2003 (3) TMI 764 - HC - Indian Laws

Summary

Issues Involved:
1. Validity of the arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996.
2. Constitution and jurisdiction of the Arbitral Tribunal.
3. Allegations of bias and impartiality against the Arbitrators.
4. Scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996.
5. Legality of awarding interest by the Arbitrators.

Issue-wise Detailed Analysis:

1. Validity of the Arbitration Agreement:
The appellant contended that there was no valid arbitration agreement as defined under Section 7 of the Arbitration and Conciliation Act, 1996. However, the District Judge found that the materials on record clearly indicated that the parties had agreed to settle disputes through arbitration as per the bye-laws of the U.P. Stock Exchange Association Ltd. The contracts between the parties contained an arbitration clause stipulating that disputes would be decided by arbitration in accordance with the bye-laws of the U.P. Stock Exchange Association Ltd. The court upheld the existence of a valid arbitration agreement.

2. Constitution and Jurisdiction of the Arbitral Tribunal:
The appellant challenged the constitution of the Arbitral Tribunal, arguing that it was not in accordance with law and that the Arbitrators had no jurisdiction. The U.P. Stock Exchange Association Ltd. had appointed Sri G.D. Sarada as an Arbitrator and, upon the appellant's failure to appoint an Arbitrator, appointed Sri M.L. Jain. Subsequently, both Arbitrators appointed Sri Gopi Shyam Nigam as the third Arbitrator. The Arbitral Tribunal, after entering upon the reference, informed the appellant about the proceedings. The appellant did not participate, and the Tribunal proceeded ex parte. The District Judge found that the Arbitral Tribunal was validly constituted and competent to give the award.

3. Allegations of Bias and Impartiality Against the Arbitrators:
The appellant alleged bias and impartiality against the Arbitrators, stating that he had no confidence in them. The Arbitral Tribunal considered the notices sent by the appellant's counsel but found no factual foundation or evidence to support the plea of bias. The District Judge observed that no evidence was led to infer that the Arbitrators were biased or interested in the matter. The court emphasized that the test for bias is whether there is a likelihood of bias, not actual bias, and found no such likelihood in this case.

4. Scope of Interference Under Section 34 of the Arbitration and Conciliation Act, 1996:
The court noted that the scope of interference under Section 34 is very limited and an arbitral award may be set aside only on specific grounds mentioned in Section 34(2). The District Judge upheld the award, finding that the appellant had not raised any valid grounds under Section 34(2) to set aside the award. The court emphasized that the legislative intent was to minimize court interference in arbitration matters and that the decision of the Arbitrators upholding their jurisdiction is final and not open to challenge under Section 34, except on limited grounds.

5. Legality of Awarding Interest by the Arbitrators:
The appellant contended that the Arbitrators had no jurisdiction to award interest. The court referred to Section 31(7)(b) of the Act, which stipulates that a sum directed to be paid by an arbitral award shall carry interest at 18% per annum from the date of the award to the date of payment, unless otherwise directed. The court found that the interest awarded at 18% per annum was in accordance with the statutory provision and upheld the award.

Conclusion:
The appeal was dismissed, and the findings of the District Judge were upheld. The court found no merit in the appellant's submissions and concluded that the arbitral award was legally valid and binding. There was no order as to costs.