SULAIKHA CLAY MINES Vs. ALPHA CLAYA

JUDGEMENT

(1.) For procedural violation, can an arbitral award be set aside under S.34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') and whether Court has power to remit back the award to the same arbitrator or any other arbitrator vis-a-vis or dehors the power under S.34(4) of the Act are some of the important questions discussed in this judgment.

(2.) Appellant and first respondent in this case are partnership firms engaged in the business of mining of china clay. Their mines are contiguously situated with a common boundary, running in the north-south direction. They have jointly secured an order for supply of china clay to M/s. English Indian Clays Limited. Since the appellant firm did not get sales-tax registration certificate, the two firms agreed that mining can be started from the respondent's firm. Mining was started from first respondent's firm on 23.11.1995. 23.11.1995, appellant firm also got sales-tax registration and joined the despatch of clay. Thereafter, some dispute arose between them and on 1.6.1996, the Managing Partner of both firms decided to refer the dispute for adjudication of Shri K.K. Abdul Aziz, second respondent, who is to act as the sole arbitrator. The reference is as follows:

(3.) Since procedural irregularities are highlighted, we will now consider the procedure adopted by the arbitrator in this matter. Arbitrator was examined as PW 2. His proceedings file was produced as Exts. B1 and B2. It shows that arbitrator received the appointment order on 5.6.1998 and he informed the parties over the phone to send their statements of facts. Statements of facts furnished by the respective parties were given to the opposite parties calling for their clarification. Reply from the appellant was received by the arbitrator on 11.7.1998 and reply from the respondent was received on 17.7.1998. Copies of the replies were not handed over to the opposite sides. The dairy further shows that the arbitrator heard the respondent on 18.7.1998 at their office at Vazhuthacaud and the appellant was heard at Attingal on 21.7.1998. On 2.8.1998, the appellant was heard at the residence of the Managing Partner and in the afternoon the arbitrator visited the site of the appellant and studied the topographical details of both the mines and the boundary line in between and the dump yards all round. Thus, both the mines were inspected by the arbitrator on that day in the presence of the appellant. Again, in the middle of August, 1998, arbitrator held discussions with the representatives of the respondent and proceeded to their site office and mines accompanied by the representatives of the respondent. On 17.8.1998, unaccompanied by any of the parties, the arbitrator visited both the mines and held final discussions with the appellant at the residence of its Managing Partner and final discussions with the respondent was held on 25.8.1998 at their premises. Thereafter, award was published on 26.9.1998. It is an admitted fact that none of the parties requested for an oral hearing separately. There was no agreement regarding the procedure to be followed by the arbitrator and place of arbitration. It was not intimated to the parties by the arbitrator. Proceedings further show that parties were heard separately without notice to the other. In other words, when the arbitrator head the respondent on 18.7.1998, no notice was given to the appellant and they were kept in dark regarding the arguments made by the opposite side. When the arbitrator visited the site of the appellant he was accompanied by the representatives of the appellant only and the date of inspection was not informed and observations and findings of the arbitrator in the inspection were not communicated to the respondent. Similarly, when the arbitrator heard the appellant, respondent was also not represented. Rejoinder filed by both parties were not communicated to the opposite parties. Under these circumstances, the District Court found that there is procedural violation which violates the mandates of the Act.