Bangalore District Court
Sri.N.R.Nanjundegowda vs ) M/S.Kotak Mahindra Prime Limited on 12 September, 2019
IN THE COURT OF THE VI ADDL. CITY CIVIL & SESSIONS JUDGE
AT BENGALURU CITY
(CCCH.11)
Dated this the 12th day of September, 2019
PRESENT: Sri.Rama Naik, B.Com., LL.B.,
VI Addl.City Civil & Sessions Judge,
Bengaluru City.
A.S.NO:14/2014
APPLICANT/ : Sri.N.R.Nanjundegowda,
PLAINTIFF S/o.late Sri.Rangegowda,
Aged about 58 years,
R/at "Sankranthi", 1057-A,
14th Main, 1st Stage, BTM Layout,
Bengaluru -560 029.
/Vs/
RESPONDENTS : 1) M/s.Kotak Mahindra Prime Limited
DEFENDANTS Represented by its Authorised
Signatory - Sri.Dayananda.S.K
Having its Office at No.20,
Uniworth Plaza, 3rd Floor,
Sankey Road, Palace Guttahalli,
Bengaluru -560 020.
2) Mr.Balakrishna.M.S
(Hon'ble Retired District & Sessions
Judge) - Arbitrator,
No.1117, I, "G" Main, 2nd Phase,
Girinagar, Bengaluru -560 085.
--
AS.14/2014
2
JUDGMENT
This suit is filed by Plaintiff under Section 34 of the Arbitration and Conciliation Act, 1996, for setting aside the impugned award dated 25.01.2014 passed by Sole Arbitrator/Defendant No.2 in Arbitration Case KMP No. 30/2013.
2) Plaintiff's case, in brief, is that, 1st Defendant is a Private Limited Company engaged in the business of vehicle financing. Plaintiff approached 1st Defendant for a loan of Rs.8,52,000/- for purchase of 'HYNDAI VARNA CRDI' car. Accordingly, loan of Rs.8,52,000/- was sanctioned to Plaintiff. Loan Agreement dated 11.08.2012 was got entered into between Plaintiff and 1st Defendant. Plaintiff agreed to repay the said loan amount as per terms of loan agreement. Vehicle was hypothecated to 1 st Defendant.
AS.14/2014 3
3) It is stated that, Plaintiff is regular in payment of monthly installments and he was not due any arrears of installments to 1st Defendant. On 06.02.2014, Plaintiff received a registered post and noticed that, 2nd Defendant passed an award on 25.01.2014. Plaintiff was not due any arrears of monthly installments to 1st Defendant as on 07.11.2013. He paid a sum of Rs.4,54,752/- towards the loan amount. Despite this, 2 nd Defendant passed an award for Rs.7,96,043/- as on 07.11.2013.
4) It is stated that, no notice was served by 2 nd Defendant on 24.12.2013 as stated in the award. No opportunity was given to Plaintiff to file his objection statement and to defend him.
5) It is stated that, 1st Defendant falsely claimed 36% interest, which is exorbitant and illegal. 1 St AS.14/2014 4 Defendant deliberately produced false documents before 2nd Defendant and obtained award.
6) Plaintiff, inter alia, has challenged the impugned award on the following grounds :
(1) Impugned award passed by learned Arbitrator is contrary to Public Policy, law, facts and materials on record.
Learned Arbitrator has committed grave errors while passing the award.
Arbitrator has no jurisdiction to entertain the claim petition.
(2) Notice marked as Ex.C.2 before 2nd Defendant filed by 1st Defendant was not issued to Plaintiff and there was no necessity to issue any such notice to Plaintiff, since Plaintiff was regular in payment of loan installments.
(3) Award as to directing Defendants jointly and severally to pay a sum of Rs.7,96,043/- as on 07.11.2013 with future interest at 3% per month from the date of termination till the date of realization is against law, since Plaintiff AS.14/2014 5 is only Respondent in the arbitral proceedings. No co-obligant is the party in the said proceedings.
(4) 1st Defendant has deliberately suppressed the materials that Plaintiff has paid substantial loan amount within time to 1st Defendant.
(5) Learned Arbitrator ought to have noticed that, notice was not served to Plaintiff and Plaintiff was not given sufficient opportunity to contest the claim of 1st Defendant.
(6) Learned Arbitrator has erred in passing the award that, 1st Defendant is entitled to take possession of the schedule vehicle with the assistance of the jurisdictional police.
(7) Learned Arbitrator passed the
award without appreciating the
materials and evidence on record. Hence, prays for setting aside the award.
AS.14/2014 6
7) 1st Defendant marked his appearance through his counsel and filed his written statement, wherein, he has denied all the averments made in the plaint and stated that, Plaintiff is a frequent defaulter in payment of loan installments. Cheques issued by Plaintiff were dishonoured. As per the terms and conditions of loan cum hypothecation agreement dated 11.08.2012, Plaintiff is liable to pay interest at the rate of 3% per month on delayed payments and Rs.500/- for dishonoured cheque. It is stated that, due to default in payment of monthly installments, Plaintiff was liable to pay Rs.7,96,043/- as on 07.11.2013, as per statement of account maintained by 1st Defendant. 1St Defendant exercised its right under Agreement and appointed sole Arbitrator vide letter dated 26.11.2013, as per Clause 31 of the loan agreement. It is stated that, despite service of notice, Plaintiff failed to contest the matter and learned Arbitrator proceeded ex-parte and recorded AS.14/2014 7 evidence of 1st Defendant. After hearing the matter, the award has been validly passed by learned Arbitrator. 1st Defendant, despite service of notice, did not choose to contest the proceedings. At this belated stage, Plaintiff has come up with cooked up story, hence, prays for dismissal of suit with exemplary costs.
8) Heard. Perused the record. 9) Points that arise for my consideration are :
(1) Whether Plaintiff has made out any of the grounds as enumerated under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the impugned award?
(2) What Order?
10) My answer to the above points are :
Point No.1 - In the Negative;
Point No.2 - As per final order, for the following :
AS.14/2014 8 REASONS
11) Point No.1 : This suit came to be filed by Plaintiff for setting aside the arbitral award dated 25.01.2014 passed by 2 nd Defendant in favour of 1st Defendant in Arbitration Case KMP.
No.30/2013, whereby, learned Arbitrator directed Plaintiff to pay a sum of Rs.7,96,043/- with future interest at the rate of 18% per annum from the date of award till the date of realization.
12) Plaintiff's main contention is that, no notice was served to Plaintiff by 2nd Defendant on 24.12.2013 as stated in the arbitral award and no opportunity was given to Plaintiff to file his objection statement to the claim statement filed by 1st Defendant. On the contrary, 1St Defendant contends that, despite notice being served, Plaintiff did not choose to contest the proceedings and now at this belated stage, Plaintiff has come AS.14/2014 9 up with false story with an intention to drag on the recovery proceedings.
13) Award makes it clear that, notice was served to Plaintiff by registered post to his residential address as furnished by 1st Defendant in the arbitral proceedings. It is also clear that, Plaintiff did not appear before the Arbitrator on 24.12.2013 or thereafter and learned Arbitrator, having regard to Section 3 of the Arbitration and Conciliation Act, 1996, held that, service of notice to Plaintiff is sufficient. Para-5 of the award reads thus:
" 5. Although notices were sent to respondents by registered post to their postal addresses as furnished by them at the time of the loan agreement, they did not appear before the Arbitrator on 24.12.2013 or thereafter. The service of notice was held sufficient in view of Section 3 of the Arbitration and Conciliation Act, 1996. Accordingly, the Arbitrator decided to proceed exparte against the respondents."
AS.14/2014 10
14) Plaintiff's contention is that, no notice was served to him. In the cause title of plaint, Plaintiff's address is shown as :
"Sri.N.R.Nanjundegowda, S/o.late Sri.Rangegowda, Aged about 58 years, Residing at "Sankranthi", 1057-A, 14th Main, 1st Stage, BTM Layout, Bangalore-560 029."
Similar address has also been mentioned in the cause title of the award. Address mentioned in the cause title of the award is as follows :
" N.R.Nanjunde Gowda, "Sankranthi", 1057-A, 14th Main, 1st Stage, BTM Layout, Bangalore-560 029."
15) Under such circumstances, it cannot be said that, Plaintiff was not served with notice. Section 3 of the Arbitration and Conciliation Act, 1996 specifically states that, any written communication is deemed to have been received, if it is delivered to the addressee personally or at his place of business, habitual residence or mailing address. From the award, it is clear that, learned Arbitrator AS.14/2014 11 sent notice to Plaintiff to his residential address as mentioned in the award, which is similar to the address as shown in the cause title of the plaint. However, Plaintiff did not choose to appear before learned Arbitrator and failed to avail the opportunity to contest the claim of 1 st Defendant. Learned Arbitrator, therefore, decided to proceed the matter exparte. When such being the case, there is no reason for Plaintiff to contend that, no notice was served to him and no opportunity was given to him to contest the claim of 1 st Defendant. Hence, the said contention is not tenable.
16) Plaintiff's further contention is that, learned Arbitrator has erred in passing the award directing Plaintiff to pay a sum of Rs.7,96,043/- as on 07.11.2013 with future interest at the rate of 18% per annum. It is contended that, the loan amount claimed by 1st Defendant is Rs.8,52,000/-, however, Plaintiff paid a sum of Rs.5,68,444/-. In AS.14/2014 12 spite of said payment being made, learned Arbitrator passed the award for Rs.7,96,043/- without appreciating the evidence on record, hence, the award requires to be set aside.
17) On the other hand, Defendant contends that, due to default in payment of monthly installments, Plaintiff is in due of Rs.7,96,043/- as on 07.11.2003 as per statement of account maintained by 1 st Defendant. In the backdrop of the contentions of the parties, it is relevant to look at the award. Para-8 and 9 of the award read as under :
" 8. The claimant's witness has sworn to the above transaction that took place between claimant and the respondents, and about the execution of the loan agreement by the respondents, and the failure of respondents to repay the amount due to claimant. The claimant has also produced copies of the loan agreement, Exhibit-C1, Loan Recall Notice, Exhibit-C2, Postal Receipt & Acknowledgments/ Returned Postal Cover - Exhibit - C3, Statement of Accounts & Foreclosure Statement, Exhibit - C4.
9. The unchallenged evidence of CW1, the uncontroverted allegation made in the claim statement coupled with above documents establish that Rs.8,52,000 was AS.14/2014 13 borrowed by respondents from claimant and further the respondents have failed to repay the loan amount. Hence it is amply clear from the documentary evidence submitted by the claimant that the respondents are due to pay Rs.796043 (Seven Lakhs Ninety Six thousand Forty Three) as on 07.11.2013, as claimed in the claim statement. The claim made in the claim statement is thus established."
18) Learned Arbitrator has passed the award after appreciation of statement of account and foreclosure statement at Ex.C.4. Ex.C.4 establishes the fact that, from 01.11.2012 to 01.02.2004, 14 cheques were got bounced, which were issued by Plaintiff in favour of 1st Defendant for repayment of loan installments. On perusal of Ex.C.4, it reveals that loan installments starts from 01.09.2012 and ends on 01.08.2017. Award makes it clear that, arbitral proceeding was initiated on 26.11.2013 vide notice dated 26.11.2013. From the date of first installment, which begins on 01.09.2012 till date of filing of the arbitration proceedings on 26.11.2013, there were 15 installments, which AS.14/2014 14 were required to be paid by Plaintiff to 1st Defendant. However, statement of account reveals that, from 01.09.2012 to 01.11.2013, 11 installments remained unpaid due to dishonour of cheques issued by Plaintiff for payment of monthly installments. Out of 15 installments, 04 installments were duly paid by Plaintiff. Since Plaintiff was irregular in payment of loan installments, 1st Defendant initiated arbitral proceedings for outstanding principal amount and interest and learned Arbitrator, having regard to the documents placed before him, was pleased to pass award for due amount. When matter stood thus, there is no substance in the contention of Plaintiff that award passed by learned Arbitrator is biased.
19) Plaintiff raises a contention that, learned Arbitrator has erred in awarding interest at the rate of 18% per annum. It is important to note that, AS.14/2014 15 even 1st Defendant claimed interest at the rate of 3% per month for delayed payment, learned Arbitrator was pleased to grant 18% future interest from the date of award having regard to the principles of law as laid down in Section 31(7)(b) of Arbitration and Conciliation Act, 1996. Findings of learned Arbitrator regarding granting of interest is as follows :
" The transaction in question being a commercial transaction the respondents will be liable to pay the current and future interest at 18% per annum from the date of award to the date of payment as provided under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996. The vehicle in question being hypothecated in claimant's favour for securing repayment of the dues under the loan agreement the claimant will be entitled to repossess the said vehicle and sell the same and adjust the sale proceeds against the claim made in this case."
20) Lastly, Plaintiff contends that, learned Arbitrator has erred in passing the award to the effect that 1st Defendant is entitled to take possession of the vehicle which was hypothecated to 1st Defendant by Plaintiff. From the averments AS.14/2014 16 made in the plaint and from documents placed before learned Arbitrator by 1st Defendant, it is clear that, said vehicle was hypothecated in favour of 1st Defendant by Plaintiff as per terms of agreement. Even in the absence of specific award for taking possession of the said vehicle, 1 st Defendant shall have right to take possession of the said vehicle and to sell it for payment of outstanding loan amount as per the terms of agreement. When such is the case, the award passed by learned Arbitrator for taking possession of the said vehicle by Plaintiff is within the purview of agreement.
21) For all these reasons, I am of the opinion that, learned Arbitrator, after considering documentary evidence and oral testimony of the parties, has passed reasoned award within the purview of contract. Award can be set aside only on the grounds as set out in Section 34 of the AS.14/2014 17 Arbitration and Conciliation Act, 1996. Here, Plaintiff has failed to make out any of the grounds as mentioned in Section 34 of the Arbitration and Conciliation Act, much less, the grounds mentioned in his plaint to set aside the impugned award; accordingly, I answer the above point in the negative.
22) Point No.2 : For the foregoing discussion and answer to Point No.1, I proceed to pass the following :
ORDER Suit filed by Plaintiff under Section 34 of the Arbitration and Conciliation Act, 1996, for setting aside award dated 25.01.2014 passed by learned Sole Arbitrator in Arbitration Case KMP. No.30/ 2013; is hereby dismissed.
(Dictated to the Judgment Writer, transcribed and computerized by her, transcript thereof corrected and then pronounced by me in open court, on this the 12th day of September, 2019.) (RAMA NAIK) VI Addl.City Civil & Sessions Judge, Bengaluru City.
AS.14/2014 18