Gujarat High Court rules against appeal before seeking remedial action

Gujarat High Court rules against appeal before seeking remedial action

The petitioner wrongly invoked the extraordinary jurisdiction of the court under the Indian Constitution and the Arbitration and Conciliation Act

The Gujarat High Court has held that if an Act prescribed a mechanism to address a grievance, but the petitioner was ignorant of it or chose to not avail of it and instead invoked the court, the procedure was not right.

The writ petition sought a stay on the arbitration proceedings on account of a past working relationship between the arbitrator and the respondent,

But dismissing the plea, Justice Ashutosh J Shastri emphasized the remedies available to the petitioner under the Arbitration and Conciliation Act, 1996 for challenging the appointment of the arbitrator.

The bench opined that the powers under the Constitution of India must be exercised sparingly when it pertained to issues that were already encompassed within the Act.

The case pertained to the petitioner and the second respondent being partners in the firm Ronak Developers by way of a partnership deed containing an arbitration clause. When a dispute arose between them, the second respondent invoked the arbitration clause. He issued a notice to the petitioner informing him about the appointment of the first respondent as an arbitrator.

The claim of the petitioner was that the appointment of the first respondent was a violation of the requirements since the second respondent had straightaway referred the matter to the arbitrator and appointed him unilaterally. The petitioner further claimed that the first and second respondents had worked together as advocates on various cases.

The petitioner was thus doubtful of the first respondent's impartiality and independence as an arbitrator. He stated that such disclosure was mandatory and thus, quashing the first respondent's appointment was justified.

The respondents contended that the petition to quash the arbitrator's appointment was not maintainable since the issue could have been put up before an alternative forum and not the High Court. They submitted that the vakalatnama (authority letter) was signed in 2000 and this fact should not have cast any doubt on the impartiality of the arbitrator.

They also pointed out that the issue was not raised in the proceedings even when an extension of four months was granted. The petitioner had only brought the issue to thwart the legal proceedings. Even in the previous Special Leave Civil Application filed before the high court in 2020, no such grievance was raised.

The respondents further submitted that the petition had wrongly invoked the extraordinary jurisdiction of the high court under the Indian Constitution and the Arbitration Act.

The high court bench observed that the Act prescribed that any person whose relationship with parties/counsel/subject matter of dispute fell under any of the specified categories, the person would be ineligible to be appointed as an arbitrator.

The court further noted that the vakalatnama was filed more than two decades ago and the telephone diary also did not establish the persistent relationship between the arbitrator and the second respondent. There was no indication that it created impartiality in the proceedings. Therefore, the evidence presented was not sufficient enough for the grievances made by the petitioner.

Justice Shastri also took note of the petitioner's initial acceptance of arbitration proceedings and that he was a participant of such proceedings. Even after the petitioner was given an extension to voice his grievances, he chose not to address those concerns. The petition was thus dismissed.