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[Cites 21, Cited by 0]

Delhi District Court

M/S Moneywise Financial Services Pvt. ... vs . on 5 October, 2020

 IN THE COURT OF SHRI MAN MOHAN SHARMA, DISTRICT
  JUDGE (COMMERCIAL COURT)­06, CENTRAL DISTRICT
             TIS HAZARI COURTS, DELHI

IN THE MATTER OF :­
                                                         OMP No. 65/2019

M/s Moneywise Financial Services Pvt. Ltd.
Having its registered office at:­
11/6B, Shanti Chamber, Second Floor,
Pusa Road, New Delhi­110005.

                                   Vs.

1.     Mr. Supreet Singh Bakshi
       Sole Proprietor
       M/s Swift Enterprises
       Having its office at
       A­3/232, Janakpuri West
       New Delhi­110058.

2.     Branch Manager
       HDFC Bank Ltd.
       A­3/11, Janakpuri, New Delhi­110058.

Date of Institution                   :               21.09.2019
Date of Reserve of Judgement          :               29.09.2020
Date of Judgement                     :               05.10.2020

JUDGMENT

1. This is a petition under section 9 of the Arbitration and Conciliation Act, 1996 for interim measures.

2. Arguments have been addressed by Shri Shreyas Jain, Ld. Counsel for the petitioner and by Shri Puneet Bajaj, Ld. Counsel for the OMP No. 65/2019 Page No. 1 of 14 respondent no. 1. Both the parties have also filed their written submissions on the official email of the Court.

3. In this matter an application under section 151 of the Code of Civil Procedure has been filed by the petitioner seeking permission to place on record the Loan Agreement. The application has been opposed by the respondent no. 1 stating the copy of the agreement to be forged and fabricated stating that in the original agreement only one party, viz. the respondent no. 1 had signed, and the signatures of the petitioner has been appended later on, when it came to know of this objection of the respondent no. 1.

4. The application is allowed subject to cost of Rs. 5000/­ (Rupees five thousand only) to be deposited by the petitioner with Delhi Mediation Centre, Tis Hazari Courts, New Delhi, within 10 days of this order, albeit the right of the respondent no. 1 to address on the aspect stated above stands reserved in the main petition under section 9 of the Arbitration and Conciliation Act, 1996.

5. The application under section 151 of the Code of Civil Procedure stands disposed of accordingly.

6. The case of the petitioner is that it had advanced a sum of Rs. 25,00,000/­ (Rupees Twenty Five Lakhs) to the respondent no. 1 on 22.09.2017 against Promissory Note. The interest is @ 19% per annum. After paying 13 EMIs the respondent no. 1 defaulted in the payment of loan amount. The agreement contains arbitration clause vide clause no. 10.1. Hence this petition for interim measures.

OMP No. 65/2019 Page No. 2 of 14

7. In reply, the respondent no. 1 took various preliminary objections. On merits, he denied taking any loan, executing the loan agreement and denied the transaction in entirety.

8. The respondent no. 1 has challenged the petition on the following grounds:­

(i). Loan agreement/arbitration agreement is unsigned by the petitioner. It is not a valid contract in the eyes of law for this reason.

(ii). It is in violation of the section 7 of the Arbitration and Conciliation Act, 1996 which envisages an arbitration agreement to be in writing.

(iii). The Courts at Delhi lack territorial jurisdiction as the agreement mentions in clause 10.1 that the seat of jurisdiction shall be at New Delhi.

(iv). Subsequently filed agreement has been forged and fabricated by the petitioner.

(v). Arbitration clause is violative of section 12(5) of the Arbitration and Conciliation Act, 1996 as the petitioner has unilateral power to appoint arbitrator.

(vi). Interim Reliefs as prayed by the petitioner are not tenable under the law.

OMP No. 65/2019 Page No. 3 of 14

9. Ld. Counsel for the petitioner has submitted that the Supreme Court of India in a catena of case law has held that the signing of an arbitration agreement is not necessary. It has to satisfy only one condition that it has to be in writing. He has relied upon various judgment of the Supreme Court in support of his submissions on this aspect.

10. The case of Caraval Shipping Services Pvt. Ltd. vs. Premier Sea Foods Exim Pvt. Ltd. 2019 (11) SCC 461 has been relied upon to cite that "signing of an agreement is not necessary when it is in writing...in addition, we may indicate that the law in this behalf, in Jugal Kishore Rameshwardas vs. Mrs. Goolbai Hormusji, AIR 1955 SC 812, is that an arbitration agreement needs to be in writing though it need not be signed. The fact that the arbitration agreement shall be in writing is continued in the 1996 Act in Section 7(3) thereof. Section 7(4) only further adds that an arbitration agreement would be found in the circumstances mentioned in the three sub­clauses that make up Section 7(4). This does not mean that in all cases an arbitration agreement needs to be signed. The only pre­ requisite is that it be in writing, as has been pointed out in Section 7(3)."

11. The judgment of Govind Rubber Limited vs. Louids Dryfus Commodities Asia Ltd. (2015) 13 SCC 477 has been cited on the point that if it can be prima facie shown that the parties were ad­ OMP No. 65/2019 Page No. 4 of 14 idem, then mere fact of one party not signing the agreement cannot absolve the parties from agreement.

12. Reliance has been placed on the judgment of Trimax International FCZ Ltd. Dubai vs. Vedanta Aluminium Ltd. (2010) 3 SCC 1 to cite that " ...in the absence of signed agreement between the parties, it would be possible to infer from various documents duly approved and signed by the parties in the form of exchange of e­ mails, letter, telex, telegrams and other means of tele­ communication."

13.He has stated that the instalments have been paid by the defendant from his bank account with respondent no. 2 and he has falsely resiled from the written agreement taking advantage of the fact that the copy which was filed earlier was taken from a scanned document, with other department of the petitioner, prior to the affixing of the signatures of the representative of the petitioner. The copy of the duly signed agreement has been placed on record. In reply to the petitioner's application under section 151 CPC in para 2. He has made payment of instalments from his bank account and now he cannot deny the transaction or agreement.

14.The Ld. Counsel for the respondent no. 1 has vehemently argued that the petitioner has forged the agreement once the defect has come to its knowledge when the respondent no. 1 has taken a specific objection to the agreement being signed by one party only.

OMP No. 65/2019 Page No. 5 of 14

No reliance can be placed upon a forged and fabricated document. Such a document is not capable of creating any binding contract.

15. He has submitted that an unsigned agreement is inconsequential and not capable of binding the parties. There is a catena of case law which has consistently held that an arbitration agreement has not only to be in writing but that it has to be signed by all the parties concerned to make a concluded contract capable of binding the parties.

16. He has relied upon NSK India Sales Company Private Ltd. vs Proactive Universal Trading 2015 4 LW 417 (Original Petition No.823 of 2014 Pronounced on: 12.08.2015 by Madras High Court) to cite that "an arbitration agreement has to be in writing. This is mandatory. One of the methods by which an arbitration agreement can be construed to be in writing is set out in Clause(b) of sub­section (4) of Section 7 of the said Act. It is specifically provided that the same can be by exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement. There are thus specific modes provided by which the agreement can be construed to be in writing. There is no reference to a method whereby such an arbitration clause can be incorporated by implication from a collective set of documents of trade where one such contained the arbitration clause. There is in fact thus no agreement whatsoever inter se the parties on the issue of the mode of resolution of the dispute through arbitration OMP No. 65/2019 Page No. 6 of 14 and there cannot be an arbitration clause by implication in any other document. In fact, the very fact that the respondent has not signed this document would show the unwillingness of the respondent to accept the arbitration as a mode of resolution of dispute, to which the petitioner had never protested."

17. Ld. Counsel for the respondent no. 1 also placed reliance upon U.P. Rajkiya Nirman Nigam Ltd vs Indure Pvt. Ltd. & Ors AIR 1996 SC1373, 1996 SCC (2) 667 to cite that draft agreement signed will not evoke commencement as bidder on the material terms of the contract; mere proposal and counter proposal will not render the contract binding between the parties; it should emerge as an agreement signed by both the parties and then only the arbitration clause can be invoked."

18. The case of Virgoz Oil and Fats Pte. Ltd vs National Agricultural Co­ operative Marketing Federation of India Ltd. 2016 SCC OnLine Delhi 6203 has been relied upon to cite that there was no arbitration agreement between the parties and exchange of letters, telegrams, and emails would not prove that such agreement was entered into between the parties. There was no correspondence between the parties, which should establish the meeting of mind and an agreement to refer any dispute to arbitration.

19. The case of Anantara Solutions Private Ltd vs Vinculum Solutions Private Ltd decided on 9th March, 2018 by the Madras High Court has also been relied upon in which the Court referred to the case of Saagrr OMP No. 65/2019 Page No. 7 of 14 Infra Limited, in which it has been held that "...a reading of section 7 makes it clear that arbitration agreement must be in writing signed by both parties and if the reference in a contract to a document containing arbitration clause constitutes an arbitration agreement, that contract must be in writing signed by both parties. The invoices by which supply was made pursuant to the purchase order is signed by the respondent, it is not signed by the revision petitioner. The reference to purchase order is signed by the revision petitioner and not by the respondent. Therefore, though in the purchase order, there is an arbitration clause, it will not become the arbitration agreement as it was not signed by both parties."

20. Judgment of Delhi High Court in the matter of Benara Bearing & Pistons Ltd vs Mahle Engine Components India Pvt Ltd. decided on 5 April, 2018 in ARB. A. (COMM.) 11/2017 has also been relied upon to cite that "...signatures on an agreement may not be material in a case where the contract between the parties can be ascertained; however, where the parties reduce their understanding to writing and it is understood that parties are to sign the agreement, it is not always safe to proceed on the basis that their signatures are not necessary. In most cases, affixing signatures on an agreement are meant to signify the party's commitment to the written agreement and its refusal to sign renders the agreement inchoate. Affixing signatures on an agreement cannot be readily inferred as an empty formality. The question as to whether the parties have mutually committed to each other has also to be viewed in the context of the nature of the contract..."

OMP No. 65/2019 Page No. 8 of 14

21. He has also cited the judgment of Calcutta High Court in M/S. Inspiration Cloths & U vs Yash Traders delivered on 22 December, 2014 in A.P. No. 408 of 2008 to cite that "according to Section 7 an arbitration agreement has to be in writing. It is said to be in writing in three circumstances stipulated in Section 7 (4) of the Arbitration and Conciliation Act, 1996. The first is if the document is signed by the parties. Secondly, if there is an exchange of documents to show a record of the agreement. Thirdly, when the agreement is pleaded in the statement of claim and not denied by the respondent. Admittedly, the bills or invoices were not signed or executed by the petitioner. Neither did they confirm the existence of the arbitration agreement in their statement of defence."

22.I have considered the submissions and the case law cited.

23.From the various judgments cited by the parties it can be culled out that the question whether there is an arbitration agreement between the parties is essentially a question of fact. It can be culled out from the circumstances and documents.

24. It is also the settled legal position that an arbitration agreement should be in writing and it is immaterial whether it has been signed by the parties or not. What has to be seen is whether there is consensus­ad­ idem in the parties to submit to the arbitration. This is essentially a question of fact.

OMP No. 65/2019 Page No. 9 of 14

25.The respondent no. 1 has denied the loan transaction or the execution of the agreement. Of course, the first copy of the agreement, as filed by the petitioner, has been signed by only one party and has not been signed by or on behalf of the petitioner. The second copy filed by the petitioner, which has been allowed to be taken on record, has been signed on behalf of the petitioner as well.

26.The second copy is stated to be forged and fabricated by the petitioner, as per the stand of the respondent no. 1.

27.A forgery involves creation of false document. It is thus to be seen if the second copy of the agreement filed by the petitioner is a copy of a false document.

28. The respondent, in reply to the petitioner's application under section 151 of the Code of Civil Procedure, has tacitly admitted the agreement to be signed by him. Even otherwise, his signatures on vakalatnama and various pleadings and affidavits are the same as on the loan agreement. There is no denial that the bank account with the respondent no. 2 is not maintained by the respondent no.1 or that no payment were ever made by the respondent no. 1 to the petitioner in the loan transaction. The reply to the application under section 9 of the Arbitration and Conciliation Act, 1996 is a work of ingenuity to deny the transaction in omnibus manner but missing the details, especially the denial of the various documents like the Promissory Note. There is no explanation how the copy of the passport, PAN or Aadhar of the respondent no. 1 have reached into the hands of the petitioner. There OMP No. 65/2019 Page No. 10 of 14 is no denial of Company Profile of the respondent no. 1 or the verification of his signatures by the banker/respondent no. 2. The collective assessment of the material on record show the existence of transaction as propounded by the petitioner.

29.Once the petitioner has released the loan to the respondent no. 1 on his execution of the loan documents including the agreement containing the arbitration clause, it has deemed to have agreed to the terms of the contract including the arbitration clause. The non­signing by the petitioner in not material. It would have been a different matter altogether, had the respondent no. 1 not signed the agreement.

30. In the worst­case­scenario, considering that the agreement in question has been signed by the petitioner subsequent to the taking of objection by the respondent no. 1, does not make it a false or forged document. By appending its signatures on the agreement in question, the petitioner is not trying to create some new liabilities or obligations against the respondent no. 1. As such, just by the subsequent appending of signatures by the petitioner, without there being a creation of any new liability against the respondent no. 1, there is no falsification of document. While signing the said loan agreement, the petitioner was ad­idem with its covenants. So also was the petitioner, who subsequently reflected the same by releasing the loan to the respondent no. 1. Mere non­signing by the petitioner thus not make it non­est. OMP No. 65/2019 Page No. 11 of 14

31.The agreement thus satisfies the requirement of section 7 of the Arbitration and Conciliation Act, 1996 being in writing and parties being in consensus­ad­idem as reflected by the material on record. As such the petition is maintainable in law.

32. The question whether the arbitration­clause is violative of section 12(5) of the Arbitration and Conciliation Act, 1996, as the petitioner has unilateral power to appoint arbitrator, is not within the domain of this Court, in view of the petition being under section 9 of the Act, thus having a limited scope. The respondent may explore suitable remedy in accordance with law in this regard.

33.The respondent no. 1 has relied upon the following case law in support of his submissions regarding the considerations for grant of interim relief:­

(i). Uppal Engineering Company (P) Ltd. Vs. Cimmco Birla Ltd.

(2005) (2) Arb. L.R. 404 (Delhi).

(ii). House Productions Private Ltd. Vs. Meediya Plus (2005) 2 MLJ

256.

(iii). ICICI Bank Ltd. Vs. Prakash Kaur and other (2007)2 SCC 711.

(iv). Civil Appeal No. 3972 of 2019, Bharat Broadband Network Ltd. Vs. United Telecoms Ltd. (DOD: 16.04.2019).

34.I have also considered the law cited by the respondent no. 1 regarding the interim reliefs. I am conscious of the same and any relief has to be considered in accordance with the settled law.

OMP No. 65/2019 Page No. 12 of 14

35.The contention regarding point no. 8 (iii) as above has not been pressed by ld. Counsel for respondent no. 1.

36.The petition under section 9 of the Arbitration and Conciliation Act, 1996 is therefore allowed and the respondent no. 2 i.e. HDFC Bank Ltd., A­3/11, Janakpuri, New Delhi­110058, is directed to attach a sum not exceeding Rs. 19,85,284.56 (Rs. Nineteen Lakh Eighty Five Thousand Two Hundred Eighty Four and Fifty Six Paisa only) from the following bank account numbers and keep that sum in the form of an FDR with it till further directions:­

a). Current account no. 15582560000614

b). Savings account no. 15581000008756

37.Arbitration proceedings, if not already commenced, be commenced within 90 days of this order.

38.As the parties have been permitted to file electronic copies of the written submissions, pleadings etc. on the official email ID of the Court, physical copies of the same be filed within 10 days from the date of this order, else the parties would be liable for consequences in accordance with law.

39.The petition stands disposed of in these terms.

40. However, before parting and in the wider interest of maintaining the purity of administration of justice, prima facie it appears that the respondent no. 1 has made a false claim in these proceedings and has attracted liability for prosecution under section 209 of the Indian Penal Code.

OMP No. 65/2019 Page No. 13 of 14

41.It would thus be appropriate, in the first instance, to issue a show cause notice to the respondent no. 1 to show cause as to why a complaint be not made under section 340 of the Code of Criminal Procedure for having made a false claim under section 209 of the Indian Penal Code and a reasonable opportunity be afforded to him to reply to the same.

42.Let a separate miscellaneous case file be created and the respondent no. 1 shall file his reply to the show cause on 23.10.2020.

43.Copy of this order be given be given to both the parties on payment of usual charges by way of Court Fee Stamps.

Digitally

44.File be consigned to Record Room. signed by MANMOHAN MANMOHAN SHARMA SHARMA Date: 

Announced                                            2020.10.08
                                                     16:18:00
on 05th October, 2020                                +0530


                                       (Man Mohan Sharma)
                               District Judge (Commercial Court)­06
                            Central District, Tis Hazari Courts,Delhi




OMP No. 65/2019                                            Page No. 14 of 14