BENCH : NAGPURMisc. Civil Application (MCA) No. 136 of 2025 Mohan Murli v. Shri Bhagwandas

228-mca-136-25.odt3.On 01.04.2009, disputes arose between the partners, whichwere amicably resolved by way of a Compromise Deed dated01.04.2009. Under the terms of the said amicable settlement, thenon-applicant voluntarily retired from the partnership firm, andthe accounts were accordingly settled. A total sum ofRs. 15,00,000/- was paid to the non-applicant towards hisretirement.4.It was further agreed that M/s Amesar and Co. wouldcontinue to carry on its business under the sole proprietorship ofShri Mohan Murli, S/o Maghanmal Amesar (the applicant herein),who would pay the entire sale consideration of Rs. 16,29,000/- forthe shop premises. It was agreed that the sale deed would beexecuted by Shri Bhagwandas Maghanmal Amesar (non-applicant)in favour of the applicant on or before 30.06.2009, free from allencumbrances, charges, and liens.5.In pursuance of the said agreement, a sum of Rs. 3,00,000/-was paid by the applicant on 25.04.2009. The remaining balanceof Rs. 13,29,000/- was to be paid at the time of execution of thesale deed. However, the non-applicant failed to execute the saledeed on 30.06.2009 despite the applicant being ready and willingto pay the balance amount. On the request of the non-applicant,the applicant waited for a further period of one month,considering the familial relationship. Despite this, the non-applicant failed to execute the sale deed and, instead, attempted tosell the shop premises to third parties and also tried to forcibly takeSKNair 328-mca-136-25.odtpossession by placing his own lock on the shop. However, due tothe timely intervention by the applicant, the said attempt did notsucceed.6.As per Clause 16 of the Partnership Deed, any disputesarising between the parties were to be referred to arbitration.Accordingly, by order dated 19.10.2012 passed by this Court, ShriArun Patil, Advocate, was appointed as the Arbitrator to resolvethe disputes between the applicant and the non-applicant, byinvoking Clause 16 of the partnership deed.7.Pursuant to the appointment, the learned Arbitrator firstadjudicated the preliminary issue regarding the maintainability ofthe arbitration proceedings and held that the subject matter of thedispute fell within the scope of the arbitration clause and was thusarbitrable. Thereafter, the applicant submitted his evidence by wayof an affidavit. However, the learned Arbitrator, in the course ofproceedings, recorded that the applicant failed to offer himself forcross-examination. It is pertinent to note that the matter was neverspecifically posted for the cross-examination of the applicant, norwas any order passed summoning the applicant for the saidpurpose.8.Subsequently, the matter was adjourned on several occasionsfor various reasons, but the proceedings were not conducted inaccordance with the procedure prescribed under the Act, 1996.Despite the pendency of evidence and absence of a clearSKNair 428-mca-136-25.odtprocedural framework for conclusion of the trial, the learnedArbitrator proceeded to pass an award dated 12.01.2019 inArbitration Petition No. 1/2010, whereby the applicant’s claim wasrejected and the applicant was further directed to bear costsamounting to Rs. 1,00,000/-.9.The said arbitral award was challenged by the applicantbefore the learned District Judge, Nagpur, under Section 34 of theAct, 1996. The learned District Judge, Nagpur, by order dated30.08.2024, set aside the award on the ground that, under Section25(c) of the Act, 1996, if a party fails to appear at an oral hearingor to produce documentary evidence, the arbitral tribunal mayproceed with the matter and make an award on the basis of theavailable evidence. The learned Arbitrator, however, failed toproceed in accordance with Section 25(c) and erroneouslydiscarded the affidavit evidence filed by the applicant withoutdeciding the matter on merits. The award was held to be in conflictwith the public policy of India and was accordingly set aside.10.In view of the setting aside of the arbitral award dated12.01.2019 by the learned District Judge, the applicant has nowfiled the present application under Section 11(6) of the Act, 1996,seeking appointment of a fresh arbitrator to adjudicate the disputebetween the parties.11. Learned counsel for the applicant submitted that thelearned Arbitrator failed to conduct the arbitration proceedings inSKNair 528-mca-136-25.odtaccordance with the provisions of the Act, 1996. It is contendedthat the applicant had duly filed his statement of claim, supportingdocuments, and affidavit of evidence before the learned Arbitrator.However, despite the availability of such material on record, thelearned Arbitrator did not adjudicate the dispute on merits asrequired under Section 25 of the Act, 1996.12.Learned counsel further submitted that the learnedArbitrator erroneously rejected the applicant’s claim solely on theground that the applicant did not remain present for cross-examination. It was argued that the proceedings were neverscheduled for cross-examination, and no order was passed to thateffect. Therefore, the rejection of the claim on this ground aloneamounts to procedural impropriety and denial of fair hearing. Insupport of his submissions, learned counsel for the applicant reliedupon the following decisions:Associated Constructions v. Mormugao Port Trust, reportedin 2010(5) MhLJ 739; Kirloskar Pneumatic Company Limited v.Kataria Sales Corporation, reported in 2024 SCC OnLine Bom941; and K.R. Traders v. Union of India, reported in 2022 SCCOnLine Bom 11762.13. Per contra, learned counsel for the non-applicant submittedthat the present application under Section 11(6) of the Act, 1996 isnot maintainable in the absence of prior issuance of a legal noticeinvoking the arbitration clause. It is contended that beforeapproaching this Court for appointment of an arbitrator, it wasSKNair 628-mca-136-25.odtincumbent upon the applicant to comply with the proceduralrequirements under the Act, particularly by issuing a noticeinvoking the arbitration clause and calling upon the other party toconcur in the appointment of an arbitrator.14.While the existence of an arbitration clause is not disputedby the non-applicant, it is submitted that the applicant has failed toadhere to the mandatory pre-requisites before invoking thejurisdiction of this Court under Section 11(6) of the Act. Theobjection raised pertains not to the arbitrability of the dispute, butto the procedural lapse in approaching the Court prematurely,without exhausting the statutory process. The arbitration clausebetween the parties is not in dispute. The respondent contendsthat the arbitral award was set aside by the learned trial Court onthe ground that the procedure contemplated under the Act, 1996was not duly followed. The respondent has further raised apreliminary objection to the maintainability of the presentapplication under Section 11 of the Act, 1996 asserting that inview of Section 21 a fresh notice invoking arbitration ought tohave been issued by the applicant prior to seeking appointment ofan arbitrator afresh. According to the respondent, in the absence ofsuch a notice, the application is premature and not maintainable.In support of these submissions, reliance was placed on thefollowing judgments:Arif Azim Company Limited v. Aptech Limited, reported in2024(5) SCC 313; and M/s D.P. Construction v. M/s VishvarajSKNair 728-mca-136-25.odtEnvironment Pvt. Ltd., decided on 06.07.2022 in Misc. CivilApplication (Arbn) No. 31 of 2021.15.I have carefully considered the submissions advanced by thelearned counsel for the applicant and the learned counsel for thenon-applicant. I have also perused the relevant documents placedon record as well as the judgments cited by both parties.16.The central issue that arises for consideration in the presentapplication is whether a fresh appointment of an arbitrator underSection 11(6) of the Act, 1996, is warranted in light of the arbitralaward dated 12.01.2019 having been set aside by the learnedDistrict Judge, Nagpur, by order dated 30.08.2024.17.It is not in dispute that the parties had entered into apartnership deed containing an arbitration clause (Clause 16), andthat disputes had arisen inter se which were referred to arbitrationby an earlier order of this Court dated 19.10.2012, whereby ShriArun Patil, Advocate, was appointed as the sole Arbitrator.18.The applicant filed his statement of claim, supportingdocuments, and evidence by way of affidavit. The learnedArbitrator, after deciding the preliminary issue regardingmaintainability, proceeded with the matter but ultimately rejectedthe applicant’s claim solely on the ground that the applicant failedto offer himself for cross-examination. However, it is the specificcase of the applicant that the matter was never posted for cross-SKNair 828-mca-136-25.odtexamination, nor was any direction issued by the Arbitrator in thisregard. This aspect was appreciated by the learned District Judge inproceedings under Section 34, who found that the Arbitratorfailed to follow the procedure contemplated under Section 25(c) ofthe Act, 1996, which provides that in case a party fails to appear orproduce evidence, the tribunal may proceed and make the awardon the basis of the evidence available on record.19.It is pertinent to note that arbitration proceedings areintended to be less formal and more flexible, but they mustnonetheless adhere to the principles of natural justice and theprocedure established under the Act. Section 25(c) specificallyempowers the Arbitral Tribunal to continue proceedings and makean award even in the absence of participation of one of the parties,provided sufficient material is on record. In the instant case, theArbitrator had the applicant’s affidavit and documentary evidencebut rejected the claim without evaluation on merits, thus violatingthe mandate of Section 25(c).20.The judgment cited by the learned counsel for the applicant,particularly in Kirloskar Pneumatic Co. Ltd. v. Kataria SalesCorporation [2024 SCC OnLine Bom 941], reiterates theprinciple that failure to permit a party to lead or rely on un-controverted evidence, or to decide the matter without addressingthe material on record, amounts to procedural irregularity andwarrants setting aside of the award. Similarly, AssociatedConstructions v. Mormugao Port Trust, 2010 (5) MhLJ 739,SKNair 928-mca-136-25.odtrecognizes the importance of adjudication on merits, particularlywhen sufficient material has been placed before the tribunal.21.As regards the objection raised by the non-applicantregarding maintainability of the present application under Section11(6) of the Act, 1996, it is to be noted that the requirement ofissuing a notice invoking the arbitration clause applies wherearbitration is sought for the first time. In the present case, thearbitration clause had already been invoked, an arbitrator wasappointed pursuant to judicial order, proceedings were conducted,and an award was passed, which was subsequently set aside by acompetent Court. In this context section 21 of the Act reads thus:"Unless otherwise agreed by the parties, the arbitralproceedings in respect of a particular dispute commence onthe date on which a request for that dispute to be referred toarbitration is received by the respondent."Therefore, the question of issuing a fresh notice under Section 21of the Act does not arise. The legislative intent behind Section 21is to mark the commencement of arbitral proceedings for thepurpose of limitation as well as to provide procedural clarity. Therespondent argues that, following the setting aside of the arbitralaward, any further proceedings would amount to a fresh initiationof arbitration, thereby requiring the applicant to issue a freshnotice invoking arbitration. Once the award has been set aside, thelogical consequence is revival of the dispute, and a freshappointment under Section 11(6) is permissible. The objectionraised by the non-applicant is thus without merit.SKNair 1028-mca-136-25.odt22.However, it is pertinent to consider whether the earlierinvocation of arbitration which had led to the constitution of anarbitral tribunal and pronouncement of an award loses its efficacyentirely upon the award being set aside. Judicial precedents haveindicated that once an award is set aside under Section 34, thearbitration clause revives, and the parties are at liberty to reinitiatearbitration unless barred by limitation or other legal impediments.In NBCC (India) Ltd. v. Zillion Infraprojects (P) Ltd., 2022 SCCOnLine Del 1774, the Delhi High Court observed that a freshnotice under Section 21 may not be necessary in every case wherethe award has been set aside, particularly where the arbitrationclause subsists and the dispute remains unresolved. That said, therequirement of a fresh notice may be viewed differently dependingon the facts of the case. Where the arbitral award is set aside due toprocedural infirmities (e.g., violation of natural justice or failure tofollow the agreed procedure), and not on merits, some courts haveemphasized the need for re-invocation to ensure compliance withdue process and procedural fairness.23.A fresh notice may not be required if original arbitrationproceedings were validly initiated. As in such case the proceedingsalready initiated and original arbitration can be recommenced.24.The Court has to consider if initial procedural failure (whichlet to the award being set aside) was due to lack of proper notice toother side under section 34(2) (a) (ii). Thus in case if the settingaside was a direct result of lack of notice, then a fresh notice wouldbe critical for new arbitrator.SKNair 1128-mca-136-25.odt25.A pragmatic approach needs to be adopted. Arbitrationearlier, was duly initiated. The non-applicant took part inarbitration proceedings. Award was set aside on the ground otherthan legality and/or requirement of notice. Therefore, asking theapplicant to issue fresh notice in the facts and circumstances of thecase, would defeat the purpose of the Act, which is to avoidunnecessary delays and swift disposal of arbitrable disputes.26.The decisions cited by the non-applicant, including ArifAzim Co. Ltd. v. Aptech Ltd., 2024 (5) SCC 313, aredistinguishable on facts. Those decisions deal with pre-referenceprocedural non-compliance, whereas the present case pertains to apost-award situation where the award has already been annulled bythe competent court.In view of the above discussion, this Court is of the opinionthat the applicant is entitled to seek a fresh reference of the disputeto arbitration under Section 11(6) of the Act, 1996. The priorarbitral award having been set aside, the arbitration clause standsrevived, and a fresh appointment is necessary to adjudicate thedispute afresh on merits, without issuance of fresh notice forappointment of Arbitrator. [NIVEDITA P. MEHTA, J.]SKNair