Karnataka HC.
Credit: DH File Photo
Bengaluru: The Karnataka High Court said rules that unilateral appointment of an arbitrator without the other party's consent is impermissible.
Justice Suraj Govindaraj said this in a petition challenging the actions of the Shriram Transport Finance Company nominating its own person as an Arbitrator, who passed an order as an Arbitrator even before being appointed, which has also been executed prior to his appointment.
“If the other party were not to respond to the request of Shriram favourably, it was for Shriram to approach this Court under Section 11 of the Act (Arbitration and Conciliation Act), seeking the appointment of any Arbitrator by this Court and not to appoint an Arbitrator by itself and proceed with the matter,” Justice Suraj Govindaraj said.
In the case at hand, Shriram Transport Finance had appointed BK Vishwanath, an advocate, as arbitrator to recover a vehicle loan of Rs 28.3 lakh from the family of deceased Manjunath. His wife Manjula and son Tarun Gowda received notices from Shriram Transport Finance Company on July 27, 2019.
The petitioners Manjula and Tarun Gowda contended that even before the issuance of this notice, applications were filed before the Arbitrator on July 12. On the very day, the Arbitrator passed an order permitting the finance to repossess the hypothecated vehicles, with the help of jurisdictional police and retain the same in the custody, till the disposal of the case. It was argued that unilateral appointment of an Arbitrator could not have been made inasmuch as the agreement entered into between the parties does not provide for a named Arbitrator.
The court noted that the manner in which the finance firm has acted categorically and unimpeachably establishes the abuse of law. “It is on the basis of this so-called order dated 12-7-2019 passed by the 2nd Respondent Arbitrator that police help has been secured, the vehicles have been seized, impounded and taken to the parking yard of Shriram, which could never have been done by Shriram since the applicable procedure and law has not been followed. Shriram has abused the process prescribed under the Act, nominated its own person as an Arbitrator, who has passed an order as an Arbitrator even before being appointed, which has also been executed prior to his appointment, and a memo has been filed,” the court said.
The court has now directed the Director General of Police to appoint a suitable officer not below the rank of Superintendent of Police to conduct an enquiry into these proceedings and to submit a report within six weeks. If there are any other similar complaints received necessary enquiry in regard thereto would also have to be held,” Justice Suraj Govindaraj said.