A.S. Bopanna, J. - (1.) The appellants herein are before this Court assailing the order dated August 30 and 31, 2007 passed by the High Court of Judicature at Bombay in First Appeal No. 187 of 2007. The said appeal was filed by the respondent No.1 herein invoking Sec. 37(1)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter referred as the 'Act 1996' for short). Through the said appeal the respondent No.1 herein had assailed the order dated 06.11.2006 passed by the Principal District Judge, Nagpur in MCA No. 538/2006 in the proceedings under Sec. 34 of the Act, 1996.
(2.) The brief facts are that the respondent No.1 herein owns a cold storage at Nagpur. Sri Suresh Wadhwani manages the same. The appellants herein who are the sons of Sri Bhaiyalal Jain are engaged in business as commission agents for agricultural products. In that regard they had utilised the services of cold storage during the year 2004 for keeping 50 bags of 'Shingada' which is an agricultural product. According to the appellants herein the respondent No. 1 had failed to store the goods in an appropriate manner which had caused damage to the same. The appellants therefore got issued a notice dated 18.05.2006 seeking for compensation. The respondent No. 1 herein by its reply dated 27.05.2006 not only denied the claim put forth by the appellants herein but also made counter claim. Thus, dispute arose between the parties. According to respondent No. 1 herein, the parties were governed by an arbitration clause and the parties had agreed to refer the dispute, if any, to the Arbitrator, Sri S.T. Madnani, Advocate. The said arbitration clause is contained in the very receipt issued in respect of the storage of goods. The respondent No. 1, therefore through their claim dated 03.06.2006 submitted the same before the learned Arbitrator 2nd respondent Sri. S.T. Madnani.
(3.) The father of the appellants herein in that background got issued a notice dated 08.06.2006 disputing the very existence of the arbitration clause and more particularly the appointment of Sri S.T. Madnani, Advocate as an Arbitrator was disputed and it was contended that the said Advocate being the counsel for the respondent No. 1 and its partners in other cases cannot act as an Arbitrator in respect of the disputes to which the respondent No. 1 is a party. A copy of the same was also dispatched to the learned Arbitrator. Further, the appellants also addressed letters dated 29.07.2006 and 07.08.2006 which was taken note by the learned Arbitrator in the order sheet of the proceedings as also in the award passed. Despite the same, unmindful of such objection raised and terming it as inconsequential, the learned Arbitrator proceeded with the matter in the absence of the appellants herein and passed the award dated 08.08.2006 directing the appellants herein to pay the claim amount as ordered. The learned Arbitrator also imposed a cost of Rs.43,000/- on the appellants. It is in that light the appellants claiming to be aggrieved filed the petition under Sec. 34 of the Act, 1996 before the District Judge, Nagpur raising objection to the award, more particularly with regard to the conduct of the learned Arbitrator. The learned District Judge while appreciating the same was of the opinion that the learned Arbitrator had in fact acted as a counsel for Sri Suresh, a partner of respondent No. 1, which fact was not disclosed in terms of Sec. 12 of the Act, 1996 and also on taking note of Sec. 13 of the Act, found the objection justified and set aside the award by order dated 06.11.2006.;