Delhi District Court
Shri Adesh Kumar Singh vs Toyota Financial Services India Ltd on 31 August, 2022
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (Comm.) No. 69/2020
1. Shri Adesh Kumar Singh
Son of Shri Raj Bahadur Singh
Resident of C-605, Ansal Town,
Rurki Bye Pass Road, Modipuram,
Meerut, UP-250001
2. Shri Kuldeep
Son of Sri Raj Bahadur Singh
Resident of 230, Koko Bagri,
Village Karala, near Hari Krishna Mandir,
New Delhi-110081 ...Petitioners
versus
1. Toyota Financial Services India Ltd.
Through its Directors
At 21, Centropolis, First Floor,
Vth Cross, Langford Road, Shanti Nagar,
Bangalore-560025
2. Shri Praveen Pruthi, Advocate
Sole Arbitrator
At Chamber No. 29, Patiala House Courts,
New Delhi-110001 ...Respondents
Date of Institution : 09/09/2020
Arguments concluded on : 23/08/2022
Decided on : 31/08/2022
Appearances : Sh. Shivam Sachdeva, Ld. Proxy Counsel for petitioners.
Sh. Rahul Parveva, Ld. Counsel for respondent.
JUDGMENT
1. Petitioners had filed the present objection petition/ application under Section 34 of The Arbitration and Conciliation Act, 1996 (herein after referred as The Act), seeking setting aside OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 1 of 37 of the impugned arbitral award dated 24/07/2020 passed in Arbitration Case No. TOYOTA/RB/5859/LOT-85/04 titled 'M/s. Toyota Financial Services India Ltd. vs Adesh Kumar Singh & Anr.' by Sh. Parveen Pruthi, Ld. Sole Arbitrator. Ld. Sole Arbitrator awarded Rs. 12,15,535/- with interest @ 18% per annum from 23/11/2019 till the payment is received or recovered by claimant/respondent from petitioners with direction to present petitioners to hand over the vehicle/machine/assets to claimant/ respondent in case their possession is with petitioners and in the alternative if, claimant/respondent has already repossessed the vehicle, then claimant/respondent shall be at liberty to dispose off the same after giving due notice to present petitioners and sale proceedings to be adjusted in the award amount whereas if the claimant/respondent has not repossessed the vehicle/assets/ equipment till date, then authorized representative of the claimant/respondent would be at liberty to repossess the vehicle/ machine/assets make INNOVA EURO IV/INNOVA CRYSTA 2.4 G X 7 SEATER from any person, who may be in possession of the aforesaid vehicle/asset/equipment with necessary police aid from the officer in charge of the police station, in whose jurisdiction said vehicle/asset/equipment is situated whereas respondent/claimant would also be entitled to sell/transfer the said vehicle/machine/assets make INNOVA EURO IV/INNOVA CRYSTA 2.4 G X 7 SEATER, bearing registration no. NA, Engine no. NA and Chassis no. NA in accordance with law for the recovery of the amount of award. Ld. Sole Arbitrator also awarded cost of Rs. 10,000/- in favour of respondent/claimant payable by petitioners.
OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 2 of 372. I have heard Sh. Shivam Sachdeva, Ld. Proxy Counsel for petitioners; Sh. Rahul Pareva, Ld. Counsel for respondent and perused the record of the case, the arbitral proceedings record, relied upon precedent, filed brief written arguments on behalf of petitioners as well as on behalf of respondent and given my thoughtful consideration to the rival contentions put forth.
3. Following is the brief factual matrix of case of petitioners as well as arguments set up by petitioners through Ld. Counsel. Petitioners are real brothers. M/s Cosmic Motors India Pvt. Ltd. at Gurugram approached petitioner no. 1 to purchase a new car and based on presentation made by their officials, petitioner no. 1 had booked a new car, make Innova Crysta GX 75, colour silver, for a total consideration of Rs. 17,00,000/- approximately on 05/10/2018 from them and they assured petitioner to deliver the car till 12/10/2018. The officials of M/s Cosmic Motors India Pvt. Ltd. suggested to petitioner no. 1 to finance his car from respondent/claimant as respondent/claimant was running the business of finance. Petitioner had discussed the same with officials of respondent/claimant and stated that the amount of loan should be transferred/disbursed, after the booking amount is paid by the petitioners to M/s Cosmic Motors India Pvt. Ltd. Respondent/claimant neither approached petitioner no. 1 to discuss the same nor informed the petitioner no. 1 prior to disbursing the amount of loan of Rs. 11,00,000/- into the account of respondent/claimant. Respondent/claimant started to charge an EMI from the account of petitioner no. 1. In November, 2018 petitioner no. 1 visited the branch office of respondent/claimant at Pitampura, New Delhi to discuss his issue/concern since OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 3 of 37 respondent/claimant had transferred/disbursed the amount of loan directly into the account of M/s Cosmic Motors India Pvt. Ltd. and started charging EMI from the account of petitioner no. 1 prior to booking amount having been paid by the petitioner no. 1. Petitioner no. 1 also informed respondent/claimant that till date, the said car was not delivered to petitioner no. 1, as the said transaction for which the loan was required to be taken/decided to disburse had not come into actual presence till date and respondent/claimant had disbursed the amount of loan without taking prior confirmation from petitioner no. 1 whereas respondent/claimant had started to deduct EMI's of Rs. 30,229/- from the account of petitioner no. 1 but all the efforts made by petitioner no. 1 went in vein. In November, 2018 petitioner no. 1 also visited the office of M/s Cosmic Motors India Pvt. Ltd. and requested them to either refund the amount of loan to respondent/claimant as respondent/claimant had transferred the amount of loan to them, without receiving any confirmation from petitioner no. 1 or to deliver the car booked by petitioner no. 1. The officials of M/s Cosmic Motors India Pvt. Ltd. asked petitioner no. 1 to deposit Rs.1,00,000/- towards the booking amount. On 22/12/2018 petitioner no. 1 arranged Rs.1,00,000/- in cash and deposited it with respondent/claimant as booking amount against which M/s Cosmic Motors India Pvt. Ltd. promised petitioner no. 1 to deliver the car within a day or two, but promises made by M/s Cosmic Motors India Pvt. Ltd. were false and thereafter said respondent/claimant lingered the matter on one pretext or the other, whereas the delivery of car was not handed over to petitioner no. 1. In mid of January, 2019, due to some personal reasons, petitioner no. 1 approached to M/s OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 4 of 37 Cosmic Motors India Pvt. Ltd. to cancel the booking made by petitioner no. 1 and requested them to refund the booking amount of Rs.1,00,000/- of the car paid by petitioner no. 1 as well as the amount of loan lying idle in the account of M/s Cosmic Motors India Pvt. Ltd. Petitioner no. 1 also informed respondent/ claimant about cancellation of booking of car and requested not to charge any EMI further, but respondent/claimant did not give any positive and proper response towards the concerned issues raised by petitioner no. 1 and continued to charge the EMI's even after the cancellation of said booking. Respondent/claimant charged four monthly installments each of Rs. 30,229/-, which comes to total amount of Rs.1,20,916/- from account of petitioner no. 1. Petitioner no. 1 had put all efforts to claim the amount of refund from the respondent/claimant but all efforts went in vein. On 07/05/2019 after making continuous follow up, M/s Cosmic Motors India Pvt. Ltd. had refunded the booking amount of Rs.1,00,000/- to petitioner no. 1 but respondent/ claimant did not refund the amount of loan either to petitioner no. 1 or to M/s Cosmic Motors India Pvt. Ltd. Petitioner no. 1 also informed respondent/claimant regarding the said cancellation of booking of the car as well as refund of the booking amount paid by M/s Cosmic Motors India Pvt. Ltd. to petitioner no. 1, but despite knowing it, respondent/claimant got served a loan recall notice dated 12/06/2019 to petitioner no. 1 asking to refund the amount of loan against which petitioner no. 1 again visited the office of respondent/claimant and tried hard to make them understand his concern and issues but to no effect, despite the fact that respondent/claimant and the Toyota Company were sister concern companies. In the month of January, 2020 OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 5 of 37 petitioner no. 1 issued a legal notice dated 15/01/2020 to M/s Cosmic Motors India Pvt. Ltd. and respondent/claimant calling upon M/s Cosmic Motors India Pvt. Ltd. to refund Rs.11,00,000/- to respondent/claimant and also called upon respondent/claimant to refund of Rs.1,20,916/- towards the amount of four EMIs deducted from account of petitioner no. 1 by respondent/claimant but none of them gave any reply to said notice delivered to them, which clearly shows the collusion of both the parties and their malafide intentions to grab the hard earned money of petitioner no. 1. Respondent/claimant gave no heed towards the concerned issues raised by petitioner no. 1. No notice/summons were served upon petitioner no. 1, issued by Ld. Sole Arbitrator. Even respondent/claimant played illegal tact with petitioner no. 1 by approaching two different Arbitrators as respondent/claimant also filed claim before Sh. Ashwani Mittal, Ld. Arbitrator at P-26, Post Office Lane, Tis Hazari Courts, Delhi-110054 and said Sh. Ashwani Mittal, Ld. Arbitrator issued one notice/summon to petitioner no. 1 for 02/03/2020, upon which Ld. Counsel for petitioner no. 1 appeared before said Ld. Arbitrator that day and requested to said Arbitrator to direct respondent no. 1 to supply the complete copy claim along with documents, but that day no one appeared for respondent/claimant before said Ld. Arbitrator; so said Ld. Arbitrator stated that the same will be informed and provided through speed post with the copy of complaint at the address of petitioner no. 1 and fixed next date 16/03/2020 and then on 23/03/2020; and then on 23/03/2020, no effective hearing was done due to lock-down in Delhi Courts but till date no copy of claim was provided to petitioner no. 1. Instead of resolving issues, respondent/claimant filed their claim before two different OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 6 of 37 Arbitrators. On 27/07/2020 respondent/claimant sent impugned arbitral award dated 24/07/2020 through speed post directly to petitioner no. 1. Resultant was the present petition/objection.
4. Petitioners have impugned the arbitral award mainly on the following grounds. Respondent/claimant appointed Ld. Sole Arbitrator unilaterally to resolve the dispute/issue between the parties without asking/taking the concurrence/consent from petitioner no. 1. Respondent/claimant had no power to appoint an Arbitrator as neither there was an agreement entered between the parties with respect to the same nor there was any copy of agreement provided to petitioner no. 1 till date. Respondent/ claimant did not provide the copy of the Loan cum Hypothecation Agreement No. NMER1145956 as well as the Guarantor Agreement to petitioner no. 1 till date. Respondent/ claimant was in collusion with M/s Cosmic Motors India Pvt. Ltd. and Ld. Sole Arbitrator and had tried to grab the money of petitioner no. 1. Ld. Sole Arbitrator did not send any notice/ summon to petitioners nor informed them about the date on which petitioner no. 1 was required to be present before him with documents to present his case. Due to lack of knowledge of arbitral proceedings initiated, petitioner no. 1 could not appear before Ld. Sole Arbitrator. Respondent/claimant approached two different Arbitrators for same claim. No loan was disbursed to petitioner no. 1. In fact even booking was cancelled by petitioner no. 1 and the booking amount of Rs. 1,00,000/- was refunded to petitioner no. 1 by M/s Cosmic Motors India Pvt. Ltd. and no car/ vehicle was delivered to petitioner no. 1. Respondent/claimant had filed petition under Section 9 of The Arbitration and OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 7 of 37 Conciliation Act, 1996 which was dismissed as withdrawn on 20/08/2020 from the Commercial Court at Karkardooma Courts, Delhi wherein also even respondent/claimant could not disclose the chasis number, engine number and registration number of the vehicle; due to the only reason that no vehicle was delivered to petitioner no. 1 nor was purchased by petitioner no. 1. When no vehicle was purchased by petitioner no. 1 then how can the loan amount be disbursed to petitioner no. 1? No proper intimation/ notice for appointment of Arbitrator as well as initiation of arbitral proceedings and continuation of the same was provided to petitioner no. 1. M/s Cosmic Motors India Pvt. Ltd. was not impleaded in arbitral proceedings though being necessary party as amount of loan was disbursed directly into the account of M/s Cosmic Motors India Pvt. Ltd. by respondent/claimant and it was M/s Cosmic Motors India Pvt. Ltd. who suggested and advised the petitioner no. 1 to finance his car from respondent/claimant. Loan amount of Rs.11,00,000/- was lying idle in account of M/s Cosmic Motors India Pvt. Ltd., who had grabbed the same with malafide intention and had not put any efforts to refund to respondent/claimant. Even respondent/claimant had concealed the material facts before Ld. Sole Arbitrator and exhibited a forged document in evidence. Impugned award does not contain the fact of liability of M/s Cosmic Motors India Pvt. Ltd., who had not delivered the car to petitioner no. 1 on time as well as not refunded the amount of loan lying idle in the account of M/s Cosmic Motors India Pvt. Ltd. even after the cancellation of the booking of the petitioner no. 1. Proper opportunity of being heard was not provided to petitioner no. 1 on or before passing of the impugned arbitral award. Ld. Counsel for petitioners argued for OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 8 of 37 setting aside of the impugned arbitral award on the above elicited grounds and premise.
5. Respondent no.1 was served on 17/01/2022 by email. Despite opportunities respondent did not file reply to the petition. However, written arguments were filed by Ld. Counsel for respondent/claimant. Following are the arguments/contentions laid in the written arguments of the respondent/claimant. It finds mention that respondent/claimant granted loan facility of Rs.11,06,213/- to petitioner no. 1/borrower for which petitioner no. 2 co-borrower stood guarantor for purchasing a vehicle INNOVA EURO IV/INNOVE CRYSTA 2.4 GX7 SEATER vide written loan agreement no. NMER1145956 dated 22/10/2018 which was duly executed between respondent/claimant and petitioners. Petitioners failed to maintain the financial discipline of the said loan agreement. Officer of the respondent/claimant pursued with petitioners again and again for collection of the defaulted EMI but the petitioners willfully neglected to repay the loan EMI. Respondent/claimant got issued legal notice dated 12/06/2019 to petitioners whereby loan facility advanced to petitioner was recalled asking petitioners to repay the outstanding loan amount but despite receipt of the said notice petitioners willfully failed and avoided to repay the dues/loan outstanding loan amount. Respondent/claimant received information that petitioners/applicants are malafidely intending to dispose off/sell/transfer the said hypothecated vehicle, which was purchased by the financed amount of the respondent/ claimant. Respondent/claimant filed petition under Section 9 The Arbitration and Conciliation Act before the Court of Ms. Twinkle OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 9 of 37 Wadhwa, Ld. Additional District Judge, Patiala House Court, Delhi for seeking interim relief for appointment of receiver with direction to take possession of hypothecated vehicle. Receiver was appointed by the said Court vide order dated 22/08/2019 and said petition was disposed off on 14/12/2019. In terms of the arbitration agreement between parties, respondent/claimant referred the matter to Ld. Sole Arbitrator vide reference letter dated 18/11/2019 and appointed the present Ld. Sole Arbitrator to adjudicate the disputes between the parties. Notices dated 23/11/2019, 07/12/2019 were sent by Ld. Sole Arbitrator to petitioners, who willfully failed/avoided to appear before Arbitral Tribunal. Ld. Sole Arbitrator passed the impugned ex parte arbitral award. It was argued by respondent/claimant through Ld. Counsel that present petition is not maintainable as petitioners have not come before this Court with clean hands and presented a distorted and incorrect version of the facts before this Court, thereby attempted to misguide and mislead this Court. Petition is an abuse the process of this Court and is not maintainable. Petitioners with malafide intentions and dishonest purpose have filed the petition by adopting arm twisting methods to intimidate the respondent to accept their illegal and unlawful demands. Petitioners failed to file any documentary evidence of the other arbitral proceedings. Petitioners tried to take advantage of their own wrong. On one hand petitioners have not paid the outstanding amount of respondent/claimant; on the other hand, when award has been passed by Ld. Sole Arbitrator, petitioners have filed the present petition to mislead this Court. Petitioner purchased the vehicle with the money of respondent/claimant. The documents such as bill and other documents and issues OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 10 of 37 related to the quality and ownership of the product are not in any way responsibility of respondent/claimant. Petitioners were served with Loan Recall Notice, appointment of Arbitrator notice and Arbitrator notices for hearing vide registered/registered AD post on the same address which is mentioned in the present petition by the petitioners. On 21/07/2022 sum of Rs.17,97,936/- was due on the petitioners. Arbitral award can be interfered with on limited grounds given in section 34 of The Act. Ld. Counsel for respondent/claimant relied upon the case of Dyna Technologies Pvt. Ltd. vs Crompton Greaves Ltd., MANU/SC/1765/2019. Ld. Counsel for respondent/claimant argued that petitioners have miserably failed to prove any of the grounds covered under Section 34 of the Act. It was argued that petitioners have failed to prove any biasness on the part of Ld. Sole Arbitrator. Ld. Counsel for respondent/claimant argued for dismissal of the present petition accordingly.
6. An arbitral award can be set aside on the grounds set out in Section 34 (2) (a), Section 34 (2) (b) and Section 34 (2A) of the Act in view of Section 5 of the Act and if an application for setting aside such award is made by party not later than 3 months from the date from which the party making such application had received the signed copy of the arbitral award or if a request had been made under Section 33 of the Act, from the date on which that request had been disposed of by the Arbitral Tribunal. If the Court is satisfied that the applicant was prevented by sufficient cause from the making the application within the said period of three months it may entertain the application within further period of 30 days, but not thereafter.
OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 11 of 377. Supreme Court in the cases of State of Maharashtra & Ors. vs ARK Builders Private Limited, (2011) 4 SCC 616; Benarsi Krishna Committee & Ors. vs Karmyogi Shelters Pvt. Ltd., (2012) 9 SCC 496 as well as in the case of Dakshin Haryana Bijli Vitran Nigam Ltd. vs M/s Navigant Technologies Pvt. Ltd., Civil Appeal No. 791 of 2021 [Arising out of SLP (C) No. 10372/2020] decided on 02/03/2021 by Supreme Court inter alia held that limitation period for setting aside an arbitral award is to be reckoned from the date the copy of the award duly signed by arbitrator is delivered to/received by the objector and not otherwise.
8. Impugned arbitral award is of date 24/07/2020. Present objections/petition under Section 34 of the Act has been filed on 09/09/2020. Accordingly, present petition is within the period of limitation.
9. Section 34 (1) (2), (2A) and (3) of The Arbitration and Conciliation Act, 1996 read as under:-
"34. Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3).
(2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 12 of 37 not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 13 of 37 the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter."
10. Supreme Court in case of Associate Builders vs Delhi Development Authority, (2015) 3 SCC 49 has held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
Also was held therein that:
"33. "...when a court is applying the 'public policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award....
Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts.."
11. Supreme Court in case of Ssangyong Engineering & Construction Company Limited vs National Highways OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 14 of 37 Authority of India (NHAI), (2019) 15 SCC 131 has held that under Section 34 (2A) of The Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse. It is held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
12. Section 4 of The Act provides that a party who knows that any provision of Part-I from which parties may derogate or any requirement under the arbitration agreement has not been complied but still proceeds with the arbitration without stating his objection to such non-compliance without undue delay or if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object.
13. Section 11 of The Act is with respect to the appointment of the arbitrators by the Supreme Court or as the case may be, by the High Court only.
14. Under Section 12 of The Act, when a person is approached in connection with his possible appointment as an arbitrator, he is bound to disclose in writing any circumstances, such as the OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 15 of 37 existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months. Various grounds are set out in the Fifth Schedule as a guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. The disclosure shall be made by such person in the form specified in the Sixth Schedule. An arbitrator may be challenged by the parties only if any circumstances referred to in Section 12 (3) of The Act subject to Section 13 (4) of The Act exist which provide for an agreement between the parties for such procedure for challenge. If such challenge is unsuccessful, the party may make an application for setting aside an arbitral award in accordance with Section 34 of The Act.
15. Section 14 of The Act provides that the mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator if he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay and he withdraws from his office or the parties agree to the termination of his mandate.
16. Section 15 of The Act provides that the mandate of arbitrator is also terminated if he withdraws from office for any OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 16 of 37 reason or by or pursuant to agreement of the parties. In such an event, the substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. If such an arbitrator is replaced, any hearing previously held may be repeated at the discretion of the arbitral tribunal unless otherwise agreed by the parties. The earlier order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator shall not be invalid unless otherwise agreed by the parties.
17. Under Section 16 of The Act, the arbitral tribunal is empowered to rule on its own jurisdiction including ruling on any objection with respect to the existence or validity of arbitration agreement. Such plea shall be raised not later than the submission of the statement of defence. If such plea is rejected by the arbitral tribunal, it has to proceed with the arbitral proceedings and declare an award. If plea of jurisdiction is accepted by the arbitral tribunal, the respondent may file an appeal under section 37 of The Act. If plea of jurisdiction is not accepted, the respondent may challenge such ruling along with award under section 34 of The Act.
18. Supreme Court in case of TRF Ltd. vs Energo Engg. Projects Ltd., (2017) 8 SCC 377 has held that by virtue of section 12(5) of The Act, if any person, who falls under any of the category specified in the Seventh Schedule shall be ineligible to be appointed as an Arbitrator. It is held that the amended law under Section 11(6-A) of The Act requires the Court to confine examination of the existence of an arbitration agreement OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 17 of 37 notwithstanding the judgment of the Supreme Court or the High Court while considering an application under section 11(6) of The Act. The designated arbitrator whose ineligibility to act as an arbitrator by virtue of amendment to Section 12 of The Act by the Arbitration and Conciliation (Amendment) Act, 2015, does not have power even to nominate any other person as arbitrator. The Supreme Court and High Court in certain circumstances have exercised jurisdiction to nullify the appointments made by the authority in such situation.
19. Supreme Court in case of Bharat Broadband Network Ltd vs United Telecoms Ltd, (2019) 5 SCC 755 after construing Section 12(5) of The Act read with Fifth, Sixth and Seventh Schedule held that the Managing Director of the party, who was a named arbitrator, could not act as arbitrator nor could be allowed to appoint another arbitrator. The disclosure of a prospective arbitrator has to be made in the form specified in the Sixth Schedule and the ground stated in the Fifth Schedule are to serve as a guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. Any prior agreement to the contrary is wiped out by the non-obstante clause in Section 12(5) of The Act the moment any person whose relationship with the parties or the counsel or the subject matter of the dispute falls under the Seventh Schedule. The sub-section then declares that such person shall be ineligible to be appointed as arbitrator. Such ineligibility can be removed by an express agreement in writing. It was held that learned arbitrator had become de jure ineligible to perform his function as an arbitrator.
OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 18 of 3720. Supreme Court in the case of Perkins Eastman Architects DPC & Anr. vs HSCC (India) Limited, (2020) 20 SCC 760 has held that in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. The person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015. Supreme Court had set aside the appointment of an arbitrator appointed by one of the parties having exclusive right to appoint and appointed an independent arbitrator in the application filed under Section 11(6) of The Act.
21. Sub-section (1) of Section 29-A of The Act (as amended by Act 33 of 2019) provides that the award shall be made within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23 of the Act. Sub- section (2) of Section 29-A of The Act provides that if the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree. Sub-section(3) of Section 29-A of The Act provides that the parties may, by consent, extend the period specified in subsection (1) for making award for a further period not exceeding six months. Subsection (4) of Section 29-A of The Act provides that if the award is not made within the period specified in sub-section (1) or the extended period specified under sub-
OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 19 of 37section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period. If the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, the Court may pass an order for reduction of fees of arbitrator(s) by not exceeding five per cent for each month of such delay. Sub-section (5) of Section 29-A of The Act provides that the extension may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.'
22. In the case of Proddatur Cable TV Digi Services vs. Siti Cable Network Ltd., 2020 SCC Online Del 350, it was inter alia held that following ratio of the judgment in the case of Perkins (supra), it is clear that a unilateral appointment by an authority which is interested in the outcome or decision of the dispute is impermissible in law. When the Arbitration Clause empowers the Company to appoint Sole Arbitrator, it can hardly be disputed that the Company acting through its Board of Directors will have an interest in the outcome of the dispute. The appellant had filed the petition under Section 14 and 15 of The Act seeking declaration that the mandate of the arbitrator appointed by the respondent be terminated and an arbitrator be appointed by High Court in the provisions of The Act. Following ratio of the judgments in Perkins (supra) and Bharat Broadband Network Limited (supra), the mandate of the Arbitrator was found terminated de jure and since the present arbitrator had become unable to perform her functions as an arbitrator, her mandate was terminated and another independent Sole Arbitrator was OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 20 of 37 appointed to substitute the previous arbitrator.
23. In the case of M/s Omcon Infrastructure Pvt. Ltd. Vs India Bulls Investment Advisors Ltd, OMP (T) (Comm.) 35/2020 and IA 6153/2020 decided on 01/09/2020 by Hon'ble Ms. Justice Rekha Palli, wherein petition was filed under Section 14 and 15 of The Act, seeking termination of the mandate of Ld. Arbitrator unilaterally appointed by the respondent and also quashing of order passed by Ld. Arbitrator, deciding the application of petitioner under Section 12 of The Act, the ratio of the decision in case of Perkins (supra) was applied and held that once the Managing Director of the respondent Company was ineligible to appoint the arbitrator, the same would also bar the Company itself from unilaterally appointing the sole arbitrator and reference was also made to the decision of Proddatur Cable TV Digi Services (supra). Therein also the mandate of the Ld. Arbitrator was terminated and new independent Sole Arbitrator was appointed.
24. I now advert to arbitral proceedings record filed by Ld. Sole Arbitrator. At page no. 4 of arbitral proceedings record is a letter dated 13/11/2019 with subject of letter of intent for appointment of Sole Arbitrator. It reads as follows:-
"TOYOTA FINANCIAL SERVICES BY HAND Date: 13.11.2019 Ref No: TOYOTA/RB/5859/LOT-85/04 Parveen Pruthi (Advocate) CHAMBER NO. 29, PATIALA HOUSE COURT, NEW DELHI OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 21 of 37 Branch Office At: G-23, House No. 8, Second Floor, Sector 7, Rohini Delhi-110085 Dear Sir Sub. : Letter of Intent for Appointment of Sole Arbitrator.
We intent to appoint you as Sole Arbitrator to adjudicate the present dispute under the terms of Schedule Loan Agreement and purview of Arbitration and Conciliation Act of 1996, as amended from time to time.
The details of the Loan Agreement & parties thereto have been more particularly mentioned in the schedule attached.
While looking forward to a healthy, fruitful, long-term and pleasant association with you, we request you to kindly acknowledge and convey your acceptance on the subject.
Thanking you, Yours faithfully, For M/s. Toyota Financial Services India Ltd.
Sd/-
Authorized Signatory
Schedule
Agreement No. NMER1145956
Borrower Name ADESH KUMAR SINGH
Borrower Address S/O RAJ BAHADUR SINGH R/O
C-605, ANSAL TOWN,
ROORKEE, BYEPAS ROAD,
MODIPURAM MEERUT,
UTTAR PRADESH-250001
Also At S/O RAJ BAHADUR SINGH R/O
230, KOKO BAGRI, VILL-
KARALA, DELHI, NEW DELHI-
110081
Also At 2 S/O RAJ BAHADUR SINGH C/O
CAR NEXT, A-19, AMAR
COLONY, LAJPAT NAGAR-4,
NEW DELHI-110024
Guarantor Name KULDEEP
Guarantor Address S/O RAJ BAHADUR SINGH R/O
OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 22 of 37
230, KOKO BAGRI, VILLAGE
KARALA, NEAR HARI
KRISHNA MANDIR, DELHI,
NEW DELHI-110081
Also At S/O RAJ BAHADUR SINGH R/O
RASHMI APPARTMENT, RANI
BAGH, NEW DELHI, DELHI-
110034
25. At page no. 5 of arbitral proceedings record is letter dated 13/11/2019 of Ld. Sole Arbitrator addressed to respondent/ claimant and reads as follows:-
"Branch Office At: G-23, House No. 8 Parveen Pruthi (Advocate), Second Floor, Sector 7, Rohini Office At: Chamber No. 29, Delhi-110085 Patiala House Court, New Delhi ___________________________________________________________ Speed post/Regd. Ad/Regd. Post M/S Toyota Financial Services India Ltd. Registered Office: No. 21, Centropolis, First Floor, 5th Cross, Langford Road, Shanti Nagar, Bangalore-560025, And its Branch office at:8th Floor, R.G. Trade Tower, District Center, Netaji Subhash Palace, Wazirpur, New Delhi-110034 Sub: Disclosure under Arbitration & Conciliation Act 1996 In Re: Agreement No. NMER1145956 Ref No: TOYOTA/RB/5859/LOT-85/04 Dear Sir, This is with reference to your letter dated 13.11.2019 regarding your intent to appoint me as a Sole Arbitrator.
Please find enclosed the statutory Disclosure in the prescribed format, under Sixth Schedule as per Section 12 (1) of Arbitration & Conciliation Act 1996, in connection with my possible appointment of Sole Arbitrator.
Thanking you Sd/-
(Sole Arbitrator) Enclosure: Disclosure under Sixth Schedule, Arbitration & Conciliation Act 1996.
CC:OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 23 of 37
1. ADESH KUMAR SINGH, S/O RAJ BAHADUR SINGH R/O C-605, ANSAL TOWN, ROORKEE, BYEPAS ROAD, MODIPURAM MEERUT, UTTAR PRADESH- 250001 Also At:-
ADESH KUMAR SINGH, S/O RAJ BAHADUR SINGH R/O 230, KOKO BAGRI, VILL-KARALA, DELHI, NEW DELHI- 110081 Also At 2:-
ADESH KUMAR SINGH, S/O RAJ BAHADUR SINGH C/O CAR NEXT, A-19, AMAR COLONY, LAJPAT NAGAR-4, NEW DELHI- 110024
2. KULDEEP S/O RAJ BAHADUR SINGH R/O 230, KOKO BAGRI, VILLAGE KARALA, NEAR HARI KRISHNA MANDIR, DELHI, NEW DELHI-110081 Also At 2:-
KULDEEP S/O RAJ BAHADUR SINGH R/O RASHMI APPARTMENT, RANI BAGH, NEW DELHI, DELHI- 110034
26. At page no. 6 of arbitral proceedings record are pasted five speed post receipts dated 13/11/2019 of speed post articles sent by Ld. Sole Arbitrator whereas complete addresses of petitioners do not find mention on these speed post receipts which only contain the following numbers and addresses:-
RLAD 1100420116 <110042> RLAD A RD339411910 IN To: ADESH KUMAR, DELHI, PIN:110024 RLAD 1100420116 <110042> RLAD A RD339411929 IN To:KULDEEP, OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 24 of 37 DELHI, PIN:110081 RLAD 1100420116 <110042> RLAD A RD339411932 IN To:KULDEEP, DELHI, PIN:110034 RLAD 1100420116 <110042> RLAD A RD339411892 IN To: ADESH KUMAR.
MEERUT, PIN:250001 RLAD 1100420116 <110042> RLAD A RD339411901 IN To: ADESH KUMAR.
DELHI, PIN:110081
27. At page no. 8 of arbitral proceedings record is a letter dated 14/11/2019 with subject of consent to act as Sole Arbitrator sent by Ld. Sole Arbitrator to respondent/claimant with following text:-
"Branch Office At: G-23, House No. 8 Parveen Pruthi (Advocate), Second Floor, Sector 7, Rohini Office At: Chamber No. 29, Delhi-110085 Patiala House Court, New Delhi ___________________________________________________________ Speed post/Regd. Ad/Regd. Post M/S Toyota Financial Services India Ltd. Registered Office: No. 21, Centropolis, First Floor, 5th Cross, Langford Road, Shanti Nagar, Bangalore-560025, And its Branch office at:8th Floor, R.G. Trade Tower, District Center, Netaji Subhash Palace, Wazirpur, New Delhi-110034 Sub: Consent to act as Sole Arbitrator In Re: Agreement No. NMER1145956 Customer Name ADESH KUMAR SINGH Ref No: TOYOTA/RB/5859/LOT-85/04 Dear Sir, This is with reference to your letter dated 13.11.2019 regarding my appointment as Sole Arbitrator to adjudicate the dispute related to above referred Agreement.OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 25 of 37
I thankfully accept the same and further confirm that my appointment is well within the terms of above referred Agreement and under provisions of Arbitration & Conciliation Act 1996.
I further assure you my best professional services at all times.
Thanking you Sd/-
(Sole Arbitrator) cc.
1. ADESH KUMAR SINGH, S/O RAJ BAHADUR SINGH S/O RAJ BAHADUR SINGH R/O C-605, ANSAL TOWN, ROORKEE, BYEPAS ROAD, MODIPURAM MEERUT, UTTAR PRADESH- 250001 Also At:-
ADESH KUMAR SINGH, S/O RAJ BAHADUR SINGH S/O RAJ BAHADUR SINGH R/O 230, KOKO BAGRI, VILL-KARALA, DELHI, NEW DELHI- 110081 Also At 2:-
ADESH KUMAR SINGH, S/O S/O RAJ BAHADUR SINGH S/O RAJ BAHADUR SINGH C/O CAR NEXT, A-19, AMAR COLONY, LAJPAT NAGAR-4, NEW DELHI- 110024
2. KULDEEP S/O RAJ BAHADUR SINGH R/O 230, KOKO BAGRI, VILL-KARALA, NEAR HARI KRISHNA MANDIR, DELHI, NEW DELHI-110081 Also At 2:-
KULDEEP S/O RAJ BAHADUR SINGH R/O RASHMI APPARTMENT, RANI BAGH, NEW DELHI, DELHI- 110034
28. Similarly at page no. 9 of arbitral proceedings record are the five speed post receipts dated 14/11/2019 stapled and which also similarly do not bear complete addresses of petitioners and OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 26 of 37 bearing similarly above elicited particulars elicited in previous speed post receipts above.
29. At page no. 10 of arbitral proceedings record is the arbitration reference notice dated 18/11/2019 purportedly sent by respondent/claimant to petitioners and bears the following text:-
"TOYOTA FINANCIAL SERVICES VIA SPEED POST/BY REGD.POST/BY REGD.AD POST Date:18.11.2019 To:-
1. ADESH KUMAR SINGH S/O RAJ BAHADUR SINGH S/O RAJ BAHADUR SINGH R/O C-605, ANSAL TOWN, ROORKEE, BYEPAS ROAD, MODIPURAM, MEERUT, UTTAR PRADESH- 250001 Also at: ADESH KUMAR SINGH S/O RAJ BAHADUR SINGH S/O RAJ BAHADUR SINGH R/O 230, KOKO BAGRI, VILL-KARALA, DELHI, NEW DELHI-110081 Also at: ADESH KUMAR SINGH S/O RAJ BAHADUR SINGH S/O RAJ BAHADUR SINGH C/O CAR NEXT, A-19, AMAR COLONY, LAJPAT NAGAR-4, NEW DELHI-110024
2. KULDEEP S/O RAJ BAHADUR SINGH R/O 230, KOKO BAGRI, VILLAGE KARALA, NEAR HARI KRISHNA MANDIR, DELHI, NEW DELHI-110081 Also at: KULDEEP S/O RAJ BAHADUR SINGH R/O RASHMI APPARTMENT, RANI BAGH, NEW DELHI, DELHI-110034 Ref: Loan Agreement NMER1145956 dated 22.10.2018 Subject: Arbitration Reference Notice Ref No: TOYOTA/RB/5859/LOT-85/04 Dear Sir/Madam, OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 27 of 37 This is in reference to above captioned Loan Agreement whereby you have availed loan facility from us. You have failed to make repayments towards the above referred loan agreement and as on date a sum of Rs.1215535/- is due and payable by you to us.
In spite of our several follow-ups & opportunities, the above amount remains unpaid. In such circumstances, Loan Agreement has been terminated vide Loan Recall Notice dated 12.06.2019. In furtherance of the same we have referred the matter to the Sole Arbitrator Mr. Parveen Pruthi, to arbitrate the disputes which had arisen between us and pass an award accordingly.
The arbitration will be conducted on "Fast Track Procedure" as provided under Sec. 29 (B) (3) to the Arbitration & Conciliation (Amendment) Ordinance, 2015.
For Toyota Financial Services India Ltd.
Sd/-
Authorized Signatory"
30. At page no. 11 of arbitral proceedings record are the five speed post receipts dated 18/11/2019 which also do not bear complete addresses of the present petitioners but inter alia bear following particulars:-
RLAD 1100420116 <110042> RLAD A RD175089021 IN To:KULDEEP, DELHI, PIN:110081 From: TOYOTA FINANCIAL SERVICES, NEW DELHI RLAD 1100420116 <110042> RLAD A RD175089018 IN To:KULDEEP, DELHI, PIN:110034 From: TOYOTA FINANCIAL SERVICES, NEW DELHI RLAD 1100420116 <110042> RLAD A RD175086405 IN To: ADESH KUMAR, DELHI, PIN:110081 From: TOYOTA FINANCIAL SERVICES, NEW DELHI RLAD 1100420116 <110042> RLAD A RD175089049 IN To: ADESH KUMAR, DELHI, PIN:110024 OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 28 of 37 From: TOYOTA FINANCIAL SERVICES, NEW DELHI RLAD 1100420116 <110042> RLAD A RD175086365 IN To: ADESH, MEERUT, PIN:250001 From: TOYOTA FINANCIAL SERVICES, NEW DELHI
31. At page nos. 12 and 13 of arbitral proceedings record is notice dated 23/11/2019 of Ld. Sole Arbitrator purportedly sent to petitioners. Similarly there are five speed post receipts stapled on the said notice which do not bear the complete particulars/addresses of the petitioners but bear the particulars as have been so elicited herein before in the earlier detailed speed post receipts.
32. It is pertinent to mention that with respect to all above elicited speed post receipts there is no tracking report enclosed in the arbitral proceedings record for service of any of the speed post article above said upon the present petitioners. At page nos. 67 to 71 in arbitral proceedings record are the tracking reports of month of August, 2020 with respect to articles dispatched by speed post in that month of August, 2020 to petitioners.
33. Following are the addresses of petitioners in the Schedule I of Agreement inter se petitioners and respondent/claimant:-
SCHEDULE Name and ADESH KUMAR SINGH, C-605 ANSAL TOWN address of ROORKEE BYEPASS ROAD MODIPURAM the MEERUT-250001 Applicant Name and KULDEEP, 230 KOKO BAGRI VILLAGE Address of KARALA N.D-110081 the Co-
Applicant(1) OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 29 of 37
34. Following is the Clause 23 of agreement inter se petitioners and respondent/claimant:-
"23. ARBITRATION In the event of any dispute or differences arising under this Agreement including any dispute as to any amount outstanding, the real meaning or purport hereof ("Dispute"), such Dispute shall be finally resolved by arbitration. Such arbitration shall be conducted in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any amendment or re enactment thereof, by a single arbitrator to be appointed by TFSIN. The venue of arbitration shall be at New Delhi and the arbitration shall be conducted in English Language.
Notwithstanding anything contained hereinabove, in the event of the law being made or amended so as to bring TFSIN under any other special legislation to enable the Lender to enforce the security or proceed to recover dues from the Applicant under any such special Act, the arbitration provisions hereinbefore contained shall at the option of TFSIN cease to have any effect and if arbitration proceedings are commenced but no Award is made, then at the option of TFSIN, such proceedings shall stand terminated and the mandate of the single arbitrator shall come to an end, from the date of the making of the law or the date when amendment becomes effective or the date when TFSIN exercises the option of terminating the mandate of the arbitrator as the case may be."
35. Section 21 of The Act provides that unless and otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which the request for that dispute to be referred to the arbitration is received by the respondent. Limitation in respect of which a request is made by one party to other party to refer such dispute to the arbitration stops when such notice is received by other party.
36. Delhi High Court in the case of Alupro Building Systems Pvt Ltd vs Ozone Overseas Pvt Ltd, O.M.P 3/2015 decided on 28/02/2017 inter alia held that where a notice under Section 21 OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 30 of 37 of the Act invoking arbitration clause is not served upon the other party by the party invoking the said clause and the arbitration proceedings are held then in absence of any agreement by the petitioner for waiving of requirement of notice under Section 21 of the Act, the impugned arbitral award would be opposed to the fundamental policy of Indian law since the mandatory requirement of the Act stands not complied and ground under Section 34 (2)(b) (ii) of the Act is attracted and such impugned award could be set aside on this ground.
37. Bombay High Court in the case of Bhanumati J. Bhuta vs Ivory Properties & Hotels Pvt. Ltd., 2020 SCC Online Bombay 157 has held that the arbitral proceedings commence in respect of dispute when notice invoking of arbitration agreement is received by other side and not when such notice is only served upon the Arbitral Tribunal. The onus is on the applicant who had issued such notice to prove the delivery of such notice upon the other side.
38. In the case of International Nut Alliance LLC vs Beena Cashew Company, 2014 SCC Online Mad 425, it was inter alia held that before composition of arbitrators, a notice to the other party is very much essential.
39. Above elicited documents from arbitral proceedings record clearly demonstrate and prove of appointment of Ld. Sole Arbitrator by above elicited letter dated 13/11/2019 of respondent/claimant before even issuance of arbitration reference notice under Section 21 of the Act by respondent/claimant to OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 31 of 37 petitioners for reference of dispute for arbitration. Per contra the above elicited arbitration reference notice dated 18/11/2019 demonstrates that it was so purportedly issued later to appointment of Ld. Sole Arbitrator unilaterally by respondent vide letter dated 13/11/2019, above elicited. Even the above said arbitration reference notice dated 18/11/2019 bears averment that "The arbitration will be conducted on "Fast Track Procedure"
as provided under Sec. 29(B)(3) to the Arbitration & Conciliation (Amendment) Ordinance, 2015."
40. Such fast track procedure laid in Section 29-B of the Act can be only applicable to parties to arbitration agreement only if such parties to agreement agree in writing to have their dispute resolved by such fast track procedure specified in sub Section 3 of Section 29-B of the Act as per Section 29-B(1) of the Act and not otherwise. There is no material placed in arbitral proceedings record or by respondent/claimant on record to infer or prove that the parties to arbitration agreement i.e., the present petitioners in any manner ever agreed in writing with respondent/claimant to have their dispute resolved by fast track procedure, above said under Section 29-B of the Act.
41. Even as per above elicited arbitral proceedings extracts, the letters dated 13/11/2019 and 14/11/2019 of Ld. Sole Arbitrator, and the arbitration reference notice dated 18/11/2019 of respondent/claimant were not appropriately served on the above elicited provided correct and complete addresses of petitioners as per agreement inter se petitioners and respondent/ claimant. Above elicited extracts of arbitral proceedings record OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 32 of 37 also clearly demonstrate that there was no agreement by petitioners for waiving of requirement of notice under Section 21 of the Act.
42. The onus was on the respondent/claimant/lender who had issued the arbitration reference notice dated 18/11/2019 to prove the delivery of such notice upon petitioners. Respondent/ claimant/lender failed to discharge its onus of proving the delivery of such arbitration reference notice dated 18/11/2019 upon petitioners. In terms of law laid down in the cases of (i) Alupro Building Systems Pvt Ltd vs Ozone Overseas Pvt Ltd (supra), (ii) Bhanumati J. Bhuta vs Ivory Properties & Hotels Pvt. Ltd. (supra) and (iii) International Nut Alliance LLC (supra), the notice under Section 21 of the Act invoking arbitration clause having not been served upon the petitioners by respondent/claimant/lender, the party invoking the said clause before appointment of arbitrator; the arbitration proceedings held then in the absence of any agreement by petitioner for waiving of requirement of notice under Section 21 of the Act; the impugned arbitral award is opposed to be fundamental policy of Indian law since the mandatory requirement of the Act stands not complied and ground under Section 34 (2)(b) (ii) of the Act is attracted and impugned arbitral award is liable to be set aside on this ground alone.
43. Supreme Court in the case of M/s Voestalpine Schienen GMBH Vs. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665 has construed Section 12(5) of The Act (as amended) and also the Seventh Schedule to The Act and has held that under OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 33 of 37 Section 12(5) of The Act, notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator. It is held that in such an eventuality, when the arbitration clause finds foul with the amended provisions i.e. Section 12(5) of The Act, the appointment of an arbitrator would be beyond pale of arbitration agreement, empowering the Court to appoint such arbitrator(s), as may be permissible. Other party cannot insist for appointment of an arbitrator in terms of the arbitration agreement. In such situation, that would be the effect of non-obstante clause contained in Section 12(5) of The Act.
44. Supreme Court in case of HRD Corporation (Marcus Oil and Chemical Division) vs. Gail (India) Limited (Formerly Gas Authority of India Ltd.), 2017 SCC OnLine SC 1024 has held that if the learned arbitrator fails to file disclosure in terms of section 12(1) of The Act read with Fifth Schedule of The Act, the remedy of the party aggrieved in that event would also be to apply under section 14(2) of The Act to the court to decide about the termination of the mandate of the arbitral tribunal on that ground.
45. With letter of Ld. Sole Arbitrator dated 13/11/2019, above elicited, is attached Disclosure under Section 12(1)(b) read with Sixth Schedule of Ld. Sole Arbitrator, but as has been above elicited, there is no clear proof in arbitral proceedings record or filed by respondent/claimant of service of said letter with said OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 34 of 37 disclosure upon petitioners at their complete and correct addresses provided in the agreement inter se petitioners and respondent/claimant. Accordingly, there is non compliance of elicited mandate of Section 12 of the Act by Ld. Sole Arbitrator by not sending appropriately the disclosure in prescribed form specified in the Sixth Schedule read with Fifth Schedule of The Act to petitioners embodying existence of grounds giving rise to justifiable doubts as to independence or impartiality of arbitrator including arbitrator's relationship with the claimant/Counsel for claimant. Per contra above elicited disclosure at page no. 7 of arbitral proceedings record simply finds mention number of ongoing arbitrations to be 118 but does not find mention that whether any or all of these 118 ongoing arbitrations were with respect to the matters of respondent/claimant; which Ld. Sole Arbitrator was bound to disclose as per mandate of Section 12 of the Act.
46. Supreme Court in the case of M/s Dyna Technologies Pvt. Ltd. vs M/s Crompton Greaves Ltd.(supra) inter alia held that arbitral award is to be set aside on the grounds of insufficiency and inadequacy of reasoning being unintelligible and therefore unsustainable.
47. The facts and circumstances embodied in the precedent relied upon by Ld. Counsel for respondent are entirely different and distinguishable to the facts and circumstances of the case in hand, so they are of no help to respondent for dismissal of the present petition.
OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 35 of 3748. In view of law laid down in the cases of (i) TRF Ltd. (supra); (ii) Bharat Broadband Network Limited (supra); (iii) Perkins Eastman Architects DPC (supra); (iv) HRD Corporation (supra); (v) Proddatur Cable TV Digi Services (supra) and (vi) M/s Omcon Infrastructure Pvt. Ltd. (supra), no arbitrator can be unilaterally appointed by the respondent/ claimant and in this case at the outset vide letter dated 13/11/2019 respondent/claimant unilaterally appointed Ld. Sole Arbitrator without consent of petitioners. Petitioners were not given proper notice of the appointment of Ld. Sole Arbitrator before the appointment of Ld. Sole Arbitrator. Petitioners were not given proper notice of the arbitral proceedings at their correct and complete addresses given in agreement elicited above. Petitioners were unable to present their case before Ld. Sole Arbitrator. Even the mandatory disclosure in terms of Fifth and Seventh Schedule of The Act in the format of Sixth Schedule of The Act was not appropriately conveyed by Ld. Sole Arbitrator to the petitioners at their correct and complete addresses given in agreement elicited above. The impugned award is accordingly liable to be set aside under Section 34(2)(a)(iii); Section 34(2)(a)
(v) of The Act; Section 34 (2)(b) (ii) of The Act and also under Section 34 (2A) of The Act as the impugned award is vitiated by patent illegality appearing on the face of the award, as elicited in detail herein above. Reliance placed upon the cases of Associate Builders (supra) and Ssangyong Engineering & Construction Co. Ltd. (supra).
49. For the foregoing reasons, the petition is allowed and the impugned award is set aside.
OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 36 of 3750. The parties are left to bear their own costs.
51. File be consigned to record room.
Digitally signed by GURVINDER PAL GURVINDER SINGH
PAL SINGH Date: 2022.08.31
13:22:46 +0530
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
st
On 31 August, 2022. Patiala House Court, New Delhi.
(DK) OMP (Comm.) No. 69/2020 Shri Adesh Kumar Singh & Anr. vs Toyota Financial Services India Ltd. & Anr. Page 37 of 37