Delhi District Court
Sh. Kiran Pal And Another vs Shri Ram Transport And Another on 6 September, 2025
IN THE COURT OF DISTRICT JUDGE-05,
CENTRAL DISTRICT, TIS HAZARI COURTS, DELHI
Presided by:-
Sh. Abhishek Srivastava, DHJS
Artb No. 280/2018
CNR No:- DLCT01-003759-2018
1. Sh. Kiran Pal
S/o Sh. Munshi Ram,
R/o H. No. 99, Block-A,
DCM Colony, Ibrahimpur, Ext.
Delhi-110084
2. Sh. Brij Mohan
S/o Sh. Sahedev,
R/o H. No. 225, Bazar Mohalla,
Village-Bakhtawar Pur,
Delhi-110036 .......Petitioners
Vs.
1. M/s Shri Ram Transport,
Finance Co. Ltd,
Office at Mookambika Complex,
3rd floor, 4, Lady Dasika Road,
Mayalpur, Chennai-600004
And its Branch Office at,
431/64/1, Ground Floor, LDA Trust Estate,
Keval Partk Ext. Azadpur, Delhi-110033.
Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.
Judgment dated 06.09.2025 Page No. 1 of 24
2. Sh. B.L. Garg, AD&S.J (Retd),
Sole Arbitrator,
At A-9, Ganpati Apartments,
6-Alipur Road, Civil Lines,
Delhi-110054. ...Respondents
Date of Institution:- 23.03.2018
Date of Judgment:- 06.09.2025
JUDGMENT
1. By this judgment, this Court shall dispose of the present petition under Section 34 of the Arbitration & Conciliation Act, 1996 filed by the petitioners against the respondent No. 1 challenging the Award dated 23.03.2015 passed by Sh. B. L. Garg, Ld. Sole Arbitrator in File No. ARB/BLG/5193/2014 titled as 'Shriram Transport Finance Company Limited V/s Sh. Kiran Pal & Ors.' (hereinafter referred to as the 'impugned award').
2. Petitioner No. 1 (Sh. Kiran Pal) & petitioner No. 2 (Sh. Brij Mohan) were the respondents No. 1 & 2, and respondent No. 1 herein (M/s Shri Ram Transport Finance Co. Ltd.) was the claimant before the Ld. Arbitrator. Only during final arguments Ld. Counsel for the petitioner No. 1 disclosed that the petitioner No. 2 had already expired during pendency of petition. A separate statement of the petitioner No. 1 was also recorded by this Court. No amended memo of parties was filed by the petitioners.
3. Parties are referred to by this Court in this judgment as per their status/ nomenclature given in the present petition before this Court. Meaning thereby, Sh. Kiran Pal as petitioner No. 1 and M/s Shri Ram Transport Finance Co. Ltd. as respondent No. 1.
BRIEF FACTS OF THE CASE, AND PROCEEDINGS BEFORE THE LEARNED ARBITRATOR
4. The facts of the case, as pleaded by the respondent No. 1 in statement of claim (before the Ld. Arbitrator), in brief, are as under:-
Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.Judgment dated 06.09.2025 Page No. 2 of 24
(a) That the respondent No. 1 is a Non Banking Finance company registered with the Reserve Bank of India. The respondent No. 1 is engaged inter alia in the business of financing, leasing and Hire Purchase of vehicle amongst other business.
(b) The the petitioner No. 1 alongwith the petitioner No. 2 approached the respondent No. 1 for vehicle loan. Petitioner No. 1 was principal borrower and the petitioner No. 2 was to stand as a surety.
Accordingly, the respondent No. 1 agreed to lend a loan to the petitioner No. 1 to the tune of Rs. 5,40,000/- for purchasing a vehicle bearing registration No. UP16T3028, and a loan agreement bearing No. AZDPRO208090004 dated 13.08.2012 was executed in this regard. As per the 'loan agreement', the total agreement value was Rs. 7,44,993/- (including interest) which was payable by the petitioners in monthly installment.
(c) The petitioners failed to adhere to the terms and conditions of the said Agreement. Despite repeated demands, the petitioners failed to make payment in terms of loan agreement, and an amount of Rs. 8,33,120/- was found due and payable by the petitioners to the respondent No. 1. Vide a notice dated 21.11.2014, the petitioners were asked to make the due amount which they failed to clear. The respondent No. 1 as such was constrained, in terms of agreement, to initiate the arbitration proceedings by appointing a sole arbitrator.
(d) The respondent No. 1 thus filed the statement of the claim before the Ld. Sole arbitrator with following prayers;
a. To pay to the claimant an aggregate sum of outstanding amount of Rs. 8,33,120/- alongwith pendente lite and future interest. b. Pending the hearing and final disposal of the arbitration proceeding the respondent be directed to surrender the possession or in breach Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.
Judgment dated 06.09.2025 Page No. 3 of 24thereof to allow the claimant to take possession of the said hypothecated property being the said vehicle of registration No. UP16T3028 and the respondent be further allowed to sell the said vehicle and the sale proceeds therefrom be adjusted against the dues of the claimant under the Award and the claimant are entitled to recover the balance outstanding from the respondents. c. Pass any such other order as this Tribunal may deem fit in the interest of justice.
5. Arbitral record shows that the sole arbitrator was appointed vide a letter dated 08.12.2014 issued by the Respondent No. 1 and dispute was referred to him for adjudication.
6. As per the Award, Ld. sole arbitrator accepted his appointment as a sole arbitrator as had nothing to disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. Ld. Arbitrator vide Order dated 08.12.2014 issued notices to the parties.
7. Statement of claim with original agreement and copies of documents were filed by the respondent No. 1. As per arbitral record, notice sent by speed post to the petitioner No. 1 was received back as petitioner No. 1 was not found available at the given address whereas sent to respondent No. 2 was not received back. Petitioners were accordingly directed to be served through publication in 'Virat Vaibhav', a Hindi daily. Since, the petitioners failed to appear, they were proceeded ex-parte vide Order dated 09.03.2015 and an ex-parte award was passed on 23.03.2015.
GROUNDS OF CHALLENGE
8. The aforesaid award has been challenged by the petitioners herein/ respondents No. 1 & 2 before the Ld. Arbitrator in the present petition inter alia on the following grounds:-
(A) That the petitioners did not receive any notice/ summons from the respondent No. 1/ Ld. Arbitrator despite the fact that they were Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.
Judgment dated 06.09.2025 Page No. 4 of 24residing on the same very address from a very long time. The copy of Award was received by the petitioner No. 2 in the month of March 2018 with the notice of execution petition from the Court of Sh. Chander Bose, the then Ld. ADJ, THC, Delhi. The petitioners immediately filed the present petition on 22.03.2018, well within the limitation period.
(B) That the petitioner No. 1 availed a loan from the respondent No. 1 for purchase of a vehicle. The petitioner No. 1 was to return, in terms of agreement dated 13.08.2012, the total loan amount of Rs. 7,44,993/- in 34 monthly installments to the respondent No. 1. That in the year 2013, the son of the petitioner No. 1 had gone missing (who is still missing) and for that reason, the petitioner No. 1 did not pay monthly installment regularly. When the petitioner No. 1 could not pay the monthly installment regularly, the petitioner No. 1, on the asking of respondent No. 1, handed over the said vehicle to respondent No. 1. Ld. Arbitrator yet passed the award in favour of respondent No. 1 for taking possession of the subject vehicle whereas the said vehicle had already been handed over to respondent No. 1. The respondent No. 1 got passed the award by concealing the true and correct facts. (C) That the Ld. Arbitrator failed to act in a fair and judicious manner in passing the award. The award has been passed in a biased manner. REPLY
9. No reply to that aforesaid petition under Section 34 of the Arbitration & Conciliation Act, 1996 has been filed by the respondent No. 1. ARGUMENTS
10. Final arguments were thereafter heard on behalf of the parties. Both the Ld. Counsel for the parties filed written submissions as well. Original arbitration proceedings were also received by this Court.
Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.
Judgment dated 06.09.2025 Page No. 5 of 2411. Ld. counsel for the petitioner No. 1 during arguments challenged the award passed by the Ld. Arbitrator on the grounds referred above and prayed for its setting aside. Per Contra, Ld. Counsel for the respondent No. 1 submitted that the present petition under Section 34 of the Arbitration & Conciliation Act, 1996 is barred by Limitation. Ld. Counsel for the respondent No. 1 further submitted that Ld. Arbitrator has rightly passed the award after properly appreciating the evidence on record. Ld. Counsel for the respondent further submitted that even otherwise the scope of interference by this Court under Section 34 of the Arbitration & Conciliation Act, 1996 is very limited and the facts of the present case does not warrant any interference by this Court. With these submissions it was prayed that the present petition should be dismissed by this Court.
12. This Court has considered the rival submissions and material on record. DISCUSSION (A) WHETHER THE PRESENT PETITION IS BARRED BY THE LIMITATION
13. Before proceeding to examine the challenge made against the ex-parte award dated 23.03.2015, it is imperative to deal with the issue of delay in filing the petition, raised by the Respondent No. 1.
14. Case of the petitioner No. 1 is that the signed copy of the arbitral award has never been received by him. His case is that it (the award) came to his knowledge when the petitioner No. 2 received the copy of award with the notice of execution petition in the month of March, 2018 and he filed the present petition on 22.03.2018. It is accordingly submitted that the period of limitation prescribed under Section 34(3) of the 1996 Act having not commenced, petition cannot be held to be barred by limitation.
15. Ld. counsel for the respondent No. 1 has submitted that the Ld. Arbitrator had issued notice of the claim petition on the given addresses of the petitioners and since service could not be affected, Ld. Arbitrator got served the petitioners Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.
Judgment dated 06.09.2025 Page No. 6 of 24by publication. Ld. Counsel for respondent No. 1 while relying on Section 3 of the 1996 Act and Section 27 of the General Clauses Act, 1897 contended that the petitioners are served with the notice of the claim petition. Ld. Counsel for the respondent no. 1 has relied on a decision of the Hon'ble Supreme Court in "Madan and Co. Vs. Wazir Jaivir Chand"; (1988) Supp. 3. S.C.R.
16. Service of copy of claim petition and service of signed copy of the arbitral award are two different things. Here, we are concerned with the service of the signed copy of the arbitral award on the petitioners. Ld. Arbitrator pasted the original postal receipts on the original copy of award whereby the copy of signed arbitral award was sent to the petitioners. Perusal of the arbitral record shows that the copy of the arbitral award sent to the petitioner No. 1 was returned back to the Ld. Arbitrator with report 'wrong address'. Likewise, copy of the claim petition sent to the petitioner No. 1 was also returned back to the Ld. Arbitrator with report 'wrong address'.
17. A plain reading of Section 34(3) of the 1996 Act shows that an application for setting aside an award may not be made after three months have elapsed from the date on which the party making the application has received the arbitral award. In Union of India v. Tecco Trichy Engineers & Contractors, (2005) 4 SCC 239, the question before the Hon'ble Supreme Court was as to what would be the effective date on which an award can be said to be received by the party as that would be the date from which limitation would begin under Sub-Section (3) of Section 34 of the 1996 Act. Examining the issue, the Hon'ble Supreme Court held as follows:-
"4. The short question which arises for decision in this appeal is: which is the effective date on which the appellant was delivered with and received the arbitral award as that would be the date wherefrom the limitation within the meaning of sub-section (3) of Section 34 of the Act shall be calculated.
Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.Judgment dated 06.09.2025 Page No. 7 of 24
5. Sub-sections (1) and (3) of Section 34 are relevant for our purpose and are reproduced hereunder:
"34. Application for setting aside arbitral award.--(1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).
* * * (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the Arbitral Tribunal:
Provided that if the court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter."
6. Form and contents of the arbitral award are provided by Section 31 of the Act. The arbitral award drawn up in the manner prescribed by Section 31 of the Act has to be signed and dated. According to sub-section (5), "after the arbitral award is made, a signed copy shall be delivered to each party". The term "party" is defined by clause (h) of Section 2 of the Act as meaning "a party to an arbitration agreement". The definition is to be read as given unless the context otherwise requires. Under sub-section (3) of Section 34 the limitation of 3 months commences from the date on which "the party making that application" had received the arbitral award. We have to see what is the meaning to be assigned to the term "party" and "party making the application" for setting aside the award in the context of the State or a department of the Government, more so a large organisation like the Railways.
xxx xxx xxx Arbt. No. 280/2018. Kiran Pal & Anr. Vs. Shri Ram Transport & Anr. Judgment dated 06.09.2025 Page No. 8 of 24
8. The delivery of an arbitral award under sub-section (5) of Section 31 is not a matter of mere formality. It is a matter of substance. It is only after the stage under Section 31 has passed that the stage of termination of arbitral proceedings within the meaning of Section 32 of the Act arises. The delivery of arbitral award to the party, to be effective, has to be "received" by the party. This delivery by the Arbitral Tribunal and receipt by the party of the award sets in motion several periods of limitation such as an application for correction and interpretation of an award within 30 days under Section 33(1), an application for making an additional award under Section 33(4) and an application for setting aside an award under Section 34(3) and so on. As this delivery of the copy of award has the effect of conferring certain rights on the party as also bringing to an end the right to exercise those rights on expiry of the prescribed period of limitation which would be calculated from that date, the delivery of the copy of award by the Tribunal and the receipt thereof by each party constitutes an important stage in the arbitral proceedings."
18. From a reading of the aforementioned judgment, it is clear that delivery of an arbitral award under Section 31(5) is not an empty formality and as it is only after the stage under Section 31 has passed that the stage of termination of arbitral proceedings under Section 32 arises and receipt by the party of the award then sets in motion several periods of limitation such as for an application for correction under Section 33(1) and application for setting aside an award under Section 34(3) of the 1996 Act etc. Reading of Section 31(5) of the 1996 Act leaves no trace of doubt that a 'signed copy' of the award must be delivered to the 'party' to the arbitration agreement.
19. In the present case, the respondent No. 1 has not filed any reply to the present petition of the petitioners and as such the respondent No. 1 has failed to traverse the stand of the petitioners. No material is placed on record to show that a signed copy of the award was delivered to the petitioners at any time prior to the filing of this petition. The fact that the petitioners were served with the Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.
Judgment dated 06.09.2025 Page No. 9 of 24notice of statement of claim through publication in a newspaper would rather support the hypothesis that the signed copy of the award was not delivered to the petitioners. Therefore, the limitation period prescribed under Section 34(3) has not commenced. In light of this, it is held that the petition is not barred by limitation.
(B) WHETHER THE ARBITRATION PROCEEDINGS HELD WITHOUT A NOTICE BY THE RESPONDENT NO. 1 TO THE PETITIONERS UNDER SECTION 21 OF THE ACT
20. As contended on behalf of the petitioners that they did not receive any notice from the respondent No. 1, next issue which is to be examined is whether the respondent No. 1 issued any notice to the petitioners under Section 21 of the Act or filed claims directly before the Ld. Arbitrator appointed unilaterally by it?
21. Ld. Arbitrator has recorded in the award dated 23.03.2015 as under;
"...AND WHEREAS dispute arose related to default in making the payment of EMIs and for the recovery of outstanding due amount calculated as per the Terms and Conditions of the loan agreement and as per the statement of account which is Ex.CW1/4. Thereafter, the undersigned has been appointed as the sole arbitrator vide letter dated 08.12.2014, by the claimant to adjudicate upon the said dispute between the parties and a reference in this regard was sent to the undersigned by hand through Ms. Varsha Singh, Advocate, counsel for the claimant..."
22. Now, I am reproducing the contents of the letter dated 08.12.2014 sent by respondent No. 1 to the Ld. Local commissioner;
DATED: 8-Dec-2014 To. SH. B.L. GARG (A.D&S.J.Retd.) SOLE ARBITRATOR...
SUB: APPOINTMENT OF SOLE ARBITRATOR Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.
Judgment dated 06.09.2025 Page No. 10 of 24Dear Sir, Our Company M/s Shriram Transport Finance Company Limited had given a vehicle loan to 1. MR. KIRAN PAL S/O MUNSHI RAM, 99, BLOCK-A, DCM COLONY, IBRAHIMPUR EXT., DELHI, DELHI, 110084.under Loan Agreement, details of which are given below:
Agreement No. - AZDPRO208090004 Date of Agmt-13/8/2012 Agmt. Value-744993/-
Vehicle Reg. No- UP16T30281
2. MR.BRIJ MOHAN S/O SAHEDEV 225, BAZAR MOHALLA VILL.-BAKHTAWAR PUR DELHI DELHI INDIA 110036 stood as guarantor for MR.. KIRAN PAL and are jointly and separately liable to ensure and pay timely and punctually all EMI and keep the vehicle fully secured in all respects.
As the aforesaid MR.. KIRAN PAL, defaulted in payment of EMI, as per the terms and conditions of the loan agreement in spite of the oral as well as written notices, a dispute has arisen between the parties. That the loan agreement bears an Arbitration clause according to which in case of dispute, the matter is to be settled through Arbitration.
I, being empowered to do so, do hereby appoint you as Sole Arbitrator to adjudicate the dispute and difference as has arisen between M/s Shriram Transport Finance Company Limited, and MR. KIRAN PAL and pass the award as per law.
You are requested here by to hold the Arbitration proceedings so as to enable us to submit our claim.
Thanking you, Your Sincerely, Authorized Signatory Shriram Transport Finance Company Limited Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.
Judgment dated 06.09.2025 Page No. 11 of 2423. Contents of letter dated 08.12.2014 shows that the respondent No. 1 through this letter had invoked the arbitration clause and referred the dispute to the Ld. sole arbitrator. Admittedly, this notice was not sent to the petitioners.
24. As per claim petition, a loan recall notice dated 21.11.2014 for recovery of an amount of Rs. 8,33,120/- was sent to the respondents. Relevant para of said loan recall notice dated 21.11.2014 is reproduced herein below;
9. That on failure of the addressees to effectively discharge your financial obligation my client terminates your agreement and vide this notice, our client hereby recall/demand total amount of Rs.833120/- as on 11/21/2014 which you the addressees are both liable to pay to our client within 7days of the receipt of this recall notice, and you are also instructed to produce the said vehicle for physical inspection failing which our client shall refer the dispute to Arbitration by way of appointment of a Sole Arbitrator at Delhi as per the terms and conditions of the aforesaid Loan Agreement and also to take possession of the vehicle, entirely at your risk as to all costs and consequences thereof, which please note. Further our client shall also have liberty to take appropriate civil and criminal action against you the addressees.
25. Hon'ble High Court of Delhi in M/s Supreme Infrastructure India Limited V/s Freyssinet Memard India Pvt. Ltd.; O.M.P. (COMM) 395/2024 (date of decision 05.05.2025), held;
17. It is no longer res integra that arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the Respondent, unless otherwise agreed by the parties. In Bharat Chugh v. MC Agrawal HUF, 2021 SCC OnLine Del 5373, this Court held in view of Section 21 which specifically deals with commencement of arbitral proceedings, if no notice sent by one party is received by the other party, arbitral proceedings cannot be stated to have commenced and obviously, something that has not commenced, cannot continue. In Alupro Building Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.
Judgment dated 06.09.2025 Page No. 12 of 24Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd., 2017 SCC OnLine Del 7228, this Court emphasised on the importance and mandate of issuing a notice under Section 21 of the 1996 Act. It was held that a plain reading of Section 21 indicates that except where parties have agreed to the contrary, the date of commencement of arbitration proceedings would be the date on which the recipient of the notice receives from the claimant a request for referring the dispute to arbitration. The object behind the provision is not difficult to discern. Party to the arbitration agreement against whom a claim is made should know what the claims are and it is possible that in response to the notice, the recipient of the notice may accept some claims either wholly or in part and disputes may get narrowed down. This may help in even resolving the disputes and reference to arbitration could be avoided. The Court has enumerated multiple objectives of a notice under Section 21 in the judgment and I quote the relevant paragraphs hereunder:-
"25. A plain reading of the above provision indicates that except where the parties have agreed to the contrary, the date of commencement of arbitration proceedings would be the date on which the recipient of the notice (the Petitioner herein) receives from the claimant a request for referring the dispute to arbitration. The object behind the provision is not difficult to discern. The party to the arbitration agreement against whom a claim is made, should know what the claims are. It is possible that in response to the notice, the recipient of the notice may accept some of the claims either wholly or in part, and the disputes between the parties may thus get narrowed down. That is one aspect of the matter. The other is that such a notice provides an opportunity to the recipient of the notice to point out if some of the claims are time barred, or barred by any law or untenable in fact and/or that there are counter-claims and so on.
Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.Judgment dated 06.09.2025 Page No. 13 of 24
26. Thirdly, and importantly, where the parties have agreed on a procedure for the appointment of an arbitrator, unless there is such a notice invoking the arbitration clause, it will not be possible to know whether the procedure as envisaged in the arbitration clause has been followed. Invariably, arbitration clauses do not contemplate the unilateral appointment of an arbitrator by one of the parties. There has to be a consensus. The notice under Section 21 serves an important purpose of facilitating a consensus on the appointment of an arbitrator.
27. Fourthly, even assuming that the clause permits one of the parties to choose the arbitrator, even then it is necessary for the party making such appointment to let the other party know in advance the name of the person it proposes to appoint. It is quite possible that such person may be 'disqualified' to act an arbitrator for various reasons. On receiving such notice, the recipient of the notice may be able to point out this defect and the claimant may be persuaded to appoint a qualified person. This will avoid needless wastage of time in arbitration proceedings being conducted by a person not qualified to do so. The second, third and fourth reasons outlined above are consistent with the requirements of natural justice which, in any event, govern arbitral proceedings.
28. Lastly, for the purposes of Section 11(6) of the Act, without the notice under Section 21 of the Act, a party seeking reference of disputes to arbitration will be unable to demonstrate that there was a failure by one party to adhere to the procedure and accede to the request for the appointment of an arbitrator. The trigger for the Court's jurisdiction under Section 11 of the Act is such failure by one party to respond.
Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.Judgment dated 06.09.2025 Page No. 14 of 24
29. Of course, as noticed earlier, parties may agree to waive the requirement of such notice under Section 21. However, in the absence of such express waiver, the provision must be given full effect to. The legislature should not be presumed to have inserted a provision that serves a limited purpose of only determining, for the purposes of limitation, when arbitration proceedings commenced. For a moment, even assuming that the provision serves only that purpose viz. fixing the date of commencement of arbitration proceedings for the purpose of Section 43(1) of the Act, how is such date of commencement to be fixed if the notice under Section 21 is not issued? The provision talks of the 'Respondent' receiving a notice containing a request for the dispute "to be referred to arbitration". Those words have been carefully chosen. They indicate an event that is yet to happen viz. the reference of the disputes to arbitration. By overlooking this important step, and straightaway filing claims before an arbitrator appointed by it, a party would be violating the requirement of Section 21, thus frustrating an important element of the parties consenting to the appointment of an arbitrator.
30. Considering that the running theme of the Act is the consent or agreement between the parties at every stage, Section 21 performs an important function of forging such consensus on several aspects viz. the scope of the disputes, the determination of which disputes remain unresolved; of which disputes are time- barred; of identification of the claims and counter-claims and most importantly, on the choice of arbitrator. Thus, the inescapable conclusion on a proper interpretation of Section 21 of the Act is that in the absence of an agreement to the contrary, the notice under Section 21 of the Act by the claimant invoking the arbitration clause, preceding the reference of disputes to Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.Judgment dated 06.09.2025 Page No. 15 of 24
arbitration, is mandatory. In other words, without such notice, the arbitration proceedings that are commenced would be unsustainable in law."
18. It would be relevant to refer to another judgment of the Division Bench of this Court in Shriram Transport Finance Company Limited v. Narender Singh, 2022 SCC OnLine Del 3412, in this context, wherein the Court was dealing with an appeal under Section 37(1)(b) of the 1996 Act and agreeing with the principles laid down in Alupro Building Systems Pvt. Ltd. (supra), it was held that if no notice is received under Section 21 by the recipient, there is no commencement of arbitral proceedings and relevant paragraphs are as follows:-
"30. A plain reading of this section shows that arbitral proceedings commence on the date on which the request for the dispute to be referred to arbitration is received by the respondent concerned. Therefore, the commencement of arbitral proceedings is incumbent on the "receipt of such request or notice". If no notice is received by the respondent concerned, there is no commencement of arbitral proceedings at all. Emphasis here is also made to the fact that the notice should not only be "sent" but also that the notice should be "received" for such request for commencement.
31. Section 21 will have to be read with Section 34 of the Act. Section 34(2)(iii) provides that an award may be set aside, in the event, where the party appointing the arbitrator has not given proper notice of the appointment of an arbitrator or the arbitral proceedings.
32. The judgment in Alupro Building case [Alupro Building Systems (P) Ltd. v. Ozone Overseas (P) Ltd.2017 SCC OnLine Del 7228] has aptly explained the relevance of a notice under Section 21 of the Act. It was held that the Act does not Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.Judgment dated 06.09.2025 Page No. 16 of 24
contemplate unilateral appointment of an arbitrator by one of the parties, there has to be a consensus for such appointment and as such, the notice under Section 21 of the Act serves an important purpose of facilitating such a consensus on the appointment of an arbitrator. It was further held in Alupro Building case [Alupro Building Systems (P) Ltd. v. Ozone Overseas (P) Ltd.2017 SCC OnLine Del 7228] that the parties may opt to waive the requirement of notice under Section 21 of the Act. However, in the absence of such a waiver, this provision must be given full effect to.
33. We are in agreement with the principles as expressed in the decision of Alupro Building case [Alupro Building Systems (P) Ltd. v. Ozone Overseas (P) Ltd.2017 SCC OnLine Del 7228] , which are enunciated below:
(i) The party to the arbitration agreement against whom a claim is made should know what the claims are. The notice under Section 21 of the Act provides an opportunity to such party to point out if some of the claims are time-barred or barred by law or untenable in fact or if there are counterclaims.
(ii) Where the parties have agreed on a procedure for appointment, whether or not such procedure has been followed, will not be known to the other party unless such a notice is received.
(iii) It is necessary for the party making an appointment to let the other party know in advance the name of the person who it proposes to appoint as an arbitrator. This will ensure that the suitability of the person is known to the opposite party including whether or not the person is qualified or disqualified to act as an arbitrator for the various reasons set forth in the Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.
Judgment dated 06.09.2025 Page No. 17 of 24Act. Thus, the notice facilitates the parties in arriving at a consensus for appointing an arbitrator.
(iv) Unless such notice of commencement of arbitral proceedings is issued, a party seeking reference of disputes to arbitration upon failure of the other party to adhere to such request will be unable to proceed under Section 11(6) of the Act. Further, the party sending the notice of commencement may be able to proceed under the provisions of sub-section 5 of Section 11 of the Act for the appointment of an arbitrator if such notice does not evoke any response.
34. The appellant Company has relied on the letters dated 20-9- 2018 and 27-9-2018 to show compliance with Section 21 of the Act. This reliance by the appellant Company is completely misconceived. The letter of 20-9- 2018 was a unilateral communication sent by the appellant Company to the respondent. As discussed above, the letter did not set forth any details about who was being appointed as an arbitrator or the procedure being followed. The appellant Company merely stated that they have a right to initiate arbitral proceedings and so they will initiate arbitral proceedings. There was no person named as an arbitrator therein nor was any consensus sought in such appointment. There is no evidence of this letter ever being received by the respondent on record either. As such, the letter dated 20-9-2018 would not qualify as notice under Section 21 of the Act.
35. The letter dated 27-9-2018, was never sent to the respondent so there was no question of this letter being received by the respondent. It was only sent to the arbitrator. This letter could not qualify to be the notice of commencement of proceedings either.
36. The record also shows that the parties had no agreement for a waiver of the requisite notice under Section 21 of the Act.
Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.
Judgment dated 06.09.2025 Page No. 18 of 2437. Hence, we hold that the arbitral appointment made by the appellant Company was not made in accordance with the provisions of Section 21 of the Act."
19. Another important objective of the notice under Section 21 that needs to be underscored is in the context of unilateral appointment of the Arbitrator. This question also came up for consideration before this Court in Alupro Building Systems Pvt. Ltd. (supra), while dealing with objections under Section 34 of the 1996 Act. One of the issues arising before the Court was whether the non-receipt of notice under Section 21 of the 1996 Act by the Petitioner therein was itself sufficient to invalidate the impugned award and the Court also proceeded to examine a connected issue as to whether the Respondent could have, without invoking the arbitration clause and issuing notice to the Petitioner under Section 21 of the 1996 Act and assuring its delivery, filed claims directly before the Arbitrator appointed unilaterally by the Respondent. The second issue touches upon the next ground raised by the Petitioner herein relating to unilateral appointment of the Arbitrator, to which I shall advert in the later part of the judgment.
20. The Court held that in the absence of an express waiver as agreed between the parties, provisions of Section 21 must be given full effect to as the Legislature should not be presumed to have inserted a provision that serves a limited purpose of only determining, for the purpose of limitation, when arbitration proceedings commenced. Court elaborated that the provision talks of 'Respondent' receiving a notice containing a request for the dispute to be referred to arbitration and these words have been carefully chosen and therefore by overlooking this important step and straightaway filing claims before an Arbitrator appointed by the party, the party would violate provisions of Section 21 and frustrate an important element of the parties consenting to the appointment of an Arbitrator. From a conjoint reading of Section 21 and the Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.
Judgment dated 06.09.2025 Page No. 19 of 24aforementioned judgments, the inevitable conclusion, to my mind, is that in the absence of an agreement to the contrary, notice under Section 21, invoking the arbitration clause, preceding the reference of disputes, is mandatory and as held in Alupro Building Systems Pvt. Ltd. (supra), without such notice, arbitration proceedings that are commenced would be unsustainable in law."
26. Coming to the case in hand, a loan recall notice dated 21.11.2014 sent by respondent No. 1 to the petitioners could not be considered as compliance with Section 21 of the 1996 Act as the letter did not set forth any details about who was being appointed as an arbitrator or the procedure being followed. The respondent No. 1 vide letter dated 21.11.2014 merely demanded the amount from the petitioners and notified them that in case they failed to repay, the respondent No. 1 will refer the dispute to Arbitration by way of appointment of a sole arbitrator as per terms and conditions of the agreement. Respondent No. 1 further notified the petitioners that they may take appropriate civil and criminal action as well against the petitioners. There was no person named as an arbitrator therein nor was any consensus sought in such appointment.
27. So far as the letter dated 08.12.2014 is concerned, as noted herein above the same is sent only to the Ld. Arbitrator. The letter is not addressed to petitioners. It is not even the case of the respondent No. 1 that they sent the copy of the same to the petitioners.
28. For the aforesaid reason, this Court is of the view that the present arbitration proceedings, being held without a notice by the respondent No. 1 under Section 21 of the Act invoking the arbitration clause being received by the petitioners, are invalid. The only exception to this would have been an agreement to the contrary between the parties. There is no such agreement by which the petitioners could be said to have waived the requirement of notice Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.
Judgment dated 06.09.2025 Page No. 20 of 24under Section 21 of the Act. The arbitral proceedings can not be sustained in law and consequently, the ex-parte award dated 23.03.2015 deserves to be set aside.
(C) UNILATERAL APPOINTMENT OF THE LEARNED
ARBITRATOR
29. It needs to be emphasised that the present case relates to a period prior to the amendment brought by the Arbitration and Conciliation (Amendment) Act, 2015 (w.e.f. 23.10.2015). However, this would make no difference as even prior to the amendment of 1996 Act, the Hon'ble Supreme Court had held that the very essence of the arbitral proceedings is consensus ad idem and therefore, there was no question of arbitration being conducted by an Arbitrator appointed by one party without the consent of the other.
30. Hon'ble High Court of Delhi in Vineet Dujodwala and Others V/s Phoneix ARC Pvt. Ltd. and Another, 2024 SCC OnLine Del 5940 ( wherein award dated 22 September 2015 was under challenge), held;
"Re. unilateral appointment of the learned Arbitrator
20. Perhaps the most damaging defect in the entire process is the fact that the appointment of the learned arbitrator was unilateral. A unilateral appointment, in an arbitral proceeding, is completely impermissible in law.
21. This is the position that has existed even prior to the amendment of the 1996 Act. The Supreme Court has, even in its decisions prior to the said amendment, clearly held that the very essence of arbitral proceedings is consensus ad idem and that, therefore, there can be no question of an arbitration by an arbitrator appointed by one of the parties without the consent of the other. One may refer, in this context, to the following passage from Dharma Prathishthanam v. Madhok Construction (P) Ltd.:
"14. In Thawardas Pherumal v. Union of India a question arose in the context that no specific question of law was referred to, either by agreement or by compulsion, for decision of the arbitrator and yet the same was decided howsoever assuming it to be within his Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.Judgment dated 06.09.2025 Page No. 21 of 24
jurisdiction and essentially for him to decide the same incidentally. It was held that : (SCR p. 58) "A reference requires the assent of both sides. If one side is not prepared to submit a given matter to arbitration when there is an agreement between them that it should be referred, then recourse must be had to the court under Section 20 of the Act and the recalcitrant party can then be compelled to submit the matter under sub-section (4). In the absence of either, agreement by both sides about the terms of reference, or an order of the court under Section 20(4) compelling a reference, the arbitrator is not vested with the necessary exclusive jurisdiction."
15. A Constitution Bench held in Waverly Jute Mills Co. Ltd. v. Raymon and Co. (India) (P) Ltd. that:
"[A]n agreement for arbitration is the very foundation on which the jurisdiction of the arbitrators to act rests, and where that is not in existence, at the time when they enter on their duties, the proceedings must be held to be wholly without jurisdiction. And this defect is not cured by the appearance of the parties in those proceedings, even if that is without protest, because it is well settled that consent cannot confer jurisdiction."
16. Again a three-Judge Bench held in Union of India v. A.L. Rallia Ram that it is from the terms of the arbitration agreement that the arbitrator derives his authority to arbitrate and in absence thereof the proceedings of the arbitrator would be unauthorised."
(Italics in original; underscoring supplied)
22. Admittedly, the appointment of the arbitrator in the present case was unilateral. That single factor, even without reference to any other infirmity, is sufficient to vitiate the award."
Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.
Judgment dated 06.09.2025 Page No. 22 of 24(D) SUPPRESSION OF MATERIAL FACT BY THE RESPONDENT NO. 1
31. Even on merit, in the considered view of this Court, the petitioner No. 1 has been able to create a doubt in the case of the respondent No. 1. It was submitted on behalf of the petitioner No. 1 that the Ld. arbitrator passed the award in favour of respondent No. 1 for taking possession of the subject vehicle whereas the said vehicle had already been handed over to respondent No. 1.
32. As per order dated 20.01.2015 passed by Ld. Arbitrator, statement of claim was filed on that date before the tribunal. Prayer clause of the claim petition has been reproduced herein above. Respondent No. 1 has prayed to the effect that [P]ending the hearing and final disposal of the arbitration proceeding the respondent be directed to surrender the possession or in breach thereof to allow the claimant to take possession of the said hypothecated property being the said vehicle of registration No. UP16T3028 and the respondent be further allowed to sell the said vehicle and the sale proceeds therefrom be adjusted against the dues of the claimant under the Award and the claimant are entitled to recover the balance outstanding from the respondents.
33. Petitioner No. 1 in support of his case has filed photocopy of two documents showing that the subject vehicle was handed over to the respondent No. 1 on 24.12.2014. Respondent No. 1 has not disputed this fact. Clearly, the respondent No. 1 suppressed this fact from the Ld. Arbitrator which led to the passing of an order in favor of the respondent No. 1 to take possession of the subject vehicle vide ex-parte award dated 23.03.2015. Any fact which goes to the root of the subject matter is a material fact and suppression of the same would amount to suppression of material fact.
34. Further, in this regard it is relevant to note that during final arguments, a copy of the statement of account of the petitioner No. 1 was filed by the Ld. Counsel for respondent No. 1 as per which an amount of Rs. 1,20,000/- was Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.
Judgment dated 06.09.2025 Page No. 23 of 24received by the respondent No. 1 on 15.03.2017 on account of auction of the subject vehicle. And, it is not the case of the respondent No. 1 that the respondent No. 1 re-possessed the vehicle in execution of ex-parte award dated 23.03.2015.
(E) CONCLUSION
35. For all the aforesaid reasons, the impugned arbitral award dated 23.03.2015 passed by the learned Arbitrator can not be sustained in law and is accordingly set aside. Parties to bear their own costs.
36. File be consigned to record room after due compliance.
(Announced in the open court on this 6th day of September, 2025 This Judgment consists of Twenty Four of signed pages).
(Abhishek Srivastava) District Judge-05, Central, THC, Delhi Digitally signed by ABHISHEK ABHISHEK SRIVASTAVA SRIVASTAVA Date:
2025.09.06 17:04:35 +0530 Arbt. No. 280/2018.
Kiran Pal & Anr. Vs. Shri Ram Transport & Anr.Judgment dated 06.09.2025 Page No. 24 of 24