Madras High Court Overturns Family-Arbitrated Award Citing Natural Justice Violation

Court sets aside arbitral award by family elders in Dadha family dispute, emphasizing adherence to natural justice principles  

In a significant ruling, the Madras High Court has set aside an arbitral award made by family elders acting as arbitrators in a dispute between M. Maher Dadha and S. Mohanchand Dadha. The decision highlights the court's commitment to ensuring the principles of natural justice are upheld, regardless of the arbitrator's composition.  

The dispute arose over the management and financial dealings of five companies linked to the Dadha family. The family had agreed to resolve their conflicts through arbitration by three family elders. However, the award made by these arbitrators on October 9 and 10, 2005, was challenged by M. Maher Dadha on the grounds of insufficient opportunity to present his case, a breach of natural justice principles.  

Justice N. Anand Venkatesh, presiding over the case, acknowledged that while the arbitrators were laypersons and family members, the adherence to natural justice is non-negotiable. The court noted that Maher Dadha was not given a crucial opportunity to address the arbitrators, as demonstrated by his request to reschedule a meeting that was not accommodated. The award was passed without granting this request, leading to a violation of natural justice.  

The judgment also reflects on the nature of arbitral awards made by non-legally trained individuals, emphasizing that while the reasoning might not match that of a legally trained mind, the conclusions must still be substantially correct and fair.  

The court has allowed the parties to return to the same arbitrators, provided the principles of natural justice are followed, ensuring both parties have the opportunity to present their case fully. This ruling underscores the judiciary's role in safeguarding procedural fairness in arbitration, irrespective of the arbitrators' background.  

Bottom Line:

Arbitration - Award passed by family elders acting as Arbitrators - Arbitral award set aside on grounds of violation of principles of natural justice when a party was not given sufficient opportunity to present their case at a crucial stage of proceedings.

Statutory provision(s): Arbitration and Conciliation Act, 1996 - Section 34(2)(a)(iii), Section 34(2)(b)(ii)

M. Maher Dadha v. Mr. S. Mohanchand Dadha, (Madras) : Law Finder Doc Id # 2797324