Delhi District Court
M/S Bmp Metals Private Limited vs M/S Kotak Mahindra Bank Ltd on 29 April, 2025
IN THE COURT OF DISTRICT JUDGE
(COMMERCIAL COURT-2)
SOUTH DISTRICT, SAKET COURTS : NEW DELHI
OMP (COMM) 72/2021
1. M/S. BMP METALS PRIVATE LIMITED
Having its Registered Office at:
B-111, Block B, Malviya Nagar,
New Delhi.
Branch Office:
E-16, Sushant Shopping Arcade,
Sushant Lok-I, Gurugram-122001.
....Petitioner
Versus
1. KOTAK MAHINDRA BANK LIMITED
1st Floor, Ceebros Center, 39,
Monieth Road Egmore, Chennai-600 008.
Also at:
1701-1706, 17th Floor, Ambadeep
Building 14, K.G.Marg,
Connaught Place, New Delhi.
....Respondent
Date of filing : 16.12.2021
Date of reserving order : 22.04.2025
Date of order : 29.04.2025
ORDER
OMP (COMM) 72/21 page no. 1 of 14 M/s. BMP Metals Private Ltd.
Vs. Kotak Mahindra Bank Ltd.
1. This is a petition under section 34 of the Arbitration and Conciliation Act, 1996 seeking setting aside of arbitration award dt.07.12.2015 passed by Ld. Sole Arbitrator Sh.R.Hamsaveni in Arbitration Case No.ARB0468/2015. An application seeking condonation of delay in filing the present petition has also been filed on behalf of petitioner.
2. Brief facts as per petitioner are that petitioner is a Corporate Body incorporated under the provisions of Company's Act, 1956 and is engaged in the business of manufacturing lead ingots. In the year 2011, petitioner (respondent in the arbitration proceedings) approached the respondent (claimant in the arbitration proceedings) for grant of loan and on the said request, the Barclays Bank on 19.03.2011 sanctioned a loan of Rs.27,00,000/-. It is stated that petitioner was continuously paying the equated monthly installments as per agreed schedule, however, it got shocked to know that no payment of TDS was made by the Barclays Bank with regard to payment of EMIs made by petitioner. It was informed by Income Tax Department that they have not deposited the TDS on EMIs which runs into lakhs of rupees. Petitioner informed the Barclays Bank to deposit the TDS on the EMIs paid by petitioner, however, it never paid heed to the matter. It is stated that out of total loan amount of Rs.27,00,000/- EMIs of around Rs.17 lakhs was paid by petitioner to Barclays Bank.
OMP (COMM) 72/21 page no. 2 of 14 M/s. BMP Metals Private Ltd.
Vs. Kotak Mahindra Bank Ltd.
3. It is further stated that petitioner was shocked on receiving loan recall notice dt. 16.05.2013 amounting to Rs.3,58,080/-, however, award was passed for double of amount which was disbursed in 2011 i.e Rs.27,00,000/-. It is stated that petitioner was also shocked to know that present loan which was sanctioned by Barclays Bank was now assigned to Kotak Mahindra Bank vide assignment deed dt. 05.02.2013, however, same was never intimated to petitioner.
4. It is further stated that thereafter, petitioner requested for copy of foreclosure statement and assignment deed from respondent, which was never complied with, however, with ill motive to harass the petitioner, respondent again issued loan recall notice in the year 2014 and respondent also lodged several complaints and cases to harass the petitioner. It is stated that thereafter, respondent bank did not invoke any proceeding against the petitioner and petitioner stopped the payment of EMIs due to non-deposition of TDS by Barclays Bank. It is stated that petitioner received summons dt.24.04.2018 from Ld.District Courts of Gurugram for appearing in Execution matter and then petitioner became aware of arbitration proceedings against petitioner which were held at its back.
5. The award has been challenged on the ground that the impugned award suffers from errors apparent on the face of OMP (COMM) 72/21 page no. 3 of 14 M/s. BMP Metals Private Ltd.
Vs. Kotak Mahindra Bank Ltd.
record not only on facts but on the issue of law; that arbitration proceedings have not been initiated in proper jurisdiction as per terms and conditions of arbitration clause of loan agreement; that appointment of Sole Arbitrator by respondent in the present matter was non est and de jure by virtue of provisions of Arbitration and Conciliation Act, 1996; that appointment of Sole Arbitrator by respondent is contrary to the law laid down by Hon'ble Supreme Court particularly in the matter of TRF Ltd.Vs. Energo Engineering Projects Ltd., (2017) 8 SCC 377 and Perkins Eastman Architects DPC & Anr. Vs. HSCC (India) Ltd., 2019 SCC Online SC 1517, wherein it has been held that interested party in arbitration cannot appoint Sole Arbitrator of its choice; that Hon'ble Supreme Court in Bharat Broadband Network Ltd. Vs. United Telecom Ltd., (2019) 5 SCC 755 held that Sole Arbitrator appointed by any interested party in arbitration is de-jure unable to perform his function; that Ld. Arbitrator proceeded with arbitration proceedings without serving notice of invocation of arbitration clause to petitioner; that Ld. Arbitrator had not issued proper notices of appearance to petitioner and had not provided sufficient time for service of notice at the address of petitioner; that impugned award is bad in law on the ground that reasonable opportunity of being heard has not been provided to petitioner and petitioner was proceeded ex-parte within 15 days from date of initiation of arbitration proceedings; that Ld. Sole Arbitrator has not OMP (COMM) 72/21 page no. 4 of 14 M/s. BMP Metals Private Ltd.
Vs. Kotak Mahindra Bank Ltd.
considered the facts and even copy of claim filed by claimant was not supplied to petitioner for filing reply; that Ld.Sole Arbitrator overlooked the terms and conditions of loan documents placed on record; that award passed for Rs.52,79,537/- alongwith penal interest and cost of arbitration by Ld. Arbitrator is double of loan amount taken by petitioner i.e Rs.27,00,000/- even after regularly paying the monthly installments. Further, the award amount is even not equivalent to loan recall notice dt.16.05.2013 and that appointment of Ld. Sole Arbitrator is in contravention of Arbitration and Conciliation Act and proper procedure was not followed while appointing the Ld. Sole Arbitrator and that Barclays Bank from whom the petitioner had taken loan has never deposited the TDS money on EMIs paid by petitioner.
6. It has been argued that petitioner was never served with any notice from respondent for invocation of Arbitration Clause of the loan agreement. It is stated that Ld. Arbitrator has been appointed by respondent bank in contravention of Arbitration and Conciliation Act, 1996 as neither any notice has been served to the petitioner nor petitioner has given consent for appointment of Ld. Arbitrator to arbitrate the dispute and without intimation, respondent succeeded in getting the award passed at the back of petitioner. It is argued that on obtaining the knowledge of filing of execution petition for executing the award petitioner wrote a letter dt. OMP (COMM) 72/21 page no. 5 of 14 M/s. BMP Metals Private Ltd.
Vs. Kotak Mahindra Bank Ltd.
01.11.2018 to Ld.Arbitrator for supply of complete arbitral record but petitioner failed to receive any reply or arbitration record. Petitioner again on 23.11.2020 wrote a letter to Ld. Arbitrator and even tried to reach Ld. Arbitrator but Ld. Arbitrator was not traceable even at the given address mentioned on the copy of award, hence, till date petitioner has not received the proceedings related to impugned award. It is argued that award was passed within 34 days from the date of invocation of Arbitration Clause which shows that arbitration was invoked and proceeded without serving any notice to the other party. Hence, the said ex-parte award deserves to be set aside; that loan recall notice dt. 06.05.2013 clearly mentioned the outstanding loan amount as Rs.3,58,080/-, however, impugned award is for an amount of Rs.52,79,537/-, which shows clear manipulation by respondent in connivance with Ld. Arbitrator.
7. It was argued that it has been mentioned in impugned award that "the first notice dt. 03.11.2015 sent to respondent was duly served" and "second notice dt. 19.11.2015 sent to respondent was duly served", which shows that there is only 15 days gap between two hearing, meaning thereby that Ld. Arbitrator had not provided sufficient time neither for serving of the notice to petitioner nor had provided sufficient time to be available in the proceedings on receipt of notice. It is argued that Ld. Arbitrator without considering the loan OMP (COMM) 72/21 page no. 6 of 14 M/s. BMP Metals Private Ltd.
Vs. Kotak Mahindra Bank Ltd.
agreement and other documents put forth by respondent and without applying judicial knowledge and prudence had passed the impugned award and that petitioner was never served with notice of arbitration sent by arbitrator as the possession of the factory i.e BMP Metals Pvt. Ltd. And house of petitioner was taken by Bank of Baroda under SARFASI proceedings, so no communication could be done or no papers were received by petitioner. To strengthen his argument, Ld. Counsel for petitioner has relied upon judgment in case titled as South East Asia Marine Engineering and Construction Ltd. (SEAMEC Ltd.) Vs. Oil India Ltd. 2020 SCC Online SC 451, wherein Hon'ble Supreme Court held that award was liable to be set aside on the ground that Arbitral Tribunal failed to interpret the contract taking into consideration all the clauses of the contract.
8. Reply to the petition was filed, wherein the respondent took the plea of limitation. It was stated that there was a delay of almost 5.5 years in filing of petition. The arbitration notice was served upon the first respondent on 03.11.2015 while those sent to respondent no.2 & 3 were returned with report unclaimed. One of the directors of petitioner had appeared before the Gurugram Court and had filed Power of Attorney for rest of the parties. The service was effected on 24.08.2018. The limitation from that day was of 90 days OMP (COMM) 72/21 page no. 7 of 14 M/s. BMP Metals Private Ltd.
Vs. Kotak Mahindra Bank Ltd.
extendable with 30 days, hence the petition is liable to be dismissed.
9. Arguments were heard. Record has been perused.
10. The respondent has objected to the petition on the ground that it was filed beyond the period of limitation i.e from the date of acquiring the knowledge about the award from the court, in which the execution petition was pending.
11. Ld. Counsel for the petitioner on the other hand argued that the petitioner had acquired knowledge whereafter it had tried to contact the arbitrator for copy of award which, however, was not supplied to it and the arbitrator was not reachable. It was argued that signed copy of award as required under Arbitration and Conciliation Act was never served upon the petitioner.
12. As per law, no petition under Section 34 of Arbitration and Conciliation Act for setting aside of arbitral award can be filed after three months from the date on which party filing petition had received the arbitral award, which period can be extended further by 30 days on reasonable cause shown to the satisfaction of the court.
13. Ld. Counsel for the petitioner has argued that no notice OMP (COMM) 72/21 page no. 8 of 14 M/s. BMP Metals Private Ltd.
Vs. Kotak Mahindra Bank Ltd.
of arbitration petition was ever served upon the petitioner. The petitioner came to know about the award from Ld.District Courts of Gurugram, wherein the execution petition was filed by the respondent against the petitioner. Since the issue of limitation in this matter is intertwined with the service of award upon the petitioner, the application seeking condonation of delay and the petition is being decided together.
14. While the main ground of petitioner is that it was never served with notice; Ld. Counsel for respondent has argued that notice as well as award was sent to the petitioner at its last known address. As per reply filed by respondent the notices of arbitration proceedings were sent to the petitioner through registered post by the office of Ld. Arbitrator and while the same was received by petitioner, the notices sent to respondent no.2 & 3 before the Arbitrator were received back with remarks 'unclaimed'. The record would reveal that address of respondent no.1 (petitioner herein) has been mentioned in the award as G-1032-A, Bhiwadi, 301019. The address of petitioner as mentioned in the loan document is B-111, Block B, Malviya Nagar, New Delhi-110017. Even in the loan recall notice the name and address of petitioner has been mentioned incorrectly as B.Enterprises, B-134/135, Freedom Fighter Enclave, Neb Sarai, New Delhi-110068 and 24-1, Hauz Khas Village, New Delhi-110016. Apparently the OMP (COMM) 72/21 page no. 9 of 14 M/s. BMP Metals Private Ltd.
Vs. Kotak Mahindra Bank Ltd.
notice sent to petitioner i.e respondent no.1 as has been shown to have been served in the award, was sent to G-1032- A, Bhiwadi, Haryana-301019, which is not the address of petitioner mentioned anywhere in the loan agreement and the notices sent to respondent no.2 & 3 were sent at B-111, Malviya Nagar address, which were returned unclaimed. There was thus no proper service attempted upon the respondent no.1 (petitioner herein) at its correct address.
15. The arbitrator apparently was not vigilant and did not see from the documents that there was no Bhiwadi address on the documents of the respondent on which the notice was shown to have been served.
16. Hon'ble Supreme Court in Dakshin Harayana Bijli Vitran Nigam Ltd. Vs. Navigant Technologies Pvt. Ltd. (2021) 7 SCC 657 relied upon the judgment in Union of India vs. Tecco Trichy Engineers & Contractors, 2005 (4) SCC 239 wherein Hon'ble Court had held that "The legal requirement under sub-section (5) of Section 31 is the delivery of a copy of the award signed by the members of the arbitral tribunal/ arbitrator, and not any copy of the award. On a harmonious construction of Section 31(5) read with Section 34(3), the period of limitation prescribed for filing objections would commence only from the date when the signed copy of the award is delivered to the party making the application for OMP (COMM) 72/21 page no. 10 of 14 M/s. BMP Metals Private Ltd.
Vs. Kotak Mahindra Bank Ltd.
setting aside the award. If the law prescribes that a copy of the award is to be communicated, delivered, dispatched, forwarded, tendered, or sent to the parties concerned in a particular way, and since the law sets a period of limitation for challenging the award in question by the aggrieved party, then the period of limitation can only commence from the date on which the award was received by the concerned party in the manner prescribed by law".. . The Hon'ble Supreme Court relying upon aforesaid and other judgments held that "we are of the considered opinion that the period of limitation for filing objection would have to be reckoned from the date on which signed copy of the award was made available to the party....".
17. In Ministry of Health & Family Welfare & Anr. Vs. Hosmac Projects Division of Hosmac India Pvt. Ltd. 2023 SCC Online Del 8296, Hon'ble High Court found following compliances as important for computation of limitation:-
(i) A signed copy of arbitral award is to be delivered to each party;
(ii) the delivery should be to a party who is competent to take a decision as to whether or not the award is to be challenged;
(iii) the expression party does not include an agent or a lawyer of such party;
(iv) the limitation u/s. 34 (3) of the Act commences when the party making the application has received the award;
OMP (COMM) 72/21 page no. 11 of 14 M/s. BMP Metals Private Ltd.
Vs. Kotak Mahindra Bank Ltd.
18. It is thus settled law that service of award is not a mere formality. The award is to be physically served upon the person against whom it is passed to make him aware of the same, so as to enable him to take steps for challenging the same within the period provided under the law.
19. The petitioner has succeeded in showing that there was no valid service either of notice or award upon it at any point of time. Therefore, the petition having been filed on 16.12.2021 cannot be considered as barred by limitation.
20. The award has been contested on the ground of it having been passed by Arbitrator unilaterally appointed by respondent. Admittedly, the award in this matter was passed by Sole Arbitrator unilaterally appointed by claimant- respondent herein and the award was passed ex-parte. The petitioner did not consent to the appointment of Ld. Sole Arbitrator in the matter at any point of time and thus, the appointment made by respondent for all practical purposes was a unilateral appointment.
21. In Dharma Prasantham Vs. M/s.Madhok Construction Pvt. Ltd. (2005) 9 SCC 686, Hon'ble Supreme Court held that a unilateral appointment as well as a unilateral reference, both will be illegal. It would make a difference in respect of a unilateral appointment and reference if the other party had OMP (COMM) 72/21 page no. 12 of 14 M/s. BMP Metals Private Ltd.
Vs. Kotak Mahindra Bank Ltd.
submitted to the jurisdiction of an arbitrator so appointed and if the rights which it has under such an agreement had been waived, then an arbitrator so appointed may proceed with the reference and the party submitting to his jurisdiction and participating in the proceedings before him may not be allowed to raise any objection in this regard.
In the present case, however, the petitioner did not submit to the jurisdiction of sole arbitrator appointed by respondent unilaterally.
22. However, in Kotak Mahindra Bank Ltd. Vs. Narendra Kumar Prajapat, 2023 LCL 709 Del., it was pleaded before the Hon'ble Delhi High Court that respondent was aware of appointment of Arbitrator and had not raised any objection to such appointment, therefore, was precluded from challenging the impugned award. Hon'ble High Court held that a party can waive its right to object to the ineligibility of an arbitrator u/s. 12 (5) of the Arbitration and Conciliation Act subject to it having been done by an express agreement in writing or such agreement ought to have been entered into after the dispute arises. Apparently, petitioner never consented to the appointment of arbitrator at any stage of proceedings much less in writing.
23. In case title Abraham Memorial Education Trust Vs. Prodigy Development Institution Delhi dt. 03.03.2021, OMP (COMM) 72/21 page no. 13 of 14 M/s. BMP Metals Private Ltd.
Vs. Kotak Mahindra Bank Ltd.
Hon'ble High Court dealt with the award which was passed Ex-parte by Unilaterally Appointed Arbitrator' and held, " Since the Arbitrator's appointment was contrary to the provisions of Arbitration Agreement and Act, the unilateral reference of disputes and the proceedings before the Sole Arbitrator are void ab initio and the award so rendered is a nullity in law. Hence, the impugned award cannot be sustained and the Court has no hesitation in setting aside the award and it is ordered accordingly."
24. The Hon'ble Courts thus have held that an award passed by an arbitrator who does not have jurisdiction to enter into the proceedings and pass the award shall be a nullity and it being so such an award being non-existent in the eyes of law.
25. In view of above discussion of facts and law, I allow the petition filed by petitioner against the impugned award. The award dt.07.12.2015 passed by Sole Arbitrator is set aside. File be consigned to record room.
Announced in the open court on 29.04.2025 (signed after correction on 30th April, 2025) (Anuradha Shukla) District Judge (Commercial Court-02) South Distt., Saket, New Delhi.
Digitally signed by anuradhaanuradha shukla shukla Date:
2025.04.30 OMP (COMM) 72/21 page no. 14 of 14 14:52:28 +0530 M/s. BMP Metals Private Ltd.
Vs. Kotak Mahindra Bank Ltd.