Appellants- Vinod Bhaiyalal Jain &Ors.
Respondents – Wadhwani Parmeshwari Cold Storage Pvt. Ltd.
The respondents here were the owner of a cold storage which was managed by Mr. Suresh Wadhwani. And the appellants in this case were the sons of Mr. Bhaiyalal Jain, who were into business relates to agricultural products. In the year 2004 the appellants had used the services of cold storage for storing 50bags of ‘singada’ (a type of fruit). It was alleged by the appellants that the bags of fruit which were stored in the respondent’s cold storage was not stored in a proper manner which led to the damage of the fruits. Thereafter, the appellants claimed compensation, to which the respondents denied and a dispute arose between the parties.
According to the respondents all the disputes were to be governed by arbitration by the Arbitrator , Mr. S.T. Madnani who was an advocate. The clause of arbitration was mentioned in receipt that was issued regarding the storage of singada bags.
In this background the father of the appellants got issues a notice that disputed the presence of any arbitration clause and more emphasis was given on the fact that Sri S.T. Madnani, who is appointed as the arbitrator had been the counsel of the respondent (no. 1) previously and hence cannot be appointed as an arbitrator. Despite these objections the matter proceeded in arbitration and award was passed directing the appellants to pay an amount of Rupees 43,000. Hence the aggrieved appellants, under section 34 of the 1996 Arbitration Act filed a petition before the District Judge.
DISTRICT JUDGE (NAGPUR)
The learned District Judge agreed with the contentions of the appellants that disputed the appointment of Sri Madnani who had earlier been a counsel of one of the respondents. Also, this fact was not disclosed in terms of section 12 of the 1996 Arbitration Act. Thus, the learned District Judge found the objection justified and set aside the award bits its order.
The respondents thereafter filed an appeal under Section 37(1)(b) of the 1996 Arbitration Act to the High Court. It was held that the objection that was raised against the appointment of the arbitrator was not raised by the appellants but the father of the appellants. It was further held that just because the Arbitrator had appeared as an advocate for the respondent would not make a reasonable man believe that the Arbitrator would be biased.
Therefore by its impugned order the High Court set aside the order of the District Judge and restored the award.
The appellants thereafter filed a petition in the Supreme Court. It was held that the learned arbitrator had received a notice regarding the fact that the appellants had filed an application in the High Court for the appointment of an independent arbitrator and requested for pausing the arbitration proceedings yet the arbitrator continued with the proceedings. The Supreme Court agreed with the Observations of the District Judge that the Arbitrator, Mr Madnani had already acted as a lawyer for the respondent and this fact was not disclosed, though under section 12 of the 1996 Arbitration Act its disclosure was pertinent.
The award was set aside and the judgement passed by the District Judge, Nagpur was restored.