2007 (4) TMI 742 - HC - Indian Laws

Court sets aside ex-parte order in arbitration case, directs prompt resolution with proper service

The court allowed the appeal, setting aside the ex-parte order against the appellant in the arbitration case. The appellant was directed to appear before ... Proceedings ex-parte - service by registered AD - service by publication - right to be heard / audi alteram partem - arbitrator's duty to give fresh notice before proceeding ex-parte - communication of statements and documents between parties under Section 24(3) - setting aside ex-parte award subject to conditions - conditional stay of execution by bank guaranteeService by registered AD - service by publication - proceedings ex-parte - right to be heard / audi alteram partem - arbitrator's duty to give fresh notice before proceeding ex-parte - Validity of proceeding ex-parte in arbitration where the appellant contends non-service and whether the arbitrator ought to have given further notice before proceeding ex-parte. - HELD THAT: - The Court examined the arbitrator's record showing notices sent by registered AD and subsequent publication in the newspaper, and the postman's reports of visits where the appellant was reportedly absent. Noting settled authority under the old Act and the principle reflected in Section 24(3) of the new Act that proceedings before an arbitrator are not to be equated with Civil Procedure Code, the Court held that an arbitrator should ordinarily fix another date and give notice of intention to proceed ex-parte before finally deciding against a party in his absence. Applying that principle, the Court found merit in the appellant's contention to an extent and concluded that the ex-parte order was not immune from being set aside where the opportunity to be heard had not been afforded in the manner required. [Paras 7]Ex-parte order set aside insofar as it was passed without affording the appellant the requisite opportunity to be heard; appellant entitled to one opportunity to be heard subject to conditions.Setting aside ex-parte award subject to conditions - conditional stay of execution by bank guarantee - remand to arbitrator for fresh hearing and disposal - Relief to be granted on setting aside the ex-parte order and subsequent directions to the Trial Court and Arbitrator. - HELD THAT: - Balancing the respondent's prejudice and the appellant's right to be heard, the Court exercised its equitable power to set aside the ex-parte order on conditions. At admission a stay of execution had been granted subject to a bank guarantee of 30% of the decretal amount; the Court directed the appellant to furnish a further bank guarantee of 30% within one month. The parties were directed to appear before the Arbitrator on a specified date, the Arbitrator was to afford the appellant an opportunity to be heard after verifying the bank guarantee and the Trial Court to issue a certificate in that regard. The Arbitrator was further directed to dispose of the case within one month after receipt of the file, with no further opportunity or notice to the appellant. [Paras 8]Ex-parte order set aside subject to the appellant furnishing an additional bank guarantee of 30% within one month; matter remitted to the Arbitrator to hear the appellant and dispose of the case within one month; execution stayed subject to the bank guarantee and related directions.Final Conclusion: The High Court set aside the ex-parte award against the appellant insofar as it was passed without affording the prescribed opportunity to be heard, conditioned the setting aside on the appellant furnishing an additional bank guarantee, and remitted the matter to the Arbitrator with directions for prompt hearing and disposal. Issues involved:1. Service of notice to the appellant in an arbitration case.2. Proceedings conducted by the Arbitrator in the absence of the appellant.3. Applicability of the new Act in the case.4. Legal obligations of the Arbitrator in case of a party's absence.5. Setting aside an ex-parte order against the appellant.Issue 1: Service of notice to the appellant in an arbitration case:The Trial Court initiated proceedings on 7.1.1993, and the Arbitrator sent a notice through registered AD on 19.5.1993, which was correctly addressed. Despite multiple visits by the postman, the appellant was not available. A second notice was sent on 10.6.1993, with similar unsuccessful attempts to serve the appellant. Eventually, the appellant was served through a publication in a newspaper on July 23, 1993, as he did not appear despite prior notices.Issue 2: Proceedings conducted by the Arbitrator in the absence of the appellant:The appellant did not appear before the Arbitrator despite being served with notices. The respondent argued that the appellant intentionally avoided attending the proceedings. The Arbitrator proceeded ex-parte against the appellant due to his non-appearance, leading to the case being decided against him.Issue 3: Applicability of the new Act in the case:The respondent contended that the new Act did not apply to the case and cited a previous judgment to support this argument. The court noted that the case fell under the old Act, emphasizing the differences between the old Act and the new Act regarding procedural requirements.Issue 4: Legal obligations of the Arbitrator in case of a party's absence:The court referred to a previous judgment and highlighted that under the old Act, an arbitrator should not proceed ex-parte against a party without giving another notice specifying the intention to proceed ex-parte. The court noted the departure from the Civil Procedure Code in the arbitration proceedings and stressed the importance of providing the defaulting party with an opportunity to be heard.Issue 5: Setting aside an ex-parte order against the appellant:After considering the arguments from both parties, the court found merit in the appellant's argument regarding the lack of personal service. The court set aside the ex-parte order against the appellant, subject to him furnishing a bank guarantee. The appellant was directed to appear before the Arbitrator and provide the bank guarantee within a month. The Arbitrator was instructed to dispose of the case within one month after receiving the file, without granting any further opportunities or notices to the appellant.In conclusion, the court allowed the appeal, setting aside the ex-parte order against the appellant and providing specific directions for further proceedings in the arbitration case.