Madras High Court
M/S. Indus Ind Bank Ltd vs Mulchand B Jain on 13 February, 2013
Equivalent citations: AIRONLINE 2013 MAD 23
Bench: N. Paul Vasanthakumar, M.M.Sundresh
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 13.2.2013 CORAM THE HONOURABLE MR. JUSTICE N. PAUL VASANTHAKUMAR AND THE HONOURABLE MR. JUSTICE M.M.SUNDRESH ORIGINAL SIDE APPEAL NO.266 OF 2011 M/s. Indus Ind Bank Ltd., formerly known as Ashok Leyland Finance Ltd., rep. by Balavenkata Giri Executive Legal Sudarsan Building No.86, Chamiers Road Chennai 600 018. ... Appellant Vs. 1. Mulchand B Jain 2. S.K.Srinivasan 3. Shailesh Arvind Patel ... Respondents Original Side Appeals filed under Order XXXVI Rule 1 of Original Side Rules against the order and decree dated 23.6.2010 in O.P.No.428 of 2009. For Appellant : Mr.K.Moorthy For Respondent No.1 : Mr.Saikrishnan for Sai, Bharat & Ilan For Respondent No.2 : Mr.S.K.Srinivasan, Arbitrator ****** J U D G M E N T
(Judgment of the Court was delivered by M.M.Sundresh, J.) This appeal has been preferred challenging the judgment rendered in O.P.No.428 of 2009, dated 23.6.2010, by which the learned single Judge by exercising the power under Section 34(2)(iii) of the Arbitration and Conciliation Act, 1996 (for brevity "the Act") was pleased to set aside the award passed.
2. It is seen that there was a Hire Purchase Agreement said to have been entered into between the third respondent, who has been given up in this appeal and the appellant. According to the appellant, respondent No.1 stood as a guarantor. The Hire Purchase Agreement was said to have been cancelled by the appellant due to the non-compliance of the conditions regarding payment and thereafter, a notice under Section 21 of the Act was said to have been issued and served on the respondents 1 and 3. After the alleged compliance, the appellant initiated proceedings by appointing Arbitrator.
3. The learned Arbitrator sent notices to respondents 1 and 3. The third respondent after receipt of notice did not turn up. Insofar as the first respondent is concerned, notices got returned with endorsements in Gujarati language and also as "unserved". Thereafter, a paper publication was effected. Even after the paper publication, the first respondent did not turn up, and accordingly, an ex-parte award was passed. Challenging the same, the first respondent approached this Court invoking the power under Section 34 of the Act.
4. The learned single Judge called for the entire records. After going through the entire records, it was found that Section 21 of the Act has not been complied with, as there is absolutely no material to hold that a notice was served on the first respondent by the appellant to commence the arbitral proceedings. The learned single Judge also found that there are discrepancies in the admitted signatures of the first respondent with that of the signatures found in the Hire Purchase Agreement. Applying Section 21 along with Sections 34 (2)(iii) and 43 of the Act, the learned single Judge was pleased to allow the application filed under Section 34 of the Act by setting aside the award. Challenging the same, the present appeal has been filed by the appellant-Bank.
5. The learned counsel appearing for the appellant would contend that considering the facts and circumstances of the case, the matter will have to be remitted back to the Arbitrator. The learned counsel also submitted that the first respondent has received the award. Therefore, the order of the learned single Judge will have to be set aside. In support of his argument, he relied upon the following judgments:
i) MANU/MH/0544/2005 = 2005 (5) Bom CR 261 (DB) (Singhal and Brothers and Anr. Vs. Mahanagar Telephones Nigam Ltd., and Ors.)
ii) CDJ 2010 MHC 2638 = 2010(1) MLJ 504 (Harish Chand Gupta & Another vs. Ashok Leyland Finance, Chennai & Another).
6. Heard the learned counsel for the appellant, counsel for the first respondent and the learned Arbitrator (Respondent No.2).
7. As discussed above, the learned single Judge called for the entire records. In this connection, it is useful to refer the following factual findings given by the learned single Judge.
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6. A copy of the award is stated to have been communicated to the petitioner only after the counsel for the petitioner herein has written to the Arbitrator. It is true that in the newspaper publication effected by the first respondent herein, the address of the petitioner is shown as "Mr.Mulchand B.Jain, Tripuda Society, Kalikund, P.O. Mattipur, Tal: Dholka, Ahmedabad." While the claim of the petitioner is that he has shifted his residence to Mangaon much earlier. The proceedings of the Arbitrator dated 27.11.2004 sent to the petitioner to Ahmedabad address was returned with an endorsement 'left' as seen in page 75 of the file. Like that, the subsequent proceedings of the Arbitrator dated 11.5.2004 addressed to the Ahmedabad address of the petitioner was also returned with an endorsement 'left'. The letter of the Arbitrator dated 21.4.2004 which was returned is of course in Gujarati language. A reference to page 90 of the file shows that the first respondent terminated and initiated arbitration proceedings as per the letter dated 7.4.2004. It is no doubt true that the letter of termination and the appointment of Arbitrator was addressed to the third respondent and the petitioner to their Ahmedabad address, but there is no evidence to show that the first respondent has in fact served the said notice on the petitioner terminating the contract and initiating the arbitration proceedings by appointing the Arbitrator.
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12. In any event, in the absence of the basic requirement of communication of such termination of contract and appointment of Arbitrator having been made to the petitioner, as it is required under Section 21 of the Act, I am of the considered view that no useful purpose would be served by referring the matter to the Arbitrator again based on the difference in the signatures alone as, in my view, the basic illegality in violation of Section 21 of the Act cannot be rectified by the parties.
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8. Therefore, the learned single Judge clearly held that there is absolutely no material to hold that Section 21 of the Act has been complied with. A perusal of Section 21 of the Act would go to show that the proceedings would commence on the date on which a request for the dispute to be referred to arbitration, is received by the concerned respondent. Therefore, the commencement of arbitral proceedings is incumbent on the receipt of the notice to be sent in accordance with Section 21 of the Act, which in other words, if no notice is received by the concerned respondent, then there is no commencement of arbitral proceedings at all. The provision is very clear to the effect that it does not even say that it should be served, but it specifically says that such notice will have to be received. Section 21 will have to be read with Section 34 of the Act. Section 34 (2)(iii) provides for a ground for setting aside an award, in a case where the applicant was not given proper notice of the appointment of an Arbitrator or the arbitral proceedings. In this case, the factual position is that the first respondent was not given proper notice of an appointment of an Arbitrator. Here again, we have to consider the specific language used under Section 34(2)(iii) of the Act, which clearly mandates that the applicant will have to be given a proper notice. Therefore, proper notice is the notice, which has to be served and received by a person concerned. We are of the view that Section 34(2)(iii) has to be read with Section 21 of the Act. On a conjoint reading of Section 21 read with 34(2)(iii), we have no doubt that the arbitral proceedings have not been commenced insofar as the first respondent is concerned.
9. In view of such position, Section 43 of the Act will have to be pressed into service. Section 43 speaks about limitation. Section 43 (2) states that for the purpose of this Section and the Limitation Act, 1963 (36 of 1963), an arbitration shall be deemed to have commenced on the date referred in section 21.
10. In view of the said deeming provision, applying the facts of the case, we have no hesitation to hold that the arbitral proceedings are barred by limitation, as there is no commencement of proceedings in the eye of law. Therefore, we are of the view that we cannot remand the matter once again for arbitration, as the proceedings are hit by Section 43 of the Act.
11. Insofar as the judgments relied upon by the learned counsel for the appellant are concerned, in Harish Chand Gupta & Another vs. Ashok Leyland Finance, Chennai & Another case (cited supra), the issue was as to whether sufficient opportunities are given by the Arbitrator to the parties before passing the award. Similarly in Singhal and Brothers and Anr. Vs. Mahanagar Telephones Nigam Ltd., and Ors case (cited supra), the issue was on the application of Section 11 of the Act. Those judgments are not applicable to the case on hand.
12. Therefore, we do not find any reason to interfere with the order of the learned single Judge. Accordingly, this original side appeal is dismissed. No costs.
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