Delhi District Court
M/S Kunnummal Exports & Ors vs M/S D.D.Fashion on 2 May, 2018
IN THE COURT OF SH. HARISH KUMAR : ADDL. DISTRICT
JUDGE -13 : CENTRAL DISTRICT : TIS HAZARI COURTS : DELHI
ARBN No. 2069/2017
In re:
1. M/s Kunnummal Exports & Ors.
C-4/4082, Vasant Kunj,
New Delhi
Through its Partner Sh. Binnu Kunnummal
2. Sh. Binnu Kunnummal
S/o Sh. Thayyil Puthanveetil Karunakaran,
Partner of M/s Kunnummal Exports
C-4/4082, Vasant Kunj, New Delhi
3. Sh. Thayyil Puthanveetil Karunakaran
Authorized Signatory of M/s Kunnummal Exports,
C-4/4082, Vasant Kunj, New Delhi
................ Petitioners
VERSUS
1. M/s D.D.Fashion,
407, Kucha Brij Nath, Chandni Chowk
Delhi-110006 through its authorized
representative Sh. Baldev Raj Nagpal
Also at:
B-69, Okhla Industrial Area
Phase-I, New Delhi-110020
2. Delhi Hindustani Mercantile Association (Regd.)
1210/16, Chandni Chowk,
Delhi -110006 (Arbitral Panel-II)
.............. Respondents
Date of institution : 14.12.2017
Date of hearing arguments : 26.04.2018
Date of Judgment : 02.05.2018
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Petition /objections under section 34 of the Arbitration and Conciliation Act,
1996 against the award No. 52/2014-15 dated 28.08.2017 of the Arbitral
Panel-II of the Delhi Hindustani Mercantile Association (REGD.) whereby
an award of Rs. 7,62,907/- alongwith pendentelite and future interest @ 15%
p.a. was passed against the petitioners.
ORDER
Present order shall dispose of the objection petition filed under Section 34 of the Arbitration and Conciliation Act, against the impugned award dated 28.08.2017 passed by Arbitral Panel- II of the Delhi Hindustani Mercantile Association (Regd.). Petitioner is aggrieved by impugned award whereby petitioner have been directed to pay Rs. 7,62,907/- alongwith pendente-lite and future interest @ 15% p.a. to the respondent No. 1.
1. Briefly stated facts of the objection petition is that the respondent no. 1 which is a proprietary concern through its authorized representative invoke Arbitration Clause printing on the invoice and arbitration was assigned to the Arbitral Panel- II of the Delhi Hindustani Mercantile Association (Regd.) for adjudication.
2. In the statement of claim, it was alleged that respondent no. 1 a proprietary concern and has authorized Sh. Baldev Raj Nagpal vide authority letter dated 17.07.2014 to sign, verify and institute the claim wherein pleaded that respondent no. 1 has a business dealing with petitioner no. 2 and on the orders placed by the petitioner, the goods/material were supplied to the petitioner No. 1, but petitioners failed to pay the price of the goods supplied, hence, a sum of Rs. 5,11,657/- was outstanding which respondent no. 1 claimed alongwith pendenlite and future interest.
3. After receiving the notice of the claim petition from the respondent no. 2, petitioner filed an application u/s 16 of the Arbitral and Conciliation Act, challenging the jurisdiction of respondent no. 2 to adjudicate the disputes and ARBN NO. 2069/17 M/s Kunnummal Exports Vs. M/s D.D.Fashion & Anr. Page No.2 of 9 also filed written statement denying the claim as well as the averments made in the petition and it was specifically objected that the claim petition filed by the respondent no. 1 was barred by the Limitation. It has been further stated that although due lapses on the part of his counsel, the petitioner could not lead any evidence to prove the contention of their written statement but despite that respondent no. 2 was duty bound to decide all the issues framed by it on the basis of pleadings of the parties in accordance with law. It has been further pleaded that respondent no. 2 erroneously decided the issue of limitation without appreciating and considering the contention of the petitioner and against the provisions of Section 18 of the Limitation Act without appreciating the well settled principal of law that once the prescribed period of limitation has expired then even the parties by agreement cannot extend the said period. Hence, petitioner has challenged the award inter-alia on following grounds:
• Ld. Arbitral panel-II of respondent no. 2, while passing the impugned award, fails to appreciate that the claim of the respondent no. 1 is time barred from the documents filed by the respondent no. 1 i.e. statement of account for the period 01.04.2005 to 01.04.2006 as there is no transaction during the period 01.04.2008 to 31.03.2012 i.e. for a period of 4 years.
• Ld. Arbitral panel-II fails to appreciate that once a period of limitation expired then even the parties to a dispute can not extent the said period of limitation by consent as under
section 18 of the Limitation Act, acknowledgement of debt should not be only in writing but the same shall also be before expiry of the period of limitation and as such the memorandum of understanding dated 24.2.2016 upon which the Ld. Arbitral Tribunal had relied upon while deciding the issue no. 2 of Limitation against the petitioner are totally ARBN NO. 2069/17 M/s Kunnummal Exports Vs. M/s D.D.Fashion & Anr. Page No.3 of 9 erroneous and contrary to the well settled provisions of law.
• Ld. Arbitral panel-II of the respondent no. 2 fails to appreciate the claim petition filed by the respondent no. 1 is not legally maintainable in law being filed in the name of the proprietorship firm which has no legal entity in the eyes of law.
• Ld. Arbitral panel-II of the respondent no. 2 fails to appreciate that an authorized person of a firm cannot be held personally liable to pay the debts of the firm until and unless he had stood surety for the repayment of the said debt and as such the award passed against the petitioner no. 3, who is admittedly and authorized person of petitioner no. 1 is not sustainable in the eyes of law.
• Ld. Arbitral panel-II of the respondent no. 2 fails to appreciate that there was no agreed arbitration clause between the parties as merely printing of some of the terms of the invoices does not amounts to agreement to refer a dispute to an Arbitrator until and unless the specific consent has been taken from the person to whom the goods were supplied through the said invocies as in commercial business, the goods are received at the business place of the purchaser by its employees who may not be literate and as such no valid and enforceable arbitration clause exists between the parties.
• Ld. Arbitral panel-II of the respondent no. 2 fails to appreciate that the awarded rate of interest of 15% p.a. is on very much higher side considering the present business ARBN NO. 2069/17 M/s Kunnummal Exports Vs. M/s D.D.Fashion & Anr. Page No.4 of 9 scenario of the country after demonetization and impugned award has resulted in miscarriage of justice, lacks of justifiable reasoning and bad in law and thus ought to be interfered.
4. Although respondent no. 1 has filed reply to the said objection petition but there is no need to mention the contents thereof as mostly the contents of the petition except which forms part of the record has been denied as respondent no. 1 has supported the award.
5. Although respondent No.1 has filed reply to the said objection petition but there is no need to mention the contents thereof as mostly the contents of the petition except which forms part of the record has been denied and thus, respondent no. 1 supported the award.
6. Ld. Counsel for the parties have addressed their respective arguments.
7. It is well settled law that Arbitral award can be set aside only on the grounds mentioned in the Section 34 of CPC as this court is not setting in appeal, hence, it will be relevant to know the legal position regarding the scope of objection U/s 34 of the Arbitration and Conciliation Act 1996 and it will be in the fitness of things to reproduce Section 34 (2) of the said Act of 1996 which provides the ground for setting aside an arbitral award. The relevant provision reads under:-
"2(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 ARBN NO. 2069/17 M/s Kunnummal Exports Vs. M/s D.D.Fashion & Anr. Page No.5 of 9
(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 decision 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.''
8. In judgment titled Govt. of N.C.T. Delhi Vs. Khem Chand 2003 RAJ 437 relying upon the AIR 1963 SC 677 it was held that a Court should approach an award to support it if it is reasonable, possible rather than to dispute it, by calling it illegal. The law in this regard as it existed prior to enactment of Arbitration and Conciliation Act 1996 still holds the field. It was further observed that the jurisdiction of the Court when called upon to decide the objection raised by a party against an arbitral award is limited, as expressly indicated in the Arbitration and Conciliation Act 1996. The Court has no jurisdiction to sit in appeal and examine the correctness of the award on merits with reference to the material produced before the Arbitrator. It cannot sit in appeal over the view of the arbitrator.
10. In case titled Navodaya Mass Entertainment Ltd. Vs. J M Combines (2015) 5 SCC 698 it was held - "In our opinion, the scope of interference of the court is very limited. Court would not be justified in reappraising the material on record and substituting its own view in place of ARBN NO. 2069/17 M/s Kunnummal Exports Vs. M/s D.D.Fashion & Anr. Page No.6 of 9 Arbitrator's view. Where there is an error apparent on the face of the record or the Arbitrator has not followed the statutory legal position, then and then only it would be justified in interfering with the award published by the Arbitrator. Once the Arbitrator has applied his mind to the matter before him, the Court cannot reappraise the matter as if it were an appeal and even if two views are possible, the view taken by the Arbitrator would prevail."
12. In the leading decision of Hodgkinson Vs. Fernie (1857) 140 ER 712, Williams J. Stated:- "The law has for many years been settled, and remain so at these days, that, where a cause or matters in difference are referred to an arbitrator, whether a lawyer or a layman, he is constituted the sole and final judge of all questions both of law and of fact. Many cases have fully established that position, where awards have been attempted to be set aside on the ground of admission of an incompetent witness or the rejection of a competent one. The court has invariably met those applications by saying, "You have constituted your own tribunal; you are bound by its decision."
13. In case title Union of India Vs. Ralia Ram, AIR 1963 SC-1685, Supreme Court held:-
"An award being a decision of an arbitrator whether a lawyer or layman chosen by the parties and entrusted with power to decide a dispute submitted to him is ordinarily not liable to be challenged on the ground that it is erroneous. In order to make an Arbitration effective and the award enforcible, machinery is device for lending the assistance of the ordinary courts. The court is also entrusted with power to modify or correct the award on the ground of imperfect form or clerical errors or decision on questions not referred, which are severable from those referred. The court has also power to remit the award when it has left some matters refer undetermined, or when the award is indefinite or where the objection to the legalities of the award is apparent on the face of the award. The court may also said aside an award on the ground of corruption or misconduct of the arbitrator, or that a party has been guilty of fraudulent concealment or willful deception. But the court cannot interfere with the award if otherwise proper on the ground that the decision appears to it to be erroneous. The award of the arbitrator is ordinarily final and conclusive, unless a contrary intention is disclosed ARBN NO. 2069/17 M/s Kunnummal Exports Vs. M/s D.D.Fashion & Anr. Page No.7 of 9 by the agreement. The award is the decision of a domestic tribunal chosen by the parties, and the Civil Courts which are entrusted with the power to facilitate Arbitration and to effectuate the award, cannot exercise appellate powers over the decision. Wrong or right the decision is binding if it be reached fairly after giving adequate opportunities to the parties to place their grievances in the manner provided by the Arbitration agreement."
14. It is otherwise also settled provision of law that Arbitrator are selected by parties and when parties have themselves chosen to get their dispute adjudicated through an Arbitrator of their choice and upon whom they had reposed faith in the wisdom of the said arbitrator then they should not have grievance to say that Arbitrator should not have acted the way he acted.
15. Keeping in mind the aforesaid principle as noted above, it is to be seen if the award is sustainable or liable to be set aside. Ld. Counsel for the petitioner has contended that the impugned award is perverse and against the law as it is settled law that any claim which has become time barred, cannot be recovered through the legal mechanism. He has referred to the statement of account of the respondent no. 1 filed, and available on the file of Arbitral proceedings which shows that as on 31.03.2008, there was debit balance of Rs. 5,11,657/- and thereafter next credit entry by way of two dishonoured cheques of Rs. 50000/- each has been shown to have been made on 12.11.2012 and 14.11.2012 which were returned on 06.12.2012 and 08.12.2012 respectively. Thereafter again there is a credit entry through dishonoured cheque of Rs. 3,95,188/- on 26.06.2014. Ld. Counsel for petitioner contends that when on 31.03.2008 there was a debit balance of Rs 5,11,657/- then plaintiff should have filed suit till 31.03.2011. Any payment made thereafter even by way of dishonoured cheque will not give fresh period of limitation in terms of Section 18/19 of the Limitation Act as the acknowledgement has got to be made well before the expiry of limitation period. He, therefore, contends that claim petition filed on 12.08.2014 was hopelessly time barred.
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16. Ld Counsel for the respondent has not disputed that any acknowledgement of liability for the purpose of Section 18 of the Limitation Act and any part payment on account of debt or of interest on legacy for the purpose of Section 19 of the said Act, has got to be done before the expiry of the prescribed period of limitation and he was unable to explain how the claim petition filed by the respondent No.1 on 12.08.2014 was within the limitation period even if payment was made on 14.11.2012 and on 26.06.2014.
17. Respondent cannot go beyond its own statement of account, therefore, payment made by petitioner on 14.11.2012 by way of cheque does not fulfill the requirement of Section 18 or 19 of the Limitation Act, 1963 for giving fresh period of limitation as same was not before the expiry of limitation period computed from 31.03.2008.
18. Hence, the impugned award being against the public policy of India cannot be sustained and is liable to be set aside and is accordingly hereby set aside. Need is not felt to discuss other grounds of objection such as non-existence of arbitration agreement.
File along with arbitral proceedings be consigned to Record Room after necessary compliance.
(Harish Kumar)
Announced in the open Court. ADJ-13(Central)/THC
(Judgment contains 9 pages) Delhi/02.05.2018
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