2006 (6) TMI 522 - HC - Indian Laws

Arbitration Award Set Aside, Respondent Ordered to Pay Costs

Ion Exchange (India) Ltd. Versus Paramount Limited

The petition was allowed, and the Award made by the sole Arbitrator was set aside. The respondent was directed to pay the costs incurred by the ... - Issues Involved1. Maintainability of the Petition before the Bombay High Court2. Jurisdiction of the Arbitrator3. Interpretation of Section 42 of the Arbitration and Conciliation Act, 19964. Bonafide Application under Section 9 of the Act5. Definition of 'Court' under Section 2(e) of the Act6. Reasonable Time for Appointment of Arbitrator7. Validity of the Arbitral AwardDetailed Analysis1. Maintainability of the Petition before the Bombay High CourtThe respondent objected to the maintainability of the petition before the Bombay High Court, arguing that the application under Section 9 of the Arbitration and Conciliation Act, 1996, was filed in a Baroda Court, thereby invoking Section 42 of the Act, which states that once an application is made in one Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications. The petitioner countered that the application under Section 9 was not bonafide and that the Chief Justice before whom an application under Section 11 of the Act was made is a Court for the purpose of Section 42 of the Act.2. Jurisdiction of the ArbitratorThe petitioner challenged the validity of the Award on the grounds that the Arbitrator had no jurisdiction to make the Award. The arbitration clause required each party to appoint one arbitrator, and the two arbitrators would appoint an Umpire. The respondent's arbitrator assumed the role of the sole arbitrator without giving a reasonable time for the petitioner to appoint its arbitrator, which was against the arbitration clause and the law.3. Interpretation of Section 42 of the Arbitration and Conciliation Act, 1996Section 42 of the Act was examined to determine whether the Baroda Court had exclusive jurisdiction. The Court held that the first application must be made to a 'Court' as defined under Section 2(e) of the Act. The Court concluded that the application under Section 11 of the Act made to the Chief Justice is not a 'Court' within the meaning of Section 2(e) of the Act, and thus, the Baroda Court's application did not oust the jurisdiction of the Bombay High Court.4. Bonafide Application under Section 9 of the ActThe Court held that for an application to be considered under Section 42 of the Act, it must be bonafide. The respondent's failure to inform the petitioner about the application under Section 9 before the expiry of the limitation period for filing a petition under Section 34 indicated malafide intention. The Court emphasized that the respondent should have promptly informed the petitioner to allow them to take an informed decision.5. Definition of 'Court' under Section 2(e) of the ActThe Court examined whether the Bombay High Court had jurisdiction under Section 2(e) of the Act, which defines 'Court' as the principal civil court of original jurisdiction. It concluded that if the claimant had filed a civil suit instead of invoking arbitration, the suit could have been entertained by the Bombay High Court, as the petitioner carried on business within its jurisdiction.6. Reasonable Time for Appointment of ArbitratorThe Court interpreted the arbitration clause to mean that the party appointing its arbitrator must give reasonable time for the other party to appoint theirs. The respondent did not specify any time, thus failing to give 'due notice' as required by the clause. The Court also referred to Section 11 of the Act, which allows the Chief Justice to appoint an arbitrator if a party fails to do so within 30 days.7. Validity of the Arbitral AwardThe Court found that the sole arbitrator's assumption of jurisdiction was illegal and contrary to the arbitration clause and Section 11 of the Act. The Award was set aside on these grounds, and the Court did not delve into other grounds raised by the petitioner for challenging the Award.ConclusionThe petition was allowed, and the Award made by the sole Arbitrator was set aside. The respondent was directed to pay the costs incurred by the petitioner.