Bangalore District Court
/ : 1) Sri.Perumpoondi G. Natarajan vs M/S.Religare Finvest Limited on 6 December, 2018
IN THE COURT OF THE VI ADDL. CITY CIVIL & SESSIONS JUDGE
AT BENGALURU CITY : (CCCH.11)
Dated this the 6th day of December, 2018
PRESENT: Sri. Rama Naik, B.Com., LL.B.,
VI Addl.City Civil & Sessions Judge,
Bengaluru City.
A.S.NO:99/2014
PLAINTIFFS / : 1) SRI.PERUMPOONDI G. NATARAJAN
APPLICANTS S/o.Sri.Perumpoondi Appavumudaliar
Ganapathi Mudaliar Dattamall,
Aged about 46 years,
R/at # 873/22, 4th 'A' Cross,
Dr.K.K.Hebbar Road,
Hanumanthanagara,
Near Maruthi Circle 50 Feet Road,
Bengaluru-19.
2) Mrs.N.Uma Maheshwari,
W/o.Sri.Perumpoondi G.Natarajan,
Aged about 45 years,
R/at # 873/22, 4th 'A' Cross,
Dr.K.K.Hebbar Road,
Hanumanthanagara,
Near Maruthi Circle 50 Feet Road,
Bengaluru-19.
3) Sri.Ganapathi Trading Company,
Partnership Firm,
No.632, 2nd Cross, 2nd Block,
BDA Layout, APMC Yard,
Bengaluru-560 022.
[By Pleaer Sri.S.M.Hegde Kadave]
AS.99/2014
2
/Vs/
DEFENDANT : M/s.Religare Finvest Limited
RESPONDENT Having its Branch Office at
Religare Finvest Limited,
1314, 1st & 2nd Floor,
Double road, HAL 2nd Stage,
Next to KHT Motors, Indiranagar,
Bengaluru-560 038.
Reptd.by its Attorney Holder-
Mr.Ali Haskar.
[By Pleader Sri.Jai M Patil]
--
JUDGMENT
This suit is filed under Section 34 of the Arbitration and Conciliation Act, 1996, by the Plaintiffs for setting aside the award No.RELIGARE/MORTGAGE/18/2013 dated 26.07.2014 passed by the learned sole Arbitrator.
2) The brief facts of the Plaintiffs' case are that, the Plaintiffs approached the Defendant Company and availed mortgage loan of Rs.42,00,000/- (Rupees Forty- two Lakhs Only). The Defendant secured many documents from the Plaintiffs including an Agreement AS.99/2014 3 dated 28.06.2011, which contains the terms and conditions of the credit facility. As the Plaintiffs could not repay the loan amount within the stipulated period, the Defendant invoked the arbitration clause contained in the Agreement and appointed an Arbitrator based in Delhi and raised a dispute against the Plaintiffs. It is contended that the Plaintiffs did not receive any notice said to have been issued by the Arbitrator in Arbitration case and they were not aware of either the appointment of the Arbitrator or the arbitration proceedings initiated by the Defendant Company. It is further contended that the arbitration proceedings initiated by the Defendant is illegal and the sole Arbitrator appointed had no authority to decide the arbitration proceedings and as such, the award passed by the said sole Arbitrator is without jurisdiction and the same is null and void and not binding on the Plaintiffs. It is also contended that the Plaintiffs were not given proper notice as required by law regarding the appointment of the Arbitrator nor they received any notice of the arbitral proceedings and as such they were unable to present their case before the AS.99/2014 4 sole Arbitrator. Even otherwise, the dispute in question is not contemplated in the Agreement in question and does not fall within the terms of submission to the Arbitration. Hence, the impugned award contains decisions on matters beyond the scope of submission of the Arbitration.
It is contended that the Arbitration clause contained in the Loan Agreement itself was not legal and proper and the same did not authorize the Defendant to appoint the sole Arbitrator and actually the loan agreement itself is not executed on the volition of the Plaintiffs, the contents of the said agreement were not disclosed to the Plaintiffs and the signatures of the Plaintiff were secured in a manner which was not legal and proper. Even otherwise, the various clauses contained in the loan agreement including the arbitration clause were in conflict with the public policy as contained in the Indian Contract Act, as such, the same is voidable. Hence, the arbitration award dated 26.07.2014 is null and void and cannot be sustained.
AS.99/2014 5 The learned Arbitrator has erred in granting future interest of 3% per month on the award amount and the same is illegal, unauthorized and against the principles of natural justice and the provisions contained in Section 31(7) and (8) of the Arbitration and Conciliation Act, 1996 does not authorize the Arbitral Tribunal to grant interest on whimsical basis, hence, prays for setting aside the impugned award passed by the learned sole Arbitrator.
3) The Defendant has appeared through its counsel and filed its written statement, wherein, it has justified the award passed by the learned Arbitrator. Inter alia it is contended that, the suit filed by the Plaintiffs is not maintainable and is liable to be dismissed as the Plaintiffs tried to set up a false and frivolous story. The Plaintiffs have admitted the loan which has been sanctioned and they have failed to produce any documents for having cleared the loan. No valid grounds are made out for setting aside the award as per the provisions of Section 34 of the Arbitration and AS.99/2014 6 Conciliation Act. The Defendant had brought to the notice of the Plaintiffs, vide notice dated 19.12.2013 for exercising its rights under the said Agreement. As the Plaintiffs failed to comply with the demands made in the legal notice, the Defendant had appointed sole Arbitrator. This fact was also brought to the notice of the Plaintiffs. The receipt of dispatch of the notice has also been placed before the learned Arbitrator. The learned Arbitrator followed all the procedures as contemplated in the Arbitration and Conciliation Act. In spite of notices thus given to the Plaintiffs, the Plaintiffs had not turned to appear before the learned Arbitrator, therefore, the Plaintiffs were placed ex-parte. The learned Arbitrator having regard to the oral and documentary evidence placed before him was pleased to pass the award after holding due enquiry. Hence, prays for dismissal of the suit.
4) Heard. Perused the pleadings and the records placed in this suit.
5) The points that arise for my consideration are:-
AS.99/2014 7 (1) Whether Plaintiffs prove any of the grounds as enumerated in Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the impugned award?
(2) What Order?
6) My answer to the above points are :-
Point No.1 - In the Negative;
Point No.2 - As per final order,
for the following :
REASONS
7) POINT NO.1 : The Plaintiffs availed mortgage loan
from the Defendant, as they failed to pay the loan amount, the dispute was referred to the learned Arbitrator. The learned Arbitrator passed the impugned award on 26.07.2014 holding that the Plaintiffs are liable to pay a sum of Rs.36,69,430=14 to the Defendant with 10% simple interest per annum from 16.12.2013 till the date of award and future interest at 10% per annum from the date of award till realization. Plaintiffs are also directed to pay costs of the proceedings of Rs.7,500/- and stamp duty of Rs.4,000/- to the Defendant and the AS.99/2014 8 Defendant is authorized to proceed against the mortgaged properties in satisfaction of the award amount in case of default in payment of award amount by the Plaintiffs.
It is an undisputed fact that, the Plaintiffs had availed mortgage loan of Rs.42,00,000/- (Rupees Forty- two Lakhs Only) from the Defendant upon executing the loan documents. This fact has been emphatically admitted by the Plaintiffs in their pleadings. The plaint para-2 reads as follows :
"2. The Applicants approached the Respondent Company for financial assistance and after negotiations, the Respondent company agreed for financial assistance and sanctioned mortgage loan of Rs.42,00,000/- (Rupees Forty Two Lakhs only) in favour of the Applicants. At the time of sanctioning the loan, the Respondent company secured many documents from the Applicants including an Agreement dated 28.06.2011, which contains the terms and conditions of the credit facility provided by the Respondent company in favour of the Applicants."
It is also an undisputed fact that, the Plaintiffs could not repay the loan amount as stipulated. This fact has also been admitted by the Plaintiffs in their pleadings. Plaint Para-3 and 4 reads as follows :
AS.99/2014 9 " 3. The Applicants further submit that, as the Applicants could not repay the loan amount within the stipulated period, the Respondent Company invoked the Arbitration clause contained in the Agreement executed between the Applicants and the Respondent Company.
Clause 10.1 and 10.2 provides for the Arbitration in case of dispute between the parties which read as follows :-
-----------
4. In pursuance of the above said clause, the Respondent company appointed an Arbitrator based in Delhi and raised a dispute against the Applicants herein."
8) From the pleadings of the Plaintiffs, it is clear that the Plaintiffs had availed mortgage loan of Rs.42,00,000/- and executed the loan documents in favour of the Defendant. As the Plaintiffs failed to repay the loan, the loan became due and the loan dispute was referred to the learned Arbitrator by invoking arbitration clause in the loan agreement.
9) The Plaintiffs first and foremost contention is that, the dispute in question is not contemplated under the Agreement and does not fall with the arbitration clause. Thus, the impugned award contains decisions on matter beyond the scope of submission of the arbitration. It is AS.99/2014 10 further contended that, the dispute in question does not fall within Clause 10.1 and 10.2 of the Agreement and the Arbitral Tribunal has no jurisdiction to decide the same. The Plaintiffs themselves have extracted the Arbitration Clause 10.1 and 10.2 in their plaint, which reads as follows:
" 10.1: Any and all disputes, claims, differences arising out of or in connection with this Agreement and the Schedule(s) of Terms/Repayment Schedules/attached hereto or the performance of this Agreement shall be settled by arbitration to be referred to a sole arbitrator to be appointed by the RFL and the award thereupon shall be binding upon the parties to this Agreement. The place of the arbitration shall be in Delhi or any other place as Arbitrator may decide, in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and any statutory amendments thereof. The proceeding of Arbitration Tribunal shall be conducted in English language. Each party to bear cost of representing its case before the Arbitrator. Costs and charges of Arbitrator to be shared equally unless otherwise provided for in the award.
10.2 : The borrower further agree that all claims, differences and disputes, arising out of or in relation to dealings/transaction made in pursuant to this agreement including any question of whether such dealings, transactions have been entered into or not, shall be subject to the exclusive jurisdiction of the Tribunal at Delhi only."
10) On perusal of Clause 10.1 and 10.2 in the Loan Agreement as extracted by the Plaintiffs make it clear that, "any and all disputes, claims, differences arising out AS.99/2014 11 of or in connection with this Agreement ............. shall be settled by arbitration". Here, the loan obtained by the Plaintiffs was not paid as per the terms of the Loan Agreement, hence, the Defendant referred the loan dispute to the learned Arbitrator as per Clause-10.1 and 10.2 as contained in the Agreement. When matter stood thus, it cannot be said that the loan dispute is not contemplated in the Agreement and the same does not fall within the Terms of submission to arbitration. The said contention of the Plaintiffs is devoid of merits and it is against the documents executed by them. The Plaintiffs have specifically agreed in Clause-10.1 and 10.2 of Loan Agreement that, the place of arbitration shall be in Delhi or any other place as Arbitrator may decide in accordance with the provisions of Arbitration and Conciliation Act, 1996. Clause-10.1 of the Agreement mandates that the place of arbitration shall be in Delhi, yet it gives discretion to the learned Arbitrator to decide any other place. However, Clause-10.2 of the Agreement has specifically stated that "all claims, differences and disputes ................. shall be subject to the exclusive jurisdiction of AS.99/2014 12 the Tribunal at Delhi only." Hence, whatever the discretion which was conferred to the learned Arbitrator to decide the place of arbitration in Clause 10.1 of the Agreement, the said discretion was to be exercised by the learned Arbitrator subject to Clause 10.2 of the Agreement, in deciding the jurisdiction. Therefore, having regard to Clause 10.1 and 10.2 of the Agreement, the learned Arbitrator decided to arbitrate the dispute in Delhi.
11) The Defendant Company is incorporated under the Companies Act, 1956 having its registered Office at Delhi and branch offices at various places including Bangalore. The Plaintiffs and Defendant agreed to the arbitrability of the dispute at Delhi, where the Defendant's registered office is situate, as per Clause 10.1 and 10.2 of the Agreement. Under such circumstances, the Plaintiffs cannot take different stand that the Arbitrator had no jurisdiction to decide the dispute referred. The learned counsel for the Defendant has placed reliance on the decision reported in 1995(3) SCR 443 in the case of Angile AS.99/2014 13 Insulations Vs. Davyashmore India Ltd. and Another, wherein it has been held as follows :
" where there may be two or more competent courts which can entertain a suit consequent upon a part of the cause of action having arisen herewith, if the parties to contract agreed to vest jurisdiction in one such court to try the disputes which might arise as between themselves, the agreement would be valid, if such a contract is clear, unambiguous and explicit and not vague, it is not hit by Sections 23 and 28 of the contract Act. This cannot be understood as parties contracting against the statute. Mercantile law and practice permit such agreement."
This decision is aptly applicable to the case of the Defendant, since the Defendant is having its registered Office at Delhi and branches at various places including one at Bangalore. The Plaintiffs and Defendant specifically agreed to the terms of the agreement that the dispute got to be arbitrated at Delhi, where the Defendant's registered office is situate. Hence, I am of the opinion that the dispute referred to the learned Arbitrator was well within the terms of the arbitration clauses in the Agreement and the impugned award passed is well within the scope of submission to Arbitration and the learned Arbitrator had AS.99/2014 14 exclusive jurisdiction to decide the arbitrability of the dispute under Clause 10.2 of the Agreement.
12) The next contention of the Plaintiffs is that, they were not given proper notice as required by law regarding the appointment of Arbitrator, nor they received any notice said to have been issued by the learned Arbitrator in the arbitration case. The Plaintiffs were not aware of either the appointment of the Arbitrator or arbitration proceedings initiated by the Defendant and as such, they were unable to present their case before the sole Arbitrator.
The Defendant has stated that legal notice was issued to the Plaintiffs vide notice dated 19.12.2013, wherein, the Plaintiffs were intimated to exercise the right of the Defendant under the Agreement. It is also stated that the Plaintiffs failed to appear before the learned Arbitrator despite notices which were duly served to them. At this stage, it is relevant to mention the proceedings AS.99/2014 15 recorded by the learned Arbitrator in the award, which reads as follows :
" That vide letter dated 26/12/2013 received by me the Claimant company nominated me as Sole Arbitrator to adjudicate upon and decide the dispute of the claim made by it against the respondents and asking for my concurrence to act as the Sole Arbitrator in terms of the loan agreement.
......................
That after perusal of records, statement of Claim, document filed by Claimant, notice/direction has been issued to the respondents as well as claimant to appear on 25/02/2014 vide my notice dated 25/01/2014 directed both the parties to appear before me on 25/02/2014. That the proceedings was/were sent to the respondents on the address available with the record.
The respondents, despite the service of the notice dated 25/01/2014 remained unrepresented in the hearing on 25/02/2014. In the interest of justice one more opportunity was given to the respondents to appear in the matter and another notice dated 25/02/2014 was sent to the respondents to appear before me on 29/03/2014. It was specifically mentioned in the said notice that the respondents was/were not present on the last date of hearing and if the respondents failed to appear on the Next Date of Hearing in that event the matter would be proceeded Ex-Parte and determined accordingly. The matter was adjourned to 29/03/2014 for appearance.
-----------
The record reveals that the notices were sent to the respondents at the last known place of his business/habitual resident by speed post. Ld. Counsel for the Claimant company has submitted that the address of the respondents furnished to this Tribunal is the correct and the last known address of the respondents and respondents has not informed the Claimant Company about any AS.99/2014 16 change of his address. He has submitted that in view of the Section 3 of Arbitration & Conciliation Act 1996, the respondents is deemed to have been duly served and thus be proceeded Ex-parte.
The relevant provisions of the Section 3 of Arbitration and Conciliation Act 1996 read as under :-
a) Any written communications is deemed to have been received if it is delivered to the addressee personally or at 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 a reasonable inquiry, a written communication is deemed to have been received if it is sent to the addressee's 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.
After considering the arguments of the Ld. Counsel for the Claimant company, provisions as contained in Section 3 of Arbitration and Conciliation Act 1996 and on the basis of the present proceedings and finding the conduct of the respondents of deliberately avoiding the present proceedings, the respondents was proceeded Ex- parte vide order 29/03/2014 and the matter was fixed for the Ex-parte evidence of the Claimant company for 05-04-2014."
13) From the proceedings recorded by the learned Arbitrator, it is crystal clear that the learned Arbitrator has taken abundant caution before passing ex-parte order against the Plaintiffs. The learned Arbitrator on receiving the letter dated 26.12.2013, wherein, he was nominated AS.99/2014 17 as Arbitrator by the Defendant to decide the loan dispute, he accepted his appointment and gave his concurrence to act as Arbitrator vide letter dated 15.01.2014 and on perusal of the claim statement and documents filed by the Defendant issued notice to the Plaintiffs on 25.01.2014 to appear before him on 25.02.2014. The Plaintiffs failed to keep their presence on 25.02.2014 before the learned Arbitrator. In spite of this, the learned Arbitrator in the ends of justice gave one more opportunity to the Plaintiffs to appear before him on 29.03.2014 vide notice dated 25.02.2014, wherein, the learned Arbitrator has specifically mentioned that if the Plaintiffs were not present on the said date of hearing, they would be placed ex-parte. In spite of the notice dated 25.02.2014 thus given, the Plaintiffs remained absent and failed to appear before the learned Arbitrator on 29.03.2014. Thereafter, the learned Arbitrator after due enquiry about the address of the Plaintiffs submitted by the Defendant and after referring Section 3 of the Arbitration and Conciliation Act, 1996 came to the conclusion that the notices sent to the Plaintiffs were duly served to the Plaintiffs and they were AS.99/2014 18 deliberately avoiding the proceedings, hence, the learned Arbitrator proceeded to place them as ex-parte.
It is important to note that the addresses of Plaintiffs No.1 and 2 mentioned in the cause title of the award and the addresses of Plaintiffs No.1 and 2 mentioned in the cause title of the plaint is one and the same. Only the 3 rd Plaintiff's address is different. The 3 rd Plaintiff is a Company duly represented by Plaintiff No.1 and Plaintiff No.1 has verified and signed the plaint on behalf of the 3 rd Plaintiff also. Such being the case, the Plaintiffs' contention that they were not given notice of arbitration and they were unable to present their case before the learned Arbitrator are not tenable and the same do not hold good.
14) One more contention of the Plaintiffs is that, the Agreement does not authorize the Defendant to appoint the Sole Arbitrator. The sole Arbitrator has no authority to decide the arbitration proceedings and as such, the award AS.99/2014 19 passed is without jurisdiction and the same is null and void and not binding upon the Plaintiffs.
The Arbitration Clauses 10.1 and 10.2 of the Agreement as referred above specifically state that, "any and all disputes, claims, ................ shall be settled by arbitration to be referred to a sole arbitrator to be appointed by the RFL and the award thereupon shall be binding upon the parties to this Agreement."
Here, the Plaintiffs and Defendant consciously agreed in the loan agreement that, the dispute relating to loan transaction to be referred to sole Arbitrator to be appointed by the Defendant. The terms of the agreement are binding upon the parties. They are estopped from contending something other than the terms of the agreement, which they agreed. When there is no mention for appointment of arbitrator in the arbitration clause, then, the parties can recourse to Arbitration and Conciliation Act, 1996 to appoint Arbitrator as stated in Section 11 of the Act. Hence, this contention of the Plaintiffs does not hold water.
AS.99/2014 20
15) The Plaintiffs have contended that, the particulars like language of the arbitration proceedings herein and written proceedings and other mandatory provisions contained in Section 21 to 24 of the Arbitration and Conciliation Act, were not complied with by the Arbitrator, hence, the entire proceedings were vitiated and the award passed has rendered null and void. This contention of the Plaintiff does not attribute any importance. As already observed, the Plaintiffs failed to appear before the learned Arbitrator in spite of giving sufficient opportunities to them. So far as language of the arbitral proceedings, the parties have specifically agreed in Clause 10.1 of the loan agreement that the proceedings of arbitral tribunal shall be in English. The Arbitrator, in the award, has specifically mentioned that the proceedings were sent to the respondents (Plaintiffs herein) on the address available with record. It can be said that the Arbitrator has followed the procedures laid down in Sections 21 to 24 of the Act. When the Plaintiffs failed to avail the opportunities given to them by the learned Arbitrator, later, they cannot AS.99/2014 21 contend that the arbitral award is not in accordance with law, which has been passed after due enquiry and following the procedures laid down in law. Hence, this contention of the Plaintiffs cannot be accepted.
16) The Plaintiffs have contended that the learned Arbitrator has erred in granting future interest at 3% per month on the award amount, it is illegal, unauthorized and against the principles of natural justice. At this stage, it is relevant to mention Claim No.2 as mentioned in the award, which reads as follows :
" The Claimant company has stated in the Claim Petition that the Claimant is entitled to receive pendant-lite and future interest @ 3% per month on the award amount.
In terms of provisions as contained in section 31(7) (8) of the Arbitration & Conciliation Ac 1996, the Arbitral Tribunal can grant the interest on the arbitral award for the period between, when the cause of action accrued till the date of award.
The transaction between the parties being a commercial transactions therefore I deem it fit and proper to award interest on the outstanding amount i.e. Rs.3669430.14/- @ 10% simple interest on the outstanding amount w.e.f. 16/12/2013 till the date of award.
The Claimant shall further be entitled to interest @ 10% per annum on the aforesaid awarded amount from the Arbitral award i.e. the AS.99/2014 22 date of passing of the award till the actual date of payment by the respondent."
17) On perusal of findings of the learned Arbitrator regarding Claim No.2 in the award, it is crystal clear that the learned Arbitrator has awarded interest at the rate of 10% per annum from 16.12.2013 till the date of award and future interest at 10% per annum from the date of passing of award till actual date of payment. The Plaintiffs have not shown any sense of reading the award in a perspective manner. Even the Defendant claimed 3% interest per month. The learned Arbitrator having regard to the transaction and power conferred in Section 31(7)(8) of the Act, was pleased to grant interest at 10% per annum from the date of award till realization. It appears that, the Plaintiffs, without looking into the award, have attacked the award saying that the award is illegal, unauthorized and against the principles of natural justice. It is against true spirit of actual fact. The learned Arbitrator, having regard to the oral evidence adduced by the Defendant and documentary evidence at Ex.CW.1(a) to CW.1(i), was pleased to come to the conclusion that the AS.99/2014 23 Plaintiffs are liable to pay the outstanding amount of Rs.36,69,430=14 as on 16.12.2013 with future interest at the rate of 10% per annum. The Plaintiffs have challenged the cost of proceedings and stamp duty awarded by the learned Arbitrator. The learned Arbitrator, in his discretion, has awarded reasonable amount towards costs of the proceedings. The question of challenging the stamp duty does not arise, as the same was required to be paid by the Defendant as provided in law for the time being in force at the instance of the Plaintiffs. For all these reasons, I answer Point No.1 in the Negative.
18) POINT NO.2 : For the foregoing discussion and answer to Point No.1, I am of the opinion that, admittedly the dispute was arisen between the Defendant and the Plaintiffs regarding non-payment of loan obtained by the Plaintiffs. The loan dispute was referred to the learned Arbitrator as per the Arbitration Clause in the Loan Agreement. In spite of giving sufficient opportunities, the Plaintiffs failed to appear before the learned Arbitrator, and as such the learned Arbitrator proceeded to place the AS.99/2014 24 Plaintiffs ex-parte and passed the award after considering the materials placed before him and after holding due enquiry. Under such circumstances, I am of the opinion that no grounds are made out by the Plaintiffs to establish that the award passed by the learned Arbitrator is vitiated under Section 34(2) of the Arbitration and Conciliation Act; accordingly, I proceed to pass the following :
ORDER The suit filed by the Plaintiff under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award No.RELIGARE/MORTGAGE/18/2013 dated 26.07.2014 passed by the learned sole Arbitrator, Sri.S.H.Anilendra Pandey, is hereby dismissed.
(Dictated to the Judgment Writer, transcribed and computerized by her, transcript thereof corrected and then pronounced by me in open court, dated this the 6th day of December, 2018.) (RAMA NAIK) VI Addl.City Civil & Sessions Judge, Bengaluru City.
AS.99/2014 25