2020 (1) TMI 1625 - HC - Indian Laws

Validity of Arbitral Award - loss allegedly incurred in the risk sale - petitioner's bid for purchase of 250 MT of the goods @ ₹ 42,810/- per MT was accepted - respondent contended that the petitioner had failed to lift the goods, as a result of which it was compelled to sell the material to third parties at the risk and cost of the petitioner. The principal legal ground urged by petitioner, was that the proceedings of the arbitration themselves were vitiated by an improper invocation of the arbitration. HELD THAT - The petitioner's contention is that it had not received any notice of commencement of arbitration in terms of Section 21 of the Act, and Rule 15 of the ICA Rules. This contention must be examined in the context of the correspondence between the parties - In the present case, however, although the petitioner did not formally participate in the arbitral proceedings, its communications to the ICA did highlight the objection under Section 21. The petitioner's challenge on this ground must be examined on its merits in this petition, and the respondent's preliminary objection is rejected. The petitioner's contention on the basis of Section 21 of the Act is wholly unmerited. The provision requires a party to send a request to the counter-party for the dispute to be referred to arbitration. The respondent's communication dated 14.12.2012 meets that requirement - The petitioner's reliance on Rule 15 of the ICA Rules also does not take its case much further. Rule 15(i) requires a notice of request for arbitration to be sent to the ICA and to the other party. The respondent herein had already given the notice of request for arbitration to the petitioner as aforesaid. Its communication dated 16.04.2013 to the Registrar of the ICA included all the documents contemplated by Rule 15(ii). The Rules, on a plain reading, require compliance of Rule 15(ii) in the communication addressed to the Registrar. Rule 15(i) requires that the proposed respondent in the arbitration also be given notice of the request for arbitration, but does not necessitate that the same communication be addressed both to the Registrar and the respondent. It is, in fact, specifically contemplated by Rule 18 that the statement of claim and attached documents would be sent subsequently by the Registrar to the respondent. It has been held in several judgments of the Supreme Court, including Associate Builders vs. Delhi Development Authority, 2014 (11) TMI 1114 - SUPREME COURT , that re-appreciation of evidence is not open to the Court under Section 34. It is evident from the above extract of the award itself that this is not a case where the award was entirely unsupported by evidence, or where the arbitrator failed to consider any material evidence. The petitioner chose not to participate in the arbitration proceedings or to bring its own evidence and arguments before the arbitrator. The learned arbitrator therefore rightly proceeded on the evidence led by the respondent. The petitioner has failed to make out any grounds for interference with the impugned award under Section 34 of the Act - The petition is dismissed with costs assessed at ₹ 50,000/-.

Summary

Issues Involved:
1. Improper invocation of arbitration proceedings.
2. Non-compliance with Section 21 of the Arbitration and Conciliation Act, 1996.
3. Validity of the arbitration agreement.
4. Merits of the arbitral award.

Detailed Analysis:

1. Improper Invocation of Arbitration Proceedings:
The petitioner contended that the arbitration proceedings were vitiated due to improper invocation. The petitioner argued that no notice invoking arbitration proceedings was served upon them as required by Section 21 of the Arbitration and Conciliation Act, 1996, and Rule 15 of the Rules of Arbitration of the Indian Council of Arbitration (ICA). The respondent countered that the petitioner had notice of the arbitral proceedings and chose not to participate. The court found that the legal notice dated 14.12.2012 from the respondent to the petitioner fulfilled the requirement of Section 21. The notice outlined the dispute, the respondent's claims, and the intent to initiate arbitration if the claims were not satisfied. The court held that the statutory requirements were fulfilled, and there was no irregularity in the invocation of arbitration.

2. Non-compliance with Section 21 of the Arbitration and Conciliation Act, 1996:
The petitioner argued that they did not receive any notice of commencement of arbitration as required by Section 21 of the Act and Rule 15 of the ICA Rules. The court examined the correspondence between the parties and concluded that the respondent's legal notice dated 14.12.2012 met the requirement of Section 21. The court also noted that the petitioner had responded to the notice on merits and raised a counter-claim, which indicated their awareness of the arbitration proceedings. The court rejected the petitioner's contention and found that the invocation of arbitration was in compliance with Section 21 and the ICA Rules.

3. Validity of the Arbitration Agreement:
The petitioner challenged the validity of the arbitration agreement in a title suit filed in the City Civil Court, Calcutta. The court noted that the City Civil Court did not grant any stay of the arbitration proceedings. The arbitrator proceeded with the arbitration in the absence of the petitioner, who chose not to participate despite being given multiple opportunities. The court upheld the arbitrator's decision to proceed with the arbitration and found no irregularity in the process.

4. Merits of the Arbitral Award:
The petitioner raised factual grounds challenging the merits of the arbitral award. The court reiterated that re-appreciation of evidence is not open to the court under Section 34 of the Act. The arbitrator had decided the matter based on the evidence led by the respondent, as the petitioner chose not to participate in the proceedings. The court found that the award was supported by evidence and that the arbitrator had considered all material evidence. The court dismissed the petitioner's challenge on merits.

Conclusion:
The petition to set aside the arbitral award was dismissed with costs assessed at ?50,000/-. The respondent was bound to its affidavit dated 26.11.2019, stating that the award would be executed only to the extent mentioned in the affidavit. The court did not adjudicate upon the correctness of the amounts stated by the respondent, leaving it open for the petitioner to challenge the amounts if necessary.