Delhi District Court
Ram Santhanam Prasad vs Pnb Housing Finance Ltd on 27 November, 2025
DLCT010006882024
IN THE COURT OF SH. M. K. NAGPAL, DISTRICT
JUDGE (COMMERCIAL COURT)-13, CENTRAL
DISTRICT, TIS HAZARI COURTS, DELHI
OMP (COMM) No. :- 06/2024
CNR No. - DLCT01-000688-2024
IN THE MATTER OF :-
1. Sh. Ram Santhanam Prasad
R/o 9, Shinnecock Ct,
Monroe Twp, NJ 08831,
USA.
2. Ms. Chaitali Bhat
R/o 9, Shinnecock Ct,
Monroe Twp, NJ 08831,
USA.
... Petitioners
Vs.
1. PNB Housing Finance Ltd.
Having its registered office At:
9th Floor, Antriksh Bhawan,
22, Kasturba Gandhi Marg,
New Delhi-110001.
2. Sh. M.S. Sabharwal
Ld. Sole Arbitrator
Ex. Additional District & Session Judge, Delhi
Ex. President Consumer Forum, Govt. of Delhi
481, Civil Wing, Tis Hazari Courts,
Delhi-110054.
....Respondents
ORDER
27.11.2025 OMP (COMM) No. :- 06/2024 1/22 DLCT010006882024
1. This application/petition has been filed by petitioners under provisions of Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act'), challenging the ex-parte arbitral award dated 29.09.2018 (hereinafter referred to as the 'impugned award') passed by a Sole Arbitrator/respondent no. 2 appointed by respondent no. 1 for adjudicating the disputes that arose between parties to this petition in arbitration case bearing No. PNBHFL/ARB/2018/502 titled as 'PNB Housing Finance Ltd. Vs. Ram Santhanam Prasad & Another.' Since the respondent no. 2 being a Sole Arbitrator has only been made a performa party to this petition, the respondent no. 1 hereinafter shall be referred to as 'respondent' only and not as respondent no.1.
2. Vide the above impugned award, Ld. Sole Arbitrator is found to have allowed the claims of respondent and has directed the petitioners herein to pay a sum of Rs. 52,97,968.73 to respondent, along with interest @ 12% pa on above outstanding amount from the date of foreclosure of loan i.e. 07.03.2018 till realization of the said amount and a cost of Rs. 35,000/-, while holding them to be jointly and severally liable to pay the said amounts.
3. I have heard the arguments advanced by Sh. Saket Gogia, Ld. Counsel for petitioners, assisted by Ms. Sheetal Maggon, Sh. Man Singh, Ms. Gauri Pande, Sh. Ahithya K.S. and Sh. Deepesh OMP (COMM) No. :- 06/2024 2/22 DLCT010006882024 Meena, Advocates, and Sh. Anish Bhola, Ld. Counsel representing the respondent. The case record, including written submissions filed by petitioners as well as the original arbitral record, has also been perused.
4. It is necessary to mention here that no formal reply to this petition or even to the application under Section 36 (2) of the above Act moved by petitioners was filed on behalf of respondent and Ld. Counsel for respondent has straightway addressed his arguments in this petition. However, no interim orders on the above application of petitioners for stay of impugned award had to be passed as it was stated before this court by Ld. Counsel for respondent that the respondent has not filed any petition seeking execution of the impugned award.
5. It is also necessary to mention here that a copy of the attested copy of arbitral award filed on record by petitioners though shows that the award was pronounced by Ld. Sole Arbitrator on 29.09.2018, but the original award contained in arbitration file shows the date of its pronouncement as 28.09.2018. Since it may be due to some clerical/typographical mistake, it is being ignored by this court.
6. It is the case of petitioners, who are husband and wife respectively, that in the year 2014, they came to know about a housing project to be developed by a renowned developer named as M/S Mantri Developers Pvt. Ltd. and the said project was to OMP (COMM) No. :- 06/2024 3/22 DLCT010006882024 be developed in heart of Bengaluru city at Hennur Road, Bengaluru. It is averred by petitioners that taking note of the good reputation of developer, the area of project and the other facts and circumstances, they had booked a residential house/flat/ unit in the said project and got it financed from respondent under a Subvention Scheme and they had executed certain documents in favour of the said respondent and developer and in relation to the said house property, including a tripartite agreement, a subvention agreement and construction agreement etc.
7. It has been submitted by petitioners that as per above Scheme, the developer had offered an assured buy-back of the said unit, in addition to a Pre-EMI Scheme, and applicants were to pay only 20-25% of the sale consideration and rest of 75-80% amount of the unit value was to be arranged or financed by respondent as a loan to petitioners and payments of EMIs were to be made to the builder by respondent as per the fixed slabs linked with construction agreement. It is averred that however, petitioners were to pay interest component of EMIs to the respondent and this component was to be reimbursed in following month by developer, until the unit was ready for occupancy. The scheduled date of delivery of possession of said housing unit by builder was fixed in March, 2017, but somehow, the construction of said project and housing unit was not completed by builder and it resulted in cancellation of the above unit by petitioners as per the option or liberty given to them by OMP (COMM) No. :- 06/2024 4/22 DLCT010006882024 developer and in terms of contained in the above documents. The petitioners have submitted that though the developer had accepted their request for withdrawal or cancellation of booking due to delay in handing over the possession and they had even submitted some documents to developer in this regard, but they were shocked to receive a possession notice from respondent stating that respondent had taken physical possession of the said apartment under Section 13(4) r/w Rule 9 of the SARFAESI Act and they also came to know that respondent had initiated arbitration proceedings against them and had unilaterally appointed the respondent no. 2 as Sole Arbitrator and had even obtained an ex-parte award against them.
8. It is also the case of petitioners that feeling aggrieved by collusive action of the respondent and developer, they had approached the Hon'ble High Court of Karnataka through Writ Petition Nos. 19314/2021 & 19416/2021, wherein the Hon'ble High Court vide its order dated 12.09.2022 was pleased to stay the continuation or initiation of any precipitative action of civil or criminal nature against them in order to recover the purported outstanding amount of above loan. It has also been submitted by petitioners that 37 similar writ petitions were also filed by other persons against the above deep rooted fraud apparent on the basis of record.
OMP (COMM) No. :- 06/2024 5/22DLCT010006882024
9. The petitioners have challenged the impugned award dated 29.09.2018 passed by Ld. Sole Arbitrator of this case mainly on following grounds:-
1) That the impugned award has been obtained by respondent fraudulently and misrepresenting the above transaction as a simple loan transaction between petitioners and the said respondent and by concealing the true facts and documents executed between the parties to this petition and the above developer;
2) That the impugned award having been obtained by respondent as a result of fraud played upon the Ld. Arbitrator is not a legal or enforceable award in view of decision of the Hon'ble Supreme Court in case of A. V. Papayya Shastry & Ors. Vs. Government of A.P. & Ors., (2007) 4 SCC 221;
3) That the impugned award having been got passed fraudulently by respondent is in conflict with public policy of India in terms of Explanation l (i) to Section 34 (2) (b)
(ii) of the above said Act and hence, it is a nullity and has to be treated as non-est in the eyes of law and in view of judgment of the Hon'ble Supreme Court in cases of Venture Global Engineering Vs. Satyam Computer Services Ltd. & Anr., 20l0 (8) SCC 660 and MTNL Vs. OMP (COMM) No. :- 06/2024 6/22 DLCT010006882024 Canara Bank, C.A. Nos. 6202-6205/2019, [2019] 11 S.C.R. 660;
4) That the impugned award is in conflict with most basic notions of morality and justice as per Explanation I (iii) to Section 34(2)(b)(ii) of the above said Act and hence, it is not sustainable in view of decision of the Hon'ble Supreme Court in case of Bikram Chaterjee & Ors. Vs. Union of India & Ors., W.P. (C) 940/2017;
5) That the impugned award is in violation of the basic principle of natural justice 'nemo debet esse judex in propria causa' and the respondent had no authority to unilaterally appoint an arbitrator and thus, the award rendered by Ld. Sole Arbitrator is not legally sustainable in view of judgment of the Hon'ble Supreme Court in cases of TRF Limited Vs. Energo Engineering Products Ltd., (2017) 7 SCR 409 and Perkins Eastman Architects DPC & Ors. Vs. HSCC (India) Ltd., MANU/SC/1628/2019.
6) That the subject matter of impugned award was not capable of settlement by arbitration as per Section 34(2)(b)
(i) of the said Act and hence, it is not legally sustainable as per judgment of the Hon'ble Supreme Court in case of A. Ayyasamy Vs. A. Paramasivam & Ors. (2016) 10 SCC 386;OMP (COMM) No. :- 06/2024 7/22
DLCT010006882024
7) That the impugned award is liable to be set aside for being vitiated and being patently illegal as per provisions of Section 34 (2A) of the above Act and decision of the Hon'ble Supreme Court in case of ONGC Vs. Saw Pipes, (2003) 5 SCC 705; and
8) That no notice of appointment of arbitrator or commencement of the arbitral proceedings was ever served or communicated to the petitioners and hence, the impugned award is liable to be set also, as also held by the Hon'ble Supreme Court in case of Sachin Gupta & Ors. Vs K.S. Forge Metal Pvt. Ltd., (2013) 10 Supreme Court Cases 540.
10. On the other hand, Ld. Counsel for respondent has though admitted that the impugned award has been passed by a sole arbitrator appointed unilaterally by respondent and hence, the same may not be legally sustainable in view of decision of the Hon'ble Supreme Court in cases of TRF Limited (Supra) and Perkins Eastman Architects DPC & Ors. (Supra) and various other judgments on subject, but he has vehemently challenged the maintainability of this petition on ground that the same is hopelessly barred by limitation. It is his submission that in terms of Section 34(3) of the above said Act, such an application for setting aside an arbitral award is required to be moved within 3 OMP (COMM) No. :- 06/2024 8/22 DLCT010006882024 months from the date of receipt of arbitral award by applicant or within 3 months of disposal of a request made under Section 33 of the said Act seeking some corrections and interpretation of the said award, as the case may be. Further, it is also his submission that in terms of the proviso added to above Section, the court can permit an applicant to file such an application within a further period of 30 days only, after expiry of above period of 3 months, but not thereafter, and even this permission has to be granted by a court only when the applicant satisfies the court that he was prevented from filing such an application by a sufficient cause. It is also his submission that the court has no power to condone the delay in filing of such an application under Section 34 of the Act beyond the above period of 3 months and 30 days, as provided in sub-section (3) of the said Section. It is also his vehement contention that the petitioners came to know about passing of the arbitral award during the course of pendency of above writ petitions or through the above order dated 12.09.2022 passed therein and since they had not approached this court through this petition within the above time limit provided by Section 34 (3) of the Act and the proviso added thereto and had filed the present petition only on 16.01.2024, the same is liable to be dismissed outrightly.
11. It is also the submission of Ld. Counsel for respondent that since this petition is hopelessly barred by time, the court cannot decide or adjudicate upon the grounds touching merits of the case OMP (COMM) No. :- 06/2024 9/22 DLCT010006882024 or even the unilateral aspect of award. It is further his submission that even otherwise, the scope of interference by this court in the above award is very limited and it cannot be set aside casually and in a routine manner and it has to be done strictly as per the grounds contained in Section 34 and other provisions of the above Act. It is also his submission that since the petitioners have failed to file certified copy of the impugned award with this petition, even on this ground the petition is liable to be dismissed. In support of his above submissions, Ld. Counsel for respondent has relied upon judgment dated 19.12.2023 passed by the Hon'ble Delhi High Court in FAO(OS) (COMM) 81/2020 & connected matters in case titled as Union of India Vs. M/S Panacea Biotec Limited.
12. Though Section 34 of the Act deals with an application for setting aside of an arbitral award and it prescribes the grounds on which such an award may be set aside by a court, but Section 12 of the above Act also contains the grounds on which appointment of an arbitrator can be challenged and a bare perusal of the provisions contained in this Section shows that an arbitrator has to be an independent person. Any relation or interest of arbitrator with any of the parties or even the non- disclosure thereof can render an arbitrator to be incompetent to conduct the arbitration proceedings in terms of said Section and the award to be delivered by such an arbitrator to be non-est or a nullity in eyes of law and hence, non-executable. The entire OMP (COMM) No. :- 06/2024 10/22 DLCT010006882024 thrust of provisions contained in above Section and Act is to ensure that an arbitrator is a neutral person and represents the consent of all parties concerned. Sub-section (2) of Section 12 of the said Act makes it necessary for the arbitrator to make certain disclosures mentioned in sub-section (1) thereof in form specified in Sixth Schedule of the Act and sub-section (5) thereof, which was inserted by the Arbitration and Conciliation (Amendment) Act, 2015, provides that notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject matter of the dispute, falls under any of the categories specified in the Seventh Schedule of Act shall be ineligible to be appointed as an arbitrator. However, as per proviso added to this sub-section, the parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.
13. In case of M/s Voestalpine Schienen Gmbh Vs. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665, the Hon'ble Supreme Court while dealing with the effect of introduction of sub-section (5) of Section 12 of the Arbitration & Conciliation Act, 1996, with simultaneous inclusion of Seventh Schedule of the said Act, has emphasized and highlighted the need of neutrality of arbitrators and it was held by their Lordships in the said case that any relation or interest of arbitrator with any of the parties in any of the forms as mentioned in Seventh Schedule OMP (COMM) No. :- 06/2024 11/22 DLCT010006882024 may effect the legality of award. It was also held by their Lordships in this case that even if any arbitration clause permitting unilateral appointment existed in an agreement prior to insertion of sub-section (5) of Section 12, the same is rendered a nullity by insertion of the said sub-section (5) and Seventh Schedule of the said Act.
14. On this aspect, it is relevant here to state that while relying upon its earlier judgment in case of TRF Limited (Supra) being relied upon by Ld. Counsel for petitioners, the Hon'ble Supreme Court in case of Perkins Eastman Architects DPC & Anr. (Supra) has held that the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator and hence, a party to the agreement would be disentitled to make any appointment of an arbitrator. The relevant extracts of the said decision read as under:-
"21. But, in our view that has to be the logical deduction from [TRF Ltd. (TRF Ltd. v. Energo Engg. Projects Ltd., MANU/SC/0755/2017 : (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] Para 50 of the decision shows that this Court has concerned with the issue, "whether the Managing Director, after becoming ineligible by operation of law, is he still eligible to nominate an arbitrator" The ineligibility referred to therein, was as a result of operation of law, in that a person having an interest in the dispute or in the outcome or decision thereof, must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint an arbitrator......"OMP (COMM) No. :- 06/2024 12/22
DLCT010006882024
15. Following the above said decision of the Hon'ble Supreme Court in case of Perkins Eastman Architects DPC & Ors. (Supra), the Hon'ble High Court of Delhi in case of Proddatur Cable TV Digi Services v. Citi Cable Network Limited (2020) 267 DLT 51 also held that it would be impermissible for a party to unilaterally appoint an arbitrator as in terms of Section 12(5) of the Arbitration & Conciliation Act read with the Seventh Schedule of the said Act, an employee would be ineligible to act as an arbitrator by virtue of the law as explained by the Hon'ble Supreme Court in TRF Ltd. (Supra) and Perkins Eastman Architects DPC & Ors. (Supra). It was further held by their Lordships that such ineligibility would also extend to a person appointed by such officials who are otherwise ineligible to act as arbitrators. Similar propositions of law have been laid down by the Hon'ble High Court in its judgments in the cases of MS Bridge Building Construction Co. Pvt. Ltd. Vs. Bharat Heavy Electricals Ltd., 2023/DHC/000404; M/S Eco Recycling Ltd. Vs. National Research Development Corporation & Anr., 2023/ DHC/1956; Man Industries (India) Ltd. Vs. Indian Oil Corporation Ltd., 2023/DHC/3875 and Kotak Mahindra Bank Ltd. Vs. Narendra Kumar Prajapat passed in EFA Commercial No. 3/2023 on 17.05.2023 (Neutral Citation No.: 2023:
DHC:3705-DB). The Special Leave Petition (Civil) Diary No. 47322/2023 filed by Kotak Mahindra Bank Ltd. against the above said order of the Hon'ble High Court stands also dismissed on 12.12.2023 by the Hon'ble Supreme Court.OMP (COMM) No. :- 06/2024 13/22
DLCT010006882024
16. The impugned award of this case has also been passed admittedly by a sole arbitrator appointed unilaterally by the respondent herein and further the said award was passed ex- parte and petitioners did not participate in proceedings before the Ld. Arbitrator or never gave their express written consent to the appointment of Ld. Arbitrator. Hence, keeping in view the above facts and legal position, Ld. Counsel for respondent has fairly agreed that the above award may not be legally sustainable or enforceable.
17. Now coming to his submission on the point of limitation and competency of this court to give findings about legality or executability of award on ground that the present petition is time barred, it is the case of petitioners that no copy of impugned award was ever served upon or delivered to them by the Ld. Sole Arbitrator as per requirements of Section 31 (5) of the above Act and hence, the present petition is maintainable as the above period of 3 months prescribed under Section 34 (3) of above Act for filing of this petition was to start only from the date on which they had received a signed copy of arbitral award from the Ld. Sole Arbitrator. It is also his submission that the above limitation period in present case has never started to run as the delivery of a signed copy of award upon them by Ld. Arbitrator was mandatory in terms of provisions contained in Section 31 (5) of the Act and it was never effected.
OMP (COMM) No. :- 06/2024 14/22DLCT010006882024
18. Section 31 (5) of the above Act prescribes that after the arbitral award is made, a signed copy thereof shall be delivered to each party. The above requirement has been held to be a mandatory obligation on the part of Arbitral Tribunal as it has an impact on the period of limitation prescribed for filing of an application under Section 34 of the said Act and challenging the award in question. In case of Union of India Vs. Tecco Trichy Engineers & Contractors, (2005) 4 Supreme Court Cases 239, being relied upon by Ld. Counsel for petitioners, the Hon'ble Supreme Court has held that delivery of an award under Section 31 (5) of the Act to each party is not a mere formality, but it is a matter of substance and the importance of a valid delivery of the award cannot be undermined as it has the effect of conferring certain rights on the party, while also setting in motion the period of limitation which on its expiry, would bring to an end the right to exercise such rights. The relevant observations made by their Lordships in the said case are as under:-
8. The delivery of an arbitral award under sub-Section (5) of Section 31 is not a matter of mere formality. It is a matter of substance. It is only after the stage under Section 31 has passed that the stage of termination of arbitral proceedings within the meaning of Section 32 of the Act arises. The delivery of arbitral award to the party, to be effective, has to be "received" by the party. This delivery by the arbitral tribunal and receipt by the party of the award sets in motion several periods of limitation such as an application for correction and interpretation of an award within 30 days under Section 33(1), an application for making an additional award under Section 33(4) and an application for setting aside an award under Section 34(3) and so on. As this delivery of the copy of award has the effect of conferring OMP (COMM) No. :- 06/2024 15/22 DLCT010006882024 certain rights on the party as also bringing to an end the right to exercise those rights on expiry of the prescribed period of limitation which would be calculated from that date, the delivery of the copy of award by the tribunal and the receipt thereof by each party constitutes an important stage in the arbitral proceedings.
19. The above legal propositions have also been followed by the Hon'ble High Court in case of Monika Oil Vs. CL Educate Limited, (2023) 1 High Court Cases (Del) 21.
20. Again, even in the recent decision dated 23.05.2025 in FAO(OS) (COMM) 206/2024 titled as Kristal Vision Projects Private Limited Vs. Union of India, the Hon'ble High Court, after discussing the entire law on this subject and the propositions of law as laid down by the Hon'ble Supreme Court in case of Tecco Trichy Engineers & Contractors (Supra) has again held and reiterated that compliance of above provisions of Section 31 (5) of the Act regarding delivery of a signed copy of an award upon parties is a mandatory requirement, though they have also laid down certain guidelines in this judgment in respect to the mode and manner of delivery thereof.
21. Coming back to facts of the present case, as already discussed, it is an ex-parte award passed by a sole arbitrator and a bare perusal of the impugned award shows that though three different addresses of petitioners herein are found given in memo of parties of the said award, but all these addresses are of Bangaluru, Karnataka. It has been submitted on behalf of OMP (COMM) No. :- 06/2024 16/22 DLCT010006882024 petitioners that they had left India and had gone to settle abroad in USA long back and this fact was very much in knowledge of respondent herein. Though Ld. Counsel for respondent has denied having knowledge of above fact by respondent during the course of arguments and has maintained that the US address of petitioners herein was not in their knowledge, but it is a matter of record that during pendency of this petition, a coloured copy of the loan application form of this case has been taken on record of the court on request of the petitioners. It is crystal clear from this application form that petitioners in their loan application itself had given their US address as their current residential address, though one of their Bengaluru addresses is also found stated therein as their permanent address.
22. On perusal of arbitral record of the case, it has further been observed that signed copies of impugned award were sent to petitioners by the Ld. Sole Arbitrator vide his letter dated 28.09.2018 at their given addresses of Bengaluru and not at their US address and it was simply for the reason that their US address was not mentioned in the memo of parties of said proceedings or claim petition filed by respondent herein. Hence, since signed copy of impugned award was not sent to the petitioners at their current or present address of US, which was very much in knowledge of respondent, and the respondent had even not cared to mention the said address of petitioners in arbitral proceedings apparently for some malafide intents, this court has no hesitation OMP (COMM) No. :- 06/2024 17/22 DLCT010006882024 in concluding that the limitation period in this case for challenging the arbitral award never commenced as it was to commence from the date when signed copy of impugned award was delivered upon the petitioners. The original postal receipts available in the arbitral record though show dispatch of the copy of award along with above letter dated 28.09.2018 of the Ld. Arbitrator, but it is of no help to the case of respondent as no presumption of delivery of award upon petitioners herein can be raised therefrom as admittedly, the above address of petitioners was not their present address and a signed copy of the award was not sent at their present address of US.
23. The submission of Ld Counsel for respondent that petitioners got knowledge of passing of impugned award from proceedings of above writ petitions or from the above order dated 12.09.2022 passed therein by the Hon'ble High Court of Karnataka and hence, the period of limitation should be taken with reference the said date is of no help to the case of respondent as compliance of the above requirement of delivery of a signed copy of impugned award upon petitioners by the Ld. Sole Arbitrator was a mandatory requirement and it cannot be permitted to or could have been dispensed with.
24. Thus, in view of the above factual and legal discussion, this court is of considered opinion that there is no merit in the above objection taken by respondent regarding maintainability of OMP (COMM) No. :- 06/2024 18/22 DLCT010006882024 this petition on the ground of limitation. As a result of the above and further since the impugned award has been passed by a sole arbitrator unilaterally appointed by respondent, the same is not legally sustainable as it has to be considered as non-est in the eyes of law and hence, a nullity. It is, therefore, liable to be set aside on this very ground.
25. Moreover, it has also been observed on perusal of arbitral record that even the notice dated 02.04.2018 served by respondent upon petitioners herein invoking the arbitration clause and appointing a sole arbitrator for adjudication of their disputes was admittedly sent on the same addresses of petitioners at Bengaluru and not at their present address of US and hence, even the said notice invoking arbitration clause is liable to be held bad.
Therefore, in the absence of service of a valid notice upon petitioners as per provisions of Section 21 of the above Act also, the impugned award is liable to be set aside. Reference in this regard can be made to the cases of Alupro Building Systems Pvt. Ltd. Vs. Ozone Overseas Pvt. Ltd., 2017 SCC Online Del 7228 and Sachin Gupta & Ors. (Supra).
26. Besides the above, this court also observes from a bare perusal of impugned award and the arbitral record that Ld. Counsel for petitioners is right in making a submission that the said award has been obtained by respondent by playing a fraud upon Ld. Arbitrator and after concealment of material facts and OMP (COMM) No. :- 06/2024 19/22 DLCT010006882024 withholding the material documents from him. As already discussed, the above loan to petitioners was advanced by respondent in respect to purchase of the above housing unit and under a Subvention Scheme and besides the loan agreement, the petitioners are also claimed to have executed a tripartite agreement, a subvention agreement and a construction agreement etc. in respect to the said loan and the manner of repayment thereof. The petitioners have also filed on record of this court copies of these documents.
27. However, it is crystal clear from the arbitral record and the award in question that the above facts and documents were never brought to the notice or knowledge of Ld. Sole Arbitrator and the impugned award suggests as if the case of respondent was that it was a simple transaction of loan between the petitioners and said respondent and an equitable mortgage in respect to said property was created by petitioners in favour of respondent to secure the repayment of said loan with interest. It is for this reason only that the respondent had not even made the above developer to be a party to the arbitral reference or proceedings. In considered opinion of this court any dispute that arose between petitioners herein and respondent in respect to the above loan or in respect to the terms of any of the documents executed between the petitioners and respondent herein and the above developer could have been settled or adjudicated upon only when all the three parties were present before the Ld. Sole Arbitrator or made to OMP (COMM) No. :- 06/2024 20/22 DLCT010006882024 participate in the said proceedings. Ld. Counsel for petitioners has rightly relied upon the judgment of Hon'ble Supreme Court in case of MTNL Vs. Canara Bank (Supra) to this effect. Hence, since the above material facts and documents in the form of a tripartite agreement, a subvention agreement and a construction agreement etc. were concealed from the Ld. Sole Arbitrator and the same were not brought to his knowledge by the respondent, the impugned award can be held to be an outcome of fraud and against the public policy of India and thus, not legally sustainable. Ld. Counsel for petitioners has rightly relied upon judgment of Hon'ble Supreme Court in case of Venture Global Engineering (Supra), wherein the following observations are found to have been made by their Lordships with reference to an award obtained on concealment of material facts and amounting to fraud:-
"46. The concept of public policy in ABC, 1996 as given in the explanation has virtually adopted the aforesaid international standard, namely if anything is found in excess of jurisdiction and depicts a lack of due process, it will be opposed to public policy of India. When an award is induced or affected by fraud or corruption, the same will fall within the aforesaid grounds of excess of jurisdiction and a lack of due process. Therefore, if we may say so, the explanation to Section 34 of ABC is like `a stable man in the saddle' on the unruly horse of public policy.
...........
.........
52. On such conjoint reading, this Court is unable to accept the contentions of the learned counsel for the respondents that facts which surfaced subsequent to the making of the award, but have a nexus with the facts constituting the award, are not relevant to demonstrate that there has been fraud in the making of the award. Concealment of relevant and material facts, which should have been disclosed before the arbitrator, OMP (COMM) No. :- 06/2024 21/22 DLCT010006882024 is an act of fraud. If the argument advanced by the learned counsel for the respondents is accepted, then a party, who has suffered an award against another party who has concealed facts and obtained an award, cannot rely on facts which have surfaced subsequently even if those facts have a bearing on the facts constituting the award. Concealed facts in the very nature of things surface subsequently. Such a construction would defeat the principle of due process and would be opposed to the concept of public policy incorporated in the explanation."
28. Thus, even on merits, the impugned award is liable to be set aside by this court.
29. Therefore, in view of above discussion, this petition under Section 34 of the Arbitration and Conciliation Act, 1996 filed by the petitioners is allowed and the above award is hereby set aside. No order as to costs.
30. File be consigned to Record Room, after due compliance.
Announced in the open court Dated: 27.11.2025 (M. K. Nagpal) Digitally District Judge, Commercial Court-13 signed by Central District, Tis Hazari Courts, MK Delhi/27.11.2025 MK NAGPAL NAGPAL Date:
2025.11.27 16:03:35 +0530 OMP (COMM) No. :- 06/2024 22/22