HC: Arbitral award liable to be set aside when it is not proved that the notice of institution of Arbitral proceeding was not duly served

  

On 15^thJuly, a bench of Delhi High Court consisting of Justice Vibhu Bhakru, held that since it could not be established that the petitioner was duly served  the notices regarding constitution of the Arbitral Tribunal or had due notice of the arbitral proceedings at the material time therefore there was merit in the petitioner’s contention that she did not have notice of appointment of the Arbitral Tribunal or of the arbitral proceedings. Based on the aforementioned, the arbitral award was set aside by the court.

Facts of the case:

The petitioner had filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 impugning an arbitral award dated 01.05.2016passed by the Arbitral Tribunal whereby the Tribunal had accepted that the total amount of ₹1,43,92,456/- was payable to respondent no.1 in respect of its claim; and an amount of ₹62,57,590/-. was payable to respondent no.2 in respect of its claim. The petitioner has assailed the impugned award on the ground as set out in Section 34(2)(a)(iii) of the Act – that the petitioner was not given a proper notice of appointment of the Arbitral Tribunal or of the arbitral proceedings and, was unable to defend the case.

Contention of the petitioner:

The learned counsel for the petitioner submitted the following contention:

 

1. It was averred that the petitioner had divorced Mr. Nitin Chawla on 05.03.2016 and has been residing separately and therefore had nothing to do with the Borrower Company nor was a working director in the Borrower Company.
2. The petitioner assailed the impugned award on the sole ground that she did not have any notice of the arbitral proceedings. It was also submitted that the impugned award is liable to be set aside as no communication was received by the petitioner from the respondents.
3. It was submitted that no notice was received by the petitioner  of initiation of arbitral proceedings nor a notice from the Arbitral Tribunal nor a copy of the ex parte award prior to 29.09.2018 and therefore, was unable to place her defence.
4. It was also urged that that the petitioner had filed Form No. DIR 11 with the Ministry of Corporate Affairs, that is, her notice of resignation from the office of a Director.

Contention of the Respondent:

Mr. Pandey, learned counsel appearing for the respondent argued in favour of the order on the following ground:

1. It was submitted that the petitioner had signed the Power of Attorney nominating the respondents to act, take possession, create mortgage, to register property in the land registry or municipal records along with letter of continuity.
2. It was argued that the petitioner is a director of the company and is liable for the acts and omissions of the company as the company is an artificial person that functions through natural persons.
3. He further submitted that the notice was sent through e-mail. In addition, dasti service was also affected.
4. He further submitted that the factum of divorce between the petitioner and Mr. Nitin Chawla is not relevant for the present petition. He submitted that the petitioner is the director of the Borrower company (M/s Chawla Iron Traders Private Limited) and was actively involved in the affairs of the company

Observation and judgement of the court:

 

The hon’ble bench of the court observed the following:

1. The arbitral record does not indicate that any notice for the appointment of an arbitrator was sent to the petitioner.
2. . The arbitral record also indicates that a notice dated 01.02.2016 was sent to the petitioner at two addresses- one at A–156, Second Floor, Meera Bagh, Delhi –110087 and the second at B–5/12, Paschim Vihar, Delhi–110063.
3. It is seen that there is a specific noting against the name of the petitioner indicating that she had refused service of the notice. However, it is pointed out that the said noting is against her first address and there is no such noting against her second address
4. It is important to note that that the Arbitral Tribunal had proceeded on the basis that the petitioner had refused service of the notice. But, there is no evidence or any material to indicate that the petitioner had refused service of the notice sent to her at her Paschim Vihar address.

Based on the above circumstances the court found that there is merit in the contention that the record does not clearly establish that the petitioner had in fact received notice of the proceedings at the said address. Thus, the impugned award insofar as the petitioner is concerned, was set aside.

The court further clarified that the respondents are at liberty to institute fresh proceedings against the petitioner.

 Read Judgment;

 

 

 

source ; .latestlaws.com

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