The Court highlights fundamental flaws in the communication process, emphasizing adherence to principles of natural justice.
In a significant ruling, the Bombay High Court has set aside an arbitral award dated 6th November 2023, citing improper service of notices to the appellants, Sedhram Nilkanth Muglikar and another. The judgment, delivered by Justice Arif S. Doctor, also nullified the District Judge's order from 4th April 2025, which had upheld the arbitral award.
The appellants contended that they were not given proper notice of the arbitration proceedings, violating their rights to present a defense. The court found that the service of notices was never duly effected, with postal endorsements indicating "left address" and "door locked," suggesting unsuccessful delivery attempts. The court criticized the arbitrator's reliance on deemed service provisions under Section 3 of the Arbitration and Conciliation Act, 1996, without proof of actual communication reaching the appellants.
Justice Doctor highlighted the absence of efforts to ascertain the appellants' current address and failure to use available e-mail addresses for notification, which further invalidated the service. The judgment emphasized that endorsements such as "unclaimed" cannot be treated as effective service when recipients are not properly served at their operative address.
The court noted that the appellants had shifted their residence within the same colony, and the bank failed to verify their current address before proceeding with the arbitration. Although the arbitral award was communicated via e-mail, prior notices were not, demonstrating a denial of effective opportunity for the appellants to participate in the proceedings.
Justice Doctor's judgment underscores the importance of adhering to the principles of natural justice and ensuring proper communication in arbitration processes. The court's decision serves as a reminder to arbitral authorities to exercise due diligence in service of notices, safeguarding parties' rights to fair participation.
Bottom line:-
Arbitration proceedings - Proper service of notice is fundamental to ensure compliance with principles of natural justice under Arbitration and Conciliation Act, 1996.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 3, 31(5), 34(2)(a)(iii)
