In a landmark ruling, the Supreme Court of India on January 9, 2025, nullified two ex-parte arbitration awards totaling over ₹46 lakh, citing lack of jurisdiction and fraudulent proceedings. The case, Civil Appeal No. 10212 of 2014 (State of Uttar Pradesh & Another vs. R.K. Pandey & Another), involved claims by R.K. Pandey, a retired lab assistant from Kanpur, over his service conditions under the U.P. government.
The judgment, delivered by a bench comprising Chief Justice Sanjiv Khanna, Justice Sanjay Kumar, and Justice R. Mahadevan, underscored the court’s commitment to maintaining the sanctity of arbitration while safeguarding against abuse.
Case Background
R.K. Pandey was employed in 1944 at the Dina Nath Parbati Bangla Infectious Disease (DNPBID) Hospital, which was transferred to the State Government of Uttar Pradesh in 1956. Upon his retirement in 1997, Pandey disputed his retirement age, claiming he should retire at 60 instead of 58. While his initial writ petition to the Allahabad High Court was withdrawn, he later initiated arbitration proceedings in 2008, invoking a purported agreement from 1957.
Pandey appointed sole arbitrators unilaterally, resulting in two ex-parte awards: one for ₹26.42 lakh with 18% interest and another for ₹20 lakh with 9% interest. These awards were subsequently challenged by the State of Uttar Pradesh.
Legal Issues
The case revolved around the following pivotal questions:
1. Existence of an Arbitration Agreement: The alleged 1957 arbitration agreement was neither referenced in official records nor authenticated. The court noted it was suspiciously produced decades after the events it purportedly governed.
2. Unilateral Appointment of Arbitrators: The Supreme Court observed that Pandey’s unilateral appointment of arbitrators violated principles of fairness and impartiality, which are fundamental to arbitration.
3. Barred by Limitation: The court highlighted that Pandey’s claims were time-barred under Section 3 of the Limitation Act, 1963, read with Section 43 of the Arbitration and Conciliation Act, 1996.
Observations of the Supreme Court
The bench unequivocally condemned the fraudulent nature of the proceedings. Chief Justice Sanjiv Khanna stated:
“Fraud and justice never dwell together. Arbitration fundamentally relies on party autonomy, and the existence of a valid arbitration agreement is a sine qua non for enforceable awards.”
The court emphasized that arbitration awards must comply with principles of natural justice and legal procedure. It further noted that Pandey’s actions, including self-appointing arbitrators and fabricating an agreement, were attempts to defraud the State.
Decision
The Supreme Court set aside both arbitration awards, declaring them null and void. It ruled that the proceedings were a sham and lacked subject matter jurisdiction. The court also dismissed the related execution proceedings and awarded costs to the State of Uttar Pradesh.
