ARBITRATOR’S POWER TO PROCEED ex parte

[Mr. M. GOVINDARAJAN]

Default of a party

Section 25 of the Arbitration Act, 1996 provides that unless otherwise agreed by the parties, where, without showing sufficient cause-

• the claimant fails to communicate his statement of claim in accordance with section 23(1), the arbitral tribunal shall terminate the proceedings;
• the respondent fails to communicate his statement of defence in accordance with section 23(1), the arbitral tribunal shall continue the proceedings without treating that failure in itself as an admission of the allegations by the claimant and shall have the discretion to treat the right of the respondent to file such statement of defence as having been forfeited;
• a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the arbitral award on the evidence before it.

Sufficient notice

The expression ‘without sufficient cause’ means that the party is prevented from appearing the arbitrator.  If sufficient cause is shown the tribunal can set the clock back and give the party an opportunity to meet any of the requirements of section 25.

Due notice to be given

The provisions of section 25 make it clear the arbitrator may pass order ex parte in the absence of any of the parties to arbitration.  Before passing ex parte order it is the duty of the arbitrator to inform the parties concerned about his intention to proceed with the case ex parte.

An arbitrator is not justified in proceeding ex parte without giving the party absenting himself due notice.  The arbitrator is to give the notice in writing to each of the parties or their solicitors.  It should express the arbitator’s intention clearly, otherwise the award may be set aside.  An ordinary appointment for a meeting with the addition of the word ‘peremptory’ marked on it is, however, sufficient.

In Halsbury’s Laws of England it has been stated that where the arbitrator proposes to proceed with the reference notwithstanding the absence of one of the parties it is advisable that he should give that party a distinct notice of his intention to do so.   If reasonable excuse for not attending the appointment can be shown, the court will set aside the award made by an arbitrator who has proceeded ex parte.

A party, who, though repeatedly written to, does not appear before the arbitrator and allows the proceedings ex parte, cannot later on say that he was not given an opportunity of being heard 

In ‘Saraswathi Chemicals v. Balmer Lawrie & Co. Limited’ – 2011 (3) TMI 1759 - MADRAS HIGH COURT it was held that the arbitrator is to inform the party that he intends to proceed with the reference at a specified time and place, whether that party attends or not.   If still a party does not attend, then and then only the arbitrator is at liberty to proceed ex parte against him.

In ‘Nagasrinivasulu v. GLADA Finance Ltd.,’ – 2008 (11) TMI 724 - MADRAS HIGH COURT it was held that where a party did not appear on the adjourned date in spite of a note by the arbitrator in the minutes of the hearing that if the party does not appear on the appointed date and time, the hearing would proceed ex parte and no separate notice is given, the ex parte award in such a case is legal.

In ‘P.S. Oberoi v. Orissa Forest Corporation Ltd., - 1982 (3) TMI 275 - ORISSA HIGH COURT it was held that when from the conduct of the objectors to an award, it is abundantly clear that they had no intention of appearing before the arbitrators, the arbitrators are justified in proceeding ex parte.

Mere inaction on the part of a party until he received a letter from the arbitrator that ex parte award was made would not lead to an inference that he would not have participated in the proceedings had he been given notice.

In ‘Daisy Trading Corporation v. Union of India’ – 2001 (10) TMI 1183 - DELHI HIGH COURT it was held that where the arbitrator had allowed a period of three weeks to the appellant to file its counter claim and reply to the claim statement of the respondent, then it was the bounden duty of the arbitrator to have ascertained the date on which service had been effected on the appellant before taking steps to proceed ex parte.

In ‘State of UP v. Combined Chemicals Co. (P) Ltd.,’- 2011 (1) TMI 1527 - SUPREME COURT it was held that where the appellant sought adjournment on the ground that he had filed an appeal against the order of the trial court on the question of maintainability of petition, the arbitrator granted adjournment but the appellant failed to obtain stay order from the appellant court and continued to abstain from the arbitral proceedings, the arbitrator was justified in proceeding ex parte against such a party.

Set aside the award

An arbitrator cannot set aside an ex parte award passed by him even if the defaulting party later on shows sufficient cause which prevented him from attending the arbitral proceedings.  However, the said power vests with the court under section 34(2)(a)(i) to set aside an award if a party was under some incapacity.  There is no other ground to get an ex parte order to set aside except on procedural irregularities or the ex parte award being contrary to the terms of the agreement or the substantive law.  Except for the limited purpose of correction of errors an arbitrator becomes functus officio once he has signed the award.

In ‘Balkishan v. Mohini Finance Co.’- 2007 (4) TMI 742 - DELHI HIGH COURT it was held that where the appellant was not served personally at any time though it was claimed that the postman had visited his office a number of time, it was necessary that the arbitrator should have given notice informing of his intention to proceed ex parte on a specified date.  The High Court set aside the ex parte order in the interest of justice.