Madras High Court
M/S. Kotak Mahindra Bank Ltd vs Mr.Mahaveer Chand Dhoka on 24 August, 2012
Bench: P.Jyothimani, P.Devadass
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 24.08.2012 CORAM THE HON'BLE MR.JUSTICE P.JYOTHIMANI AND THE HON'BLE MR.JUSTICE P.DEVADASS O.S.A.No.140 of 2012 and M.P.No.1 of 2012 M/s. Kotak Mahindra Bank Ltd. Rep. by its Manager, Ceebross Centre, I Floor, No.39, Montieth Road, Egmore, Chennai-8. .. Appellant Vs. 1.Mr.Mahaveer Chand Dhoka 2.Mr.Gautham Chand Dhoka 3.Mr.Abhaya Kumar Dhoka 4.Mr.Mitthalal 5.Mr.Rikab Chand Dhoka 6.Mr.Dhanraj 7.Mr.P.Valliappan, Sole Arbitrator, 30 (Old No.21), Karpagambal Nagar, Mylapore, Chennai-4. .. Respondents Prayer: Appeal against the fair and decretal order passed by the learned Single Judge dated 15.02.2012 in O.P.No.678 of 2010. For Appellant : Mr.S.S.Rajesh For Respondents 1 to 6 : Mr.Santhannaraman J U D G M E N T
P.DEVADASS, J., The first respondent, namely, Kotak Mahendra Bank Ltd., Chennai, in O.P.No.678 of 2010, aggrieved by the Fair Order and Decretal Order of the learned Single Judge dated 15.02.2012 setting aside the Arbitrator's award dated 04.05.2010, has directed this Original Side Appeal.
2. Let us notice the circumstances that led to the filing of this intra-Court Appeal.
3. Appellant is a Banking Company. It gives various kinds of loans. One of it is Property Loan. It is also known as Home Finance. On 29.12.2005, Respondents 1 to 6 (petitioners 1 to 6 in O.P.No.678 of 2010) were sanctioned a property loan of Rs.51 Lakhs. There are two modes of charging the interest. One is, fixed interest. The other one is, adjustable interest rate (AIR). However, there is concession of 1%. Under the second mode, the interest will remain fixed for 12 quarters, namely, for 36 months. Thereafter, the revision will take place. The respondents 1 to 6/borrowers have opted to the second mode. The interest is at 9.5% p.a. (10.5% p.a. less 1%). The loan is to be repaid in 60 monthly installments at Rs.1,07,110/- each commencing from 1.2.2006 to 1.1.2011. It is inclusive of the interest amount. On 29.12.2005, a Loan Agreement embodying the above terms and conditions was executed. Accordingly, the borrowers started paying the installments.
4. After the 12 quarters, on 06.10.2008, the Bank sent letter informing the borrowers the revision of interest from 9.5% p.a. to 15.75% p.a. (16.75% p.a., less 1%) with effect from 01.10.2008. Accordingly, the installment due together with enhanced rate of interest was demanded. This was objected to by the borrowers on the ground that without any basis, authority and contrary to the Loan Agreement unilaterally the rate of interest has been increased.
5. However, the Bank had brushed aside this on the ground that it has the power of revision in the Loan Agreement and it had also done it in accordance with the statutory circulars of Reserve Bank of India (RBI).
6. Thus, the controversy between them is as to the increase of interest from 9.5% p.a. to 15.75% p.a. from 01.10.2008.
7. In pursuance of the Loan Agreement, to resolve this controversy, the Bank appointed Mr.P.Valliappan, Advocate (2nd Respondent in O.P.No.678 of 2010 and 7th Respondent in the O.S.A.) as sole Arbitrator.
8. Before the Arbitrator, disputing the increase in the rate of interest, the borrowers have filed their detailed claim petition. The Bank has filed its detailed counter justifying the increase in the rate of interest. The claimants have filed 12 documents as Ex.C.1 to Ex.C12. The Bank had filed 5 Master Circulars issued by RBI as to the charging of interest on advances as Ex.R1 to Ex.R5.
9. The Arbitrator among other issues had one specific issue as to the rate of interest payable by the claimants. The Arbitrator after referring to the Loan Agreement, the option exercised by the borrowers and the power of the Bank to revise the rate of interest, answered the issue that the borrowers cannot question the hike in the rate of interest, dismissed their claim petition and passed the award accordingly.
10. In the circumstances, the borrowers have filed O.P.No.678 of 2010 under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the award reiterating the very same contentions that they have raised before the Arbitrator as to the increase made in the rate of interest. The Bank sought to sustain the award referring to the provision for revision of rate of interest in the Loan Agreement and also the RBI Master Circulars.
11. On 15.02.2012, the learned Single Judge passed the impugned order, allowing the Original Petition, setting aside the award holding that the sudden increase in the rate of interest on the strength of some R.B.I. circulars, which were not produced before the Arbitrator is improper, thus, the award has been passed in violation of principles of natural justice.
12. As stated at the out set, aggrieved, the Bank has directed this Original Side Appeal.
13. The learned counsel for the Appellant-Bank assailed the learned Single Judge's Order as flawed both factually and legally. The learned counsel pointed out that the RBI circulars, enabling the Bank to increase the rate of interest has been actually marked before the Arbitrator as Ex.R1 to Ex.R5 and that also forms part of the list of documents appended to the award. So, the learned Single Judge is not correct in observing that those circulars were not produced.
14. The learned counsel for the Bank also contended that the Loan Agreement providing for hiking the rate of interest has been accepted by the borrowers by their signing the same. Upon consideration of the materials placed before him, the Arbitrator had rendered his factual finding as to the making of increase in the rate of interest on merits. Under Section 34 of the Arbitration and Conciliation Act, 1996, this Court should not act as an Appellate Forum reappraising the evidence adduced before the Arbitrator. An award can be set aside only on the grounds provided in Section 34 of the Act and not otherwise. Merely because another view is possible nor the Arbitrator had reasoned his award in an improper way or the documents produced before him were not mentioned in the award, an award cannot be set aside as it would make the Court an Appellate Forum, which is impermissible in law.
15. In support of his submissions, the learned counsel for the Appellant relied on the following decisions:
(i) BOC INDIA LTD. Vs. BHAGWATI OXYGEN LTD. [2007 (9) SCC 503].
(ii) G.RAMACHANDRA REDDY AND Co. Vs. UNION OF INDIA AND ANOTHER [2009 (6) SCC 414].
(iii) RAVINDRA AND ASSOCIATES Vs. UNION OF INDIA [2010 (1) SCC 80].
(iv) J.G.ENGINEERS (P) LTD. Vs. UNION OF INDIA AND ANOTHER [2011 (5) SCC 758].
(v) CHAIRMAN, GUINDY INDUSTRIAL ESTATE INFRASTRCTURE UPGRADATION Co., CHENNAI Vs. GURUMURTHY ENGINEERING ENTERPRISES, CIVIL ENGINEERING CONTRACTORS, CHENNAI AND OTHERS [2012 (2) MLJ 702].
16. The learned counsel for the Appellant also contended that the learned Single Judge reasoned his Judgment on the ground that the Arbitrator's award is bad because of non-observance of principles of natural justice. It is on the premise of non-production of RBI Circulars. But, the award itself contains those circulars. Violation of principles of natural justice has not been enumerated as a ground in Section 34 of the Arbitration and Conciliation Act, 1996.
17. The learned counsel for the Appellant also contended that the Banks have to run their business including their lending rates in accordance with the circulars issued by RBI from time to time. Both the lenders and the borrowers are bound by it. In the instant case, as regards home finance, the RBI issued circulars giving freedom to the Bank to revise the rate of interest. Further, in the Loan Agreement, the borrowers have also consented to increase the rate of interest. At any rate, the rate of interest hiked by the Bank is not usurious and excessive. When the interest is charged in accordance with RBI circulars, the transaction cannot be reopened on the ground that the rate of interest is excessive. In this respect, the learned counsel cited STATE BANK OF INDIA Vs. YASANGI VENKATESWARA RAO [AIR 1999 SC 896].
18. On the other hand, the learned counsel for the borrowers would contend that without any power; basis; and transparency, unilaterally the Bank has hiked the rate of interest. The Bank did not show the particular RBI circular specifying the rate of interest, in pursuance of which, the Bank has hiked the interest rate. The learned counsel took exception to the way in which the Arbitrator had dealt with Issue No.C dealing with rate of interest payable by the borrowers. The learned counsel pointed out that nowhere in the discussion for the said issue the Arbitrator had mentioned the RBI circular specifying the rate of interest, thus, the award is opposed to public policy. In this connection, the learned counsel also cited CENTRAL BANK OF INDIA Vs. RAVINDRA AND OTHERS [AIR 2001 SCC 3095].
19. We have given our thoughtful consideration to the submissions of either counsel. Perused the entire materials on record, the award of the Arbitrator and the order of the learned Single Judge and went through the various decisions cited before us.
20. The grievance of the borrowers is to the seal of approval given by the Arbitrator for the unilateral increase of interest made by the Bank without any basis from 9.5% p.a. to 15.75% p.a. On that account, they sought for setting aside the award by recourse to Section 34 of the Arbitration and Conciliation Act, 1996.
21. It is useful here to see the very Section 34, the ambit, purport and scope of power of a Court in cancelling an award as envisaged under Section 34 of the Act. Under the Old Arbitration Act, 1940 setting aside the award has been provided in Section 30 of the Act. In the present Arbitration and Conciliation Act, 1996, in Chapter VII, in Section 34, the remedy of setting aside the award under certain circumstances is provided.
22. Section 34 runs as under:-
Section 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 subsection (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 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 matter 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.- Without prejudice to the generality of sub-clause (ii) of clause (b), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced of affected by fraud or corruption or was in violation of section 75 or section 81.
(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.
(4) On receipt of an application under sub-section (1), the court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.
23. In J.G.ENGINEERS (P) LTD. Vs. UNION OF INDIA [2011 (5) SCC 758], explaining the scope and power of a Court under Section 34 of the Arbitration and Conciliation Act, 1996, in setting aside an arbitral award, the Hon'ble Apex Court held as under:-
10. A civil court examining the validity of an arbitral award under Section 34 of the Act exercises supervisory and not appellate jurisdiction over the awards of an Arbitral Tribunal. A court can set aside an arbitral award, only if any of the grounds mentioned in Sections 34(2)(a)(i) to (v) or Sections 34(2)(b)(i) and (ii), or Section 28(1)(a) or 28(3) read with Section 34(2)(b)(ii) of the Act, are made out. An award adjudicating claims which are excepted matters excluded from the scope of arbitration, would violate Sections 34(2)(a)(iv) and 34(2)(b) of the Act. Making an award allowing or granting a claim, contrary to any provision of the contract, would violate Section 34(2)(b)(ii) read with Section 28(3) of the Act.
24. In McDERMOT INTERNATIONAL INC. Vs. BURN STANDARD CO. LTD. [2006 (11) SCC 181], explaining the role of the Court, the Hon'ble Apex Court held as under:-
52. The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it.
25. In M.P.HOUSING BOARD Vs. PROGRESSIVE WRITERS AND PUBLISHERS [2009 (5) MLJ 145], the Hon'ble Apex Court held as under:-
18. It is fairly well settled and needs no restatement that the award of the arbitrator is ordinarily final and the courts hearing applications under Section 30 of the Act do not exercise any appellate jurisdiction. Reappraisal of evidence by the court is impermissible. .......
26. In UNION OF INDIA Vs. BUNGO STEEL FURNITURE (P) LTD. [1967 (1) SCR 324, the Hon'ble Apex Court held that the Court had no jurisdiction to investigate into the merits of the case or to examine the documentary and oral evidence in the record for the purposes of finding out whether or not the arbitrator has committed an error of law. The Court as a matter of fact, cannot substitute its own evaluation and come to the conclusion that the Arbitrator had acted contrary to the bargain between the parties.
27. In U.P. STATE ELECTRICITY BOARD Vs. SEARSOLE CHEMICALS LTD. [2001 (3) SCC 397], the Hon'ble Apex Court held as under:-
4. ..... When the arbitrators have applied their mind to the pleadings, the evidence adduced before them and the terms of the contract, we do not think, it is within our scope to reappraise the matter as if this were an appeal, and it is clear that where two views are possible -- in this case there is no such scope -- the view taken by the arbitrators would prevail.
28. In SUDHARSAN TRADING CO. Vs. GOVT. OF KERALA AND ANOTHER [1989 (2) SCC 38], the Hon'ble Apex Court held that reasonableness of the reasons given by the Arbitrator, cannot be challenged and held as under:-
29. ...... Furthermore, in any event, reasonableness of the reasons given by the arbitrator, cannot be challenged. Appraisement of evidence by the arbitrator is never a matter which the Court questions and considers. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of the evidence. The arbitrator is the sole Judge of the quality as well as the quantity of evidence and it will not be for the Court to take upon itself the task of being a judge on the evidence before the arbitrator.
29. In MUNICIPAL CORPORATION OF DELHI Vs. JAGAN NATH ASHOK KUMAR AND ANOTHER [1987 (4) SCC 497], the Hon'ble Apex Court held that the Court cannot substitute its view for the view of the Arbitrator and set aside the award and held as under:-
It may be possible that on the same evidence the court might have arrived at a different conclusion than the one arrived at by the arbitrator but that by itself is no ground in our view for setting aside the award of an arbitrator.
30. In TRUSTEES OF THE PORT OF MADRAS Vs. ENGG. CONSTRUCTION CORPN. LTD. [1995 (5) SCC 531], it was held that the award can be set aside when there is an error of law apparent on the face of the award and not an error of fact. The Court also held that an error of law on the face of the award means an error of law which can be discovered from the award itself or from a document actually incorporated therein.
31. In BOC INDIA LTD. Vs. BHAGWATI OXYGEN LTD. [2007 (9) SCC 503], the Hon'ble Apex Court held that when the Arbitrator taken a plausible view on interpretation of the contract, a Court cannot set aside an award under Section 34 of the Arbitration and Conciliation Act, 1996 on the ground of misconduct of arbitral proceedings.
32. In G.RAMACHANDRA REDDY AND Co. Vs. UNION OF INDIA AND ANOTHER [2009 (6) SCC 414], it was held that merely because the Court could take a different view, the award cannot be set aside.
33. In RAVINDRA AND ASSOCIATES Vs. UNION OF INDIA [2010 (1) SCC 80], the Hon'ble Apex Court held that when the finding of the fact is recorded by the Arbitrator with regard to a disputed fact, the Court cannot interfere into such factual findings.
34. In ONGC LTD. Vs. SAW PIPES LTD. [2003 (5) SCC 705], it was held that a Court can set aside an award under Section 34(2)(b)(ii) of the Act, as being in conflict with the public policy of India, if it is (a) contrary to the fundamental policy of Indian law; or (b) contrary to the interests of India; or (c) contrary to justice or morality; or (d) patently illegal. The Court also held that to hold an award to be opposed to public policy, the patent illegality should go to the very root of the matter and not a trivial illegality and an award could be set aside if it is so unfair and unreasonable that it shocks the conscience of the court, as then it would be opposed to public policy.
35. In CHAIRMAN, GUINDY INDUSTRIAL ESTATE INFRASTRCTURE UPGRADATION Co., CHENNAI Vs. GURUMURTHY ENGINEERING ENTERPRISES, CIVIL ENGINEERING CONTRACTORS, CHENNAI [2012 (2) MLJ 702], one of us (P.JYOTHIMANI, J.,) had elaborately gone into the ambit and power of Court in setting aside the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, also referred to Section 30 of the previous Act of 1940, analysed the various grounds incorporated in Section 34 of the present Act made available to set aside an arbitral award, referred to the various decisions rendered on the point and summarised the position of law as under:-
11. .........it is relevant to note that the jurisdiction of this Court while exercising its power under Section 34 of the Act is limited and it cannot be exercised for the purpose of re-appreciation of evidence or factual matrix, for, the Arbitrator is the sole Judge chosen by the parties in respect of the appreciation of evidence, either regarding quantity or quality. Simply because on appreciation of evidence two views are possible, the Court cannot substitute its view for the view of the Arbitrators. This celebrated concept is uniformly followed by the Apex Court and all other Courts in this country on the conception that the arbitration is the creation of the parties by mutual consent to settle their dispute outside the Court, but at the same time the law confers a legal status to such award passed by the Arbitrators. Under Section 34 of the Act, the power of the Court to set aside the award is limited. ....
17. Therefore, it is well settled that the power of this Court in entering into the factual matrix, especially in cases of appreciation of evidence by the Arbitrator, is not well within the realm of this Court under Section 34 of the Act. .......
36. Keeping the provisions of Section 34 of the Act, the principles laid down in the various decisions seen above in our mind, now let us proceed to assess the view of the learned Single Judge with regard to the award of the Arbitrator involved in this appeal.
37. The Appellant is a Banking Company. It is also a Financial Institution. Banking business also includes lending of finance for various projects with varying rate of interest. It has to do its business in accordance with the Banking Regulation Act, 1949 and also the circulars issued by RBI from time to time.
38. As already stated at the out set, on 29.12.2005, the borrowers were granted an housing finance of Rs.51 Lakhs. The Loan Agreement was executed on 29.12.2005 embodying the terms and conditions of the loan, repayment schedule, rate of interest, the revision thereof and when the revision has to take place and its modalities. In the Loan Agreement, the borrowers have opted to adjustable interest rate(AIR). A concession of 1% also has been provided. The rate of interest will be static and unchanged, for 12 quarters, namely, 36 months, precisely, 36 monthly installments. At the start the interest was at 9.5% pa. (10.5% - 1%). The Bank has got the power to revise the rate of interest after the 12 quarters, namely, at the 37th installment.
39. The terms and conditions as to the rate of interest and the adjustable interest rate are detailed in 'Schedule C' to the Loan Agreement. In the said Schedule, it is mentioned that the loan has to be repaid in 60 monthly installments at Rs.1,07,110/- each, commencing from 01.02.2006 to 01.01.2011. In the same Schedule, it has also been mentioned that the Bank may vary the RPLR (Retail Prime Lending Rate) from time to time in such a manner as the Bank deem fit in its sole discretion.
40. In the Loan Agreement, clause 2.5 (d) providing for revision of rate of interest runs as under:-
Notwithstanding anything herein contained, the Bank shall have the right, at any time or from time to time, to review and reschedule the EMIs/Monthly Installments, tenure or the Loan amount in such manner and to such extent as the Bank may in its sole discretion decide on account of changes necessitated because of any part payment made by the Borrower or changes in the interest rate (if the option of Adjustable Rate of Interest is availed of by the Borrower) or conversion by the Borrower from one interest to the other. In such event/s the Borrower shall repay the Loan or the outstanding amount thereof as per the revised Schedules as may be determined by the Bank in its sole discretion and intimated to the Borrower in writing. Where such alteration or reschedulement involves variation in
i) the date for payment of EMIs/Monthly Installments; or
ii) the amount of interest, principal of EMIs/Monthly installments; or
iii) the numbers thereof; or
iv) the EMI/Monthly Installments is not adequate to cover interest payments in full; or
v) the EMI/Monthly Installment results in the term of the Loan exceeding the retirement age of the Borrower(s) as applicable.
vi) for any other reason EMI/Monthly Installment attracts change.
41. Signifying their acceptance to the said terms and conditions, the borrowers have also signed in the Loan Agreement. In their Lawyers' notice dated 20.01.2009, they have also accepted the Loan Agreement and also they having opted to the adjustable interest rate as provided in 'Schedule C' to the Loan Agreement.
42. It is not in dispute that the borrowers have paid without any demur, the monthly installments up to 12 quarters. On 06.10.2008, the Bank informed them the change in the RPLR for AIR for home finance granted to them, which runs as under:-
We would like to advise you that the Retail Prime Lending Rate of the Bank has been revised from 10.5% to 16.75% with effect from 01-OCT-08. Under the terms of your loan, this change is applicable to your loan, from 01-OCT-08 and the Adjustable Interest Rate applicable to your Loan for EMI Stage from this date stands revised at 15.75%.
43. It is seen that the revision of rate of interest was in accordance with the provisions in the Loan Agreement. It was also duly informed to the borrowers. This aspect has been adverted to by the Arbitrator in his award. The borrowers did not say that the interest is usurious nor excessive. They say that the increase is without any basis, unilateral, so, not binding on them.
44. But, the terms and conditions of the Loan Agreement, particularly as to the rate of interest and the reason thereon stares at them. So, they cannot argue as against the said terms and conditions of the Loan Agreement, to which they have consented to. It is purely a matter of contractual terms and in pursuance of that only the hike in the rate of interest has been made by the Bank. This has been referred to by the Arbitrator in his award.
45. The appellant is a Banking Company. It has to run his Banking business strictly in accordance with the provisions of the Banking Regulation Act, 1949. The RBI is one of the watchdogs of the finance and economy of the nation. It controls and regulates the credit policy of the country by issuing circulars, directives also as to the charging of interest on the various advances granted by the Banks and Financial Institutions. They cannot defy it. So, not only the lenders but, also the Borrowers are bound by RBI's directives and circulars [see STATE BANK OF INDA Vs. YASANGI VENKATESWARA RAO (supra) and CENTRAL BANK OF INDIA Vs. RAVINDRA AND OTHERS (supra)].
46. Before the Arbitrator, the Bank has produced 5 Master Circulars issued by RBI on charging of interest on various advances. Those Circulars are dated 01.07.2005, 01.07.2006, 02.07.2007, 01.07.2008 and 01.07.2009. In fact, they were marked as Ex.R1 to Ex.R5 before the Arbitrator. The Loan Agreement between the Bank and the borrowers is dated 29.12.2005. The said Ex.R1 to Ex.R5 covers the period of Loan Agreement and the rate of interest revised by the Bank.
47. In these circulars, the Banks were given freedom to determine the rate of interest without reference to BPLR (Benchmark Prime Lending Rate) regardless of size in respect of 8 categories of loans. One of them is housing finance. It relates to property loans. This is a common feature. Now, immediately, we may refer to the observation of the learned Single Judge made in his impugned Judgment. The learned Single Judge has found fault with the Appellant/Bank in not producing the RBI Circulars either before the Arbitrator or before the Court. Ex facie it is contrary to record as they were marked as Ex.R1 to Ex.R5 before the Arbitrator and they form part of the award and that was also produced before the learned Single Judge.
48. It has been pointed out by the learned counsel for the Appellant that the RBI, the Apex controlling Bank in the Banking Industry in India, by its statutory circulars enabled the Bank to freely determine the rate of interest without reference to the BPLR to certain categories of advances, one of which is home finance.
49. When we peruse the RBI Circulars, namely, Ex.R1 to Ex.R5 appended to the award, the arguments of the learned counsel for the Appellant has to be sustained.
50. At any rate, the borrowers did not say that the rate of interest is usurious nor excessive. Their only grievance is that the hike in the rate of interest is made without any basis. But, we have elaborately seen that there is basis for the Bank to hike the rate of interest.
51. The learned counsel for the borrowers would found fault with the way in which the Arbitrator has written his award, more particularly, 'Issue No.C' dealing with the rate of interest payable by the borrowers, as he has not specified the particular RBI circular and the rate of interest provided therein for home finance.
52. In making this submission, the learned counsel seems to have missed the core of the matter before the Arbitrator, before the learned Single Judge and also before us. It is not the case of the Bank that they have hiked the rate of interest from 9.5% p.a. to 15.75% p.a. (16.75% p.a. - 1 %) as provided in a circular of the RBI. Their submission is that so far as certain categories of advances are concerned, which includes home finance also, in its circulars, the RBI has mentioned that the Bank is free to determine the rate of interest without reference to the BPLR, regardless of the size of the loan. For that purpose, the Bank had referred to RBI circulars. This is what exactly stated in those circulars also. That apart, there is provision in the Loan Agreement for revising the rate of interest at the 37th monthly installment.
53. The grievance of the borrowers is that in the award the Arbitrator has not mentioned the particular circular, that is to say that the Arbitrator has not properly drawn up the award nor properly appreciated the evidence adduced before him. It relates to the merit of the matter. In other words, the appraisal of the evidence produced before the Arbitrator. As per the decisions seen already, it is out side the scope of the power of this Court. This Court cannot act as an Appellate Court, nor re-appreciate the evidence adduced before the Arbitrator, nor substitutes its own view. Further, there is no error apparent on the face of the award. Further, under Section 34 of the Act, the Court cannot weight the reasonableness of the reasons given in the award.
54. The learned Single Judge in his impugned Order had observed that as the RBI circulars were not produced before the Arbitrator, the award has been passed in violation of the principles of natural justice. We have already seen that the learned Single Judge is factually error in saying so. Further, in the facts and circumstances, no question of violation of principles of natural justice arises. The view of the learned Single Judge will not come under Section 34 (2) (b) (ii) of the Arbitration and Conciliation Act,1996 that the arbitral award is in conflict with the public policy of India.
55. As held in G.RAMACHANDRA REDDY AND Co. Vs. UNION OF INDIA AND ANOTHER [2009 (6) SCC 414], the jurisdiction of the Court to interfere with the award of an Arbitrator is limited. The word only employed in Section 34 (2) of the Arbitration and Conciliation Act, 1996 signifies that the award could be set aside only on the grounds provided in the said Section. We have already seen those grounds. None of the grounds adumbrated in the said Section is available to the borrowers in this case.
56. Thus, looking from any angle, no ground as provided in Section 34 of the Act has been demonstrated by the borrowers to set aside the award. Thus, the view of the learned Single Judge as regards the award is incorrect. It calls for our interference. So, the Order of the learned Single Judge is required to be unseated.
57. In the result, this Original Side Appeal is allowed. The Fair Order and Decretal Order of the learned Single Judge dated 15.02.2012 passed in O.P.No.678 of 2010 are set aside. The award of the Arbitrator dated 04.05.2010 is upheld. On payment of the dues as per the revised rate of interest up to date, deducting the amounts already paid, the Appellant shall return the Original Documents to Respondents 1 to 6. In the facts and circumstances, the parties are left to bear their own costs. Consequently, M.P.No.1 of 2012 is closed.
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