Delhi District Court
Sanjeev Kumar vs Jitendra Kumar Batra And Anr on 29 March, 2025
IN THE COURT OF DISTRICT JUDGE-04,
(PRESIDED OVER BY: ANIL CHANDHEL)
WEST DISTRICT, THC, DELHI
CNR NO. DLWT01-001147-2018
ARBTN NO. 12/2018
MR. SANJEEV KUMAR,
S/o Mr. M.P. Sharma,
R/o House No.-18, Extension 2-B,
Gali No.12, Nangloi,
Delhi-110041 ....OBJECTOR
Versus
1. MR. JITENDRA KUMAR BATRA,
S/o Mr. Khan Chand Batra,
R/o 42, Pocket 11A, Fourth Floor,
Panchsheel Enclave, Sector 23,
Rohini, Delhi-110085
2. MR. VIJAY GARG,
S/o Mr. C.D. Garg,
21, Block-D,
Pakha Road Institution Area,
Janakpuri,
New Delhi-110058. ...RESPONDENTS
OBJECTIONS UNDER SECTION 34 OF
THE ARBITRATION AND
CONCILIATION ACT, 1996 AGAINST
THE AWARD DATED 14.11.2017, PASSED
BY LD. SOLE ARBITRATOR MR. VIJAY
GARG IN ARBITRATION CASE NO. 01
OF 2015, TITLED AS, 'JITENDRA
KUMAR BATRA VS. SANJEEV KUMAR'.
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ARBTN NO. 12/2018
DATE OF INSTITUTION : 05.02.2018.
JUDGMENT RESERVED ON : 28.03.2025.
JUDGMENT PRONOUNCED ON : 29.03.2025
Counsel for the Objector : Mr. Sudhir Anand, Advocate.
Counsel for the Respondent No.1: Mr. Vikrant Arora.
JUDGMENT
1. The present petition under Section 34 of the Arbitration and
Conciliation Act, 1996 has been filed to challenge the award
dated 14.11.2017, passed by Ld. Sole Arbitrator Mr. Vijay
Garg in Arbitration Case No. 01 of 2015, titled as, ‘Jitendra
Kumar Batra Vs. Sanjeev Kumar’. In terms of the
impugned award dated 14.11.2017, the Ld. Sole Arbitrator
directed the Objector to pay a sum of Rs.30,00,000/- (Rupees
Thirty Lakhs Only) to the Respondent No.1, alongwith
interest @ 9% per annum with effect from 01.07.2015. The
Respondent No.1 is the only contesting Respondent in the
present proceedings and the Respondent No.2 is the Ld. Sole
Arbitrator, whose role in the proceedings was limited to
filing of the Original record of Arbitral proceedings.
2. Arbitration Proceedings before the Ld. Sole Arbitrator:
It will be appropriate to recapitulate the Arbitration
proceedings before Ld. Sole Arbitrator and the same are
being summed up in brief in the paras stated hereinbelow:
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2.1. The Objector and the Respondent No.1 entered into a
Collaboration Agreement dated 25th October 2012, which
contained the following Arbitration clause :
“20. That in case any dispute arises between both the
parties regarding the terms and conditions of this
Agreement then the same shall be referred and
settled through a sole arbitrator Shri Vijay Garg,
whose decision shall be file and binding upon
both the parties, under Arbitration Act.”
The Respondent No.1 invoked the arbitration clause and
issued a notice dated 17.08.2015 to the Objector for
invocation of Arbitration. The copy of the aforesaid notice
was marked to the Ld. Sole Arbitrator Mr. Vijay Garg, who
was requested to conduct the proceedings.
2.2. The Objector has issued a reply dated 22.08.2015 to the
notice dated 17.08.2015, whereby he raised objections to the
appointment of Arbitrator, by citing the grounds of bias as
well as conflict of interest. A copy of the aforesaid reply
dated 22.08.2015 was also marked to the Ld. Sole Arbitrator.
2.3. Ld. Sole Arbitrator, on 22.08.2015, issued notice to the
parties for appearance before him on 12.09.2015. The
aforesaid notice was sent to the Objector by speed post on
24.08.2015 at 17:06 Hrs., which is indicated from the copy
of the postal receipt available in the case file. There is no
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postal receipt of service of the aforesaid notice on the
Respondent No.1.
2.4. The Objector appeared before the Ld. Arbitrator on
06.09.2015 and parties were directed to file their pleadings
and also pay the fees of the proceedings and the matter was
adjourned for 06.10.2015.
2.5. The Respondent No.1 filed the statement of claim on
01.10.2015. The facts, stated in the statement of claim, are
briefly summed up in paras stated hereinbelow:
i. The Respondent No.1 is a renowned builder and the
Objector is the owner of the Plot no. 18, Gali No.,
12, Extension 2-B, Nangloi Delhi-110041
measuring 200 sq. yards. The Objector and the
Respondent No.1 entered into a collaboration
agreement dated 25.10.2012 for reconstruction of
the aforementioned property in the shape of stilt
parking, upper ground floor, first floor, second floor
and third floor along with roof and lift.
ii. The parties agreed that the Respondent No.1 would
be given an amount of Rs. 23,50,000/- along with
one floor i.e. upper ground floor, in consideration
for reconstruction of the property.
iii. The Respondent No.1 carried out the reconstruction
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work, in terms of the Collaboration agreement
except some finishing work which was going on as
per the requirements of the Objector. However, the
Objector shifted to the first floor of the property in
July 2015, against the consent of the Respondent
No.1, while the finishing work was still going on,
which created inconvenience and hindrance in
completion of the same.
iv. The Respondent No.1, on account of the paucity of
funds and other personal reasons, had entered into
an Agreement to Sell with one Mr. Satish Dabas for
the sale of the Upper Ground Floor with the
Respondent’s permission. The aforesaid floor was to
be transferred in favour of the Respondent No.1, in
terms of the Collaboration Agreement. Accordingly,
the Objector had executed the Sale Deed of the
aforesaid floor, in favour of Ms. Sushila wife of Mr.
Satish Dabas, as desired by the purchaser, for a total
sale consideration of Rs.33,90,000/-. The Objector
received the amount of Rs.30,00,000/- by way of
cheques and Rs.3,90,000/- in cash.
v. Since, upper ground had fallen to the share of the
Respondent No.1, in terms of the Collaboration
Agreement, the amount received by the Objector, in
the sum of Rs.3,90,000/-, was remitted by the
Objector to the Respondent No.1. The Objector also
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ARBTN NO. 12/2018
assured to remit/pay the remaining amount of
Rs.30,00,000/-, upon the encashment of the
cheques.
vi. The Objector turned dishonest subsequently and did
not make payment of Rs.30,00,000/- as agreed,
despite repeated requests and demands causing a
stagnation in the entire finishing process. Thereafter
the Objector started obstructing the Respondent
No.1 and his labour from entering the premises,
causing great harassment and hardships to the
Respondent No.1 to carry out the remaining
finishing work process.
vii. Since the Respondent No.1 served a legal notice
dated 3rd August, 2015, which was not replied to
despite service. The Respondent No.1 invoked the
arbitration, in terms of collaboration agreement, by
way of notice dated 17.08.2015.
viii. The Respondent No.1 has claimed recovery of
Rs.30,00,000/- alongwith interest.
2.6. None appeared on behalf of the Objector on 06.10.2015. It is
mentioned in the Order dated 6.10.2015 that Ld. Sole
Arbitrator received a threatening call from Mr. Satish Dabas
from the mobile No., registered in the name of Objector’s
father. The Arbitration file also contained an Original letter
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dated 03.10.2015, signed by the Ld. Sole Arbitrator and
written to the SHO Police Station, Nangloi, wherein it was
stated that the Ld. Arbitrator received death threats to him
and his family, from Mr. Satish Dabas, if he did not favour
Mr. Sanjeev Kumar. The original letter is in the file and it is
not evident, whether the same has been sent or not.
2.7. On 19.10.2015, the Objector filed an Application under
Section 13 and 16 of the Arbitration and Conciliation Act,
1996 challenging the jurisdiction of Ld. Arbitrator. The
Objector has raised allegations against the Ld. Arbitrator,
citing the grounds of bias and conflict of interest. The
aforesaid application was dismissed by Ld. Arbitrator in
terms of an Order dated 19.11.2015 and the Objector was
directed to file his statement of defence.
2.8. The Objector filed his statement of defence on 30.11.2015.
The Objector denied the averments of statement of claim.
The facts stated in the statement of defence are being
reproduced hereinbelow:
i. The execution of the collaboration agreement dated
25.10.2012 was not denied, however it is stated that the
aforesaid agreement was entered through Mr. Vijay
Garg, who was also the architect for the construction of
the house, being subject matter of the dispute. It is
stated that the Respondent No.1 and the Arbitrator
played a fraud and got executed a custom made
agreement, which favoured the interests of the
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Respondent No.1. It is stated that the Objector had
entered into the agreement at the instance of Mr. Vijay
Garg, who assured that the construction will be raised
with the best of materials and the project would be
completed within the specific time.
ii. The Objector has cited various incidents wherein it was
stated that the Respondent No.1 was short of funds and
missed the deadline, despite the payment of the amount
agreed in the agreement to sell. It is stated that the
Objector was being promised by the Arbitrator about
the completion of the work by the Respondent No.1 and
both of the them extorted money without raising
construction, in accordance with the agreement dated
25.10.2012.
iii. It is stated that the Objector had already paid more than
Rs.25,00,000/- by January, 2014. It is stated that in
June, 2014, the Respondents came up with the new
scheme for sale of the upper ground floor and it was
assured that the project would be completed with the
money raised by selling the upper ground floor. It is
stated that the deal of the first floor was done for
Rs.75,00,000/- and the Respondent No.1 took
Rs.20,00,000/- from Mr. Satish Dabas. It is stated that
despite receiving the money, the Respondent No.1 was
interested only in construction of upper ground floor
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and was not interested in the construction of the
remaining floor.
iv. It is stated that subsequently the Respondents made a
promise to the Objector that at the time of final sale of
upper ground floor, a sum of Rs.42,90,000/- , i.e., the
sale consideration would be kept as a security by both
of them. It is stated that in January, 2015 the sale deed
of the upper ground floor was executed in the name of
Ms. Sushma Dabas, under force and pressure of the
Respondents, with the view to raise funds to construct
the house. It is stated that a sum of Rs.12,90,000/- was
given to Mr. Vijay Garg at his office in presence of Mr.
Daulat Ram, one Mr. Satish Dabas and family members
of the Objector and the remaining money was given to
the Objector. It is stated that the Respondent No.1 was
entitled to receive the upper ground floor only after
completion of the complete work.
v. It is stated that subsequently, the Respondents started
demanding more money for completion of the
construction in the building. It is stated that the
Objector has been cheated by the Respondents and the
Respondent No.1 abandoned the building and the
Respondent No.1 is not entitled to any further amount
towards the first floor, as he has failed to complete the
construction work in terms of the collaboration
agreement dated 25.10.2012.
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vi. It is stated that the Objector has suffered huge losses, on
account of the fraud of the Respondents and by non-
completion of the construction work. It is stated that the
Objector has made a complaint to the Police Station
Nangloi. It is stated that the Arbitrator has always
supported the Respondent No.1 and is acting in
conspiracy with him and therefore is not entitled to
legally competent to conduct the arbitration
proceedings.
vii. It is stated that the oral agreement to sell the upper
ground floor for completion of the construction was not
part of the original collaboration agreement. It is stated
that the Objector was forced to executed the sale deed
as the Respondent No.1 has locked the premises and the
Respondent No.2, i.e., the Arbitrator justified his act.
viii. It is stated that the Arbitrator has withheld cash
payment received by him on 24.06.2015, which is
reflected in the conversation recorded by the Objector
and is presented in the form a CD along with the reply.
It is stated that the conversations recorded in the
aforesaid CD records the conduct of the Arbitrator and
his incompetence to conduct the arbitral proceedings.
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2.9. Ld. Sole Arbitrator framed the following Issues on
04.01.2016:
i. Whether as per the contract between the parties
claimant was entitled for the sale proceeds of the upper
ground floor or not?
ii. Whether the sale proceeds are retained by the
Respondents and as alleged claimant is entitled to
recovery of the said amount of Rs.30,00,000/-?
iii. Whether the claimant is entitled to any interest on the
said amount or not if yes that what rate and from which
date?
iv. Whether the work was abundant by the claimants or he
was refrained from completing the work by the
Respondents?
2.10. The Respondent No.1 led his evidence and has only
examined himself as a witness (CW-1). The Respondent
No.1 reiterated the contentions of the statement of claim in
his examination in chief. The Respondent No.1 has exhibited
and relied upon the following documents in her examination-
in-chief:
i. Exhibit CW-1/1: Copy of the collaboration
agreement dated 25.10.2012;
ii. Exhibit CW-1/2: Copy of the sale deed;
iii. Exhibit CW-1/3: Copy of the agreement to sell.
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iv. Exhibit CW-1/4: Copy of the legal notice dated
03.08.2015;
v. Exhibit CW-1/5: Copy of the legal notice dated
17.08.2015;
vi. Collaboration agreement dated 25.10.2012.
The CW-1 was cross-examined by the Objector/ his Counsel
and was discharged upon conclusion of his cross-
examination.
2.11. The Objector lead his evidence and has examined two
witnesses in support of his case. The Objector himself
appeared as the RW-1 and reiterated the contentions of the
statement of defence in his examination in chief. The
Objector has exhibited and relied upon the following
documents in her examination-in-chief:
i. Exhibit R-1(Colly): The pages of diary
containing payment details (8 pages);
ii. Exhibit R-2(Colly): Emails (6 pages);
iii. Exhibit R-4: Estimates given by Mr. Vijay
Garg (5 pages);
iv. Exhibit R-4: The Certificate under Section
65B.
The RW-1 was cross-examined by the Ld. Counsel for the
Respondent No.1 and was discharged upon conclusion of his
cross-examination. The Objector has examined Mr. Satish
Kumar as RW-2. The RW-2 did not rely upon any document
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in his examination in chief. The RW-2 was cross-examined
by the Ld. Counsel for the Respondent No.1 and was
discharged upon conclusion of his cross-examination.
2.12. Thereafter Ld. Sole Arbitrator heard the final arguments and
passed the impugned award.
3. Grounds of Challenge/submissions of parties :
3.1. Ld. Counsel for the Objector has submitted that the
appointment of the Arbitrator was unilateral and against the
consent of the Objector and therefore, the proceedings
conducted by the sole Arbitrator were non-est ab initio. It is
submitted that there was serious conflict of interest, apparent
on the face of the record and the Ld. Sole Arbitrator was
completely biased against the Objector and Ld. Sole
Arbitrator has acted as agent of the Respondent No.1. It is
submitted that Ld. Sole Arbitrator has wrongly dismissed
the application under Section 13 and Section 16 of
Arbitration and Conciliation Act, 1996, without dealing with
the grounds of the same and further decided the matter, by
passing observation on merits in the aforesaid application. It
is submitted that Ld. Sole Arbitrator has passed an award
against the basic principles of law and ignored the relevant
evidence and rendered findings without any evidence. It is
submitted that the Ld. Sole Arbitrator has ignored the fact
that the Respondent No. 1 has himself abandoned the work
and therefore was not entitled to the consequence of the
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completion of the work.
3.2. Ld. Counsel for the Respondent No.1 has submitted that the
Arbitrator was a named Arbitrator in the agreement and the
Objector did not have any right to object to his appointment.
It is submitted that the Objector has levelled unnecessary
allegations against the Arbitrator merely with the sole
objective of derailing the proceedings. It is submitted that the
Arbitrator has given fair hearing to the parties and rendered
the findings on the basis of evidence led by the parties.
4. Conclusions on the Objections and Reasons for such
Conclusions:
4.1. The Objector has raised two fold objections to the impugned
award. The Objector has challenged the appointment as well
as the competence of the Ld. Arbitrator to act as an
Arbitrator. The Objector has also challenged the impugned
award on its merits and the same is stated to be in conflict
with the public policy. The aforesaid objections are being
discussed in detail in the paras hereinafter:
4.2. Objection to the appointment and competence of the Ld.
Sole Arbitrator:
4.2.1. The principal ground of challenge is the appointment of
Arbitrator without consent of the Objector and his de-jure
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ineligibility to act as an Arbitrator. It is submitted that the
appointment of the Arbitrator was invalid and without the
consent of the Objector. It is submitted that the Arbitrator
was not fit to be an Arbitrator in the matter on account of his
conflict of interest in the subject matter of proceedings as
well as on the ground of apparent bias. The Objector has
challenged the Order of dismissal of the Application under
Section 13 and 16 of the Arbitration and Conciliation Act,
1996.
4.2.2. It is the contention of the Respondent No.1 that the arbitrator
was a named arbitrator in the agreement and therefore, his
appointment was valid and the Arbitrator has thus assumed
jurisdiction in terms of the agreement between the parties
and the arbitration has commenced prior to the amendment
of 2015 and therefore, the appointment and competence can-
not be challenged.
4.2.3. The parties entered into the Collaboration Agreement dated
25.10.2012, which contained an arbitration clause. The
clause 20 of the agreement is arbitration clause and the
arbitration was agreed to be conducted by an Arbitrator
named therein. Though the Objector has contended that the
name of Arbitrator was left blank and was filled in
subsequently, however in the cross-examination dated
07.09.2016 (page 226 of Arbitral Record), the Objector has
admitted that Mr. Vijay Garg was named as an Arbitrator in
Collaboration Agreement dated 25.10.2012, after the parties
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have discussed and concurred on his name. The Ld.
Arbitrator was thus a named arbitrator in the arbitration
agreement and admittedly, the notice for invocation of the
arbitration was issued on 17.08.2015, i.e., prior to the
amendment of 2015 in the Arbitration and Conciliation Act,
1996. Therefore, the challenge to the competence of the Ld.
Arbitrator has to be examined in view of the aforementioned
facts.
4.2.4. It has been held in, “Ellora Paper Mills Ltd. v. State of
M.P., MANU/SC/0008/2022: 2022:INSC:11 : (2022) 3 SCC
1”, that a person falling within the purview of Section 12(5)
is de-jure ineligible to be an arbitrator irrespective of the fact
that the arbitration commenced prior to the amendment of
2015. The aforesaid proposition has further been recently
followed by the Hon’ble High Court of Delhi in, “Isar
Engineers Private Ltd. Vs. NTPC-Sail Power Company
Ltd. (03.02.2025): 2025:DHC:658 MANU/DE/0575/2025″
and the relevant observations of the Hon’ble Court are being
reproduced hereinbelow:
“12. The first question that arises for the consideration of
this court is whether the unilateral appointment of
Arbitrator done pre-amendment of 2015 can be
challenged on the grounds of bias, partiality and lack
of independence of the Arbitrator.
15. No doubt prior to the amendment of 2015, the fact that
the named Arbitrator is an employee, could not ipso-
facto be a ground for bias of the Arbitrator, as held in
the judgment of the Hon’ble Supreme Court in Aravali
Power Co. (P) Ltd. v. Era Infra Engg. Ltd.,
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MANU/SC/1139/2017:2017:INSC:894:
(2017)15SCC32, however the same also held that
justifiable apprehension can be raised in case the
person was the controlling or dealing authority with
respect to the subject matter in dispute. The operative
portion of the judgment reads as under:
“22. The principles which emerge from the decisions
referred to above are:
22.1. In cases governed by 1996 Act as it stood
before the Amendment Act came into force:
22.1.1. 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.
22.1.2. Unless the cause of action for invoking
jurisdiction under Clauses (a), (b) or (c) of
sub-section (6) of Section 11 of the 1996 Act
arises, there is no question of the Chief Justice
or his designate exercising power under sub-
section (6) of Section 11.
22.1.3. 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.
22.1.4. 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
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ignoring the procedure prescribed, the Chief
Justice or his designate may, for reasons to be
recorded ignore the designated arbitrator and
appoint someone else.” (Emphasis Supplied)
16. In a similar matter of Ellora Paper Mills Ltd. v. State of
M.P., MANU/SC/0008/2022 : 2022:INSC:11 : (2022) 3
SCC 1, wherein the Arbitral Tribunal was constituted
unilaterally in 2001 (i.e. pre-amendment of 2015) and
the arbitral proceedings were stayed till 2017, the
Hon’ble Supreme Court while relying on the judgments
of TRF Ltd. v. Energo Engg. Projects Ltd.,
MANU/SC/0755/2017 : 2017:INSC:577 : (2017) 8 SCC
377 and Bharat Broadband Network Ltd. v. United
Telecoms Ltd., MANU/SC/0543/2019 :
2019:INSC:537 : (2019) 5 SCC 755 held that the
amendment of 2015 will be applicable and the Arbitral
Tribunal appointed unilaterally would have lost its
mandate in terms of section 12(5) read with Seventh
Schedule of the Arbitration and Conciliation Act, 1996.
The operative portion of the judgment reads as under:
11.3. The learned counsel appearing on behalf of the
respondent has also submitted that in the facts
and circumstances of the case, the decision of
this Court in Jaipur Zila Dugdh Utpadak
Sahkari Sangh [Jaipur Zila Dugdh Utpadak
Sahkari Sangh Ltd. v. Ajay Sales & Suppliers,
MANU/SC/0646/2021 : 2021:INSC:465 :
(2021) 17 SCC 248] is not applicable. It is
submitted that in the said case, the arbitrator
was appointed after amendment of the
Arbitration Act, 2015. However, in the present
case, the arbitrator was appointed
approximately 20 years prior thereto and
thereafter the arbitration proceedings
commenced and even the appellant also
participated. It is therefore contended that the
amended Section 12(5) of the Arbitration Act
which is brought in the statute by way of
amendment in 2015 shall not be applicable
retrospectively. It is submitted that Section 12(5)
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of the Arbitration Act shall have to be made
applicable prospectively.
12. We have heard the learned counsel for the
respective parties at length. Having heard the
learned counsel for the respective parties and
on considering the impugned judgment and
order [Ellora Paper Mills Ltd. v. State of M.P.,
MANU/MP/0906/2021] passed by the High
Court, the short question which is posed for
consideration of this Court is, whether, the
Stationery Purchase Committee’ Arbitral
Tribunal consisting of the officers of the
respondent has lost the mandate, considering
Section 12(5) read with Seventh Schedule of the
Arbitration Act, 1996. If the answer is in the
affirmative, in that case, whether a fresh
arbitrator has to be appointed as per the
Arbitration Act, 1996‘
13. It is not in dispute that the High Court earlier
constituted the Arbitral Tribunal of Stationery
Purchase Committee comprising of officers of
the respondent viz. Additional Secretary,
Department of Revenue as President, and : (i)
Deputy Secretary, Department of Revenue, (ii)
Deputy Secretary, General Administration
Department, (iii) Deputy Secretary, Department
of Finance, (iv) Deputy Secretary/Under
Secretary, General Administration Department,
and (v) Senior Deputy Controller of Head
Office, Printing as Members.
14. It may be true that the earlier Arbitral Tribunal’
Stationery Purchase Committee was constituted
as per the agreement entered into between the
parties. It is also true that initially the said
Arbitral Tribunal was constituted by the High
Court in the year 2001, however, thereafter
Stationery Purchase Committee’ Arbitral
Tribunal could not commence the arbitration
proceedings in view of number of proceedings
initiated by the appellant. There was a stay
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granted by the High Court from 4-5-2001 to 24-
1-2017 and thereafter in the year 2019, the
present application was preferred before the
High Court invoking Section 14 read with
Sections 11 and 15 of the Arbitration Act, 1996
seeking termination of the mandate of the
originally constituted Arbitral Tribunal and to
appoint a new arbitrator.
16. As observed hereinabove, the Arbitral Tribunal’
Stationery Purchase Committee consisted of
officers of the respondent State. Therefore, as
per Amendment Act, 2015 ‘ sub-section (5) of
Section 12 read with Seventh Schedule, all of
them have become ineligible to become
arbitrators and to continue as arbitrators.
Section 12 has been amended by the
Amendment Act, 2015 based on the
recommendations of the Law Commission,
which specifically dealt with the issue of
neutrality of arbitrators”. To achieve the main
purpose for amending the provision, namely, to
provide for neutrality of arbitrators”, sub-
section (5) of Section 12 lays down that
notwithstanding any prior agreement to the
contrary, any person whose relationship with
the parties or counsel or the subject-matter of
the dispute falls under any of the categories
specified in the Seventh Schedule, he shall be
ineligible to be appointed as an arbitrator. In
such an eventuality i.e. when the arbitration
clause is found to be foul with the amended
provision, the appointment of the arbitrator
would be beyond the pale of the arbitration
agreement, empowering the Court to appoint
such an arbitrator as may be permissible. That
would be the effect of the non obstante clause
contained in sub-section (5) of Section 12 and
the other party cannot insist upon the
appointment of the arbitrator in terms of the
arbitration agreement.
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17. It cannot be disputed that in the present case,
the Stationery Purchase Committee’ Arbitral
Tribunal comprising of officers of the
respondent State are all ineligible to become
and/or to continue as arbitrators in view of the
mandate of sub-section (5) of Section 12 read
with Seventh Schedule. Therefore, by operation
of law and by amending Section 12 and
bringing on statute sub section (5) of Section 12
read with Seventh Schedule, the earlier Arbitral
Tribunal’ Stationery Purchase Committee
comprising of the Additional Secretary,
Department of Revenue as President, and: (i)
Deputy Secretary, Department of Revenue, (ii)
Deputy Secretary, General Administration
Department, (iii) Deputy Secretary, Department
of Finance, (iv) Deputy Secretary/Under
Secretary, General Administration Department,
and (v) Senior Deputy Controller of Head
Office, Printing as Members, has lost its
mandate and such an Arbitral Tribunal cannot
be permitted to continue and therefore a fresh
arbitrator has to be appointed as per the
Arbitration Act, 1996.
20. In view of the above and for the reasons stated
hereinabove, the impugned judgment and order
[Ellora Paper Mills Ltd. v. State of M.P.,
MANU/MP/0906/2021] passed by the High
Court is contrary to the law laid down by this
Court in TRF [TRF Ltd. v. Energo Engg.
Projects Ltd., MANU/SC/0755/2017 :
2017:INSC:577 : (2017) 8 SCC 377 : (2017) 4
SCC (Civ) 72], Bharat Broadband Network
[Bharat Broadband Network Ltd. v. United
Telecoms Ltd., MANU/SC/0543/2019 :
2019:INSC:537 : (2019) 5 SCC 755 : (2019) 3
SCC (Civ) 1] and the recent decision of this
Court in Jaipur Zila Dugdh Utpadak Sahkari
Sangh [Jaipur Zila Dugdh Utpadak Sahkari
Sangh Ltd. v. Ajay Sales & Suppliers,
MANU/SC/0646/2021 : 2021:INSC:465 :
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Sanjeev Kumar vs. Jitendra Kumar Batra & Anr. Page No. 21 of 42
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(2021) 17 SCC 248]. It is held that the earlier
Arbitral Tribunal’ Stationery Purchase
Committee comprising of the Additional
Secretary, Department of Revenue as President,
and : (i) Deputy Secretary, Department of
Revenue, (ii) Deputy Secretary, General
Administration Department, (iii) Deputy
Secretary, Department of Finance, (iv) Deputy
Secretary/Under Secretary, General
Administration Department, and (v) Senior
Deputy Controller of Head Office, Printing as
Members, has lost its mandate by operation of
law in view of Section 12(5) read with Seventh
Schedule and a fresh arbitrator has to be
appointed under the provisions of the
Arbitration Act, 1996. The impugned judgment
and order [Ellora Paper Mills Ltd. v. State of
M.P., MANU/MP/0906/2021] passed by the
High Court is therefore unsustainable and
deserves to be quashed and set aside.”
17. In the present case, in somewhat similar facts, the
named Arbitrator entered into reference in 2011 and the
petitioner repeatedly displayed its apprehension with
the appointment of the Arbitrator, both pre and post
commencement of arbitral proceedings. The petitioner
approached the Hon’ble High Court of Orissa, Cuttack
under section 11 of the Arbitration and Conciliation
Act, 1996 to appoint an impartial and independent
arbitrator since the named Arbitral was the authority
dealing with the contract in question between the
parties. The arbitration was initially kept in abeyance
by the Hon’ble Orissa High Court vide order dated
05.10.2012 and it was only on 10.03.2017 that a
clarification regarding no stay on arbitration was given
by the court. Applying the dicta of Ellora Paper Mills
Ltd. v. State of M.P., (2022), the named arbitrator could
not have been permitted to continue, having become de
jure ineligible under section 12(5) of the Arbitration
and Conciliation Act, 1996.
19. In the present case, it is the General Manager/Business
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Unit Head of the respondent company who was
supervising the work in question and was directly
involved in the execution of the work. It is the General
Manager/Business Unit Head of the respondent
company with whom the petitioner’s had repeated
meetings regarding the progress of the work and the
authority that took the decision of termination of the
contract. Hence, the apprehension that the Arbitrator
would be biased and partial towards the respondent
cannot be said to be an unjustifiable apprehension. In
addition, the petitioner approached the High Court of
Orissa, Cuttack immediately on getting to know about
the appointment of the General Manager/Business Unit
Head of the respondent company apprehending
partiality and bias on part of the Arbitrator.
20. In view of the above discussion, the Impugned Award is
liable to be set aside on this ground alone.”
4.2.5. Therefore, even the named arbitrator, falling within the
purview of under Section 12(5) of the Arbitration and
Conciliation Act, 1996, in proceeding commencing prior to
the amendment of 2015 is de-jure ineligible to act as an
arbitrator in the matter, if he has played a substantive role in
the matter and there appears to be reasonable apprehension
about fairness. The challenge to the competence of Ld.
Arbitrator is to assessed and examined in view of the law
discussed hereinabove.
4.2.6. The Objector has challenged the competence of the Ld.
Arbitrator on the ground that he was involved in the
transaction and there was serious conflict of interest on the
part of Ld. Arbitrator in relation to the subject matter of the
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proceedings. It is submitted that the Ld. Sole Arbitrator was
practically a witness of the dispute between the parties, at
several stages and therefore, was unable to be a fair
adjudicator. The Respondent No.1 invoked the Arbitration by
issuing a letter dated 17.08.2015, which was replied by the
Objector by reply dated 22.08.2015. In his reply, the
Objector has levelled allegations against the Ld. Arbitrator
and has stated that he was involved in the dispute between
the parties in the substantive manner. It is stated that the
collaboration agreement was entered through the Arbitrator.
It is stated that the payments to the Respondent No.1 were
made by the Objector at the insistence of the Arbitrator. It
is stated that the contract was re-negotiated for raising the
funds, at the instance of the Arbitrator. The copy of the
aforesaid letter been marked to Ld. Arbitrator and the
Original Speed and Courier receipt of the same are also
available in the Arbitral record and in terms of Section 3 of
the Arbitration and Conciliation Act, 1996, the aforesaid
letter is deemed to be served. The Ld. Arbitrator has not
taken note of the aforesaid reply, though the original reply is
in the arbitration files.
4.2.7. Ld. Arbitrator proceeded with the matter, despite there being
protest for his appointment by the Objector, in terms of reply
dated 22.08.2015. Thereafter the Objector has also filed an
application under Section 13 and Section 16 of the Act, 1996
and challenged the competence and jurisdiction of the Ld.
Arbitrator. The averments of the Application under Section
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13 and 16 of the Act, filed by the Objector, are being
reproduced hereinbelow:
“1. It is stated that on 25.10.2012, Shri Jitender Batra
entered into a collaboration agreement with the
Respondent, the mediator Sh. Vijay Garg,
(presently action as sole arbitrator) architect for
the construction of House of the complainant.
2. It is stated that Shri Jitender Batra and Shri Vijay
Garg (presently acting as sole arbitrator)
conspired in a planned manner to cheat the
Respondent. The collaboration agreement dated
25.10.2012 was drafted in planned manner and it
was represented by Sh. Vijay Garg (presently
action as sole arbitrator) that this agreement is
merely a formality and to complete the
construction, the respondent can trust on him as
he is a relative of the one of the friend of the
Respondent. In the collaboration agreement no
Schedule of the payment in respect of schedule of
work completion was mentioned. No penalty
clause was mentioned and all these fats were
intentionally and in a planned manner left to the
discretion of Sh. Jitender Batra, only to give
benefits to Sh. Jitender Batra. The Respondent
entered into such type of agreement only on the
assurances and representations of Sh. Vijay Gar
(presently acting as sole arbitrator. It is pertinent
to mention here that Sh. Vijay Garg also become
Sole Arbitrator in the Agreement dated
25.10.2012.
3. The construction of the plot has to be completed
with a period of 15 months i.e. till Feb.2014 and
the quality of the construction was p to be marked
as provided in the specification described in the
annexure with in the collaboration agreement
dated 25.10.2012. It is pertinent to mention her
that Shri Jitender Batra and Sh. Vijay Gard
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(presently acting as sole arbitrator) assured and
promised to the Respondent that all the
specification described in the annexure will be
completed with the best quality of material and
also assured that the project would be completed
with in specified time.
4. It is stated that in Nov. 2012, the Respondent
handed over the possession of the said property to
Sh. Jitender Batra and shifted on a rented
premises. On 16.12.2012, Sh. Jitender Batra
received first installment of Rs.1,00,000/- from the
Respondent. Sh. Jitender Batra stopped the
construction many a time on the ground that he
was short of funds and when the Respondent
approached Sh. Vijay Garg (presently acting as
sole arbitrator), he assured again and again to the
Respondent not to worry as he will take care of the
project and directed the Respondent to make
payment to Sh. Jitender Batra to start the
construction again and again. When the
Respondent made complaints to Sh. Vijay Garg
(presently acting as sole arbitrator) regarding the
show process of construction, he assured again
and again to trust on him.
5. It is stated that in Jan. 2014, Sh. Jitender Batra
stopped the construction again. Till Feb.2014
when Sh. Jitender Batra was supposed to hand
over the complete building as per the specification
made the Collaboration Agreement to the
Respondent, Sh. Jitender Batra had already taken
more than 25 lac and in the name of construction
he had completed only the basis structure with five
lanters and when the Respondent made complaints
to Sh. Jitender, Sh. Jitender Batra bluntly stated
that he has no money to complete the project and
do whatever. The Respondent was very shocked
and surprised at the conduct of Sh. Jitender Batra
as Sh. Jitender Batra and completed only the 30%
of the complete project and the Respondent had
already overspent on the basis of allurements and
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assurances given by Sh. Vijay Garg (presently
acting at sole arbitrator). Sh. Vijay Garg again
assured to the Respondent that he will take care of
the project and promised to sort out all the
problems. It is pertinent to mention here that Sh.
Jitender Batra and Sh. Vijay Garg (presently
action as sole arbitrator) directed the Respondent
to make the direct payment to the labour and other
persons also.
6. It is stated that in June, 2014, Sh. Jitender and Sh.
Vijay Garg (presently action as sole arbitrator)
again planted a new scheme to raise the funds in
the name of selling the Upper Ground Floor,
which Sh. Jitender Batra would get after the
completion of the project. Sh. Vijay Garg
(presently action as sole arbitrator) in very
planned, calculated and conspired manner made
this proposal to the Respondent and his family as
Sh. Jitender Batra was short of funds and
allurements assured that the project will be
completed with the money raised by selling the
Upper Ground Floor. The Respondent and his
family could not anticipate the conspiracy hatched
by Sh. Jitender Batra and Sh. Vijay Garg
(presently action as sole arbitrator) and having no
other option, the Respondent acceded to this
demand on the basis of the assurances give by Sh.
Jitender Batra and Sh. Vijay Garg (presently
action as sole arbitrator).
7. The deal of the First floor was done at Rs.
75,00,000/- and Sh. Jitender Batra took Rs.
20,00,000/- as an advance from Sh. Satish Dabas,
the proposed buyer of the Upper Ground Floor.
There after Sh. Jitender Batra gain started the
work, but to the shock and surprise to the
Respondent that he was started the work in the
Upper Ground Floor only. When the Respondent
made complaint to Sh. Jitender Batra, he
represented that he will complete the upper ground
floor and if the Respondent disturb him he
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threatened to go to Court. The Respondent having
no other alternative approached the Sh. Vijay
Garg (presently action as sole arbitrator) again
and again to take his problem. Sh. Vijay Gar
(presently action as sole arbitrator) assured that
you will enter the premises before Dewali this year
i.e. 2014. Even thereafter the work had been
stopped so many time.
8. The complainant made huge and cry to Sh. Vijay
Garg (presently action as sole arbitrator) about
the conduct of Sh. Jitender Batra, Sh. Vijay Garg
(presently action as sole arbitrator) always used
to give false and fabricated allurement and
assurances and always try to justify Sh. Jitender
Batra. When the Respondent told Sh. Vijay Garg
(presently action as sole arbitrator)that he had
already failed to all his promises and assurances,
he again taken the Complainant in confidence by
saying that at the time of final sale, the entire rest
money of sale proceedings i.e. sum of Rs.
42,90,000/- would be kept as a security by both of
us i.e. the Respondent and Sh. Vijay Garg
(presently action as sole arbitrator).
9. In the month of July, 2015, the sale deed of the
upper ground floor was done by the Respondent in
the name of wife Sh. Satish Dabas and a sum of
Rs. 12,90,000/- was given to Sh. Vijay Garg
(presently action as sole arbitrator) as his office at
Plot No. 21, Block, D Pankha Road, Industrial
Area Janak Puri, New Delhi-58 in the present of
Sh. Daulat Ram, one Shri Jain, Sh. Satish Dabas,
father and younger brother of the Respondent
along with the Respondent himself. And the rest of
money was given to the Respondent in the form of
two cheques.
10. Immediately thereafter, Sh. Vijay Garg (presently
action as sole arbitrator) start demanded money
from the Respondent as received by him to start
the construction and always insisted to give money
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in advance out of funds with the Respondent.
When the Respondent asked Sh. Vijay Garg
(presently action as sole arbitrator) that
12,90,000/- is already with you and no work was
started except the plaster of the four wall Sh. Vijay
Garg (presently action as sole arbitrator) bluntly
stated and forget about Rs. 12,90,000/- and if I
(Respondent) want to get my work complete,
provide funds immediately. The Respondent sated
that he ready to provide funds as the payment is a
security for the construction, but Sh. Vijay Garg
(presently action as sole arbitrator)has not given
any explanation in regarding the payment of Rs.
12,90,000/- and directed the Respondent to release
the payment, if you (Respondent) wants to get the
work start again or go to any Supreme Court or
any Court or file any case and you (Respondent)
can not complete the work.
11. Sh. Jitender Batra used degraded/low quality of
material in the construction as promised in the
detailed specification and assured by Shri.
Jitender Batra and Sh. Vijay Garg (presently
action as sole arbitrator) and thereby, cheated the
Respondent. It can be seen from the naked eyes
that the quality of work done is law and degraded
one.
12. Sh. Jitender Batra, threatened in different manners
that construction of the Respondent’s house will
not complete as the Court procedure take many
decade in solving the cases and the Respondent
having no other option he acceded the illegal
demands of Sh. Jitender Batra and Sh. Vijay Garg
(presently action as sole arbitrator).
13. Sh. Jitender Batra and Sh. Vijay Garg (presently
action as sole arbitrator) humiliated harassed the
Respondent and degraded the reputation of the
family of the Respondent.
14. By the acts, deeds, representations, allurements
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and assurances of Sh. Jitender Batra and Sh. Vijay
Garg (presently action as sole arbitrator), the
Respondent had suffered huge financial loss as the
Respondent lost more than Rs.30 lac and one floor
of the house and in the name of construction, he
got the upper two floors in unfurnished and rought
position and the quality of work at the parking
area at ground floor and at the first floor is very
poor in nature. Whole conduct of Sh. Jitender
Batra and Sh. Vijay Garg (presently action as sole
arbitrator), shows that they are in habit of winning
over the confidence of people on the basis of
allurements, false and fabricated promises and
cheat them in a very planned and conspired
manner.
15. Both Sh. Jitender Batra and Sh. Vijay Garg
(presently action as sole arbitrator) are liable to
be prosecuted for fraud, cheating,
misappropriation, criminal breach of trust,
threatening, defaming and harming the reputation
of the Respondent and his family. On 23.08.2015,
the Respondent made complaint to the S.H.O. PS
Nangloi and on 26.08.2015 to the ACP concern.
The Respondent having no other option has to file
criminal case against Sh. Jitender Batra and Sh.
Vijay Garg (presently action as sole arbitrator)
which fixed for today i.e. 03.11.2015. Both Sh.
Jitender Batra and Sh. Vijay Garg (presently
action as sole arbitrator) has already appeared at
the Police Station Nangloi in connection with the
above criminal case.
16. Sh. Jitender Batra send a legal notice dated
17.08.2015 on the false and manipulated facts. By
this notice dated 17.08.2015, Sh. Jitender Batra
showed his intention to revoke the alleged
arbitration clause. The Respondent replied this
legal notice along with legal notice dated
22.08.2015 and a copy of the same was also send
to Sh. Vijay Garg (Now Sole Arbitrator). It was
specifically mentioned that Sh. Vijay Garg (Now
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Sole Arbitrator) is your person (of Sh. Jitender
Batra) and Sh. Vijay Garg (Now Sole
Arbitrator)always supported Sh. Jitender Batra
and Sh. Vijay Garg (Now Sole Arbitrator) acted in
conspiracy with Sh. Jitender Batra and as such Sh.
Vijay Garg is not a fit person to be in Arbitrator.
The copy of the reply cum legal notice dated
22.08.2015was sent to Sh. Jitender Batra and Sh.
Vijay Garg (Now Sole Arbitrator) through
Whatsapp and also through speed post.
17. It was also specifically mentioned in reply cum
legal notice dated 22-.08.2015 that the new
agreement regarding the sale of First Floor
between Sh. Jitender Batra, Sh. Vijay Garg (Now
Sole Arbitrator), Respondent and Sh. Satish Dabas
was not part of Agreement dated 25.10.2012 and
as such the Arbitration Clause in the agreement
dated 25.10.2012 could not be starched to this new
agreement as such Sh. Vijay Garg (Now Sole
Arbitrator) is not competent to initiate Arbitration
Proceedings is regard of this new agreement.
18. Sh. Vijay Garg (Now Sole Arbitrator) has
embezzled a sum of Rs.12,90,000/- given by the
Respondent to you Sh. Vijay Garg (Now Sole
Arbitrator) for the construction of his house and in
spite of various demands for the release the
payment of Rs. 12,90,000/-, Sh. Vijay Garg (Now
Sole Arbitrator) never accounted for or reference
the same.
19. In the given premises of the facts and
circumstances you Sh. Vijay Garg (Now Sole
Arbitrator) is not a competent person to decide the
present statement of claim for the recovery of
Rs.36,75,000/- filed on behalf of the claimant Sh.
Jitender Batra.
4.2.8. In terms of the above-mentioned allegations, the Objector
has attributed a role to Ld. Arbitrator from the stage the
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execution of the collaboration agreement itself. The
allegations are specific and are enormous. The allegations
against the Arbitrator are not only limited to mere mediation
in the dispute, but are in the nature of being in control of the
entire controversy. The Objector even claims to have paid
Rs.12,90,000/- in cash to the Arbitrator, in relation to dispute
in question. The Respondent No.1 has filed a reply to the
application and stated that the Ld. Arbitrator did not have
any role in the transaction. At the same time, it is stated by
the Respondent No.1 that the Ld. Arbitrator was not in
collusion with the Respondent No.1, which was evident from
the fact that since the date of collaboration agreement, the
Objector himself sought intervention of Ld. Sole Arbitration
even on petty issues, which were duly sorted out by the Ld.
Sole Arbitrator.
4.2.9. Ld. Sole Arbitrator has dismissed the Application vide an
Order dated 21.11.2015 and operating part of the Order is
being reproduced hereinbelow:
“12. I have gone through the records and am of the
view that the allegations qua the Sole Arbitrator
(i.e., the undersigned) are false, baseless and
afterthought being leveled by the respondent only
after service of the legal notice dated 17.08.2015
upon the respondent in order to avoid the payment
in respect of the Sale Consideration admittedly
received by the respondent qua the portion which
has fallen to the share of the Claimant as per the
Collaboration Agreement.
13. Further, the disputes so raised by the Claimant
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have arisen out of the Collaboration Agreement
dated 25.10.2012, since the portion sold i.e. the
upper floor of the property of the respondent has
come to the share of the Claimant and he
admittedly was entitled to receive the Sale
Consideration, which was otherwise being
received on sale of the said portion by the
respondent being the recorded owner and
admittedly had to remit it to the claimant herein.
The Claimant is seeking the recovery by way of the
present claim qua the sale consideration of the
said portion which he is entitled as per the
collaboration agreement dated 25.10.2012, as
such the Sole Arbitrator herein is fully entitled to
arbitrate the disputes between the parties as
mutually agreed and appointed by consent of the
parties under the collaboration agreement dated
25.10.2012. The application of the respondent is
hereby dismissed.”
4.2.10. An Order passed under Section 13 and 16 of the Arbitration
and Conciliation Act, 1996, dismissing an application for
challenge to jurisdiction is not appealable under Section 37
of the Act of 1996 and only course available to party
aggrieved is to challenge the same, within the scope of the
challenge to the award, under Section 34 of the Arbitration
and Conciliation Act, 1996. Therefore, the Objector has
assailed the aforesaid Order within the scope of the present
petition.
4.2.11. This Court is unable to appreciate the reasons and
conclusions of Ld. Arbitrator as the Ld. Arbitrator has given
conclusive finding on the fact about the rights and
entitlements of the Claimant. There was no statement of
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defence and the entire observations proceed on the basis of
admission of the parties and source of such admission has
not been stated in the Order. Ld. Sole Arbitrator does not
deal with the allegations of being part of the transaction and
brushes them aside by terming them an attempt to defeat the
rights of the Claimant.
4.2.12. One more aspect, which is worth noticing here is that there
are serious allegations levelled by the Ld. Sole Arbitrator
upon the Objector and his witness, prior to filing of the
Application under Section 13 and Section 16 of the
Arbitration Act, 1996. The Arbitration file contains an
Original letter dated 03.10.2015, signed by the Ld. Sole
Arbitrator and written to the SHO Police Station, Nangloi,
wherein it was stated that the Ld. Arbitrator received death
threats to him and his family, from Mr. Satish Dabas, if he
did not favour Mr. Sanjeev Kumar. The original letter is in
the file and it is not evident, whether the same has been sent
or not. It is mentioned in the Order dated 6.10.2015 that Ld.
Sole Arbitrator received a threatening call from Mr. Satish
Dabas from the mobile No., registered in the name of
Objector’s father. It is also mentioned that the Objector has
filed a criminal case and the statement of the Ld. Arbitrator
and the parties were recorded in the police station. The
Objector and Ld. Sole Arbitrator seems to engaged in
criminal complaints and cases against each-other, though the
relevant details of the aforesaid cases is not on record.
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4.2.13. Even though if the allegations of the Objector are treated to
be exaggerated and all of acts, attributed to the Arbitrator
may not have been proved, still the previous involvement of
the Ld. Arbitrator with the parties and dispute, is evident
from the evidence recorded in the matter. The cross-
examination of the Respondent No.1, i.e., CW-1 dated
02.03.2016 (page 168 of Arbitral record) is relevant in this
regard and the relevant part of the same is being reproduced
hereinbelow:
“14. When last you contacted Mr. Sanjeev for doing
work?
Ans. On Sunday, sometime in July 2015 at Mr. Vijay
Garg’s residence in Rohini.
15. Why you went to Sh. Vijay Garg’s house?
Ans. For meeting with Mr. Sanjeev Kumar.
16. Meeting in what regard?
Ans. For payments and resumption of construction
work at the site.
25. I put to you that Sh. Sanjeev used to you email to
your as well as to Vijay Garg regarding the
payments made by him to different persons.
Ans. Yes, the amount were all accounted for between
us.”
The aforesaid cross-examination clearly indicates that the
parties have been mediating and renegotiating the terms
between them through the Ld. Sole Arbitrator. Ld. Sole
Arbitrator is aware of the e-mail and claim of payment by
the Objector. The Cross-examination of Objector, i.e., RW-1
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23.09.2016 (at page No.236 of the Arbitral Record) is also
relevant and the same is being reproduced hereinbelow:
“Q.: Is it correct that Mr. Vijay Garg always heard your
complaints and resolved the same in reference to
the collaboration agreement?
Ans.: Yes it is correct to say that I was always heard and
got the problems resolved but always we are put to
obliged the same to get the work done because our
problem was that the work was not getting done
and all the time I used to convey the same to Mr.
Vijay Garg as the claimant always says he is not
having funds to complete/start the work. The same
I convey and same was again put to us that if we
want to get the work started then gave some
amount to start the work again.”
4.2.14. The above-mentioned cross-examination indicate that the Ld.
Arbitrator was not only privy to the bare facts of the case,
but also to the role being played by the parties, the payments
being made by the parties and difficulties being faced by the
parties. The parties were meeting under his aegis for
renegotiating and he was being informed by the Objector,
with regard to payments made to the Respondent No.1. The
Arbitrator is thus a relevant witness of the facts pertaining to
present case as to who was responsible for the breach of the
agreement.
4.2.15.The Ld. Sole Arbitrator is privy to the dispute between the
parties and participated in the resolution of the same
previously and he is witness of the fact with regard to
conduct/misconduct of parties, which creates serious conflict
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of interest in his role as an arbitrator, in view of the personal
knowledge of the dispute in question. The proceedings suffer
from bias on the face of it, which is evident from the Order
passed on the Application under Section 13 and 16 of the
Act. Ld. Sole Arbitrator easily falls within categories of 1, 2,
4 , 8 and 16 under Seventh Schedule of Act of 1996.
Moreover the apprehension of bias becomes more than
reasonable, when the Arbitrator and the party contesting in
the arbitration are agitation criminal complaints/cases against
each other.
4.2.16. Therefore, the Ld. Sole Arbitrator has wrongly rejected the
application under Section 13 and Section 16 of the Act of
1996 and he was de-jure ineligible to act as an Arbitrator
between the parties, with regard to dispute in question on
account his previous involvement, as discussed hereinabove.
Therefore, the award passed by the Ld. Sole Arbitrator is not
sustainable and deserves to be set aside on this ground alone.
4.3. Objection to award on Merits:
4.3.1. It has been held by the Hon’ble Supreme Court of India in
“Delhi Airport Metro Express Pvt. Ltd. Vs. Delhi Metro
Rail Corporation Ltd.: 2021(5)ARBLR1(SC)” that an
award is patently illegal if the Arbitrator takes a view, which
is not possible or renders conclusion without evidence and in
ignorance of vital evidence. The relevant observations of the
Hon’ble Court are being reproduced hereinbelow:
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“25. Patent illegality should be illegality which goes to
the root of the matter. In other words, every error of
law committed by the Arbitral Tribunal would not
fall within the expression ‘patent illegality’. Likewise,
erroneous application of law cannot be categorised
as patent illegality. In addition, contravention of law
not linked to public policy or public interest is
beyond the scope of the expression ‘patent illegality’.
What is prohibited is for courts to re-appreciate
evidence to conclude that the award suffers from
patent illegality appearing on the face of the award,
as courts do not sit in appeal against the arbitral
award. The permissible grounds for interference with
a domestic award Under Section 34(2-A) on the
ground of patent illegality is when the arbitrator
takes a view which is not even a possible one, or
interprets a Clause in the contract in such a manner
which no fair-minded or reasonable person would,
or if the arbitrator commits an error of jurisdiction
by wandering outside the contract and dealing with
matters not allotted to them. An arbitral award
stating no reasons for its findings would make itself
susceptible to challenge on this account. The
conclusions of the arbitrator which are based on no
evidence or have been arrived at by ignoring vital
evidence are perverse and can be set aside on the
ground of patent illegality. Also, consideration of
documents which are not supplied to the other party
is a facet of perversity falling within the expression
‘patent illegality’.”
If the conclusions rendered by the Ld. Sole Arbitrator are
examined on the touchstone of above-mentioned principles,
the award in question is patently illegal.
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4.3.2. The admitted case of the parties is that the Respondent No.1
agreed to raise construction in the property of the Objector
and the same was agreed to be converted to multiple floors,
i.e., stilt parking, upper ground floor, first floor, second floor
and third floor with roof rights. It was agreed that the
Objector will pay a sum of Rs.23,50,000/- to the
Respondent No.1. It was agreed that the Respondent No.1
will complete the construction within 15 months from
22.11.2012. It was agreed that the Respondent No.1 will
raise the aforesaid construction/structure at his costs and
expenses. It was agreed that the Respondent No.1 shall
remain entitled to upper ground floor and 25% share in the
stilt parking. Therefore, if the collaboration agreement dated
25.10.2012 is read in totality, the entitlement of the
Respondent No.1 for the upper ground floor arises upon
completion of the construction from ground floor till fourth
floor.
4.3.3. The Respondent No.1 had initiated the arbitration
proceedings for recovery of Rs.30,00,000/-, which was
stated to be received by the Objector towards the sale of the
upper ground floor. The Respondent No.1 has been
exhaustively cross-examined on the aspects of incomplete
construction. The Respondent No.1 has admitted that he did
not have funds for completing the construction. The
Respondent No.1 has multiple times been asked to produce
the details and documents of the construction, carried out by
him. However the Respondent No.1 does not divulge the
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extent and details of the construction carried out by him,
which could have supported his case. The Respondent No.1
has admitted that the Objector has made payment of
Rs.23,50,000/- to him.
4.3.4. Ld. Arbitrator has concluded that the Respondent No.1
admitted to have not completed the entire work, however the
Objector has not shown the quantum of unfinished work and
therefore the Respondent No.1 was entitled to
Rs.30,00,000/-. The aforesaid finding is completely
unsustainable as once the Respondent No.1 himself admits to
have not completed the construction, he becomes dis-entitled
for the prayer of recovery. The entitlement of the Respondent
No.1 to claim the money on account of sale of the upper
ground floor is contemporaneous with the obligation of
completing the construction. In order to seek the recovery or
enforce the right in the first floor, the Respondent No.1
should have ideally filed an action for specific performance
of the collaboration agreement, by showing his readiness and
willingness to fulfill his part, instead initiating an action for
recovery.
4.3.5. The Respondent No.1 has admitted in cross-examination
dated 09.03.2016 (Page 180 of the Arbitral record) that he
has received Rs.20,00,000/- on account of deal of the Upper
Ground Floor. The Respondent No.1 has further admitted in
same cross-examination (page No.181 of the arbitral record)
that Mr. Satish Dabas has given to him and the Objector
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Rs.75,00,000/-. The aforesaid facts have been stated in the
statement of defence, however the Respondent No.1 has not
stated anything in the statement of claim about the aforesaid
amounts received on account of the deal with regard to upper
ground floor. In case of incomplete construction, if the
Respondent No.1 intended to raise a proportionate claim for
recovery, then the burden of proof was upon him to show as
to what an extent he completed the construction and how
much proportionate amount he would be entitled towards the
same. The Respondent No.1 has also to account for the
amount, which he had already received. The Respondent
No.1, in any case, is not entitled to entire upper ground floor
or entire sale consideration of the same, without first
fulfilling his own obligation, i.e., without completing the
construction. Ld. Arbitrator has framed the Issues in the
matter and has not rendered any findings on any of them.
Therefore, this Court finds the view taken by the Ld. Sole
Arbitrator is not a possible one, in view of the facts of the
case and the Ld. Sole Arbitrator has rendered the
aforementioned conclusions by ignoring vital evidence in
the matter. Therefore, the impugned award is liable to be set
aside on the ground of patent illegality.
5. Order:
Accordingly, in terms of the discussion/reasons stated
hereinabove, the present petition/objections under Section 34
of the Arbitration & Conciliation, 1996 is allowed and the
award dated 14.11.2017, passed by Ld. Sole Arbitrator Mr.
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ARBTN NO. 12/2018
Vijay Garg in Arbitration Case No. 01 of 2015, titled as,
‘Jitendra Kumar Batra Vs. Sanjeev Kumar’, is set aside. The
files be consigned to the record room after due compliance.
Digitally signed by
ANIL ANIL CHANDHEL
CHANDHEL Date: 2025.03.29
17:06:26 +0530
Announced in the open Court (ANIL CHANDHEL)
today on 29th of March, 2025 DISTRICT JUDGE-04
WEST DISTRICT
THC/DELHI/29.03.2025
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