Delhi District Court
M/S Suncity Distributors And Others vs Samsung India Electronics Pvt Ltd on 22 September, 2025
IN THE COURT OF SH. PULASTYA PRAMACHALA
DISTRICT JUDGE, (COMMERCIAL COURT)-01,
PATIALA HOUSE COURT, NEW DELHI
INDEX
Sl. HEADINGS Page Nos.
No.
1. Memo of Parties 2
2. Description of case 3-11
4. Ground of objection/challenge 12-14
5. Reply/Arguments filed by Respondent 14-15
6. Arguments/Submissions of petitioner 15-18
7. Arguments of respondent 18-20
8. Appreciation of Arguments, Facts & Law 20-39
9. Decision 39
Digitally
signed by
PULASTYA
PULASTYA PRAMACHALA
PRAMACHALA Date:
2025.09.22
17:35:01
+0530
OMP (COMM) No.235/2019 (Pulastya Pramachala)
District Judge (Commercial Court)-01,
Page No.1 of 39 Patiala House Court, New Delhi
OMP (COMM) No. 235/2019
In the matter of: -
1. M/s. Suncity Distributors
Shop No.11, Opposite Babu Rajender Marg,
Near Barkatullaha Stadium,
Jodhpur-342003.
2. Mr. Surendra Kumar Lila
Partner M/s. Suncity Distributors,
Shop No.11, Opposite Babu Rajender Marg,
Near Barkatullaha Stadium,
Jodhpur-342003.
Also At :
E-32, Shastri Nagar, Jodhpur,
Rajasthan-342003.
3. Mr. Laxman Das
Partner M/s. Suncity Distributors,
Shop No.11, Opposite Babu Rajender Marg,
Near Barkatullaha Stadium,
Jodhpur-342003.
Also At :
E-32, Shastri Nagar, Jodhpur,
Rajasthan-342003.
...Petitioners
Versus
1. Samsung India Electronics Pvt. Ltd.
A-25, Ground Floor, Front Tower,
Mohan Cooperative Industrial Estate,
New Delhi-110044.
2. Sh. B.L. Garg
Sole Arbitrator A-9, Ganpati apartments,
6, Alipur Road, Civil Lines, Delhi-110054.
...Respondents
Date of Institution : 21.12.2019
Arguments heard on : 11.09.2025
Decided on : 22.09.2025
Decision : Petition is allowed.
OMP (COMM) No.235/2019 (Pulastya Pramachala)
District Judge (Commercial Court)-01,
Page No.2 of 39 Patiala House Court, New Delhi
JUDGMENT
DESCRIPTION OF CASE
1. Petitioners have filed this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') challenging the Award dated 14.09.2019 as passed by ld. Arbitrator/respondent no.2 herein.
2. Briefly stated, the alleged dispute was referred to ld.
Arbitrator/respondent no.2 herein for adjudication as per Arbitration and Conciliation Act, 1996, and it was alleged that respondent no.1 herein/claimant had invoked arbitration clause of the agreement dated 17.01.2008. Present petition/objections mentions that claimant/respondent no.1 herein was a company engaged in the business of manufacture and sale of electronic items and home appliances with the brand name of "Samsung". Petitioners herein were partnership concern and petitioners no.2 and 3 herein were partners thereof and they worked in the field of sales and marketing of consumer electronics products. Petitioners no.2 and 3 were in-charge and were responsible for the conduct of the business of petitioner no.1 firm.
3. Petition mentions/reproduces the claim made by respondent herein alleging that in the year 2008 claimant company appointed petitioner no.1 company herein, as distributor for sale of Samsung products. In pursuance to which petitioners placed orders for supply of air conditioners, refrigerators, washing machine, colour television and other home appliances, on the claimant company, which were regularly supplied by respondent-1/claimant to petitioners herein. Claimant raised bills OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.3 of 39 Patiala House Court, New Delhi accordingly, a running account of the petitioners was being maintained by the claimant company.
4. Statement of claim further mentioned that at the time of afore-
said appointment of petitioners as distributors, petitioners issued a declaration letter enclosing duly signed cheques bearing no. 125316 and 125317 both drawn on UCO Bank, Jodhpur, Rajasthan, to claimant. As per said letter, in the event of any amount due and payable by the petitioners herein to claimant, claimant was authorized to fill up the date and such due amount, on the afore-said two cheques. At that time, petitioners had assured claimant that: - (i) petitioners would keep sufficient balance in their account to honour the afore-said two cheques;
(ii) petitioners would not stop the payment of the afore-said cheques; and (iii) if petitioners change the signatory of the cheques and/or close the account, petitioners would provide to claimant/replace the afore-said cheques, with new cheques either from the same account or from the new account, which petitioners would open, as the case may be.
5. Statement of claim further mentioned that on account of ordered goods supplied by claimant to petitioners herein on 26.07.2010, there was an outstanding balance of Rs.80,46,667.55 to be paid by petitioners herein to claimant. After reconciliation of account, claimant issued credit notes of Rs.1,93,288.05, a sum of Rs.78,53,379.05 was due and payable by petitioners herein to claimant. Claimant intimated the total outstanding amount of Rs.78,53,379.05 to petitioners herein and claimant also requested petitioners to make the payment of overdue amount. But OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.4 of 39 Patiala House Court, New Delhi petitioners failed to make payment of above-mentioned outstanding amount.
6. Statement of claim further mentioned that as per afore-said declaration letter, claimant filled up outstanding amount of Rs.78,53,379.05 in one of the cheques bearing no.125316. This cheque was due and payable by petitioners by putting the date as 11.02.2011. Claimant deposited it for payment/encashment with its bank, which got dishonored upon its presentation for the reason "Account Closed by the Drawer" on 22.02.2011. Thereafter on 08.03.2011, claimant sent a notice of dishonor of cheque to petitioners herein intimating about the same, by registered A.D. post as well as by UPC, which were duly served upon petitioners. But despite service of said notice of dishonor, petitioners did not make afore-said due/outstanding payment to claimant. Therefore on 07.04.2011, claimant initiated a proceeding u/s. 138 of Negotiable Instruments Act, 1881, bearing CC 3114/1/11, which was pending trial before ld. MM, Patiala House Courts, New Delhi.
7. Statement of claim further mentioned that there was an arbitration agreement between the parties provided in distributorship agreement, which provided for reference of all disputes or differences arising out of the agreement or any rights or liabilities of the parties to the sole arbitrator to be appointed by Director of claimant company. It was further mentioned that since the petitioners herein failed to make the payment of Rs.78,53,379.05, despite the fact that they had accepted the goods supplied by claimant, petitioners were jointly and OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.5 of 39 Patiala House Court, New Delhi severally liable to pay the afore-said amount along with interest at the rate of 22% per annum on the due amount of Rs.78,53,379.05 and that the interest up to the date of filing of statement of claim came to Rs.69,02,622. Thus, the total liability of petitioner to pay a sum was Rs.1,47,60,001.05. Petitioners were also liable to pay pendente lite and future interest @ 22% per annum of Rs.1,47,60,001.05 besides, costs.
8. Petitioners contested the claim petition of claimant by filing their reply and stating that the entire claim of claimant was liable to be dismissed as the same was belated one and time barred, as the last transaction between the parties took place on 10.06.2010. The amount claimed by claimant was not due and the payable amount was required to be given to the claimant as per credit note of Rs.85,40,546/-. Still, there was shortfall of Rs.5,90,817/- payable by claimant to petitioners herein. Therefore, no amount was due and payable to claimant by petitioners herein, rather claimant was liable to pay Rs.5,80,817/- to the petitioners.
9. It was further mentioned that Arbitral Tribunal had no jurisdiction to entertain the claim of claimant as the matter for appointment of Arbitrator was pending before Hon'ble High Court of Rajasthan at Jodhpur and the Tribunal had exceeded its authority by conducting the proceedings. It was further mentioned that claimant had concealed all the material facts from the Tribunal with ulterior motive to obtain a judicial order in its favour, and that it suffered from vires of "suggestion falsie and suppresiovarie". Claim of claimant was not supported by any documentary evidence. Claimant by filing the claim petition had OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.6 of 39 Patiala House Court, New Delhi tried to blanket and shield its own wrong and fault. Claim of claimant deserved to be dismissed at the threshold itself as claimant had suppressed true facts and had not approached the Tribunal with clean hands.
10. It was further mentioned that claimant had been fully paid all their debts by petitioners herein, rather claimant failed to pay bona-fide commission as agreed which was distributor margin @ 4% on audio visual items and 3.5% on Home Appliances Product Category, as well as discount on the goods supplied without orders, which was evident from the letter dated 12.12.2009. This letter dated 12.12.2009 was issued by claimant and if claimant was awarded compensation inspite of non-payment, which were due towards claimant and non-adherence to the terms of agreement, it would have amounted to rewarding it for its own wrongs, which would have been contrary to the public policy.
11. It was further mentioned that petitioners sent various e-mails as well as verbal communications to the agents of claimant, for not sending any goods/materials without any written order, and if claimant sent any good/material without order then 10% discount was applicable on the goods sent without order. Even after receiving such communication, claimant continued in sending goods/material without any order which clearly implied that claimant had accepted the condition imposed by petitioners.
12. It was further mentioned that petitioners herein made various payments and cleared the dues of claimant and in turn claimant supplied various goods amounting to Rs.80 lacs to petitioners. But claimant had not paid further commission of Rs.5,80,817/-
OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.7 of 39 Patiala House Court, New Delhi which was due and payable by claimant on the goods sold by petitioners herein. When claimant did not make payment to petitioners in respect of commission on the sold goods, petitioners stopped doing business w.e.f. 10.06.2010 with claimant after making payment of Rs.11,17,496/- vide cheque no.363932 dated 08.06.2010 to claimant as the last full and final amount due and payable by petitioners herein to the claimant.
13. It was further mentioned that vide letter dated 05.07.2010, claimant asked petitioners to take notice for debit balance of Rs.54,55,359.931. Thereafter, on 06.08.2010 AR of claimant handed over a hand written statement of account, showing total outstanding balance of Rs.80,46,668/- and net payable amount was Rs.74,01,222/-. Statement of account was duly signed and endorsed by AR of claimant as well as blank stamp of petitioners without any signature obtained on the said statement of account. Claimant somehow managed the stamp of petitioners and put an impression of the same. Vide letter dated 19.08.2010, claimant asked for overdue payment of Rs.78,86,370/- from petitioners herein. Vide letter dated 02.09.2010 petitioners once again asked claimant to clear their stand on the commission as well as adjust the same, which was due and payable by them. Vide notice dated 15.11.2010, claimant again asked petitioners herein to make payment of Rs.78,68,370/- along with an interest of 18% p.a. with further threat to present two security cheques, which were handed over to claimant at the time of signing of Distributorship Agreement. Said notice was duly replied by petitioners vide reply dated 19.11.2010 declining the claim of claimant with a further OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.8 of 39 Patiala House Court, New Delhi demand not to represent the cheque for encashment as the account from which the said cheques were issued had already been closed. It was also mentioned in that notice that parties had done business from a different bank account that was also well within the knowledge of claimant. Instead of making payment of petitioners herein, claimant issued a notice dated 15.11.2010 stating therein that the distributorship margin had already been given to the petitioners as per company policy, while no such margin money was ever paid. Said notice was duly replied by petitioners.
14. It was further mentioned that at the relevant time of allotting distributorship to petitioners, it was promised by claimant company's officials that claimant would hand over afore-said two cheques back to petitioners within six months of issuance on the condition, if petitioners continued distributorship satisfactorily for six months. It was mentioned that petitioners herein had continued with the distributorship up to June 2010 i.e. more than six months with utmost satisfaction, but when petitioners demanded back afore-said two cheques, the agents of claimant refused for the same on one or other pretext and finally said that they had lost the said cheques. In order to avoid misuse of said cheques, petitioners informed their banker to stop the payment of said cheques and opened a new account with the same bank. This was informed to claimant accordingly and claimant updated their records and continued business relation with the petitioners. The value of the transaction done through new account was approximately Rs.9 crores and thus, claimant OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.9 of 39 Patiala House Court, New Delhi misused and got dishonored the said cheques in order to impose a huge financial liability against petitioners, got issued legal notice dated 08.03.2011, which was duly replied by the petitioners herein vide reply dated 18.04.2011. Even after receipt of reply, claimant filed aforesaid false and frivolous criminal complaint u/s. 138 NI Act.
15. It was further mentioned that after coming to know about the said complaint case, petitioners herein immediately filed a criminal complaint against claimant for misuse of the valuable security, which was also pending trial before the competent court of law at Jodhpur. In order to avoid the payment of petitioners, claimant had moved requisite application before one Export Credit Agency operated by Korean (Min. of Commerce, Industry and Energy), which extended credit insurance through Re-Insurance Process, through IFFCO Tokyo General Insurance Co. Ltd. Petitioners received a communication dated 27.01.2011 from that insurance agency asking the details from petitioners regarding claim of claimant filed before them. Said agency also sent a reminder dated 04.02.2011 asking various details from petitioners and in response to the same petitioners replied with communication dated 21.03.2011.
16. It was further mentioned that petitioners sent a notice dated 17.04.2013 to claimant for appointment of an Arbitrator at the registered address mentioned in the Distributorship Agreement, for resolving the dispute amicably between the parties, but claimant miserably failed to adhere to the request of appointment of Arbitrator. Thereafter, respondents (petitioners herein) OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.10 of 39 Patiala House Court, New Delhi approached ld. District & Sessions Judge at Jodhpur by filing a petition u/s. 9 of Arbitration and Conciliation Act and also seeking for stay of any kind of proceedings initiated by claimant and that petitioners had also filed a petition vide SB Arbitration Application no.35/2013 before Hon'ble High Court of Rajasthan at Jodhpur.
17. Petitioners had filed their counter claim of Rs.05,90,817/-.
Claimant had filed its rejoinder to reply of petitioners and also replied to the counter claim, wherein claimant had controverted the pleas of petitioners and reiterated the facts stated in its statement of claim as correct.
18. Following issues were framed on or about 19.04.2016 by the previous Arbitrator Sh. Ravi Kishore: -
i. Whether the Claimant is entitled for a claim a sum of Rs. 78,53,379.05 from the respondent as per the Statement of Claim?
ii. Whether the Claimant is entitled for interest@22 % p. a. on the aforesaid amount w. e. f. 26-07-2010 and also pendente lite and future interest@22%. p. a.?
iii. Whether the Claim is within the limitation?
iv. Whether the respondent is entitled for an amount of Rs. 85,40,546 from the Claimant on account of discount/credit?
v. Whether the Claimant is entitled for costs?
19. Vide award dated 14.09.2019, learned Sole Arbitrator awarded the claimed amount to the claimant with interest @ 15% p.a and rejected the counter claim of petitioners herein.
OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.11 of 39 Patiala House Court, New Delhi GROUNDS OF CHALLENGE
20. Being aggrieved of the impugned Award dated 14.09.2019, petitioners have preferred the present petition on the following relevant grounds: -
i. That ld. Arbitrator erred in not appreciating the fact that cause of action as pleaded in statement of claim of respondent no.1 herein was for non-payment of dues by petitioners herein, which had been stated to have been arisen on 10.06.2010. That claim having been filed in February 2014, which was clearly time barred. ii. That alleged notice dated 23.08.2013 relied upon by the claimant/respondent no.1 herein, was not a notice within the meaning of S. 21 of Arbitration & Conciliation Act, 1996. For that purpose, no proper invocation of arbitration clause had taken place in the instant petition.
iii. That proper and legally permissible way of appointment of Arbitrator was to approach Hon'ble High Court for appointment of an Arbitrator. For that purpose, even notice dated 23.08.2013 was sent after the expiry of period of limitation. iv. That the time limit for filing recovery proceedings, if at all, was to run from 11.06.2010, which ended on 10.06.2013. The said arbitration proceedings had been initiated in February 2014, which was clearly barred by limitation.
v. That dishonor of cheque on 11.02.2011 would not be a circumstance within the meaning of S. 19 of Limitation Act for running of fresh period of limitation.
vi. That respondent in the year 2008 itself were informed/were well aware that the account from which the cheques bearing no. 125316 and 125317 were issued and which were later presented by the respondent in a clandestine manner, was closed in May 2008 itself. Being aware of the same, respondent could not have banked them, much less use it as a method of payment. This fact came out in the cross-examination of respondent witness in the proceedings u/s. 138 NI Act.
OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.12 of 39 Patiala House Court, New Delhi vii. That the entire cause of action pleaded in statement of claim was of alleged breach of contract and not of recovery on the basis of dishonor of cheque. Therefore, the so-called dishonor of cheque was of no consequence for calculating the period of limitation. There is no applicability of S.19 of Limitation Act. viii. That ld. Sole Arbitrator wrongly relied upon S.19 of Limitation Act to reach a finding that the claim of respondent was within time.
ix. That the very appointment of ld. Arbitrator was shrouded in mystery, the entire arbitration stood vitiated on account of bias- ness and fraud.
x. That claim of respondent was totally time barred. That the impugned Award passed by respondent no.2, is liable to be set aside as earlier ld. Arbitrator joined the law firm of counsel for claimant and recused himself from the arbitral proceedings. Respondent no.1/claimant once again appointed Sh. Sandeep Desmukh as Sole Arbitrator, who recorded the evidence, cross- examination of respondent no.1/claimant witness as well as examination in chief of appellants/petitioners herein and partly cross-examination of the appellants/petitioners herein witness. But due to biased behavior of the Sole Arbitrator, appellants/petitioners herein raised objection and informed the said ld. Arbitrator vide communication dated 06.04.2019. Thereafter, he recused himself from the said proceedings and respondent no.1/claimant once again appointed respondent no.2 herein as Sole Arbitrator. Respondent no.2 herein informed appellants/petitioners herein regarding his appointment, to which petitioners herein responded and showed their inability to appear on the said date of hearing. That petitioners herein requested to adjourn the date of hearing. That respondent no.2 herein again wrote to petitioners herein regarding next date of hearing and in that communication dated 08.07.2019, respondent no.2 herein had informed that the documents of the proceedings had been handed over to previous Arbitrators by the counsel of respondent no.1 herein. For which petitioners herein filed objection vide OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.13 of 39 Patiala House Court, New Delhi letter dated 19.07.2019, 12.08.2019 and 24.08.2019 stating therein that if the entire record of the proceedings was with respondent no.1 herein/claimant (as well as their counsel) there was every likelihood of tampering the record to favour respondent no.1 herein/claimant. Inspite of receipt of objections, respondent no.2 herein passed the impugned Award. xi. That because the impugned Award is liable to be set aside as ld.
Arbitrator despite receipt of the communication/objection from the petitioners herein, decided the matter ex-parte without taking objection into consideration.
xii. That there was no cause of action in favour of claimant/respondent no.1 herein, as it was claimant which failed to clear its own liability against petitioners herein. On these grounds petitioner has prayed to set aside the impugned award dated 14.09.2019 as passed by respondent no.2/ld. Sole Arbitrator.
REPLY/ARGUMENTS FILED BY RESPONDENT
21. Respondent filed a detailed reply opposing the present petition.
Respondent-1 has taken objection regarding maintainability of this petition pleading that the grounds raised by the petitioners for assailing the impugned award are misconceived, misplaced, erroneous, and devoid of any merits. As per respondent-1, findings given by ld. Arbitrator relate to matter of fact and the court cannot sit in appeal over the findings given by ld. Arbitrator. There is nothing in petition to suggest that view taken by ld. Arbitrator is opposed to public policy. Views taken by him are plausible and based on material on the record. Since despite service of notice petitioners did not appear before ld. Arbitrator, therefore, they do not have any right to question the constitution and appointment of Arbitrator. Non participation in the OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.14 of 39 Patiala House Court, New Delhi proceedings amounts to waiver of the rights to raise any objection in S. 34 of the Act. Petitioners have not given correct account of facts. The Arbitral Tribunal was constituted in accordance with agreement between the parties.
ARGUMENTS/SUBMISSIONS OF PETITIONER
22. Petitioner filed written submissions in support of the present petition. In the written submissions filed by petitioner, it has been mentioned that the appointment of ld. Arbitrator is clearly in contravention to the Clause 15 of the Distributorship Agreement, wherein it has been specifically provided that the arbitrator shall be appointed with and subject to provisions of Arbitration & Conciliation Act, 1996. Petitioners relied upon the case of TRF Limited v. Energo Engineering Projects Limited, (2017) 8 SCC 377; Perkins Eastman Architects DPC & Anr. v. HSCC (India), 2019 SCC OnLine SC 1517; Hindustan Construction Company Limited and Another v. Union of India and Others, 2019 SCC OnLine SC 1520 and Alupro Building Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd., 2017 SCC OnLine Del 7228, on the issue regarding appointment of a sole arbitrator. It has been further mentioned that the unilateral appointment of the arbitrators by respondent is also violative of Sections 12 and 13 read with Schedule V and VII. There was no declaration given by ld. Arbitrator with respect to his independence or impartiality. Reliance was placed upon the case of Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd, (2017) 4 SCC 665. Further plea has been taken that the notice for appointment of OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.15 of 39 Patiala House Court, New Delhi Arbitrator was not in terms with Section 21 of the Arbitration and Conciliation Act.
23. It has been further mentioned that petitioners were informed regarding the appointment of respondent no.2 herein as the Arbitrator. Petitioners expressed their inability to appear on next date of hearing i.e. 08.07.2019 and requested for an adjournment. Despite the petitioners seeking an adjournment, respondent no.2 herein conducted the arbitration proceedings in the absence of petitioners and passed an order dated 08.07.2019. It has been further mentioned that petitioners filed repeated objections vide letters dated 19.07.2019, 12.08.2019 and 24.08.2019, since there was a very high likelihood of respondent no.1 herein tampering with the case records in its favour and against petitioners. It has been further mentioned that ld. Arbitrator ignored the said objections and continued to conduct the arbitral proceedings. There is nothing on record to show that the orders of subsequent hearings were served to petitioners.
24. On the point of arbitration barred by limitation, it has been mentioned in the written submissions that it is an admitted position that the last business transaction between petitioners and respondent no.1 took place on 10.06.2010. The time limit for filing the recovery proceedings began on 10.06.2010 and ended on 09.06.2013. Statement of claim was filed by respondent no.1 in March 2024 i.e. after the expiry of period of three years from the last transaction between the parties. It has been further mentioned that the issue of limitation had to be decided by the Arbitral Tribunal being a jurisdictional issue under Section 16 of OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.16 of 39 Patiala House Court, New Delhi the Act. The Arbitral Tribunal was strictly bound by the limitation period and had to strictly adhere by it.
25. It has been further mentioned that the counter claim of petitioners has been rejected without any proper reasoning by ld. Arbitrator. Reliance was placed upon the case of Ashok Kumar Kalra v. Surendra Agnihotri, (2020) 2 SCC 394.
26. In respect of merits of the petition, petitioner relied upon certain case laws, which are as under: -
i. BGS SGS Soma JV vs. NHPC Ltd., (2020) 2 SCC 234. ii. Bharat Aluminium Co. vs Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552.
iii. Noy Vallesina Engineering Spa vs. Jindal Drugs Ltd. & Ors.
(2021) 1 SCC 382.
iv. BBR (India) Pvt. Ltd. vs. S.P. Singla Constructions Pvt. Ltd. (2023) 1 SCC 693.
v. Southern Railway vs. M.R. Ramakrishnan, OP (C) NO. 3115 OF 2018.
vi. Radhika Engineering Co. v. Telecommunication Consultants India Ltd., OMP (T) (COMM.) 53/2024, decided on 2805.2024 by Hon'ble High Court of Delhi.
vii. Govind Singh v. M/s. Satya Group Pvt. Ltd. & Anr. FAO (COMM) 136/2022, decided on 06.01.2023 by Hon'ble High Court of Delhi.
27. An application was filed by ld. Arbitrator to submit that he had lien over Award in question and petitioners had not paid their share of costs. It was prayed to direct petitioners to pay and without such payment this petition not be heard. In respect of this application of Arbitrator/respondent no.2, petitioner relied upon certain case laws, which are as under: -
OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.17 of 39 Patiala House Court, New Delhi i. Oil and Natural Gas Corporation Ltd. Vs. Afcons Gunanusa JV, Arbitration Petition (Civil) No. 05 of 2022, decided on 30.08.202, by Hon'ble Supreme Court.
ii. Union of India v. Tecco Trichy Engineers & Contractors, Civil Appeal No. 1784 of 2005, decided on 16.03.2005 by Hon'ble Supreme Court.
iii. Benarsi Krishna Committee & Ors. v. Karmyogi Shelters Pvt.
Ltd., Special Leave Petition (C) No.23860 of 2010, decided on 21.09.2012 by Hon'ble Supreme Court.
iv. The Superintending Engineer (Highways and Rural Works), 76/2, Sardar Patel Road, Guindy Chennai-25 & Ors. v. D.G. Deivasigamani & Ors. Appeal No. 41 of 2004, decided on 08.07.2004 by Hon'ble High Court of Madras.
v. Dolphin Laboratories Pvt. Ltd. v. Kaptab Pharmaceuticals, Suit No. 174 of 1980, decided on 26.11.1980 by Hon'ble Calcutta High Court.
vi. Ganga Ram Hospital Trust v. Municipal Corporation of Delhi, RFA no.163 of 1997, decided on 01.06.2001 by Hon'ble High Court of Delhi.
ARGUMENTS OF RESPONDENT
28. In the written arguments filed on behalf of respondents, it has been mentioned that present petition is not maintainable on the ground that the Arbitrator under law had held lien on the award since the petitioner has not paid their share of arbitration fees. On this ground itself the petitioner is disentitled to file present objections challenging the award u/s. 34 of the Act. It has been further mentioned that since dispute arose between the parties, the same were referred to arbitration in terms of the Clause 16 of the Agreement dated 17.01.2008. Originally arbitration proceeding commended before one Sh. Ravi Kishore, Sole Arbitrator and on his recusal Sh. Sandeep Deshmukh was OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.18 of 39 Patiala House Court, New Delhi appointed as Sole Arbitrator. However, due to his personal difficulties the matter was finally referred to Sh. B.L. Garg, District and Sessions Judge (Retd.) as Sol Arbitrator/respondent no.2 herein. It has been further mentioned that petitioners herein had initially participated in the arbitral proceeding, however, after the recusal of Sh. Sandeep Deshmukh as Sole Arbitrator, petitioners herein had stopped appearing before Sh. B.L. Garg, Sole Arbitrator/respondent no.2 herein. It has been further mentioned that Arbitrator has rightly passed the Award after considering the pleadings, documents and evidence produced by both the parties. Thus, there are no occasion for this court to interfere with a well-reasoned award. It has been further mentioned that entire ground of challenge is on re-appreciation of evidence, which is not permissible under law. The Award cannot be interfered, merely because this court may give a different plausible conclusion than the one arrived by ld. Arbitrator.
29. Respondent relied upon following judgments: -
i. Associate Builder v. Delhi Development Authority, (2015) 3 SCC 49.
ii. Ssangyong Engineering and Construction Company Limited v.
National Highway Authority of India, (2019) 15 SCC 131. iii. Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd., 2019 SCC OnLine SC 1656.
iv. Navodaya Mass Entertainment v. J.K. Combines, (2015) 5 SCC
698.
v. Gyan Chand and Brothers and Anr. v. Rattan Lal Alias Rattan Singh, (2013) 2 SCC 606.
OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.19 of 39 Patiala House Court, New Delhi vi. Commissioner of Income Tax Delhi v. Woodward Governor India Pvt. Ltd. (2009) 13 SCC 1.
vii. Union of India v. Pradeep Vinod Construction Company, (2020) 2 SCC 464.
viii. Union of India v. Parmar Construction Company, (2019) 15 SCC
682. ix. BCCI v. Kochi Cricket Pvt. Ltd. & Ors., (2018) 6 SCC 287. x. West Bengal Housing Board v. Abhishek Construction, 2023 SCC OnLine Cal 827.
xi. Rajesh Kumari v. Prem Chand Jain, 1997 (42) DRJ 280. xii. Jay Shree Tea & Industries Ltd. v. Dropti Devi & Anr. 2009 SCC OnLine Del 2736.
xiii. Corporation Bank v. Sushil Enterprises & Ors., 2003 SCC OnLine Del 480.
APPRECIATION OF ARGUMENTS, FACTS & LAW
30. Respondent in written submissions, took plea that this petition is not maintainable because of lien of Arbitrator over the Award against the petitioners. Hence, first limb of arguments were made on this point itself. Ld. counsel for petitioners submitted that because of lien over the award, statutory remedy available to petitioners under Section 34 of the Act cannot be taken away. He argued that in none of the provisions, remedy u/s 34 has been barred on account of lien over the award. Ld. counsel took analogy from S. 9 CPC, to submit that in absence of express bar in the law, statutory remedy u/s 34 cannot be denied.
31. Per contra, ld. counsel for respondent relied upon order passed by Hon'ble Delhi High Court in M/s Glodyne people power ltd. vs. M/s Caparo financial solutions ltd., OMP (Comm) 499/2019, decided on 23.02.2024, to submit that petition is liable to be OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.20 of 39 Patiala House Court, New Delhi dismissed on account of this lien itself. However, I find that this issue has become inconsequential because one FDR was already furnished on the record by petitioners towards payment in discharge of this lien on 29.08.2024. Though at that time, it was submitted by ld. counsel for petitioners that same was being furnished without prejudice to his rights and contentions, however, I do not find any reason in favor of the petitioners to withhold that amount, to which ld. Arbitrator was rightfully entitled to and could get it recovered as per S. 39 of the Act. That FDR can be released to ld. Arbitrator and this petition can be decided on its merits.
32. Now coming back to the question of merits of this petition, it has to be appreciated that the scope of enquiry under section 34 is restricted to consideration whether any one of the grounds mentioned in section 34 exists for setting-aside the Award. Section 34 of the Act 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 OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.21 of 39 Patiala House Court, New Delhi 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.
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.
(2A) 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-
OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.22 of 39 Patiala House Court, New Delhi appreciation of evidence."
33. The general principles are that 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, even if the 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 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.
34. Hon'ble Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, 2019 SCC OnLine SC 677 held that under Section 34 (2A) of the Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the Award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.23 of 39 Patiala House Court, New Delhi led by the parties and therefore, would also have to be characterized as perverse. It was held that a finding based on no evidence at all or an Award which ignores vital evidence in arriving at its decision, would be perverse and liable to be set aside on the ground of patent illegality.
35. Hon'ble Supreme Court in the case of Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It was held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
36. Hon'ble Supreme Court in the matter of PSA SICAL Terminals Pvt. Ltd. vs. Board of Trustees of V.O Chidambranar Port Trust Tuticorin reported as 2021 SCC OnLine SC 508, reiterated its view as taken in MMTC Limited Vs. Vedanta Limited reported as (2019) 4 SCC 163, and held as follows: -
"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 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 OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.24 of 39 Patiala House Court, New Delhi 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 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.
12. 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."
37. Accordingly, I shall deal with the next issue related to argument of petitioners against unilateral appointment of Arbitrator. It is admitted fact in this case that arbitration clause was invoked much prior to amendment in the Act w.e.f. 23.10.2015, vide which S. 12 (5) was inserted in the Act, thereby making unilateral appointment of Arbitrator illegal. Prior to 23.10.2015, there was no such disqualification in law attached to unilateral appointment. Thus, the question is that whether disqualification under Section 12 (5) of the Act, would apply in an arbitration proceeding, which was already initiated prior to 23.10.2015. This question has been subject matter of deliberation before Supreme Court as well as Delhi High Court in several cases.
OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.25 of 39 Patiala House Court, New Delhi
38. In the case of Pradeep Vinod (supra), Hon'ble Supreme Court observed that: -
"11. ....... Admittedly, the request for referring the dispute was made much prior to the Amendment Act, 2015 which came into force w.e.f. 23-10-2015. Since the request for appointment of arbitrator was made much prior to the Amendment Act, 2015 (w.e.f. 23-10-2015), the provision of the Amendment Act, 2015 shall not apply to the arbitral proceedings in terms of Section 21 of the Act unless the parties otherwise agree. As rightly pointed out by the learned counsel for the appellant, the request by the respondent(s) contractors is to be examined in accordance with the principal Act, 1996 without taking resort to the Amendment Act, 2015."
39. In the case of Parmar Construction (supra), Hon'ble Supreme Court observed that: -
"26. The conjoint reading of Section 21 read with Section 26 leaves no manner of doubt that the provisions of the 2015 Amendment Act shall not apply to such of the arbitral proceedings which has commenced in terms of the provisions of Section 21 of the principal Act unless the parties otherwise agree. The effect of Section 21 read with Section 26 of the 2015 Amendment Act has been examined by this Court in Aravali Power Company Private Limited Vs. Era Infra Engineering Limited, (2017) 15 SCC 32 and taking note of Section 26 of the 2015 Amendment Act laid down the broad principles as under: − "22. The principles which emerge from the decisions referred to above are:
22.1. In cases governed by 1996 Act as it stood before the Amendment Act came into force:
22.1.1. The fact that the named arbitrator is an employee of one of the parties is not ipso facto a ground to raise a presumption of bias or partiality or lack of independence on his part. There can however be a justifiable apprehension about the independence or impartiality of OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.26 of 39 Patiala House Court, New Delhi an employee arbitrator, if such person was the controlling or dealing authority in regard to the subject contract or if he is a direct subordinate to the officer whose decision is the subject-matter of the dispute. 22.1.2. Unless the cause of action for invoking jurisdiction under Clauses (a), (b) or (c) of sub-section (6) of Section 11 of the 1996 Act arises, there is no question of the Chief Justice or his designate exercising power under sub-section (6) of Section 11.
22.1.3. The Chief Justice or his designate while exercising power under sub-section (6) of Section 11 shall endeavour to give effect to the appointment procedure prescribed in the arbitration clause. 22.1.4. While exercising such power under sub-section (6) of Section 11, if circumstances exist, giving rise to justifiable doubts as to the independence and impartiality of the person nominated, or if other circumstances warrant appointment of an independent arbitrator by ignoring the procedure prescribed, the Chief Justice or his designate may, for reasons to be recorded ignore the designated arbitrator and appoint someone else.
22.2. In cases governed by 1996 Act after the Amendment Act has come into force: If the arbitration clause finds foul with the amended provisions, the appointment of the arbitrator even if apparently in conformity with the arbitration clause in the agreement, would be illegal and thus the court would be within its powers to appoint such arbitrator(s) as may be permissible.""
40. In the case of Abhishek Construction (supra), Hon'ble Supreme Court held that: -
"25. In the instant case, the petitioner/award debtor has presented the arbitral award before this Court to be sacrificed at the altar of unilateral appointments. The judicial expansion of Section 12(5) r/w Schedule VII of the Act to make the arbitrator de jure ineligible creates a substantive right on the OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.27 of 39 Patiala House Court, New Delhi parties which had not existed when the arbitrator in the instant case was appointed by the parties and therefore the arbitral proceedings had begun under the unamended Act. It is a settled principle of law that a statute which creates substantive rights and liabilities on the parties shall be construed to be prospective in operation. Hence, on one hand, due regard has to be accorded to the principles of impartiality and un-biasedness which are safeguarded by insertion of Section 12(5) r/w Schedule VII of the Act, whilst on the other hand, the Court must ensure that substantive rights and liabilities should not be imposed on a particular party retrospectively. Therefore, even though 2015 Amendment Act is applicable on court proceedings in relation to arbitral proceedings which had commenced before the effective date, the applicability cannot be said to include the substantive rights and liabilities emerging out of the 2015 Amendment Act. While I have no doubts in holding that the act of unilateral appointment is outlawed as of today and cannot be sustained at any stage whatsoever, it was not so when the unilateral appointment was made in the instant case. This Court finds itself in consonance with the arguments put forth by the counsel for the award holder that there was no bar placed on unilateral appointment of an arbitrator at the time when the appointment was made in the instant case."
41. In the case of ABB India Ltd. Vs Bharat Heavy Electricals Ltd.
[2020 SCC OnLine Del 2070], Delhi High Court dealt with similar situation and held as under: -
"16. The issue to be determined is, quite obviously, whether Section 12(5) of the 1996 Act would apply to the facts of the present case, or not.
18. Section 26 of the 2015 Amendment Act read as under:
"26. Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.28 of 39 Patiala House Court, New Delhi in relation to arbitral proceedings commenced on or after the date of commencement of this Act."
33. Having thus set out the contention of SPSCL, advanced before it, the Supreme Court went on, in para 16 of the report, to hold thus:
"Considering the facts and circumstances of the present case, we are not inclined to go into the merits of this contention of the appellant nor examine the correctness or otherwise of the above view taken by the Delhi High Court in Ratna Infrastructure Projects case; suffice it to note that as per Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015, the provisions of the Amended Act, 2015 shall not apply to the arbitral proceedings commenced in accordance with the provisions of Section 21 of the principal Act before the commencement of the Amendment Act unless the parties otherwise agree. In the facts and circumstances of the present case, the proviso in Clause (65) of the general conditions of the contract cannot be taken to be the agreement between the parties so as to apply the provisions of the amended Act. As per Section 26 of the Act, the provisions of the Amendment Act, 2015 shall apply in relation to arbitral proceedings commenced on or after the date of commencement of the Amendment Act, 2015 (w.e.f. 23-10-2015). In the present case, arbitration proceedings commenced way back in 2013, much prior to coming into force of the amended Act and therefore, provisions of the amended Act cannot be invoked."
35. The observations and findings of the Supreme Court, in S.P. Singla Constructions Pvt Ltd., may be enumerated thus:
(i) In view of the facts and circumstances of the case before it, the Supreme Court did not enter into the merits of the contention, of SPSCL, that the concluding caveat, in Clause (65) of the GCC, made Section 12(5) of the 1996 Act OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.29 of 39 Patiala House Court, New Delhi applicable to the arbitral proceedings between SPSCL and the State of Himachal Pradesh. Nor did the Supreme Court examine the correctness, or otherwise, of the judgement of this Court in Ratna Infrastructure Projects (P) Ltd.
(ii) Section 26 of the 2015 Amendment Act makes the provisions of Section 12(5) inapplicable to arbitral proceedings commenced before 23rd October, 2015.
(iii) The arbitral proceedings, between SPSCL and the State of Himachal Pradesh had commenced in 2013, much prior to 23rd October, 2015.
(iv) "In the facts and circumstances" of the case before it, the proviso in Clause (65) of the GCC could not be regarded as an "agreement between the parties", so as to make Section 12(5) applicable.
38. Parmar Construction Company is a decision which considerably impacts the outcome of these proceedings. The Supreme Court, in the very first para of the judgment, delineated three issues, arising for consideration, of which the first issue was worded thus:
"(1) The High Court was justified in invoking amended provision which has been introduced the Arbitration and Conciliation (Amendment Act), 2015 with effect from 23rd October, 2015 (hereinafter being referred to as "Amendment Act, 2015")?
Clearly, therefore, the very first issue, identified by the Supreme Court, as arising before it, was the issue with which we are concerned in the present case. We may turn, therefore, to the facts.
55. The above study reveals that the facts which obtained, and the dispute which arose, in Parmar Construction Company, were substantially akin to the facts, and the dispute, in the present case. For all intents and purposes, the arbitration clause, in that case, was also similar to the one before the petitioner and the respondent, with a caveat, akin to the caveat contained in the second paragraph of clause 33.1 of the GCC in the present case. A specific contention OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.30 of 39 Patiala House Court, New Delhi was taken, before the Supreme Court, that, in view of the said caveat, Section 12(5), as inserted by the 2015 Amendment Act, would apply. The Supreme Court rejected the contention and held that the benefit of the Section 12(5) of the 1996 Act was not available to PCC."
42. The arguments of both the parties have already been mentioned herein-above with reference to several judgments relied upon by both the parties. In order to seek guidance from a particular judgment, it has to be seen that which one is based on similar fact situation, as peculiar to this case. There is no second thought for the legal proposition that after amendment in the Act in 2015 with effect from 23.10.2015, unilateral appointment of Arbitrator cannot be termed as valid, unless there is written waiver from the other party. This law holds ground even if the arbitration agreement between the parties, came into existence prior to 23.10.2015. An Award passed by unilaterally appointed Arbitrator, thus, cannot pass the test of legality in such situations.
43. However, here is the case wherein not only arbitration agreement was executed prior to 23.10.2015, rather even arbitration proceedings were already initiated before the amendment was done in the Act in 2015. Most of the judgments cited by petitioners relate to the situations wherein either new Arbitrator was to be appointed or Arbitrator was appointed after amendment. However, here is the case wherein award has already been passed under the arbitration initiated prior to the amendment. Therefore, it has to be seen if this award can be termed to be nullity on the grounds of having been passed by Arbitrator without jurisdiction? There cannot be quarrel with the proposition that under unamended Act, unilateral appointment of OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.31 of 39 Patiala House Court, New Delhi Arbitrator was allowed. In this case, Sh. Ravi Kishor was appointed as first Arbitrator before 23.10.2015. After some time, he took recuse and thereafter, Sh. Sandeep Deshmukh was appointed. However, he also subsequently recused himself and then Sh. B.L. Garg was appointed vide letter dt. 03.06.2019. He proceeded with arbitration proceeding from the stage where it was left by previous Arbitrator.
44. In the case of ABB (supra) also, arbitration was invoked and an Arbitrator was appointed prior to 23.10.2015. However, tenure of first Arbitrator was terminated and a new Arbitrator was appointed after 23.10.2015. This appointment of new substitute Arbitrator was challenged before Delhi High Court, on the grounds of being hit by S.12 of the amended Act. In the background of arbitration being initiated under the regime of law prior to the amendment w.e.f. 23.10.2015, Hon'ble Delhi High Court examined the law and various judgments given by Supreme Court, dealing with validity of arbitrator's appointment subsequent to amendment but in an arbitration-proceedings already initiated prior to 23.10.2015. Delhi High Court held that appointment of new Arbitrator was not vitiated on account of Section 12(5) of the 1996 Act, as inserted by the 2015 Amendment Act. This judgment has been subsequently approved by Supreme Court in the case of Ratnam Sudesh Iyer v. Jackie Kakubhai Shroff, (2022) 4 SCC 206. Delhi High Court has discussed most of the prominent judgments of Supreme Court, which were cited before me, in the case of ABB (supra). Hence, I am not required to give my interpretation of those judgments. In OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.32 of 39 Patiala House Court, New Delhi view of such legal position, I do not find any merit in the argument based on unilateral appointment of Arbitrator.
45. Next issue is based on compliance of S.21 of the Act. Ld. counsel for petitioners argued that the notice dt. 23.08.2013 as sent on behalf of respondent, did not satisfy the requirement of S.21 of the Act. He submitted that this notice was merely a demand notice. Per contra, ld. counsel for respondent-1 submitted that in the said notice it was stated that in default of payment, dispute would be referred to arbitration. To appreciate the rival contentions, it would be relevant to reproduce the relevant part of aforesaid notice, which is as follows: -
"We, therefore, hereby finally call upon you to make payment of above stated amount of Rs. 78,53,379.05 alongwith up to date interest thereon @ 22% per annum from the respective due date(s) of the invoices to our client within one week of this notice, failing which, our client shall be compelled to refer the disputes to the arbitration holding you responsible for all the costs and consequences arising therefrom."
46. The language of aforesaid notice is well explicit to show that in substance it was a demand notice. Merely because there was a warning recorded to refer the disputes to arbitration, it cannot be said that through this notice respondent exhibited intention to refer the dispute to arbitration at that time itself, or intimated the petitioners for appointing the Arbitrator. It is appropriate to refer to Section 21 of the Act, which provides as under: -
"Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent."
OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.33 of 39 Patiala House Court, New Delhi
47. The language of provision makes it amply clear that notice is to be given to request to refer the dispute to arbitration. Evidently notice dt. 23.08.2013 as sent by respondent, did not have contents to request to refer the dispute to arbitration or to intimate that matter/dispute as narrated in the notice, was being referred to arbitration and to mention the name of Arbitrator.
48. Hon'ble Delhi High Court in the case of Alupro Building Systems Pvt Ltd vs Ozone Overseas Pvt Ltd (supra) inter alia held that where a notice under Section 21 of the Act invoking arbitration clause is not served upon the other party by the party invoking the said clause and the arbitration proceedings are held, then in absence of any agreement by the petitioner for waiving of requirement of notice under Section 21 of the Act, the impugned arbitral award would be opposed to the fundamental policy of Indian law since the mandatory requirement of the Act stands not complied and ground under Section 34 (2)(b) (ii) of the Act is attracted and such impugned award could be set aside on this ground. In that case, Hon'ble Delhi High Court while dealing with mandate of S.21 of the Act, observed as under: -
"The object behind the provision is not difficult to discern. The party to the arbitration agreement against whom a claim is made, should know what the claims are....... ....Even assuming that the clause permits one of the parties to choose the arbitrator, even then it is necessary for the party making such appointment to let the other party know in advance the name of the person it proposes to appoint."
49. Tested on the parameters of above-mentioned legal principles, I find notice dt. 23.08.2013 lacking to satisfy the requirements of S. 21 of the Act. It is not the contention of respondent that OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.34 of 39 Patiala House Court, New Delhi petitioners had waived their rights under Section 21 in writing. Therefore, Award in question is found to be passed in contravention of a legal mandate, which is obviously against the fundamental policy of Indian law.
50. Next issue relates to claim of respondent being time barred.
Admittedly the last transaction between the parties took place on 10.06.2010 and the matter was referred for arbitration by appointing the first Arbitrator on 31.01.2014. Ld. Arbitrator accepted the plea of respondent to count limitation from 11.02.2011, on the basis of a cheque with signature of petitioner bearing same date, being presented for encashment by respondent. Ld. Arbitrator took into consideration the date of notice dt. 23.08.2013 as the end date to count the limitation. He relied upon the judgment passed in the case of Rajesh Kumar (supra).
51. In the case of Rajesh Kumar (supra), Hon'ble High Court of Delhi held that: -
"6. A payment by cheque satisfies the requirement of Section 19 inasmuch as the acknowledgment of payment appears in the handwriting of or in a writing signed by the person making the payment in the form of a cheque.
7. A direct authority available on the point is Gori Lal v. Ramjee Lal, AIR 1961 MP 346, wherein on a review of the available case law on the point, a learned single Judge of the High Court of Madhya Pradesh has held :
"If one bears in mind that the word "payment" has been used in two different senses, it would be clear that the moment the negotiable instrument is handed over and accepted by the creditor and is in the debtor's handwrit-ing, there has been a payment for the purposes of Section 20, OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.35 of 39 Patiala House Court, New Delhi Limitation Act and a fresh period of limitation has already started.
If the negotiable instrument is dishonoured subsequently the creditor, no doubt, can fall back on his original claim. But the new term of limitation of the subsequent happening. To link S. 20 with the subsequent honouring of the negotiable instrument would indeed lead to absurd results. The debtor has intended and at all events represented to the creditor that the negotia-ble instrument is good, and thereby the creditor has for his part, been given a feeling of security with a fresh term of limitation. If it turns out that the debtor's negotiable instrument is dishonoured (or as for that matter the currency notes that he has given turn out to be counter-feit) this fresh term of limitation cannot be blocked. Again, if one looks to the equity side of it, a payment which the debtor means as a sheer pretence, but the creditor accepts as genuine, cannot certainly deprive the latter of what S. 20 has already given him.
Thus I would hold that the passing of the cheque is payment for the purpose of S. 20 and if the other conditions were fulfillled, a fresh term of limitation started from that date, whether or not it is subsequently honoured. That way the suit of the plaintiff was not time-barred."
8. The above said single Bench view has been approved by a Division Bench of High Court of MP in BalChand Bhandari v. India Pictures and Ors.AIR 1967 MP 280 (PARA 11).
9. So is the view taken by the HC of Calcutta in Mauris Mayahas v. W. Morley and Ors. AIR 1925 Cal 937 holding :
"If a cheque is given in part payment of a debt, the fresh period of limitation under S. 20 should be computed from the actual giving of the cheque and not from the time when the Bank pays cash for it.
10. I am in respectful agreement with the view taken by the High Courts of Madhya Pradesh and Calcutta. Several observations made by their Lordships of the Supreme Court OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.36 of 39 Patiala House Court, New Delhi in Jiwan Lal Acharya v. Rameshwar Lal Aggarwala, AIR 1967 SC 1118 lend sup-port to the said view. It was a case of a postdated cheque issued in payment of a debt and relied on as payment for the purpose of extending limitation under Section 20 of the Limitation Act, 1908. The question arising for decision was whether the effective date for extending the period of limitation would be the date of the cheque or the date of delivery thereof. Dealing with the question their Lordships have observed (vide para 8) :
"Where therefore the payment is by cheque and is conditional, the mere de-livery of the cheque on a particular date does not mean that the payment was made on that date unless the cheque was accepted as unconditional payment. Where the cheque is not accepted as an unconditional payment, it can only be treated as a conditional payment. In such a case the payment for purposes of S. 20 would be the date on which the cheque would be actually payable at the earliest assuming that it will be honoured"
"The fact that the presented it later and was then paid is immaterial for it is the earliest date on which the payment could be made that would be the date where the conditional acceptance of a post-dated cheque becomes actual payment when honoured. ............""
52. In the case of Jay Shree Tea (supra) as relied upon by respondent, Hon'ble Supreme Court held that: -
"9. Having heard learned counsel for the appellant I am of the view that the learned Additional District Judge went wrong in invoking Article 14 of the Limitation Act. I see no reason why Article 1 of the Limitation Act was not attracted to the facts of the case. The `Statement of Account' Ext.PW1/6 on the basis of which the appellant filed the suit cannot be said to be an incomplete statement. It contains all the entries from the year the respondents stopped making payment to the appellant till the filing of the suit. And what is of significance is that the `Statement of Account' contains entries which corresponds to the acknowledgments of debt by the OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.37 of 39 Patiala House Court, New Delhi respondents vide Ext.PW1/3, PW1/4 and PW1/5 referred to hereinabove. There could be no better proof of the authenticity of the 'Statement of Accounts' maintained by the appellant than the fact that the entries made therein were in consonance with the letters containing acknowledgments of debt by the respondents and those were letters which were received by the appellant along with the demand drafts prior in point of time than the dates on which the entries were made. Even otherwise, owing to the absence of the respondents there was no challenge to the correctness of the documents Ext.PW1/3 to PW1/6 and yet the learned Additional District Judge chose to discard the said documents. It is true that the appellant in effect was claiming the price of goods delivered by it to the respondents but as per paragraph 10 of the plaint it had based its case on the books of accounts being maintained by it on the basis of mutual open and current account and I see no reason why the appellant could not rely on the 'Statement of Account' maintained by it and invoke Article 1 of the Limitation Act."
53. The ratio of Jay Shree (supra) is not relevant in this case, as the extension of limitation was sought on the basis of a cheque with dt. Of 11.02.2011, rather than any mutual open current account. It is to be seen if ratio of Rajesh Kumar (supra) is applicable to this case? As per admitted facts of this case, petitioners had given blank signed cheques in the year 2008 as security. The cheques were filled by respondent meaning thereby that date and amount was filled by the respondent as per their option. It is settled law that the payee has the right to fill in the blank signed cheque in material particulars. The ratio of Rajesh Kumar (supra) leaves no doubt that even if such cheque is dishonored, it shall be validly taken into consideration for extension of limitation. However, when it has been found that notice dt. 23.08.2013 was not a valid notice to invoke arbitration, then counting the limitation from 11.02.2011 upto invocation of arbitration with notice dt. 23.08.2013, cannot be valid in law. In that situation, one has to take into OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.38 of 39 Patiala House Court, New Delhi consideration the date of filing the Statement of Claim for counting the limitation. As per finding recorded by ld. Arbitrator, Statement of Claim was filed on 21.03.2014. This was apparently beyond 3 years from the date of 11.02.2011. In that situation, I do find that claim of respondent was filed beyond limitation and thus, Award in question once again comes under teeth of the fundamental policy of Indian law i.e. to reject the time barred claim.
DECISION
54. In view of foregoing discussions and observations, petition is allowed and Award in question is set aside. File be consigned to record room, as per rules.
Digitally signed by PULASTYA PRAMACHALAPULASTYA PRAMACHALA Date:
2025.09.22 17:35:19 +0530 Pronounced in the (PULASTYA PRAMACHALA) Open Court on this District Judge (Commercial Court)-01, 22th day of September, 2025 Patiala House Court, New Delhi OMP (COMM) No.235/2019 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.39 of 39 Patiala House Court, New Delhi