Thursday, September 28, 2023

Delhi court dismisses HDFC Bank plea against appointment of sole arbitrator in finance deal with Rs 25,000 cost

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A local court in the national capital has disposed of a petition filed by the HDFC Bank Limited seeking enforcement of an Ex-parte Arbitral Award passed by a sole arbitrator, who was unilaterally appointed by the DH Finance Company on August 27, 2021, in its favour.

District Judge Surinder S. Rathi at Commercial Court in Shahdara district, Karkarduma on November 23, further imposed a cost of Rs 25,000 on Execution Petitioner HDFC, giving it time till four weeks to deposit the amount with the Shahdara Bar Association (SBA).

The court observed that the amount would be used for conducting orientation courses to improve advocacy skills and strengthen the justice system at the grassroot level.

The District Judge focussed on 14 key questions on law, while delivering his verdict. First, it held that generally, the Execution Court cannot go behind the Decree.

However, if the Executing Court found that the judgment was non est or that the Decree/Award was a nullity on the grounds of lack of inherent jurisdiction with the Arbitral Tribunal, Section 47 of the Code fully empowered the Execution Court to declare the Decree/Award as ‘Not Executable’ but not a ‘Nullity’. 

Citing several landmark cases and statutory provisions of the Delhi High Court and the Supreme Court, the District Judge ruled that unilaterally appointing a sole arbitrator was ‘non est’ and void ab initio.

It said the awards passed by such a Tribunal were ‘Non-Executable’. The court held that the actions of such an execution petitioner was held to be a ‘gross abuse of legal process’ in an attempt to reap benefits from his own wrong with impunity and utter disregard for the Courts. 

The District Judge noted that such occurrences hampered the ease of doing business in India and manipulated the hapless respondents. 

It further held that the agreements must be in consonance with Section 12(5) read with Schedule 7 of the Arbitration and Conciliation Act, 1996 (amended in 2015), adapting to recent practices as suggested in the BN Srikrishna Report.

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