Delhi District Court
This Is A Petition Under Section 34 Of The ... vs . on 20 December, 2021
IN THE COURT OF SH. SACHIN JAIN, ADDL. DISTRICT JUDGE-02,
SOUTH-WEST DISTRICT, DWARKA COURTS, NEW DELHI
Arbtn.No. 48/2020
CNR No. DLSW010079042018
IN THE MATTER OF:
Amit Jain
S/o Sh Naresh Jain
R/o H.No. BU-252, Pitampura
Delhi - 110088
Also at:
C/o M/sGoyam Metals at Khasra No. 22/23
Gali No.4, Samay Pur Industrial Area
Delhi - 110042 ... Objector
Vs.
1. Kotak Mahindra Bank Limited
27, BKC, C-27 G Block
Bandra Kurla Complex,Bandra (E)
Mumbai - 400051
2. Sh. Prahlad Narayan Khandelwal
(Retd. District and Sessions Judge)
Sole Arbitrator
At Flat No. 509, Ground Floor
Dwarka Residential Scheme
DDA, SFS Flats, Pokect-I
Sector 22, Dwarka, New Delhi - 110075 ... Respondents
Date of institution of petition: 10.04.2018
Date of judgment reserved: 17.11.2021
Date of pronouncement of judgment: 20.12.2021
ORDER
1. This is a petition under section 34 of the Arbitration and Conciliation Act, 1996 ( hereinafter referred to as "Act") filed by the petitioner for setting aside the award dated 15.12.2017 passed by the Ld. Sole Arbitrator.
2. In order to avoid confusion the parties are referred to as per their original status before the arbitral tribunal i.e. the objector/Petitioner herein shall be referred as respondent and respondent/claimant herein as Claimant.
3. Brief facts of the case are that in the year 2010 the respondent approached the office of Citi Financial Consumer Finance India Ltd (CCFIL) to avail a personal loan facility. On the said proposal and after completion of preliminary formalities, the respondent entered into a loan agreement bearing account No.16222539. Under the said agreement personal loan facility of ₹7,00,000/- (Rupees Seven lakhs only) was provided to the respondent, which is to be repaid in total 48 equated monthly installments of ₹21,321/- each as per the schedule of the agreement. Thus, the respondent is liable to repay a total sum of ₹10,23,408/- (Rupees Ten lakhs twenty three thousand and four hundred eight only) which is to be paid as per the annexure to the loan agreement. However, the respondent failed to repay the same despite repeated requests and follow ups.
4. It is further stated that as per Clause No. 22 of the agreement it has been specifically mentioned that CCFIL shall be entitled to transfer or assigned any of its obligation rights or benefits to any party without the consent of the borrower i.e. respondent herein and the borrower shall fulfill and perform all his obligations to such transferee or assignee. In pursuant to the terms of the Clause No. 22 vide a deed of assignment dated 26.11.2014 CCFIL assigned/ sold/ transfer the entire receivable in the captioned personal loan account in favour of Kotak Mahindra Bank Ltd (the claimant herein). Pursuant to said assignment, the claimant has become solely entitled to receive the said receivable.
5. It is further stated that as per Clause 29 of the said agreement executed between the parties also pertains the arbitral clause which envisages that if any controversy of dispute should arise between the parties in performance, interpretation or application of the loan amount involving any matter the same shall be submitted to the arbitration to a single arbitrator to be nominated by the assignor / claimant whose decision shall be final under the provision of the Arbitration Act 1996, further as per the said clause the parties had agreed that the arbitration proceedings shall be held in New Delhi.
6. The respondent defaulted in repayment of loan and therefore, a demand notice dated 21.02.2017 was issued, calling upon the respondent to pay the outstanding dues alongwith 18% p.a. as on 05.03.2014 and in case the respondent failed to comply with the said legal notice then it shall be presumed that a dispute has been arisen between the claimant and the respondent and the same shall be referred to arbitration of arbitrator as per the loan agreement.
7. As the respondent failed to comply with the demand notice, the claimant invoked the arbitration clause and appointed respondent No.2 as the sole arbitrator. Respondent No.2 after hearing the claims of both the parties passed the impugned arbitration award dated 15.12.2017 whereby the claim of Rs 5,47,577.63 ( Rupees Five lakhs forty seven thousand five hundred seventy seven and sixty three) alongwith future interest of 12% p.a. on principal amount of Rs 5,11,407/- from 06.03.2014 till actual realization was allowed in favour of the claimant and against the respondent.
8. The main grounds urged by the Objector/ petitioner herein are:-
i. The objector/ petitioner never signed any agreement/ document or any letter or bond for agreeing the resolution of any dispute with the respondent No.1 by any arbitration hence the alleged nomination of the alleged sole arbitrator i.e. the respondent No.2 as well as the entire arbitration proceedings have no effect in the eyes of law. ii. The alleged sole arbitrator did not appreciate the application filed by the objector challenging his jurisdiction u/s 16 of Arbitration and Conciliation Act as the respondent No.1 without intimating to the objector/ petitioner has referred the alleged dispute to the respondent No.2 which is against the principle of natural justice and despite the objector/ petitioner has raised the said issue at the initial stage of the commencement of arbitration proceedings before the respondent No.2 but the Ld. Arbitrator has not decided the said application at the first instance and allegedly held his appointment legal in the final award dated 15.12.2017 which against the preview of Section 16 of Arbitration and Conciliation Act.
iii. The alleged sole arbitrator did not give proper opportunity of hearing to the objector and conducted the alleged arbitration proceeding in a biased manner and did not follow the principles of natural justice and passed the impugned award which is in conflict with the public policy of India and the same is quite evidence from the order sheet where the respondent No.2 granted time to the respondent No.1 for filing of evidence over telephone and closed the evidence of the respondent No.1 in the absence of petitioner/ objector without affording any opportunity to cross -examine the respondent No.1 and this shows that the arbitrator has not conducted the arbitration proceedings in proper and fare manner. iv. The alleged sole Arbitrator while passing the impugned award did not appreciate the facts that the alleged letter of assignment issued by the assignor i.e. the citi financial dated 23.01.2015 bearing reference No. 16222539CKA in favour of the respondent No.1 without informing/ communicating the same to the objector / petitioner and in the absence of the same, the alleged assignor agreement cannot be executed against the objector/ petitioner without giving him an opportunity to put his case before the citi financial regarding the alleged loan.
v. The alleged sole Arbitrator while passing the impugned award did not appreciate that the alleged loan was granted to the objector/ petitioner on 26.02.2010 for sum of Rs 7,00,000/- which was to be repaid in 48 equal monthly installments of Rs 21,321/- and the same was to be completed in the month of January, 2014 and whereas the present claim petition has been filed by the respondent No.1 on 10.03.2017 as per the paper book supplied by the respondent No.1 to the objector/ petitioner and hence, the period of limitation shall be run from the date of last installment due in the month of January, 2014 and from this the respondent No.1 can file any litigation within 3 years from the cause of action occurred in the month of January, 2014 and not after that. Merely, issuing a notice on 21.02.2017 to the objector/ petitioner does not extended the period of limitation for filing the claim against the objector/ petitioner in the month of March 2017 and the claim petition is highly time barred as per law.
vi. Without prejudice to the rights of the objector/ petitioner, the petitioner submits that the alleged sole Arbitrator passed the impugned award without appreciating the fact that the respondent No.1 has no where mentioned the alleged date of declaring the objector/ petitioner as NPA and further more relied upon the Foreclosure statement dated 05.03.2014. From the said foreclosure, cause of action arose upto the date 05.03.2017 and not thereafter as the claim was filed on 10.03.2017 and same is beyond the period of limitation. vii. The alleged sole arbitrator has committed gross error by conducting the arbitration proceedings without giving proper notice which would reflect from the letters sent by the objector to the alleged sole arbitrator and further illegally and unlawfully proceeded the objector as ex parte as claimed in the award but the objector/ petitioner duly participated in the arbitral proceeding.
viii. The alleged sole arbitrator has committed gross error by conducting the arbitration proceedings without giving proper notice which would reflect from the fact that the evidence of the witnesses of the respondent No.1 could not be cross examined by the objector and the order was passed by committing miscarriage of justice to the objector.
ix. The impugned award being illegal, unlawful, arbitrary and against the principle of natural justice and equity as well as biased is liable to be set-aside.
x. The alleged sole Arbitrator has not followed the requisite procedure before passing the alleged award in question and has passed the same in great misconceived and vexatious manner. xi. The alleged sole arbitrator in all illegalities have passed/ pronounced/ published the impugned award on 15.12.2017 without proper stamp and accordingly, the same is liable to be set aside. It is submitted that the impugned award has been allegedly published on 15.12.2017 while the certificate of stamp has been issued on 13.12.2017 and accordingly, the copy of the award was supplied to the objector/ petitioner on 20.01.2018.
9. Notice of the petitioner was issued to the respondents and in pursuant to the notice respondent No.1 appeared on 12.09.2018 and filed reply to the objections filed by the objector/ petitioner.
10. Respondent No.1/claimant in his reply to the objections stated that the present objections filed by the objector is filing without issuing notice to the respondents under Section 34(5) of the Arbitration and Conciliation Act, 1996. It is further averred that the objector has filed the petition neglecting the due procedure of law and hence the petition is liable to be dismissed. Respondent No. 1 vehemently denied the objections filed by the objector and submitted that the petitioner/ applicant is raising absurd allegations without adducing any just ground, reason or material. It is further averred that the Arbitrator after applying his judicial mind and after following the due course by giving sufficient opportunities to both the parties pronounced the arbitral award. It is further averred that since the loan agreement executed between the objector and the respondent No.1, courts at Gurgaon, Haryana shall have the exclusive jurisdiction adjudicate to all disputes arising out of the agreement in question, hence the objection filed by the objector is baseless and hence liable to be dismissed.
11. The scope of inquiry in Section 34 proceedings is restricted to consideration whether any one of the grounds mentioned in Section 34(2) exists for setting-aside the award.
Section 34 (1) and (2) of The Arbitration and Conciliation Act, 1996 read as under:
"34. Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India. Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute."
12. It is clear that the scope of the interference by the court under section 34(2) Arbitration Act has been time and again restricted in Catena of Judgments by Hon'ble Superior Courts and it has been held that in proceedings under section 34 of the Act, 1996, the re-appreciation of the facts, evidence or interpretation of the terms of contract in not permissible. What is permissible is, if there is a patent illegality, apparent error on the face of the record, perversity in the award or misconduct by the learned arbitrator.
13. Coming to the case in hand, I have duly examined the grounds pleaded in the objection petition in the light of the facts and circumstances of the case, reply filed by the respondent, legal position and heard the submissions of both the sides at length.
14. During the course of arguments the Ld. Counsel for the objector confined his arguments on three ground i.e.
i) As he is not signatory to the assignment agreement vide which the loan account was transferred to Kotak Mahindra bank and objector never signed any fresh agreement with respondent no.1 herein iner-alia agreeing for resolution of dispute through arbitration proceedings, the award is liable to be set-aside.
ii) The application u/s 16 of arbitration and conciliation act filed by the objector challenging the jurisdiction of the arbitrator was not decided by the sole arbitrator at first instance and held his appointment legal in the final award which is against the preview of section 16 of the Act.
iii) The arbitrator failed to take into consideration that the claim was time barred as the loan was granted on 26.02.2010, which was to be repaid in 48 equated installments and the same was to be completed in January 2014 and where as the present claim petition has been filed on 10.03.2017 which is beyond the period of limitation of three years. Merely issuance of demand notice on 21.02.2017 to the objector does not extend the period of limitation. Moreover, the Ld. Arbitrator has relied upon the Foreclosure statement dated 05.03.2014. From the said foreclosure, cause of action arose upto the date 05.03.2017 and not thereafter as the claim was filed on 10.03.2017 and same is beyond the period of limitation.
15. Per-contra, the Ld. Counsel for the respondents/claimants submitted that the impugned arbitral award does not suffer from any illegality and prays for the dismissal of the present objections being devoid of merits on the ground that the arbitral tribunal considered all the objections raised by the objector in the present case and decided each of them on merits.
Conclusion:
Re: Assignment of Loan Agreement without consent of borrower.
16. The issue is no more res-Integra and the Hon'ble High Court of Delhi following the findings given in its earlier judgment of Bestech India Private Ltd. v. MGF Developments Ltd ( (2009) 161 DLT 282), wherein it was held that if the contract is assignable then the arbitration agreement enshrined in the contract will follow the assignment, in its recent judgment in Kotak Mahindra Bank v. S. Nagabhushan & Ors. (2018 SCC OnLine Del 6832) while deciding an application under Section 34 of the Act has held that post the assignment of the loan agreement the rights under the arbitration agreement being in the nature of remedy for enforcement of rights under the agreement are assignable as well.
17. Therefore, in light of the legal position reproduced above, in the present case, clause No. 22 of the loan agreement has specifically mentioned that CCFIL shall be entitled to transfer or assigned any of its obligation rights or benefits to any party without the consent of the borrower and the borrower shall fulfill and perform all his obligations to such transferee or assignee. Therefore, the argument of the objector is devoid of merits and does not call for any interference with impugned the arbitral award.
Re: Application u/s 16 of the Act filed by the objector/respondent was not decided by the Arbitrator at first instance but decided at the time of final award thereby upholding his appointment as legal.
18. This issue is also no more res-Integra and in catena of Judgments passed by the Hon'ble High Court of Delhi, it is held time and again that it is not mandatory for an Arbitral Tribunal to adjudicate upon an objection raised under Section 16 of the Arbitration Act at the very threshold before proceeding with the trial.
In Glencore International AG v. Indian Potash Limited & Ors . [263 (2019) DLT 663],the Hon'ble Delhi High Court has held that "18. The contention raised that an error had been committed by the Arbitral Tribunal in not ruling on the objection raised with regard to jurisdiction at the very threshold was misconceived as the Arbitral Tribunal had the discretion to rule on its jurisdiction either at the preliminary stage or at the time it rendered a final award in the matter." Similarly in Pankaj Arora v. AVV Hospitality LLP & Ors. [MANU/DE/1405/2020], the Hon'ble High Court of Delhi has reiterated in the following words:
"16. I am unable to read sub-section 5 of Section 16 as casting a mandate, on the arbitrator, or the Arbitral Tribunal, to decide the objection, to its/his jurisdiction, to adjudicate on any claim/counter claim, necessarily before recording of evidence. No doubt, issues of jurisdiction are, ordinarily, to be addressed at the outset. That, however, is more a rule of prudence than one of inflexible procedure. Legally, so long as the said decision is taken prior to the making of the final arbitral award, in my view, no infraction of Section 16 could be said to have occurred."
19. In light of the above legal position, coming to the case in hand, the arbitral tribunal decided the application u/s 16 of the act moved by the objector challenging the jurisdiction of the tribunal on merits before passing the impugned arbitral award.
20. It is one of the contentions of the objector/petitioner that in the application u/s 16 of Act moved by him was on the ground that no offer was ever made by the claimant/respondent to him for the appointment of respondent no.2 as the sole arbitrator and even no concurrence was given by him to the appointment of any arbitrator in the present matter.
21. However, on perusal of the arbitration file it is observed that the claimant had issued a letter of intent dated 28.02.2017 (Ex.-15) for appointment of respondent no.2 as the sole arbitrator for adjudication of dispute in terms of clause 29 of the loan agreement and CC (carbon copy) of the same through registered post (Ex.-16, 17 and 18) was also sent to the objector on 02/03/2017. It is an admitted fact that the objector never challenged the appointment of the sole arbitrator in terms of Section 11(5) of the act within a period of thirty days, which amounts to waiver in terms of Section 4 of the Arbitration and Conciliation Act, 1996. Hence, the contention of the objector is not sustainable and the impugned arbitral award does not entail interference of this Court.
Re: Claim is time barred
22. To decide the present contention, it is important to reproduce relevant facts of the case. It is an admitted fact that the loan was granted on 26.02.2010, which was to be repaid in 48 equated installments and the Ist installment was to be paid from 05.04.2010 as per statement of account (Ex.-7), meaning thereby that the last installment has to be paid on 05.03.2014 and therefore, the suit for recovery or arbitration proceeding can be initiated within a period of three years as per the limitation act i.e. on or before 05.03.2017.
23. Section 43 (2) of the arbitration and conciliation act, 1996 provides that:
"For the purposes of this section and the Limitation Act, 1963 (36 of 1963), an arbitration shall be deemed to have commenced on the date referred to in section 21".
AND Section 21 of the Act provides as under:
Commencement of arbitral proceedings.-- Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
24. On combined reading of both the provisions reproduced above, the relevant date for the purpose that whether a particular claim is barred by limitation or not is the date on which the request to refer the dispute to arbitration is received by the respondent i.e. objector /petitioner herein.
25. Coming to the present case, in the demand notice dated 21.02.2017 ( Ex.-9) issued by the claimant, at clause no. 5 it is mentioned that "in the event of failure on the part of the borrower to repay the loan amount within 7 days, it shall be presumed that a dispute has been arisen between us and the same shall be referred to the arbitration of an arbitrator as per the loan agreement". The copy of the said notice was sent to the objector /petitioner on 22.02.2017, which stands duly proved as per the postal receipts annexed/marked by the claimant during arbitral proceedings as (Ex- 10,11 &12).
26. Further, on 28.02.2017, the claimant sent a letter of intent dated 28.02.2017 (Ex.-15) for appointment of respondent no.2 as the sole arbitrator for adjudication of dispute in terms of clause 29 of the loan agreement and CC (carbon copy) of the same was also sent to the objector/petitioner through registered post (Ex.-16, 17 and 18) .
27. Therefore, on the basis of aforesaid two notices viz: demand notice dated 21.02.2017 and letter of intent dated 28.02.2017, it can be safely presumed that the request to refer the dispute to arbitration was received by the objector/petitioner well within the limitation period in terms of Section 3 (2) of the Act of 1996 wherein it is provided "the communication is deemed to have been received on the day it is so delivered".The onus was on the objector/petitioner to establish that he has not received the above two notices before the expiry of limitation period in the present case and this Court is of the view that the objector/petitioner failed to discharge that onus, as Section 3 of the Act, raises a rebuttable presumption of fact. It is pertinent to mention here that it is not the case of the objector/petitioner that the notices were sent on a wrong address, rather, he himself mentioned the same residence address in memo of parties filed in the present objection petition on which the above two notices were sent to the objector.
28. From the perusal of the impugned arbitration award and arbitration pro- ceedings it is clear that the grounds taken in the present petition by the petitioner were also argued before the learned arbitrator and the same were considered in details by the learned arbitrator.
29. This Court is of the view, learned arbitrator has taken the correct view on the issues involved in arbitration relating to assignment of loan agree- ment; contention regarding limitation period; objections raised in applica- tion under section 16 of the Act, 1996.
30. In view of the above discussion, in my opinion, the petition is devoid of any merit and therefore, the same is dismissed.
31. No order as to cost.
32. File be consigned to Record Room after due compliance, necessary action and as per Rules.
Pronounced in the open Court (SACHIN JAIN)
on 20.12.2021 Addl. District Judge-02, South West
Dwarka Courts Complex, Delhi