Delhi District Court
M/S Omauli Agro Exports vs M/S Small Farmers Agri Business ... on 7 April, 2026
IN THE COURT OF DISTRICT JUDGE
(COMMERCIAL COURT-2)
SOUTH DISTRICT, SAKET COURTS : NEW DELHI
OMP (COMM) 44/2025
1. M/s. Omauli Agri Exports
Through Proprietorship Firm
C/o. Mr. D.P.Bhandari,
60-A, Market Yard,
Latur -413512, Maharashtra.
2. Mr.Om Prakash R.Bhandari
M/s.Omauli Agri Exports
C/o. Mr. D.P.Bhandari,
60-A, Market Yard,
Latur -413512, Maharashtra.
....Petitioners
Versus
1. Small Farmers Agri-Business Consortium
Regd.Office:-NCUI Auditorium Building
5th Floor, Siri Institutional Area,
August Kranti Marg, New Delhi.
....Respondent
Date of filing : 27.08.2025
Date of reserving order : 19.03.2026
Date of order : 07.04.2026
ORDER
1. This is a petition under section 34 of the Arbitration and Conciliation Act, 1996 seeking setting aside of arbitration OMP (COMM) 44/25 page no. 1 of 12 M/s. Omauli Agro Exports & Ors.
Vs. M/s. Small Farmers Agri Business Consortium award dt.06.05.2025 passed by Ld. Sole Arbitrator Dr.Alok Srivastava.
2. Brief facts are that petitioner no.1 M/s. Omauli Agri Exports is the proprietary concern represented by its proprietor Mr.Om Prakash R.Bhandari i.e petitioner no.2. It is stated that petitioner no.2 established a business of exports of grapes from Gat No.289, Village Astha District Latur in his 40 acres land by using an advanced technology and encouraged the other adjoining regional farmers to grow grapes.
3. In the course of business of export of grapes petitioner required to build a cold storage unit and for this purpose petitioner borrowed a loan of Rs.100 lakhs approx. from Bank of Maharashtra, which was a term loan and it could be repaid as schedules.
4. Respondent, Small Agri-business consortium, is a society under Department of Agriculture and cooperation, Ministry of Agriculture, Govt. of India (SFAC) established with an object to provide Venture Capital Assistance, mainly provides financial assistance in addition to term loan sanctioned by Nationalized Bank called as lending bank of their recommendation.
5. On request of petitioner, respondent i.e SFAC entered into an OMP (COMM) 44/25 page no. 2 of 12 M/s. Omauli Agro Exports & Ors.
Vs. M/s. Small Farmers Agri Business Consortium agreement on 25.08.2006 with petitioner M/s. Omauli Agro Exports. This agreement was for SFAC to provide VCA to Omauli Agro Exports for an amount of Rs.23.71 lakhs for establishing an agribusiness project for grading, packaging, pre-cooling, cold storage and export facility of agriculture produce and a term loan was provided to Omauli Agro Export by the lending bank, Bank of Maharashtra.
6. The VCA was to automatically get converted into loan from the date the lending bank would have recovered the term loan provided to Omauli Agro Exports or on the end date of term loan whichever was earlier and the converted loan would remain secured by creation of charge (mortgage and hypothecation) in favour of SFAC on the project assets previously held by the lending bank and till such time as the converted loan with interest accrued to SFAC was repaid. The agreement also included a provision that if the borrower Omauli Agro Exports did not repay to the SFAC in lump sum immediately after repayment of bank loan, the amount would be converted into loan and the borrower OAE would be required to pay the entire amount of loan together with accrued amount of interest in four quarterly installments and the rate of interest would be the same as charged by the bank on its term loan.
7. According to the agreement, borrower was to submit its OMP (COMM) 44/25 page no. 3 of 12 M/s. Omauli Agro Exports & Ors.
Vs. M/s. Small Farmers Agri Business Consortium balance sheet/financial statement duly signed by a chartered accountant every year to SFAC. In the event the borrower was unable to repay the outstanding liabilities to SFAC and if there was a dispute concerning the agreement, the dispute was to be referred for adjudication through arbitration to the Indian Council of Arbitration, New Delhi.
8. The loan borrowed from lending bank was of Rs.1,00,00,000/-
and financial assistance provided by respondent was to the extent of Rs.23.71 lacs and these amounts were spent to construct the cold storage godown to promote the export of grapes to the other countries.
9. It is submitted that on 17.09.2015 respondent initiated arbitral proceedings against the petitioner. Since by then the petitioner had not repaid the bank term loan hence the claim of respondent was rejected being premature. Petitioner had repaid the term loan of Bank of Maharashtra on 04.04.2018. Present arbitral proceedings were filed on 30.04.2024.
10.The award has been challenged on the ground that Ld. Arbitrator took up perverse plea that since respondent company did not supply yearly balance sheet every year hence the cause of action cannot be said to have begun on 04.04.2018 but began when the statement of defence was filed by petitioner on 12.02.2025 before the Ld. Arbitrator; that OMP (COMM) 44/25 page no. 4 of 12 M/s. Omauli Agro Exports & Ors.
Vs. M/s. Small Farmers Agri Business Consortium Ld.Arbitrator failed to appreciate the basic law that debtor should follow the creditor. It is stated that SFAC being Govt. Institute was duty bound to have taken note of the fact whether the loan of lead bank had been paid by petitioner or not. The limitation was not contingent on the fulfillment of covenant of the petitioner whether he has given the statement to the bank or not. That impugned award is liable to be set aside in as much as claimant has failed to comply with mandatory provisions of service of notice u/s.21 of Arbitration and Conciliation Act invoking Arbitration Proceedings; that notice u/s. 21 being the start of arbitration proceedings has to be mandatorily served within period of limitation of 3 years from cause of action; that even if it is assumed though not admitted that claimant has served the notice even then ipso facto, the present notice is barred by limitation; that present claim petition itself is hopelessly time barred; that Ld. Arbitrator failed to appreciate that it is undisputed and admitted case of parties that venture capital assistance (VCA) granted by claimant was repayable to the claimant by respondent only after the repayment of term loan of lending bank i.e Bank of Maharashtra. The term loan of lending bank has been repaid by respondent on 04.04.2018 and cause of action to file present arbitration proceedings is three years from the date of repayment of term loan of lending bank by respondent, which period expired on 03.04.2021.
OMP (COMM) 44/25 page no. 5 of 12 M/s. Omauli Agro Exports & Ors.
Vs. M/s. Small Farmers Agri Business Consortium
11.Reply to the petition was filed by respondent. It is stated that it is an admitted fact that the repayment of term loan of the lending bank was done on 04.04.2018. The petitioner had an opportunity to repay the VCA if it was not paid immediately after repayment of the term loan when it was converted into loan within one year i.e by 04.04.2019. Therefore, the cause of action would arise after expiry of one year from 05.04.2018 i.e on 04.04.2019. It is stated that issue of limitation was discussed in detail by Ld. Arbitrator in para no. 15 to 22 of the Award. It is stated that petitioner hid the fact of repayment of term loan to the lending bank on 04.04.2018. Respondent was bound by the agreement to let the respondent know the date of repayment of term loan of lending bank. Had the petitioner submitted the balance sheet to the respondent every year, the respondent would have known the repayment of term loan from the balance sheet. Respondent came to know about repayment of term loan when petitioner filed his statement of defence on 12.02.2025 hence, cause of action for respondent continued from 05.04.2018 till 12.02.2025. It is stated that lending bank is not a party to the agreement dt.25.08.2006 which was executed solely between petitioner and respondent. It is well settled legal principle that debtor is required to comply with the demands of creditors which he has failed to do. It is stated that notice dt. 27.04.2024 was sent by counsel of respondent to petitioner through email followed by request letter dt.30.04.2024 to ICA for appointment of an Arbitrator OMP (COMM) 44/25 page no. 6 of 12 M/s. Omauli Agro Exports & Ors.
Vs. M/s. Small Farmers Agri Business Consortium subsequent to invocation of arbitration clause contained in agreement dt. 25.08.2006. It is stated that notice was served to the respondent (petitioner herein) and that too within limitation of three years.
12.Arguments heard. Record perused.
13.It is stated that as per article 137 of Limitation Act the limitation for invocation of arbitration clause was 3 years from the date of cause of action. The petitioner had cleared the term loan of the lending bank on 04.04.2018, whereafter cause of action arose in favour of the respondent. The three years period expired on 03.04.2021. It is stated that even if the benefit of the judgment of Hon'ble Supreme Court in Suo Moto Civil Writ Petition No.03/2020 is given to the respondent, the claim would be barred by limitation. The case of the respondent as also the finding of Ld. Arbitrator in the award is that the petitioner was bound under the agreement to inform the respondent about the closure of term loan. It is stated that the petitioner never informed the respondent about the repayment of loan to the principal bank in 2018 and therefore, the limitation for instituting arbitration could begin only upon respondent's acquiring the knowledge about repayment of loan of the lending bank by the petitioner. The relevant facts in this regard are that the petitioner had taken one loan from the Bank of Maharashtra and VCA of 23 lakhs OMP (COMM) 44/25 page no. 7 of 12 M/s. Omauli Agro Exports & Ors.
Vs. M/s. Small Farmers Agri Business Consortium from the respondent. As per the terms the loan of respondent was to be repaid by the petitioner after it had paid the loan of the bank. Relevantly, the respondent had initiated arbitral proceedings earlier also, which however, were declined on the ground that the cause of action would accrue only after the respondent had cleared the dues of the lending bank. That being so and in terms of clause 10 of the agreement, the onus was on the petitioner to have informed the respondent about the conclusion of bank loan. Admittedly, there was no agreement between the respondent and the lending bank or any other mode through which the respondent could have found as to when the loan was repaid by the petitioner. The petitioner thus was obligated to have informed the respondent about the closure of its loan with the bank and to have started repaying the loan of the respondent.
Apparently, the petitioner turned dishonest and did not inform the respondent about the repayment of loan of lending bank and further did not start paying the dues of the respondent. The respondent as it had done earlier again initiated arbitral proceedings and found only after the written statement was filed by respondent that term loan stood concluded. The petitioner therefore, wants a double benefit out of situation, firstly by having avoided the payment at the time of first arbitral proceedings on the ground of it being pre-mature and then on the ground of limitation having expired while remaining dishonest in not disclosing to the OMP (COMM) 44/25 page no. 8 of 12 M/s. Omauli Agro Exports & Ors.
Vs. M/s. Small Farmers Agri Business Consortium respondent as to when the said loan was finally repaid. At the cost of repetition it is to be noted that there was no way with the respondent except for the petitioner's providing the information as per clause 10 of the agreement, which the petitioner did not do, to have found the date on which the term loan stood paid. The respondent otherwise could have tried to find the same by trial and error method by having instituted the arbitration proceedings which it did twice.
14.It has been argued that limitation was not contingent on the fulfillment of covenant of the petitioner whether he has given the statement to the bank or not. The petitioner, however, has not been able to explain as to how in absence of this the respondent was supposed to know as to when the petitioner had cleared the loan. It is not the case of petitioner that it had provided such documents at any point of time to the respondent from which the respondent could have found as to when the loan of the petitioner would stand repaid finally. If the term of the payment itself was that it will become due after the petitioner had repaid the loan of lead bank, it was only for the petitioner to have disclosed to the respondent that it had repaid the loan actually by submitting the regular statements of account and not the respondent to have followed with the lending bank, which in any case was not obligated to inform to the respondent anything. There was thus only one way with the respondent to have come to know about this fact OMP (COMM) 44/25 page no. 9 of 12 M/s. Omauli Agro Exports & Ors.
Vs. M/s. Small Farmers Agri Business Consortium which was through petitioner and the petitioner cannot be allowed to take benefit of its own wrong in having not informed to the respondent about the repayment of loan of lead bank and then trying to say that petition was time barred. There is nothing wrong with the reasoning of Ld. Arbitrator having been given on the issue of limitation warranting intervention of the court under section 34 of the Arbitration & Conciliation Act.
15.The petitioner is challenging the notice u/s.21 given by the respondent for appointment of arbitrator. Petitioner has placed reliance on the judgment of Hon'ble Delhi High Court in Amit Guglani Vs. L & T Housing Finance Ltd. through Managing Director (Del) 2023 Lawpack (Del) 96149. The said order was passed in a petition u/s. 11 (6) of the Act filed for appointment of the arbitrator. It was while considering the plea of appointment of arbitrator that the court held that the notice given before initiation of arbitration was not proper. Same was the finding in the other judgment relied by the petitioner being M/s.D.P. Construction Vs. M/s.Vishvaraj Environment Pvt. Ltd., 2022 SCC Online Bom. 1410. The notice in the said case said that the party shall be constrained to such redressal of his grievance by approaching the competent court of law (sic).
16.Per contra, in the instant matter the arbitrator was appointed OMP (COMM) 44/25 page no. 10 of 12 M/s. Omauli Agro Exports & Ors.
Vs. M/s. Small Farmers Agri Business Consortium by Indian Council of Arbitration after the issuance of notice by the respondent to the petitioner. Ld. Arbitrator dealt with the argument of petitioner. Ld. Arbitrator quoted from the notice sent through email dt.27.04.2024, wherein there was specific reference for initiation of arbitration proceedings. The arbitrator wrote in the conclusion that there was nothing wrong in respondent having approached ICA after issuance of this notice. In Amit Guglani (Supra) there was no mention about the arbitration clause or for reference of matter to the arbitrator. Similarly in D.P. Construction (supra) the notice did not mention anything about the arbitration or reference of matter to the arbitrator. The respondent on the contrary had given the notice to the petitioner stating therein... " failing which I have clear instruction from my client to initiate arbitration proceedings before Indian Council of Arbitration..." The notice therefore, was clear about the intent of respondent for going to the arbitration. The judgments do not apply to the facts of the case and there is nothing wrong in the findings of Ld. Arbitrator.
17.In UHL Power Company Ltd vs State of HP (2022) 4 SCC 116, Hon'ble Supreme Court held as under:
"As it is, the jurisdiction conferred on Courts u/s 34 of Arbitration Act is fairly narrow, when it comes to the scope of an appeal u/s 37 of the Arbitration Act, the OMP (COMM) 44/25 page no. 11 of 12 M/s. Omauli Agro Exports & Ors.
Vs. M/s. Small Farmers Agri Business Consortium jurisdiction of an appellate Court in examining and order, setting aside or refusing to set aside an award, is all the more circumscribed."
18.The Hon'ble Delhi High Court in Ircon International Ltd vs Afcons Infrastructure Limited 2023 SCC Online Del. 2350 held that , "patent illegality warranting setting aside of award should be such illegality or deficiencies at the face of award and/ or shock the conscience of the Court in order for it to qualify to be set aside by this Court.
19. In view of above discussion and the authoritatively settled law regarding limited scope of intervention in the petition u/s. 34 Arbitration & Conciliation Act, there is no perversity on the face of the award warranting interference by this court. There is no merit in the case. The petition is dismissed. File be consigned to record room.
Digitally signed by anuradha shukla anuradha Announced in the open court Date: shukla 2026.04.08 on 07.04.2026 14:09:36 +0530
(digitally signed and uploaded on 08.04.2026) (Anuradha Shukla) District Judge (Commercial Court-02) South Distt., Saket, New Delhi.
OMP (COMM) 44/25 page no. 12 of 12 M/s. Omauli Agro Exports & Ors.
Vs. M/s. Small Farmers Agri Business Consortium