable to be dismissed; that the entire sale consideration was not paid by the first respondent and hence, they disputed
the claim of the first respondent that the petitioners were liable to pay a sum of Rs. 9,24,000/- as per the Hire Purchase Agreement. The
petitioners alleged that the first respondent suppressed the proposal terms and the promissory note dated 9.5.2001 and that they had failed to
approach the Tribunal with clean hands. The petitioners further pointed out that their vehicle was repossessed by the first respondent in the month
of July, 2003 and the arbitration proceedings were initiated in the month of January, 2004. Even assuming that the petition was maintainable, the
first respondent was not entitled to claim interest beyond July, 2003 after the vehicle was repossessed. It is also alleged that the first respondent
had not given due credit to the payment made by the first petitioner to the tune of Rs. 2,97,601/-. Taking the stand that the additional finance
charges at 36% per annum was usurious, illogical and fanciful, the petitioners pointed out that when there was an offer for the sale of the vehicle for
Rs. 5,60,499/-, which was within the knowledge of the first respondent, there was no justification for the sale of the vehicle for a lesser sum. It is
stated that the vehicle was taken possession as in full and final settlement of the claim. However, the first respondent failed to carry out the promise
and sold the vehicle for a sum of Rs. 3,50,000/- even during the subsistence of the agreement under the guise of a default in payment of the dues
under the agreement. The petitioners took the stand that by selling the vehicle for a paltry sum of Rs. 3,50,000/-, the first respondent had caused a
wrongful loss of Rs. 2,10,499/-. Consequently, the petitioners claimed that there was loss of business notionally valued at Rs. 2,00,000/-. Thus a
counter claim of Rs. 4,10,494/- was made against the first respondent. The petitioners alleged that the first respondent had failed to produce the
statement of accounts and the receipts, which would establish the ingenuity of the claim of the first respondent.
After hearing both sides and on perusal of the documents, learned Arbitrator pointed out that two issues arose for consideration:
(i) How much money the respondents have to pay to the claimant ?
(ii) Is the respondent entitled to Rs. 4,10,499/- as claimed in their counter ?
Learned Arbitrator noted that the petitioners were not present and set the petitioners ex parte. On the question as to the liability to pay interest
after the first respondent repossessed the vehicle, learned Arbitrator pointed out that after referring to Ex. A13 dated 23.7.2003, the first
respondent had not charged any interest on and from 23.7.2003 till the date of final Application. On the objection of the petitioners that they had
informed the first respondent that the vehicle would fetch more than Rs. 3,50,000/-, learned Arbitrator pointed out that the petitioners had not
produced any documentary evidence that they had informed the first respondent informing about the offer for the vehicle at Rs. 5,85,000/- and that
they had not introduced any buyer to the claim prior to the date. Further, the petitioners had produced Exs. B1 and B2 relating to the offers only
before the learned arbitrator long after the sale. Consequently, learned Arbitrator rejected the plea of the petitioners. As to the objection raised by
the petitioners on the notice on the appointment of the Arbitrator, learned Arbitrator held that the first and second petitioners had received the
registered letters sent by the first respondent and that they had not replied. Going by the statement of accounts and the correspondence between
the parties, learned Arbitrator passed an award in favour of the first respondent for a sum of Rs. 4,59,206/- payable by all the petitioners jointly
and severally together with interest at 36% from 10.1.2004 till the date of realisation. Learned Arbitrator further granted a sum of Rs. 32,969/-
relating to the R.T.O. Expenses, as evidenced under the documents Exs. A21 and A22 and disallowed the claim for incidental expenses at Rs.
10,000/-, as no evidence was produced. Rejecting the counter claim of the petitioners, the learned Arbitrator held that the petitioners had not
proved their claim. Thus the award was passed.
The said award dated 6.9.2005 is under challenge before this Court.
Learned counsel appearing for the petitioners pointed out that the Claim Petition was presented on 9.1.2004. Ex. A16 is the notice of arbitration
sent to the first and second petitioners and Exs. A17 and A18 are the postal acknowledgments of the notices of arbitration. Ex. A19 is the letter of
appointment of the Arbitrator and Ex. A20 is the postal acknowledgment of Ex. A19. Ex. A23 is the postal acknowledgment of the service of
notice on the third petitioner. The petitioners alleged that the learned Arbitrator acted in a biased manner and that there is no material recorded to
show that the learned Arbitrator was satisfied of the claim of the first respondent herein. Taking the objection that the Application itself is not
maintainable as the first respondent had not placed the original of the Hire Purchase Agreement on the basis of which the claim was made, learned
counsel pointed out that that Mr. Om Prakash Sandu did not have any authority to sign the pleadings on behalf of the first respondent. No
documents were filed in support of his claim that he was authorised to file the Claim Petition and prosecute the proceedings. Learned counsel
appearing for the petitioners pointed out that the person who signed as a witness in the hypothecation agreement marked as Ex. C1 cannot sign the
Claim Petition.
The petitioners further pointed out that the petitioners had entered into sale agreement with third parties even prior to the repossession of the
vehicle by the first respondent and with the concurrence of the first respondent. There was failure to follow the procedure in the matter of sale of
the vehicle. Learned counsel appearing for the petitioners pointed out that the entire proceedings are conducted in an arbitrary manner;
consequently, the award is liable to be set aside, both on account of the legal misconduct as well as on the award being against public policy.
Learned counsel further pointed out that no notice was sent to the petitioners, on the Arbitrator setting the petitioners ex parte, and to the
posting of the case for passing the award on 6.9.92005. In this regard, he placed reliance on the decision reported in Lovely Benefit Chit Fund and
Finance Pvt. Ltd. Vs. Shri Puran Dutt Sood and Others, ; Juggilal Kamlapat Vs. General Fibre Dealers Ltd., and Oil and Natural Gas Corporation
Ltd. Vs. SAW Pipes Ltd., and submitted that as there was no notice setting the petitioners ex parte, Writ with legal misconduct, the award was
liable to be set aside. He farther pointed out that the claim itself was based on the Hire Purchase Agreement which was never produced before the
learned Arbitrator.
Learned counsel appearing for the petitioners further pointed out that when the petitioners had informed the first respondent about the offer for
purchase of the vehicle at a higher amount, the first respondent had sold it without any intimation and for a price much below what was offered. He
further pointed out that the learned Arbitrator failed to advert to the documents filed; consequently, the award merited to be set aside and hence,
prayed for setting aside the award.
Learned counsel appearing for the petitioners pointed out that the first respondent produced the photocopies of the hire purchase agreement
and going by the records of the learned Arbitrator, it is clear that the first respondent never produced the originals. Contrary to the minutes of the
proceedings, Learned Arbitrator passed the award setting the petitioners ex parte.
Learned counsel appearing for the first respondent submitted that the petitioners never denied the execution of the hire purchase agreement and
the default committed by them. The allegation that the agreement was signed in blank form and that the first respondent had interpolated the same
are baseless. As held by this Court in the decision reported in S.S.M. Soundappan and Others Vs. K.G. Balakrishnan and Others, in the absence
of any proof, the allegations have to be rejected.
As regards the contention of the petitioners herein that they had entered into an agreement dated 15.7.2003 for the sale of the vehicle at Rs.
5,85,000/-, document marked as Ex. B2, learned counsel appearing for the first respondent submitted that the vehicle was surrendered on
19.7.2003. Had there been really a sale agreement, the petitioners would not have surrendered the vehicle in such an eventuality, apart from the
fact that the petitioners should have informed about the sale agreement, which they did not. Hence, the contention as to the sale agreement is only
an after-thought to oppose the claim in the arbitration proceedings. Learned counsel submits that in any event, given the credit for depreciation, the
vehicle could not have been sold for more than Rs. 3,50,000/-, since the vehicle was not in good condition. The first respondent further submitted
that the interest was levied only upto 8.7.2003 as per the statement of accounts furnished to the Arbitrator. It is further stated that the statement of
accounts tallied with the Claim Petition and although the proposal form and promissory note were placed; however, not marked due to oversight
and hence, could not be a ground for setting aside the award. He pointed out that Ex. A13 gives a complete extract of the statement of accounts.
Placing reliance on the decision reported in Vijay Packaging Vs. Spectra Packs Private Ltd., Madras and Hon''ble Mr. Justice N.
Krishnaswamy Reddy, , learned counsel submitted that when the statement of accounts was there as Ex. A13 and by oversight, the learned
Arbitrator had failed to notice the same, the award could not be set aside as one without material.
Learned counsel further pointed out that the arbitration proceedings were conducted at the Madras Hire Purchase Association and in spite of
repeated requests to the petitioners, they failed to respond. The matter stood adjourned for nearly 29 times before passing the award. The
arbitration proceedings went in for nearly 11/2 years. Placing reliance on the decision reported in The State of Kerala Vs. Arya Refrigeration and
A/C Co. etc. etc., he pointed out that when the terms of the contract were not in any way disregarded in passing the award and the findings based
on documents produced evidencing the defaults, the award could not be set aside on the ground that the order setting the petitioners ex parte was
not sent to the petitioners. As to the stand of the petitioners that the witness to the arbitration agreement was the claimant in the arbitration
proceedings and had no authorisation to represent the Company, learned counsel appearing for the first respondent pointed that in the Claim
Petition itself, the executant had verified himself as power of attorney holder on behalf of the first respondent-Company.
The original power of attorney was given to the learned Arbitrator and he was satisfied of the authority given to the signatory to sign the Claim
Petition to allow the claimant to proceed further. There is no mandatory requirement of the first respondent-Company to affix the seal as alleged.
As to the non-production of the original Hire Purchase Agreement, learned counsel pointed out that the same was produced before the learned
Arbitrator at the time of filing the Claim Petition but later on taken with the permission of the learned Arbitrator for the purposes of filing the same
before the Criminal Court in connection with the Criminal Complaint filed against the petitioners. He submitted that the provisions of the Indian
Evidence Act applied only to the judicial proceedings as held in the decision reported in Vijay Packaging Vs. Spectra Packs Private Ltd., Madras
and Hon''ble Mr. Justice N. Krishnaswamy Reddy, and the Arbitrator was required to follow the principle of fairness and the well established
principles of evidence sustained and the technical objection based on Section 34 of the Indian Evidence Act need not be considered by the
Arbitrator. Pointing out that the learned Arbitrator should have passed an award of Rs. 4,92,175/- as against an award of Rs. 4,59,206/-, learned
counsel appearing for the first respondent pointed out that there was calculation error and mistake and that this Court had jurisdiction to correct
and modify the same. Learned counsel submits that there are no merits in the Application; hence, the same be dismissed.
Considering the claims of the first respondent as to the filing of the original agreement and the power of attorney filed before the learned
Arbitrator, on notice by this Court, learned Arbitrator has sent the records of the proceedings to this Court.
A perusal of the same shows that the first respondent-Company had authorised Om Prakash Sandu under a general power of attorney to sign
the Application in all Courts of law for and on behalf of the Company. The original general power of attorney executed on 25th September 2000 is
available in the records. The Claim Petition also reads that the said Om Prakash Sandu was given the authority under the general power of attorney
to sign the documents. Consequently, I do not find any merit in the contention of the petitioners that Om Prakash Sandhu had no authority to sign
the Claim Petition, and that the claim itself thus not made by the Company, the Claim Petition was liable to be rejected.
On the contention of the petitioner as to the improper service of notice and to the assumption of jurisdiction by the Tribunal, it is an admitted
fact that the petitioners went in for a Hire Purchase Agreement and they committed default in the payment of the dues. Consequent on the dispute
arising between the parties, the first respondent herein invoked the arbitration clause as early as 18th December 2003. The notice to invoke the
arbitration clause was issued on 27th August 2003. Notice of appointment of the learned Arbitrator was given to the first and the second
petitioners as well as to Sriramulu the third petitioner herein, as per the acknowledgment found in the paper book. Notice as to the appointment of
the Arbitrator was sent by letter dated 19th September 2003 to Nagasrinivasulu, the first petitioner herein, and to Chandrasekara Reddy, the
second petitioner herein. This was delivered by Registered Post on 25.9.2008. The Registered Post Acknowledgment Due to the second
petitioner is not there. It is stated that the first respondent made a complaint to the Postal Authorities as to the non-receipt of the acknowledgment.
The notice as to the appointment of the learned Arbitrator was said to have been sent to the third petitioner on 17.1.2004 by Registered Post
Acknowledgment Due. The Claim Petition was filed on 9.1.2004. Notice to the third petitioner was given on 7.1.2004, whereas, notice as regards
the appointment of the Arbitrator was sent to the first and second petitioners as early as 19th September 2003. The first hearing of the case was
posted on 13th February 2004 by the learned Arbitrator and a common counter was also filed by the petitioners herein. The petitioners submit that
there had not been a proper initiation of the proceedings; hence the same is liable to be rejected. On a perusal of the counter filed on behalf of the
petitioners, it is seen that no objection was taken as has now been contended nor the grounds raised before this Court touch on this. Except for an
oral submission made, no protest was made as to the assumption of jurisdiction of the learned Arbitrator at any stage of the proceedings. In the
circumstances, there being no contention taken to object to the jurisdiction at the earliest opportunity, I do not find any justification in the
submission of the learned counsel appearing for the petitioners that there is no proper initiation of the arbitral proceedings. In any event, having
participated in the proceedings without raising any protest, I do not find, there exists any ground violating Section 16 of the Act.
As regards the second contention of the learned counsel appearing for the petitioners that the Claim Petition did not carry the seal of the
Company, it may be noted that having regard to the fact that the Claim Petition was for and on behalf of the first respondent herein, the fact that the
signature at the end of the Claim Petition did not carry the seal of the Company does not defeat this claim. As already pointed out, the power of
attorney was filed before the learned Arbitrator and satisfied of the claim made on behalf of the first respondent, the learned Arbitrator permitted
the first respondent to proceed with the claim. In the face of the evidence thus available and the learned Arbitrator thus satisfied of the authority of
the signatory in the Claim Petition, I do not find merit in the petitioners'' contention that the claim should have been dismissed as there was no
authority and that the signature did not carry the seal of the Company.
As to the contention of the petitioner that the claim was based on the Hire Purchase Agreement and that the relief itself rested only on this
document and that the first respondent failed to produce the originals before the Tribunal, learned counsel appearing for the petitioners made a
specific reference to the order passed by the Arbitral Tribunal on 9.8.2005 directing the production of the original Hire Purchase Agreement and
that the matter was adjourned to 23.8.2005. However, learned Arbitrator noted on 23.8.2005 that the claimant filed a photo copy of the Hire
Purchase Agreement as the original was filed before the Metropolitan Magistrate Court. On that day, the petitioners were not present and were set
ex parte. The claimant was heard and the matter was adjourned to 6.9.2005 for passing the award. He pointed out that no details are given as
regards the pending criminal proceedings or was an attempt taken to produce the certified copy of the agreement to be filed before this Court.
When the very claim is based on the document, it was incumbent on the claimant to produce either the original agreement, or in its absence, on
valid grounds, to produce the certified copy. When both had not been complied with, the question of proceeding with the Claim Petition to pass
the award is not sustainable.
In the course of the proceedings, learned counsel appearing for the first respondent relied on the decision reported in Vijay Packaging Vs.
Spectra Packs Private Ltd., Madras and Hon''ble Mr. Justice N. Krishnaswamy Reddy, wherein, this Court viewed that the strict Rule of evidence
in C.P.C. do not apply to the proceedings before this Court and that the Arbitrator is required to follow the principles of fairness and the well
established principles of evidence sustained and the technical objection based on Section 34 of the Indian Evidence Act need not be considered by
the Arbitrator.
While considering the question as to a situation where the award was passed on the accounts statement produced by the claimant that the
aggrieved party to the award contended that the claimant had failed to prove the entries therein in accordance with the Indian Evidence Act, this
Court, considered the submission based on Section 34 of the Indian Evidence Act. Rejecting the said submission, this Court held as follows:
The submission made by placing reliance on Section 34 of the Evidence Act is not very well founded as Section 1 of the Indian Evidence Act,
1872 provides that the Act applies to judicial proceedings in or before any Court, including Courts-martial. The Act in terms does not apply to
arbitral proceedings. It is clear that the arbitrator is not confined by the technical rules of evidence and so long as the basic principle of fairness and
the well established principles of evidence are not violated, it cannot be held that the arbitrator has failed to act in accordance with law.
The Division Bench held that the documentary evidence placed before the learned Arbitrator was accepted by both the parties as genuine and
its authenticity was not in question at all. The reliance placed by the learned Arbitrator on the accounts produced by the claimant was an act well
within the jurisdiction and by placing such reliance, learned Arbitrator did not commit any misconduct. Guided by the said decision of the Division
Bench of this Court, as far as the present case is concerned, when the factum of the execution and that the amount due under the agreement was
also not denied, apart from they being proved, the contention of the petitioners that the award should fail for want of the original agreement cannot
be accepted. The endorsement made by the learned Arbitrator shows that the original was returned to the claimant for production before the
Criminal Court and that the series of correspondence between the parties clearly show the liability of the first petitioner as guaranteed by the other
petitioners. Merely because the first respondent produced the photocopy at a later stage of the proceedings, it does not mean that the original was
not produced. In the face of the endorsement in the files of the learned Arbitrator as to the return of the original, it is clear that the original was
placed before the Arbitral Tribunal and the learned Arbitrator was satisfied of the production, but for which the endorsement as to the return would
not have been there. Going by the above facts, I do not find any legal misconduct in the award passed.
On the question of the petitioners set ex parte without any intimation thereon, it is seen from the records before this Court that the award was
passed on 6.9.2005. A perusal of the minutes of the learned Arbitrator shows that on 23.8.2005, he noted that the petitioners were absent and
they were set ex parte and immediately directed the matter to be posted the matter on 6.9.2005, on which date, learned Arbitrator delivered the
award.
Learned counsel appearing for the petitioners placed reliance on the decision reported in Lovely Benefit Chit Fund and Finance Pvt. Ltd. Vs.
Shri Puran Dutt Sood and Others, Juggilal Kamlapat Vs. General Fibre Dealers Ltd., and Oil and Natural Gas Corporation Ltd. Vs. SAW Pipes
Ltd., hat failure to give notice about the petitioners being set ex parte is fatal to the passing of the award.
It is seen from the records that although the arbitration proceedings commenced in the year 2004, the matter stood adjourned on several
occasions for one reason or the other. As rightly pointed out by the first respondent, the matter stood adjourned by more than 29 times. When the
learned Arbitrator decided to set anyone ex parte, it is but fair that the parties must be informed about the said decision. Learned Arbitrator should
have given information of the said decision to the first respondent before passing the award as against the petitioners.
It is not denied by the petitioners that they did not appear either in person or through counsel on 23.8.2004. No reasons are given in the
Petition filed before this Court as to the absence of the petitioners to appear on that day before the learned Arbitrator. The petitioners, however,
contend that the learned Arbitrator passed the order summarily, without affording a reasonable opportunity to the petitioners herein and made an
ex parte order in an unceremonious manner. It is further claimed that there is no material to show how the Arbitrator was satisfied as to the claim of
the first respondent.
A perusal of the award herein shows that the claim was made on 9.1.2004 in the first hearing on 23.1.2004. A perusal of the dates given
therein shows that there had been sittings in which the petitioners were there; that there were many sittings in which the petitioners were also
absent. It is seen that as early as 8.2.2005, on the absence of the petitioners to appear before the learned Arbitrator, the learned Arbitrator set the
petitioners ex parte. On 15.2.2005, the learned counsel appearing for the petitioners filed the counter claim. The petition was restored and the
order setting ex parte was recalled and for reply, the matter was adjourned to 1.3.2005. Again, on 1.3.2005, the matter stood adjourned for filing
a translated copy of the documents by the petitioners herein. The matter was posted on 8.3.2005. On 8.3.2005, the first respondent was noted
absent. Hence, the matter was listed on 15.3.2005 and thereafter, again on 3.5.2005, once again, the petitioners herein were absent. Hence, the
matter was posted finally to 5.7.2005. On 5.7.2005, the petitioners were present. For framing issues, the matter was adjourned to 26.7.2005. At
the request of the petitioners herein, the matter was adjourned to 2.8.2005. There was no representation by the petitioners herein on 2.8.2005.
The matter was posted for enquiry on 9.8.2005. On this day, learned Arbitrator directed the first respondent herein to produce the hire purchase
agreement as the same was in the VIII George Town Court. For enquiry, the matter was adjourned to 23.8.2005. On this day, the first respondent
herein produced the photocopy, as the original was filed before the Magistrate''s Court. The petitioners, however, did not appear either in person
or through counsel. The petitioners were set ex parte and the matter was posted for passing the award. There are no records to show that the
learned Arbitrator sent notice as regards this fact, nor does the award make any reference that even on this day of passing the award, whether the
petitioner was present before the Tribunal
The proceedings recorded on 23.8.2005 reads as follows:
Claimant counsel filed photo copy of the Hire Purchase Agreement, as the original filed in Metropolitan Court. Counsel for respondent as well as
respondent called absent. Counsel for claimant argued the matter. Respondent set ex parte. Post it for award. Call on 6.9.2005.
Sd/- xxxx
23.08.2005
It may be noted that u/s 25 of the Arbitration and Conciliation Act, 1996, when the claimant failed to communicate the statement of claim in
accordance with Section 23(1) of the Arbitration and Conciliation Act, 1996, the Arbitral Tribunal is entitled to terminate the proceedings. As per
Section 25(b) of the Arbitration and Conciliation Act, 1996, where the respondent fails to communicate his statement of defence in accordance
with sub-section (1) of Section 23, the Arbitral Tribunal shall continue the proceedings without treating that failure as an admission of the
allegations of the claimant. Under sub-section (c) of Section 25, if a party fails to appear in a hearing or to produce documentary evidence, it is
open to the Arbitral Tribunal to pass an award on the evidence before it. The provision lays down the consequences of the failure, thereby ensure
the effectiveness of the parties'' agreement or settlement of the dispute through arbitration. It may be seen from Section 25(c) that the Arbitral
Tribunal is not precluded from proceeding with the hearing and if the parties are given sufficient notice in advance, but yet failed to respond to that,
the Tribunal could proceed with the hearing to pass the award. It is no doubt true that there are no materials available to show that the learned
Arbitrator informed the petitioners herein by notice as to the order passed on 23.8.2005 setting the petitioners, for the second time, ex parte. All
that the award reads is that the petitioner and the counsel were called absent on 23.8.2005. The petitioners were set ex parte and the matter was
posted for award to be called on 6.9.2005.
Learned counsel appearing for the petitioners placed reliance on the decision reported in Lovely Benefit Chit Fund and Finance Pvt. Ltd. Vs.
Shri Puran Dutt Sood and Others, Juggilal Kamlapat Vs. General Fibre Dealers Ltd., and Oil and Natural Gas Corporation Ltd. Vs. SAW Pipes
Ltd., in support of his contention that an ex parte award made without notice to the party amounted to legal misconduct and liable to be set aside.
He pointed out to the decision reported in Oil and Natural Gas Corporation Ltd. Vs. SAW Pipes Ltd., , that an award made in violation of the
arbitral procedure is liable to be set aside. By prescribing the procedure, the Tribunal is required to proceed and decide the dispute in accordance
with the provisions of the Act.
In the decision reported in Juggilal Kamlapat Vs. General Fibre Dealers Ltd., the Calcutta High Court viewed that the procedural rule
applicable to arbitration proceedings is more tolerant than the rule followed in Courts of law. The Calcutta High Court summarised the principles
which govern the matter as follows:
If a party to an arbitration agreement fails to appear at one of the sittings, the Arbitrator cannot or, at least, ought not to, proceed ex parte against
him at that sitting. Where in such a case it does not appear that the nonappearance was anything but accidental or casual, the Arbitrator ought
ordinarily to proceed in the ordinary way, fixing another date of hearing and awaiting the future behaviour of the defaulting party. If, on the other
hand, it appears that the defaulting party had absented himself with a view to preventing justice or defeating the object of the reference, the
Arbitrator should issue a notice that he intends at a specified time and place to proceed with the reference and that if the party concerned does not
attend, he will proceed in his absence. But if after making such a peremptory appointment and issuing such a notice, the Arbitrator does not in fact
proceed ex parte on the day fixed, but fixes another subsequent date, he cannot proceed ex parte on such subsequent date unless he issues a
similar notice in respect of that date as well.
If he issues a similar notice and the party concerned does not appear, an award made ex parte, will be in order. But if he does not issue such a
notice on the second occasion, but nevertheless proceeds ex parte, the award will be liable to be set aside, in spite of a notice of a peremptory
hearing having been given in respect of the earlier date, subject, however, to the condition that prejudice was caused to the party against whom the
ex parte order was made. But this duty to give notice of an intention to proceed ex parte is not an absolute duty.
If it appears from the circumstances of the case that a particular party is determined not to appear before the Arbitrators in any event, as when he
has openly repudiated either the reference itself or the particular Arbitrators and has shown no desire to recant, the Arbitrators are not required to
issue a notice of an intention to proceed ex parte against such a recusant person and may proceed ex parte and make a valid award without issuing
a notice. The better course, however, even in such a case is to issue a notice and give the party concerned a chance to change his mind.
The Calcutta High Court held that when the award has been passed and no notice of intention to proceed ex parte was given, the principle to
be applied is that the award will not be upheld, unless it is shown or it appears that the omission to give a notice to a defaulting party has not
caused any prejudice to the party against whom the ex parte award was made. The Calcutta High Court held that when there is an omission to give
a notice, there will, however, always be a presumption that prejudice has been caused. The principle to be borne in mind is that the failure to attend
is not required to be explained on satisfactory grounds in order to dislodge the ex parte award, but the ex parte award requires to be defended by
establishing that the omission to issue a notice of an intention to proceed ex parte has not caused any prejudice.
The said decision of the Calcutta High Court was followed in the decision reported in Lovely Benefit Chit Fund and Finance Pvt. Ltd. Vs. Shri
Puran Dutt Sood and Others, wherein, the Delhi High Court took the view that where one of the parties failed to appear in one of the sittings, the
Arbitrator should fix another date for hearing and give notice to the defaulting party on a specified date. If after the notice the defaulting party fails
to appear, the Arbitrator may proceed in his absence. The Court further pointed out that when an ex parte award has been made, the principle to
be applied is that the award will not be upheld unless it is apparent that the failure to give notice of intention to proceed ex parte has not caused any
prejudice to the party against whom the ex parte award was made.
It is no doubt true that after setting the petitioner ex parte once, learned Arbitrator set aside the said order and granted a hearing to the
petitioners herein. However, subsequent thereto, except for one hearing, the petitioners did not appear. A perusal of the number of hearings given
and the opportunity given to the parties herein show that there is no wanting of compliance of the principles of natural justice in giving this
opportunity to the petitioners herein. There had been consistent default of the petitioners in their appearance before the Arbitral Tribunal. After
posting the case finally on 5.7.2005, at the request of the first respondent, the matter was adjourned to 2.8.2005 from 26.7.2005. The petitioners
did not appear. Hence, the matter was posted on 9.8.2005. As per the order dated 9.8.2005, there is no endorsement as to whether the
petitioners were present. Thereafter on 27.8.2005, the last hearing date, the petitioner herein was called absent, set ex parte and on 6.9.2005, the
award was passed. It is no doubt true that in a given set of circumstances, an ex parte order passed is liable to be set aside if it results in prejudice
to the defaulting party by reason of the fact no fair opportunity was granted to the defaulting party to defend his stand. As already noted, Section
25 of the Arbitration and Conciliation Act, 1996 lays down the consequences of failure of a party to appear before the learned Arbitrator. When
there had been consistent defaults, the contention of the petitioners that failure to give a second notice to proceed ex parte would vitiate the award
cannot be accepted and it is not open to a person who is absent for the second time to contend legal infirmity in the passing of the ex parte award.
The fact that the learned Arbitrator did not give a second notice of his intention to proceed ex parte, hence, cannot amount to a legal misconduct.
While it is not denied that the Arbitrator should not proceed hastily, at the same time, being a forum chosen by the parties themselves, it is
incumbent on the parties to the proceedings to cooperate to resolve the disputes at the earliest point of time. Considering the conduct of the
petitioners herein for his consistent absence, it cannot be said that the learned Arbitrator committed a misconduct in the matter of passing the
award without intimating about the petitioners being set ex parte. The decisions relied on are, hence, distinguishable on facts. If the petitioners are
prejudiced by the award, they alone have to be blamed for having brought this state of affairs.
As already pointed out, the original power of attorney is found in the file of the learned Arbitrator and the fact that the learned Arbitrator had
not informed the petitioners about they being set ex parte cannot be faulted with for the reason that the petitioners were found consistently absent
that after setting them ex parte once and recalling the same once, again the petitioners were set ex parte on their failure to appear on the given date.
A reading of the award shows that sufficient opportunity was given to the petitioners to participate in the proceedings. That being so, I do not find
any merit in the submission of the learned counsel appearing for the petitioners to accept the same to the set aside the award.
In the decision reported in Juggilal Kamlapat Vs. General Fibre Dealers Ltd., , various principles are laid down in the matter of the setting a
defaulting party ex parte and an award passed ex parte. If the party to the agreement failed to appear in one of the sittings, setting a party ex parte
to pass an award, no doubt, may look unjudicious. However, as in this case, after setting aside an order passed setting the petitioner ex parte,
when an opportunity was given and the matter was adjourned to 23.8.2005 and the petitioners did not appear and with no reasons offered and the
prejudice shown by reason of the ex parte order except that it had resulted in an award against them, I do not find there exists any legally justifiable
ground for this Court to interfere with the award. It is not as though he was not aware of the date of hearing fixed for 23.8.2005. The petitioners
took no steps to ascertain the result of the proceedings held on 23.8.2005. On the other hand, they remained quiet only to receive the award and
to file a Petition before this Court thereafter, on receipt of the award. The conduct of the petitioners herein, hence, does not justify the claim made
before this Court that the award suffers a legal misconduct. It is relevant to note that even in the various grounds raised before this Court, no
reason has been given by the petitioners for the default in appearance before the Arbitrator on 23.8.2005.
Being party to the agreement, the parties are bound by the terms. The claim herein is based on the execution of the agreement and when
admittedly the execution had not been denied, the award passed cannot be set aside. Taking note of all these facts, I do not have any hesitation in
rejecting the plea of the petitioners. Accordingly, this Original Petition is dismissed.