Delhi District Court
Prem Sagar Dhingra & Ors vs Magma Fincorp Ltd. & Ors on 9 January, 2015
IN THE COURT OF SH. LALIT KUMAR:
ADDI. DISTRICT JUDGE 01: SOUTH EAST DISTRICT:
SAKET COURTS: NEW DELHI
ARB 69/14
Prem Sagar Dhingra & Ors. .... Petitioner
Versus
Magma Fincorp Ltd. & Ors. ....Respondent
J U D G E M E N T
1. By this order, I shall decide the petition under Section 34(1), (2)(ii) & (iii) and Section 11(1) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') for setting aside the exparte award dated 05.02.2014.
2. Brief facts for the decision are that the applicant / petitioner has made an application under Section (1),(2)(ii) &
(iii) and Section 11(1) of the Arbitration and Conciliation Act challenging the exparte award dated 05.02.2014 passed by Ld. Sole Arbitrator, Sh. Atul Tripathi. Vide the impugned order, an award of Rs.15,41,684/ alongwith interest @ 18% w.e.f 23.10.2012 till its realisation to be payable jointly or severally from the petitioners. Ld. Arbitrator has also awarded a sum of Rs. 25,000/as a cost of arbitration in favour of respondent and against the petitioners.
ARB 69/14 Prem Sagar Dhingra Vs. Magma Fincorp Ltd. Page 1 of 113. It is further submitted that the said exparte award was passed by respondent no.2, has not followed the provisions of Section 11(1) of Arbitration and Conciliation Act. It is further submitted that the petitioners were in regular touch with the respondent company and the petitioner was shocked when received a copy of impugned award in the month of March 2014 inspite of strong objection on the appointment of Arbitrator, respondent company not only appointed arbitrator rather gone ahead to pass the award without following due process of law by not considering the merits of the case as no opportunity was ever afforded to petitioners to lead evidence. Further respondent no.1 has failed to comply with the provisions of Section 11(1) of Arbitration and Conciliation Act as he did not mention the name of Arbitrator at the time of execution of the said agreement on which the respondent no.2 was appointed as an arbitrator. The said agreement was executed between the time of issuance/ grating the alleged loan to the petitioners.
4. It is further submitted that the respondent no.1 used to get signed of the customer on the blank format of its prescribed form as the financial organization/ financial institution not filled up in a proper manner and accordingly the name of the arbitrator was not mentioned in the said agreement, when the petitioner signed the said agreement. Accordingly to the provisions of concerned Section the arbitrator must be ARB 69/14 Prem Sagar Dhingra Vs. Magma Fincorp Ltd. Page 2 of 11 appointed if any dispute arises between the parties with the consent of both the parties but in this case the respondent no.1 arbitrarily appointed his own paid person as a sole arbitrator without getting the consent of petitioner.
5. It is further submitted that the respondent no.1 has also failed to inform the petitioner prior to appointment of an arbitrator and also to provide the knowledge of referring the dispute to the arbitrator. The same process is mandatory requirement of the concerned act and the respondent no.1 did not follow the mandatory provision for the concerned Act. Even petitioner has not received any notice of appointment of arbitrator or to join the arbitration proceedings from the Arbitrator.
6. The main ground taken by the petitioner is that the respondent no.1 has failed to inform the petitioner prior to appointment of an arbitrator and also to provide the knowledge of referring the dispute to the arbitrator which is mandatory requirement of the concerned act and the respondent no.1 did not follow the mandatory provision for the concerned act. It is alleged that petitioner no.1 has been paying the regular EMI amount upto his financial strength as and when the petitioner no.1 started facing financial crises, then the petitioner no.1 immediately informed in person to the respondent no.1 and ARB 69/14 Prem Sagar Dhingra Vs. Magma Fincorp Ltd. Page 3 of 11 requested not to take any harsh action as he will pay the entire legitimate outstanding amount of the fixed EMI in near future and respondent no.1 also appreciated the request of the petitioner no.1 and also assured not to take any harsh action against the petitioner and moreover the petitioner no.1 clearly stated to the respondent no.1 that at the time of taking any action, the respondent no.1 had to inform in a proper and effective manner and also suggested to appoint an arbitrator after getting the consent of the petitioner no.1 but the respondent no.1 neither informed the petitioners in a proper and effective manner prior to appointment the sole arbitrator i.e respondent no.2 nor the respondent no.2 has served any notice in a proper and effective manner although the respondents have the both address of the petitioners.
7. It is further alleged that respondent no.2 / arbitrator has exhibited the entire documents in the award on his own without seeing any original documents and as such the respondent no.1 flouted the provisions of Evidence Act and such copy of the documents has no substance.
8. Reply to the said petition filed on behalf of respondent no.1 mentioning that the present application is not maintainable as the pleas / grounds raised herein were not raised before Ld. Sole Arbitrator which otherwise is mandatory ARB 69/14 Prem Sagar Dhingra Vs. Magma Fincorp Ltd. Page 4 of 11 in terms of Sec. 16 of the Act.
9. It is mentioned in the reply that petitioner was not under any incapacity and he got proper notice of the appointment of Ld. Sole Arbitrator and the arbitral proceedings since all the notices and exchange of letters was made at the only and last known address of the applicant by the respondent no.1 as furnished by him at the time of making an application for grant of loan facility. It is further submitted that the impugned award has categorically dealt with the dispute falling within the terms of submission to arbitration and the said proceedings were within the scope of submission to arbitration. The composition of the Arbitral Tribunal was in accordance with the arbitration agreement entered into between the parties and therefore, the same should not be setaside. The arbitral award is not in conflict with public policy of India and therefore, the same should not be setaside on the baseless grounds. It is denied that the exparte award was passed by the respondent no.2 in an arbitrary manner has not followed the provision of Section 11(1) of the Arbitration and Conciliation Act. It is denied that the petitioners were not given a chance to present their defence. The petitioners did not intentionally appear before the Ld. Arbitrator, hence waiving their right to present their defence and award passed by the Arbitral Tribunal and the procedure adopted is in accordance with the terms of the agreement entered into between the ARB 69/14 Prem Sagar Dhingra Vs. Magma Fincorp Ltd. Page 5 of 11 parties. It is further submitted that Ld. Sole Arbitrator was pleased to issue notice on two occasions firstly on 29.09.2012 and secondly on 26.10.2012 but none appeared on behalf of the present petitioners. It is denied that the petitioner had informed the respondent no.1 in person about the hardships he was facing. The respondent no.1 neither got any such request nor any assurances were made on behalf of respondent no.1. The respondent no.1 served a demand notice dated 25.06.2012 thereby calling upon the present petitioners to pay the outstanding dues but there was no response or compliance on behalf of the petitioner. It is further submitted that as per Section 19(1) of the Arbitration and Conciliation Act the arbitrator appointed under an arbitration agreement is not bound by the provisions of Indian Evidence Act unless otherwise is specifically agreed by the arbitrator himself. It is denied that each financial institution has got the signature of the loan seeker on the blank format and the said signed format filled up as and when the same is required.
10. I have heard Ld. Counsel for the parties and gone through the record as well as the record of Ld. Arbitrator which had been summoned in the present case.
11. The present objection under Section 34 of Arbitration and Conciliation Act has been filed qua the award passed by the ARB 69/14 Prem Sagar Dhingra Vs. Magma Fincorp Ltd. Page 6 of 11 Ld. Sole Arbitrator Sh. Ajay Tripathi on 05.02.2014. The main contention of the petitioner is that he has never received any notice from the Ld. Arbitrator and he was not a party there due to said reasons. Present award is an exparte award. Ld. Counsel for petitioner further argued that he has not been served even with the notice under Section 11 of Arbitration Act for appointment of the Sole Arbitrator by the respondent no.1 which is mandatory in law. Without giving a notice under Order 11 of Arbitration Act, the respondent no.1 appointed the Sole Arbitrator which is barred in law. The petitioner only came to know about the award when they received the copy of the impugned award in the month of March, 2014. It is argued by petitioner that he has never been granted any chance to represent himself before the Ld. Sole Arbitrator or to put his case before him. The entire proceedings is misconceived and based on the wrong facts provided by the respondent no.1 to the Ld. Sole Arbitrator. Petitioner was paying the installment amount to the respondent no.1 time to time and whenever he failed to pay he informed in person to the respondent no.1 with a request not to take any harsh action as he is arranging the money to pay the installment and respondent no.1 always assured him that he will not take any action against him. It is further argued by the petitioner that all the document which were exhibited in the exparte evidence were the photocopies and originals thereof ARB 69/14 Prem Sagar Dhingra Vs. Magma Fincorp Ltd. Page 7 of 11 have never been produced to Ld. Sole Arbitrator.
12. On the other hand, Ld. Counsel for respondent no.1 argued that petitioner was very well given notice under Section 11 of Arbitration Act before appointment of Ld. Sole Arbitrator on the last known address of the petitioner with the respondent no.1.
13. It is further argued by the respondent no.1 that after initiation of the arbitration proceedings, petitioner was given notice by the Ld. Sole Arbitrator through speed post. It is the petitioner who chose not to appear before the Ld. Sole Arbitrator as he has no respect of law. It is further argued by the respondent no.1 that petitioner failed to maintain his loan account and had defaulted in payment of the installments.
14. I have also perused the arbitration record which has been summoned from Ld. Arbitrator in this court. Perusal of the arbitration proceedings shows that on 29.09.2012 the reference of dispute between the parties was referred to Ld. Sole Arbitrator who upon hearing issued notice to respondent therein for 26.10.2012. However, notices were not returned back and respondent therein also did not appear on 26.12.2012. Ld. Counsel for the claimant requested there to proceed respondent therein exparte. Ld. Sole Arbitrator recorded their statement in this regard that the notice was sent on the last known address of ARB 69/14 Prem Sagar Dhingra Vs. Magma Fincorp Ltd. Page 8 of 11 the respondent therein. However, it is seen that there is no date put on the statement and also it was remained unsigned by the AR of the claimant company. For the next date of hearing also notices were issued respondent therein, however, the notices not returned back to Ld. Sole Arbitrator and the respondents therein did not present on that day also. Consequently, they were proceeded exparte by Ld. Sole Arbitrator. AR of the claimant company tendered his evidence by way of affidavit. It is seen that again the statement for tendering the affidavit was remained unsigned and without any date. It is further seen that after deed of assignment vide which the present respondent became the claimant before the Ld. Sole Arbitrator notices were issued to respondents but again the notices were not received back to Ld. Sole Arbitrator and so as the respondents therein appeared before the Ld. Sole Arbitrator. The award was passed by Ld. Sole Arbitrator on 05.02.2014.
15. It remained a mistry to this court why the statements given by the AR of the claimant company remained unsigned on both occasions when he was pressing to proceed the respondents therein exparte and while he was tendering his evidence by way of affidavit. It is also seen that on three occasions the notices were issued to the respondents therein and the notices never returned back to the Ld. Sole Arbitrator or the AD cards, if the RC delivered. The claimant has not produced any track record of ARB 69/14 Prem Sagar Dhingra Vs. Magma Fincorp Ltd. Page 9 of 11 the Registered AD whether they have been delivered or to whom they have been delivered. Ld. Sole Arbitrator recorded in the proceedings that as per Section 3 of Arbitration and Conciliation Act, the respondents are proceeded exparte. Bare perusal of Section 3 of Arbitration and Conciliation Act, reveals that "3. receipt of written communication
1. unless otherwise agreed by the parties.
a) any written communication is deed to have been received if it is delivered to the addressee personally or his place of business, habitual residence or mailing address and
b) if none of the places referred to in clause
(a) can be found after making reasonable inquiry, a written communication is deemed to have been received if it is sent to the addressees last known place of business, habitual residence or mailing address by registered letter or by any other means which provides a record of the attempt to deliver it.
16. None of the clause is saying that if the registered AD does not return back it will be deemed to be served. Also in absence of any track record of the registered letters, it cannot be held that the respondents herein have been served with the registered AD.
17. During the course of arguments also, on the query of the court, Ld. Counsel for claimant / respondent herein failed to provide the track record of the notices which were issued by Ld. ARB 69/14 Prem Sagar Dhingra Vs. Magma Fincorp Ltd. Page 10 of 11 Sole Arbitrator to the respondent / petitioner herein.
18. In the above observation, I am of the view that respondents/ petitioners herein were not duly served with the summons before the Ld. Sole Arbitrator. The natural justice demands that every person has a right to be heard before passing of any order against him.
19. In view of the above said observation and in the interest of justice, I am of the opinion that the present petition be returned back to Ld. Sole Arbitrator for disposal of the claim petition in presence of both the parties. Respondent / petitioner herein must be granted an opportunity to prove himself and to put his case before passing of any order. Consequently, the present petition under Section 34 of Arbitration and Conciliation Act is returned to the Ld. Sole Arbitrator for proper adjudication in accordance with law.
20. File be consigned to record room. A copy of this judgement be sent to Ld. Sole Arbitrator alongwith Arbitration Record.
Announced in the open (LALIT KUMAR)
Court on 09.01.2015 ADJ01: South East District
Saket Courts, New Delhi
(This Judgement contains 11 pages
and each page bears my signatures).
ARB 69/14 Prem Sagar Dhingra Vs. Magma Fincorp Ltd. Page 11 of 11
ARB 69/14
Prem Sagar Dhingra Vs. Magma Fincorp Ltd.
09.01.2015
Present: Ld. Counsel for the parties.
Vide separate judgement, petition under Section 34 of Arbitration and Conciliation Act is returned to Ld. Sole Arbitrator for proper adjudication in accordance with law.
File be consigned to record room. A copy of this judgement be sent to Ld. Sole Arbitrator alongwith Arbitration Record.
(LALIT KUMAR) ADJ01(SE), Saket Courts, New Delhi / 09.01.2015 ARB 69/14 Prem Sagar Dhingra Vs. Magma Fincorp Ltd. Page 12 of 11