Rajasthan High Court - Jaipur
(Ranjeet Bafna & Anr. vs . Kotak Mahendra Bank Ltd. & Anr.) on 21 May, 2014
Author: Alok Sharma
Bench: Alok Sharma
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH JAIPUR O R D E R S.B. CIVIL MISC. APPEAL NO.2498/2012 (Ranjeet Bafna & Anr. Vs. Kotak Mahendra Bank Ltd. & Anr.) Date of Order : May 21st, 2014 HON'BLE MR. JUSTICE ALOK SHARMA REPORTABLE Mr. S.C. Gupta, for the objectors-appellants. Mr. Pankaj Gupta, for the claimants-respondents. BY THE COURT
1. This Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter 'the Act of 1996') appeal challenges the order dated 09.05.2012, passed by the Additional District & Sessions Judge No.5, Jaipur Metropolitan, Jaipur. Thereby the objections filed by the objector-appellant and the guarantor (hereinafter 'the non-claimants') under Section 34 of the Act of 1996 were rejected qua the ex-parte award dated 05.12.2008, passed by the Sole Arbitrator.
2. The background facts of the case are that under a loan agreement dated 31.03.2007, the non-claimants availed a loan of Rs.12,54,847/- from the claimants-respondents, Kotak Mahendra Bank Ltd. (hereinafter 'the claimant-Bank'). The loan was for the purchase of a commercial vehicle i.e. Truck TATA 4018 bearing engine No.447207CSZ3037772 and chassis No.C62557040. The loan was to be repaid along with contracted interest in 46 monthly installments of which the first 34 were for an amount of Rs.36,000/- p.m. and the remaining 12 for a sum of Rs.34,200/- p.m. As routine the non-claimants undertook to abide by the terms of the loan agreement dated 31.03.2007. The commercial vehicle purchased from the loan advanced by the claimant-Bank was under hypothecation to the claimant-Bank which consequently had the first and exclusive charge over it. The agreement provided that in the event of breach of any of the terms and conditions of the agreement by the non-claimants, the claimant-Bank would had the right to repossess the commercial vehicle in issue, sell it by auction or private contract, appropriate amounts received and adjust the same with the outstandings due. Realisable outstanding amount due, if any, thereafter as per the terms and conditions of the agreement would then be recovered under a money decree.
3. The case of the claimant-Bank is that having obtained the loan facility from it under the loan agreement dated 31.03.2007, only two of the due installments were paid by the principal borrower. Breach was occasioned and the default event thus occurred. The aforesaid default entitled the claimant-Bank in terms of the loan agreement dated 31.03.2007 to repossess the commercial vehicle in question, recall the entire loan amount and recover the entire outstanding dues from the non-claimants. In the process, the claimant-Bank issued notices on or about 12.09.2008 to the non-claimants regarding the outstanding dues and also indicating its desire to inspect the hypothecated vehicle. But to no avail. The notice dated 12.09.2008 required the non-claimants to settle the disputes arising from the default event and deposit the entire amount outstanding and due under the loan agreement dated 31.03.2007. The non-claimants were notified that in the event the disputes with regard to the breach of the obligation by them under the loan agreement dated 31.03.2007 not being settled and outstanding entire amount as per the agreement not paid as required, the disputes would be referred for adjudication to the Sole Arbitrator as per Clause 10.16 of the loan agreement dated 31.03.2007. There was no response from the non-claimants. In these circumstances, the claimant-Bank resorted as a first step to an application under Section 9 of the Act of 1996 on or about 10.12.2007 before the Additional District and Sessions Judge, Jaipur Metropolitan, Jaipur seeking appointment of a receiver in respect of the hypothecated vehicle to ensure its security and protection. On the application being transferred to the Court of Additional District Judge No.4, Jaipur Metropolitan, Jaipur, it was pleased vide order dated 18.01.2008 to appoint a receiver to take possession of the hypothecated vehicle in issue. The application was finally disposed of on 22.08.2008 with a direction that the hypothecated vehicle would remain in the custody of the receiver pending the decision in the disputes with regard to non-payment of monthly installments by the non-claimants under the loan agreement dated 31.03.2007 and finally abide the award of the Sole Arbitrator on the disputes as per the agreement between the parties. Possession of the vehicle was taken by the claimant-Bank.
4. The claimant-Bank thereafter under Clause 10.16 of the loan agreement dated 31.03.2007 referred the dispute arising from the non-payment of amounts due to the Sole Arbitrator under its letter dated 15.09.2008. A claim petition followed on 17.09.2008 for sum of Rs. 17,54,782/- stated to be due and outstanding under the agreement of 31.03.2007 against the non-claimants as detailed in the statement of accounts of the claimant-Bank, which was made part and parcel of the Statement of Claim. Aside of the liability of the non-claimants, the claimant-Bank also sought a declaration or direction from the Sole Arbitrator that the appellant No.2-guarantor one Devi Chand Bapna, father of the non-claimant No1-objector (hereinafter 'the guarantor) also be held jointly and severally liable to make payment of the due and outstanding including interest @ 36% p.a. (as agreed to in the loan agreement dated 31.03.2007) effective 18.09.2008 till the realization of the amount by the claimant-Bank. Costs of the arbitration were also claimed.
5. On the claim being filed, notices were issued to the non-claimants on 17.09.2008 through registered post. However, the registered notices were returned qua the non-claimant No.1 with the remark that B ?????? ??? 1785 ????? ?? ???? ??? ??" and the notices sent to the non-claimant No.2 (guarantor) were returned unserved with the remark that ??? ??? ???? ?? ???????????? ?? ?? ???? ????? ??. The Sole Arbitrator in the circumstances, by resort to Section 3 of the Act of 1996 held that taking into consideration the attempt to deliver the notices on the non-claimants at their mailing address as indicated in the application for grant of loan amount made to the claimant-Bank and also in the schedule to the loan agreement dated 31.03.2007, service on the non-claimants i.e. the borrower and the guarantor was deemed to have been made. So holding ex-parte proceedings was drawn against both the non-claimants on 15.10.2008. The Sole Arbitrator noted that although it was not necessary for him to again inform the non-claimants that an ex-parte order had been passed against them in the arbitration proceedings, yet in the interest of justice information of the arbitration proceedings again be sent. Hence vide letter dated 20.10.2008 information was again sent to the absent parties stating that an ex-parte order had been made in the arbitration proceedings against them and if they so wished, they could submit the cause of non-appearance before the Sole Arbitrator on the next date fixed i.e. 05.11.2008 and participate with their defence. This letter dated 20.10.2008 appears to have been served on the non-claimant-borrower. Vide his registered letter dated 02.11.2008, acknowledging the letter dated 20.10.2008 the non-claimant-borrower informed the Sole Arbitrator that he had purportedly not received the notices of the arbitration proceedings at any time, nor a copy of the claim petition and for this reason had been prevented from filing a reply to the claim petition and taking his lawful defence. A prayer was made that all documents including a copy of the claim petition be supplied to facilitate filing of reply thereto and information with regard to the next date be sent such that the disputes between the parties could be lawfully resolved. However, neither the non-claimant-borrower nor the guarantor i.e. son and father respectively, appeared before the Sole Arbitrator on 05.11.2008 as indicated in the arbitrator's letter dated 20.10.2008. The matter was thereupon adjourned to 20.11.2008. On 20.11.2008, the Sole Arbitrator referring to the non-claimant-borrower's letter dated 02.11.2008 received by registered post, again issued information to him through UPC of the next date i.e. 26.11.2008. Resort to UPC appears to have been had by the Sole Arbitrator in view of the fact that oddly while the earlier registered AD notices sent by the Sole Arbitrator on 17.09.2008 and prior thereto on 12.09.2008 by the claimant-Bank terminating the loan agreement dated 31.03.2007 had been returned unserved in spite of the said notices being addressed to the recorded mailing addresses of the two and the subsequent letter dated 20.10.2008 sent to the same addresses by UPC had been receipted. On 26.11.2008, none again appeared for both the non-claimants before the Sole Arbitrator.
6. In the circumstances, the evidence of the claimant-Bank's witness was taken on record by the Arbitrator on the next date. Requisite documents including the loan agreement dated 31.03.2007 and the statement of account maintained by the claimant-Bank in the usual course of its business were exhibited before the Sole Arbitrator. The testimony of the claimant-Bank's sole witness one Ajay Sharma, a Manager in the employment of the claimant-Bank, being unshaken and unchallenged in view of the proceedings being ex-parte, the Sole Arbitrator being satisfied with the claim and the evidence in support thereof passed the ex-parte award dated 05.12.2008 for a sum of Rs.17,54,582/- in favour of the claimant-Bank along with future interest @ 12% p.a. from the date of the award till the date of payment. It was further directed that the non-claimants be liable to pay the claimant-Bank cost of arbitration proceedings including the fee of the Sole Arbitrator as Rs.6,000/-. A copy of the award dated 05.12.2008 was sent on the same day to the non-claimants i.e. both the borrower and the guarantor, now appellants before this Court, by registered post AD. It was further directed that in the event subsequent to the taking possession of the hypothecated vehicle i.e. Truck TATA 4018 bearing engine number and chassis number detailed in this judgment, the claimant-Bank were to sell the said truck in terms of the loan agreement dated 31.03.2007, aside of the amount expanded in the sale proceedings of the truck, the remainder amount would be adjusted against the amount of Rs.17,54,582/-. It was further directed that the amount then due subsequent to the adjustment of the amount received from the sale of the truck TATA 4018 would be recoverable by execution of the award in terms of Section 36 of the Act of 1996.
7. Objections against the award dated 05.12.2008 were filed before the Additional District and Sessions Judge, Jaipur Metropolitan, Jaipur on 19.01.2011 and thereafter transferred to the Court as referred to hereinabove. The Additional District Judge No.5, Jaipur Metropolitan, Jaipur vide his impugned order dated 09.08.2012 dismissed the objections. Hence this Appeal under Section 37 of the Act of 1996.
8. Mr. S.C. Gupta, appearing for the non-claimants i.e. the borrower and the guarantor, submitted that the Sole Arbitrator had no jurisdiction to address the claim petition at Jaipur in view of the specific provision under Clause 10.16 of the loan agreement dated 31.03.2007 whereunder the arbitration was to be held at Chennai. It was submitted that in terms of Section 20 of the Act of 1996 when a party agreed to a place of arbitration, it has to be so held at that place and the Arbitrator has no jurisdiction except in situations of Section 20(3) of the Act of 1996 to hold sitting at other places with the consent of the party and this situation / condition was evidently absent in the present case. He further submitted that the Sole Arbitrator was biased as against the non-claimants as would be evident from the haste with which he conducted the arbitration proceedings and passed the impugned award within three months of his appointment. Counsel emphatically submitted that the whole conduct of the arbitration proceedings indicates that the Sole Arbitrator was not an independent person and has proceeded on the mere askance of the claimant-Bank, relied upon documents not admissible in evidence and wrongly invoked the provisions of Section 3 of the Act of 1996 to construe even lack of service on the non-claimants as deemed service for facilitating the passing the ex-parte award on 05.12.2008. It was submitted that in spite of the admitted receipt of the non-claimant-borrower's letter dated 02.11.2008 by the Arbitrator, the copy of the claim petition along with supporting documents and the affidavit in evidence of the claimant-Bank's witness were not supplied consequent to which the claim petition could not be contested. It was submitted that even otherwise the impugned award dated 05.12.2008 was perverse to the evidence on record and liable to be quashed and set aside. It was also submitted that the appointment of the Sole Arbitrator was fraudulently obtained by the claimant-Bank on the false assertion that the non-claimant-objector had consented to his appointment.
9. Mr. S.C. Gupta has relied upon the judgment of the Hon'ble Supreme Court in the case of Nahar Enterprises Vs. Hyderabad Allwyn Ltd. & Anr. [(2007) 9 SCC 466] to contend that the copy of the plaint not having been served on the defendant in spite of his information as to the pendency of the proceedings even by way of court's notices, no service in the eye of law could be found. He has also placed reliance upon the judgment of the Hon'ble Supreme Court in the case of Sushil Kumar Sabharwal Vs. Gurpreet Singh & Ors. [(2002) 5 SCC 377] to contend that improper service of summons wherefrom knowledge of the pending suit could be ascertainable without knowledge of the actual date of the hearing in the suit was also no service in the eye of law. It was submitted that such cases would not be one of mere irregularity in service of summons in terms of proviso to Order 9 Rule 6 CPC but would be a palpable case of non-service of summons vitiating the ex-parte proceedings against the defendant. Reliance has also been placed on the judgment of the Hon'ble Rajasthan High Court in the case of Firm M/s. Ganesh Traders Bombay Vs. M/s. Rohida Industries [1998 (2) RLW (Raj.) 1188] where telephonic information to the defendant with regard to the pendency of the suit was not regarded, as service on him as summons as mandated in the manner provided under the Code of Civil Procedure had not been duly served on the defendant. The said judgments, in my considered opinion, are however founded upon the interpretation of the provisions of the Code of Civil Procedure, 1908 which under Section 19 of the Act of 1996 does not apply to proceedings under the Act of 1996. The Act of 1996 provides for a procedure with regard to the service of notice on the parties to the arbitration. That is under Section 3 of the Act of 1996. The question as to whether a party to an arbitration agreement has been served notice in the arbitral proceedings or not thus has to be therefore determined with reference to Section 3 of the Act of 1996 and not with reference to the provisions of the Code of Civil Procedure. The argument of Mr. S.C. Gupta on this count is therefore rejected. Mr. Gupta also placed reliance on the judgment of the Karnataka High Court in the case of Rudramuni Devaru Vs. Shrimad Maharaj Niranjan Jagadguru & Ors. [AIR 2005 Karnataka 313] to contend that where proper notice of appointment of an Arbitrator or of the arbitral proceedings was not given consequent to which a party was unable to remain present in the arbitral proceedings before the Arbitral Tribunal, an arbitral award passed by such a Tribunal was liable to be set aside by the court. He submitted that the Hon'ble Karnataka High Court in the aforesaid case has held that for the minimum requirement of proper hearing to a party it was essential that each party must have notice that hearing was to take place with reference to the date, time and place of such hearing and further that thereafter each party must have a reasonable opportunity to be present at the hearing along with his witnesses and advocates. Each party must then have the opportunity to be present throughout the hearing in the arbitration and to present statements, documents, evidence and arguments in support of its / his own case. Counsel submitted that in compliance with the principles of natural justice and as mandated under the Act of 1996, each party must also be supplied with the statements, documents and evidence adduced by the other side along with a reasonable opportunity to cross-examine his opponents witnesses and reply to the arguments advanced in support of his opponent's case. The submission made relying on the judgment of the Hon'ble Karnataka High Court in the case as detailed hereinabove however is not apposite to the facts of the case at hand and as the facts of the present case clearly different. In the instant case, the facts detailed indicate that more than adequate efforts were made to attempt delivery of the notice of the arbitral proceedings to the non-claimants by registered post and also by UPC. In fact the non-claimant-borrower vide his letter dated 02.11.2008 indeed admitted to the receipt of UPC notice dated 20.10.2008 of the arbitral proceedings having been commenced and the next date being 05.11.2008. Aside of the deemed service with reference to Section 3 of the Act of 1996 with registered notices earlier sent to his mailing address (as detailed in the application for grant of loan facility and also in the schedule to the loan agreement dated 31.03.2007) having been returned unserved. An intransigent party before the Arbitrator cannot be allowed to hold hostage the entire arbitral proceedings by mere absence in spite of both deemed and admitted notice of arbitral proceedings. In fact the Hon'ble Karnataka High Court in the case of Rudramuni Devaru (Supra) itself has while detailing the necessity of compliance with the principles of natural justice and adequate opportunity to a party to present its case before the Arbitrator also held that it is true that a party has no absolute right to insist on his convenience being consulted in every respect. The matter is very much within the discretion of the Arbitral Tribunal and the court may intervene only in cases of positive abuse. [EMPHASIS MINE]. No positive abuse is made out in the facts of the case at hand. The Hon'ble Karnataka High Court in the aforesaid judgment on the contrary also held that the principles of natural justice would stand complied with where despite notice of proceedings a party to the arbitration chooses to remain absent. This was so in the present case. In my considered view, in the facts obtaining in the present case neither fairness, nor principles of natural justice can be stated to have been violated in the arbitral proceedings before the Sole Arbitrator culminating in the ex-parte award dated 05.12.2008.
10. Mr. Gupta then placed reliance on the judgment of the Hon'ble Supreme Court in the case of State of Maharashtra & Ors. Vs. ARK Builders Pvt. Ltd. [(2011) 4 SCC 616]. The said judgment holds that if law prescribes that copy of the award is to be communicated, delivered, dispatched, forwarded, rendered or sent to parties concerned in a particular way and also sets the period of limitation for challenging the order / award by aggrieved party, then the period of limitation commences from the date on which order / award was received by the party concerned in manner prescribed by law. The Hon'ble Supreme Court has held that what is contemplated under Section 31(5) of the Act of 1996 is not merely delivery of any kind of a copy of award but a copy of award duly signed by the Arbitral Tribunal. To come to this conclusion, the Hon'ble Supreme Court held that Section 31(5) of the Act of 1996 has to be read along with Section 34(3) of the aforesaid Act for determining the question of expiry of limitation for filing objections under Section 34 of the Act of 1996 against an arbitral award. There can be no question or any issue with regard to the judgment rendered by the Hon'ble Supreme Court in the case of ARK Builders Pvt. Ltd. (Supra). The argument however is vacuous and besides the point in the instant case. The Sole Arbitrator on the date of passing of the award dated 05.12.2008, proceeded to dispatch a signed copy of the award to the non-claimants by way of registered post to their mailing addresses recorded in the schedule to the loan agreement dated 31.03.2007. The said registered notices were returned not unexpectedly unserved in the context of earlier registered notices to the same mailing addresses also being returned unserved while oddly notice / letter dated 20.11.2008 sent under UPC to the same addresses were admittedly served and even acknowledged under the non-claimant-borrower's letter dated 02.11.2008. Section 3 of the Act of 1996 therefore became operative and service / communication of the ex-parte award dated 05.12.2008 was deemed to have been made on the non-claimants in view of the proof of attempt to deliver the copy of the award on them. Section 3(1)(b) of the of the Act of 1996 provides for deemed delivery / communication following genuine attempt to deliver notices / written communication and has been promulgated in furtherance of the public policy of expediting arbitral proceedings and their conclusion and not allow recalcitrant litigants to hold to ransom and stall arbitration proceedings by the simple expedient of manipulating the poorly paid and helpless postman. The legislature seems to have been aware from past experience of the potential bottleneck in arbitral proceedings in view of service not being effected for reason of non-claimants making themselves scare. Intendment of Section 3(1)(b) of the Act of 1996 is plain and recorded attempt to deliver written communication to the parties on their recorded address in the agreement entails a deemed delivery or receipt of the written communication. In my considered view, it being established from the proceedings before the Sole Arbitrator that the award dated 05.12.2008 signed by the Sole Arbitrator was sent by registered letter to the non-claimants at their recorded mailing addresses in the loan agreement dated 31.03.2007, the said arbitral award would be deemed to have been communicated to the parties in accordance with law within a reasonable time of the dispatch of the registered letter. Limitation would therefore for the purpose of Section 34(3) of the Act of 1996 begin to run thereon rendering a filing of objections beyond the period prescribed as not maintainable.
11. Mr. S.C. Gupta, has also relied upon the judgment of the Hon'ble Supreme Court in the case of Bipromasz Bipron Trading SA Vs. Bharat Electronics Ltd (BEL) [(2012) 6 SCC 384]. The said judgment has no relevance to the case at hand as it merely holds that only when a communication is deemed to be received by the affected party itself even with reference to Section 3 of the Act of 1996, time for purpose of computing limitation for various purposes for action under the Act of 1996 would begin to run. The Hon'ble Supreme Court in the aforesaid case has only reiterated that a written communication of an order passed by an authority cannot be stated to take effect unless the same is communicated to the party affected. In Harchand Singh Vs. M/s Reliable Agro Engineering Services (Pvt.) Ltd. also relied upon by Mr. S.C. Gupta the Hon'ble Punjab-Haryana High Court has held that for a party to an arbitral proceeding to be proceeded against ex-parte, it should have been served upon and delivered notices at least by way of registered post because in case of service by registered post, 'delivery' of written communication can be assumed but not in case of service through UPC. Far from aiding the case of the appellants in my considered opinion, the case of Harchand Singh (Supra) supports the case of the claimant-Bank as it is not in dispute that notices to the arbitral proceedings were sent to the non-claimants by registered post on 17.09.2008 as also was the copy of the arbitral award duly signed by the Sole Arbitrator on 05.12.2008.
12. Per contra, Mr. Pankaj Gupta, appearing for the claimant-Bank, submitted that the mere decision on the arbitration proceedings expeditiously within a period of three months more so in the context of the arbitration proceedings being ex-parte cannot be construed without anything more as evidence of the arbitrator's bias. Arbitration is in any event designed to be expeditious while complying with the principles of natural justice. Section 19 of the Act of 1996 specifically excludes applicability of Code of Civil Procedure, 1908 and Evidence Act, 1872. Principles of natural justice were not at all violated. Counsel submitted that the proceedings before the Sole Arbitrator indicate that the Sole Arbitrator was in fact rather indulgent in allowing the non-claimants more than their fair share of opportunity to contest the claim. It was submitted that for reason of the registered notice of the arbitration proceedings sent on 17.09.2008 being returned unserved in spite of being posted on the recorded mailing addresses of the non-claimants as detailed in the schedule attached to the loan agreement dated 31.03.2007 and in the application for grant of loan made to the claimant-Bank, the Sole Arbitrator could after having made proceedings ex-parte on 15.10.2008 itself proceeded straight away. But by way of abundant caution and fairness sent information of the ex-parte proceedings again vide letter dated 20.10.2008 to the non-claimants. It was submitted that this letter was indeed received by the non-claimant-borrower at his recorded address in the loan agreement dated 31.03.2007 i.e. House No.1785, B Sector, Shastri Nagar, Jodhpur. A response thereto emanated under the non-claimant-borrower's letter dated 02.11.2008 albeit sent from the address of his father, the guarantor i.e. B-44, Shastri Nagar, Jodhpur. Counsel submitted that further in spite of none appearing for the non-claimants even on 05.11.2008, the Sole Arbitrator adjourned the matter in another act of indulgence to 20.11.2008. Further notices of the next date of hearing were again sent to the non-claimants on 21.11.2008 for appearance on 26.11.2008, yet none appeared. He submitted that in the context of the aforesaid facts, the argument of the counsel for the non-claimants as to the Arbitrator's bias allegedly inferable from haste is more than a little stretched and wholly unsustainable. No misconduct on the part of the Sole Arbitrator in the cross-hair of Section 34(2)(a) & (2)(b) of the Act of 1996 could be thus found on the said ground to vitiate the award dated 05.12.2008.
13. Counsel then submitted that Section 3 of the Act of 1996 takes into its ambit situations of a party to an arbitration agreement avoiding service in proceedings before the Arbitrators duly appointed in terms of the agreement. The provisions of Section 3 of the Act of 1996 are based on past experience of courts (of which Parliament on a legal presumption was aware) where service even by registered post on the opposite party reluctant to participate in proceedings before courts, apparently for lack of any plausible defence, was a bottleneck in the achievement of the expedited disposals. He submitted that Section 27 of the General Clauses Act, 1897 with regard to presumption of service by registered post was found by the Hon'ble Supreme Court inadequate to deal with situations of registered notices being returned unserved for reasons of the addressee not being found. And this situations had been noticed by the Hon'ble Supreme Court in the case of M/s. Madan & Co. Vs. Wazir Jaivir Chand [AIR 1989 SC 630] dealing with the provisions of J. & K. Houses and Shops Rent Control Act, 1966. Counsel submitted that in the aforesaid case, the Hon'ble Supreme Court has observed as under :
All that a landlord can do to comply with this provision is to post a prepaid registered letter (acknowledgment due or otherwise) containing the tenant's correct address. Once he does this and the letter is delivered to the post office, he has no control over it. It is then presumed to have been delivered to the addressee under Section 27 of the General Clauses Act. Under the rules of the post office, the letter is to be delivered to the addressee or a person authorised by him. Such a person may either accept the letter or decline to accept it. In either case, there is no difficulty, for the acceptance or refusal can be treated as a service on, and receipt by, the addressee. The difficulty is where the postman calls at the address mentioned and is unable to contact the addressee or a person authorised to receive the letter. [Emphasis Mine] All that he can then do is to return it to the sender. The Indian Post Office Rules do not prescribe any detailed procedure regarding the delivery of such registered letters. When the postman is unable to deliver it on his first visit, the general practice is for the postman to attempt to deliver it on the next one or two days also before returning it to the sender. However, he has neither the power nor the time to make enquiries regarding the whereabouts of the addressee; he is not expected to detain the letter until the addressee chooses to return and accept it; and he is not authorised to affix the letter on the premises because of the assessee's absence. His responsibilities cannot, therefore, be equated to those of a process server entrusted with the responsibilities of serving the summons of a Court under Order V of the C.P.C. The statutory provision has to be interpreted in the context of this difficulty and in the light of the very limited role that the post office can play in such a task. If we interpret the provision as requiring that the letter must have been actually delivered to the addressee, we would be virtually rendering it a dead letter. The letter cannot be served where, as in this case, the tenant is away from the premises for some considerable time. Also, an addressee can easily avoid receiving the letter addressed to him without specifically refusing to receive it. He can so manipulate matters that it gets returned to the sender with vague endorsements such as "not found", "not in station", "addressee has left" and so on. [Emphasis Mine] It is suggested that a landlord, knowing that the tenant is away from station for some reasons, could go through the motions of posting a letter to him which he knows will not be served. Such a possibility cannot be excluded. But, as against this, if a registered letter addressed to a person at his residential address does not get served in the normal course and is returned, it can only be attributed to the addressee's own conduct. If he is staying in the premises, there is no reason why it should not be served on him. If he is compelled to be away for some time, all that he has to do is to leave necessary instructions with the postal authorities either to detain the letters addressed to him for some time until he returns or to forward them to the address where he has gone or to deliver them to some other person authorised by him. In this situation, we have to chose the more reasonable, effective, equitable and practical interpretation and that would be to read the words "served" as "sent by post", correctly and properly addressed to the tenant, and the word "receipt" as the tender of the letter by the postal peon at the address mentioned in the letter. No other interpretation, we think, will fit the situation as it is simply not possible for a landlord to ensure that a registered letter sent by him gets served on, or is received by, the tenant.
14. Counsel submitted that the Hon'ble Supreme Court thereafter proceeded to further observe that it was quite conscious that the provision in regard to the notice contemplated by the statute is unsatisfactory and hope that the legislature would soon set it right. [Emphasis Mine]. Section 3(b) of the Act of 1996 making attempt to serve notices / written communication equivalent to delivery appears to be Parliament's answer to an evasive and intransigent addressee seeking to stall determination of disputes by legally constituted Arbitral Forum against himself. In support of the contention of service having been effected, aside of the invoking Section 3 of the Act of 1996 for deemed service in view of the attempt to deliver with the registered notice having been sent to the mailing addresses of the non-claimants as recorded in the Schedule to the loan agreement dated 31.03.2007 as also in the application for grant of loan made to the claimant-Bank, counsel for the claimant-Bank submitted that the letter dated 02.11.2008 under the hand of the non-claimant-borrower admitted to the receipt of the arbitration notice dated 20.10.2008 informing him of the ex-parte proceedings drawn against him on 15.10.2008 and the next date being 05.11.2008. And this was conclusive of the matter on the issue of service. Yet the non-claimants did not choose to participate in the arbitration proceedings, but sought to stall the proceedings by demanding a copy of the claim petition and documents which had earlier been sent on 25.09.2008 through registered post by the claimant-Bank, but also returned unserved. Counsel submitted that in the case of Ethiopian Airlines v. Ganesh Narain Saboo, [(2011) 8 SCC 539], the Hon'ble Supreme Court has held that where a statute even impliedly excludes the applicability of the Code of Civil Procedure, the provisions of CPC cannot be invoked circuitously. The case at hand is on a better footing with Section 19 of the Act of 1996 expressly excluding of CPC in arbitration proceedings. Counsel then submitted that thus the argument of the non-claimants that owing to non-receipt of a copy of the claim petition and the documents in support thereof was no service in the eye of law with reference to order 5 CPC is of no avail in the circumstances. He submitted that having admittedly received the notice of the arbitration proceedings, it was incumbent upon the non-claimants to participate therein, as also obtain the copy of the the claim petition and the documents in supported thereof which for their own evasive conduct had not been earlier received by them in spite of having been sent by the claimant-Bank by registered post on 25.09.2008. Not having been so, nothing can be made out by the non-claimants with regard to the alleged inadequacy of service for non-supply of copy of the claim and documents in support thereof as desired under letter dated 02.11.2008.
15. Counsel also submitted that this Court as a court of appeal ought not to interfere with the order dated 09.05.2012 by the court below dismissing the objections under Section 34 of the Act of 1996 as the said order is a well considered order and nothing erroneous or perverse can be attributed thereto in the facts of the case. Emphasising the limitation of jurisdiction of an appellate court to interfere with findings of fact when not perverse, counsel emphatically submitted that even though an appellate court can conceivably take a different view of the evidence on record, such a differed view is not even possible in the instant case. This Court cannot substitute its own opinion on the evidence unless a palpable error can be made out in the lower court's order by the appellant-non-claimants either on facts or law. None of the aforesaid two situations obtains in the present case. Counsel further submitted that in fact no error at all has been committed by the court below in addressing the merits of the objections filed by the non-claimants.
16. Mr. Pankaj Gupta has also very emphatically submitted that the objections filed by the non-claimants were in any event palpably hit by Section 34(3) of the Act of 1996 having been filed on or about 19.01.2011 against the award dated 05.12.2008. Counsel submitted that a copy of the arbitral award was deemed to have been served upon the appellants herein i.e. the non-claimant-borrower and the guarantor on it being sent by registered post by the Sole Arbitrator on 05.12.2008 to their mailing address as recorded in the schedule to the loan agreement dated 31.03.2007. Communication by way of registered post was unquestionably an attempt to deliver the arbitral award and in law was deemed to have been received by the parties concerned under Section 3(1)(b) of the Act of 1996. Counsel submitted that in this view of the matter, the objections filed on 19.01.2011 after a delay of over two years from the passing of the award dated 05.12.2008 were irreparably beyond limitation set out in Section 34(3) of the Act of 1996 and in terms of the judgment of the Hon'ble Supreme Court in the case of Popular Construction Co. (Supra) should have been dismissed in limine. Counsel submitted that the learned court below was however unlawfully indulgent to the appellants-non-claimants and in spite of a specific objection as to the maintainability of the objections filed belatedly beyond the period of limitation provided under Section 34(3) of the Act of 1996, the court below eschewed consideration of a jurisdictional issue and instead addressed the matter on merits. That, counsel submitted, should not obstruct this Court in dismissing the appeal against the order 09.05.2012, passed by the court below on the ground of objections not being maintainable. This Court as an appellate court exercises the same powers as the court of the first instance under Section 34 of the Act of 1996.
17. Counsel further submitted that there is no force in the contention of the counsel for the non-claimants based on Section 20 of the Act of 1996 as to the invalidity of the arbitration proceedings being conducted at Jaipur and not at Chennai as provided for in this arbitration clause. For one, the said ground was never taken at any point of time by the non-claimants before the Sole Arbitrator in spite of notice of the arbitral proceedings as evident from the admitted receipt of the letter dated 20.10.2008 and the non-claimant-borrower's letter dated 02.11.2008aside of deemed service of communication in the facts detailed hereinabove with reference to Section 3(1)(b) of the Act of 1996. Further, learned counsel submitted that no such objection was also taken even before the court below in the application under Section 34 of the Act of 1996. This Court being the appellate court under Section 37 of the Act of 1996, no new ground should be allowed to be agitated. Equating the jurisdiction of the Arbitrator to that of the civil courts, counsel has invoked the judgment of the Hon'ble Supreme Court in the case of Hira Lal Patni Vs. Sri Kali Nath [AIR 1962 SC 199]. Based thereon counsel reiterated that unless taken in the first instance an objection based on territorial jurisdiction stands waived as it would be in the instant case with no objection being taken to the territorial jurisdiction by the non-claimants in spite of service and more particularly the non-claimant-borrower's letter dated 02.11.2008 admitting knowledge of the arbitral proceedings before the Sole Arbitrator at Jaipur as also its next date and venue. It was further submitted that the attack is even otherwise specious as the venue at Jaipur was kept by the Arbitrator only for the convenience of the parties both of whom reside in the State of Rajasthan. No prejudice has been caused from the arbitration having been held at Jaipur ant not at Chennai.
18. Heard. Considered.
19. Service on the opposite party in all manner of litigation before all forums is without doubt a huge bottleneck blighting the administration of justice. Manipulative litigants exist on both sides of the divide : amongst plaintiffs, petitioners, and appellants on the one hand and the defendants, non-petitioners and the respondents on the other hand. For civil cases manner of service is provided for under Order 5 CPC. Service in criminal matters has been provided for under the Criminal Procedure Code via summons, bailable warrants and non-bailable warrants. But yet the state of affairs existing in pending litigations before the courts resulting from service incomplete category of cases is therefor all to see in particular the advocates and Judges constantly engaged in the exercise of moving the wheels of justice. Even Section 27 of the General Clauses Act providing for presumption of service where the conditions for such presumption are satisfied was found to be inadequate and wanting of legislative intervention as observed by the Hon'ble Supreme Court in the case of M/s. Madan & Co. (Supra). The Hon'ble Supreme Court in the aforesaid case observed that legislative intervention would be desirable to overcome the situation of registered letters being returned for reason of the addressee not being found. Section 3(1)(b) of the Act of 1996 appears to be a response in some measure to the observation of the Hon'ble Supreme Court in M/s. Madan & Co. (Supra) which the Parliament in law is assumed to be aware of (aware of the existing state of law) and to the limitations of Section 27 of the General Clauses Act. Section 3 of the Act of 1996 therefore provides that attempt to deliver be deemed delivery on the addressee where letter / communication was sent to the registered / mailing address of the addressee and thus a genuine attempt made to notify the opposite party of matters covered by the Act. In the context of the mischief sought to be remedied by Parliament, Section 3(1)(b) of the Act of 1996 has necessarily to be purposively interpreted and Heydon's Rules applied. A literal interpretation of Section 3 of the Act of 1996 has of necessity of justice to be eschewed lest it become a dead letter and the intention of Parliament defeated while the mischief targeted perpetuated. In the case of Swantraj & Ors. Vs. State of Maharashtra [(1975) 3 SCC 322], the Hon'ble Supreme Court has held that when two contentions as to interpretation of a provisions in the statute claim acceptance what must tilt the balance is the purpose of the statute, its potential frustration and judicial avoidance of the mischief by a construction which meets the ends of ensuring potent the remedies intended by the Legislature. Referring to Maxwell on interpretation of statute, 12th Edition pare 137, the Hon'ble Supreme Court quoted therefrom as under :
"There is no doubt that 'the office of the Judge is, to make such construction as will suppress the mischief, and advance the remedy, and to suppress all evasions for the continuance of the mischief.' To carry out effectually the object of a statute, it must be so construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited or enjoined : quando liquid prohibit, prohibetur et omne per quod devenitur ad illud.
20. In Mandal Revenue Officer Vs. Goundla Venkaiah & Anr. [(2010) 2 SCC 461] , the Hon'ble Supreme Court was again inclined to interpret a statute, purposively. The issue before the the Apex Court in the said judgment were the provisions of Andhra Pradesh Land Grabbing (Prohibition) Act, 1982. The Hon'ble Supreme Court has held that the object of Land Revenue Act was to free the public as well as the private land from the clutches of encroachors and unauthorised occupants. The provisions contained therein were required to be interpreted by applying mischief rule as enunciated in Heydon's case.
21. Thus where in the facts of a given case a genuine attempt to deliver any communication to the opposite party in proceedings under the Act of 1996 is established to the satisfaction, first of the Arbitrator, and, then when the award is challenged, before the court to its satisfaction, actual delivery of the written communication / notices in issue by the Arbitrator or otherwise in the course of arbitration proceedings is of little irrelevance. No inquiry of the actual delivery of communication or no defence based on mere purported non-delivery of such communication would in such circumstances be necessary.
22. Reverting to the facts of the present case, it transpires that the non-claimants-borrower as also the guarantor are a son and father duo. In the application form while applying for the loan, the non-claimant-borrower gave out his mailing address as House No.1785, B Sector, Shastri Nagar, Jodhpur. In the loan agreement dated 31.03.2007, the non-claimant-borrower again stated his address to be House No.1785, B Sector, Shastri Nagar, Jodhpur and that of his father as House No.B-44, Shastri Nagar, Jodhpur. Following the default in the discharge of obligations under the loan agreement dated 31.03.2007 and non-payment of the agreed EMIs by the non-claimants borrower, registered notices were sent on 12.09.2008 by the claimant-Bank to both the non-claimants-borrower and the guarantor stating that in the circumstances the loan agreement dated 31.03.2007 stood terminated and the entire outstanding loan amount was forthwith payable within three days. The vehicle hypothecated as purchased from the loan amount was required to be presented for inspection. The duo was also informed that resort to arbitration proceedings in terms of clause 10.16 of the loan agreement dated 31.03.2007 was being had to resolve the dispute thus arising and they take notice thereof. The registered notices albeit sent to the addresses set out in the schedule to the loan agreement between the parties were however returned unserved. Thereafter following the appointment of the Sole Arbitrator at the instance of the claimant-Bank under Clause 10.16 of the loan agreement dated 31.03.2007 and filing of the claim, registered notices were again sent to the non-claimants on 17.09.2008 by the Sole Arbitrator informing them of the commencement of arbitration and requiring their presence on the next dated i.e. 15.10.2008 with their defence. Both the registered notices were returned, the one to the non-claimant-borrower with the postal endorsement that House No.1785, B Sector, Shastri Nagar, Jodhpur did not exist and the one to the non-claimant-guarantor with the postal endorsement that the addressee not available for delivery of the registered letter at House No.B-44, Shastri Nagar, Jodhpur in spite of repeated visits of the postman. Thereupon, by resort to Section 3 of the Act of 1996, proceedings were made ex-parte against the non-claimants. Yet by way of abundant caution and varying the mode of communication, letter dated 20.10.2008 was sent to the non-claimants by UPC in the hope that the knock of the postman at the door of the non-claimants, as in the case of delivery of registered post, would not trigger avoidance. It appears that this variation in the mode of service through UPC succeeded and the letter dated 20.10.2008 sent by the Sole Arbitrator was receipted by the non-claimant-borrower as evidenced from his reply thereto under registered letter dated 02.11.2008 sent however oddly not from House No.1785, B Sector, Shastri Nagar, Jodhpur, the address given out to the claimant-Bank, but from House No.B-44, Shastri Nagar, Jodhpur, the address of his father. Therein it was stated that a copy of the claim petition had not been supplied to him, nor documents in support thereof furnished. It was further stated by the non-claimant-borrower that the said documents be supplied under intimation of the next date in the arbitration such that he could participate in the proceedings and set up his defence to the claim of the claimant-Bank. No attempt was however made to appear before the Sole Arbitrator on 05.11.2008 as required under the Sole Arbitrator's written communication dated 20.10.2008. On the matter coming up before the Sole Arbitrator on 20.10.2008, he found that again none appeared for the non-claimants in spite of best efforts and communication on the recorded addresses as per schedule to the loan agreement dated 31.03.2007. Thereon, on the request of the claimant-Bank, the matter was adjourned to 20.11.2008 for taking up its evidence in support of its claim. On 20.11.2008, the Sole Arbitrator recorded the receipt of the registered letter dated 02.11.2008 under the hand of the non-claimant-borrower, yet finding the non-claimants to be absent again, he directed that further communication be sent to the non-claimant-borrower at his recorded mailing addresses and also to the addressed indicated in his communication dated 02.11.2008 i.e. House No.B-44, Shastri Nagar, Jodhpur. It was directed that such communication be sent by UPC apparently for the reason that while earlier communication by the registered post to the same address had failed, the subsequent communication by way of UPC sent on 20.10.2008 had succeeded. The matter was posted for 26.11.2008 for final argument by the Sole Arbitrator the claimant-Bank's evidence having been recorded in pursuance to the Arbitrator's order dated 20.11.2008. The non-claimant-borrower was informed vide letter dated 20.11.2008 both at his 1785, B Sector, Shastri Nagar, Jodhpur and B-44, Shastri Nagar, Jodhpur addresses of the next date in the arbitration being 26.11.2008 at 6 p.m. The non-claimants were again informed that the arbitration proceedings under the contract dated 31.03.2007 had already been made ex-parte against them on 15.10.2008 and in the event of their continuing to play truant, the matter would be decided ex-parte against them on the basis of material available on record. It was stated that no further communication in this regard would be issued. Yet again none appeared on 26.11.2008. Arguments were then heard and the matter reserved for orders / award. Award was pronounced ex-parte on 05.12.2008.
23. In my considered opinion, in the facts detailed above, no case of non-service of notice of the arbitration proceedings on the appellants-non-claimants can be made out even remotely. The consequent argument of the counsel for the appellant-non-claimants of the award dated 05.12.2008 being in contravention of the principles of natural justice is therefore also palpably specious and unsustainable. Section 3 of the Act of 1996 is a complete answer to the aforesaid two arguments. Deemed delivery of the written communication at the hands of the Arbitrator having been made on the appellants-non-claimants in the facts detailed above, the non-appearance of the appellants as non-claimants before the Sole Arbitrator was at their own peril and they are liable to suffer consequences. This Court is of the definitive opinion that the appellants-non-claimants were notified as required in law of the arbitral proceedings. The conclusion is also buttressed from the non-claimant-borrower's own registered letter dated 02.11.2008 to the Arbitrator acknowledging receipt of his letter dated 20.10.2008 informing him about the arbitration proceedings having commenced and made ex-parte owing to absence on 15.10.2008 in spite of registered notices in the first instance to the recorded addresses of the non-claimants. To my mind, the conduct of the non-claimants i.e. both the borrower and the guarantor, the son and father duo is mala fide. They had made clear efforts at evading service and stalling the arbitral proceedings even while continuing to enjoy dishonestly the loan amount procured from the claimant-Bank under contract dated 31.03.2007 and thereafter breaching it without much ado subsequent to the payment of only two installments. The protestation on innocence claiming lack of knowledge of arbitration proceedings and denial of principles of natural justice on the failure of the Arbitrator and the claimant-Bank in providing a copy of the claim petition and the documents in support thereof are transparently baseless and cannot derail this Court from its obligation to do justice. In my considered opinion, the non-claimants, son and father duo, the borrower and the guarantor, were very much aware of the arbitration proceedings and yet chose not to participate therein. Having played the cat and mouse game and having failed, the non-claimants are not deserving of any indulgence of this Court for the ostensible reason of the award being vitiated by the Arbitrator's misconduct and being contrary to public policy having been allegedly passed without due notice to the non-claimants and consequent denial / contravention of the principles of natural justice.
24. I also find no force in the contention of Mr. S.C. Gupta, counsel for the non-claimants that even if the non-claimants had knowledge of the arbitration proceedings, yet copy of the claim petition as also the documents in support thereof and the affidavit of the claimant-Bank's witness not having been supplied to them, the arbitration has been vitiated for want of proper service. Mr. Gupta as recorded hereinabove has relied upon the provisions of the Code of Civil Procedure more particularly Order 5 Rule 2 CPC which provides that every summons in a suit shall be accompanied by a copy of the plaint. In support Sr. Counsel has also invoked the judgments of the Hon'ble Supreme Court in the cases of Nahar Enterprises (Supra) and Sushil Kumar Sabharwal (Supra). The arguments based on CPC and therefore also based on the judgment of the Hon'ble Supreme Court dealing with cases under CPC are wholly in apposite to the proceedings under the Act of 1996 on the issue as to when proper service can be stated to be complete in an arbitration. The reason for negating the arguments have already been detailed hereinabove and herein it would merely suffice to refer to Section 19 of the Act of 1996 which excludes the applicability of CPC to arbitration proceedings. I therefore find no force in the contention. I also find no force in the contention of the counsel for the non-claimants that the documents relied upon by the claimant-Bank before the Sole Arbitrator were not original copies, therefore inadmissible in evidence and in basing an award on such documents, the Arbitrator flouted the law of land and therefore the award would stand in contravention of the public policy of India and furnish a ground for being set aside under Section 34(2)(b) of the Act of 1996. Reference again to Section 19 of the Act of 1996 would be necessary as it excludes even the provisions of the Evidence Act from the conduct of arbitration proceedings. Aside of the aforesaid as argued by the counsel for the claimants-Bank the documents produced before the Sole Arbitrator were wholly admissible in evidence as proved by the claimant-Bank witness. The documents were primarily the loan agreement dated 31.03.2007 as also the statement of accounts from the ledger of the non-claimant-borrower maintained by the claimant-Bank in the due course of its business abstract whereof would be admissible in evidence in any court of law under the Banker's Books Evidence Act, 1891. I also do not find any force at all in the submission of the counsel for the non-claimants that the ex-parte proceedings having been initiated under letter dated 15.10.2008 and having been concluded by the Sole Arbitrator under the award dated 05.12.2008 should be liable to be set aside on the ground of it having been passed in haste indicative of mala fide of the Arbitrator or in any event his non-application of mind. The argument is palpably on the face of it quite desperate and has to be noticed only to be rejected. Expediting proceedings and reasonable haste by itself tantamount to no illegality. Only undue haste in contravention of principles of natural justice can supply a ground of haste by itself vitiating adjudication. As such adjudication would then be in contravention of principles of natural justice. This is the ratio which can be culled out from the judgment of the Hon'ble Supreme Court in the case of Bharat Steel Tubes Ltd. & Anr. Vs. State of Haryana & Anr. [(1988) 3 SCC 478] wherein the enunciation effectively is that haste can be a ground of challenge not on point of law, but based on a question of fact. This would take me back to the facts of the case. They however need not be reiterated as the Arbitrator had taken all steps within his might to communicate to the non-claimants the factum of commencement of arbitration proceedings and in fact had even succeeded under his written communication dated 20.10.2008 acknowledged by the non-claimant-borrower under his registered letter dated 02.11.2008. Neither haste nor contravention of the principles of natural justice can therefore in the facts of the case be agitated as a ground to challenge the award dated 05.12.2008 as upheld by the court below in dismissing the non-claimants' objections thereto under its order dated 09.05.2012.
25. I also find no force in the contention of the counsel for the non-claimants as to the illegality to the proceedings being held at Jaipur with reference to the arbitration clause in the loan agreement dated 31.03.2007 between the parties providing for the seat of arbitration being Chennai. The contention of the non-claimants' counsel was that the arbitration proceedings at Jaipur were thus in contravention of Section 20 of the Act of 1996 and thus liable to be set aside as the award dated 05.12.2008 was per se bad for this reason. For one the said objection was never taken at any point of time either in the registered letter dated 02.11.2008, written by the non-claimant-borrower to the Sole Arbitrator or in the objections filed before the court below. It has been taken for the first time before this Court. The contention is liable to be dismissed on this count alone. Aside of the above, in my considered opinion, Section 20(1) of the Act of 1996 only deals with the seat of substantive law applicable to the arbitration and the courts which would have jurisdiction to supervise the arbitration proceedings within the parameters of the Act of 1996. In terms of Sub-Section (3) thereof, the venue of the arbitral proceedings can be varied when parties appear on notice with their consent. As held by the Hon'ble Supreme Court in the case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., [(2012) 9 SCC 552], the seat of arbitration is relevant only for the purpose of conferring supervisory jurisdiction over the arbitral proceedings and the operating substantive law. Section 20 of the Act of 1996 does not relate to the territorial jurisdiction of the Arbitrator himself. The Arbitrator has the authority under the contract between the parties to decide the dispute. The issue of venue of jurisdiction is another matter which in any event does not arise in the present case for three reasons : (i) that no objection was made to the proceedings being conducted at Jaipur in the non-claimant-borrower's letter dated 02.11.2008; (ii)the non-claimant-borrower and the guarantor reside in the State of Rajasthan and obviously the proceedings at Jaipur would be convenient to the parties; (iii) the non-claimant-borrower himself filed objection under Section 34 before the Civil Court at Jaipur. Aside of the aforesaid lack of territorial jurisdiction does not go to the root of the matter and can be waived as and when such waiver can also be construed in the overall facts of a case. As it can be in the facts of the case. No prejudice has been caused to the non-claimants from the arbitration proceedings having been conducted at Jaipur and not at Chennai. Not even attempt to show prejudice has been made. No interference is thus called for on this count.
26. There is no force in the contention of Mr. S.C. Gupta that the ex-parte award dated 05.12.2008 was vitiated for reason of the Arbitrator having been appointed by the subterfuge of the claimant-Bank stating that the non-claimants had consented to his appointment. The reason lies on the language of clause 10.16 which provides for arbitration under the contract dated 31.03.2007 and categorically provides that the arbitrator would be appointed by the claimant-Bank. In this view of the matter, there was no occasion for the claimant-Bank to resort to any subterfuge of misrepresentation and careless language used in the application to appointing the Arbitrator is of little consequence.
27. The award dated 05.12.2008 is a well considered and detailed award. It is an admitted fact that the loan amount of Rs.12,54,847/- was taken by the non-claimant-borrower and guaranteed by his father also a non-claimant before the Arbitrator. It is also an admitted fact that only two of the 46 installments was paid and thereafter the borrower and the guarantor defaulted in discharging their obligations in spite of thereafter the consequent termination of the contract dated 31.03.2007 and recall of the entire loan amount, the money due was not repaid. The non-claimants were indisputably liable to repay the amount due as has been found by the Arbitrator. The Arbitrator in fact has not awarded interest @ 36% p.a. as agreed between the parties under the loan agreement dated 31.03.2007 on the amount due. Only interest @ 12% p.a. has been awarded. In my considered opinion, the appellants-non-claimants had failed to make out any ground under Section 34 of the Act of 1996 before the learned trial court for setting aside the award dated 05.12.2008 under its order dated 09.05.2012, which is a well considered and reasoned order and liable to be upheld. There is a catena of judgments of the Hon'ble Supreme Court on the limitation of the courts interfering with an arbitral award both in the exercise of power under Section 34 of the Act of 1996 as also Section 37 thereof. By way of illustration reference to two judgments of the Hon'ble Supreme Court in the cases of Delhi Development Authority Vs. R.S. Sharma & Co., New Delhi [(2008) 13 SCC 80] and J.G. Engineers Pvt. Ltd. Vs. Union of India & Anr. [(2011) 5 SCC 758] would suffice. In Delhi Development Authority (Supra), the Hon'ble Supreme Court held as under :
21. From the above decisions, the following principles emerge:
(a) An Award, which is
(i) contrary to substantive provisions of law ; or
(ii) the provisions of the Arbitration and Conciliation Act, 1996 ; or
(iii) against the terms of the respective contract ; or
(iv) patently illegal, or
(v) prejudicial to the rights of the parties;
is open to interference by the Court under Section 34(2) of the Act.
(b) The award could be set aside if it is contrary to :
(a) fundamental policy of Indian Law; or
(b) the interest of India; or
(c) justice or morality;
(c) The Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court.
(d) It is open to the Court to consider whether the Award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India.
28. In J.G. Engineers Pvt. Ltd. (Supra), it was held by the Apex Court as under :
Interpreting the said provisions, this court in Oil & Natural Gas Corporation Ltd. vs. Saw Pipes Ltd.[2003 (5) SCC 705] held that a court can set aside an award under section 34(2)(b)(ii) of the Act, as being in conflict with the public policy of India, if it is (a) contrary to the fundamental policy of Indian Law; or (b) contrary to the interests of India; or (c) contrary to justice or morality; or (d) patently illegal. This Court explained that to hold an award to be opposed to public policy, the patent illegality should go to the very root of the matter and not a trivial illegality. It is also observed that an award could be set aside if it is so unfair and unreasonable that it shocks the conscience of the court, as then it would be opposed to public policy.
29. It is thus trite that the court hearing an application under Section 34 of the Act of 1996 does not act as an appellate court and where an award passed by an Arbitrator is a reasoned one not contrary to any substantive provisions of law or terms the contract or perverse to the evidence on record or not ex facie indicative of non-application of mind or is not in contravention of principles of natural justice or is not palpably illegal, it cannot be set aside. None of the grounds detailed above were made out in the present case before the court below.
30. The upshot of the aforesaid discussion is that the present appeal is without merits. Dismissed with cost of Rs.50,000/- to be deposited with the Rajasthan State Legal Services Authority within eight weeks from today. Copy of this order be sent to the Rajasthan State Legal Services Authority. In the event of non-deposit of costs as directed, subject no doubt to orders in appeal if filed, R.S.L.S.A. would be free to take steps, including moving an application before this Court, for recovery of costs.
(ALOK SHARMA), J MS/- All corrections made in the judgment/order have been incorporated in the judgment/order being emailed.- Manoj Solanki, P.A.