TaxTMI 
TaxTMI 
2023 (4) TMI 315
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.... amount, the loan of the petitioners was foreclosed and thereafter the respondent unilaterally appointed a sole Arbitrator on 05.02.2021 by referring the clauses in the Loan-cum-Hypothecation Agreement dated 27.11.2019. The Arbitrator proceeded to conduct the arbitration proceedings and he had passed an award dated 30.08.2021 and the same is under challenge before this Court. 3. The main grounds of challenge that are made by the petitioners are that the respondent appointed the learned Arbitrator unilaterally through his letter dated 05.02.2021. Further, the learned counsel for the petitioners would contend that the learned Arbitrator has not send any notice to the petitioners and also the respondent has not served any claim statement to counter it. Under these circumstances, without any further communication, the learned Arbitrator passed an ex-parte award dated 30.08.2021. 4. The learned counsel for the petitioners would submit that as per the law laid down by the Hon'ble Apex Court in the case of Perkins Eastman Architects DPC Vs. HSCC (India) Ltd., reported in 2019 SCC OnLine SC 1517, in the event of any unilateral appointment of Arbitrator without the consent of the ....
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....e documents, it appears that in the present case in the terms of the provision of Clause 20 of the Loan-cum-Hypothecation Agreement dated 30.08.2021, the respondent has option for the appointment of sole Arbitrator at their discretion. In terms of Clause 20 of the said agreement, the authorised representative of the respondent had nominated the sole Arbitrator. 10. In terms of Schedule VII of the Act, if the Arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party or if the Arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration shall be ineligible to be appointed as Arbitrator. 11. When a person is ineligible to be appointed as Arbitrator, in the same way, he is also ineligible to nominate any Arbitrator. This is what the Hon'ble Apex Court has held in the Perkins case. 12. In the present case, the person appointed as the Arbitrator is neither the employee, consultant, advisor or have any other past or present business relationship or manager, dire....
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....der whether the appointment of an arbitrator made by the Managing Director of the respondent therein was a valid one and whether at that stage an application moved under Section 11(6) of the Act could be entertained by the Court. The relevant Clause, namely, Clause 33 which provided for resolution of disputes in that case was under: "33. Resolution of dispute/arbitration (a) In case any disagreement or dispute arises between the buyer and the seller under or in connection with the PO, both shall make every effort to resolve it amicably by direct informal negotiation. (b) If, even after 30 days from the commencement of such informal negotiation, seller and the buyer have not been able to resolve the dispute amicably, either party may require that the dispute be referred for resolution to the formal mechanism of arbitration. (c) All disputes which cannot be settled by mutual negotiation shall be referred to and determined by arbitration as per the Arbitration and Conciliation Act, 1996 as amended. (d) Unless otherwise provided, any dispute or difference between the parties in connection with this agreement shall be referred to sole arbitra....
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....and, it is canvassed by the learned Senior Counsel for the respondent that the ineligibility cannot extend to a nominee if he is not from the Corporation and more so when there is apposite and requisite disclosure. We think it appropriate to make it clear that in the case at hand we are neither concerned with the disclosure nor objectivity nor impartiality nor any such other circumstance. We are singularly concerned with the issue, whether the Managing Director, after becoming ineligible by operation of law, is he still eligible to nominate an arbitrator. At the cost of repetition, we may state that when there are two parties, one may nominate an arbitrator and the other may appoint another. That is altogether a different situation. If there is a clause requiring the parties to nominate their respective arbitrator, their authority to nominate cannot be questioned. What really in that circumstance can be called in question is the procedural compliance and the eligibility of their arbitrator depending upon the norms provided under the Act and the Schedules appended thereto. But, here is a case where the Managing Director is the "named sole arbitrator" and he has also been conferred w....
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....ts are struck by Section 23 of the Contract Act, is embodied in the maxim: "qui facit per alium facit per se" (what one does through another is done by oneself). To put it in another form, that which cannot be done directly may not be done indirectly by engaging another outside the prohibited area to do the illegal act within the prohibited area. It is immaterial whether, for the doing of such an illegal act, the agent employed is given the wider powers or authority of the "pucca adatia", or, as the High Court had held, he is clothed with the powers of an ordinary commission agent only." 53. The aforesaid authorities have been commended to us to establish the proposition that if the nomination of an arbitrator by an ineligible arbitrator is allowed, it would tantamount to carrying on the proceeding of arbitration by himself. According to the learned counsel for the appellant, ineligibility strikes at the root of his power to arbitrate or get it arbitrated upon by a nominee. 54. In such a context, the fulcrum of the controversy would be, can an ineligible arbitrator, like the Managing Director, nominate an arbitrator, who may be otherwise eligible and a respectable....
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....olution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (Act 3 of 2016) and recognised by the decision of this Court in TRF Limited." Therefore, the unilateral appointment of Arbitrator is non-est in law. 15. Now the question that arise for consideration is that whether the petitioners participated in the arbitral proceedings or after having the knowledge of the appointment of the sole Arbitrator, failed to challenge the said appointment in terms of Section 13 of the Act, and whether the same would deprive the rights of the petitioners to challenge the said appointment of the Arbitrator in terms of the provisions of Section 34 of the Act for the violation of provisions of Section 12(5) of the Act? 16. In my considered view, the answer is no. The petitioners can certainly entitled to challenge under Section 34 of the Act, if there is any violation of the provisions of the Act. Even though, the petitioners have not challenged the unilateral appointment of the sole ....