R.Sakthikumar @ Ram S.Kumar v. U.Damodharan @ Arun Ulag

J U D G M E N T(The judgement of the Court was delivered by M.CHOCKALINGAM,J.)Challenge is made to an order of the learned single Judge of thisCourt made in O.P.No.355 of 2006 whereby the award of the Arbitratorwas confirmed by dismissing the O.P.2. The Court heard the learned counsel for the appellant andalso for the respondent and made a scrutiny of all the materialsavailable.3. The appellants filed the said O.P. challenging the award dated17.7.2004 made by the sole arbitrator for the following facts andcircumstances. (a) The appellants are the husband and wife, while the firstrespondent is the sister's son of the first appellant. The secondrespondent is the close associate of the parties. The appellants andthe respondents commenced two companies, one by name Think BusinessNetwork, TBN(US) based in United States and the other TBN(IN) basedin India. The appellants are having 51% of shares and the respondents49% in the company based in United States and had equal shares inTBN(IN) in the company based in India. The companies were commencedin October 1996 and carried on the business activities till 2000 –2001. The object of the software service of TBN (US) was to locatethe customers who were in requirements of software service and afterdoing so, it should place orders before TBN(IN). It is also agreedthat the TBN(IN) should perform the service and provide to TBN(US).The US based company should pay for the service rendered by theother and in turn, the TBN(US) should provide to its customers andrecover the money from them. A customer called 'Kinzan' was locatedby TBN(US). They wanted service from TBN(IN). For the servicerendered by Indian based Company for the customer 'Kinzan', paymentwas not made by TBN(US) though 'Kinzan' has paid the amount to TBN(US). The TBN(IN) took a stand that till TBN(US) pays TBN(IN) for thesoftware service performed in favour of 'kinzan'. TBN(IN) shouldcontinue to retain the ownership of the copyright in respect of thesoftware. Therefore, TBN(US) should not permit 'Kinzan' to use thecopyright. In view of the same, there was a rift between theparties. The appellant filed a suit against TBN(US). (b) The petitioners/appellants floated a Company called 'DhyanInfotech Pvt.Ltd. and diverted its business in favour of the newlycreated company. The first respondent was the Director of the U.S.based Company and he was excluded from the entire process. Theappellants made allegations against the first respondent andrefused to provide accounts and removed him from the Directorship.Under such circumstances, the first respondent filed a comprehensivesuit in the Superior Court in California in which proceedings, theyagreed for arbitration. Both the appellants and the respondents areU.S. citizens. Admittedly, the parties agreed for two arbitrations,one in respect of the company in U.S. and the other in respect of the https://hcservices.ecourts.gov.in/hcservices/ company in India. Insofar as US Company is concerned, it was agreedthat the arbitral proceedings should be placed before the SuperiorCourt at California and it should be proceeded with. In respect ofboth arbitral proceedings, Mr.Rao, a Chartered accountant at Chennaiwas appointed as a sole Arbitrator. Insofar as the arbitral award inrespect of the Indian based Company is concerned, it was agreed byall the parties and it was also placed before the Superior Court atCalifornia and it was not challenged, but the arbitral award made bythe said sole Arbitrator in respect of the U.S. based Company waschallenged before the learned single Judge of this court inO.P.No.355 of 2006.4. The appellants challenged the award in the said O.P. mainly onthe following grounds :i) The award was opposed to the principles ofnatural justice.ii) The Arbitrator has misconducted himselfand has acted in a biased manner.iii) The Arbitrator has travelled beyond the scopeof reference and decided the matters and rights ofCompanies who were not parties to the ArbitrationAgreement.5. The learned single Judge after looking into the materialsavailable and hearing the submissions made, rejected all thecontentions putforth by the petitioner side and confirmed the award.Hence, this appeal at the instance of the petitioners.6. Advancing the arguments on behalf of the appellants, thelearned senior counsel would submit that the agreement specifies thatthe difference and disputes relating to the Company where to bereferred to arbitration as detailed in paragraph 2. Para 4 of theAgreement provides that Arbitration and Conciliation Act, 1996, shallapply. Para 6 of the Agreement provides that the Arbitrator was atliberty to convey, discuss, reply, receive or accept the order to therelated parties by e-mail, fax, and other accepted modes oftransmission. Placing reliance on Sections 18 and 24(3) of theArbitration Act, the learned counsel would submit that under Section18, both the parties to the arbitration proceedings should be treatedequally and to be given full opportunity to present their case.Section 24(2) of the Act provides that all statements, documents andinformation submitted to the Arbitration Tribunal by one party shallbe communicated to the other party. The above principles constitutethe principles of natural justice. 7. Learned counsel further submits that in the instant case, itwould be seen that the hearing that had taken place is one sided.The Arbitrator has heard and received information from each partiesin the form of e-mails and in the form of questionnaire and has notfurnished the same to the other parties. It would be quite evident https://hcservices.ecourts.gov.in/hcservices/ from page 2 of the Award under the head "hearing and proceedings",the Arbitrator has had information from individuals parties foundin Exhibit B, C, C and E and considered only the informationfurnished by the respondents without furnishing the same to the otherparties and without the other parties knowing its contents. Muchreliance was placed by the respondents on Clause 6 of the ArbitrationAgreement before the learned Single Judge. The said clause onlyenables the Arbitrator to convey or receive communications by email,fax etc. but did not permit the Arbitrator to decide the issue ofone party communicating the same to the other party. In fact, it maynot be permissible for the parties to even agree upon suchprocedure in view of Section 24(3) of the Act, which mandatesinformation to be given to the other parties. Section 24(3) is notin controversy between the parties. Section 24(1), 25, 26 of the Actwould clearly indicate "unless and otherwise agreed upon by theparties" but the same was absent in Section 24(3). In fact,appellant No.2, has not even answered the questionnaire which wassent to her on 4.1.2004 which would be evident in page Nos.100 and101 of the paper book. It would be seen from Exhibits B,C and D thatthe Arbitrator has sent the questionnaire to the parties only inJuly 2004 and got the answers from three of the parties. From theavailable materials, it would be quite clear that the Arbitratorhas sent e-mails to the respective parties. None of the saidinformation had been communicated to the other. Therefore, there wasviolation of mandatory provisions contained in Section 24(3) of theAct. Hence, the Award has to be set aside for violation of mandatoryprovisions.8. Added further learned counsel, the Award was opposed tovarious provisions of the Arbitration and Conciliation Act. Section23(1) of the Act provides that the parties should state the factssupporting their claim, the points to the issue and the relief orremedies sought for, while the other party should state the defence,unless the other party agrees to certain statements. 9. In the instant case, there was no claim statement made by theparties containing any claim or relief. Apart from that, Section 19(2) of the Act provides for the parties to agree on the procedurewhich however is subject to Part I which contains Sections 2 to43. Hence, it would be quite clear that Section 23(1) of the Act wasmandatory and was not subject to any contract to the contrary. Theprocedure to be followed could be agreed but the requirement to filea claim statement containing the claims and relief/s was mandatory.In the instant case, Section 23 of the Act has not been compliedwith. 10. It is pertinent to point out that number of reliefs grantedby the Arbitrator was not even found in the answer to thequestionnaire submitted by the parties. In the course of the award,the Arbitrator has held that the amount of US$2,90,000 is payable toTBN-IN by TBN-US. The claim is not even found in the answer to thequestionnaire submitted by the first respondent. Equally, in pageNo.14 of the Award, the Arbitrator has held that TBN-US shall get https://hcservices.ecourts.gov.in/hcservices/ compensated from Dhyan Infotech and the said Indian Company shall pay25% to gross receipts in the EMS and other Software to TBN-US whichagain is not found in any claim by the first respondent, even in theanswer to the questionnaire submitted by him. Thus, it would bequite clear that the award has proceed to decide upon the matterswhich were not found in any claim putforth. Apart from the above, theAward was opposed to Section 28 of the Arbitration and ConciliationAct. The said provision provides that Arbitral Tribunal shoulddecide in accordance with the terms of the contract and shall takeinto account the usage of the trade applicable to the transaction. 11. The Arbitration Agreement was entered into between theparties who were Directors/shareholders of TBN-US. Dhyan Infotechwas not a party to the Arbitration Agreement. The award directs theIndian Company to pay TBN-US for the use of its alleged intellectualproperty rights in EMS and also software to an extent of 25% ofgross receipts. Since Dhyan Infotech was not a party to theArbitration Agreement, the rights of the said Company cannot beadjudicated, the direction was opposed to the Indian law, sinceintellectual property rights cannot be assigned for non-payment ofmonies. The Award was also opposed to Section 81 of the Act also. Theparties have not been treated equally and given equal opportunity.The Arbitrator had hurriedly conducted the proceedings and passedthe award without providing opportunity. The questionnaire were sentin piece meal by the Arbitrator only in July 2004. There was hardlytime for the parties to know about the answers given by the otherparties or even to require the Arbitrator to furnish information. On8.7.2004, the Arbitrator has addressed the first respondent to theeffect that the first respondent wants the accounts of TBN-US to beaudited and has suggested that he would make a trip to the U.S. andaudit the accounts. The Arbitrator had offered his services andrequested information for visa and had asked for expenses. The firstpetitioner had replied to the effect that there are not enough fundsfor TBN-US to pay for the audit. Thereafter, there was exchange of e-mails between the first and the third respondent/Arbitrator. As couldbe seen from the exchange of e-mails on 15.7.2004, the firstrespondent has addressed the Arbitrator regarding the allegedmisappropriation of TBN EMS software by Dhyan Infotech and also madecertain suggestions and two days thereafter, the Award has beenpassed. Apart from that, it is also seen from the award that theArbitrator reckoned the figures which are not borne out by any of theexhibits on record. The calculation made by the Arbitrator appears tohave been made on the basis of the personal information received fromthe first respondent behind the back of the appellants. This wouldalso vitiate the Award. All would indicate that the thirdrespondent/Arbitrator acted in bias. 12. The learned counsel took the Court to the letter addressedby the first respondent to the third respondent/Arbitrator on15.7.2004 which according to him would indicate bias and misconducton the part of the third respondent/Arbitrator. The ArbitrationAward has been made beyond the terms of the reference. The Awardwould clearly go to show that it dealt with the Companies who are not https://hcservices.ecourts.gov.in/hcservices/ parties to the Arbitration Agreement. Dhyan Infotech is not a partyto the Arbitration Agreement at all. The mail at pages 163 and 165 ofthe paper book addressed by the first respondent to the thirdrespondent would make out a case of bias of the third respondentagainst the appellants and in favour of the first respondent. Thedocument would indicate a private conversation which clearly revealsthe private interaction between the first respondent and the thirdrespondent which would vitiate the Award. All the above would clearlyindicate that the award suffered by all the above reasons mentioned,since it is violative of all mandatory provisions of law and it hasgot to be set aside, but the learned single Judge has not paid itsattention on any one of these aspects, but has affirmed the awardaccepting the contentions putforth by the respondent side. Hence, thejudgement of the learned single Judge has got to be set aside.13. In support of the contention, the learned counsel for theappellants relied on the following judgments:i) 2005(2) ALR 342 (Rudramuni Devaru vs. ShrimadMaharaj Niranjan Jagadguru Dr.Gangadhar rajayogendraMahaswamigalu, Moorusaavira Math, Hubli & ors.)ii) 2006(7) SCC 800 (Suresh Chandra Nanhoryavs. Rajendra Rajak)iii) 2008(4) R.A.J. 168 (Ker) (Impexcorporation v. Elenjikal Aquamarine Exports Ltd.)iv) 2003(2) Arb.LR 5(SC) (Oil & Natural GasCorporation Ltd. vs. SAW Pipes Ltd.)v) 2008(1) Arb. I.R 484 (Delhi) (Oceanic dehydratesPvt.Ltd. vs. Union of India)vi) 2005(1) R.A.J. 121 (Ker) (Sulaikha Clay Minesv. Alpha Clays)vii) AIR 1970 SC 82 (H.E.M. Union v. State ofBihar)viii) AIR 1987 SC 1242 (Ram Sarup Gupta v.BishunNarain Inter College) ix) 2002 Sup. ALR 375 (Gowri Spinning Mills Ltdvs. Adimoolam)x) AIR 1970 SC 967 (Dewan Singh v. Champat Singh)14. Contrary to the above contentions learned counsel for therespondents putforth his submissions in his sincere attempt tosustain the order of the learned single Judge. The learned counselfor the respondents also relied on the following decisions.(i) (2009) 5 MLJ 1055 (Vijayakumar Raju v. IndusInd Bank Ltd. ). https://hcservices.ecourts.gov.in/hcservices/ (ii) 2007 (4) Arb.LR 18 (Bombay)(DB) ( VimalG.Jain v. Vertex financial services Pvt. Ltd) (iii) (2002)3 Supreme Court cases 572 (NarayanPrasad Lohia v. Nikunj Kumar Lohia) (iv) AIR 1987 Supreme Court 2316 (Delhi MunicipalCorpn.v. M/s. Jagan Nath Ashok Kumar)15. The Court paid its anxious consideration on the submissionsmade and scrutinised all the materials available.16. Admittedly, an agreement for reference to the sole Arbitratorwas entered into between the parties on 2.2.2004 which reads asfollows: "WHEREAS differences and disputes have arisen betweenthe parties in connection with the administration,management and other affairs of the 'company';WHEREAS the parties aforesaid have agreed to settle thedifference and disputes more specifically detailed hereunderand refer the matters to sole arbitrator for arbitration;......2. The matters of differences/disputes relating to thecompany specifically referred to arbitration as per para 1,are detailed hereunder but not limited to:a) Business relationship and commercialtransactions with Think Business Networks PrivateLimited, India and other related parties;b) Cases filed by the company againstindividuals/companies in its capacity asplaintiff/respondent;c) Cases filed against the company by theindividuals/companies and in which the company isa defendant;d) Remuneration/compensation to the directorsof the company for the period after April 1st,2002;e) Legal expenses & claim of reimbursement tothe parties involved, administration, capitalstructure & shareholding pattern and conduct ofaffairs of the company;f) Valuation of assets and liabilities of thecompany including contingent assets and contingentliabilities to arrive at network of the company; https://hcservices.ecourts.gov.in/hcservices/ g) Withdrawal of the cases filed by thecompany or in which the company is involved;h) All matters connected by procedure, legalobligations for the above matters;i) To arrive at compensation amount, statedas value per share as per accepted accountingstandards, for transfer of shares in respect ofwilling parties;......4. The parties herein agree to co-operate, furnishrelevant date and handover possession during the period ofarbitration for early award of arbitration and further agreethat the provisions of the Arbitration and Conciliation Act,1996 shall apply, provided they are not inconsistent orrepugnant to this agreement;5. The arbitrator will decide the matter within 4months. But in case the matter could not be decided within 4months, the time to make the award shall be extended by onemore month. The cost of arbitration and the expenses shallbe met out of the company's funds.6. The arbitrator may ask for auditing of books ofaccount of the company to a period relevant to thearbitration, for finalisation of the accounts of thecompany, may appoint consultants or advisors to value theassets of the company, may take administrative assistancefor other related matters of arbitration. The arbitrator isat liberty to convey, discuss, reply, receive- accept andorder to the related parties herein communication by email,fax and other accepted modes of transmission during thearbitration process."Under the said agreement, the sole Arbitrator Mr.Rajeshwara Rao,Chartered Accountant, Mylapore, Madras was appointed in respect oftwo companies, TBN-US based in United States and TBN-IN, based inIndia. Two arbitral proceedings were initiated, pending the suit inthe Superior Court of California. The said Arbitration Agreement wasentered in India. It is also an admitted position that two arbitralawards came to be made by the same Arbitrator, following the sameprocedure. The arbitral award in respect of the disputes betweenthe parties insofar as India was concerned, it was not adjudicated byeither of the parties but insofar as the award made by the Arbitratorin respect of the disputes arose in TBN-US based in United States,the arbitral award is challenged before the Court. It is also borneby documentary evidence that before the Superior Court inCalifornia, the parties would submit the arbitral awards forconfirmation but the appellants filed O.P. before this Court.Preliminary objections were raised as to the jurisdiction of thisCourt by the respondents but the same was rejected by the Court. The https://hcservices.ecourts.gov.in/hcservices/ said order has become final, since it was not appealed against. Apartfrom that, in Clause 4 of the Agreement, it was agreed that theprovisions of the Arbitration and Conciliation Act, 1996, providesthat they were not inconsistent or repugnant to the Agreement. 17. The Award was challenged by the appellants on the groundsthat it was in violation of mandatory provisions under Sections 23and 34 of the Arbitration and Conciliation Act. Apart from that, itdealt with the third parties and thus exceeded the terms of theAgreement and it is also hit by bias. Sections 23 and 24 of theArbitration and Conciliation Act, 1996 reads as follows:" 23. Statement of claim and defence. (1) Within theperiod of time agreed upon by the parties or determinedby the arbitral tribunal, the claimant shall state thefact supporting his claim, the points at issue and therelief or remedy sough, and the respondent shall statehis defence in respect of these particulars, unless theparties have otherwise agreed as to the requiredelements of those statements.(2) The parties may submit with their staements alldocuments they consider to be relevant or may add areference to the documents or other evidence they willsubmit.(3) Unless otherwise agreed by the parties, eitherparty may amend or supplement his claim or defenceduring the course of the arbitral proceedings, unlessthe arbitral tribunal considers it inappropriate toallow the amendment or supplement having regard to thedelay in making it.24. Hearings and written proceedings. - (1) Unlessotherwise agreed by the parties, the arbitral tribunalshall decide whether to hold oral hearings for thepresentation of evidence or for oral argument, orwhether the proceedings shall be conducted on the basisof documents and other materials:Provided that the arbitral tribunal shall hold oralhearings, at an appropriate stage of the proceedings,on a request by a party, unless the parties have agreedthat no oral hearing shall be held. (2) The parties shall be given sufficient advancenotice of any hearing and of any meeting of thearbitral tribunal for the purposes of inspection ofdocuments, goods or other property.(3) All statements, documents or other informationsupplied to, or applications made to the arbitraltribunal by one party shall be communicated to the https://hcservices.ecourts.gov.in/hcservices/ other party, ad any expert report or evidentiarydocument on which the arbitral tribunal may rely inmaking its decision shall be communicated to theparties."18. Admittedly, both the parties did not putforth their claimstatements and also did not claim in respect of their respectiveclaims and objections to their claims. On appointment, the soleArbitrator has issued questionnaire in piece meal and the same werealso answered. In clause 6 of the agreement, it is found that theArbitrator could convey or receive the communication by e-mail, faxetc. 19. The first contention putforth by the appellants side that theparties were not allowed to place their claim statement and thedefence statement from the opposite part cannot be countenanced fortwo reasons. The disputed parties are all based in United states andthe Chartered Accountant appointed as sole Arbitrator was based atMadras, India. Taking into consideration, the said fact, clause 6should have been incorporated to the effect enabling the Arbitratorto convey or receive communications through e-mail, fax etc. Apartfrom that, insofar as arbitral award in respect of Indian basedcompany TBN-IN is concerned, the same procedure was adopted to whichthe appellants have not raised even the little finger but havefollowed the same procedure and the said Award is also was notchallenged. Under such circumstances, now the appellants cannot bepermitted to state that proper procedure was not adopted.20. Section 24(3) of the Act mandates that all statements,documents or other information supplied to, or applications made tothe arbitral tribunal by one party shall be communicated to the otherparty. In the instant case, admittedly, after the questionnaire wereserved upon the appellants on the one side and the respondents on theother and the answers were also obtained therefor, neither thequestionnaire served upon one party and the answer receivedtherefrom was communicated to the other party enabling tounderstand what was actually claimed by the other party and how theclaims of the first party was defended by the other party. Thus, boththe parties were kept in darkness. It is possible and permissible toagree upon some procedure, but the Arbitrator cannot go against themandate to pass on the information given by one party to the otherparty. As per Section 24 of the Act, unless otherwise agreed by theparties, the Arbitrator was duty bound to communicate all thestatements, documents and other information supplied by one party tothe other party. In the instant case, the arbitral agreement does notstand contrary to the provisions under section 24(3) of the Act. 21. It could be seen from the available materials, acommunication was sent by the Arbitrator on 14.7.2004 which reads asfollows:"find attached is the list of questions. Please replyat the earliest. I will be making the award by 17th July. I https://hcservices.ecourts.gov.in/hcservices/ have given the reasons in my earlier email. I am alsoattaching the mail addressed to your wife, since I do nothave her email id. If she is still in India, I will forwardthe same to her. Please forward."In reply, the first appellant has sent a communication to theArbitrator on 16.7.2004 which reads as follows:"I had forwarded your email to my wife. Since she isin India, she requested she would need a few more days.However she mentioned that she will get it completed bySunday (Sat 18th) and send it to me and I will forward ityou in return."22. When the Arbitrator has sent the questionnaire awaiting thereply to take a decision and when the same was replied by the firstappellant as seen above, the Award came to be passed on 17.7.2009which would be quite clear that even before the receipt of theanswers for the questionnaire from the first appellant, theArbitrator was haste in making the Award. 23. In the instant case, it is quite evident that the Arbitratorhas traversed beyond the jurisdiction by fastening the liability onthe third party, the companies, who are not parties to the contract.24. The learned counsel for the respondents pointing to Clause 2of the Arbitration Agreement would submits that it speaks about thedifferences and disputes relating to the Company pertaining to thebusiness relationship and commercial transactions with Think BusinessNetwork Private Limited, India and other related parties and allmatters connected by procedure, legal obligations for the abovematters, which in the considered opinion of the Court, these clausescannot be taken as a shelter by the Arbitrator to go beyond the termsof the Agreement. It remains to be stated that the Arbitrator hasgranted number of reliefs which were not the subject matter ofreference or the answers to the questionnaire submitted by theparties. The Arbitrator had held that the amount of US$2,90,000 ispayable to TBN-IN by TBN-US. It did not find place in thequestionnaire. Apart from that, he has also found that TBN-US shouldget compensated from Dhyan Infotech Pvt. Lt. and the Indian Companyshall pay TBN-US for use of its IP rights in the EMS and othersoftware to the extent of 25% of the gross receipts booked by DhyanInfotech for EMS and also for its use in the next 8 years, which wasactually not a claim made by the first respondent in thequestionnaire. Thus, it would be quite clear that the Arbitrator hasproceeded to decide the matters which neither find place in theclaim nor in the answers to the questionnaire. Thus, it can be statedthat it was opposed to Section 23 read with Section 18 of the Act. 25. Section 28(3) makes it clear that the Arbitral Tribunalshould decide in accordance with the terms of the contract. It isevident from the Arbitration Agreement that it was entered intobetween four parties namely, the petitioners and the respondents who https://hcservices.ecourts.gov.in/hcservices/ are Directors and shareholders of the Companies and Dhyan InfotechPrivate Limited against whom the liability was fastened is not aparty to the Arbitration Agreement. Dhyan Infotech Private Limitedand the said Indian Company was directed to pay for the use of thealleged intellectual property rights. 26. The contentions putforth by the respondent's side that such adirection for payment cannot be outside the scope of the terms of theagreement, since it would come under clause 2 of the agreement. Thiscontention cannot be countenanced so long as Dhyan Infotech Pvt.Ltdwas a third party to the arbitration agreement. The rights andliabilities of the said Company cannot be adjudicated upon.27. The learned counsel for the appellants assailing the awardstated that the personal knowledge of the Arbitrator had a role toplay in framing the questions found in the questionnaire. The learnedcounsel pointing to page 144 of the typed set of papers would statethat "It is to the notice of the arbitrator that a company called'DHYAN INFOTECH PRIVATE LIMITED' has been incorporated in India andfrom the place where management of TBN India is taking place and hasthe same address in USA also as that of TBN – US. The company isincorporated with your existing co-directors in these companies andthe new company formed also has the similar objects as that of theexisting companies referred above", which according to the learnedcounsel can also stand a good reason to set aside the award and alsoin view of the decision taken in AIR 1970 SC 967 (Dewan Singh v.Champat Singh) wherein it is held as follows: "This agreement does not empower the arbitratorseither specifically or by necessary implication todecide the disputes referred to them on the basis oftheir personal knowledge. The recital in thatagreement that the arbitrators may decide the disputesreferred to them in "whatever manner" they think doesnot mean that they can decide those disputes on thebasis of their personal knowledge. The proceedingsbefore the arbitrators are quasi-judicial proceedings.They must be conducted in accordance with theprinciples of natural justice. The parties to thesubmission may be in the dark as regards the personalknowledge of the arbitrators. There may bemisconceptions or wrong assumptions in the mind of thearbitrators. If the parties are not given opportunityto correct those misconceptions or wrong assumptions,grave injustice may result. It is nobody's case thatthe parties to the submission were informed about thenature of the personal knowledge, the arbitrators hadand that they were given opportunity to correct anymisconception or wrong assumption. Further in thepresent case there were as many as five arbitrators.It is not known whether the award was made on thebasis of the personal knowledge of all of them or onlysome of them. Arbitration is a reference of a dispute https://hcservices.ecourts.gov.in/hcservices/ for hearing in a judicial manner. It is true thatparties to an agreement of reference may include in itsuch clauses as they think fit unless prohibitedbylaw. It is normally an implied term of anarbitration agreement that the arbitrators mustdecide the dispute in accordance with the ordinarylaw: see Chandris v. Isbrandtsen Moller co., 1951-1 KB240 that rule can be departed from only ifspecifically provided for in the submission."the award has got to be set aside. 28. In the instant case, the arbitrator has proceeded to make anaward by denying the opportunity of putting forth the case and tomeet the claim of the other side. The natural justice would requirenot only giving opportunity but sufficient and reasonableopportunity, since it is the essence of fair adjudication. Theprinciples of natural justice should be strictly followed in order toprevent miscarriage of justice.29. Apart from all the above, regarding the violation ofmandatory provision of the Act, the Court is able to see bias whichis evident in the strict sense of the terms. It is contended by therespondent side that the question of bias was not raised in thepetition, but, this contention, cannot be accepted, since it hasspecifically averred. It would be more apt to reproduce the contentsof the letter dated 15.7.2004 sent by the first respondent to theArbitrator which reads as follows:"I have furnished the proof required to show thatRam/Raj have misappropriated the Think EMS softwarefor their new company Dhyan Infotech. Please let meknow if you have any questions.If you are able to make the ruling that thesoftware has been misappropriated, then kindly includethe attached proof as part of your arbitration awardso that it will be more binding if Ram/Raj choose tocontest the award in US courts......."The above passage written by the respondent to the Arbitrator is notin the nature of the answers to the questionnaire but in the natureof persuasion to make an award for misappropriation.30. A reading of the above letter would indicate that it is insuggestive nature so that an order could be passed in favour of therespondent. The contention put forth by the respondent side that themessage was given on 15.7.2004, but the award came to be passed on17.7.2004 and hence, the Arbitrator has not looked into his message,cannot be of no avail to the respondent for the simple reason that itwas a fax message which would have reached him immediately. The tenorof this communication coupled with the refusal to grant time to theappellant for answering the questions as found in the questionnaireon 15.7.2004 as requested by the appellant on 14.7.2004 would clearly https://hcservices.ecourts.gov.in/hcservices/ indicate that the award was an outcome of bias. 31. The Act mandates that the Arbitrator should apply his mindinto the terms of the contract entered into between the parties anddecide the rights and liabilities, but, in the instant case, theArbitrator has proceeded to pass an award even against the thirdparties who were not parties to the contract or arbitral agreementand thus, he has travelled beyond the contract.32. Thus, the Court is able to see that in the instant case, theappellants were not given the statements of claim and defence made bythe opposite party to putforth its case and thus, they were preventedfrom presenting their case and the arbitral award also dealt with thedispute not contemplated and not falling within the terms of thesubmissions to the Arbitrator. As stated above, it contains matterbeyond the scope of arbitration. Apart from all the above, it is acase where the Court is able to notice that the principles ofnatural justice being offended and also against the public policy andit was also hit by bias. 33. In view of all the above, the learned single Judge shouldhave set aside the award but has taken a contrary view which in theconsidered opinion of the Court, does not stand the scrutiny of law.Hence, the order of the learned single Judge has got to be set asideand the award under challenge has also to be set aside. Accordingly,the appeal is allowed leaving the parties to bear their costs.Consequently, connected M.P.No.1 of 2009 is closed. Sd/- Asst. Registrar. /true copy/ Sub Asst. Registrar.vsiToThe Sub-Asst.Registrar,Original Side, High Court, Chennai-1041 cc To Mr..R.Murari, Advocate, SR.425291 cc To Mr.M/s. Sarvabhauman Associates, Advocate, SR.42519 O.S.A.No.256 of 2009.gbv(co)pmk.22.9.2009.