Delhi District Court
Khurshid And Anr vs M/S Shriram Transport Finance Company ... on 4 April, 2024
In the court of Shri Naresh Kumar Laka
District Judge - 07, Central,
Tis Hazari Courts, New Delhi
ARBTN DJ No. 56/21
CNR NO. DLCT01-005081-2021
In the matter of:
1. Khurshid
S/o Sh. Nawab Khan,
R/o H.No. 54/01, Village - Guraksar,
Tehsil - Hathin, Distt. - Palwal,
Haryana.
2. Lallu,
S/o Sh. Ebaj,
R/o H. No. 23/02, Village Panchnaka,
Tehsil -Hathin, District - Palwal,
Haryana.
..... Petitioners
VERSUS
M/s Shriram Transport Finance Co. Ltd.
Registered Office - Mookambia Place 3rd Floor,
Lady Desika Road No. 4, Chennai-600004.
Branch office at-
Near Alwalpur Chowk,
Above Punjab National Bank Palwal,
Tehsil & District Palwal, Haryana.
..... Respondent
ARBTN DJ No. 56/21 Page No. 1 of 9
Khurshid and Anr. Vs. M/s Shriram Transport Finance Co. Ltd.
Date of Institution : 27.03.2021
Arguments concluded on : 30.03.2024
Date of decision : 04.04.2024
Result : Petition allowed.
Petition/Application under Section 34 of the Arbitration and
Conciliation Act, 1996.
JUDGMENT
The Present petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the arbitration award dated 09.06.2015 passed by Sh. I.C. Tiwari, Ld. Sole Arbitrator. Reply to the said application has been filed on record on behalf of the respondent. I have heard argument at length on the said petition from Sh. Chandan Prajapati, Ld. Counsel for petitioner and Sh. Mohit Chawla & Sh. Ankit Kr. Tyagi, Ld. Counsel for respondent. Record perused.
2. It is an admitted fact that a loan was advanced to the petitioner by the respondent for financing a vehicle vide the loan agreement dated 18.02.2013. The arbitration proceedings were initiated on the ground that petitioner defaulted in making payment of the EMIs and even the hypothecated vehicle was also repossessed by the respondent and sold in auction and its amount is claimed to have been adjusted in the total ARBTN DJ No. 56/21 Page No. 2 of 9 Khurshid and Anr. Vs. M/s Shriram Transport Finance Co. Ltd. outstanding amount.
3. After holding proceedings, the Ld. Arbitrator passed an exparte award directing the petitioners to pay the amount of Rs.2,05,526/- along with interest @ 12% per annum with effect from 26.09.2014 till the date of realization. Some miscellaneous cost were also imposed upon the petitioner towards arbitration proceedings, counsel fees etc.
4. In the present petition, the petitioners challenged the manner of appointment of the Arbitrator, the ex parte proceeding conducted by the Ld. Arbitrator and passing of the final award. It is further alleged that various procedure lapses were committed by the Ld. Arbitrator. On the other hand, the Ld. Counsel for the respondent argued that the present petition is beyond the period of limitation and only on this ground alone, it deserves to be dismissed. He further argued that the petitioner no. 1 paid only few installments and he did not adhere to the financial discipline in making the outstanding amount as well as the EMIs. It is further argued that the present petition has been filed just to delay the execution of the arbitration award and to abuse the process of law.
5. The petitioner no. 1 claimed that his vehicle was taken away by the respondent on 25.12.2013 and at that time, its value was around Rs.3,00,000/- and he was informed that the remaining outstanding amount will be adjusted with the said amount and thereafter the petitioner did not ARBTN DJ No. 56/21 Page No. 3 of 9 Khurshid and Anr. Vs. M/s Shriram Transport Finance Co. Ltd. hear anything from the side of the respondent. He claimed that only after five years, a notice of execution proceeding was received on 05.01.2020 from the District Court of Palwal and before the said notice, no demand letter or any legal notice was served upon the petitioners.
6. It is claimed that after receiving the notice of execution, the counsel for the petitioner approached the Ld. Arbitrator and applied for certified copy of arbitration award dated 16.03.2020, but the signed or certified copy of the arbitration award was not provided to him on the ground that the same was not traceable. The petitioners then filed a petition before a court, but the same was withdrawn on 15.03.2021 as certified copy of the award was not made available. It is further stated that the attested copy of photocopy of the arbitration award was filed before this court only on 10.11.2022 by the respondent, therefore, the period of limitation starts from the said date only.
7. The Ld. Counsel for the petitioner further submitted that as per the provision of the Arbitration Act, there is a mandate of supplying the signed copy of the arbitration award to the parties but it was not complied by the Ld. Arbitrator and the respondent. Therefore, when the original arbitration award was not traceable, it can be said that the period for the purpose of counting the limitation did not start until 10.11.2022. The present petition was filed before this court on 30.03.2021, therefore, this court holds that the same is within the period of limitation, counting the ARBTN DJ No. 56/21 Page No. 4 of 9 Khurshid and Anr. Vs. M/s Shriram Transport Finance Co. Ltd. period of limitation from 10.11.2022.
8. The Ld. Counsel for the petitioners further argued that no notice of the appointment of Arbitrator was served. However, the counsel for the respondent argued that it has been mentioned in the arbitration award itself that the notice was served. From the perusal of the arbitration award, it is seen that there is no mention with regard to sending of information to the petitioner about the appointment of Arbitrator though notice of the arbitration proceeding was sent to the petitioners. There is a difference in sending the information before appointment of the Arbitrator and sending the notice of the arbitration proceedings inasmuch as petitioners also had a right to challenge the appointment process of the Arbitrator or to suggest any other Arbitrator. The Arbitrator has to be appointed on the mutual consent of the parties or as per the terms of contract. In the arbitration clause of the loan agreement, no name of the Arbitrator was provided and the entire discretion has been given to the respondent to appoint an Arbitrator unilaterally. In all fairness, in the absence of specific name of the Arbitrator, mentioned in the loan agreement, this court can say that there was no consent of the petitioners for appointing any Arbitrator unless they were informed or consulted before the appointment of Arbitrator. There is nothing on record to suggest that the petitioner no. 1 was ever informed that Sh. I.C. Tiwari was being appointed as Arbitrator, nor there is notice in this regard on record.
ARBTN DJ No. 56/21 Page No. 5 of 9Khurshid and Anr. Vs. M/s Shriram Transport Finance Co. Ltd.
9. It is further argued that the notice of the arbitration proceeding was never served upon the petitioner. On the other hand, the counsel for the respondent stated that in the arbitration award it is itself mentioned that the notice was sent through registered AD post to the petitioner, but the same was received unserved with the report that he was not residing at the said village. It was further stated that the notice sent to the respondent no. 2 (guarantor of the petitioner) was not received back as served or unserved. It is further mentioned that another envelop containing statement of claim was sent to the respondent no. 1 (petitioner) which was received with the report "refused" and the notice sent to the respondent no. 2 (guarantor) received with the report that despite several visits, he was not found at the given address. Ultimately, the respondent no. 1 and 2 were served through publication in the newspaper and when no one appeared, both the respondents were proceeded ex parte.
10. No doubt as per Section 3 of the Arbitration Act, there is a presumption of service when a notice has been sent at a given address through registered post, but this court is of the considered opinion that when the notice was received back with the report that the petitioner no. 1 was not residing in the said village, efforts should have been made to ensure the correctness of the said address of the petitioner no.1. Even the report of refusal of second notice does not bear any signature of the petitioner and it is not clear as to who had refused the said notice. As such, this court holds that there was no proper service upon the petitioners and no ARBTN DJ No. 56/21 Page No. 6 of 9 Khurshid and Anr. Vs. M/s Shriram Transport Finance Co. Ltd. genuine efforts were made in this regard.
11. It is further argued that as per the Section 12 of the Arbitration Act, a disclosure statement was required to be made by the Arbitrator as to in how many cases of same party, he was appointed as an Arbitrator and it is argued that if an Arbitrator is appointed in more than 3 cases on behalf of the same party, then it goes to the root of the matter to reflect biasness on the part of the Arbitrator. In this regard, the counsel for the petitioner relied upon upon following:
i) Ministry of Health & Family Welfare and Anr Vs. Hosmac Projects Division of Hosmac India Pvt. Ltd. FAO(OS) (COMM) 326/2019.
ii) Dakshin Naryana Bijli Vitran Nigam Ltd. Vs. Navigant Technologies Pvt. Ltd. (2021) 7 SCC 657.
iii) In Re Cognizance for extension of limitation Suo Moto Writ Petition (C) 3 of 2020.
iv) Dulal Poddar Vs. Executive Engineer, Dona Canal Division & Ors. (2004) 1 SCC 73.
v) MS Mittal Pigments Pvt. Ltd. Vs. MS Gail Gas Limited O.M.P. (COMM) 509/2020.
vi) Bindiya Ajay Chawla Vs. Citi Financial Consumer Finance India Ltd. & Ors. 2012 SCC OnLine Bom 208.
vii) Ram Kumar & Anr. Vs. Shriram Transport Finance Co. Ltd. FAO(COMM) 60/2021.
viii) Alka Sachdeva Vs. Bhasin Infotech and Infrastructure Pvt. Ltd. O.M.P. (COMM) 239/2022.
ix) Dhananjay Vs. The Union of India & Ors. Civil Writ Jurisdiction Case No. 3456 of 2021, decided on 19.05.2023.
12. On the said point, the following observation of Supreme Court ARBTN DJ No. 56/21 Page No. 7 of 9 Khurshid and Anr. Vs. M/s Shriram Transport Finance Co. Ltd. in the matter of Ram Kumar & Anr. Vs. Shriram Transport Finance Co. Ltd. FAO(COMM) 60/2021 are relevant to the present case:
"This Court is of the view that the approach of the learned Commercial Court is flawed. Unilateral appointment of the Arbitrator by the respondent is impermissible. The fact that the learned Sole Arbitrator had been engaged in a number of matters by the respondent is, concededly, a material fact that would raise justifiable grounds as to his independence and impartiality. Thus, in addition to being ineligible as an arbitrator under Section 12(5) of the A&C Act, the grounds giving rise to justifiable doubts as to the independence and impartiality exist in the present case. The learned Sole Arbitrator was required to disclose in writing such circumstances which are likely to give rise to justifiable doubts as to his independence and impartiality, but he had failed to make any such disclosure. In our view, since the grounds giving rise to justifiable doubts as to impartiality exist, failure to make such disclosure vitiates the arbitral proceedings and the impugned award."
13. In the entire arbitration award, there is no disclosure as to in how many cases, the said Arbitrator was appointed and there is no disclosure of the said Arbitrator in this regard. The Ld. counsel for the petitioners has drawn attention of this court on the newspaper whereby notice of the arbitration proceeding was served upon the petitioners. He pointed out that in the said newspaper, various notices were published on behalf of M/s Shriram Transport Finance Company (respondent herein), which shows that the same Arbitrator was appointed on behalf of the said company in many other cases. This court finds substance in the said argument. From the perusal of the said newspaper, it is observed that in as ARBTN DJ No. 56/21 Page No. 8 of 9 Khurshid and Anr. Vs. M/s Shriram Transport Finance Co. Ltd. many as 29 notices which were published in the name of Sh. I.C. Tiwari, Sole Arbitrator, respondent was M/s Shriram Transport Finance Company. Therefore, this fact clearly shows that concerned Arbitrator violated the mandate of the arbitration law and on this ground alone, he was disqualified to be appointed as an Arbitrator in the arbitration proceeding in question.
14. In the right of aforesaid facts, this court holds that the Arbitrator was not appointed as per law, the ex parte proceedings were also not conducted in all fairness and there are other violation of provisions of the Arbitration Act. Therefore, the present petition is allowed and the impugned arbitration award dated 09.06.2015 is set aside as per Section 34(2)(iii) & (v) of Arbitration and Conciliation Act, 1996. The respondent company is however, at liberty to initiate fresh arbitration proceeding, if desired, as per law. File be consigned to record room.
Digitally signed by NARESH NARESH KUMAR
Announced & dictated in KUMAR LAKA
Date: 2024.04.04
the open court on 04.04.2024 LAKA 16:00:23 +0530
(Naresh Kumar Laka)
District Judge-07
Central, THC, Delhi
ARBTN DJ No. 56/21 Page No. 9 of 9
Khurshid and Anr. Vs. M/s Shriram Transport Finance Co. Ltd.