Delhi District Court
Sidharth Raina vs Pnb Housing Finance Ltd on 2 May, 2023
IN THE COURT OF SH. SANJEEV AGGARWAL,
DISTRICT JUDGE (COMMERCIAL)-03, SOUTH,
SAKET COURTS, NEW DELHI
OMP (COMM)- 9/2019
CNR NO. DLST010038552019
1.Sidharth Raina, Aged 33 years
Registered office:
9th Floor, Antriksh Bhawan,
22 Kasturba Gandhi Marg,
New Delhi-110001
Also at:
1101, 11 Tower D, Capital Gateway,
Abhinandan Farm House,
Palam Vihar Colony-122001
2. Smt. Priyanka Maini, Aged 32 years,
Registered office:
9th Floor, Antriksh Bhawan,
22 Kasturba Gandhi Marg,
New Delhi-110001
Also at:
1101, 11 Tower D, Capital Gateway,
Abhinandan Farm House,
Palam Vihar Colony-122001
...Petitioners
Versus
1. PNB Housing Finance Ltd.
Registered office at:
9th Floor, Antriksh Bhawan,
22 Kasturba Gandhi Marg,
New Delhi-01
OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 1 of 19
2. Sh. Jaswant Singh (Sole Ld. Arbitrator)
Chamber No. 781, Saket Court Complex,
Saket, New Delhi
...Respondents
Date of institution of petition : 06.06.2019
Date of reserving judgment : 15.04.2023
Date of pronouncement : 02.05.2023
JUDGMENT
1. Vide this judgment, I shall dispose off the present petition / objections filed u/S. 34 of The Arbitration and Conciliation Act, 1996 (hereinafter referred to as an Act) by the petitioner against the arbitration award dated 08.08.2018, passed by Ld. Sole Arbitrator.
2. Brief facts which can be taken out from the relevant para(s) of the award dated 08.08.2018 are as under :
1. The claimant, PNB Housing Finance Ltd., is a company incorporated under the companies Act, 1956 is having its registered office at 9 th floor, Antirksh Bhawan, 22 Kasturba Gandhi Marg, New Delhi-
110001. The Claimant is engaged, inter-alia in the business of rendering financial/credit facilities, to the intending borrowers.
2. As per claimant, the respondents as borrower and co-
borrower(s)/ Guarantor (s) approached the claimant company to avail loan facility. Being approached OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 2 of 19 and / or requested by the respondents in the manner as aforesaid and further believing upon all the statements and /or assurances made by the respondents, including the assurances of making regular payments of monthly installments together with the interest accrued thereon, HOU/JAN/0216/ 270677 by virtue of executing of loan agreement for an amount of Rs.66,00,000/- out of this an amount of Rs. 60,06,750/- was disbursed as on date of filing of claim. The said loan was repayable in equitable installments alongwith applicable interest. For securing the loan facility availed by the respondents, the said property i.e. 1101, 11, Tower D, Capital Gate Abhinandan Farm House/ Palam Vihar Colony-
122001 was mortgaged with the claimant after disbursement of laon facility as per the terms of the loan agreement by way of depositing of original title documents of the property.
3. As per the terms of the loan agreement and other documents, the respondents were required not to assign, transfer, further pledge, charge or in any way encumber against the interest of the lender, the security so created, during the continuation of the liability of the said loan facility.
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4. It has been submitted by the claimant company, that the respondents defaulted in payment of installments on various dates as per the repayment schedule and a numbers of installments remained unpaid. As the respondents failed to adhere to the repayment schedule, the Claimant Company as per the terms and conditions contained in loan agreement recalled the aforesaid loan facility vide their legal notice dated 26.12.2017 whereby the respondents were called upon to pay the entire loan outstanding amount of Rs. 61,32,223.36/- which has become due and payable by the respondents as on 26.12.2017 towards the loan account no. HOU/JAN/0216/270677 with interest and other charges as agreed in the aforesaid loan agreement.
5. The respondents, despite receipt of the aforesaid demand notice dated 26.12.2017 did not comply with the terms of notice and neither paid the amount nor replied to the said notice.
6. However, despite the receipt of the said notice the respondents did not clear the dues and consequently the claimant under the given circumstances referred the present claim/dispute related to repayment of the said loan for arbitration.
7. The loan agreement executed between the parties OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 4 of 19 contained an arbitration clause as under:-
"Any and all disputes, claims, difference arising out of or in connection with this agreement and the schedule or the performance of this agreement shall be settled by arbitration to be referred to a Sole Arbitrator to be appointed by the PNBHFL and the award thereupon shall be binding upon the parites to this agreement. The place of arbitration shall be in Delhi or any other place as arbitrator may decide, in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and any statutory amendments thereof. The proceeding of Arbitration Tribunal shall be conducted in English language. Each party has to bear cost of representing its case before the Arbitrator. Costs and charges of Arbitrator to be shared equally unless/otherwise provided for in the award.
"The borrower further agrees that all claims, difference and disputes, arising out of or in relation to dealing/ transaction made in pursuant to this agreement including any question whether such dealing, transaction have been entered into or not, shall be subject to the exclusive jurisdiction of the Courts at Delhi only"
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8. It is noted that under the loan agreement as entered into between the parties it has been specifically agreed that all the parties shall observe and adhere to the terms and conditions of the loan agreement. Consequently all the parties have agreed to get the dispute resolved by way of arbitration.
9. The agreement provides for the place of arbitration to be Delhi and accordingly the claimant issued a letter dated 17.01.2018 to me thereby nominating me as sole arbitrator to adjudicate upon and decide the dispute of the claim made by it against the respondents and asking for my concurrence to act as sole arbitrator in terms of the loan agreement. I accepted my appointment and gave my concurrence to act as sole arbitrator for adjudication of dispute having arisen between the parties and fixed the matter for preliminary hearing. Vide notice dated 18.01.2018, I directed both the parties to appear before me on 20.02.2018 and the claimant was also directed to file the statement of claim along with the documents. The notice of the proceedings was sent to the respondents on the addresses supplied by the claimant.
10. The respondents despite service of the notice dated 18.01.2018 remained unrepresented in the hearing on 20.02.2018, Ld. Counsel for the claimant alongwith OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 6 of 19 authorized representative appeared and filed this tribunal on 21.03.2018. The matter was adjourned to 21.03.2018 for appearance of the respondents.
11.On 21.03.2018, Ld. Counsel for the claimant appeared but none again appeared on behalf of the respondents despite service of the notice dated 20.02.2018.
XXXX XXXX XXXX XXXX
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12. The record reveals that several notices were sent to the respondents at the last known place of their business/habitual residence by speed post and the respondents were also served through advertisements in newspaper but the respondents remained unrepresented. Ld. Counsel for the claimant submitted that the addresses of the respondents furnished to this tribunal are the correct and the last known addresses and the respondents have not informed the claimant about any changes of their addresses. He has submitted that in view of the Section 3 of Arbitration & Conciliation Act 1996, the respondents are deemed to have been duly served and thus be proceeded ex-parte.
13. The relevant provisions of the Section 3 of Arbitration & Conciliation Act 1996 read as under:-
a) Any written communication is deemed to have OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 7 of 19 been received if it is delivered to the addressee personally or at his place of business/habitual residence or mailing address and.
b) if none of the places, referred to in clause (a) can be found after making a reasonable inquiry, a written communication is deemed to have been received if it is sent to the addressee's last known place of business/habitual residence or mailing address by registered letter or by any other means which provides a record of the attempt to deliver it.
3. The said arbitration award has been questioned on the following main grounds :
That the said arbitration award has been passed without following the principles of natural justice, and the said ex parte award has been passed against the principles of public policy, and the respondents have not fully disclosed the material facts to the Ld. Arbitrator. It is stated that the respondent bank acted arbitrarily and unlawfully by disbursing more than 90% of the loan amount, which was in contravention and against the RBI circular dated 03.09.2013, whereby the RBI has categorically instructed the banks that the bank should desist from upfront disbursal of the loan amount and the disbursal should be closely linked to the stages of construction, yet the loan was disbursed in this manner. It is further stated that the bank OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 8 of 19 officials are hands in gloves with the builder in disobeying the said circular.
It is also stated that no invocation notice was served upon the petitioners. It is also stated that the petitioners were never served with any notice to appear before the Ld. Arbitrator and the whole proceedings have been carried out against the principles of natural justice and are liable to be set aside.
It is also stated that the petitioners never gave consent for appointment of the Ld. Arbitrator, who had been appointed unilaterally against the principles of natural justice. It is therefore, stated that the arbitration award dated 08.08.2018 is liable to be set aside.
4. Reply has been filed by the respondent no. 1 stating that the said arbitration award has been rightly passed against the petitioners, who despite being aware of the arbitration proceedings pending against them before the Ld. Sole Arbitrator, deliberately chose not to participate.
It is also stated that the Ld. Arbitrator had issued notices of the arbitration proceedings to both the petitioners not only once or twice, but thrice and on all the occasions even after service of the notice(s), the petitioners chose not to appear before the Ld. Arbitrator, despite due service of the notice(s).
It is also stated that all the procedures have been duly followed including the principles of natural justice and the arbitration award dated 08.08.2018 is in line with the public policy. It is denied OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 9 of 19 that the loan was disbursed in contravention of the circulars of the RBI or any circular dated 03.09.2013.
All the grounds taken by the petitioner in the present petition u/S. 34 of the Act have been vehemently denied. It is stated that the petitioners in the garb of RBI circulars are trying to run away from their liability of the outstanding loan due and payable by them to the finance company. It is further stated that it is a matter of record that number of opportunities have been provided to the petitioners not only before the invocation of the arbitration clause of loan agreement, but even during the course of arbitration also the petitioners were notified about the arbitration proceedings pending before the Ld. Arbitrator.
It is stated that the petitioners have failed to gave any valid reason of not receiving the notice(s) sent to them by the Ld. Arbitrator, as on the same address, petitioners have been served with the service of the execution petition bearing no. 482/19, titled as PNB Housing Finance Limited Vs. Sidharth Raina. It is also denied that the arbitration clause is bad in law. Therefore, it is stated that the petition u/S. 34 of the Act is liable to be dismissed.
5. An application u/S. 34(3) of the The Arbitration and Conciliation Act, 1996 had also been filed on behalf of the respondent no. 1 stating that the arbitration award was passed on 08.08.2018, the date of service of the arbitration award is 16.08.2018 and the date of receipt of arbitration award is 23.08.2018. The statutory period of 120 days i.e. 90 + 30 days expired on 23.12.2018. The present petition has OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 10 of 19 been filed on 01.06.2019, which is hopelessly time barred.
6. No separate reply has been filed by the petitioners to the said application of the respondent u/S 34(3) of the Act, however, during the course of arguments, it was orally contended that the petitioners for the first time received summons on 06.04.2019 regarding the execution petition bearing no. 482/19, titled as PNB Housing Finance Limited Vs. Sidharth Raina from the Gurgaon Court. The summons were accompanied with the execution petition, whereby they for the first time, came to know about the ex parte arbitration award dated 08.08.2018.
It is stated that no arbitration award (signed or unsigned) was ever served upon the petitioners. Therefore, it is argued that the present petition has been filed within limitation from the date of knowledge of the arbitration award dated i.e. 06.04.2019 on 06.06.2019 within the statutory period of 90 + 30 days, it is therefore, stated that the said objection by Ld. Counsel for respondent no. 1 is without any substance.
7. I have gone through the rival contentions.
8. It is settled law that the Arbitrator is a Judge of the choice of the parties and his decision, unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even by the Court as a Court of law could come to a different conclusion on the same facts. The Court cannot reappraise the evidence and it is not open to the OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 11 of 19 Court to sit in appeal over the conclusion of the Arbitrator. It is not open to the Court to set aside a finding of fact arrived at by the Arbitrator and only grounds on which the award can be set aside are those mentioned in the Arbitration Act. Where the Arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the Court in exercise of the power vested in it. Where the Arbitrator is a qualified technical person and expert, who is competent to make assessment by taking into consideration the technical aspects of the matter, the Court would generally not interfere with the award passed by the Arbitrator.
9. With regard to the limitation aspect, there is no reason to doubt the averments made by the petitioners that they only came to know about the arbitration award dated 08.08.2018 when they were served with the copy of the execution petition filed by the respondent no. 1 before Gurgaon Court, as the said averments are supported by the statement of truth / affidavit of the petitioners. Therefore, since the date of knowledge of the arbitration award is stated to be on 06.04.2019 and the present objections u/S 34 of the Act have been filed on 06.06.2019, therefore, the same are within limitation i.e. within the statutory period of 90 + 30 days, as prescribed u/S. 34 (3) of The Arbitration and Conciliation Act, 1996.
10. During the course of arguments, Ld. Counsel for the petitioners took two main objections to the award, firstly that the appointment of the Ld. Arbitrator is unilateral and cannot be legally sustained in view of the OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 12 of 19 law laid down in the judgment of Perkins Eastman Architects DPC & Anr. Vs. HSCC (India) Ltd." decided on 26 November, 2019 in Arbitration Application No.32 of 2019. The second main objection taken by Ld. Counsel for the petitioner was of non service of the notice(s) regarding the appointment of the arbitrator and other proceedings, which is in violation of principle of natural justice or in violation of doctrine of audi alterm parterm.
11. It is not disputed that the petitioners had approached the respondent for availing the house loan facility or that the respondent had sanctioned the house loan facility to the tune of Rs. 65,00,000/- in favour of the petitioners vide sanction letter dated 15.03.2016. It is stated that the petitioners started paying EMI qua the aforesaid loan bearing the loan account no. HOU/JAN/0216/270677 from 21.04.2016 and made the payment qua monthly EMIs on regular basis, as is evident from the provisional interest statement issued by the respondent bank.
12. It is admitted between the parties that the following is the arbitration clause, as per the loan agreement between the parties :
10.8 Arbitration "Any and all disputes, claims, difference arising out of or in connection with this agreement and the schedule or the performance of this agreement shall be settled by arbitration to be referred to a Sole Arbitrator to be appointed by the OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 13 of 19 PNBHFL and the award thereupon shall be binding upon the parites to this agreement. The place of arbitration shall be in Delhi or any other place as arbitrator may decide, in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and any statutory amendments thereof. The proceeding of Arbitration Tribunal shall be conducted in English language. Each party has to bear cost of representing its case before the Arbitrator. Costs and charges of Arbitrator to be shared equally unless/otherwise provided for in the award.
"The borrower further agrees that all claims, difference and disputes, arising out of or in relation to dealing/ transaction made in pursuant to this agreement including any question whether such dealing, transaction have been entered into or not, shall be subject to the exclusive jurisdiction of the Courts at Delhi only"
13. Now adverting to the main contention of the petitioners regarding the unilateral appointment of the arbitrator, it has been held by the Hon'ble Supreme Court in the judgment of Perkins Eastman Architects DPC & Anr. Vs. HSCC (India) Ltd." decided on 26 November, 2019 in Arbitration Application No.32 of 2019, wherein it has OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 14 of 19 been held in para 16 as under :
"16....But, in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (Act 3 of 2016) and recognised by the decision of this Court in TRF Limited (2017) 8 SCC 377."
14. In the present case also, the power to appoint the sole arbitrator solely lies with the respondent no. 1. Therefore, in view of the aforesaid judgment, which is squarely applicable to the facts of the present case, in a case where one party has the right to appoint the sole arbitrator, its choice will have an element of exclusivity in determining the course for dispute resolution. Naturally the person who has interest in the outcome of the decision must not have the right to appoint a sole arbitrator.
In view of the law laid down in the above judgment, the contrary argument of the Ld. Counsel for the respondent that the said judgment is not applicable to the facts of the present case is not tenable.
15. As discussed above, the arbitration clause 10.8 of the loan agreement provides that the PNBHFL reserves the right to appoint the sole arbitrator in the event of dispute between the parties and it has also been mentioned in the said arbitration clause that the award thereupon shall be binding upon the Parties.
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16. In view of the aforenoted existing legal position at present, this court is satisfied that the procedure of appointment of sole arbitrator, as specified in the clause 10.8 of the loan agreement i.e. the arbitration of a single arbitrator to be nominated by lender, is not in accordance with law and therefore, this Court finds that the Ld. Sole Arbitrator was de-jure ineligible to act as an arbitrator under Section 12(5) r/w Schedule VII of The Arbitration and Conciliation Act, 1996.
17. With regard to the arguments qua non service of the notice(s), sent by the Ld. Arbitrator with regard to the arbitration proceedings, as argued by Ld. Counsel for the petitioner, it has been held in the judgment Shabnam Gulati Vs. Religare Finvest Pvt. Ltd. FAO(OS) 338/2016, CMs Nos. 43195, 45018 and 45938/2016 decided on 22.09.2017, in para 12 as under:
12. As far as the second contention is concerned, learned counsel appearing on behalf of the appellant drew our attention to the notice of the arbitration proceedings dated 19.09.2012 issued by the arbitrator and the postal receipt and also the envelop cover by which the said notice had been returned with remark "unclaimed". The appellant points out that the postal receipt reflects an incorrect Pin Code inasmuch as instead of Pin Code "400050", Pin Code reflected in the postal receipt is "400001". In our opinion this mistake in the Pin Code is of no relevance inasmuch as other details and particulars, namely, name of the addressee i.e. the appellant and her husband and their residential address i.e. the flat number, the floor, colony, etc. are correct. It is not that the postal authorities were unable to locate the address, for the said reason. Further, subsequent notice was issued by the arbitrator before proceeding ex-parte against the appellant. The OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 16 of 19 envelope at page 162-163 of the paper book enclosing the second notice correctly records the Pin Code number as "400050". The FAO (OS) 338/2016 Page 9 envelope was returned with the remark "unclaimed" and not because the address was incorrect or not found.
18. It has also been held by the Hon'ble Delhi High Court in para 26 of the judgment Tata Capital Financial Services Ltd. Vs. A. G. Aerovision Electronics Pvt. Ltd. & Ors. OMB (ENF.) (COMM.) 150/2016 dated 15.01.2018 as under :
26. In my view, if the submission of the learned counsel for the petitioner that till service of signed copy of the arbitral award from the learned arbitrator is actually received by the petitioner though it was not claimed by the petitioner inspite of intimation posted by the postman, it will not amount to delivery of the award under Section 31(5) of the Arbitration Act is accepted, dishonest litigant who deliberately does not claim copy of the signed award sent by the learned arbitrator inspite of the postman having posted the intimation, the limitation would never commence for filing a petition under Section 34(3) of the Arbitration Act and the beneficiary of the award would never be able to apply for execution of such award. The arguments of the learned counsel for the petitioner, in my view, is ex facie contrary to the principles laid down by the Supreme Court in the case of C.C. Alavi Haji (supra) and judgment of the Calcutta High Court in the case of New Globe Transport Corporation (supra), contrary to Section 3 of the Arbitration and Conciliation Act, 1996, Section 27 of the General Clauses Act, 1897 and also to the provisions of Section 31(5) of the Arbitration Act, 1996.
19. Further it has been held by the Hon'ble Supreme Court in para 14 of the judgment of C.C. Alavi Haji Vs. Palapetty Muhammed & Anr.
Appeal (crl.) 767 of 2007 dated 18.05.2007 as under :
14. Section 27 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 17 of 19 registered post. In view of the said presumption, when stating that a notice has been sent by registered post to the address of the drawer, it is unnecessary to further aver in the complaint that in spite of the return of the notice unserved, it is deemed to have been served or that the addressee is deemed to have knowledge of the notice. Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business. This Court has already held that when a notice is sent by registered post and is returned with a postal endorsement refused or not available in the house or house locked or shop closed or addressee not in station, due service has to be presumed.
[Vide Jagdish Singh Vs. Natthu Singh ; State of M.P. Vs. Hiralal & Ors. and V.Raja Kumari Vs. P.Subbarama Naidu & Anr. ] It is, therefore, manifest that in view of the presumption available under Section 27 of the Act, it is not necessary to aver in the complaint under Section 138 of the Act that service of notice was evaded by the accused or that the accused had a role to play in the return of the notice unserved.
20. The law laid down in the aforesaid judgment(s) is squarely applicable to the facts of the present case. In the present case, as per the arbitration record, the Ld. Arbitrator had sent the notices to the petitioners regarding the arbitration proceedings at the address i.e. 1101, 11, Tower D, Capital Gateway, Abhinandan Farm House, Palam Vihar Colony, 122001, which is one of the the same address, as mentioned in the memo of parties of the present petition. Therefore, the petitioners cannot be allowed to say that the said notices sent during the arbitration proceedings, which were correctly addressed to the petitioners, were not received by the petitioners.
Further the petitioners were also served by way of publication in "The Times of India" newspaper dated 16.06.2018. In any case, in view of the aforesaid judgment(s) (supra), Section 27 of the General OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 18 of 19 Clauses Act gives rise to the presumption regarding due service of the notice(s), when they were sent at the correct address by registered post unless or until the contrary is proved by the addressee, service of notice(s) will be deemed to have been effected.
21. In view of the afore going discussion, this Court is satisfied that the award dated 08.08.2018 passed by the Ld. Sole Arbitrator cannot be legally sustained and is therefore, set-aside. As a consequence, the present petition u/S. 34 of the The Arbitration and Conciliation Act, 1996 stands allowed. In view of the above, the application moved by the petitioner u/S 36(2) of The Arbitration and Conciliation Act, 1996 does not survive. Same also stands disposed off accordingly. Parties to bear their own costs. File be consigned to record room.
Announced in the open court today on 02.05.2023.
(Sanjeev Aggarwal) District Judge (Commercial)-03 South, Saket Courts, New Delhi OMP (Comm) 9/2019 (CNR No. DLST010038552019) Page No. 19 of 19