Arbitrator cannot pass ex-parte orders without issuing notices to parties: Bombay high court

Godrej Properties had moved Bombay high court, challenging the ex-parte order, claiming that the order was passed by the arbitrator without even issuing a notice to them, which the arbitrator could not have done

Observing that an arbitrator cannot pass ex-parte orders without issuing notices to parties to the dispute before it, the Bombay high court (HC) has struck down an arbitral order against Godrej Properties.

Observing that an arbitrator cannot pass ex-parte orders without issuing notices to parties to the dispute before it, the Bombay high court (HC) has struck down an arbitral order against Godrej Properties. (Getty Images/iStockphoto)

Justice GS Kulkarni said sections 18, 19 and 24 of the Arbitration and Conciliation Act, 1996, mandate that in the conduct of arbitral proceedings parties are not only treated with equality but each party “shall be” given full opportunity to present its case.

“This would be more imperative when the parties are already before the arbitral tribunal,” said justice Kulkarni while striking down the October 8 order passed by the sole arbitrator on an interim application filed by Goldbricks Infrastructure Private Ltd., the other party to the commercial arbitration which had staked certain claims against Godrej Properties.

Goldbricks Infrastructure had last year moved HC. The court had referred the commercial dispute for arbitration to a retired Chief Justice of India. Both the sides had filed applications for certain interim measures, and acting on such a plea filed by Goldbricks Infrastructure, the arbitrator had on October 8 restrained Godrej Properties from dealing with or creating any third party rights in unsold flats and other units of Residential Zone –II.

Godrej Properties had moved HC, challenging the ex-parte order, claiming that the order was passed by the arbitrator without even issuing a notice to them, which the arbitrator could not have done.

Justice Kulkarni accepted the argument advanced on behalf of Godrej Properties. The single-judge bench said Section 24 (2) mandates that the parties “shall be” given sufficient advance notice of any hearing and this would include hearings for ad-interim, interim or final orders.

“In my opinion, the provisions certainly make it incumbent upon the arbitral tribunal to give sufficient notice of any hearing to the parties before it,” said the court. “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 ex-parte 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,” justice Kulkarni added, referring to the fact that the sole arbitrator had not even heard Goldbricks Infrastructure before passing of the order.