Delhi District Court
Mr. Raja Nand Sharma vs M/S Sushil Global Commodities Pvt. Ltd on 15 December, 2022
IN THE COURT OF SH. SUDHANSHU KAUSHIK :
ADDL. DISTRICT JUDGE-02 & WAQF TRIBUNAL :
PATIALA HOUSE COURTS : NEW DELHI
ARBTN NO.3340/2017
CNR NO.DLND01-005975-2017
IN THE MATTERS OF :-
MR. RAJA NAND SHARMA
HOUSE NO.148, W NO.5,
SHAMSHERPUR, PAONTA SAHIB,
HIMACHAL PRADESH-173025
.....PETITIONER
VERSUS
M/S SUSHIL GLOBAL COMMODITIES PVT. LTD.
12, HOMJI STREET, FORT,
MUMBAI-400001
.....RESPONDENT
DATE OF INSTITUTION : 23.05.2017
DATE OF CONCLUSION OF FINAL ARGUMENT : 17.11.2022
DATE OF PRONOUNCEMENT OF ORDER : 15.12.2022
DECISION : PETITION DISMISSED
ORDER
1. This is a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') whereby petitioner Raja Nand Sharma has challenged the ex-parte arbitration award dated 06.10.2012 passed by the Sole-Arbitrator Sh. Harbans Lal (hereinafter referred to as 'the Arbitrator').
Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 1 of 18
2. In terms of the award, the Arbitrator directed the respondent to pay a sum of Rs.2,30,776.71/- (Rupees Two Lac Thirty Thousand Seven Hundred Seventy-Six and Seventy-One paise) along with interest at the rate of 10% per annum from the date of filing of arbitration application till realization of the amount.
3. The brief facts as revealed from the record are;
A) Respondent Sushil Global Commodities Private Limited is a company registered as a Trading Member of Multi Commodity Exchange of India Limited (MCX).
B) Petitioner Raja Nanda Sharma opened a trading account with the respondent after executing a membership client agreement on 13.11.2009 and started trading in commodities through the respondent.
C) Pursuant to the directions issued by the petitioner from time to time, respondent carried out various transactions through the trading account and respondent was maintaining a statement of account of all the transactions. In respect of the transactions carried out by the petitioner, respondent issued electronic contract notes, which were duly forwarded on the petitioner's email ID.
Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 2 of 18 D) Respondent forwarded the statement of account for a sum of Rs.2,30,776.51/- to the petitioner and demanded the payment of the amount due in terms of the said statement in respect of the transactions carried out from 01.04.2010 to 14.03.2012 but petitioner failed to pay the outstanding amount.
E) Repeated reminders and demand notices dated 06.07.2021 and 22.07.2021 were sent to the petitioners to clear the outstanding amount but he failed to do so. Respondent issued demand notices dated 19.08.2011 and 01.12.2011 through its counsel but the same were returned back with remarks 'Addressee Left'. Notice dated 01.12.2011 was also sent at the official address of the petitioner and the same did not come back.
F) Respondent approached MCX on 05.04.2012 for resolving the dispute through arbitration. MCX forwarded the statement of claim of respondent and other relevant documents to the petitioner but the same were received back with report 'left without address'. Thereafter, MCX sent a reminder on the email of the petitioner but no response was received. MCX appointed the Arbitrator and the proceedings commenced.
Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 3 of 18 G) Notice of statement of claim filed by the respondent was issued to the petitioner with directions to submit reply and relevant documents. In addition, the notice was directed to be published in a daily Newspaper having circulation in the area where the respondent was residing. The notice was published in the Newspaper 'Divya Himachal' edition of 11.08.2012. Notice sent through registered post was received back undelivered with remarks 'insufficient address'. H) Arbitrator made an observation that the address mentioned on the registered post was exactly the same, which was disclosed by the petitioner in the KYC documents with MCX. After making these observations, Arbitrator proceeded ex-parte and finally passed the impugned award dated 06.10.2012.
4. The award has been challenged on the following grounds;
(a) That petitioner was never served with the notice of initiation of arbitration and the entire proceedings were conducted behind his back.
(b) That petitioner came to know about the award for the first time on 10.03.2017, after receiving summons from the court of ADJ, Distt. Sirmor at Nahan (Himachal Pradesh) where the execution petition was filed by the respondent.
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(c) That there could have been no outstanding liability as the transactions carried out by the petitioner used to be squared off against the margin money deposited by him.
(d) That the trading account of a client is maintained on daily basis and in case, there is any shortfall, the petitioner would have certainly deposited the same as per the norms of trading.
5. I have heard the rival submissions.
6. The petitioner has challenged the award primarily on the ground that the award was passed behind his back and he had no knowledge of the arbitration proceedings. Counsel for the petitioner has contended that the arbitrator wrongly went ahead with the arbitration proceedings by proceeding ex-parte against the petitioner. He has submitted that the petitioner came to know about the arbitration record only on 10.03.2017, after receiving summons from the court, where the execution of the award was filed by the respondent. He has mentioned that the summons from the executing court were received by the petitioner on 10.03.2017 and the present petition was filed within three months. He has mentioned that the period of limitation for filing the award started running only from 10.03.2017, when the petitioner gained knowledge about the award. He has submitted that although, the present petition was filed beyond a period of Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 5 of 18 30 days but it was well within the period of 90 days. Counsel has submitted that delay in filing the petition needs to be condoned. He has further mentioned that there was no outstanding liability and the Arbitrator wrongly proceeded ahead and passed the award. He has prayed that the award may be set aside.
7. On the other hand, counsel for the respondent has prayed that the petition deserves to be dismissed. He has submitted that the petition is devoid of merit. Counsel argued that the challenge to the award is not maintainable. He has argued that the award can be challenged only on the grounds set-out under Section 34 of the Act. Counsel has submitted that the scope of examining the validity of an award is very limited. He has submitted that the court is not competent to re-appreciate facts and question the validity of the award merely on account of the reason that a different view was possible on the same facts. He has contended that the court cannot substitute its own opinion for the findings given by the Arbitrator. He has argued that so long as the finding of the Arbitrator is based on evidence and facts brought on record during the arbitration proceedings, the court cannot over turn the finding. He has argued that the arbitrator made an observation in the Award that MCX took up the matter with the petitioner and forwarded him the relevant documents for filing reply. He has mentioned Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 6 of 18 that it was also observed by the Arbitrator that MCX had also issued an email to the respondent. Counsel has submitted that the Arbitrator also tried to effect the service upon the petitioner. He has mentioned that the Arbitrator made an observation that the address furnished on the envelope of the notice sent to the petitioner was the same as disclosed by him in the Membership Client Agreement and KYC. Counsel has submitted that there is an inordinate delay in filing the petition and the petition is not accompanied with application seeking condonation of delay. He has mentioned that the Award was passed on 10.02.2012, whereas the present petition was filed on 02.05.2017. He has mentioned that petitioner has failed to furnish explanation for the delay in filing the petition. He has argued that the award has not been challenged on the grounds mentioned under Section 34 of the Act and the same can not be set-aside merely on the ground that it was an ex-parte award. He has contended that the finding given by the Arbitrator cannot be re-appreciated by the court while deciding a petition under Section 34 of the Act. He has submitted that the court dealing with the petition under Section 34 of the Act is not sitting as a court of appeal against the award passed by the Arbitrator. He has mentioned that there is nothing which may show that the award is unfair and unreasonable. He has argued that the petitions should be dismissed. Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 7 of 18
8. I have perused the record in the light of respective arguments.
9. The grounds for setting aside of an award have been enumerated under Section 34 of the Act, which reads as under;
"34. Application for setting aside arbitral award - (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3).
(2) An arbitral award may be set aside by the Court only if-
(a) the party making the application furnishes proof that i. a party was under some incapacity, or ii. the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any Indication thereon, under the law for the time being in force; or iii.the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or iv. the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or v. the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that;
i. the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or ii. the arbitral award is in conflict with the public policy of India.
Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 8 of 18 Explanation 1: For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if;
i. the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or ii. it is in contravention with the fundamental policy of Indian law; or iii. it is in conflict with the most basic notions of morality or justice.
Explanation 2: For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence".
10. While interpreting and defining the scope and extent of judicial intervention for setting aside an award, the Apex Court has observed in the matter of "Delhi Airport Metro Express Private Limited Vs Delhi Metro Rail Corporation Limited" (2022) 1 SCC 131 that while deciding applications filed under Section 34 of the Act, courts should strictly act in accordance with and within the confines of Section 34 of the Act. It was held that the Courts would refrain from appreciating or re-appreciating the matters of fact as well as law. The Apex Court made an observation that the court dealing with the application under Section 34 of the Act is not authorized to dissect and re-access the factual aspects of the case. The Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 9 of 18 observation contained in para-28 of the judgment aptly summarizes the scope of judicial intervention.
"28....There is a disturbing tendency of courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. This approach would lead to corrosion of the object of the 1996 Act and the endeavors made to preserve this object, which is minimal judicial interference with arbitral awards. That apart, several judicial pronouncements of this Court would become a dead letter if arbitral awards are set aside by categorizing them as perverse or patently illegal without appreciating the contours of the said expressions...."
11. While dealing with the scope of challenging the award on the ground that it is against the 'public policy', it has been observed by the Hon'ble Supreme Court in case of "Associate Builders Vs DDA" 2015 (5) SCC 49 that it must be clearly understood that when a court is applying the 'public policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of facts cannot be corrected. The court held that a possible view by the Arbitrator on facts as necessarily to pass muster as the Arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award.
12. The Court observed in Delhi Airport Metro's case (supra) that 'Patent illegality' should be an illegality which goes to the root of the matter. It Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 10 of 18 was held that every error of law committed by the Arbitral Tribunal would not fall within the expression patent illegality. The court observed that mere erroneous application of law cannot be categorized as patent illegality. It was further observed that contravention of law not linked to public policy or public interest is beyond the scope of the expression patent illegality. The court held that the Courts dealing with the applications under Section 34 are prohibited to re-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as courts do not sit in appeal against the arbitral award. The observations made in this regard in para No.29 of the Judgment are as under;
"29...the permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression patent illegality."Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 11 of 18
13. In Delhi Airport Metro Express case (supra), the Apex Court interpreted the expression 'Public Policy of India' and cited with approval the decision in "Ssangyong Engineering and Construction Company Limited vs National Highways Authority of India (NHAI)" (2019) 15 SCC 131 wherein it was observed as under;
"34. What is clear, therefore, is that the expression public policy of India, whether contained in Section 34 or in Section 48, would now mean the fundamental policy of Indian law as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA i.e. the fundamental policy of Indian law would be relegated to Renusagar (supra) understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd, as explained in paras 28 and 29 of Associate Builders, would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2) (a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders.
35. It is important to notice that the ground for interference insofar as it concerns interest of India has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the most basic Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 12 of 18 notions of morality or justice. This again would be in line with paras 36 to 39 of Associate Builders, as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of Associate Builders, Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco [ONGC, as understood in Associate Builders, and paras 28 and 29 in particular, is now done away with."
14. Coming to the facts of the present matter. In the present matter, the petitioner has challenged the award only on the ground that it was passed ex-parte. It has been the sole line of argument of the petitioner that the award deserves to be set-aside because it was passed ex-parte. At best, petitioner's case, as disclosed in the petition, could be that his case falls under Section 34 (2)(a)(iii) of the Act as he was not given proper notice of the appointment of Arbitrator or the arbitral proceedings or that he was otherwise unable to present his case. He has not challenged the award on any other grounds mentioned under Section 34 of the Act.
15. It is an admitted position that the present petition has been filed beyond the mandatory period of three months as prescribed under Section 34(3) of the Act. Petitioner has contended that he had no information that the ex- Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 13 of 18 parte award has been passed against him. He has submitted that he gained information about the award only after receiving summons from the court where the respondent filed the execution petition in respect of the award. He has mentioned that the summons in the execution petition were received by him on 10.03.2017 and thereafter, he filed the present petition on 02.05.2017. He has contended that the limitation period needs to be counted from the date of knowledge and therefore, the award has been filed within limitation.
16. Record shows that before the appointment of Arbitrator, MCX forwarded an email on 12.05.2012 at the email address provided by the petitioner in the KYC document. It was disclosed in this email that that Arbitrator shall be appointed under the Bye laws of the exchange but no response was received. On initiation of arbitration, Arbitrator made sincere efforts to get the petitioner served with the notice of initiation of arbitration proceedings by sending postal communication at the address of petitioner but the same was received back with remarks 'insufficient address'. The Arbitrator made an observation that petitioner has furnished the same address in the KYC document submitted by him at the time of executing the Membership Client Agreement. The observations made by the Arbitrator find support from the record. The notice of the Arbitrator was sent to the Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 14 of 18 petitioner at the address furnished in the KYC. Notice was also published in a local Newspaper 'Divya Himachal' edition of 11.08.2012. Thereafter, the Arbitrator observed that sufficient opportunity has been granted to the petitioner but he has failed to appear and therefore, he is being proceeded ex-parte.
17. Section 18 of the Act mandates that the parties shall be treated with equality and each party shall be given full opportunity to present his case. In the present matter, the Arbitrator made sincere efforts to get the notice served on the petitioner by sending it through post at the address provided by him in the KYC document. Apart from this, the notice was also published in the daily Newspaper having circulation in the year where the petitioner was residing. In view of this, it can not be concluded that the parties were not treated with equality and each party was not given full opportunity to present his case. The petitioner was well aware of the fact that arbitration proceedings are going to be initiated as MCX had already forwarded an intimation to him on his email but he did not bother to revert to the email or inquire about the initiation of the arbitration proceedings. In view of this, no fault can be attributed to the Arbitrator, who gave a fair & reasonable opportunity to the petitioner by trying to effect service upon him by usual mode.
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18. Record further demonstrates that after passing of the award on 06.10.2012, the copy of the award was sent at the address of the petitioner but the same was returned back on 23.10.2012 with remarks 'refused'. Thus, in such circumstances, nothing more could be expected from the Arbitrator. Evey possible effort was made to serve the petitioner by usual modes. Having failed to effect the service of initiation of arbitration by usual modes, Arbitrator effected the service by way of publication and thereafter proceeded ex-parte. On passing of the award, a copy of the award was sent at the address provided by the petitioner but the same was returned back with remarks 'refused'. The present petition has been filed after a gap of more than five years after passing of the impugned award and it is not accompanied with any application seeking condonation of delay.
19. Petitioner has mentioned that he came to know about the award only after receiving summons from the executing court on 10.03.2017. Even if this contention is accepted, still, the award can not be set-aside merely on the ground that it was an ex-parte award. There is material on record to show that proper notice of the appointment of the Arbitrator and the arbitral proceedings was given to the petitioner, therefore, the ground available under Section 34(2)(iii) of the Act is not made out. The petitioner has not Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 16 of 18 challenged the award on any other ground. I have perused the award and the same appears to be a well reasoned award. The Arbitrator passed the award on the basis of statement of account of the petitioner after observing that various cheques given by him as margin money were dishonoured.
20. Petitioner has not denied the opening of the trading account. He has, in fact, admitted that he used to do trading on MCX platform through the respondent. He has mentioned that he used to deposit the margin money through cheque. The award was passed by the Arbitrator on the basis of the statement of account, wherein, the transactions carried out by the petitioner were duly reflected. The Arbitrator took note of the fact that electronic contract notes were forwarded to the petitioner. The electronic contract notes were sent at the registered email of the petitioner. The Arbitrator took into account that the statement of account was duly dispatched to the petitioner. At no point of time, petitioner lodged any complaint about the trade transactions reported on his email. Respondent was maintaining a running account of the petitioner wherein the transactions done by him were duly reflected. The payments received from the petitioner were also reflected in the said account. Taking note of all these facts, the Arbitrator passed the award. The provisions of Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 17 of 18 arbitration and conciliation have been put in place to expedite the process of adjudication specially in commercial matters. The Arbitrator award can not be set-aside merely because one of the parties did not participate in the arbitration proceedings even through, every effort was done to ensure its presence. In case, the arbitration award is set-aside merely because it was passed ex-parte, it would amount to rewarding a party, who managed to remain absent during the arbitration proceedings. That could not be the intention of the legislature in enacting the Act.
21. In the present matter, petitioner was given proper notice of the appointment of Arbitrator as well as arbitral proceedings. The petitioner has failed to demonstrate that he was otherwise unable to present his case. The award is well reasoned and based on irrefutable evidence. I find no merit in the petition filed by the petitioner under Section 34 of the Act. Same is dismissed.
22. Arbitral Record be sent back to the concerned Arbitrator.
23. File be consigned to Record Room after due compliance. Announced in open Court on 15.12.2022 (Sudhanshu Kaushik) Addl. District Judge-02 & Waqf Tribunal, New Delhi District, Patiala House Courts, New Delhi/15.12.2022 Arbtn.No.3340/2017 Raja Nand Sharma Vs. M/s. Sushil Global Commodities Pvt. Ltd. Page 18 of 18