TMI Blog2015 (6) TMI 1133X X X X Extracts X X X X X X X X Extracts X X X X ..... sent a copy of the award on 25.07.2009. The Ar.OP was filed on 22.07.2010 and hence, the Ar.O.P filed on 22.07.2010, under Section 34, is barred by limitation. Unilateral appointment of the Arbitrator by one party without consent of other party - Held that:- The learned Arbitrator informed the opposite party on 05.01.2009 about the constitution of the Arbitral award. The opposite party received the notice on 16.01.2009. The opposite party did not send any reply objecting to the appointment of the Arbitrator nor he has filed any challenging petition within 15 days after becoming aware of the constitution of Arbitration Tribunal under Section 13(2) of the Act, but the opposite party denied his signature under Ex.X2. The opposite party was also informed about the procedure to be followed and copy of the notice in Ex.X3 and the acknowledgment is marked as Ex.X4. The opposiate party failed to appear before the Arbitration Tribunal and so the opposite party was set exparte, but the opposite party denied his signature in Ex.X4 in his reply. Therefore,the opposite party is aware of the Arbitration and he had consented to the appointment of the Arbitrator. Legality of award - whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... District Judge, Tiruppur, dismissing the petition filed for setting aside the award passed by the sole Arbitrator, 5th respondent in A.P.No.1/2009 dated 15.07.2009. The respondents 1 to 4 in the CMA are the claimants and they have filed Arbitration Petition No.1/2009, before the learned Arbitrator, the 5th respondent in this appeal. A.P.No.1/2009 was filed for cancellation of main agreement, dated 23.02.2007, supplementary agreements dated 30.12.2007 and 09.07.2008 for a direction to the opposite party viz., the appellant herein to surrender possession of the company with all its assets and return all the title deeds and share certificates. The claimants/respondents 1 to 4 herein have also claimed damages at the rate of ₹ 5 lakhs per mensem from 30.12.2007 and cost of the Arbitration. This Court adopts the rank of the parties as stated in the A.P.1/2009. The 4th petitioner in A.P.1/2009 is the 4th respondent in this appeal. The 4th petitioner is a Private Limited Company of which 70% of share-holding is owned by petitioners 1 to 3. The petitioners/claimants and the respondent/opposite party entered into a memorandum of agreement and identity regarding transfer of shares and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of production and business. The opposite party is liable to pay the damages, at the rate of ₹ 5 lakhs per mensem, from 30.12.2007 with interest, at 18% per annum on their defaulted payment till realisation. So the claimants/petitioners prayed for an award to be passed. 3. As per clause XIV in the agreement dated 23.02.2007, the petitioners/claimants have nominated the Arbitrator, after due notice to the opposite party. The Arbitrator has issued a notice to the opposite party informing the opposite party on 05.01.2009, about the constitution of the Arbitral Tribunal. This notice was received by the opposite party on 08.01.2009 and the office copy of the notice was marked as Ex.X1 and the acknowledgment has been marked as Ex.X2. The opposite party did not send any reply, objecting to the appointment of the sole Arbitrator, nor has he filed a petition questioning the constitution of the Arbitral Tribunal. After filing of the claim petition by the petitioners, copies of the claim petition and documents of the petitioners were sent to the opposite parties calling upon him to file his written statement in person or through an authorised agent or an advocate on 30.05.2009 at 11 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the opposite party. But the other obligations mentioned in the agreement were not performed within the stipulated time and so the parties have entered into a supplementary agreement dated 31.03.2008 for completing all obligations. The supplementary agreement Ex.P5 gives the details of the amounts paid by the opposite party till then. It also mentions the obligations to be performed by the claimants. After Ex.P5, Supplementary Agreement extending the time till 31.03.2008, another supplementary agreement Ex.p6 was executed on 09.07.2008, extending the time till 31.10.2008 for completing all the obligations, as on the date of this supplementary agreement, the opposite party has paid a total sum of ₹ 4.67 crores towards partial consideration. But the total obligations agreed to be preformed by the parties, as per the main and supplementary agreement were not completed, thereafter. PW1 has deposed that even after the extended supplementary agreement, under Ex.P6, the opposite party did not perform his part of obligation. According to PW1, the petitioners were always ready and willing to perform their part of the obligations. As per Ex.P1, agreement, the transferring of the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and so there was breach of contract. Even though the opposite party has taken possession of the company and the business in a running condition, the opposite party has failed to comply with the obligations. The face value of the shares was fluctuating. The learned Arbitrator has found that the opposite party had abandoned the contract and so, the claimants have terminated the agreement and informed the same, to the opposite party under Ex.P7. As per Ex.P1 agreement the obligations of both the parties are as follows:- Obligations of the claimants are as follows: (i) They should deliver duly executed instruments of transfer along with the share certificates after discharging the shares from their encumbrances. (ii) They are liable for all liabilities of the company including statutory liability and dues to workers of the company. (iii) They should deliver all records, books and papers relating to the company. (iv) To hand over the company as a going concern. Obligations of the Opposite Party are as follows: (i) Payment of consideration as laid down under Clause IV(i)(a), (b), (c). (ii) To discharge the liabilities of the company as enu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e machineries and other assets of the company. 9. The claimants have stated that the opposite party was in illegal possession of the properties of the company, after the termination of the contract, and so the opposite party has no right to continue in possession of the company and the opposite party is liable to re-deliver all the properties to the claimants. 10. A question was raised in this matter whether the opposite party is entitled to get back the amounts paid by him to the claimants towards the partial consideration, but the main agreement Ex.P1 and the supplementary agreement Ex.P5 and P6, do not contain any forfeiture clause, in the event of breach of contract by the opposite party. But there is no clause that the claimants should return all the amounts received from the opposite party in the event of breach of contract by the opposite party, but the learned Arbitrator was of the opinion that the opposite party would not ask for repayment of consideration paid by him, in as much as he had the benefit of running the mill and making some gains. It is for the opposite party to prove whether he had made any gains or suffered any loss. According to the Arbitrator, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssession of the company to the opposite party. The learned Arbitrator has found that the opposite party was liable to redeliver possession of the building with all the accessories and machineries, in the same condition, in which they were delivered to the opposite party on 30.12.2007 and it is open to the claimants to claim compensation for any damage or missing of the accessories or machineries. The Arbitral clause XIV of the agreement is not a bar for redeeming the properties in their original condition or for claiming compensation for the damages caused to the properties. The claimants have handed over the title documents in respect of lands, buildings to the opposite party and the opposite party is liable to return those documents to the claimants and the opposite party shall transfer all the equity shares in favour of the claimants. The learned Arbitrator passed the following award on 15.07.2009 in the following manner. (1) The agreements, dated 23.02.2007, 30.12.2007 and 09.07.2008 entered into between the petitioners and Opposite Party shall stand cancelled. (2) The Opposite Party shall return possession of the mill will all accessories and machineries to the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty by registered post, with acknowledgment due, on 27.04.2009. The opposite party has received the claim petition with copies of documents. The opposite party was called upon to file his written statement in person or through a duly authorised agent or an advocate on 30.05.2009. The opposite party was given more than a months time, to file his written statement. The covering letter has been marked as Ex.X3. The postal acknowledgment has been marked as Ex.X4. Since the opposite party did not file his written statement on 30.05.2009, another notice was sent to him on 06.06.2009 extending the time till 17.06.2009, to file his written statement. It was also informed to him in the notice dated 06.06.2009 that if he fails to file his written statement on 17.06.2009, the Arbitral Tribunal would continue the proceedings in his absence. 14. In the counter affidavit, the Arbitrator has further stated that the opposite party has never cared to appear before the Arbitration Tribunal or to file his written statement, and to participate in his Arbitration proceedings, hence, he was set ex parte and evidence of PW1 was recorded. After recording the evidence of PW1 on 24.06.2009, xerox copies o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was paid to the claimants and possession of the company was handed over. On 30.12.2007, 30,0000 shares were also transferred to the opposite party. As the opposite party could not pay the entire consideration, time was extended upto 31.10.2008, though the 2nd supplementary agreement dated 09.07.2008 did not provide for extension of time. The 1st claimant has submitted that the opposite party, issued a cheque for ₹ 50 lakhs, as per the supplementary agreement dated 09.07.2008 which was bounced, when presented to the bank. Thus, the opposite party did not discharge the liabilities of the company, as referred in schedule 'c' in the agreement dated 23.02.2007. The opposite party could not comply with the terms of agreement and therefore, the 1st claimant was put to financial loss, apart from the damages caused by the opposite party. The opposite party has no justification to retain possession of the company and the properties. The claimants are in need of money and their valuable asset and property were locked up, by the petitioner. Hence, the claimants have filed the Arbitration proceedings. The 1st claimant has submitted that in the reply notice given on 12.02.2009 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected to the proceedings, and so, an award was passed on merits on 15.07.2009, and a copy of the award was sent to both the parties, and now the application has been filed under Section 34(2) of the Act, and it is hopelessly barred by limitation. The opposite party has deliberately absented himself to drag on the matter and the allegations made in the application AOP.219/2010, are false to the knowledge of the Opposite Party. It is contended that the appointment of the Arbitrator, was legal. The allegation that consent of the opposite party was not obtained for appointment of the Arbitrator is not correct, in view of the receipt of several notices of proceedings from the Arbitrator. To the knowledge of the claimants the opposite party has not filed application under Section 11 and 16 of the Act. The other allegations are not admitted and therefore, the 1st claimant has prayed for the dismissal of the application. 16. The 4th claimant M/s.Sakthi Iswarya Spinning Mills Pvt Ltd., filed counter. O.P.219/2010 is barred by limitation. The claimants 1 to 3 have entered into an agreement, with the opposite party, for transfer of shares held in the 4th respondent company, to the opposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, and the further obligations, like, the liability of cotton supplies, sale tax due, provident fund dues and settlement of unsecured and secured creditors was pending and the interest for the belated payment was agreed to be borne by the opposite party and the claimants in equal proportion, so the claimants were compelled to refer the dispute to an Arbitrator and the Arbitrator has issued notice on 05.01.2009 about his appointment to all the parties. 17. The 4th claimant in it counter statement has filed its grounds by way of reply and they are as follows:- (i) The allegations in ground 1 is false and misleading. The arbitrator has been duly appointed and the petitioner has not raised any objection to the appointment of the arbitrator nor did he express his displeasure to the appointment of the arbitrator. The petitioner simply excluding himself from the arbitration proceedings, after having knowledge about it will not affect the arbitration proceedings. (ii) The allegations in ground 2 are denied as false. As per the original agreement, when the disputes arisen between the parties, it is clearly stated in Clause 14 of the agreement that 'any dispute', differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings, the application should have been filed on or before 25.10.2009 and the application dated 21.06.2010 is belated and the petition is not maintainable and the same is hopelessly barred by limitation. (x) The arbitration award passed is perfect and valid. The application filed by the petitioner is devoid of any merits and the same has to be dismissed in limine. (xi) This respondent therefore pray that this Hon'ble Court may be pleased to dismiss the petition and thus render justice. 18. The 1st claimant has filed additional counter statement. The 1st claimant has stated that the award copy sent to the address of the opposite party was returned, as unclaimed and any challenge to the award should be filed within 45 days from the date of the award and the court is empowered to condone any further delay after 45 days, but beyond 90 days, no application for setting aside the Arbitration award is maintainable. Though the opposite party was well aware of the award, having sent to him, by the Arbitrator on 15.07.2009, the opposite party has filed this Ar.OP.21/2012, beyond the prescribed time and so, the application is hopelessly barred by limitation. The 1st c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings of the award and that there is violation of natural justice. Learned counsel for the appellant submitted that the award has to be set aside as it is patently illegal. 21. With regard to appointment of Arbitrator, the learned Arbitrator was nominated by the claimants after due notice to the opposite party. The Arbitrator informed the opposite party on 05.01.2009 about the constitution of the Arbitration Tribunal and this notice was received by the opposite party on 06.01.2009 and the office copy of the notice is marked as Ex.X1 and the acknowledgment is marked as Ex.X2. The opposite party did not send any reply objecting to the appointment of the Arbitrator nor has he filed a challenging petition questioning the constitution of the Arbitration Tribunal. The Arbitrator has sent copies of the claim petition and the documents relied upon by the claimants were sent to the opposite party calling upon him to file his written statement on 30.05.2009 at 11 A.M before the Arbitration Tribunal. It is seen from the award that the opposite party was informed that the procedure to be followed in conducting the Arbitration proceedings would be followed on 30.05.2009. Copy of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice on 02.01.2009 under Ex.P11 informing the opposite party that the 5th respondent Mr.B.Kali was nominated as sole Arbitrator as per Section 10(2) of the Act and he has also stated that both of them have agreed to nominate a sole Arbitrator. It is mentioned that the receipt of this letter has been admitted by the opposite party in the petition. The 5th respondent Arbitrator has sent copy of the claim petition which was received by the opposite party under Ex.X4 acknowledgment. The opposite party himself has produced a copy of the notice dated 05.01.2009 under Ex.P14 but the opposite party has denied his signature in Ex.X2 and X4. The opposite party has claimed to have filed a petition under Section 11 of the Act, for an appointment of an Arbitration for resolving a dispute under the agreement dated 23.02.2007, but in the cross examination the opposite party has stated that he did not state like that. 23. It is on record that the opposite party has produced copy of the letter dated 02.01.2009 and notice of the Arbitrator dated 05.01.2009 and so it is clear that the opposite party has received both the letter and the notice, but now the opposite party denies the receipt of the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings despite several notices sent by the Arbitrator informing the Opposite Party by sending copies of the documents to the opposite party, the lower court observed that the opposite party has consented for the appointment of sole Arbitrator and has allowed the proceedings to go on. The claimants submitted that the opposite party cannot say now that the claimants should have filed an application before My Lord The Hon'ble Chief Justice for appropriate relief. The lower court held that there is no ground under which the award can be set aside. I concur with these findings of the lower court. 25. The learned counsel for the claimants submitted that under Section 34(3) of the Act, the challenge regarding the award can be made only within 3 months from the date on which the party challenging the award has received. The award was passed on 15.07.2009 and since the opposite party has refused to receive the award copy sent by the Arbitrator immediately after the award, this petition in Ar.O.P.21/2012, filed on 22.07.2010, is barred by limitation. The learned Arbitrator has produced the cover in which the award copy was sent to the opposite party and the opposite party has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following questions at the time of argument which are stated below:- (1) Whether the application under Section 34 of the Arbitration and Conciliation Act 1996 is barred by limitation? (2) Whether the unilateral appointment of the Arbitrator by one party without consent of other party confers jurisdiction upon the Arbitration Tribunal? (3) Whether such an award passed by such Arbitration Tribunal is being void ab initio and nonest in law? (4) Whether the Arbitrator has followed the principles of natural justice while passing the ex parte award? (5) Whether the ex parte award passed by the Arbitrator is iniquitous and lopsided award without following the principles of equity, good conscience and fair play? 28. The learned Arbitrator and the learned Principal District Judge, Coimbatore, found that the application under Section 34 is barred by limitation. It is seen from the records that the learned Arbitrator has sent the award by registered post and it was returned as intimation refused and door locked . If the intimation is found as refused, then under Section 27 of the General Clauses Act, 1898 (Central Act X of 1897), the opposite party is deemed to have k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of law and natural justice and the learned Arbitrator has considered all the documents and evidence let in by the party. There is no justification by the opposite party to avoid the Arbitral Tribunal and the opposite party knew about the proceedings. The opposite party gave a cheque of ₹ 50 lakhs to the claimants without funds in his account and the cheque was dishonoured. A criminal complaint was filed by the claimants in C.C.No.1406 of 2009 before the Judicial Magistrate I, Coimbatore, and that opposite party has sent a reply to the claimants that the entire matter was under Arbitration, referred to the Arbitrator, so the opposite party was consciously aware of the Arbitral proceedings. Therefore, it cannot be now contended by the opposite party that he was not aware of the Arbitration proceedings. Therefore, I find that the award is not void ab initio and non-est in law. Principles of natural justice have been followed by the learned Arbitrator. 31. The last question is whether ex parte award is iniquitous without following the principles of equity, good conscience and fair play. The learned counsel for the appellant is unable to support his argument on false princ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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