Case Briefs
Truth and Youth (TAY) 2021. All rights reserved.

N. Rajagopal  vs TVS Motor Company Limited


Author: Nikitha Panchagnula, student at University College of Law, Osmania University.


Citation: N/A

Date of Decision: March 30, 2021

Bench: P. T. Asha

Original Copy: View

Statutes involved: The Arbitration and Conciliation Act, 1996

 

Issues in Question:

  • Whether the arbitral proceedings can be initiated and be proceeded with by one party in the absence of a demand or a dispute being raised by another party?
  • Whether the award passed by the Tribunal when no statement of claim was filed by the Appellant (i.e., the claimant) is sustainable?

Background of the case:

  • The 1st respondent’s company had appointed the Appellant as the Authorized Stockist of their company’s spare parts accepting the request made by the Appellant. In lieu of this, the respondent company has issued a letter of offer on 16-01-2003 appointing the Appellant as their stockist. The business for the sales counter was to be conducted in an area of 800 Sq.ft and another 800 Sq.ft was to be used as godown at BD road, Chindamani Commercial Complex, Salem. To quote in all correspondence, the Appellant was given a unique stockist code. The respondent company in their offer letter has mentioned that disputes, if any, arising out of this agreement be resolved by Arbitration and that the Managing Director of the company would appoint the Sole Arbitrator. The venue was agreed to be at Hosur and the Sole Arbitrator was required to submit the award within 6 months of entering the reference. The Appellant has signed the offer letter conveying his acceptance. Hence, the contract has been concluded between the parties. 
  • The Appellant made a request in writing through letters to the Executive Director of the respondent company to restore the trade incentive and the credit limit that were being originally given to him taking into consideration the sales achievement made by him, the long association between the company and himself and his capacity to achieve the targets prescribed by the company. 
  • Though the Appellant did not raise a dispute or request to appoint an Arbitrator conveying that the dispute has aroused, the respondent company made a request for the appointment of the Arbitrator to their Chairman and the Managing Director. Thereafter the 2nd respondent was appointed as Sole Arbitrator and later a notice was sent to the Appellant regarding the same. 
  • The Appellant in his letter addressing to the 2nd respondent conveyed that the appointment of the Arbitrator was not needed as no dispute arose and that his request could be solved through mere discussions. Even after receiving such letters from the Appellant, the Arbitrator proceeded with the matter. The Appellant has not filed his statement of claim and hence the Arbitrator has treated the letters sent by the Appellant to the Executive Director of the company as his claim statement. Thereafter the Arbitrator passed an award dismissing the claim petition and asking the Appellant to pay the full cost of the Arbitral proceedings. 
  • The Appellant has challenged the award passed by Arbitrator before the Principal District Court, Krishnagiri u/s 34 of The Arbitration and Conciliation Act, 1996 to set aside the award. The learned judge has dismissed the petition. Thereafter, the Appellant has challenged the award passed by the learned judge before the Hon’ble High Court of Madras.

Judgement: 

  • The Court found glaring procedural irregularities, total disregard to the fundamental procedure provided by the Act, absence of jurisdiction to the Arbitral Tribunal in the present case.  
  • It held that the Arbitral proceedings was conducted without any jurisdiction due to:
  1. Absence of any dispute between the Appellant and the respondent company.
  2. The Appellant has not raised any dispute with the respondent company.
  3. The Appellant has not made any request for the constitution of the Arbitral Tribunal.
  4. The respondent company commenced the Arbitral proceedings and not the Appellant, violating the provisions of Section 21 of the Act.
  5. Upon receiving the notice from the Arbitrator, the Appellant has clearly stated that he will not take part in the proceedings.
  6. When the Appellant has not filed the statement of the claim within the stipulated time period as provided by the Arbitrator, the Arbitrator has failed to terminate the proceedings.
  7. By treating the letters sent by the Appellant to the Executive Director of the respondent company as the statement of claim, the Arbitrator has Suo moto exceeded his jurisdiction. 
  • Therefore, the High Court set aside the order passed by the learned Principal District Judge and consequently the award passed by the Arbitrator was declared non-est and void, and therefore, was set aside.

Critical Analysis: 

  • This entire case revolves around the issue as to whether a dispute was raised by the Appellant which gave rise to the appointment of the arbitral tribunal. Since the 1996 Act does not define the term ‘dispute’ the court in the present case relied on the Black’s Law dictionary for its meaning which explained the dispute to be ‘a conflict or a controversy’. Therefore, dispute contemplates the existence of a conflict or a controversy which were missing in the present case. 
  • The 2nd respondent being the Sole Arbitrator has totally failed to adopt a judicial approach overlooking the rudimentary and fundamental principles of the Act. The learned District Judge has also failed to make a note that the entire Arbitral proceedings right from its commencement till the award is made was totally irrational and perverse. Hence, the Hon’ble High Court rightly remarked that this was a case of patent irregularity. 

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