Chattisgarh High Court
Madhusudan Agrawal vs Galaxy Exfeen Ltd. And Others on 17 July, 2026
Author: Narendra Kumar Vyas
Bench: Narendra Kumar Vyas
1
CGHC010156132005 2026:CGHC:30412
AFR
HIGH COURT OF CHHATTISGARH AT BILASPUR
Reserved on 16-6-2026
Pronounced on 17-7-2026
MA No. 1490 of 2005
ï‚· Madhusudan Agrawal s/o Shri Jagdish Prasad Agrawal, aged about
35 years r/o. Bajrang Chowk, Newra, Tahsil Tilda, District Raipur,
Chhattisgarh.
... Appellant/non-applicant/objector
versus
1. Galaxy Exfeen Ltd. (Presently Sunita Finlies Limited) through
managing Director, Registered Office in front of Rajkumar College,
G.E. Road, Raipur, Chhattisgarh
(Applicant/claimant)
2. Yogesh Agrawal, Proprietor Usha Car Service, Samta Colony,
Raipur, Chhatisgarh.
(... Non-Applicant No.2.)
For appellant. : Mrs. Shraddha Mishra, Advocate appears
on behalf of Mr. Prateek Sharma,
Advocate.
For Respondents No.1 & 2 : Mr. Mayur Khandelwal, Advocate.
(Hon’ble Mr. Justice Narendra Kumar Vyas)
C A V Order
1. This appeal has been filed by the appellant/objector under Section 37
of the Arbitration & Conciliation Act, 1996 (for short, “the Act, 1996”)
against the order dated 1-10-2005 passed by the District Judge,
2
Raipur in Miscellaneous Civil Case No. 133 of 2005 (Madhusudan
Agrawal Vs. Galaxy Exfeen Limited & others) by which an application
filed under Section 34 of the Act, 1996 by the appellant for setting
aside the award dated 2-1-1999 passed by the Arbitrator has been
rejected.
2. The record of the case would demonstrate that the notice to
respondent No. 2 remained unserved despite direction of this Court to
issue fresh notice to respondent No. 2 on the correct address on
payment of process fee as per rules vide order dated 13-06-202 as no
efforts have been made by the appellant to get service of notice upon
respondent No. 2 on the correct address. The record of the case
would further demonstrate that this Court has issued a fixed date SPC
for appearance of respondents No. 1 and 2 vide order dated 24-03-
2026 fixing the matter on 16-04-2026. On 16-04-2026, vakalatnama
was filed on behalf of respondent No. 1, but SPC issued to respondent
No. 2 was unserved due to incorrect address of the respondent No. 2
and no efforts were made by the appellant to get correct address of
respondent No. 2. Thus, from above factual matrix derived from the
record would clearly demonstrate that the appellant is not interested to
serve the notice upon respondent No. 2. Therefore, there was no
option for this Court, except to hear the argument on behalf of the
appellant and respondent No. 1 only on 16-06-2026.
3. This Court has called the record of the Arbitration case as well as
record of the learned District Judge and following facts have been
revealed which are as under:
3
(A) An agreement of hire purchase was executed between
respondent No.1/Finance Company and respondent No.2 Yogesh
Agrawal, who was guarantor of third party ie., appellant for
providing finance for purchase of new vehicle and the terms and
conditions were enumerated in the hire purchase agreement. As
per Clause 3 of the Hire Purchase Agreement executed on
27.08.1996, a sum of Rs. 56,282/- was initially payable by the
hirer ie., appellant and a sum of Rs. 1320/- as service charges
both of which shall become the absolute property of the owner
and total sum of Rs. 1,76,484/- is payable by the finance
company for purchase of the vehicle.
(B) Clause No. 21(a) of the Hire Purchase Agreement (hereinafter
referred to as “Agreement”) provides that all disputes, differences
and or claims, arising out of this Agreement whether during its
subsistence or thereafter shall be settled by arbitrator in
accordance with the provisions of Indian Arbitration Act, 1940 or
any statutory amendments thereof and shall be referred to the
Sole Arbitration of an arbitrator nominated by the Managing
Director of the owner. Clause 21 (a) and 21(b) of Hire Purchase
Agreement is reproduced as under:
“(21)(a) All disputes, differences and/or claims, arising out of
this Hire Purchase Agreement whether during its
subsistence or thereafter shall be settled by arbitration in
accordance with the provision of Indian Arbitration Act, 1940
or any statutory amendments thereof and shall be referred
to the sole Arbitration of an arbitrator nominated by the
Managing Director of the Owner. The award given by such
an Arbitrator shall be final and binding on all the parties to
this agreement. It is a term of this agreement that in the
event of such an arbitrator to whom the matter has been
originally referred dying or being unable to act for any
4reason, the Managing Director of the Owner, at the time of
such death of the arbitrator or his inability to act as
arbitrator, shall appoint another person to act as arbitrator.
Such a person shall be entitled to proceed with the
reference from the stage at which it was left by his
predecessor.
21(b) The venue of arbitration proceedings shall be at
Raipur (M.P.). The constants of the aforesaid Agreement
were read out, explained to the Hirer and to the Guarantor/s
in their own language after the said Agreement was fully
filled in and understood by the Hirer and the Guarantor/s
and thereafter the signatures of the Hirer and Guarantor/s
were taken on this Agreement.”
(C) It is also revealed from the record that Respondent No.1 / Galaxy
Exfleen Limited (hereinafter referred to as “Finance Company”) is
a registered Finance Company and respondent No.2 Yogesh
Agrawal, who is proprietor of Usha Car Services, Raipur has got
financed the vehicle Maruti Van on installment for appellant by
receiving margin money of Rs. 56,180/- on 25-8-1996 from the
appellant for total sale consideration of Rs. 1,88,000/-. As per the
Agreement executed between Madhusudan Agrawal and
respondent No. 2 Yogesh Agrawal who was guarantor of the
appellant, the financed amount has to be repaid by the appellant
with interest in 23 equal installments. Accordingly, the appellant
has given 23 blank cheques bearing serial Nos. from 154878 to
154900.
(D) It is also a case of the appellant that respondent No.2 is a man of
confident of respondent No.1 and on his assurance finance was
made, but Maruti Van was not provided to the appellant/objector
despite the payment of margin money on 20-2-1997, as such the
Finance Company in connivance with respondent No.2 Yogesh
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Agrawal has committed fraud. It is also the case of the appellant
that the respondent No. 1 has given demand draft to respondent
No. 2 and also recovered first installment of Rs. 7,750/- despite
this Maruti Van was not provided to the appellant.
(E) It is also the case of the appellant that since respondent No.2 has
not provided the Van therefore, the appellant sent a legal notice
dated 17-02-1997 alleging the fraud committed by respondent No.
1 and also lodged a complaint before the Police Station, Azad
Chowk thana on 30-04-1997. In the meantime the Finance
Company /respondent No.1 invoking its power appointed Suresh
Jain as Sole Arbitrator for resolving the dispute. The Sole
Arbitrator on his appointment as Arbitrator has issued notice to
the appellant. Respondent No. 1 filed his claim alleging that
finance was made to the appellant for purchase of Maruti Van
which was payable to Maruti Udyog New Delhi and the
respondent has given first installment on 25-09-1996 which was
bounced, as such they made demand for payment of installment,
as such he has violated the terms of Agreement. It is also the
case of respondent No. 1 that after obtaining the loan he has not
purchased the vehicle, but utilized the same for own purpose,
thus it has been prayed for passing the award of Rs. 1,68,484/-
with interest from 27-08-1996. Since the appellant could not
appear, therefore, the Sole Arbitrator passed an ex parte award
on 02-01-1998.
(F) The appellant has filed an application under Section 14(2) of
Arbitration Act, 1940 for setting aside ex parte award before the
6
learned Third Additional District Judge Raipur who vide order
dated 30-11-1998 has set aside the ex parte award and directed
the appellant to appear before the Sole Arbitrator on 21-01-1999.
(G) After remand, the appellant raised objection regarding the
procedure to be followed while conducting the Arbitration award
proceeding and also regarding appointment of Suresh Jain being
an employee of respondent No.1 as Arbitrator and also submitted
reply on merit denying the claim of the respondent No.1. This
Court to avoid repetition is not mentioning the averments in detail
as in the appeal also same grounds have been raised by the
appellant which will be discussed by this Court in subsequent
paragraphs. The learned Arbitrator rejected the objections and
passed the award on 14-03-2001 which has been challenged by
the appellant by filing an application under Section 34 of the Act,
1996 before the learned District Judge, Raipur. The learned
District Judge Raipur vide impugned order dated 01-10-2005 has
rejected the same. Being aggrieved with this order the appellant
has preferred this appeal under Section 37 of the Act, 1996.
4. Learned counsel for the appellant would submit that since the
Arbitration Act, 1940 has already been repealed and new Act has
already been enacted, therefore, proceeding under Arbitration Act,
1940 is illegal. It has been further contended that no consent of the
applicant was obtained before engagement of Arbitrator, therefore,
engagement of Suresh Jain as Arbitrator is illegal. Learned counsel for
the appellant would further submit that the Sole Arbitrator Mr. Suresh
Jain was paid employee of the Company as he was working as
7
Company Secretary and friend of respondent No.1, therefore, in view
of Section 12 (1) of the Act, 1996, he cannot be appointed as
Arbitrator, as such the entire award passed by the learned Arbitrator is
void ab initio. It has been further submitted that no proper opportunity
of hearing to take defence has been given to the applicant, therefore,
the award should have been set aside by the learned District Judge
while hearing the application filed under Section 34 of the Act, 1996.
He would further submit that learned District Judge should have
considered that the ground raised by the applicant falls within the
ambit of Section 34 of the Act, 1996 where the Court can interfere in
arbitration award. It has been further contended that the documents
and evidences have not been properly appreciated by the learned trial
Court while dismissing the application filed under Section 34 of the
Act, 1996, as such the order dated 01-10-2005 is illegal and same is
liable to be set aside by this Court.
5. On the other hand, learned counsel for respondent No.1/Finance
Company would submit that the learned District Judge after
considering the entire facts and law has passed the well reasoned
order and the applicant is unable to make out any permissible ground
wherein the Court can interfere in the award, as such the impugned
order passed by the learned District Judge is legal and justified which
does not warrant any interference by this Court. It is also contended
that from perusal of Clause 21(a) and 21(b) of the Act, it is quite vivid
that an employee can be appointed as Arbitrator unless the applicant
is able to establish that he has vested or personal interest in the
agreement. He would further submit that at the relevant time, law does
not prohibit the appointment of an employee as Arbitrator. It has also
8
been contended that as per the agreement Clause 21 (a)(2), it is quite
vivid that the dispute or claim will be settled by arbitration in
accordance with Arbitration Act, 1940 or any statutory enactment
thereof whereas the Arbitration Act, 1940 was repealed on 16-08-
1996. Section 85 of the Act also provides repeal and saving clause
which provides that the Arbitration (Protocol and Convention) Act,
1937, the Arbitration Act, 1940 and the Foreign Awards (Recognize
and Enforcement) Act, 1961 are hereby repealed and Sub-section 2
provides that notwithstanding such repeal the provision of said
enactment shall apply in relation to arbitration proceeding which
commence before this Act came into force unless otherwise, agreed
by the parties, but this Act shall apply in relation to arbitration
proceeding which commence on or after this Act comes into force.
Thus, the proceedings have to be governed by the Arbitration and
Conciliation Act, 1996 which has been rightly conducted by the
learned Arbitrator. It has also been contended that the learned
Arbitrator while passing the impugned award has mentioned that the
dispute is determined as per Indian Arbitration Act, 1940 or the
statutory amendments made in the provisions and has also taken note
of Section 19(1) and 19(4) of the Act, 1996, therefore, it cannot be
held that proceeding has been conducted under the Arbitration Act,
1940. Thus, this objection raised by the appellant may be rejected.
6. So far as denial of opportunity of hearing is concerned, it has been
contended that the respondent No.1 has appeared before the
Arbitrator and he has participated in the proceeding, therefore, it
cannot be said that the notice or consent has not been obtained from
the respondent as the appellant without any reservation has
9
participated in the proceeding, as such, it cannot be held that no
consent of the applicant was obtained before the proceedings initiated
by the Arbitrator or with regard to appointment of the Suresh Jain as
Sole Arbitrator.
7. Lastly, he would submit that the impugned award passed by the
learned trial Court rejecting the application filed under Section 34 of
the Act, 1996 is legal and justified which does not warrant any
interference as no permissible ground available to him under Section
34 of the Act, 1996 is made out by the applicant and would pray for
dismissal of the appeal.
8. I have heard learned counsel for the parties and perused the record of
the trial Court as well as Arbitrator with utmost circumspection.
9. The point emerged for consideration of this Court is whether the award
passed by the Arbitrator is legal and justified and order passed by the
learned District Judge rejecting the application under Section 34 of the
Act, 1996 is legal, justified warranting interference by this Court?
Submission regarding applicability of the Indian Arbitration Act,
1940 or Arbitration & Conciliation Act, 1996:
10. Now this Court is examining whether the proceeding initiated by the
learned Arbitrator has been conducted under the Act of 1940 or Act,
1996. From perusal of the Arbitration award dated 14-03-2001 passed
by the Sole Arbitrator, it is quite vivid that arbitration proceedings were
conducted under the Act of 1996 as the Arbitration Act, 1940 was
repealed on 16-08-1996 and the Agreement was executed on 27-08-
1996. Clause 21 of the Agreement provides that the arbitration
proceedings will be conducted as per Act of 1940 or as per statutory
10
amendments made therein, thus the proceeding has to be governed
as per new Act of 1996 which has rightly been initiated by the learned
Arbitrator as in the impugned award of Sole Arbitrator has considered
the procedures provided in Section 19 of the Act, 1996 which provides
determination of rule of procedure and also observed that as per this
provision it will not be bound by the Code of Civil Procedure or Indian
Evidence Act, accordingly, it has held that it has power to regulate the
procedure. The learned Arbitrator has also observed in the award that
since both the parties have not given consent to regulate the
procedure and power conferred upon him under the Act, 1996, it has
regulated the procedure, thus, it is quite vivid that the arbitration
proceedings have been initiated under the Act, 1996, therefore, the
objection raised by the respondents that the proceedings have been
conducted under Act of 1940 is misconceived and deserves to be
rejected.
11. The record of the case would further demonstrate that the appellant
has filed an application under Section 34 of the Act, 1996 before the
learned District Judge Raipur wherein the learned District Judge has
also observed in paragraph of 11 of its judgment that the learned
Arbitrator has conducted the arbitration proceeding under the Act,
1996 cannot be held to suffer from perversity or illegality warranting
interference by this Court.
12. The learned Arbitrator relying upon Clause 21 (b) of the Agreement
has conducted the proceedings under the Act, 1996 which is as per
the Agreement and the Clause of the Agreement which provides
Arbitration has been rightly considered by the Arbitrator and
11
conducted the proceeding as per the Act, 1996. How the
agreement/contract has to be interpreted is always subject matter of
examination before the Hon’ble Supreme Court and the Hon’ble
Supreme Court in the case of Disortho S.A.S vs. Meril Life
Sciences Private Limited, reported in (2026) 2 SCC 599 has held
that the interpretation of a contract involves determining of the
meaning that a reasonable person with all relevant backgrounds,
knowledge available to the parties at the time of contract would deploy
from the documents and also held that the law governing the
arbitration agreement means its validity, scope and interpretation has
to be determined in accordance with the Indian law. Thus, from the
Clause 21(b), it is quite vivid that the arbitration has to be governed
from the Arbitration Act, 1940 or its statutory amendments made
therein, it means through the Act prevailing on the date of agreement
which is Act, 1996. Thus, the procedure followed by the Arbitrator has
strictly been conducted in accordance with the Act, 1996, as such, the
objection/submission raised by the appellant regarding conduction of
proceeding deserves to be rejected and accordingly it is rejected. The
Hon’ble Supreme Court in Disortho S.A.S (Supra) has held in
paragraphs 29 to 32 as under:
“29. In Arnold v. Britton,31 the Supreme Court of United
Kingdom observed as under:
“When interpreting a written contract, the court is
concerned to identify the intention of the parties by
reference to “what a reasonable person having all the
background knowledge which would have been available
to the parties would have understood them to be using the
language in the contract to mean”, to quote Lord
Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd
[2009] AC 1101, para 14. And it does so by focussing on
the meaning of the relevant words, in this case clause
3(2) of each of the 25 leases, in their documentary, factual
12and commercial context. That meaning has to be
assessed in the light of (i) the natural and ordinary
meaning of the clause, (ii) any other relevant provisions of
the lease, (iii) the overall purpose of the clause and the
lease,
(iv) the facts and circumstances known or assumed by the
parties at the time that the document was executed, and
(v) commercial common sense, but (vi) disregarding
subjective evidence of any party’s intentions […].
30. The interpretation of a contract involves determining the
meaning that a reasonable person, with all relevant background
knowledge available to the parties at the time of the contract,
would derive from the document. A similar principle is outlined in
Chitty on Contracts,32 which, when discussing inconsistent
terms, observes:
“Where the different parts of an instrument are
inconsistent, effect must be given to that part which is
calculated to carry into effect the purpose of the contract
as gathered from the instrument as a whole and the
available background, and that part which would defeat it
must be rejected. The old rule was, in such a case, that
the earlier clause was to be received and the later
rejected; but this rule was a mere rule of thumb, totally
unscientific, and out of keeping with the modern
construction of documents. When considering how to
interpret a contract in the case of alleged inconsistency,
the courts distinguish between a case where the contract
makes provision for the possibility of inconsistency and
the case where there is no such provision. In the latter
case the contract documents should as far as possible be
read as complementing each other and therefore as
expressing the parties’ intentions in a consistent and
coherent manner.” 31 2015 AC 1619.
31 Clause 16.5 is clear and unambiguous. It explicitly states that
the entire agreement shall be governed by and construed in
accordance with the laws of India, and all matters arising from
the agreement shall fall under the jurisdiction of the courts in
Gujarat, India. Given this, it is reasonable to assume that, when
drafting this clause, the parties were fully aware of Clause 18,
which provides for arbitration and conciliation under the
Arbitration and Conciliation Centre of the Chambers of
Commerce in Bogota. In our view, Bogota has been designated
as the venue for conciliation and arbitration, while the courts in
Gujarat, India, retain exclusive jurisdiction over disputes. This
must, unless there is a divergence in lex arbitri, include
jurisdiction over appointments and act as a conduit for the
arbitration in Bogota, Colombia.
32. The law governing the arbitration agreement, being Indian
law, means that its validity, scope, and interpretation will be
determined in accordance with Indian law. But which national
courts–those in India or Colombia–exercise supervisory
13
jurisdiction over the arbitration proceedings? Does the A&C Act
apply to these arbitration proceedings? Upon a consistent
reading of the Distributor Agreement, it is clear that only the
courts in Gujarat, India, are referenced. While it is acknowledged
that the venue for arbitration is Bogota, Colombia, and that the
procedural rules of the Arbitration and Conciliation Centre at the
Chambers of Commerce in Bogota are to apply, this does not
diminish the supervisory powers of Indian courts, as explicitly
outlined in Clause 16.5.”
Submission regarding appointment of an employee as Arbitrator:
13. Further submission regarding appointment of Suresh Jain as Sole
Arbitrator who was an employee of the company is being examined by
this Court. Section 12 of the Act, 1996 provides ground for challenge
of appointment of an Arbitrator and Section 12 of the Act, 1996 as it
stood prior to amendment on 23-10-2015 at the time of appointment of
Sole Arbitrator reads as under:
“12. Grounds for challenge.- (1) When a person is approached
in connection with his possible appointment as an arbitrator, he
shall disclose in writing any circumstances likely to give rise to
justifiable doubts as to his independence or impartiality.
(2) An arbitrator, from the time of his appointment and throughout
the arbitral proceedings, shall, without delay, disclose to the
parties in writing any circumstances referred to in sub-section (1)
unless they have already been informed of them by him.
(3) An arbitrator may be challenged only if-
(a) circumstances exist that give rise to justifiable doubts as to
his independence or impartiality, or
(b) he does not possess the qualifications agreed to by the
parties.
(4) A party may challenge an arbitrator appointed by him, or in
whose appointment he has participated, only for reasons of
which he becomes aware after the appointment has been made.”
14. From perusal of the said provisions of Section 12 of the Act, 1996 as
stood prior to amendment, it is quite vivid that there is no bar
regarding appointment of employee as Arbitrator unless the appellant
is able to doubt as to independency or impartiality of the Arbitrator. In
14
absence of any justifiable apprehension about his independency or
impartiality, the appointment of Mr Suresh Jain as Arbitrator could not
be rendered invalid and enforceable. The record of the case further
demonstrates that the Arbitrator in the present arbitration proceeding
is neither dealing authority in regard to the contact or was directly sub-
ordinate to the officers whose decision is subject matter of dispute.
The learned Arbitrator in its award has categorically mentioned that he
has orally and in writing intimated the appellant and the respondent
that the Sole Arbitrator has no interest over the dispute for which he
has been appointed as Arbitrator. Accordingly, it has rejected the said
objection regarding his appointment as Arbitrator while passing the
award. The record of the case would further clarify that the dispute
arose due to Hire Purchase Agreement executed between the
appellant, respondent No. 1 and 2, where the Arbitrator has no role to
play, thus, the objection regarding appointment of Arbitrator has rightly
been turned down by the District Judge. The learned District Judge
while rejecting the objection has also taken note of the fact that earlier
also the objection regarding appointment of Arbitrator was raised
which has been rejected by the learned 3rd Additional District Judge
vide its order dated 30-11-1998 which has not been challenged before
any higher forum, as such it has attained finality, thus reason of
rejection cannot be found faulty warranting any interference by this
Court.
15. The objection regarding appointment of an employee as Arbitrator
before the amendment on 23-10-2015 has been considered by the
Hon’ble Supreme Court in case of Aravali Power Company Private
15
Limited vs. Era Infra Engineering Limited reported in (2017) 15
SCC 32, wherein the Hon’ble Supreme Court has held as under:
“22. The principles which emerge from the decisions referred to
above are:-
A. In cases governed by 1996 Act as it stood before the
Amendment Act came into force:-
(i) The fact that the named arbitrator is an employee of one
of the parties is not ipso facto a ground to raise a
presumption of bias or partiality or lack of independence
on his part. There can however be a justifiable
apprehension about the independence or impartiality of an
employee arbitrator, if such person was the controlling or
dealing authority in regard to the subject contract or if he is
a direct subordinate to the officer whose decision is the
subject-matter of the dispute.
(ii) unless the cause of action for invoking jurisdiction
under Clauses (a), (b) or (c) of sub-section (6) of Section
11 of 1996 Act arises, there is no question of the Chief
Justice or his designate exercising power under sub-
section (6) of Section 11.
(iii) The Chief Justice or his designate while exercising
power under sub-section (6) of Section 11 shall endeavour
to give effect to the appointment procedure prescribed in
the arbitration clause.
(iv) While exercising such power under sub section (6) of
Section 11, If circumstances exist, giving rise to justifiable
doubts as to the independence and impartiality of the
person nominated, or if other circumstances warrant
appointment of an independent arbitrator by ignoring the
procedure prescribed, the Chief Justice or his designate
may, for reasons to be recorded ignore the designated
arbitrator and appoint someone else.
B. In cases governed by 1996 Act after the Amendment Act has
come into force:-
If the arbitration clause finds foul with the amended
provisions, the appointment of the Arbitrator even if
apparently in conformity with the arbitration clause in the
agreement, would be illegal and thus the Court would be
within its powers to appoint such arbitrator(s) as may be
permissible.
23. The observations of the High Court in paragraphs 37-38 as
quoted above show that the exercise was undertaken by the
High Court, “in order to make neutrality or to avoid doubt in the
mind of the petitioner” and ensure that justice must not only be
done and must also be seen to be done. In effect, the High
Court applied principles of neutrality and impartiality which have
been expanded by way of Amendment Act, even when no cause
of action for exercise of power under Section 11(6) had arisen.
16
The procedure as laid down in unamended Section 12
mandated disclosure of circumstances likely to give rise to
justifiable doubts as to independence and impartiality of the
arbitrator. It is not the case of the Respondent that the
provisions of Section 12 in unamended form stood violated on
any count. In any case the provision contemplated clear and
precise procedure under which the arbitrator could be
challenged and the objections in that behalf under Section 13
could be raised within prescribed time and in accordance with
the procedure detailed therein. The record shows that no such
challenge was raised within the time and in terms of the
procedure prescribed. As a matter of fact, the Respondent had
participated in the arbitration and by its communication dated
04.12.2015, had sought extension of time to file its statement of
claim.”
Submission regarding consent of appointment for appointment
of Arbitrator:
16. Further submission of learned counsel for the appellant that the
respondent No. 1 before appointment has not obtained consent of the
appellant, therefore, the appointment of the Arbitrator is illegal, as
such, the entire award passed by the learned Arbitrator is void ab initio
is being considered by this Court.
17. The record of the case would show that the objection raised by the
appellant regarding consent deserves to be rejected on the count that
as per Clause 21(a) of Act, 1996 the Managing Director of the
Company has exclusive jurisdiction to appoint the Arbitrator and as
per Section 11(2) of Act, 1996 which provides that the parties are free
to agree on a procedure for appointing the arbitrator or arbitrators
accordingly, as per the agreement the Managing Director is the
authority to appoint the Arbitrator which he has appointed, thus, there
is no illegality in appointing Suresh Jain as Sole Arbitrator. Learned
District Judge while deciding the application filed under Section 34 of
the Act, 1996 has taken into consideration the factum of rejection of
17objection regarding appointment by the learned Third Additional
District Judge in Civil Case No. 6B/1998 vide its order dated 30-11-
1998 and recorded its finding that the said order has attained finality,
as such issue with regard to appointment of Suresh Jain as Arbitrator
cannot be reopened or re-agitated which does not suffer from
perversity or illegality warranting interference by this Court,
accordingly, this submission also deserves to be rejected and
accordingly, it is rejected.
Submission regarding no opportunity of hearing:
18. Further submission of the appellant regarding no opportunity of
hearing is being considered by this Court. This Court has requisitioned
the record of the case and from perusal of the record, it is quite vivid
that after the remand by the learned Third Additional District Judge the
appellant appeared along with his counsel before the learned
Arbitrator on 21-01-1999 and sought time accordingly, the
proceedings were adjourned to 13-02-1999. On 13-02-1999, since the
original records from the Courts were not received, therefore, the
matter was adjourned to 01-03-1999 and again the matter was
adjourned to 20-03-1999. The records were received on 19-03-1999,
on 20-03-1999, the appellant appeared and sought time to file reply to
the statement of claim filed by the respondent No.1, accordingly
proceeding was adjourned to 10-04-1999. The record of the case
would show that respondent No.2 was not appearing, therefore, an
application was filed for publication of the notice in the newspaper
which was considered and allowed. Accordingly, the same was
18published in the newspaper on 09-04-1999 and the same was taken
on record.
19. The record of the case further demonstrates that an application was
filed by the appellant for adjournment and fixing the matter on 24-04-
1999. The learned Arbitrator rejected the application for stay of the
proceeding in absence of any order of the High Court and fixed the
matter on 24-04-1999. Again on 24-04-1999 the respondent moved an
application for adjournment and to stay the proceedings. Learned
Arbitrator fixed the matter on 08-05-1999 for reply on the said
application, on 08-05-1999, the appellant has not appeared therefore,
proceedings were adjourned to 22-05-1999. Since no one is
appearing, therefore, the learned Arbitrator intimated the date of
hearing to the counsel for the appellant over telephone which was
accepted by him. On 22-05-1999, arguments were heard, the
appellant has also made his submission through his counsel and the
proceedings were adjourned to 31-05-1999 for order on this
application and finally order was passed on 05-06-1999 rejecting the
said application for stay of the proceedings till the matter is finally
decided by the High Court. The order sheets show that the appellant
intended to install the proceedings on various reasons. Thereafter, on
31-07-1999, the appellant raised an objection regarding continuation
of the proceeding which was rejected and again adjournment was
sought to file reply to the statement of claim filed by respondent No. 1.
The respondent moved various applications to install the proceedings
and finally he has submitted reply as well as written argument on 04-
03-2001.
19
20. The record of the arbitration proceedings would further demonstrate
that respondent No. 1 was examined before the Arbitrator and the said
witness was cross-examined by the counsel of the appellant
extensively. The appellant was also examined before the Arbitrator
and he was also cross-examined by the respondent No. 1 on 04-03-
2001, thereafter, the impugned award was passed by the learned
Arbitrator wherein it has recorded its finding that the appellant is
unable to pay Rs. 1,68,484/- through 23 installments which has
caused financial loss to the respondent No. 1. It has also recorded its
finding that the appellant is unable to follow the conditions of the
Agreement which is his responsibility.
21. From perusal of the aforesaid facts derived from record of the
arbitration case, it is quite vivid that learned Arbitrator has given
opportunity of hearing in every aspect of the matter and objections
raised by the appellant have also been dealt and thereafter, by a
reasonable and possible explanation, it has been decided. Thus, the
submission made by learned counsel for the appellant that no
opportunity of hearing has been given to the appellant and on this
count the impugned award or the order of the learned District Judge
deserves to be set aside is misconceived and accordingly, it is
rejected.
Submission regarding non-interference in arbitrational award by
the learned District Judge while deciding the application under
Section 34 of the Arbitration and Conciliation Act, 1996:
22. From the above stated discussion and considering the evidence,
material placed on record before the Arbitrator who has passed the
20
well reasoned award dated 04-03-2001, it is quite vivid that neither the
impugned award nor the order dated 01-10-2005 passed by the
learned District Judge while rejecting the application under Section 34
of the Act, 1996 falls within the circumstances stipulated under Section
34 of the Act, 1996 where this Court can interfere. The Hon’ble
Supreme Court in case of Punjab State civil Supplies Corporation
Limited and another vs. Sanman Rice Mill and others, reported in
2024 SCC Online SC 2632 has held as under:
“12. It is pertinent to note that an arbitral award is not liable
to be interfered with only on the ground that the award is
illegal or is erroneous in law that too upon reappraisal of the
evidence adduced before the arbitral trial. Even an award
which may not be reasonable or is non-speaking to some
extent cannot ordinarily be interfered with by the courts. It is
also well settled that even if two views are possible there is
no scope for the court to reappraise the evidence and to
take the different view other than that has been taken by
the arbitrator. The view taken by the arbitrator is normally
acceptable and ought to be allowed to prevail.
13. In paragraph 11 of Bharat Coking Coal Ltd. v.
L.K.Ahuja,4 it has been observed as under:
“11. There are limitations upon the scope of interference in
awards passed by an arbitrator. When the arbitrator has
applied his mind to the pleadings, the evidence adduced
before him and the terms of the contract, there is no scope
for the court to reappraise the matter as if this were an 4
(2001) 4 SCC 86 appeal and even if two views are
possible, the view taken by the arbitrator would prevail. So
long as an award made by an arbitrator can be said to be
one by a reasonable person no interference is called for.
However, in cases where an arbitrator exceeds the terms of
the agreement or passes an award in the absence of any
evidence, which is apparent on the face of the award, the
same could be set aside.”
18. Recently a three-Judge Bench in Konkan Railway
Corporation Limited v. Chenab Bridge Project
Undertaking7 referring to MMTC Limited (supra) held that
the scope of jurisdiction under Section 34 and Section 37 of
the Act is not like a normal appellate jurisdiction and the 6
(2019) 4 SCC 163 7 (2023) 9 SCC 85 courts should not
interfere with the arbitral award lightly in a casual and a
cavalier manner. The mere possibility of an alternative view
21
on facts or interpretation of the contract does not entitle the
courts to reverse the findings of the arbitral tribunal.
20. In view of the above position in law on the subject, the
scope of the intervention of the court in arbitral matters is
virtually prohibited, if not absolutely barred and that the
interference is confined only to the extent envisaged
under Section 34 of the Act. The appellate power of Section
37 of the Act is limited within the domain of Section 34 of the
Act. It is exercisable only to find out if the court, exercising
power under Section 34 of the Act, has acted within its limits
as prescribed thereunder or has exceeded or failed to
exercise the power so conferred. The Appellate Court has
no authority of law to consider the matter in dispute before
the arbitral tribunal on merits so as to find out as to whether
the decision of the arbitral tribunal is right or wrong upon
reappraisal of evidence as if it is sitting in an ordinary court
of appeal. It is only where the court exercising power
under Section 34 has failed to exercise its jurisdiction vested
in it by Section 34 or has travelled beyond its jurisdiction
that the appellate court can step in and set aside the order
passed under Section 34 of the Act. Its power is more akin
to that superintendence as is vested in civil courts while
exercising revisionary powers. The arbitral award is not
liable to be interfered unless a case for interference as set
out in the earlier part of the decision, is made out. It cannot
be disturbed only for the reason that instead of the view
taken by the arbitral tribunal, the other view which is also a
possible view is a better view according to the appellate
court.
21. It must also be remembered that proceedings
under Section 34 of the Act are summary in nature and are
not like a full-fledged regular civil suit. Therefore, the scope
of Section 37 of the Act is much more summary in nature and
not like an ordinary civil appeal. The award as such cannot
be touched unless it is contrary to the substantive provision
of law; any provision of the Act or the terms of the
agreement.”
23. Thus, the submission made by the learned counsel for the appellant
that the learned District Judge should have interfered in the award is
misconceived and deserves to be rejected and accordingly, it is
rejected.
24. Accordingly, the point determined by this Court is answered against
the appellant and in favour of the respondent No. 1.
22
25. From the above factual and legal position, it is quite vivid that there is
no patent illegality on the face of the award, secondly the award is
speaking award with findings and interpretation based upon reasons.
Moreover, there is apparently no violation of fundamental policy of any
Indian law or the basic norms of morality and justice to enable the
Courts to interfere with the award. The Hon’ble Supreme Court in case
of Jan De Nul Dredging India Pvt. Ltd. v. Tuticorin Port Trust
reported in 2026 INSC 34 decided on 07.01.2026 has held that
appeal under Section 37 of Act, 1996 has a must narrow scope of
intervention particularly when the arbitration award has been upheld
under Section 34 of the Act. The Hon’ble Supreme Court in paragraph
51 has held as under:
“51. Before parting, we consider it proper to note that the Act is
a special enactment which aims to resolve
contractual/commercial disputes through arbitration with the
minimum intervention of the court, if not without the intervention
of the court. In the event, the courts are allowed to step in at
every stage and the arbitral awards are subjected to challenge
before the courts in hierarchy before court of first instance,
through regular appeals and finally by means of SLP/Civil
Appeal before the Supreme Court, it would obviate/frustrate
and defeat the very purpose of the Act. It is therefore,
necessary to accept the arbitral award if it is not patently illegal
or does not fall within the scope of intervention under Section
34 of the Act. The appeal thereof has a much narrower scope
of intervention particularly when the arbitral award has been
upheld under Section 34 of the Act. The appellate jurisdiction
acquires little significance only when the arbitral award has
been erroneously upheld or set aside by the court in exercise of
its power under Section 34 of the Act as discussed earlier, but
has no authority of law to consider the matter which was before
the Arbitral Tribunal on merits.”
26. Thus, there is no patent illegality nor the arbitration award is against
the public policy of India which can be interfered by this Court while
hearing Arbitration Appeal under Section 37 of the Act, 1996, as such,
23
the appeal is sense merit, liable to be dismissed and accordingly, it is
dismissed.
27. The interim order passed by this Court on 17-01-2006 is vacated.
Sd/-
(Narendra Kumar Vyas)
Judge
Raju
RAVVA
SATYANARAYANA
RAJU
Digitally signed by
RAVVA
SATYANARAYANA RAJU
Date: 2026.07.17
17:15:40 +0530
24
Head Note:
The appellate jurisdiction has a much narrow scope of intervention
particularly when the arbitration award has been upheld under
Section 34 of the Act, 1996.
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