Delhi District Court
Ajay Khandelwal vs Pnb Housing Finance Ltd on 16 November, 2022
IN THE COURT OF SH. SANJEEV AGGARWAL,
DISTRICT JUDGE (COMMERCIAL)-03, SOUTH,
SAKET COURTS, NEW DELHI
OMP (COMM) 23/2020
CNR NO. DLST01-005034-2020
1. Ajay Khandelwal
S/o. Sh. Babu Lal Khandelwal
2. Babita Khandelwal
W/o. Sh. Ajay Khandelwal
Add : H. No. 46, Kalyan Sampath Green,
Gram Kali Billod, Depalpur, Near Jeevan Jyoti
Square Deplapur, M.P.-453001
...Applicants
Versus
PNB Housing Finance Ltd.
Add. 9th Floor, Antriksh Bhawan, 22
Kasturba Gandhi Marg, New Delhi-110001
...Respondent
16.11.2022
JUDGMENT
1. This is an application / objections filed u/S. 34 of The Arbitration and Conciliation Act, 1996 (hereinafter referred to as an Act) by the applicants / petitioners, as mentioned in the memo of parties above.
2. Brief facts which can be taken out from the said application / objections are as under :
1. That the respondent is a company registered under the provisions of Companies Act, 1956. The respondent being the juristic personality has been impleaded OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 1 of 27 through its Director who is managing and controlling the day to day affairs of the respondent who is responsible for all acts, deeds, omissions and commissions of the respondent.
2. That the respondent is a registered under the National Housing Bank Act, 1987, and is also a notified company under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 by Ministry of Finance on 10.11.2003.
3. That the respondent is engaged in the business of rendering financial/credit facilities, in the forms of various loan etc. i.e. loan against property, mortgage loans and home loans to the intending borrowers.
4. That the applicants had approached to the respondent for availing the housing loan facility. The respondent had sanctioned the housing loan facility to the tune of Rs.48,50,000/- (Rupees fourty eight lakh fifty thousand only) vide Loan account No.DOU/IND/1015/249286 in favour of the applicant on 24.12.2015. The loan was refundable by paying the 180 monthly installments to the tune of Rs.53,462/- per month and the said loan and credit facility was sanctioned in favour of the applicants against the security and guarantee of the immovable property bearing Plot No.60, Kalyan Sampath Greens, Gram Kali Billod, Depalpur, Indore, M. P.
5. That the applicants had approached to the respondent for availing the housing loan facility . The respondent had sanctioned the housing loan facility to the tune of Rs.25,00,000/- (Rupees twenty five lakh only) vide Loan account No.NHL/IND/1215/257698 in favour of the applicants on 25.12.2015. The loan was refundable by paying the 180 monthly installments to the tune of Rs.30,408/- per month and the said loan and credit facility was sanctioned in favour of the applicants against the security and guarantee of the immovable property bearing Plot No.46, Kalyan Sampath Greens, OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 2 of 27 Gram Kali Billod, Depalpur, Indore, M. P.
6. That the applicants had availed the said housing loan facilities against the security and surety of two immovable properties i.e. Plot No.46, Kalyan Sampath Greens, Gram Kali Billod, Depalpur, Indore, M. P. and Plot No.60, Kalyan Sampath Greens, Gram Kali Billod, Depalpur, Indore, M. P. with respondent.
7. That the applicants had deposited a sum of Rs.19,500/-
on 08.12.2016, Rs.61,896/- on 19.09.2017 and had also deposited the 13 monthly installments to the tune of Rs.3,95,304/- @ Rs.30,408/- per month with respondent in respect of housing loan account No.257698. All the entries in respect of making of the payment by the applicants to the respondent has been duly reflected in the statement of account.
8. That the applicants had deposited a sum of Rs.1,08,104/- on 19.09.2017 and had also deposited the 16 monthly installments to the tune of Rs.8,57,030/- @ Rs.53,462/- per month and Rs.38,00,000/- with respondent in respect of housing loan account No.249286 in respect of the property bearing Plot No.60, Kalyan Sampath Greens, Gram Kali Billod, Depalpur, Indore, M. P. All the entries in respect of making of the payment by the applicants to the respondent has been duly reflected in the statement of account. The respondent after taking the entire amount from the applicants had released the above mentioned property in favour of the applicants free from all encumbrances.
9. That the respondent dishonestly, fraudulently and maliciously had concealed the material facts that the respondent had issued the no dues certificate dated 24.11.2017 and that no dues certificate the respondent had certified the fact that Mr. Ajay Kumar Khandelwal and Babita Khandelwal had availed a loan A/C No.HOU/IND/1015/249286 and NHL/IND/1215/257698 for Rs.47.00 lacs and Rs.25.00 lacs and had mortgaged 2 OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 3 of 27 properties out of those 2 properties we are releasing here with property No. Plot No.60, Kalyan Sampath Greens, Gram Kali Billod, Depalpur, Indore, Madhya Pradesh on receiving of Rs.38.00 lacs being part payment towards his loan.
10. That the applicants has not received the notice dated 23.07.2019 in any mode through which the applicants were called upon to pay the entire outstanding amount of Rs.41,50,808.40 paise as on 22.07.2019 with interest and other charges. The respondent has not placed any cogent evidence on record to prove the serving of the notice upon the applicants. The applicants by way of any mode has not received the notice dated 23.07.2019.
1. That the applicants has also not received any notice i.e. letter dated 06.09.2019 in respect of nominating the sole Arbitrator to adjudicate upon the dispute and nor has received any notice dated 17.09.2019 for giving the appearance on 14.10.2019 before Sole Arbitrator.
11. That the applicants has also not received the notice for giving the appearance on 14.11.2019 before Sole Arbitrator.
12. That on 09.01.2020 the respondent to prove its case had examined Sh. Sandeep Kumar as Authorized Representative who has exhibited the following documents in his evidence i.e. i. Copy of power of attorney Ex. CW1/A. ii. True copy of loan agreement and other loan related documents Ex. CW1/B (colly).
iii. Copy of legal notice/loan recall notice dated 23.07.2019 with postal receipts - Ex. CW1/C. iv. Copy of Statement of account and Foreclosure dated 22.07.2019 -Ex.CW1/D. v. Copy of reference notice dated 06.09.2019 are exhibited as Ex. CW1/E.
13. That the learned Arbitrator vide its order dated 27.02.2020 has given the following reliefs in favor of the OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 4 of 27 respondent i.e. a. A sum of Rs.41,40,808.40 (Rupees fourty one lakh fourty thousand eight hundred eight and fourty paise only) being outstanding amount towards aforesaid loan agreement alongwith future interest. Subject to the adjustment of payment by the respondents (applicants herein) if any after 22.07.2019.
b. Interest @ of 15% per annum on the amount awarded from the date of foreclosure till aware date toward pendent elite interest.
c. Interest @ of 15% per annum on the amount awarded from the date of passing the award till realization of the amount.
d. A sum of Rs.45,000/- (Rupees fourty five thousand only) is awarded to the claimant as cost of the present proceeding.
e. The respondents (applicants herein) shall not assign, transfer, further pledge, create any charge or in any way encumber the property bearing (1) Plot No.60, Kalyan Sampath Greens, Gram Kali Billod Depalpur, Indore, Madhya Pradesh-452001.
f. 2. Plot No.46, Kalyan Sampath Greens, Gram Kali Billod, Depalpur, Indore, Madhya Pradesh-452001. g. Till the entire amount as awarded is paid to the claimant. h. In the case the payment of entire awarded amount is not made to the claimant by the respondents (applicants herein) in that event the claimant shall be entitled to sell the aforesaid stated property strictly as per terms and conditions of the said agreement executed between the parties for the realization of the above dues under the loan agreement in part or full as the case may be. The grounds taken by the petitioners in the objections are as under :-
i. Because the Learned Arbitrator was not independent, impartial and neutral person and has passed the award in collusion and connivance with the respondent and under the mechanical dictation, aid, advise and OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 5 of 27 instruction of the respondent and did not apply his mind independently, judiciously, fairly and has not acted according to the principle of natural justice, equity, good conscience, fair trial and fair play in action in any legal proceeding the adjudication of the dispute must be by independent, neutral and transparent personality.
iii. Because the learned Arbitrator has totally failed to consider that the respondent has not placed on record any cogent, credible, reliable evidence on record of serving the notice dated 06.09.2019 for appointing the sole Arbitrator and place of Arbitration so the award is contrary to the principle of natural justice, equity, good conscience, fair trial and fair play in action.
v. Because the learned Arbitrator has totally failed to consider that there was no material on record how the notice dated 17.09.2019 was served upon the applicants even no cogent, credible and reliable evidence has been placed on record to prove and establish the fact in respect of serving the notice upon the applicants to give the appearance on 14.11.2019. On 14.11.2019 the learned Arbitrator himself has proceeded exparte against the applicants without giving any notice through publication in the news paper when the award was going to visit civil consequences.
vi. Because the learned Arbitrator has totally failed to consider that the respondent has not examined any postal authority to prove and establish the fact of serving the notice of appointment of Arbitrator, commencement of the arbitration proceeding and appearance of the parties.
vii. Because no notice in public news paper has been circulated in respect of arbitration proceeding so the award has been passed without giving any opportunity OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 6 of 27 of being heard to the applicants and the same is legally null and void and nonest in eyes of law.
viii. Because the conduct of the respondent totally dis- entitled it from claiming any relief under the provisions of Arbitration and Conciliation Act as the respondent deliberately, willfully, knowingly and intentionally has concealed the material facts i.e. no dues certificate dated 24.11.2017 in which the respondent has admitted and acknowledged the fact that Mr. Ajay Kumar Khandelwal and Babita Khandelwal had availed a loan A/C No.HOU/IND/1015/249286 and NHL/IND/1215/ 257698 for Rs.47.00 lacs and Rs.25.00 lacs and had mortgaged 2 properties out of those 2 properties we are releasing here with property No. Plot No.60, Kalyan Sampath Greens, Gram Kali Billod, Depalpur, Indore, Madhya Pradesh on receiving of Rs.38.00 lacs being part payment towards his loan and in this manner the respondent has played a fraud upon the learned Arbitrator in a pre plan manner.
x. Because the respondent can not be permitted to take the undue, unfair benefit and advantage of its fraudulent conduct as the respondent deliberately, willfully, knowingly and intentionally withhold and concealed the material facts from the learned Arbitrator that one property i.e. Plot No.60, Kalyan Sampath Greens, Gram Kali Billod, Depalpur, Indore, M. P. has already been released. Moreover the learned Arbitrator was having the full knowledge in respect of records of the respondent and also ignored this material facts so the award is legally null and void and nonest in eyes of law.
xv. Because the learned Arbitrator has totally failed to consider, appreciate the loan amount against two loan numbers as mentioned above before ascertaining and adjudicating the liability.
OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 7 of 27 It has been prayed by the petitioners in the objections as under :
In view of the facts and circumstances and submissions made above it is respectfully prayed that this Hon'ble court may kindly be pleased to :-
i. Set aside and quash the award dated 27.02.2020 passed by the learned Arbitrator Sh. Raj Kumar Sharma, Ex. Additional District and Session Judge, Delhi in Arbitration Case No.PNBHFL/ARB/2019/1036.
ii. Stay the operation of the award dated 27.02.2020 passed by the learned Arbitrator Sh. Raj Kumar Sharma, Ex. Additional District and Session Judge, Delhi in Arbitration Case No.PNBHFL/ARB/2019/1036.
iii. Call the records of the learned Arbitrator Sh. Raj Kumar Sharma, Ex. Additional District and Session Judge, Delhi in Arbitration Case No.PNBHFL/ARB/ 2019/1036.
3. Reply has been filed by the respondent, in which number of preliminary objections have been taken, the relevant paras of which are reproduced as under :
3. That the application is not at all maintainable under the provisions of Section 34 of the Arbitration and Conciliation Act, 1996 or under any other provision of the under said Act. That on bare perusal of the application, the Applicant came up with the Petition as if the Petitioners seems like to prefer the appeal against the Impugned Award as appeared from the Grounds and warranted the court to entail the review on the merit of dispute. However, the present court under limited jurisdiction shall have to OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 8 of 27 adjudicate the present dispute under the specific periphery of the said section and may not traverse beyond its power and jurisdiction. It is submitted that the Petitioners attempted to mislead the court in preferring the present application for the setting aside impugned award in the present format ignoring narrow space provided in said Section despite little scope is available for setting aside said award. On above ground, the application is not maintainable and liable to be dismissed at threshold. The reliance of observation and findings in Judgment titled as MMTC vs. M/s Vedanta Ltd (Civil Appeal No. 1862/2014) decided by Hon'ble the Supreme Court of India is placed herein to substantiate the limited jurisdiction of present court to adjudicate upon the application filed u/s 34 of said Act. It is held by Apex Court that it is settled by law that the court does not sit in appeal over the arbitral award and may interfere on merit on the limited ground provided under section 34(2) (b)(ii) if the award is against the public policy of India so alleged. The Judgment also includes and narrates the patent violation of public policy, violation of fundamental policy of Indian Law etc., the relevant para is reproduced hereunder for ready reference:
11. As far as Section 34 is concerned, the position is well−settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii), i.e. if the award is against the public policy of India. As per the legal position clarified OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 9 of 27 through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the fundamental policy of Indian law would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury reasonableness.
Furthermore, patent illegality itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)
(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. (Associate Builders v. DDA, (2015) 3 SCC 49). Also see ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705; Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445; and McDermott International v. Burn Standard Co. Ltd., (2006) 11 SCC 181).
OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 10 of 27
7. That the present application/petition is not maintainable and is liable to be dismissed in the light of findings and observation laid down in catena of Judgment (i) Lalji Raja and Sons Vs. Hansraj Nathurm
(ii) Narhari Shivam Shet Narvekar Vs. Pannalal v mediram (iii)State of Bihar vs.Bihar Rajya Bhumi Vikas Bank Samiti and (vi) Emkay Global Financial Service Limited Vs. Giridar Sondhi. It is submitted that Ex-Parte Arbitral Award binds then Judgment Debtor who should followed necessary procedural law for the satisfaction of Arbitral Award. On above said precedents, the present application is thus liable to be dismissed having no merit.
8. That Arbitration proceeding was conducted as per the law and was concluded as per mandate of Arbitration and Conciliation Act, 1996 and said proceedings was duly initiated and presided by Sole Arbitrator after being duly concurred by him and consented to act as Sole Arbitrator to resolve the dispute. The petitioners waved off their right to object for the appointment/proposing Sole Arbitrator in said loan agreement being a admitted fact, however, despite availing ample of opportunities, Petitioners measurably failed to protect its right and interest during the pendency of Arbitration Case before Tribunal and now, make a agitation against such well reasoned and speaking award with a malafide intention to stall the execution proceeding proposed to be initiated by Respondent with a intention to discourage the end of justice and to deter the Arbitration's aims and objectives and to build up potential risk of miscarriage of justice. It is stated that the Petitioners deliberately run away from the Tribunal with a bad intention to put blanket on its own wrongs to deceive respondent and not participated in Arbitral proceedings at the primary OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 11 of 27 stage but such rights were vitiated and no longer survive after termination of Arbitration proceedings. The petitioners did not render its legal obligation to assist the Tribunal as a prudent man does so. With reasonable doubts, it is pertinent to mention herein that the petitioners deliberately discouraged the prime objective of Arbitration prospects.
10. That petitioner defaulted in perusing his case before the Tribunal rightly from notice dated 17.09.2019 and 14.10.2019 respectively. Prior to above said notices, the petitioner also suppressed the material facts in respect of service of letter of intent for appointment of Ld. Sole Arbitrator dated 22.08.2019 and reference of dispute to Ld. Sole Arbitrator 06.09.2019. Admittedly, the Petitioners had per- mandated the appointment of Arbitrator being an integral part of the Arbitration Clause and who waved off its rights in derogation. However, despite availing ample of opportunity to pursue her cases, the Petitioners was not taken any due care at all to defend their right and interest during pendency of Arbitration proceedings. It is pertinent to mention herein that, the inability of Petitioners to discharge its responsibility within the time frame as such the Petitioners were considered as default party for which the Arbitral Tribunal continued till the pronouncement of judgment.....
Further in the preliminary submissions in the reply, the brief facts narrated by the respondent are reproduced as under :
1. The Respondent company PNB Housing Finance Ltd, is a company incorporated under the Companies Act, 1956, subsidiary of PNB and Registered with National Housing Company in OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 12 of 27 terms of Section 29 A of The National Housing Company Act, 1987 and having its registered office at 9th Floor, Antriksh Bhawan, 22, Kasturba Gandhi Marg, New Delhi-110001 and is a notified Company under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.The Respondent engaged, inter-alia in the business of rendering financial/credit facilities, in the form as disbursement of various loans etc, i.e. Loan against property, Mortgage Loans and Home Loans to the intending borrows.
2. The petitioners one of them is a Borrower and other one is a Co-Borrower approached to Respondent to avail the loan who applied for availing a Credit Facility for housing loan against two immovable property bearing address, Plot No. 60, KalyanSampth Greents, Gram Kalibillod Depalpur, Indore, Madhya Pradesh-452001 and Plot no. 46, Kalyan Sampth Greens, gram Kali Billod, Depalpur, Indore, Madhya Ppradesh- 452001.
3. The petitioners had inter alia assured/consented to abide by all the term and conditions for availing such loan from Respondent agreed to pay such loan by EMIs regularly including the interest accrued thereon month wise basis without making delay or default in any manner whatsoever.
4. Being approached and/or requested by the petitioner, Respondent extended its facilities against said properties vide loan Account HOU/IND/1015/ 249286 by virtue of executing of loan agreement dated and Respondent sanctioned a loan of Rs.48,50,000/- was disbursed to them.
As agreed by the petitioners, the entire loan was equated by monthly installment of Rs. 53462/- for the period of 180 months. However, the applicable OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 13 of 27 EMI of Rs. 39093/- to secure the Financial Assets of Respondent, the petitioners created mortgage against said proposed property.
5. That the Arbitration clause which forms a part of the loan agreement shall be treated as an agreement independent of the other terms of the contract and any dispute arises out of the agreement shall be settled by Arbitration clause. The Arbitration clause is reproduced hereunder for ready reference:
10.8 Arbitration clause:
Any and all disputes, claims difference arising out of or in connection with loan documents and or the performance of the Loan documents 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 Parties. The place of Arbitration shall be in Delhi or any other place as arbitrator may decide and shall be in accordance with the provisions of the Arbitration and conciliation Act, 1996 and any statutory amendments thereof. The proceedings of Arbitration tribunal shall be conducted in English langue. Each party has to bear cost of representing its case before the Arbitrator. The cost of Arbitration including fees and expenses of Arbitrator shall be shared equally by the parties unless the award otherwise provides.
Subject to this Article herein, the borrower(s) further agrees that all claims, difference and disputes, arising out of or in relation to dealings/transaction made in pursuant to the loan OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 14 of 27 documents including any question of whether such dealing, transaction have been entered into or not, shall be subject to the exclusive jurisdiction of the courts at Delhi only.
6. The petitioners, however, failed to adhere to the terms and condition of said loan agreement and defaulted in paying various EMIs. The respondent under contractual obligation, recalled the loan facility granted to the petitioner vide legal notice dated 23.07.2019 through its counsel calling upon the petitioner to pay a sum of Rs. 41,50,808.40 which became due and payable by the petitioner on or before 7 days from the date of receipt of said notice.
7. Despite repeated reminder and notices, the petitioners overlooked the advent of adverse effect of such default, were not percept and same were not entered into the deaf ear of petitioner and deliberately avoided the Respondent with a ulterior motive to enjoy monies at the cost of the Respondent who is the trustee of the public fund and ensure the public at large to secure and safeguard such property.
8. That the Respondent initiated the Arbitration proceeding in compliance to relevant provisions of said Act as the parties on dispute has a right and liberty to invoke/initiate the arbitration proceeding in terms of Arbitration clause mentioned in the loan agreement duly agreed by them.
9. That the Arbitration proceeding was invoked in due process in compliance to various statutory provisions lay down in said Act. Ultimately, the arbitration proceedings was concluded vide award dated 27.02.2020.
OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 15 of 27 On merits in the reply, it is stated in the relevant para(s) as under :
8.9 Save only the contents of Para Nos. 8 to 9 are matter of record, the contents contrary to the material facts and beyond the documents are incorrect and specifically denied. It is admitted facts that once the property bearing Plot No. 60, Kalyan Sampth Green, Gram Kali Billod, Depal Pur Indore released to the petitioners while lifting all the charges free from encumbrances, thereafter respondent never initiated any lawful proceedings to enforce the interest on said released property.
However, the charge remined operative on other property bearing Plot No. 46, Kalyan Sampath Greens, Gram Kali Billod, Depal Pur Indore from the day of mortgage in terms of loan agreement, HOU/IND/1015/249286, still alive till days. The arbitration proceeding was initiated as per the terms and conditions of the loan agreement where the arbitration clause forms a part of said agreement. The dispute and differences arose due to default from the petitioners for default in paying various EMI for which the loan account became non-Operative. The dispute was submitted to Arbitration for recourse. As the charge was created on both the properties on question being mortgage property as per the loan agreement, the statement of claim shall entail to mention the particulars of mortgage properties being a procedural law. Nevertheless, the respondent, under the contractual obligation had not enforced any security interest/charge created upon the released property. However, the Respondent being a secured creditor, to take the possession of secured assets, preferred the appropriate application before the court of DM, Indore and application u/s 14 of Securitizing & OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 16 of 27 Reconstruction of Financial Assets & Enforcement of Security interest Act 2002 was allowed qua the unreleased property in short property bearing plot No. 46, Kalyan Sampath. Due to default of EMI pertaining to the loan account bearing No. HOU/IND/1015/249286, the loan account was recalled and the security interest was enforced on Mortage property, bearing Plot No. 46, Kalyan Sampath Greens, Gram Kali Billod, Depal Pur, Indore.
10. That the contents of Para No. 10 are false hence denied. Any contents contrary to the material facts and record are specifically denied. It is denied that the notice has not been received by the petitioners as alleged. It is further denied that the respondent has not placed any cogent evidence on record in support of service as alleged. It is submitted that the notice bears the same address as appeared in the award dated 27.02.2020. As the award was served upon the petitioners, the notice must have been delivered to them. The petitioners deliberately suppressed the material facts leading to said services to mislead Court.
11. That the contents of para No. 11 are false hence denied. Any contents contrary to material facts and beyond the documents on record are specifically denied. It is denied that the petitioners have not received the letter dated 06.09.2019 as alleged. It is further denied that the petitioners have not received the notice dated 17.09.2019 as alleged. It is submitted that the above said notice and letter were sent to the petitioner mentioning the same address as appeared on the face of the award dated 27.02.2020 duly served upon them being an admitted fact. Therefore, the contradictory statement of petitioners to the effect of service of the award made by them, evidently OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 17 of 27 suffice the service of notice and letter was duly effected upon them. Such facts were suppressed by the petitioner to create the illusion before the court to gain the benefit of innocence and the petitioners had not come with clean hands as such they are not all entitled to get the benefit of equity.
On merits, it was further denied that the award has been passed in collusion and in connivance with the respondent. It was further denied that the award was dictated under the instructions of respondent or that the Ld. Arbitrator did not apply his mind independently, judiciously, fairly and not acted according to the principle of natural justice. It is also stated that all the letters and notices were sent to the petitioner and were duly served upon them, however, despite service of those notices, the petitioner avoided the arbitration proceedings and kept them aside from the hearings. The doctrine of audi alterm parterm has been duly adhered to and the Ld. Arbitrator went in depth and decided the matter on merits.
It is further stated that the arbitration proceedings were concluded within one year from its commencement and the petitioner has filed the present application with malafide intention. It is also stated that as per the mandate of the said Act, the Arbitrator can opt its own procedure to conduct its arbitration process. It is denied that the Sole Arbitrator has failed to consider the cogent material on the record and did not follow the principle of natural justice on the record. It is further stated that the all the notices and letters were served upon the petitioner, as they were sent at the last known address of the petitioner. Therefore, it is stated that there was no infirmity or illegality in the award, which is OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 18 of 27 speaking award in accordance with the mandate of The Arbitration and Conciliation Act and the present objections are devoid of any merits.
4. Re-joinder has been filed by the petitioners to the reply filed by the respondent, in which the averments made in the application / petition have been reiterated and those made in the reply filed by the respondent have been denied.
5. I have gone through the rival contentions.
6. 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 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.
7. During the course of arguments, Ld. Counsel for the respondent admitted that the present objections have been filed within limitation, as prescribed u/S. 34(3) of The Arbitration and Conciliation Act, 1996, as it OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 19 of 27 has been stated by Ld. Counsel for the applicants that the copy of the award dated 27.02.2020 was received by them on 30.09.2020 and the present objections have been filed on 20.10.2020 i.e. within the period of limitation.
8. Further 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 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.
9. 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. 48,50,000/- in favour of the petitioners on 24.12.2015. The said loan was refundable by paying 180 monthly installments to the tune of Rs. 53,462/- per month and they had availed the said loan facility against the security of the immovable property bearing Plot No. 60, Kalyan Sampath Greens, Gram Kali Billod, Depalpur, Indore, M.P.
10. It is stated that the petitioners thereafter also approached the respondent for availing another house loan facility which was granted to the tune of Rs. 25 Lakhs vide loan account no. NHL/IND/ 1215/257698 OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 20 of 27 in favour of the petitioners on 25.12.2015. the said loan was refundable by paying 180 monthly installments to the tune of Rs. 30,408/- per month. It is stated that the said loan facilities were availed against the security of two immovable properties i.e. Plot No. 46, Kalyan Sampath Greens, Gram Kali Billod, Depalpur, Indore, M.P. and Plot No. 60, Kalyan Sampath Greens, Gram Kali Billod, Depalpur, Indore, M.P.
11. It is further stated in para 9 of the objections as under :
That the respondent dishonestly, fraudulently and maliciously had concealed the material facts that the respondent had issued the no dues certificate dated 24.11.2017 and that no dues certificate the respondent had certified the fact that Mr. Ajay Kumar Khandelwal and Babita Khandelwal had availed a loan A/C No.HOU/IND/1015/249286 and NHL/IND/1215/257698 for Rs.47.00 lacs and Rs.25.00 lacs and had mortgaged 2 properties out of those 2 properties we are releasing here with property No. Plot No.60, Kalyan Sampath Greens, Gram Kali Billod, Depalpur, Indore, Madhya Pradesh on receiving of Rs.38.00 lacs being part payment towards his loan...
12. However, in the reply, the said factum that the loans were issued against two separate account numbers has not been disputed. There is only a vague denial. In this regard, Ld. Counsel for the petitioners has relied upon the No dues Certificate (NDC), which reads as under :
This is to certify Ms. Ajay Kumar Khandelwal, and Babita Khandelwal had availed a loan (Loan a/c no. HOU/IND/1015/249286 AND NHL/IND/1215/257698) for Rs. 47.00 lacs and Rs. 25.00 lacs and ad OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 21 of 27 mortgaged 2 properties out of those 2 properties were are releasing here with property no. PLOT NO. 60, KALYAN SAMPATH GREENS, GRAM KALI BILLOD, DEPALPUR, Indore Madhya Pradesh on receiving of Rs. 38.00 lacs being part payment towards his loan.
13. From the perusal of the record, it appears that two separate loans were obtained by the petitioners and as a security for the same, they had mortgaged two properties, as stated in the objections. Be that as it may.
It is admitted between the parties that the following is the arbitration clause, as per the loan agreement Ex. CW1/B (colly).
10.8 Arbitration clause:
Any and all disputes, claims difference arising out of or in connection with loan documents and or the performance of the Loan documents 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 Parties. The place of Arbitration shall be in Delhi or any other place as arbitrator may decide and shall be in accordance with the provisions of the Arbitration and conciliation Act, 1996 and any statutory amendments thereof. The proceedings of Arbitration tribunal shall be conducted in English language. Each party has to bear cost of representing its case before the Arbitrator. The cost of Arbitration including fees and expenses of Arbitrator shall be shared equally by the parties unless the award otherwise provides.
Subject to this Article herein, the borrower(s) further agrees that all claims, difference and OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 22 of 27 disputes, arising out of or in relation to dealings/transaction made in pursuant to the loan documents including any question of whether such dealing, transaction have been entered into or not, shall be subject to the exclusive jurisdiction of the courts at Delhi only.
14. Now adverting to the main contention of the petitioners / applicants 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 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."
15. In the present case also, the power to appoint the sole arbitrator solely lies with the respondent. 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 OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 23 of 27 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, in view of the judgment relied upon by him in the written submissions namely Union of India Vs. Dhanwanit Devi (complete citation not given) is not applicable to the peculiar facts of the present case in my respectful view.
16. As discussed above, the 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.
17. 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.
18. With regard to the pre arbitration proceeding notices and other notices sent by the Ld. Arbitrator including the copy of the arbitration award, it is not disputed by ld. Counsel for the petitioners that the addresses at which they were sent were the last known or the correct addresses of the petitioners. It is not the case of the petitioners that the OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 24 of 27 said addresses mentioned in the arbitration record were not the correct addresses or the said addresses did not pertain to them.
19. It has 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.
20. 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 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 OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 25 of 27 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.
In view of the law laid down in the aforesaid judgment(s), Section 27 of the General Clauses Act gives rise to the presumption regarding due service of the notice(s), when it was sent at the correct address by registered post unless or until the contrary is proved by the addressee, service of notice will be deemed to have been effected at the time of which, the letter would have been delivered in the ordinary course of business.
21. Further in view of the law laid down in the judgment of the Hon'ble Delhi High Court Tata Capital Financial Services Ltd.(supra), which is squarely applicable to the facts of the present case. The said argument is not tenable and it cannot be argued by Ld. Counsel for the petitioners that the pre arbitration proceeding notices and other notices sent by the Ld. Arbitrator including the copy of the arbitration award were not duly served upon the petitioners.
22. With regard to another argument taken by the Ld. Counsel for OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 26 of 27 the petitioners that there is an error on the face of the record that the award dated 27.02.2022 passed by the Sole Arbitrator is illegal and infructuous because the Sole Arbitrator passed the award against both the properties, however, for the property bearing no. 60, the respondent has already issued NOC dated 24.11.2017 in favour of the petitioners / applicants.
It is settled law unless there is an error apparent on the face of the record, which makes it unsustainable, the award is not liable to be set aside. If the court comes to a different conclusion on the same facts as the court cannot reappraise the evidence and it is not open to the court to sit in appeal over the conclusion of the arbitrator, therefore, in view of the above position of law, the said argument is not legally tenable.
23. In view of the afore going discussion, this Court is satisfied that the award dated 27.02.2020 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. Parties to bear their own costs. File be consigned to record room.
Announced in the open court today on 16.11.2022.
(Sanjeev Aggarwal) District Judge (Commercial)-03 South, Saket Courts, New Delhi OMP (Comm) 23/2020 (CNR No. DLST01-005034-2020) Page No. 27 of 27