Karnataka High Court
M/S Print And Imaging Solutions Pvt ... vs Mrs Annie Koshy on 22 January, 2013
Author: N.Ananda
Bench: N. Ananda
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 22ND DAY OF JANUARY 2013
BEFORE
THE HON'BLE MR.JUSTICE N. ANANDA
M.F.A.No.10222/2011 (AA)
BETWEEN:
M/s.Print and Imaging Solutions Pvt. Ltd.
No.12, Embassy Court,
Flat No.14, Cresent Cross Road,
Bangalore - 560 001.
Rep. by its Director
Mr.S.S.Ajay Guptha. ... Appellant
(By Smt.Pramila M.Nesargi, Senior Advocate for M/s.Pramila
Associates, Advocates)
AND:
Mrs.Annie Koshy
W/o late N.K.Koshi
Aged about 75 Years,
R/at No.26, Benson Cross Road,
Benson Town,
Bangalore - 560 046. ... Respondent
(By Sri C.K.Nandakumar, Advocate for C/R)
This appeal is filed under section 37(1)(b) of Arbitration &
Conciliation Act, to set aside the arbitration award dated
17.08.2009 passed by the arbitrator and judgment dated
02.11.2011, passed in A.S.No.25023/2009, on the file of IV
Additional City Civil and Sessions Judge, Mayohall Unit,
Bangalore, dismissing the suit and etc.
This appeal having been heard and reserved for judgment
on 22.11.2012, coming on for pronouncement this day, the court
delivered the following:-
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JUDGMENT
The appellant is the tenant of part of commercial complex (hereinafter referred to as 'schedule property') of which respondent is the owner. They had entered into a registered lease deed dated 15.04.2002. The appellant was inducted as a tenant in schedule property for a period of five years from 15.04.2002. After expiry of lease period, appellant continued to be a tenant on monthly rent of Rs.1,07,148/-. The appellant stopped payment of rent after June 2007. The respondent issued a notice for termination of tenancy and tenancy was terminated and called upon appellant to pay Rs.11,14,315/- with interest thereon at the rate of 18% per annum and also sought for delivery of possession. There was no response by appellant. Therefore, respondent invoked arbitral clause under the lease agreement and issued notice to appellant on 14.03.2008.
2. The appellant received notice but did not respond to notice either agreeing for the nominee or suggesting his own arbitrator. Therefore, respondent filed C.M.P. No.39/2008 by 3 invoking section 11 of the Arbitration & Conciliation Act, 1996 (for short, 'the Act').
3. The appellant entered appearance through an Advocate in C.M.P.No.39/2008, however he did not file objections nor any statement regarding nomination of arbitrator.
4. In C.M.P.No.39/2008, this court passed the following order on 01.08.2008:-
"6. Since the petitioner has invoked the said arbitral clause and notice thereof was issued to the respondent calling upon him to suggest the nominee, that having not been done, I am of the view that an Arbitrator is required to be appointed to resolve the dispute between the parties. Indeed it is also to be noticed that notwithstanding the fact that the Lease Deed is terminated, the arbitral clause would survive, if any decision is required, on this point, once can refer to the Judgment of the Apex Court in the case of National Agricultural Coop. Marketing Federation India Ltd., Vs. Gains Trading Ltd., reported in (2007)5 SCC 692 and in the case of Bharat Petroleum Corporation 4 Ltd., Vs. Great Eastern Shipping Co. Ltd., reported in (2008)1 SCC 503.
7. Consequently, the following order is passed:
(a) Petition stand allowed.
(b) Mr.S.Anantha Murthy, Retired District Judge, No.565/1, 7th Main, HAL II Stage, Indiranagar, Bangalore - 8 is appointed as an arbitrator to resolve the dispute inter se between the parties.
(c) Let a copy of this order be communicated to the Arbitrator.
(d) The Arbitrator, on receipt of the order shall enter upon a reference and proceed to dispose of the matter."
5. It is not in dispute and cannot be disputed that lease deed entered into between parties on 15.04.2002 provides for reference of dispute arising with regard to terms and conditions of lease deed to arbitration. It is also stated in the arbitration clause that place of arbitration shall be at Bangalore. The arbitrator appointed by this court in C.M.P.No.39/2008 5 entered arbitration and passed the award on 17.08.2009. The operative portion of the award reads thus:-
"ORDER
1. The Opposite party is directed to vacate the property within three months from today and put the claimant in vacant possession of the same.
2. The Opposite party is directed to pay the claimant arrears of rent if any found due from June 2007 and till the date of termination of tenancy along with service tax payable as per law after deducting the amount appropriated viz., Rs.5,33,628/-. All these amounts shall bear interest @ 18% per annum from the date/dates they fell due and upto the date of payment.
3. The Opposite party is directed to pay to the claimant mesne profits at the rate of Rs.1,07,148/- per month from 01.02.2008 to the date of putting the claimant in vacant possession of the property along with interest @ 18% per annum and service tax if any, payable under law.6
4. The claimant is entitled to receive from the opposite party the entire costs of arbitration including the Arbitrator's fees, the advocate's fees, the cost of the venues arranged by the claimant for conducting the arbitration proceedings and the stamp duty to be paid by the claimant. The advocate's fees is fixed at Rs.10,000/-.
5. The claimant shall file a memo of calculation up to the date of this Award within two weeks from today and pay the stamp duty as per law within four weeks from today.
6. Advocate's fee Rs.10,000/-."
6. The appellant filed an application under section 34 of the Act before the trial court, inter alia contending that; he had not received notice from arbitrator; appellant was not aware of the proceedings before arbitrator; an exparte award was passed by arbitrator. The appellant had sought to set aside the award by invoking section 34(2)(a)(iii) of the Act reading as hereunder:-
"34. Application for setting aside arbitral award (1) ...7
(2) ...
(a) ...
(i) ...
(ii) ...
(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"
7. The arbitrator was appointed by this court in C.M.P. No.39/2008 and appellant had entered appearance in C.M.P. No.39/2008 and he was represented by an Advocate. Therefore, appellant cannot contend that he was not given proper notice of appointment of arbitrator. It is the case of appellant that arbitrator had not notified him about further arbitration proceedings. Therefore, award is an exparte award.
8. The appellant has also contended;- the power of attorney of respondent had filed affidavit evidence on behalf of respondent. The power of attorney was not fully aware of the transactions between appellant and respondent. Therefore, arbitrator should not have relied upon affidavit 8 evidence and the impugned award suffers from various infirmities.
9. As could be seen from the grounds urged in this appeal as also in the application filed under section 34 of the Act, the grievance of appellant is that arbitrator had not issued notices to appellant of further proceedings of arbitration.
10. I have heard Smt.Pramila M.Nesargi, learned Senior Counsel for appellant and Sri C.K.Nandakumar, learned counsel for respondent.
11. The appellant having challenged the award on the ground of lack of proper notice was duty bound to persuade the trial court that there was actual or real prejudice caused by alleged breach. The award cannot be set aside on technical or procedural irregularities when no harm is caused in final analysis.
12. In order to understand the scope of court below under section 34 of the act, as also of this court under section 37 of 9 the Act, it will be useful to refer to following decisions of the Supreme Court.
13. In a decision reported in (2007) 7 SCC 679 (in the case of Markfed Vanaspati & Allied Industries Vs. Union of India), the Supreme Court has held:-
"17. Arbitration is a mechanism or a method of resolution of disputes that unlike court takes place in private, pursuant to agreement between the parties. The parties agree to be bound by the decision rendered by a chosen arbitrator after giving hearing. The endeavour of the court should be to honour and support the award as far as possible."
14. In a decision reported in AIR 2003 SC 2629 (in the case of Oil and Natural Gas Corporation Ltd. Vs. SAW Pipes Ltd.), the Supreme Court has held:-
"75. CONCLUSIONS:-
In the result, it is held that:-
A. (1) The Court can set aside the arbitral award under Section 34(2) of the Act if the party making the application furnishes proof that:-
(i) a party was under some incapacity, or 10
(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;
2) The Court may set aside the award:-
(i) (a) if the composition of the arbitral tribunal was not in accordance with the agreement of the parties,
(b) failing such agreement, the composition of the arbitral tribunal was not in accordance with Part-I of the Act.
(ii) if the arbitral procedure was not in accordance with:-
(a) the agreement of the parties, or
(b) failing such agreement, the arbitral procedure was not in accordance with Part-I of the Act.
However, exception for setting aside the award on the ground of composition of arbitral tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part-I of the Act from which parties cannot derogate.
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(c) If the award passed by the arbitral tribunal is in contravention of provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.
(3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:-
(a) fundamental policy of Indian law;
(b) the interest of India; or
(c) justice or morality, or
(d) if it is patently illegal.
(4) It could be challenged:-
(a) as provided under Section 13(5); and
(b) Section 16(6) of the Act."
In the case on hand, appellant had contended that he was not given proper notice of arbitral proceedings. It is needless to state whether appellant had not been served with notice of arbitral proceedings or not is a question of fact. The appellant had not led evidence to prove this fact. On the other hand, at the request of learned counsel for parties, the trial court called for records relating to arbitration to verify truth or otherwise of contents of the application. 12
The learned trial Judge after securing original records from arbitrator has held that arbitrator after entering appearance had issued notice to both parties and also granted time to file claim statement to respondent and thereafter to file objection statement by appellant.
15. The records of arbitration are made available to this court. It is seen from records of arbitration proceedings, the arbitrator entered upon reference on 27.11.2008, pursuant to order made by this court in C.M.P.No.39/2008 dated 01.08.2008 and sent notices to appellant and respondent to appear before arbitrator at 4.30 p.m. on 15.12.2008. It appears, the arbitral proceedings were held in the residence of arbitrator at Bangalore. On 15.12.2008, respondent (claimant), the Director of appellant company namely Sri S.S. Ajay Gupta were present. Sri C.K.Nanda Kumar, Advocate filed power for respondent. Sri Ajay Kumar, Director of appellant sought for a month's time to engage service of an advocate on the ground that he had undergone a surgery about two months back and further surgery is taking place in a week's time. The Arbitrator has held that a 13 month's time cannot be granted and directed appellant to engage services of one advocate in two or three weeks, in the meantime, claimant was granted two weeks time to file statement of claim and granted time to appellant to file objections to claim thereafter. Notice of further proceedings was given to both parties. Both parties were directed to appear before the arbitrator on 09.01.2009, on which date claimant filed statement of claim. The appellant did not appear before arbitrator on 09.01.2009. On 20.02.2009, arbitrator sent final notice to appellant to file objection statement if any and to pay arbitration fee. On 14.03.2009, appellant had not filed objection statement and did not pay fee of arbitrator. On 14.03.2009, arbitrator directed claimant to file affidavit evidence and notified to appellant the date of further proceedings as 14.05.2009.
16. On 14.05.2009, counsel for respondent filed affidavit evidence along with original documents. The arbitrator adjourned further proceedings to 30.05.2009 for marking documents and for cross-examination of deponent by appellant if any. On 30.05.2009, there was no sitting and 14 arbitration proceedings were adjourned to 13.06.2009 with notice to appellant. On 13.06.2009, counsel for respondent filed an affidavit stating that appellant had refused to receive communication relating to date and venue of proceedings. The power of attorney of respondent was examined and documents as per Ex.P.1 to Ex.P.20 were marked and evidence of respondent was closed and claimant was given two weeks time to file written arguments. On 09.07.2009, arbitrator on hearing learned counsel for respondent (claimant), reserved the case for award.
17. It is the contention of appellant that on 15.12.2008, he had appeared before arbitrator, however he has denied that arbitrator had sent notices regarding further dates of arbitral proceedings.
18. The learned trial Judge on verification of records sent by arbitrator has held that notices of arbitration had been sent to appellant and he had been directed to file statement of objection. On 14.03.2009, appellant had neither appeared before arbitrator nor he had sent statement of objections. 15 The arbitrator had sent one more notice to appellant to appear before arbitrator on 20.02.2009, but the appellant failed to appear before arbitrator. On 20.02.2009, a final notice was sent to appellant to file statement of objections and pay arbitral fee, but there was no response from appellant. Another notice dated 01.06.2009 was sent by arbitrator to appellant, intimating the date of further proceedings on 13.06.2009. The appellant did not appear before arbitrator. The aforestated notices were sent by arbitrator through Professional Courier services. The copies of notices issued by arbitrator to appellant and receipts issued by Professional Couriers for having served notices to appellant are available on records. Therefore, the contention of appellant that arbitrator had not notified appellant regarding dates and venue of arbitral proceedings cannot be accepted.
19. As could be seen from the impugned award, arbitrator considering claims raised by respondent and documents produced in support of such claims and also after hearing learned counsel for respondent has passed the impugned 16 award. The arbitrator has not drawn adverse inference against appellant for not putting forth statement of objections or documents. On the other hand, arbitrator has passed the award on appreciation of documents relied upon by respondent.
20. The law is fairly well settled that party invoking court's intervention alleging want of notice or breach of rules of natural justice has to establish that there has been some actual or real prejudice caused by the alleged breach.
21. The learned senior counsel for appellant taking me through records has submitted that there is no proof of service of notice of dates of proceedings or venue of proceedings.
22. It is apparent from the order sheet maintained by arbitrator that proceedings were held in the residence of arbitrator at Bangalore, however proceedings on 08.06.2009 were held in Woodlands Hotel as the arbitrator had to record evidence of respondent. The date and venue of hearing was 17 duly intimated to appellant. Therefore, this submission cannot be accepted.
23. The learned senior counsel for appellant would submit that arbitrator as also trial court should not have relied upon the affidavit filed by the advocate for respondent to hold that appellant had refused to receive copy of claim statement and intimation regarding date and venue of arbitration proceedings.
24. It is seen from records that one of the advocates appearing for respondent had filed an affidavit on 08.07.2009 before arbitrator. In the absence of contra evidence, there are no reasons to believe the contents of this affidavit, more particularly arbitrator had directed Advocate to serve a copy of claim petition on appellant.
25. The learned senior counsel for appellant would submit that arbitrator should not have accepted service of notice through Professional Couriers.
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26. The Act does not define proper notice or mode of service of notice. In the circumstances, proper notice shall be deemed to be a notice giving reasonable time to comply with the requirements. After amendment of the provisions of Order V Rule 9 CPC by Act No.46/1999, summons to defendants can be served through courier service as approved by the court.
27. It is not the case of appellant that Professional Couriers is not a recognised courier service for the purpose of service of summons under Order V Rule 9 CPC. Therefore, submission of learned senior counsel for appellant cannot be accepted.
28. The learned senior counsel for appellant would submit that arbitrator should not have relied on affidavit evidence filed by the power of attorney holder of respondent, who had no personal knowledge of transaction between appellant and respondent.
29. The respondent had executed deed of power of attorney on 31.03.2008, constituting her son Mr.Jude Koshy 19 as her lawful attorney to institute and prosecute any legal proceedings, including suits, civil miscellaneous petitions, writ petitions, arbitration proceedings, special leave petitions, arbitration suits, appeals, petitions and other proceedings in relation to property bearing No.46 (Old No.3/43), which is a larger part of schedule property.
30. It is also seen from registered lease deed dated 15.04.2002 that son of respondent namely Mr.Jude Koshy had attested lease deed entered into between appellant and respondent. In the circumstances, contention of learned senior counsel for appellant that arbitrator should not have placed reliance on affidavit evidence filed by the son of respondent cannot be accepted.
31. On re-examination of the matter, I am of the considered opinion the contention of appellant that court below should have set aside the award on the ground that appellant was not given proper notice of arbitral proceedings is untenable. There are no reasons to interfere with the impugned judgment.
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32. Therefore, I pass the following:-
ORDER The appeal is dismissed. It is made clear that respondent herein while executing the impugned award shall give deductions to payments made by appellant to respondent during pendency of this appeal before this court.
Sd/-
JUDGE SNN