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The Bombay High Court bench of Justice G. S. Kulkarni has passed an order holding that an arbitral tribunal cannot pass ex-parte ad-interim orders since the Arbitration and Conciliation Act mandates advance notice. The Court was hearing an appeal against an ex-parte order passed by a Sole Arbitrator on a Section 17 application filed by the respondent.

Brief Facts

A single arbitrator was appointed by the Bombay High Court to adjudge on the dispute regarding sale of unsold flats in a residential zone. However, upon an application under Section 17 of the Arbitration and Conciliation Act, 1996, the Arbitrator passed an ex-parte order in favour of the respondent without hearing the appellant. The appellant then filed an appeal against the order of the Arbitrator under Section 37 of the Arbitration and Conciliation Act, 1996.

Contention of Appellant

Dr. Bindra Saraf, arguing on behalf of the Appellants posed the following contentions:

1. Under Section 18 read with sub-Section (2) of Section 24 of the Act, the arbitral tribunal is required to hear both parties before any order on any fresh Section 17 application is passed by the arbitral tribunal.
2. The Respondent had not sought an ex-parte ad-interim order in its Section 17 application, on the contrary, the application sought a date for hearing of the application under Section 17.
3. It is alien to the arbitration jurisprudence and/or that it is not a practice in our country, that an arbitral tribunal would pass ex-parte ad-interim orders or pass orders without notice to the parties involved in the arbitral proceedings.” Reference was made to the 2006 amendment to Section 2 UNCITRAL Model Law on International Commercial Arbitration. Such amendment was inculcated in the Indian law by adding Article 17B to Arbitration and Conciliation Act, however, such changes were not accepted by the legislature.
4. The requirements under Order 39 Rule 3 of the Code of Civil Procedure were not followed in passing of the ad-interim order.

Order

Justice Kulkarni stated that there was no extraordinary situation, which would warrant passing an order under a Section 17 application. The Court while holding that the Arbitral Tribunal ought not to have passed an order without proper notice, observed, 

     "In my opinion such provisions certainly make it incumbent upon the arbitral tribunal to give sufficient notice of any hearing to the parties before it. If this is what is plainly reflected from the said provisions of the Act, it would be unknown to law and quite peculiar for an arbitral tribunal to pass an exparte ad-interim order, on the mere filing of a Section 17 application, without hearing even the party making the application, much less the contesting respondent, who would certainly be affected and/or prejudiced by an ex-parte order."

The bench added, "It may be that the arbitral tribunal is of a firm opinion in the facts of a given case, that some urgent orders are required to be passed to protect the arbitral interest of the parties, however, fairness of the procedure...would not permit an arbitral tribunal to pass an ex-parte order on a Section 17 application and more so when the parties are sufficiently before the arbitral tribunal."

The Court further observed that provision of ex parte interim orders are rare in arbitration laws and that the ex-parte order as passed under the amended provisions of the UNCITRAL Model Law, does not appear to reflect the accepted practice in the major centres of arbitration.

Case Title: Godrej Properties Ltd. Vs Goldbricks Infrastructure Pvt. Ltd.