Madras High Court
Mr.R.Madesh vs M/S.Aptus Value Housing Finance India ... on 12 July, 2024
Author: C.V.Karthikeyan
Bench: C.V.Karthikeyan
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 12.07.2024
Coram:
THE HONOURABLE MR.JUSTICE C.V.KARTHIKEYAN
Arb.O.P.No.19 of 2024
and
A.No.2420 of 2024
1.Mr.R.Madesh
2.Mrs.M.Abinaya .. Petitioners
Vs.
M/s.Aptus Value Housing Finance India Limited
Represented by Mr.S.Balaji, Assistant Manager – Legal
8B, Doshi Towers, 205, Poonamallee High Road,
Kilpauk, Chennai – 600 010. .. Respondent
This Petition filed under Section 34(2) of the Arbitration and Conciliation
Act, 1996 praying,
(a).To set aside the exparte award dated 15.12.2023 in Arbitration Case
No.SJK/AVHFIL-39 of 2023 passed by the Sole Arbitrator Mr.S.Jayakumar, in
the dispute arising between M/s.Aptus Value Housing Finance India Limited
and Mr.R.Madesh and others in respect of Loan Agreement
No.A1341800006998 dated 30.06.2014 by allowing this petition.
(b).To direct the respondent to pay the costs.
For petitioner : Mr.K.J.Parthasarathy
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ORDER
This petition has been filed taking advantage of Section 34(2) of the
Arbitration and Conciliation Act, 1996 seeking interference with an award of
the sole arbitrator dated 15.12.2023.
2.The petitioners were the respondents in the arbitration proceedings. The
petitioners had entered into a loan agreement with the respondent, M/s.Aptus
Value Housing Finance India Limited and had obtained a loan of Rs.10/- Lakhs
and in that connection had also provided as collateral security, property at
Naligabetta Agraharam Village, Hosur Taluk, Krishnagiri District in
S.No.10/4A, 10/4B, 10/5A and 10/5B measuring about 1.53.0 Hectares in Sub-
division S.No.325/1A. The said lands had been converted into house sites in
S.No.10/5A & 10/5B. There was an obligation on the part of the petitioners to
repay the amount of Rs.10/- Lakhs with interest at 16% pa in Equated Monthly
Instalments (EMI) of Rs.14,687/-. It is also covenanted that the date of the first
payment of EMI shall be in the first day of month of the following month in
which disbursement of the loan was completed. It is not in dispute that the loan
had been disbursed to the petitioners herein to a sum of Rs.10/- Lakhs.
However, there had been default in the payment of EMI by the petitioners
herein. This had necessitated the respondent to issue a notice under Section
13(2) of Arbitration and Conciliation Act, 1996 on 18.05.2023. It is stated that
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the loan was recalled by the respondent and in the said notice, it had been stated
that the account had been declared as non-performing asset on 10.05.2023. The
total outstanding balance was Rs.10,34,864/-. It was therefore demanded that
the petitioners should comply with the demand to avoid further action under the
Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002. The details of the recalled amount were given in the
notice. In the loan agreement, there is a clause for arbitration and it is as
follows:
“11.1. In the event of any dispute or any claim arising
pursuant to or in relation to or touching upon this agreement,
either party shall be entitled to require the managing director of
APTUS or if there is no managing director, such person who is
nominated by the board of APTUS in this regard to nominate and
appoint an arbitrator to resolve the dispute or claim so made by
such party and the decision of such sole arbitrator shall be binding
on the parties and such arbitration shall be in accordance with
Arbitration and Conciliation Act, 1996 or any statutory
modifications or amendments thereto or any other law or any
statutory replacement relating to adjudication of dispute by
arbitration.
11.2.The managing director of APTUS or such other
nominated person as aforesaid shall be entitled to appoint an
arbitrator in the place of the arbitrator appointed earlier, if a
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vacancy arises for any reason whatsoever and the arbitrator so
appointed shall be entitled to proceed with arbitration proceedings
from the stage of the earlier arbitration proceedings.
11.3.The venue of arbitration shall be at CHENNAI at the
place nominated by the Arbitrator.”
3.Taking further action, in consequent to such a covenant in the
agreement, the respondent had appointed as arbitrator to preside over the
arbitral tribunal, Mr.S.Jayakumar. The learned arbitrator entered appearance
and directed notice to the petitioners herein. One of the grounds raised in this
petition is that this appointment of the arbitrator was unilateral in nature, but I
am not able to accept that contention raised on that particular ground, since the
covenant in the agreement itself provides for the respondent to require the
Managing Director of the respondent and if there is no Managing Director, such
other person who is nominated by the board of Aptus to be appointed as
arbitrator. Therefore, the power of respondent to appoint an arbitrator is quite
wide and it is not restricted to appoint a member of the respondent, but any
other persons who is considered competent by the Board of the respondent.
Therefore, the contention of the learned counsel for the petitioners that there has
been unilateral appointment of an arbitrator to the disadvantage of the
petitioners is rejected.
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4.The learned counsel for the petitioners, however, placed an alternate
argument and pointed out the notes in the award, which are extracted below:
14.08.2023 Dispute was referred to arbitration by appointing Mr.S.Jayakumar
as Sole Arbitrator in accordance with the agreement in reference
and as per the Arbitration and Conciliation Act, 1996, to try,
adjudicate and resolve the dispute between the claimant and the
respondents.
14.09.2023 Date of notice for the 1st hearing on 07.10.2023.
07.10.2023 Date of first hearing.
07.10.2023 The authorized representative for the claimant present. Notice sent
to the respondents was returned unserved. As the service of the
notice is not complete on the respondent, a fresh notice is ordered
to the respondents. Hence, the matter is adjourned to 28.10.2023.
28.10.2023 The authorized representative for the claimant present. The
proceeding of the 1st hearing and 2nd hearing notice sent to the
respondents was returned unserved. The service of the notice is
complete and held sufficient on the respondents. Despite, two
notices sent to the respondents, they had neither appeared nor filed
any objections. The respondents were called absent and set-
exparte. On behalf of the claimant, exhibits A1 to A5 marked and
the matter was reserved for passing award. The said proceedings
were sent to the respondents.
5.The noting of the arbitrator had been pointed out by the learned
counsel. A perusal of the same shows that the date of first hearing was on
07.10.2023. Notice had been issued on 14.09.2023 for the hearing dated
07.10.2023. The notice was returned unserved. Fresh notice was directed for the
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hearing date 28.10.2023. It was stated that notice had been again issued and was
returned unserved. The method of service when notices are returned unserved
are prescribed under the Civil Procedure Code. The arbitrator was under an
obligation to find out the reason why the notice had been returned unserved.
6.In paragraph No.2 of the award, he had noted that the notice sent to the
last known address had been returned unserved, but that constituted sufficient
service. In my opinion, the observation of the learned Arbitrator is not correct.
Section 34(2) of the Arbitration and Conciliation Act, 1996 provides a specific
ground to interfere with an award under Section 34 of the Act when notice had
not been served in manner known to law.
7.This is the ground which is now urged by the learned counsel for the
petitioners. He pointed out the noting, which had been extracted above and the
observations of the arbitrator that even if notice has not been served notice was
deemed sufficient. That observation of the learned Arbitrator does not stand the
scrutiny of this Court. The arbitral tribunal should have taken efforts to serve
the present petitioners at the last known address and even if the notice had been
returned unserved, further steps should have been taken in manner known to
law to complete the service. A conclusion that taking notice on two separate
occasions and even though notices had been returned unserved would deemed
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that the notice is sufficient is not a correct view taken by the arbitrator.
8.Without entering into any further discussion on the merits of the claim
of the respondent, on this one sole ground itself, I hold that the arbitral award
will have to be necessarily interfered with by this Court. The award dated
15.12.2023 is therefore set aside. The respondent may proceed further in
manner known to law, if at all they are of the impression that they should
proceed further.
9.A perusal of the records also show that as a condition for stay, this
Court had directed that the petitioners should deposit a sum of Rs.2,50,000/- to
the credit of Arb.O.P.No.19 of 2024. The learned counsel states that such
condition had been complied with. The Registry may examine the same and if a
memo is filed, on proper identification, the amount may be refunded to the
petitioners.
C.V.KARTHIKEYAN, J.
smv
10.In view of the above reasons, this Arbitration Original Petition stands Page No.7/8 https://www.mhc.tn.gov.in/judis allowed.
12.07.2024 Internet: Yes/No Index: Yes/No smv Arb.O.P.No.19 of 2024 Page No.8/8 https://www.mhc.tn.gov.in/judis