Delhi District Court
M/S Om Enterprises vs Pawan Kumar Chhabra on 18 July, 2023
IN THE COURT OF SH RAJESH KUMAR SINGH
DISTRICT JUDGE (COMMERCIAL) (DIGITAL)-07
SOUTH-EAST, SAKET COURT, DELHI
OMP (Comm.) No. 29/2022
CNR No. DLSE01-006280-2022
M/s Om Enterprises
Through its Partner
Sachin Sharma
Registered Office at
207, Suneja Tower-1,
District Centre, Janakpuri,
New Delhi-110058
......Petitioner
Vs.
Pawan Kumar Chhabra
S/o Late Sh. Krishan Chander Chhabra
R/o E-144, Saket, New Delhi-110017
PH: 9811135658
[email protected]
......Respondent
Date of E-filing of petition : 11.07.2022
Date of hearing of final argument : 07.07.2023
Date of Judgment : 18.07.2023
JUDGMENT
1. The petition has been filed under Section 34 of Arbitration & Conciliation Act, 1996 (hereinafter referred to as the Act) to challenge the award dt. 10.03.2022 passed by the Ld. Sole Arbitrator.
2. The petitioner entered into four loan agreements with the respondent. The present dispute pertains to the loan agreement dt. 06.08.2020 for Rs. 37,50,000/-. The amount is wrongly mentioned in figures at page 1 of the agreement as 37,50,0000/-.
RAJESH The amount is correctly mentioned in words as Rupees Thirty KUMAR SINGH Digitally signed by OMP (COMM) No. 29/22 OM ENTERPRISES VS. PAWAN KUMAR CHHABRA PAGE NO. 1 OF 10 RAJESH KUMAR SINGH Date: 2023.07.18 02:34:55 +0530 Seven Lacs Fifty Thousand. Petitioner availed the loan for bona fide need for investment in the trading business. It was submitted by Ld. Counsel for the petitioner that the petitioner was doing trading of bearings. The agreement provided for a guaranteed profit of Rs. 6,00,000/- to the respondent within sixty days of the receipt of the loan by the petitioner. There was penalty clause for default and the respondent had the right to recall the loan in case of default. The detailed terms and conditions are mentioned in the loan agreement which is part of the record and therefore, I am not reproducing the same. The petitioner also issued security cheque and executed a promissory note.
3. The petitioner failed to pay the guaranteed profit to the respondent. The respondent filed four arbitration petitions u/S 11 of the Act and they were disposed of by Hon'ble High Court by a common judgment dt. 01.09.2021. Hon'ble High Court was pleased to appoint Mr. Ajay Kumar Jain as the Sole Arbitrator in all four matters. Ld. Arbitrator has rendered four separate awards.
4. The present petition has been filed u/S 34 (2) (a) (v) of the Act. In the grounds of challenge, it is stated (i) the petitioner filed the written statement on 03.11.2021 through email. On the date of hearing i.e. 08.11.2021, Ld. Arbitrator refused to accept the WS and also imposed cost of Rs. 5,000/- each in the four matters. The petitioner did not receive typed copy of the order. In the proceedings sheet of the next date, the petitioner did not find mention of the earlier order of Ld. Arbitrator refusing to take the WS on record. This created apprehension of bias in the mind of the petition. He filed an application under Section 13 (2) of the Act, (ii) Ld. Arbitrator did not take into account Covid 19 Pandemic which amounted to force majeure under clause 7 of the Digitally signed by RAJESH RAJESH KUMAR OMP (COMM) No. 29/22 OM ENTERPRISES VS. PAWAN KUMAR CHHABRA PAGE NO. 2 OF 10 KUMAR SINGH SINGH Date:
2023.07.18 02:35:02 +0530 agreement, (iii) The petitioner could not make the payment due to reasons beyond his control and he had requested the respondent to co-operate, (iv) Heavy interest has been granted over and above the amount of guarantee profit despite the fact that the petitioner suffered huge losses during the Covid 19 Pandemic, (v) Covid 19 was considered a force majeure by Hon'ble Delhi High Court in OMP(I) (COMM.) 88/2020 titled Hallibourton Offshore Services Inc. Vs. Vedanta Ltd., (vi) As per Section 28 (3) of the Act, Ld. Arbitrator was required to decide the dispute according to the terms of the contract. Hon'ble Supreme Court has also held in ONGC Vs. Saw Pipe AIR 2003 (SC) 2629 that the arbitrator is required to decide the dispute in accordance with the terms of the contract, (vii) The Ld. Arbitrator failed to take into account the payment of Rs. 9 lac made by the petitioner to the respondent. The respondent had acknowledged the payments by whatsapp messages dt.
29.08.2020 and 01.09.2020, (viii) The proceedings were not conducted by Ld. Arbitrator in accordance with the video conferencing rules notified by the Hon'ble Delhi High Court vide notification no. 325/DHC dt. 01.06.2020.
5. Perusal of the grounds of challenge shows that the ground related to non-appreciation of the force majeure clause has been repeated. During arguments, Ld. Counsel for the petitioner pressed only two grounds. The first ground taken by Ld. Counsel for the petitioner is that the contract did not provide for any rate of interest but it is stated in para 21 (c) of the award which is subject matter of OMP(COMM.) 28/22 that the claimant is entitled to the contractual rate of 21%. In the present award, Ld. Arbitrator did not use the term contractual rate in the present Digitally signed by RAJESH RAJESH KUMAR KUMAR SINGH OMP (COMM) No. 29/22 OM ENTERPRISES VS. PAWAN KUMAR CHHABRA PAGE NO. 3 OF 10 SINGH Date:
2023.07.18 02:35:11 +0530 award but he awarded interest at the rate of 24% in para 21 (c) of the award The second ground taken by Ld. Counsel for the petitioner is related to the force majeure clause.
6. I have considered the arguments of Mr. Sameer Bhatnagar, Ld. Counsel for the petitioner and Ms. Gayatri Puri, Ld. Counsel for the respondent. I have also perused the record including the original arbitral record.
7. With the present petition, the petitioner has filed an application u/S 5 of the Limitation Act seeking condonation of delay of 14 days in filing of the petition. It is stated that the award was passed on 10.03.2022 and the petitioner filed the objection u/S 34 of the Act within time before the Dwarka Court. The said petition was withdrawn on 09.06.2022. Thereafter, summer vacation started. After making the necessary changes the present petition has been filed.
8. Copy of order dt. 04.07.2022 passed by Ld. DJ(Comm.)/SW/Dwarka Courts in OMP(COMM.)17/22 titled Sachin Kumar Sharma Vs. Pawan Kumar Chhabra has been filed with the application. Perusal of the order shows that the petition was filed before the Dwarka Court on 04.06.2022. Ld. Counsel for the petitioner withdrew the said petition on the ground of territorial jurisdiction with liberty to file a fresh petition before the court of competent jurisdiction.
9. Ld. Counsel for the respondent did not raise the issue of delay and no arguments were submitted in this regard. Under Section 34 (3) the petition is to be filed within three months from the date of receipt of the signed copy of the award by the petitioner. The limitation can be further extended by 30 days if the petitioner is able to show that he was prevented by sufficient Digitally signed by RAJESH RAJESH KUMAR KUMAR SINGH OMP (COMM) No. 29/22 OM ENTERPRISES VS. PAWAN KUMAR CHHABRA PAGE NO. 4 OF 10 SINGH Date:
2023.07.18 02:35:20 +0530 cause from making the application within the period of three months.
10. The period of three months from the date of award expired on 10.06.2022. The petition was filed before the Dwarka Court on 04.06.2022 i.e. within three months. The petition was withdrawn on 04.07.2022 on the ground of territorial jurisdiction and it was refiled before this court on 11.07.2022. It came up for consideration before the Ld. Predecessor Court on 11.07.2022. Though, the application has been moved u/S 5 of the Limitation Act, it also contains the grounds of Section 14 of the Limitation Act. If we exclude the time for which the petition remained pending in the Dwarka Court by applying Section 14 of the Limitation Act, the petition comes within limitation i.e. three months from the date of award. It would be appropriate to allow the application by applying Section 14 of the Limitation Act. It is also pertinent to note that by giving the grace period of 30 days under proviso to Section 34 (3) also the petition comes within limitation. Accordingly, the application is allowed and I proceed to decide the petition on merit.
11. The petition has been filed u/S 34 (2) (a) (v) of the Act which reads as:
" 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"
12. The Ld. Arbitrator was appointed by Hon'ble High Court and the petitioner has not mentioned any procedure which had been agreed by the parties and which was not followed. Digitally signed by RAJESH RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.07.18 OMP (COMM) No. 29/22 OM ENTERPRISES VS. PAWAN KUMAR CHHABRA PAGE NO. 5 OF 10 02:35:28 +0530 Therefore, Section 34 (2) (a) (v) has no application. The petitioner alleges bias. It is stated in the petition that failure of Ld. Arbitrator to mention in the proceedings sheet what had been orally observed regarding not taking on record of the WS created apprehension in the mind of the petitioner. The petitioner filed OMP (T) (COMM.) 126/21 before Hon'ble High Court for change of the arbitrator. The petition was heard by Hon'ble High Court on 08.12.2021. In para 4 of the order dt. 08.12.2021 Hon'ble High Court observed "According to Ms. Ahluwalia, this order is passed in violation of principles of natural justice. As such, the grievance of the petitioner as voiced by Ms. Ahluwalia seems to be spanning the entire spectrum from unprofessional conduct by smoking, to bias (which is not alleged) to violation of the principles of natural justice."
13. It is to be noted that bias was not alleged in the petition filed before Hon'ble High Court as noted in para 4 of the order dt. 08.12.2021 which has been reproduced above. Ld. Counsel for the petitioner appearing before Hon'ble High Court had also admitted as noted in para 3 of the order that there was no specific allegation of bias. The petition was ultimately disposed off as infructuous and withdrawn on 11.03.2022. Section 18 of the Act mandates that the parties shall be treated with equality and each party shall be given a full opportunity to present his case. If the arbitral tribunal fails to give full opportunity to a party to present his case, it may furnish ground under Section 34 (2) (a) (iii) which provides that the award can be challenged if the aggrieved party was not able to present his case. It may also furnish a ground of challenge under Section 34 (2) (b) (ii) read with explanation I (iii) which provides that an award will be in Digitally signed by RAJESH RAJESH KUMAR KUMAR SINGH SINGH Date:
OMP (COMM) No. 29/22 OM ENTERPRISES VS. PAWAN KUMAR CHHABRA PAGE NO. 6 OF 10 2023.07.18 02:35:35 +0530 conflict with public policy of India if it is opposed to justice. The petition does not have any ground to bring the petition under the aforesaid provisions. The issues raised by the petitioner can be considered under Section 34 (2-A) of the Act as the crux of the ground of challenge is that the award is patently illegal.
14. Ld. Counsel for the respondent cited authorities at Bar on the scope of judicial review of an arbitral award. The law in this regard is settled. In para 29 of Delhi Airport Metro Express (P) Ltd. Vs. DMRC (2022) 1 SCC 131, it was held thus:-
"patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression "patent illegality". Likewise, erroneous application of law cannot be categorized as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression "patent illegality". What is prohibited for the courts to re-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award. The permissible grounds for interference with a domestic award under Section 34 (2A) on the ground of patent illegality is when Arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and Digitally signed by RAJESH RAJESH KUMAR OMP (COMM) No. 29/22 OM ENTERPRISES VS. PAWAN KUMAR CHHABRA PAGE NO. 7 OF 10 KUMAR SINGH Date:
SINGH 2023.07.18
02:35:43
+0530
can be set-aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression of "patent illegality".
15. On the issue of force majeure both Ld. Counsel relied upon the judgment by Hon'ble Delhi High Court in Hallibourton Offshore Services Inc. Vs. Vedanta Ltd. Ld. Counsel for the petitioner referred to the Government circulars filed with the rejoinder and submitted that Covid 19 Pandemic was a unique situation which should have been considered for force majeure in terms of the judgment by Hon'ble High Court. It was further submitted that during Covid 19 Pandemic businesses of essential services were only allowed. Bearings did not fall within the scope of essential services and therefore, the very purpose of loan/investment was defeated and this amounted to a force majeure situation.
16. To oppose the submissions of Ld. Counsel for the petitioner on the ground of force majeure, Ld. Counsel for the petitioner submitted that Ld. Arbitrator rightly considered the issue under para 18 to 21 of the award. In paragraph 20 of the award it is observed that the agreement was executed on 06.08.2020 and the petitioner was aware of the Covid 19 Pandemic. No exemption had been provided in the agreement on the ground of Covid 19 Pandemic. Ld. Counsel further submitted that the view taken by the Ld. Arbitrator is a possible view and it cannot be reviewed by the court u/S 34 of the Act.
17. I agree with the submissions made by ld. Counsel for the respondent in respect of the findings of Ld. Arbitrator regarding Digitally the force majeure clause. signed by RAJESH RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.07.18 02:35:50 +0530 OMP (COMM) No. 29/22 OM ENTERPRISES VS. PAWAN KUMAR CHHABRA PAGE NO. 8 OF 10
18. The next issue raised by Ld. Counsel for the petitioner is regarding the rate of interest. The agreement provides for penal interest at the rate of 3% per month on the loan amount if the guaranteed profit was not paid. Section 31 (7) (a) provides that the arbitral tribunal may grant interest for the pre-reference period at a reasonable rate. The rate of interest awarded by Ld. Arbitrator is less than the penal interest contemplated by the parties. The rate of interest cannot be interfered with u/S 34 in the particular facts of the present case.
19. The petitioner has raised the issue of non-consideration of the payments allegedly received by the respondent. The petitioner relies upon whatsapp messages dt. 28.08.2020 and 01.09.2020. It is stated in ground G of the petition that petitioner had paid Rs. 9 lacs to the respondent. This defence was not taken in the statement of defence/WS filed before the Ld. Arbitral Tribunal. Copy of the statement of defence/WS has been filed at page 68 to 73 of the present petition. This plea was taken in the written submissions filed at the time of final arguments. Print out of the whatsapp messages dt. 29.08.2020 and 01.09.2020 was annexed with the written submissions. In paragraph 7 of the written submissions, it was stated that payment of Rs. 3 lac was confirmed on 29.08.2020 and another payment of Rs. 3 lac was confirmed on 01.09.2020.
20. Ld. Arbitrator rightly did not entertain the contention of the payments allegedly made by the respondent. This defence had not been taken in the statement of defence/WS. The Written submissions/arguments cannot be beyond pleadings. It is also to be noted that in the present petition the total amount allegedly paid by the respondent is mentioned as Rs. 9 lacs whereas the Digitally signed by RAJESH RAJESH KUMAR KUMAR SINGH OMP (COMM) No. 29/22 OM ENTERPRISES VS. PAWAN KUMAR CHHABRA PAGE NO. 9 OF 10 SINGH Date:
2023.07.18 02:35:59 +0530 total amount mentioned in the Written submissions filed before the Ld. Arbitral Tribunal adds up to Rs. 6 lac. It is also pertinent to note that this issue was not raised before this court during the final arguments.
21. The ground taken by the petitioner that the proceedings were not conducted by the Ld. Arbitral Tribunal in accordance with the video conferencing rules framed by Hon'ble High Court has no substance. The guidelines are for the courts. It is not shown in what manner the petitioner was prejudiced. This ground has also not been pressed in the oral arguments before this court.
22. The promissory note executed by the petitioner mentions that the respondent was entitled to recover the guaranteed profit, principal amount and interest. Therefore, grant of the relief of recovery of the guaranteed profit with interest and grant of separate relief for recovery of the principal amount with interest is in consonance with the agreement between the parties. The decision of Ld. Arbitral Tribunal in this regard cannot be faulted.
23. In view of the above discussion, it is held that there is no merit in the petition. The objection filed by the petitioner by way of the present petition against the award dt. 10.03.2022 is dismissed with cost of Rs. 10,000/- (Rupees Ten Thousand Only). The cost be paid by the petitioner to the respondent within 30 days from the date of this order. If the cost is not paid, the respondent will be entitled to include the amount in the execution petition. File be consigned to Record Room. RAJESH Digitally by RAJESH signed KUMAR SINGH KUMAR Date:
2023.07.18 SINGH 02:36:09 +0530 (Rajesh Kumar Singh) District Judge (Comm.) Digital-07 South East, Saket Courts Delhi 18.07.2023(GK) OMP (COMM) No. 29/22 OM ENTERPRISES VS. PAWAN KUMAR CHHABRA PAGE NO. 10 OF 10