Atul Kalra & Anr. vs. Kunal Seth

Facts

The petitioners filed a petition under Sections 14 & 15 of the Arbitration and Conciliation Act, 1996, seeking termination of an arbitrator's mandate and appointment of a substitute. The dispute arose from a lease deed dated 29.11.2019 between the petitioners and M/s Dieu & OR, represented by its Proprietor, Mr. Kunal Seth (respondent). The lease was for a property at M-43, Greater Kailash Part-I Market, New Delhi, at a monthly rent of ₹1,60,000 plus GST for six years, with a one-year lock-in period. The respondent paid rent until March 2020 but allegedly vacated the premises in September 2021 without notice or payment of rent. The petitioners had unilaterally appointed an arbitrator, but in light of the Supreme Court's judgment in Perkins Eastman Architects DPC & Anr. v. HSCC (India) Limited, they approached the High Court. Service of notice on the respondent proved difficult, with attempts indicating the respondent was abroad or had shifted premises. The claimed amount is approximately ₹50 Lakhs.

Held

The Court held that proper service had been effected on the respondent, and their non-appearance indicated a deliberate choice not to participate. The Court acknowledged the petitioners' submission regarding the invalidity of the unilaterally appointed arbitrator based on the Supreme Court's judgment in Perkins Eastman Architects DPC & Anr. v. HSCC (India) Limited. Consequently, the Court terminated the mandate of the earlier arbitral tribunal. The Court then appointed Justice Dinesh Kumar Singh, Former Judge, Patna High Court, as a fresh arbitrator to adjudicate the dispute. The arbitration proceedings will be conducted under the aegis of the Delhi International Arbitration Centre (DIAC). The Court clarified that all rights and contentions of the parties, including arbitrability and preliminary objections, are left open for the new arbitrator to decide. The parties were directed to approach the learned arbitrator within two weeks.

Key Issues

1. Whether the mandate of the unilaterally appointed arbitrator should be terminated due to the prohibition under the Supreme Court's ruling in Perkins Eastman Architects DPC & Anr. v. HSCC (India) Limited, concerning the appointment of an arbitrator by a party to the dispute? 2. Whether proper service of notice was effected upon the respondent, justifying the Court's proceeding in their absence? Petitioner's Arguments: The petitioners argued that the unilateral appointment of an arbitrator by them was invalid in light of the Supreme Court's decision in Perkins Eastman Architects DPC & Anr. v. HSCC (India) Limited, which prohibits a party from appointing an arbitrator unilaterally. They contended that the respondent had abandoned the leased premises without notice and failed to pay rent, leading to the dispute. They also asserted that they had made diligent efforts to serve notice on the respondent, and despite the respondent's absence, proper service had been effected. Respondent's Arguments: No arguments were recorded for the respondent as they remained unrepresented.