Award Passed By An Arbitrator Who Doesn't Have Qualification As Per Agreement Is Non-Est: Madhya Pradesh High Court

The Bench of Justice Subodh Abhyankar further held that an application filed under Order 7 Rule 11 of CPC challenging the jurisdiction of the arbitrator is to be treated as the application under Section 16 of the A&C Act as the nomenclature of an application is inconsequential but what is averred and the prayer/relief sought therein is relevant.

Facts

The parties entered into an agreement in the year 2003 whereby the respondent was to construct a water park. Clause 46 of the agreement was the arbitration clause that provided the dispute to be referred to arbitrator who shall be (A) fellow of the institution of Engineers India or (B) fellow of the Indian Institute of Architects or (C) Member of the Institute of the Surveyors (India).

A dispute arose between the parties when the appellant allegedly withheld payments due to the respondent. Therefore, the respondent filed an application under Section 11 of the A&C for the appointment of an arbitrator. The application was disposed of with a direction to the parties to approach the arbitrator named in the agreement.

Thereafter, the respondent designated "Kalp Kartik Architects" as the arbitrator. The arbitrator entered the reference and served notice of arbitration on the petitioner. Consequently, the appellant filed an application under Order 7 Rule 11 of CPC objecting to his appointment being contrary to the agreement between the parties. However, the same was withdrawn after the award was made.

The arbitrator, without deciding the objections on merit, dismissed the application on the ground that the objections raised by the appellant were already dealt with by the Court under Section 11 application. Thereafter, the final award was passed.

The appellant challenged the award under Section 34 of the A&C Act, however, the lower court rejected the application. Aggrieved by the award and the decision of the lower Court, the appellant preferred an appeal under Section 37 of the Act.

The contention of the parties

The appellant challenged the impugned order and the award on the following grounds:

• The appointment of the arbitrator is not in consonance with the agreement between the parties, therefore, the arbitrator had no jurisdiction and the award passed by him is non-est.
• The majority of the arbitral proceedings were conducted without any notice to the appellant, therefore, the award is liable to be set aside.

The respondent countered the submissions of the appellant on the following grounds:

• Clause 1.2 defines Architects as "Kalp Karthik Architects" and as per Clause 46 which is the arbitration agreement, any dispute between the parties was to be referred to Architects, therefore, the appointment is valid.
• The appellant had preferred a civil revision against the order passed under Order 7 Rule 11 that was withdrawn by it without taking the liberty to raise that objection under Section 34 of the A&C Act, therefore, it cannot be permitted to raised that ground again in challenge to the award.
• The contention of the petitioner that no notice of proceeding was served on it is without any merit for the reason that as per the arbitral orders and record, the appellant was present before the tribunal on dates subsequent to the rejection of its application.

Analysis by the Court

The Court held that the arbitrator rejected the application preferred by appellant challenging its jurisdiction merely on the ground that the High Court had decided those issues under Section 11 application, however, the Court had merely directed the parties to appoint the arbitrator as provided in the agreement.

The Court held that Clause 46 of the agreement provided certain qualifications for the arbitrator and if the agreement between the parties provides for certain qualifications of an arbitrator, then the appointment must be made in accordance with those qualifications only. However, the arbitrator was appointed was not qualified as per the aforesaid conditions, therefore, the award passed by it is without any jurisdiction.

The Court held that an application filed under Order 7 Rule 11 of CPC challenging the jurisdiction of the arbitrator is to be treated as the application under Section 16 of the A&C Act as the nomenclature of an application is inconsequential but what is averred and the prayer/relief sought therein is relevant.

It further observed that even if a civil revision was filed by the appellant against the order passed by the arbitral tribunal under s.16(5), it was clearly not maintainable and its dismissal as withdrawn without seeking any liberty to raise the objection in the application to be filed under s.34 of the Arbitration Act had no consequences at all.

Accordingly, the Court allowed the appeal and the arbitral award was set aside.

Case Title: Chokhi Dhani v. JS Construction, Arbitration Appeal No. 15 of 2016.

Citation: 2022 LiveLaw (MP) 193

Counsel for the Appellant: S.C. BAGADIA, SENIOR ADVOCATE WITH SHRI AMIT UPADHYAY

Counsel for the Respondent: R.S. CHHABRA, SENIOR ADVOCATE WITH SHRI GAURAV CHHABRA

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