Madras High Court
Mr.M.Subbiah vs M/S.Daimler Financial Services India ... on 10 December, 2020
Author: M.Sundar
Bench: M.Sundar
O.P.No.527 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 10.12.2020
Coram
THE HONOURABLE MR. JUSTICE M.SUNDAR
O.P.No.527 of 2020
Mr.M.Subbiah
No.40/23, Raja Badhar Street
Flat No.2, T.Nagar, Chennai-600 017. ... Petitioner
vs.
1. M/s.Daimler Financial Services India Pvt. Ltd.,
Rep. By its authorised representative
Having its registered office at Unit 202, Camus 3B
RMZ Millennia Business Park
No.13, Dr.MGR Road, Perungudi
Chennai-600 096.
2. Mr.S.Ganesh
No.28/13-6, Crescent Park Street
T.Nagar, Chennai-600 017. ... Respondents
Original Petition filed under Section 34(3) of the Arbitration and
Conciliation Act, 1996, to allow this petition and set aside the award
dated 18.05.2019 passed by the sole Arbitrator in ACP.(Daimler) No.20
of 2016.
For petitioner : Mr.V.Subramanian
ORDER
Captioned 'original petition' ['OP' for the sake of brevity, convenience and clarity] is an application under Section 34 of 'The http://www.judis.nic.in Page No.1/13 O.P.No.527 of 2020 Arbitration and Conciliation Act, 1996 (Act No.26 of 1996)', which shall hereinafter be referred to as 'A and C Act' for the sake of brevity, convenience and clarity has been presented in this Court more than one year ago in September 2019, on 24.09.2019 to be precise with a delay of 29 days in filing which was condoned by Hon'ble Predecessor Judge vide order dated 03.02.2020 made in A.No.9295 of 2019. Thereafter, the matter was first listed in the motion list before me on 07.12.2020 and it was adjourned to 08.12.2020, on 08.12.2020, at the request of learned counsel representing the counsel on record for petitioner it was adjourned to 10.12.2020 (today).
2. Before embarking upon the exercise of examining the submissions made in captioned OP, this Court deems it appropriate to remind itself about Sub-Section (6) of Section 34 of A and C Act, which reads as follows:
'34. Application for setting aside arbitral award.-
(1) .............
(2) .............
(3) .............
(4) .............
(5) .............
http://www.judis.nic.in Page No.2/13 O.P.No.527 of 2020 (6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon other party.'
3. Adverting to the one year time line under Sub-Section (6) of Section 34 of A and C Act, Hon'ble Supreme Court in Bhumi Vikas case law being State of Bihar Vs. Bihar Rajya Bhumi Vikas Bank Samiti reported in (2018) 9 SCC 472, in paragraph No.26 held as follows:
'26. We are of the opinion that the view propounded by the High Courts of Bombay and Calcutta represents the correct state of the law. However, we may add that it shall be the endeavour of every court in which a Section 34 application is filed, to stick to the time-limit of one year from the date of service of notice to the opposite party by the applicant, or by the Court, as the case may be. In case the Court issues notice after the period mentioned in Section 34(3) has elapsed, every court shall endeavour to dispose of the Section 34 application within a period of one year from the date of filing of the said application, similar to what has been provided in Section 14 of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015. This will give effect to the object sought to be achieved by adding Section 13(6) by the 2015 Amendment Act.' http://www.judis.nic.in Page No.3/13 O.P.No.527 of 2020
4. Though Bhumi Vikas case law is an authority for the broad proposition that pre application notice under Sub-Section (5) is directory and not mandatory, the aforesaid observation made by Hon'ble Supreme Court in paragraph No.26 is of significance. Now that pre application notice under Sub-Section (5) of Section 34 of A and C Act has been held to be directory and not mandatory, this Court has repeatedly held that one year time line ingrained in Sub-Section (6) of Section 34 has to be computed from the date of presentation of Section 34 application in cases where Section 34 applications are presented without pre application notice under Sub-Section (5) of Section 34 of A and C Act. Applying this principle in the light of aforementioned observation made by Hon'ble Supreme Court in Bhumi Vikas case law, captioned OP has been languishing for well over one year at the inception stage itself. To be noted, captioned OP has been filed assailing an 'arbitral award dated 18.05.2019 bearing reference No.ACP.(Daimler) No.20 of 2016' [hereinafter 'impugned award' for the sake of convenience and brevity].
5. Mr.V.Subramanian, learned counsel on record who is before me in this web hearing on a video conferencing platform submits that http://www.judis.nic.in Page No.4/13 O.P.No.527 of 2020 notwithstanding grounds raised in OP he would project the point that arbitration proceedings have not been completed within one year time line and/or the extended time period of six months (six months extension permissible by mutual agreement though there is none in the case on hand) and this infarcts the impugned award. Learned counsel submits that he would project that fifth and sixth schedules to A and C Act have not been adhered to. Besides this point, adverting to captioned OP and grounds raised therein, learned counsel submitted that pre-sale notice has not been given for the two trucks which form subject matter of arbitration and therefore, there are serious doubts about the price at which the trucks were sold.
6. This Court is of the considered view that time lines are lifelines qua arbitration which is an important Alternative Dispute Resolution (ADR) mechanism.
7. Therefore, presentation of OP under Section 34 of A and C Act and allowing the same to slip into slumber for long periods particularly, over one year which is the time frame prescribed for disposal of OP itself http://www.judis.nic.in Page No.5/13 O.P.No.527 of 2020 is not desirable and it militates against the basic legal philosophy underlining arbitration as an ADR mechanism. In this regard, it is not out of place to add that adequate alternate measures for filing/removal of objections/hearing were put in place qua Covid-19 situation. To be noted, this is only an observation and this Court now proceeds to examine the challenge to the impugned award on merits.
8. Captioned OP being one under Section 34 of A and C Act, considering the short statutory perimeter and limited legal landscape of a Section 34 drill or in other words the limited legal landscape within which a Section 34 legal exercise should perambulate, short facts shorn of elaboration will suffice.
9. Short facts or in other words, essential facts imperative for appreciating this order in a nut shell are that the parties to captioned OP entered into Loan-cum-Hypothecation agreements bearing Nos.20102980 & 20102981 dated 05.09.2013 for purchase of 2 numbers of BHARAT BENZ HDT 2523R CBC vehicle bearing Engine Nos.400950D0003716 & 400950D0003730, Chassis http://www.judis.nic.in Page No.6/13 O.P.No.527 of 2020 Nos.MEC2121CGDP003528 & MEC2121CGDP003529 for like sums of Rs.23,80,000/- each; this 05.09.2013 'Loan-cum-Hypothecation agreements' shall be referred to as 'said contracts' in plural and 'said contract' in singular for the sake of convenience and clarity; the aforementioned 'two trucks' shall be referred to as 'said trucks' in plural and 'said truck' in singular for the sake of convenience and clarity; said contracts contain arbitration clauses which serve as arbitration agreement between the parties i.e., arbitration agreement within the meaning of Section 2(1)(b) read with Section 7 of A and C Act; that financial assistance given by first respondent to borrower/petitioner and guarantor/second respondent have to be repaid in 46 'EMIs' ('Equated Monthly Instalments'); that there was delay/default qua EMIs; that the said trucks were surrendered by petitioner; that said trucks were sold by first respondent; that aforementioned arbitration agreement was triggered by first respondent and AT was constituted; out of 46 EMIs, 14 EMIs were paid, after giving credit to the same and sale value of said trucks first respondent, as claimant before the 'Arbitral Tribunal' ['AT' for the sake of convenience and clarity] made claim for the balance; that AT vide impugned award, allowed the claim to an extent of Rs.18,74,105.84 with http://www.judis.nic.in Page No.7/13 O.P.No.527 of 2020 interest; assailing the impugned award, captioned OP has been presented in this Court on 24.09.2019.
10. With regard to first submission that arbitral proceedings were not completed within one year and possible extended six months, a perusal of impugned award reveals that arbitration clause was invoked on 12.05.2015. This is evident from Paragraph 5(a)(v) of the impugned award, which reads as follows:
' (v)............. On 12.05.2015, the Claimant has invoked the Arbitration Clause and referred the dispute to Arbitration in respect of the non-payment of due wherein the Claimant has also nominated the undersigned as the Sole Arbitrator to try, adjudicate and resolve the dispute. Therefore, the appointment of Arbitrator is proper and valid.'
11. This is prior to 23.10.2015 and therefore, this puts an end to the time frame for arbitral proceedings argument, with regard to disclosure under Sections 12, 5 and 6, there is no material before this Court to demonstrate that there are doubts about the impartiality of the arbitrator. Though preliminary issues of certain kind can be raised at http://www.judis.nic.in Page No.8/13 O.P.No.527 of 2020 Section 34, it is not necessary to dilate on the same in this order as in the light of peculiar facts and circumstance of this case, this plea does not hold water at this distant point of time. This view is taken considering the trajectory and time taken in this matter. To be noted, the impugned award is also a contested award or in other words, the impugned award has been made after full contest.
12. With regard to pre-sale notice, the same issue has been raised before AT and AT has dealt with the same. To be noted, first respondent before AT (petitioner in captioned OP) has even made a counter claim in this regard. This argument is captured in paragraph No.B(i) of the impugned award in the following manner:
'B(i)................ the 1st respondent has made a Counter Claim stating that no notice was issued prior to sale. Hence the sale is not valid in law; the date of sale has not been mentioned in the claim statement; the vehicle was sold by private treaty without holding public auction thereby the claimant has not mitigated the alleged damages by trying to obtain the best possible price and thereby committed illegalities in not issuing pre-sale notice and in not bringing the vehicles to public auction;
http://www.judis.nic.in Page No.9/13 O.P.No.527 of 2020 pre-sale notice is mandatory in view of Section 176 of Indian Contract Act. By stating so, the 1st respondent seeks declaration that the sale of vehicles bearing Registration Nos.TN 18 R 9045 and TN 18 R 8984 as null and void.'
13. The above has been dealt with by AT and relevant portion in impugned award reads as follows:
'(viii) ............. The agreement to the effect that the surrendered vehicles would be sold is well within the knowledge of the respondents. The claimant has issued a legal notice dated 09.04.2015 under Exhibit C5 regarding the default that had been committed by the respondents. The vehicles were surrendered on 08.06.2015. At the time of surrender, inventory of vehicle was taken mentioning the damage of the respective vehicle. The claimant has also obtained the valuation report dated 26.10.2015 under Exhibit C10 wherein it was valued that the present market value is around Rs.13 Lakhs. The claimant has obtained an offer from the prospective buyer Mr.Ganapathy Dhanasekaran dated 11.02.2016 under Exhibit C11 who had offered a sum of Rs.11 Lakhs to purchase the vehicle in as is where is condition. Having sold the vehicles, the claimant has issued a legal notice dated 10.05.2016 under http://www.judis.nic.in Page No.10/13 O.P.No.527 of 2020 Exhibit C12 claiming loss that had occurred after sale and a copy of the postal receipt was also filed along with the same as a proof for the same. Inspite of the same, the respondents had not raised any objections regarding the sale or the sale value. The respective vehicle was sold on 12.02.2016 and 18.02.2016. However, the 1st respondent has questioned the sale and sale value by way of counter statement dated 23.09.2016 and the 2nd respondent by way of his counter statement dated 04.11.2016 respectively for the first time before this Tribunal. By virtue of the documents, as referred above, the claimant has taken due care before and after the sale of the vehicles. The Claimant has also obtained valuation report and quotations from the prospective buyer. The sole purpose of surrendering of vehicles is to enable the claimant to realise the sale proceeds towards the due under the agreement which is well within the knowledge of the respondents. Having surrendered the vehicles the 1st respondent has not made any attempt to bring any offer.
Admittedly, the vehicles in reference are of commercial vehicles. The commercial vehicles would have more usage thereby wear and tear of the same would be much more. Due to which, the value of the vehicles will be in deterioration day by day. If the vehicles are kept idle that may cause further deterioration and reduction in value http://www.judis.nic.in Page No.11/13 O.P.No.527 of 2020 which would cause financial loss to both the respondents and the claimant. The respondents had not produced any evidence to prove the value. In the light of the above, this Tribunal is of the considered view that the sale price on the vehicle is fair and reasonable.'
14. There is nothing in this case to demonstrate that the aforementioned view taken by AT regarding pre-sale notice is an implausible view or in other words, a view which no reasonable person could take and therefore, this Court does not find any ground to judicially intervene qua impugned award within the limited legal/statutory perimeter of Section 34 of A and C Act.
15. In the result, campaign against impugned award in captioned OP fails and the same is dismissed. There shall be no order as to costs.
10.12.2020 Speaking/Non-speaking order Index : Yes / No Internet : Yes / No mk M.SUNDAR.J., http://www.judis.nic.in Page No.12/13 O.P.No.527 of 2020 mk O.P.No.527 of 2020 10.12.2020 http://www.judis.nic.in Page No.13/13