Delhi District Court
Gulshan Kumar Grover vs Shriram Transport Finance Company ... on 3 October, 2018
IN THE COURT OF SH. M.P. SINGH, ADJ03 (CENTRAL
DISTRICT), TIS HAZARI COURTS, DELHI
Arbt. No. 93/16
New Arbt. No. 585305/16
In the matter:
1. Gulshan Kumar Grover
S/o Sh. Sona Ram
Presently at H. No. 143, MAX Complex
Tehsil & Distt., Mohali, (Punjab)
2. Rajinder Grover
S/o Sh. Sona Ram
R/o 56/1, Ward No. 6, B.N.1, Nalagarh,
Tehsil Nalagarh, Distt. Solan, H.P. ...Petitioners
Versus
Shriram Transport Finance Company Limited
Mookarmbika Complex, 3rd Floor No. 4,
Lady Desika Road, Mylapore, Chennai04 .... Respondent
Petition instituted on - 19.12.2016
Judgment pronounced on - 03.10.2018
JUDGMENT
1. This is a petition under section 34, Arbitration and Conciliation Act, 1996.
2. Facts are as follows: On 31.07.2008 Gulshan Kumar Grover (petitioner no.1) availed of a vehicle loan of Rs. 10.98 lacs from GE Capital Transportation Financial Services Ltd. (for short 'GECTFSL') vide loan agreement no. TNCHAR CVZ 00347548. Rajender Grover (petitioner no.2) was the co Arbt. No. 93/16 New Arbt. No. 585305/16 Page 1 of 11 borrower /guarantor of this loan. Loan documents would reflect that one Jyoti Prakash was another coborrower /guarantor for this loan. The loan was repayable in 47 Equated Monthly Installments (EMIs) of Rs. 30,465/ each. The loan agreement contained an arbitration clause. As per the petitioners, petitioner no.1 had made some part payments towards the loan to GECTFSL.
3. In terms of Order dt. 03.09.2009 of Hon'ble Delhi High Court GECTFSL amalgamated to M/s GE Capital Services India (for short 'GECSI'). Thereafter, GECSI by way of assignment agreement dt. 22.12.2009 transferred petitioners' debt to respondent company.
4. Respondent dispatched a notice dt. 17.09.2015 to the petitioners and to Jyoti Prakash asking them to pay the balance amount within seven days, failing which arbitration proceedings would be initiated. Respondent then vide its letter dt. 27.10.2015 dispatched to the petitioners and to Jyoti Prakash informed them about invoking the arbitration clause and also visàvis appointment of arbitrator. Vide award dt. 30.07.2016 Ld. Arbitrator held in respondent's favour and against the two petitioners and Jyoti Prakash.
5. Petitioners allege that GECTFSL had obtained their signatures on blank papers on the pretext that they were required for sanctioning the loan. It is claimed that initially petitioner no.1 Gulshan Kumar Grover used to pay EMIs to Arbt. No. 93/16 New Arbt. No. 585305/16 Page 2 of 11 GECTFSL and the latter thereafter of its own accord stopped collecting payments from him. And to know the reasons thereof, Gulshan Kumar Grover is stated to have repeatedly visited GECTFSL's office at Baddi, but their officials always told him that there were some internal company problems and that presently they would not collect the payments from him. GECTFSL's officials at Baddi also told him that very soon their company problems would stand resolved and they would then start to collect the payments from him. Suddenly, in second week of February 2011 a person claiming himself to be respondent's representative came to Gulshan Kumar Grover's house and demanded payment of due installments qua the loan. The said representative orally informed Gulshan Kumar Grover that respondent company had purchased GECTFSL together with its assets and liabilities. Despite Gulshan Kumar Grover's repeated requests, the said representative gave no documents to show as to how respondent had purchased GECTFSL together with its assets and liabilities. Petitioner no.1 Gulshan Kumar Grover then approached GECTFSL office at Baddi, but he got no satisfactory reply.
6. In the last week of February 2011 a representative of respondent visited the house of petitioner no.1. Under his threats to seize the vehicle, petitioner no.1 Gulshan Kumar Grover gave him a cheque of Rs. 91,395/ bearing no. 419339 dt. 28.02.2011 drawn on State Bank of Patiala, Nalagarh. On 01.05.2011 the said respondent's representative again collected Arbt. No. 93/16 New Arbt. No. 585305/16 Page 3 of 11 a cheque of Rs. 60,930/ bearing no. 419340 dt. 05.05.2011 drawn on State Bank of Patiala, Nalagarh. The said representative never again turned up to collect the payments. Petitioner no.1 made his best efforts to contact GECTFSL, but to no avail.
7. Petitioners allege that GECTFSL never informed them that it had amalgamated into GECSI. Neither of these two companies ever intimated the petitioners that the loan agreement stood assigned to the respondent. They aver that there exists no privity of contract between them and the respondent as they had not taken the loan from the latter. They state that they never received any notice for terminating/revoking the loan agreement. They deny receiving respondent's notice dt. 17.09.2015. It is averred that in January 2015 petitioner no.1 had left Nalagarh and shifted to Mohali (Punjab) and that petitioner no. 2, a heart and diabetic patient for the last about four years, had been mostly staying at Ludhiana for his medical treatments. They assert that they had no knowledge of the arbitration proceedings and that no notice for arbitration was ever served upon them. It is claimed that on 12.11.2016 petitioner no.2 Rajender Grover for the first time came to know from his covillager Jyoti Prakash that an ex parte award had been passed against him. He then got in touch with his counsel and obtained certified copies of the arbitration proceedings. Ld. Arbitrator delivered the certified copies of the entire proceedings to his counsel on 02.12.2016 and thereafter Arbt. No. 93/16 New Arbt. No. 585305/16 Page 4 of 11 petitioner no.2 informed petitioner no.1 about the award.
8. Petitioners seek to challenge the award on the following grounds: (a) That they had not been properly served and were not afforded proper opportunity to contest the claim; (b) That the award was passed on the basis of fabricated and manipulated documents; (c) That arbitrator failed to appreciate the fact that GECTFSL never intimated them in writing that they had amalgamated into GECSI. Further, neither GECSI nor GECTFSL intimated them that they had assigned the loan to the respondent. Copy of the loan assignment agreement was not given to them; (d) Petitioner no.1 had taken loan from GECTFSL and not from the respondent; (e) Petitioners had never entered into arbitration agreement with respondent company at any point of time; (f) Ld. Arbitrator did not follow the arbitration procedure as prescribed under Arbitration and Conciliation Act, 1996; (g) Ld. Arbitrator failed to appreciate the fact that the claim was time barred; (h) Ld. Arbitrator failed to notice that petitioner no.1 had been making regular payments of installments to GECTFSL and the latter thereafter of its own accord stopped taking payments from him; (i) No notice for termination of loan agreement was served upon them; (j) Ld. Arbitrator ignored the fact that Adhir Kumar was not the authorised representative of the respondent and there was neither any Resolution of Board of Directors in his favour; (k) Award of interest of 18 % per annum and the cost of Rs. 35,000/ are excessive; (l) Petitioners have no personal knowledge as to Arbt. No. 93/16 New Arbt. No. 585305/16 Page 5 of 11 how Jyoti Prakash was made a guarantor in the loan agreement.
9. Respondent filed its reply. It stated that there was no valid reason for petitioners' nonappearance before Ld. Arbitrator even after publication in newspapers and they rightly suffered the proceedings ex parte on 03.06.2016; that the petitioners did not appear on 12.01.2016 despite service of notice; that again on 09.03.2016 they did not appear; that given this, they were ordered to served through publication in the dailies Amar Ujala and The Tribune having circulation in Himachal Pradesh; that petitioners were given ample opportunities to appear before Ld. Arbitrator; that admittedly petitioners are in arrears of loan and did not pay the entire loan amount to GECTFSL; that petitioners made no regular payment till 01.12.2010; that respondent acquired the rights under assignment and thus it is thus entitled to make the recoveries; that petitioners were well informed about the assignment of loan by letter dt. 20.04.2010; that all the notices, including the notice dt. 17.09.2015 had been duly served upon the petitioners; that present action is merely a device to delay the proceedings. Denying other averments, respondent seeks dismissal of the petition.
10. Arguments heard. Record perused.
11. Rights under a loan agreement are assignable by its very nature. Reference in this regard can be had to the decision Arbt. No. 93/16 New Arbt. No. 585305/16 Page 6 of 11 reported as ICICI Bank Limited vs. Official Liquidator of APS Star Industries Limited and Others, (2010) 10 SCC 1.
Thus, there is nothing wrong or illegal in assignment by GECTFSL and/or GECSI of petitioners' debt to the respondent.
12. The next question is whether subsequent to assignment of the loan, the respondent would also get the right to enforce the arbitration clause that was contained in the loan agreement between the petitioners and GECTFSL and also whether Arbitration Agreement itself is assignable. Clauses 2 (a) and 13
(a) of the Loan Agreement contained provisions for assignment of the loan. The extant law is that if a contract is assignable, the arbitration clause will follow the assignment of the contract. Reference in this regard can be had to the decisions reported as Bestech India Private Ltd. vs. MGF Developments Ltd. & Ors., (2009) 161 DLT 282 and DLF Power Limited vs. Manglore Refinery & Petrochemicals Limited, 2016 SCC OnLine Bom 5069. In Chloro Controls India Private Limited vs. Severn Trent Water Purification Inc. & Others, (2013) 1 SCC 641 the Apex Court while discussing the issue whether even nonsignatories to Arbitration Agreement can be referred to arbitration observed:
70. Normally, arbitration takes place between the persons who have, from the outset, been parties to both the arbitration agreement as well as the substantive contract underlining that agreement. But, it does occasionally happen that the claim is made against or by someone who is not originally named as a party. These may create some difficult situations, but certainly, they are not absolute obstructions to law / the arbitration Arbt. No. 93/16 New Arbt. No. 585305/16 Page 7 of 11 agreement. Arbitration, thus, could be possible between a signatory to an arbitration agreement and a third party. Of course, heavy onus lies on that party to show that, in fact and in law, it is claiming 'through' or 'under' the signatory party as contemplated under Section 45 of the 1996 Act. Just to deal with such situations illustratively, reference can be made to the following examples in Law and Practice of Commercial Arbitration in England (Second Edn.) by Sir Michael J. Mustill:
"1. The claimant was in reality always a party to the contract, although not named in it.
2. The claimant has succeeded by operation of law to the rights of the named party.
3. The claimant has become a part to the contract in substitution for the named party by virtue of a statutory or consensual novation.
4. The original party has assigned to the claimant either the underlying contract, together with the agreement to arbitrate which it incorporates, or the benefit of a claim which has already come into existence."
102. Joinder of nonsignatory parties to arbitration is not unknown to the arbitration jurisprudence. Even the ICCA's Guide to the Interpretation of the 1958 New York Convention also provides for such situation, stating that when the question arises as to whether binding a nonsignatory to an arbitration agreement could be read as being in conflict with the requirement of written agreement under Article I of the Convention, the most compelling answer is "no" and the same is supported by a number of reasons.
103. Various legal basis may be applied to bind a non signatory to an arbitration agreement.
103.1 The first theory is that of implied consent, third party beneficiaries, guarantors, assignment and other transfer mechanisms of contractual rights. This theory relies on the discernible intentions of the parties and, to a large extent, on good faith principle. They apply to private as well as public legal entities. The second theory includes the legal doctrines of agent principal relations, apparent authority, piercing of veil (also called the "alter ego"), joint venture relations, succession and estoppel. They do not rely on the parties' intention but rather on the force of the applicable law.
Arbt. No. 93/16 New Arbt. No. 585305/16 Page 8 of 1113. Having covered the ground thus, we now come to the next aspect. An arbitral award cannot be challenged on any ground other than those set out in section 34(2), Arbitration and Conciliation Act, 1996. Petitioners were certainly not under any kind of incapacity. It is also none of petitioners' case that the agreement containing arbitration clause was not valid. It, however, contended that there was no justification for initiating the arbitration as petitioner no.1 had been making payments to GECTFSL and the latter of its own accord stopped taking the payments. This is no ground set aside the arbitral award. Before commencing with the arbitration, notices had been issued to the petitioners. The notices were issued to the correct available addresses of the petitioners. Notices to the two petitioners returned unserved with report of 'unclaimed'. The record would indicate that Jyoti Prakash (other co borrower/guarantor) was duly served and he had in fact appeared before Ld. Arbitrator in the arbitration proceedings. Petitioners argue that they shifted to some other addresses and consequently they had no knowledge of the arbitration proceedings. There is nothing on record to substantiate this averment. That apart, this can be no ground to set aside the arbitral award. It is none of respondent's fault that the petitioners had changed their addresses and shifted to new ones. Petitioners had also been served by the mode of publication in newspapers. Under the given circumstances, when Jyoti Prakash (other coborrower/guarantor) had been Arbt. No. 93/16 New Arbt. No. 585305/16 Page 9 of 11 served with the notice of arbitration and he had actually appeared before Ld. Arbitrator in the arbitration proceedings, it is difficult to accept that the petitioners had no knowledge of the arbitration proceedings. This is more so, when Jyoti Prakash, as per the petitioners themselves, is their covillager. It is also none of petitioners' case that the arbitral award dealt with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contained decisions on matters beyond the scope of submission to arbitration. It is also none of petitioners' case that they are aggrieved by the composition of the Arbitral Tribunal. In short, none of the grounds contemplated under section 34 (2) (a), Arbitration and Conciliation Act, 1996 assist the petitioners. Further, it is not shown that the arbitral award in question was against the public policy of India or that the subject matter of the dispute was not capable of settlement by arbitration. Thus, the two grounds under section 34 (2) (b), Arbitration and Conciliation Act, 1996 also do not assist the petitioner.
14. Petitioners vehemently argued that Ld. Arbitrator had wrongly set them ex parte in the arbitration proceedings; that the claim was time barred; that respondent's authorised representative had no resolution of Board of Directors in his favour; that award of interest of 18 % per annum and the cost of Rs. 35,000/ are excessive; that Ld. Arbitrator did not follow the procedure under Arbitration and Conciliation Act; and that documents relied upon by respondent were manipulated and Arbt. No. 93/16 New Arbt. No. 585305/16 Page 10 of 11 fabricated. Suffice to note that this Court is not sitting in appeal over the award of Ld. Arbitrator. In view of the mandate of section 34, Arbitration and Conciliation Act, 1996 the grounds of court interference in an arbitral award are very limited. That apart, it is not explained or pointed out as to how the arbitral claim was time barred and this Court is not sitting in first appeal over the award of Ld. Arbitrator. The grounds of interference in an arbitral award in terms of section 34, Arbitration and Conciliation Act are very limited. It is also difficult to comprehend as to how the documents relied upon by the respondent were fabricated and manipulated. It is also difficult to comprehend as to which procedure did Ld. Arbitrator not follow. Suffice to note that on these aspects petitioners seem to be merely shooting arrows in the dark. Further, it may be mentioned here that arbitral record would show that the copy of the award had been dispatched to the petitioners by registered post.
15. I see no reason to interfere with the arbitral award under section 34, Arbitration and Conciliation Act, 1996. The present petition under section 34, Arbitration and Conciliation Act, 1996 stands dismissed. File be consigned to record room.
Digitally signedANNOUNCED IN THE OPEN MURARI
PRASAD
by MURARI
PRASAD SINGH
Date:
COURT ON 03.10.2018
SINGH
2018.10.03
15:09:45 +0530
(M. P. SINGH)
ADJ03 (CENTRAL)
TIS HAZARI COURTS
DELHI
Arbt. No. 93/16
New Arbt. No. 585305/16 Page 11 of 11