Bombay High Court
Jamboo Kumar Jain And Anr vs Tata Capital Financial Services ... on 17 February, 2015
Author: R.D. Dhanuka
Bench: R.D. Dhanuka
Kvm
1/28
ARBP685.12
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 685 OF 2012
1. Jamboo Kumar Jain )
491, Jawahar Marg, Indore - 452002 )
2. Praful Kumar Jain (@Anchaliya) )
s/o. Shri Jamboo Kumar Jain, )
13 B2, Cape Tower, Hiland Park, )
1925 Chakgaria, Beside Big Bazar Metropolis )
Mail, Kolkatta 700094 ) ..... Petitioners
Versus
1. Tata Capital Financial Services Limited )
a Non-Banking Finance Company duly )
registered with the Reserve Bank of India )
and incorporated under the provisions of the )
Companies Act, 1956 and having its registered )
office at One Forbes Dr.V.S.Gandhi Marg, )
Fort, Mumbai 400001 )
2. Dilip Kumar Jain )
in his individual capacity and also as legal heir )
of the Mr.Samarthmal Jain having his address )
at 22, Santha Bazar, Indore 452002 )
3. Pradeep Kumar Jain )
having his address at 14, Bada Sarafa )
Indore 452002 )
4. Dinesh Kumar Jain )
in his capacity as legal heir of Late )
Mr.Samarthmal Jain having his address at )
579, M.G. Road, Indore 452004 )
5. Mrs.Manjula Mahendrakumar Nahar, )
in her capacity as legal heir of Late )
::: Downloaded on - 17/03/2015 21:11:05 :::
Kvm
2/28
ARBP685.12
Mr.Samarthmal Jain, residing at Veer Park )
Road Nimach, Madhya Pradesh ) ..... Respondents
Mr.Prabhijit Jauhar, a/w. Mr.Arun Arora, i/b. Haresh Mehta & Co. for the
Petitioners.
Dr.Birendra Saraf, a/w. Ms.Nelly Mehta, i/b. MDP & Partners for Respondent no.1.
CORAM : R.D. DHANUKA, J.
DATED : 17th FEBRUARY, 2015
JUDGMENT :
By this petition filed under section 34 of the Arbitration and Conciliation Act, 1996, (for short the said 'Arbitration Act'), the petitioners seek to impugn the arbitral award dated 19th October, 2011 passed by the learned arbitrator granting certain claims in favour of the respondent no.1. Some of the relevant facts for the purpose of deciding this petition are as under :-
2. The petitioners and respondent nos. 2 to 5 were the original respondents in the arbitral proceedings whereas respondent no.1 was the original claimant. Prior to 2009 the respondent no.1 had granted working capital term loan facility of Rs.3 crores, purchase invoice discounting facility of Rs.4 crores and sales invoice discounting facility of Rs. 3 crores to M/s.Nanesh Foods Ltd., formerly known as Samta Foods Limited.
3. It is the case of the respondent no.1 that as on 30 th November, 2009 the said company was liable to pay the amount of Rs.2,33,32,108/- to the respondent no.1.
The respondent no.1 raised a demand for recovery of the said amount vide letter dated 11th December, 2009. Various cheques issued by the said company were dishonoured. The respondent no.1 thereafter issued notice under section 138 read ::: Downloaded on - 17/03/2015 21:11:05 ::: Kvm 3/28 ARBP685.12 with 141 of the Negotiable Instruments Act, 1881 on 8 th September, 2009 to the said company as well as some of the parties herein.
4. On 26th September, 2008, certain deeds of guarantee were executed by the said company, by some of the respondents and also by the petitioners in favour of the respondent no.1. Dispute arose between the parties. By letter dated 16 th September, 2010, respondent no.1 appointed a Senior Advocate of this court as a sole arbitrator to adjudicate upon the dispute between the parties. Respondent no.1 initially filed a common statement of claim against Nanesh Foods Ltd. and the petitioners. It was the case of the petitioners that the respondent no.1 made unilateral alteration in the deeds of guarantee dated 26 th September, 2008 which were executed by the petitioners.
5. The respondent no.1 also filed a petition under section 9 of the Arbitration Act being Arbitration Petition (L) No.1101 of 2010. On 12 th November, 2010, the learned arbitrator conveyed in writing to the parties his acceptance as an arbitrator and fixed a preliminary meeting in the said arbitration. It is the case of the respondent no.1 that the said letter dated 12th November, 2010 was addressed and duly served upon the parties to the arbitration proceedings and also upon the advocates who were appearing for them in Arbitration Petition (L) No.1101 of 2010. The notices were sent by the learned arbitrator at the same address of the petitioners at which the notice under section 138 of the Negotiable Instruments Act was sent by the respondent no.1.
6. It was the case of the petitioners that the petitioners were former directors of the said Nanesh Foods Ltd. and were inducted as directors in the year 1993 and 2001 respectively. The petitioners never participated into day to day affairs of the ::: Downloaded on - 17/03/2015 21:11:05 ::: Kvm 4/28 ARBP685.12 company and w.e.f. 1st April, 2009 both the petitioners had alleged to have resigned from the directorship of the said company. It was the case of the petitioners that a notice of resignation w.e.f. 1st April, 2009 was duly intimated to the Registrar of Companies by filing Form 32 as prescribed by the Ministry of Company Affairs. The petitioners did not file any written statement before the learned arbitrator. The learned arbitrator made an award on 19th October, 2011 directing the petitioners and respondent nos. 2 and 3 to jointly and severally pay a sum of Rs.5,58,52,846.36 in respect of the purchase invoice discounting facility and sales invoice discounting facility with further interest on Rs.5,09,76.146.77 at the rate of 19% per annum from 21st December, 2010 till payment and/or realization and directed the other respondents to the arbitration proceedings to pay to the extent of the estate of the deceased Samarthmal Jain coming to their hands. The learned arbitrator further directed the parties to pay Rs.3,16,52,046/- for the working capital term loan facility with further interest of Rs.3,07,21,110/- at the rate of 17.75% per annum from 21st December, 2010 till payment and/or realization and directed to pay cost incurred by the respondent no.1 quantified at Rs.1,64,558/-.
The learned arbitrator also directed those parties to pay to the respondent no.1 arbitrator's fees quantified at Rs.1,40,000/-. This award has been impugned by the petitioners. The rest of the respondents to the arbitration proceedings have not impugned the said award and are impleaded as respondent nos. 2 to 5 by the petitioners in this arbitration petition.
7. Learned counsel appearing for the petitioners submits that the notice dated 11th December, 2009 was served upon the petitioner no.2 by the respondent no.1 calling upon to pay various amounts at his Calcutta address. He submits that in so far as petitioner no.1 is concerned, the said notice was served upon the petitioner at the address 22, Santha Bazar, Indore - 452002 which was the address of the ::: Downloaded on - 17/03/2015 21:11:05 ::: Kvm 5/28 ARBP685.12 company i.e. M/s.Samtha Foods Limited and was also served at the two addresses at Indore. It is submitted that similarly in so far petitioner no.2 is concerned, the said notice was also served upon petitioner no.2 at the address of the company i.e. 22, Santha Bazar, Indore -452002 and also at the Indore address of the petitioner no.2.
8. It is submitted that though in the affidavit in reply filed by the respondent no.1, it has been alleged that the respondent no.1 made a bonafide attempt to serve the affidavit of evidence upon the petitioners but the petitioners had alleged to have refused to accept the service of the same and therefore the said affidavit was served by an e-mail is concerned, the petitioners had never been served with any such pleadings and/or affidavit. It is submitted that the minutes of the meeting relied upon by the respondent no.1 in paragraph (6)(n) annexed at Ex.17 to the affidavit in reply which was alleged to have been served by respondent no.1 would clearly indicate that the said minutes of the meeting held on 22 nd September, 2011 was not in respect of the subject matter of this proceedings but related to some other matter filed by the respondent no.1 against M/s.R.K.Trade Links (Foods) Pvt.Ltd. It is thus submitted that none of those documents referred to in paragraph 6(n) were ever received by the petitioners.
9. It is submitted that in the affidavit of service dated 26 th September, 2011 filed before the learned arbitrator by the respondent no.1 refers to an alleged service by e-mail dated 21st September, 2011 also would indicate that the said e- mail was sent at the e-mail ID of the company and not the petitioners. It is submitted that the said e-mail was alleged to have been sent on 21 st September, 2011 whereas the petitioners had already resigned as director of the said company M/s. Nanesh Foods Ltd. in the year 2009 itself.
::: Downloaded on - 17/03/2015 21:11:05 :::Kvm 6/28 ARBP685.12
10. Learned counsel submits that no notice was ever received by the petitioners from the learned arbitrator of the hearing of the arbitral proceedings at any stage. The affidavit of service filed by the respondent no.1 would clearly indicate that the papers and proceedings as well as notices were not sent upon the petitioners but alleged to have been served at the address of the company. The petitioners were no more concerned in any manner whatsoever with the said company since 2009.
11. It is submitted by the learned counsel that even in the criminal complaint filed by the respondent no.1, three addresses of the petitioners were mentioned therein including two addresses of Indore. None of the notices by the respondent no.1 or by the learned arbitrator were admittedly served on the other two addresses of the petitioners at Indore though the respondent no.1 as well as the learned arbitrator had all the three addresses of the petitioners were available with them. The respondent no.1 could not have effected any service of the notice and/or the papers and proceedings of the arbitration on behalf of the petitioners at the address of the company.
12. It is submitted that in any event, the learned arbitrator never issued any notice to the petitioners before proceeding with the matter ex-parte against the petitioners cautioning that on the date of the hearing he proposed to proceed with the matter ex-parte against the petitioners, if the petitioners fail to remain present on such date. It is submitted that there was no proper notice issued by the learned arbitrator. The petitioners came to know about the award made by the learned arbitrator only through the relatives. No sooner the petitioners came to know about the award rendered by the learned arbitrator, the petitioners requested the learned arbitrator to furnish copy of the award which was belatedly served upon the petitioners by the learned arbitrator.
::: Downloaded on - 17/03/2015 21:11:05 :::Kvm 7/28 ARBP685.12
13. It is submitted by the learned counsel that since there was neither proper notice nor any papers and proceedings were served upon the petitioners, the petitioners failed to represent their case properly before the learned arbitrator. The impugned award is ex-parte award and thus in violation of the principles of natural justice and deserves to be set aside.
14. In support of the aforesaid submissions, the learned counsel placed reliance on the judgment of Andhra Pradesh High Court in case of Nadendla Gopala Rao vs. Steel City Securities Ltd., 2011(1) R.A.J. 504 (AP). Reliance is placed on paragraphs 3, 8, 13, 15 to 17 of the said judgment and it is submitted that since there was no notice issued by the learned arbitrator expressing his intention to proceed ex-parte, such failure may vitiate the award unless it was apparent that such failure did not cause any prejudice to the party against whom the ex-parte award has been made by the learned arbitrator. It is submitted that in absence of the petitioners, the learned arbitrator at the most could have decided only the jurisdictional issue and could not have decided the matter on merits ex-parte.
Paragraphs 13 to 17 of the said judgment reads thus :-
13. In Sohan Lal Gupta v. Asha Devi Gupta (2 supra) the Supreme Court in para-23 held that for constituting a reasonable opportunity, the following conditions are required to be observed:
" 23. xxx xxx xxx
1. Each party must have notice that the hearing is to take place.
2. Each party must have a reasonable opportunity to be present at the hearing, together with his advisers and witnesses.
3. Each party must have the opportunity to be present throughout the hearing ::: Downloaded on - 17/03/2015 21:11:05 ::: Kvm 8/28 ARBP685.12
4. Each party must have a reasonable opportunity to present evidence and argument in support of his own case.
5. Each party must have a reasonable opportunity to test his opponent's case by cross-examining his witnesses, presenting rebutting evidence and addressing oral argument.
6. The hearing must, unless the contrary is expressly agreed, be the occasion on which the parties present the whole of their evidence and argument. "
14. After laying down the principles for constituting a reasonable opportunity in para-29 it was held as under:
" The principles of natural justice, it is trite, cannot be put in a straight jacket formula. In a given case the party should not only be required to show that he did not have a proper notice resulting in violation of principles of natural justice but also to show that he was seriously prejudiced thereby. In Chairman, Board of Mining Examination and Chief Inspector of Mines v. Ramjee (1977) 2 SCC 256, this Court held:
" ...Natural justice is no unruly horse, no lurking land mine, nor a judicial cure-all. If fairness is shown by the decision- maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating. We can neither be finical nor fanatical but should be flexible yet firm in this jurisdiction. No man shall be hit below the belt - that is the conscience of the matter'."
15. Appellant entering into an agreement with the respondent on 25-10-1997, the respondent invoking arbitration clause as per its byelaws and arbitrator issuing notice etc. are not ::: Downloaded on - 17/03/2015 21:11:05 ::: Kvm 9/28 ARBP685.12 disputed. The appellant on receiving the first notice of hearing addressed a letter dated 01-10-1998 declining to participate in the arbitration proceedings on the ground that there was no dispute as regards the trades on the exchange. The arbitrator after adjourning the proceedings to 26-11-1998, received a letter dated 14-11-1998 in which the appellant reiterated his earlier stand communicated in his letter dated 01-10-1998. Thereafter, NSE of India addressed a letter to the appellant on 16-11-1998 informing the appellant that the arbitrator wished to hear the appellant and examine such evidence as he may produce in support of his contention underlying the argument i.e. lack of jurisdiction and called upon to appear on 26-11-1998. When the appellant on receiving the notice by which he was asked to appear before the arbitrator to participate in the proceeding and adduce evidence about lack of jurisdiction of the arbitrator fails to appear, the arbitrator can only decide the jurisdictional issue. On holding that the arbitrator will have jurisdiction, a notice fixing another date for enabling the appellant to file his rebuttal statement indicating therein if the appellant failed to file such rebuttal statement and produce his evidence on the date so fixed for hearing, he will proceed with the reference ex-parte against him and on that date fixed it is competent for the arbitrator to proceed ex-parte and pass an ex-parte award. The arbitrator has not followed such procedure nor indicated in the notice dated 16-11-1998 that failure of the appellant to substantiate his claim with regard to jurisdiction of the arbitrator, the arbitrator will proceed with the claims ex-parte and pass the award. If that be the case, failure to issue such notice expressing his intention to proceed ex parte vitiates the award as the appellant was not given proper notice of arbitral proceedings incapacitating to present his case.
16. We are fortified with our view from the judgment of Allahabad High Court in Thakur Singh v. Kandai : AIR 1935 Allahabad 852 wherein it was held when the party on receiving the first notice by which he was asked to appear before the arbitrator to participate in the proceeding fails to appear then the arbitrator has to direct that he shall proceed with the reference ex-parte. This does not entitle the arbitrator to ::: Downloaded on - 17/03/2015 21:11:05 ::: Kvm 10/28 ARBP685.12 straightaway award the claim against the defaulting party ex-parte. Whereas the Calcutta and Delhi High Courts expressed that when a party fails to appear on receiving the notice, the arbitrator in such case should give notice of his intention to proceed ex-parte. In case of failure to issue such notice expressing his intention to proceed ex-parte, such failure may vitiate the award unless it is apparent that such failure has not caused any prejudice to the party against whom the ex-parte award has been made by the arbitrator. See Jaggilal Kamlapat v. General Fibre Dealers : AIR 1955 Calcutta 354; Lovely Benefit Chit Fund and Finance (P) Ltd. v. Puran Dutta : AIR 1983 Delhi 413. However, Punjab and Haryana High Court also expressed the same view in Premlal v. Om Prakash AIR 1956 Punjab 187 , namely, arbitrator should adopt the similar procedure before proceeding with the case ex-parte and passing an award ex-parte.
17. Since we have satisfied that the arbitrator has not indicated that failure of the appellant's appearance on the fixed date he will not only decide jurisdictional issue and proceed with the claim of the respondent/applicant and pass ex-parte award, appellant was denied a reasonable opportunity to contest the claim. Hence, the award passed is in violation of principles of natural justice, is liable to be set aside. We accordingly do so. Since no other point with regard to jurisdiction of the arbitrator to entertain the dispute has been urged before us, it is not necessary for us to decide the jurisdiction of the arbitrator, which he already ruled he has jurisdiction to entertain the dispute.
15. Learned counsel placed reliance on the judgment of the Supreme Court in case of Sachin Gupta and another vs. K.S.Forge Metal Private Limited (2013) 10 SCC 540 and in particular paragraph (2) and it is submitted that since the learned arbitrator has rendered an award without issuing any notice and without hearing the petitioner, the award is liable to be set aside under section 34(2) (a)(iii) of the Arbitration and Conciliation Act, 1996. Paragraph (2) of the said judgment of the ::: Downloaded on - 17/03/2015 21:11:05 ::: Kvm 11/28 ARBP685.12 Supreme Court reads thus :-
2. We are satisfied that the High Court could have set aside the award only on the ground that the award has been rendered against the respondent without issuance of any notice and without hearing the respondent. On this ground alone, the award was liable to be set aside under Section 34(2)(a)(iii) of the Arbitration and Conciliation Act, 1996. There was no necessity for the learned Single Judge to convert itself into a court of first appeal. It was certainly not necessary to examine the dispute between the parties so minutely or to make such strong remarks against any of the parties. Judges at all levels are required to be restrained and circumspect in use of the language, even when criticising the conduct of a party.
However, we agree with the conclusion of the High Court that the award had to be set aside as no notice had been served on the respondent. But, having set aside the award, it would have been appropriate if the matter had been referred back to the arbitrator. In the event, any of the parties were not satisfied, an independent arbitrator agreeable to both the parties could have been appointed.
16. The learned counsel also placed reliance on the judgment of the Delhi High Court in case of Daisy Trading Corporation vs. Union of India 95 (2002) Delhi Law Times 12 and submits that it is duty of arbitrator to always ensure that the party being proceeded ex-parte is sufficiently noticed. Paragraphs 4 to 6 of the said judgment of the Delhi High Court read thus :-
4. The main object to getting the disputes adjudicated upon by way of alternative dispute mechanism of arbitration is to settle the disputes once for all. In order to meet the object and purpose of the Arbitration Act every Arbitrator is expected to make all out efforts to see that both the parties are given fair and reasonable opportunity of being heard. The Arbitrator is not supposed or expected to leave the things in such a state that his award itself becomes counter productive and subject of criticism and non-acceptance.::: Downloaded on - 17/03/2015 21:11:05 :::
Kvm 12/28 ARBP685.12
5. As far as possible the Arbitrator should not show haste or hurry in closing the proceedings so as to avoid the remittance of the award. Extra caution in patience is to be exercised before proceeding ex parte. Arbitrator should always ensure that the party being proceeded ex parte is sufficiently noticed. The very observation of the Arbitrator that it was on the vehement insistence of the counsel for the respondent that the matter was heard ex parte and closed for making and publishing the award shows that the Arbitrator did not adhere to the principles of natural justice. The observation of the Arbitrator that there was sufficient presumption of the service of notice sent through registered AD on account of its non-return by the Postal Authorities is also legally unsound. Even if such a presumption is available it is dislodged the moment the concerned party denies having received the same.
6. It appears that due to the insistence of the respondent the Arbitrator acted in feverish haste and made and published the award without hearing the party who had preferred the claim particularly when there was no counter-claim filed by the respondent. The respondent was given as many as five long years to prefer any counter-claim or objections but he did not chose to file any.
17. Learned counsel appearing for the petitioners placed reliance on the judgment of the Delhi High Court in case of M/s.Lovely Benefit Chit Fund & Finance Pvt.Ltd. vs. Puran Dutt Sood and others, AIR 1983 Delhi 413 and in particular paragraph (11) thereof and submits that the arbitrator should fix another date for hearing and give notice to the defaulting party of his intention to proceed ex-parte on a specified date, time and place and even after notice if the defaulting party does not take part in the proceedings the arbitrator may proceed in his absence. It is submitted that since the learned arbitrator did not issue any notice making it clear that he would proceed with the matter ex-parte on the alleged date of hearing, the award deserves to be set aside. Paragraph (11) of the said judgment of Delhi High Court in case of M/s.Lovely Benefit Chit Fund & Finance Pvt.Ltd.
::: Downloaded on - 17/03/2015 21:11:05 :::Kvm 13/28 ARBP685.12 (supra) reads thus :-
"11. From these authorities, it is apparent that an arbitrator ought not to proceed ex parte against a party if he has failed to appear at one of the sittings. The arbitrator should fix another date for hearing and give notice to the defaulting party, of his intention to proceed ex pane on a specified date time and place. Even after notice if the defaulting party does not take part in the proceedings the arbitrator may proceed in his absence".
18. It is submitted that if according to the respondent no.1, the petitioner was not accepting the service at the address of the company, the respondent no.1 could have served the petitioners by publication in the manner prescribed in the Code of Civil Procedure which the respondent no.1 failed to comply with. The notices alleged to have been effected by the respondent no.1 or by the learned arbitrator thus could not have been considered as duly served. Reliance is placed on the judgment of Delhi High Court in case of M/s.Sona Finance Pvt.Ltd.
vs.M/s.Triupati Paper Mills Pvt.Ltd. and another 2003 VI AD (Delhi) 515.
19. The learned counsel for the petitioners placed reliance on the judgment of the Supreme Court in case of Loonkaran Sethia etc., vs. Mr.Ivan E.John and others AIR 1977 SC 336 and submits that since there were alterations in the deed of guarantee alleged to have been signed by the petitioners carried out by the respondents without consent of the petitioners, such deed of guarantee were rendered void and could not have been relied upon before the learned arbitrator.
20. Dr.Saraf, learned counsel appearing for the respondent no.1 on the other hand invited my attention to paragraphs 7 and 8 of the arbitration petition in which the petitioners have alleged that the statement of claim as well as intimation of ::: Downloaded on - 17/03/2015 21:11:05 ::: Kvm 14/28 ARBP685.12 hearing was never served upon the petitioners by the learned arbitrator. It is submitted that the said statement made by the petitioners in the petition is totally false and incorrect.
21. Learned counsel invited my attention to a letter addressed by the advocate of the respondent no.1 dated 2nd November, 2010 to the learned arbitrator requesting the learned arbitrator to appoint a date and time for preliminary meeting in the matter. Respondent no.1 also informed the learned arbitrator the name of the learned advocate who was representing the petitioners herein in the proceedings filed under section 9 of the Arbitration Act in this court for the purpose of issuing notice. A copy of such notice was also sent to the petitioners as well as respondent nos. 2 to 5. In so far as the petitioners are concerned, the said notice was served upon the petitioners' at their address at 22, Santha Bazar, Indore - 452002.
22. Learned counsel for the respondent no.1 invited my attention to the notice issued by the learned arbitrator on 12th November, 2010 to the petitioners as well as respondent nos. 2 to 5 and also to their respective advocates informing the date of the preliminary meeting on 22nd November, 2010 at 5 p.m. in his chamber. The said notice was also sent to the petitioners as well as respondent nos. 2 to 5 at various addresses. In so far as petitioners are concerned, the said notice was served at the address 22, Santha Bazar, Indore - 452002.
23. Learned counsel appearing for the respondent no.1 invited my attention to the letter dated 20th November, 2010 addressed by the petitioners and two of the respondents to the learned arbitrator acknowledging the receipt of the notice dated 2nd November, 2010 and raising an objection in respect of the arbitration proceedings contending that the proceedings were not maintainable under any of ::: Downloaded on - 17/03/2015 21:11:05 ::: Kvm 15/28 ARBP685.12 the provisions of the Arbitration Act and that the learned arbitrator could not act as a sole arbitrator in the matter. A perusal of the said notice addressed by the petitioners clearly indicates that the petitioners themselves had given their addresses in the notice as resident of 22, Santha Bazar, Indore - 452002. The petitioners had received the said notice on that address sent by the learned arbitrator as well as by respondent no.1.
24. Learned counsel invited my attention to the minutes of the meeting held on 22nd November, 2010 by the learned arbitrator in which the petitioners as well as the respondent nos. 2 to 5 herein were absent. In the said minutes of the meeting the learned arbitrator referred to the letters received from the petitioners raising such objections. The learned arbitrator issued various directions in the said meeting and proposed to hold the next meeting on 1 st February, 2011 for framing issues and for issuing other directions in his chambers. In the said meeting, the learned arbitrator directed that after the statement of claim and written statement was filed, an application under section 16 could be made by any party with a copy to the other side. A copy of the said minutes was also sent by the learned arbitrator at the same address which was mentioned in the letter addressed by the petitioners i.e. 22, Santha Bazar, Indore - 452002.
25. Learned counsel pointed out that the respondent no.1 alongwith their advocates' covering letter dated 23rd December, 2010 forwarded a copy of the statement of claim as per directions issued by the learned arbitrator to the petitioners as well as to the respondent nos. 2 to 5. The petitioners were served with a copy at their addresses 22, Santha Bazar, Indore - 452002.
26. On 1st February, 2011, the learned arbitrator held a meeting in which the ::: Downloaded on - 17/03/2015 21:11:05 ::: Kvm 16/28 ARBP685.12 learned arbitrator referred to a letter dated 31st January, 2011 signed by the petitioners and the respondent nos. 2 to 5 acknowledging the letter dated 24 th November, 2010 forwarding minutes to them by the learned arbitrator. In the said minutes, the learned arbitrator recorded that by its letter dated 20 th November, 2010, the respondent no.1 had asked for six weeks time for filing written statement which was granted by the learned arbitrator till 31 st January, 2011. M/s. Nanesh Foods Ltd. who was respondent no.1 did not file any application and did not raise any contention under section 16 of the Act. The learned arbitrator gave one more opportunity to the said company to file written statement if any. In so far as other respondents in the said proceedings i.e. the petitioners herein as well as respondent nos. 2 to 5 are concerned, the learned arbitrator also gave an opportunity to them to file an application under section 16 of the Act before filing the written statement if they wanted to raise any plea of jurisdiction. In the said meeting, the learned arbitrator issued various directions to the parties making it clear that if the application was not made by the respondents therein, a further direction would also take place on 28th February, 2011. The learned arbitrator also directed the parties that all the communication addressed to the learned arbitrator be served on the other side.
27. The petitioners by their letter dated 31st January, 2011 alongwith respondent nos. 2 to 5 addressed to the learned arbitrator acknowledging the receipt of copy of the minutes of the meeting dated 22 nd November, 2010 and contending that they had already submitted their written reply/preliminary objections on 20 th November, 2010 but those objections had not been decided by the learned arbitrator by passing a reasoned and speaking order. In the said letter, the petitioners also admitted that a copy of the statement of claim submitted by the respondent no.1 herein was directly forwarded to them by the respondent no.1 which did not require any ::: Downloaded on - 17/03/2015 21:11:05 ::: Kvm 17/28 ARBP685.12 written statement unless and until the preliminary objections raised by the petitioners and respondent nos. 2 to 5 were duly decided by the learned arbitrator by passing a reasoned and speaking order. In the said letter, the petitioners also made it clear that in the next meeting proposed to be held on 1 st February, 2011 by the learned arbitrator, the petitioners as well as respondent nos. 2 to 5 did not think it fit to remain present before the learned arbitrator until and unless the preliminary objections raised by them were decided in accordance with law by passing a reasoned and speaking order.
28. On 1st February, 2011 the learned arbitrator forwarded copies of the minutes of the meeting held on 1st February, 2011 to all the parties at their respective addresses referred by the parties in their correspondence. On 23 rd February, 2011 the respondent no.1 through their advocates addressed a letter to the learned arbitrator as well as the petitioners and respondent nos. 2 to 5 placing on record that the petitioners and respondent nos. 2 to 5 were served with a copy of the statement of claims, however they had failed and neglected to file any written statement on or before 31st January, 2011. In the meeting held on 1 st February, 2011 the petitioners and the respondent nos. 2 to 5 were absent. In the said meeting, respondent no.1 contended that since no application under section 16 of the Arbitration Act had been filed by the petitioners and respondent nos. 2 to 5, they had deemed to have given up their rights to challenge the jurisdiction of the learned arbitrator to decide the matter. The respondent no.1 requested the learned arbitrator to proceed on the basis that the claims filed by the respondent no.1 was undefended and to continue with the arbitral proceedings. A copy of the said letter was also forwarded by the respondent no.1 to all the parties at their respective addresses.
::: Downloaded on - 17/03/2015 21:11:06 :::Kvm 18/28 ARBP685.12
29. Learned counsel also invited my attention to the receipts issued by the courier M/s.Blue Dart showing the acknowledgment of the notice by the petitioners and respondent nos. 2 to 5. On 28 th February, 2011 the learned arbitrator forwarded minutes of the meeting dated 28 th February, 2011 to all the parties. In the said meeting the petitioners and respondent nos. 2 to 5 were absent and did not even file any written statement though admitted the service of the statement of claim in their letter dated 31 st January, 2011. The learned arbitrator in the said meeting directed the respondent no.1 to intimate to Mr.J.M.Puranik, advocate who had represented the petitioners and respondent nos. 2 to 5 in the petition filed under section 9 of the Arbitration Act by the respondent no.1 in this court about the status of the arbitration proceedings. In the said minutes of the meeting he made it clear that the last opportunity shall be given to the petitioners and respondent nos. 2 to 5 and if they do not appear on the next date of the hearing, the arbitration proceedings would be proceeded ex-parte without any further notice to the petitioners and respondent nos. 2 to 5. The learned arbitrator fixed the next meeting on 15th March, 2011 at 5 p.m. cautioning to all the parties that if any party shall remain absent on that date, the matter shall proceed ex-parte. A copy of the said minutes of the meeting was forwarded to all the parties by the learned arbitrator.
30. On 1st March, 2011 the respondent no.1 filed its affidavit of service showing service of statement of claim on petitioners and respondent nos. 2 to 5 before the learned arbitrator and requested to take the same on record. On 1 st March, 2011, the petitioners and respondent nos. 2 to 5 from their address 22, Santha Bazar, Indore - 452002 addressed to the learned arbitrator acknowledging the minutes of the meeting dated 1st February, 2011 and once again contended that the petitioners had already raised preliminary objections on 20th November, 2010 and 31st January, ::: Downloaded on - 17/03/2015 21:11:06 ::: Kvm 19/28 ARBP685.12 2011 which were the objections virtually under the provisions of section 16 of the Arbitration and Conciliation Act, 1996 and for hearing of the said application, the petitioners did not want to remain personally present before the learned arbitrator.
31. In the meeting held on 15th March, 2011 none appeared for the petitioners and the respondent nos. 2 to 5. The learned arbitrator in the minutes of the meeting referred to the fax dated 15th March, 2011 sent by the petitioners and respondent nos. 2 to 5 urging the learned arbitrator to decide their contentions under section 16 of the Arbitration Act and indicating that they did not wish to remain present at the hearing. A perusal of the said letter dated 15 th March, 2011 indicates that the petitioners and respondent nos. 2 to 5 had received communication dated 28 th February, 2011 alongwith a copy of the minutes dated 28 th February, 2011. The petitioners also acknowledged that in the said minutes of the meeting, the petitioners were granted last opportunity to appear on 15th March, 2011 and in their absence, the matter would be proceeded ex-parte. The petitioners informed that since the letter was received only on 8 th March, 2011 alongwith minutes of the meeting, it was practically not possible for them to appear before the learned arbitrator on 15th March, 2011. The petitioners however made it clear that since they had already filed their objections and till that objections were decided by the learned arbitrator, the petitioners did not appear before the learned arbitrator till such objections were decided.
32. In the meeting held on 15th March, 2011, the learned arbitrator granted one more opportunity to the petitioners and respondent nos. 2 to 5 to file written statement on or before 15th April, 2011 and made it clear that if the written statement was not filed before the next date, the respondent no.1 shall be entitled to proceed ex-parte against the parties without any further notice. In so far as the ::: Downloaded on - 17/03/2015 21:11:06 ::: Kvm 20/28 ARBP685.12 objections raised by the petitioners and respondent nos. 2 to 5 was concerned, the learned arbitrator informed that the hearing of those contentions shall take in the meeting proposed to be held on 18th April, 2011.
33. On 18th April, 2011, the learned arbitrator passed an order under section 16 of the Arbitration Act and considered the objections raised by the petitioners and respondent nos. 2 to 5 and directed that the statement of claim filed by the respondent no.1 herein would be stated as statement of claim only against M/s.Nanesh Foods Limited. The learned arbitrator directed the respondent no.1 herein to file separate statement of claim against the petitioners and respondent nos. 2 to 5 on or before 2nd May, 2011 and to serve copy thereof to those parties. The learned arbitrator directed the petitioners and respondent nos. 2 to 5 to file written statement in their respective cases on or before 6 th June, 2011 and directed that the meeting would be held on 13th June, 2011 for further directions.
34. On 8th June, 2011 the respondent no.1 filed its statement of claim against the petitioners and respondent nos. 2 to 5 and requested the learned arbitrator to take the same on record and applied for condonation of delay for filing the statement of claim. Respondent no.1 forwarded a copy of the said written statement to the petitioners and respondent nos. 2 to 5 at the address 22, Santha Bazar, Indore - 452002 which were duly served. Respondent no.1 filed affidavit of service before the learned arbitrator in that regard annexing a copy of the acknowledgment showing the proof of service of the statement of claim.
35. Dr.Saraf, learned counsel for respondent no.1 also invited my attention to various notices sent by e-mail by the learned arbitrator to the parties from the records and proceedings filed by the learned arbitrator in this court. A perusal of ::: Downloaded on - 17/03/2015 21:11:06 ::: Kvm 21/28 ARBP685.12 the e-mails dated 15th June 2011, 19th July 2011, 20th August 2011 and 22nd September 2011 clearly indicates that the petitioners as well as respondent nos. 2 to 5 were duly served with various notices by the learned arbitrator from time to time.
36. The learned counsel submits that even in the Form No.32 which is alleged to have been filed by the petitioners with the Registrar of Companies, the petitioners had given their addresses as Samta Foods Limited, 22, Santha Bazar, Indore - 452002. He submits that the petitioners have made false statement that the petitioners were never served with the copy of the statement of claims as well as notices from the learned arbitrator on or from the respondent no.1.
37. The learned counsel placed reliance on section 3(1) (a) of the Arbitration and Conciliation Act, 1996 and submits that since all the notices were served by the learned arbitrator and respondent no.1 at the place of business and habitual residence or mailing address of the respondent nos. 2 to 5, there was proper service of the notices and the notices sent by the learned arbitrator as well as respondent no.1 were deemed to have been served upon the petitioners and respondent nos. 2 to 5. The learned counsel submits that all these correspondence referred to aforesaid which were from petitioners and the respondent nos. 2 to 5 on one hand and the learned arbitrator as well as respondent no.1 acknowledging the receipt of the pleadings as well as notices have been suppressed by the petitioners in this petition. The learned counsel submits that the learned arbitrator had given several opportunities to the petitioners as well as respondent nos. 2 to 5 to file written statement and to remain present. The petitioners were thus not unable to represent their case as falsely alleged.
38. In so far as merits of the matter is concerned, it is submitted that the ::: Downloaded on - 17/03/2015 21:11:06 ::: Kvm 22/28 ARBP685.12 petitioners as well as other guarantors have waived their rights to any modification in the deed of guarantee by entering into a writing and thus could not make any such grievance. It is submitted that this court cannot go into the merits in this proceedings since no written statement came to be filed by the petitioners.
39. Dr.Saraf, learned counsel for the respondent no.1 distinguished all the judgments relied upon by the learned counsel for the petitioners on the ground that the learned arbitrator had in various notices including last notice had made it clear that if the petitioners chose to remain absent, the learned arbitrator would proceed with the matter ex-parte. The learned arbitrator thus had issued a caution notice though the same was not required. The learned counsel relied upon the judgment of this Court delivered on 21st August, 2013 in case of Devendra T.Koli and Anr.
vs.L & T Finance Ltd. & Anr. in Arbitration Petition No.368 of 2013 and in particular paragraphs 11 and 12. In the said judgment the learned Single Judge has relied upon the judgment of the Division Bench of this court in case of T.V. & Radio Publicity Services vs. Union of India & Anr. 2007(4) Bom.C.R.341.
Relevant paragraph of the judgment of the learned Single Judge quoting the judgment of Division Bench in case of T.V. & Radio Publicity Services (supra) reads thus :-
11 Division Bench of this Court in T.V. & Radio Publicity Services (Supra) in paragraph 5 was considering the provisions of old Arbitration Act, 1940. Observations of the Division Bench made in paragraphs 5 and 6 would be relevant for our purpose, which are re-produced hereinafter:
"5. As regards the contention about the proceedings being ex parte and, therefore, opportunity should be given to the appellant. The contention is totally devoid of substance. In fact the said submission is contrary to the records. The relevant ::: Downloaded on - 17/03/2015 21:11:06 ::: Kvm 23/28 ARBP685.12 portion of the Award regarding the appearance and the participation of the parties in the proceedings reads thus:
. The respondent failed to present himself during the hearing and present his case before the arbitrator although he had received the said Notice (dt.9-6-97) for which the acknowledgment by way of Registered A.D. card is on the records. Thereafter, as many as five hearings were held on 23- 7-97, 6-8-97, 21-8-97, 25-9-97 and 3-10-97 as notified, at which the representatives of the claimant and their Counsel were present and submitted their papers/documents in support of their claim. But there was none to represent the respondent.
The minutes of all these hearings have been furnished to both the parties from time to time. It is pointed out that the Notices and the minutes of the above mentioned five hearings held between 23.7.97 and 3.10.97 were sent to the respondent by Registered Post A.D. but the same have come back from the <Postal> Department with the <remarks> that the addresses (respondent) have not claimed them despite the intimations given to him by the <postal> Department.
6 The above notings in the Award clearly disclose that the appellant was not only served with the notice about the hearing of the matter, but even after the hearing was concluded, all the records regarding the hearings were <posted> to the appellant by Registered Post A.D. However, the appellant did not accept the same in spite of <intimation> by the <Postal> Department.
In the circumstances, the appellant can not claim to have no knowledge of the proceedings. In those circumstances, the arbitrator was justified in proceeding ex-parte against the appellant, when a proper opportunity was afforded to him to defend the case. It is the appellant who has to blame himself for the same and cannot seek undue advantage of his own failure to appear before the arbitrator and defend his case."
40. In rejoinder, learned counsel for the petitioner submits that all the correspondence relied upon by the respondent no.1 were for the period prior to the segregation of the claims ordered by the learned arbitrator. It is submitted that since respondent no.1 was fully aware of the other address of the petitioners, ::: Downloaded on - 17/03/2015 21:11:06 ::: Kvm 24/28 ARBP685.12 respondent no.1 as well as the learned arbitrator ought to have served the notice also at the other addresses of the petitioners. Since the learned arbitrator did not issue any caution notice before proceedings with the matter ex-parte, the learned arbitrator could not have render ex-parte award.
REASONS AND CONCLUSIONS :-
41. A perusal of the record clearly indicates that the petitioners had been served with the copy of the statement of claim from the respondent no.1 and also various notices alongwith minutes of the meeting from time to time from the learned arbitrator at the address mentioned in the letters addressed by the petitioners themselves. It is not in dispute that even in the Form 32 filed by the petitioners with the Registrar of Companies, the address of the petitioners continued to be that of 22, Santha Bazar, Indore - 452002. Even in the letters addressed by the petitioners, their address of 22, Santha Bazar, Indore - 452002 has been shown.
42. A perusal of the correspondence exchanged between the petitioners and the learned arbitrator as well as with the respondent no.1 also clearly indicates that the petitioners had acknowledged receipt of the statement of claim from the respondent no.1 and had acknowledged the receipt of various minutes of the meeting from the learned arbitrator from time to time. The only objection raised by the petitioners in those letters was that the learned arbitrator shall decide the objections raised by the petitioners in those letters purporting to be the objections under section 16 of the Arbitration Act and taking a stand that till such objections were decided by the learned arbitrator, the petitioners would not appear before the learned arbitrator in any of the meeting. In my view the parties taking such an unreasonable stand and having duly acknowledged the receipt of the statement of claim from the respondent no.1 and the factum of receipt of minutes of the meeting held by the ::: Downloaded on - 17/03/2015 21:11:06 ::: Kvm 25/28 ARBP685.12 learned arbitrator from time to time cannot be allowed to take a stand that the petitioners were not duly served by the respondent no.1 or by the learned arbitrator.
43. A perusal of the award indicates that the learned arbitrator has proceeded ex- parte against the petitioners and respondent nos. 2 to 5 only after rendering several opportunities to the petitioners and respondent nos. 2 to 5 for filing written statement and also to appear before the learned arbitrator. Perusal of the notices and minutes of the meeting also clearly indicates that the learned arbitrator had made it clear time and again that if the petitioners chooses to remain absent, the learned arbitrator would proceed with the matter ex-parte against the petitioners and respondent nos. 2 to 5. The petitioners have not disputed the factum of receipt of all such minutes of meeting forwarded by the learned arbitrator to the petitioners. I am thus not inclined to accept the submissions of the learned counsel for the petitioners that the petitioners had not been served with copy of statement of claim and the notices from the learned arbitrator for hearing. I am also not inclined to accept the submission that the learned arbitrator as well as the respondent no.1 were bound to serve the petitioners at all the three addresses mentioned in one of the correspondence. The petitioners themselves had given their address of 22, Santha Bazar, Indore - 452002 all throughout in their correspondence with the learned arbitrator as well as with the respondent no.1. In my view the petitioners have made a false and misleading statement in the arbitration petition that they were not served with the copy of the statement of claim as well as notices in the above matter.
44. A perusal of the record also indicates that the large number of correspondence exchanged between the petitioners and the learned arbitrator and with the respondent no.1 have been suppressed by the petitioners in the arbitration ::: Downloaded on - 17/03/2015 21:11:06 ::: Kvm 26/28 ARBP685.12 petition. The respondent no.1 has brought on record all those correspondence entered into between the petitioners and with the learned arbitrator and with the respondent no.1 for the perusal of this court.
45. In so far as judgment of various courts relied upon by the petitioners in support of the submission that the learned arbitrator had not given proper opportunity to the petitioners to remain present or that the caution notice was not issued by the learned arbitrator before proceeding with the matter against the petitioners ex-parte is concerned, in my view none of those judgments relied upon by the learned counsel for the petitioners would assist the petitioners.
46. A perusal of the record on the contrary indicates that the learned arbitrator had given several opportunities to the petitioners to file written statement and to remain present on the day each of the hearing fixed though the petitioners were adamant not to appear before the learned arbitrator till their objection under section 16 of the Arbitration Act was first decided by the learned arbitrator. Even after disposal of the objection under section 16 by the learned arbitrator, the petitioners chose to remain absent before the learned arbitrator though served with the notices.
The learned arbitrator in my view has complied with the principles of natural justice much more than what was required in the facts and circumstances of this case.
47. In my view once the petitioners were served with the pleadings as well as all the notices with a direction to file written statement and to remain present before the learned arbitrator and inspite thereof, the petitioners have chosen not to file any written statement and not to remain present, the petitioners themselves have to be blamed for an ex-parte award having been passed by the learned arbitrator. In my ::: Downloaded on - 17/03/2015 21:11:06 ::: Kvm 27/28 ARBP685.12 view the petitioners have not made out a case that the petitioners were unable to present their case or that were not given proper notice of the arbitral proceedings by the learned arbitrator. On the contrary records indicates contrary position.
48. Division Bench of this court in case of T.V. & Radio Publicity Services (supra) referred to aforesaid has held that if a party chooses to remain absent though proper opportunity was offered to him to defend the case by the learned arbitrator, the learned arbitrator in those circumstances was justified proceeding ex-
parte against the said party and such party has to blame himself for the same and cannot seek undue advantage of his failure to appear before the learned arbitrator and defend his case. In my view the judgment of Division Bench in case of T.V. & Radio Publicity Services (supra) squarely applies to the facts of this case. Since the petitioners had chosen not to remain present before the learned arbitrator and not to file written statement, the learned arbitrator was fully justified in proceeding with the matter ex-parte against the petitioners. The petitioners could not be permitted by the learned arbitrator to delay the outcome of the arbitration proceedings on one or the other frivolous ground.
49. In so far as submission of the learned counsel that the documents relied upon by the respondent no.1 were altered unilaterally by the respondent no.1 and thus could not rely upon by the respondent no.1 is concerned, though respondent no.1 has given satisfactorily reply to this submission of the learned counsel for the petitioners, in my view since the petitioners did not file any written statement before the learned arbitrator and chose to remain absent deliberately inspite of service of the statement of claim along with documents and the notices from time to time, the petitioners cannot be allowed to make any submissions on the alleged alterations in the deed of guarantee at this stage in this petition.
::: Downloaded on - 17/03/2015 21:11:06 :::Kvm 28/28 ARBP685.12
50. In my view, petition is devoid of merits and contains falsehood on the part of the petitioners and is full of suppression of material facts and documents forming part of record before the learned arbitrator.
51. I, therefore, pass the following order :-
Arbitration Petition No.685 of 2012 is dismissed with cost quantified at Rs.25,000/- which shall be paid by the petitioners to the respondent no.1 within two weeks from today.
ig (R.D. DHANUKA,J.)
::: Downloaded on - 17/03/2015 21:11:06 :::