Bangalore District Court
M/S Gurukul Vidyapeeth English School vs M/S Varthana Finance Private Limited on 30 October, 2024
Digitally signed by
KABC170025402023 SUDINDRA SUDINDRA NATH S
NATH S Date: 2024.11.05
18:04:40 +0530
IN THE COURT OF LXXXIII ADDL. CITY CIVIL & SESSIONS JUDGE,
COMMERCIAL COURT, BENGALURU (CCH-84)
Present: Sri S. Sudindranath, LL.M., M.B.L.,
LXXXIII ADDL. CITY CIVIL & SESSIONS JUDGE
BENGALURU.
COM.AP.No.161/2023
Dated on this 30th day of October 2024
Petitioner M/s.Gurukul Vidyapeeth English
School,
Plot No.47, Santhosh Hill,
12/1 & 12/2 Gut No.22,
Near Shani Temple,
Kalpataru Industrial,
East Thane,
Maharashtra - 400 607
Represented by its President
(By Sri.Nandish.R, Advocate)
// versus //
Respondent 1. M/s. Varthana Finance Private
Limited
(Formerly known M/s. Thirumeni
Finance Pvt. Ltd.,)
5BC-110 3rd Floor Varasiddhi
Outer Ring Road, Service Road,
3rd Block, HRBR Layout Kalyan Nagar,
Bangalore - 560 043
Represented by its Legal Manager
Mr.Girish.P.
2. M/s.Bhagwat Prasad Educational
Trust,
Plot No.47, Santhosh Hill,
12/1 & 12/2,
2
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Gut No.22, Near Shani Temple,
Kalpataru Industrial,
East Thane, Maharashtra - 400 607.
Represented by its Trustees
3. Mr.Dibyalochana D Mohanty (Dead)
S/o Mr.Duryodhan Mohanty
Aged about 54 years,
DN.Mohanty Estate,
Gurukul Vidyapeeth
Manorama Nagar Road,
Near Shani Temple,
Thane, Maharashtra - 400 607
3(a) Smt.Padmini Mohanty,
W/o Late Dibyalochan D Mohanty
DN Mohanty Estate,
Gurukul Vidyapeeth
Manorama Nagar Road,
Near Shani Temple,
Thane, Maharashtra - 400 607.
3(b) Priyanka Mohanty,
D/o Late Dibyalochan D Mohanty
DN Mohanty Estate,
Gurukul Vidyapeeth
Manorama Nagar Road,
Near Shani Temple,
Thane, Maharashtra - 400 607.
4. M/s. Gyanoday Education Trust,
Aged about years,
House No.367, Kolht, Chanchoti Phata
Post: Kaman, Kolht Taluka,
Vasai (East) Thane,
Maharashtra - 401201.
5. M/s. Gyanoday Multipurpose School,
Aged about years,
House No.367, Kolht, Chanchoti Phata
Post Kaman, Kolht Taluka,
3
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Vasai (East), Thane,
Maharashtra - 401 201.
6. Mrs. Poonam Arun Verma
W/o Mr.Arun Verma
Aged about 39 years,
Flat No, wing-C-701,
Peninsula Park Building
7th Floor, Near D-Mart
Opp New Viva College
Virar West Thane,
Maharashtra - 401303
7. Mr.Arun Verma
S/o Mr.Ramakrishna Verma
Aged about 45 years,
Flat No Wing-C-701,
Peninsula Park Building
7th Floor, Near D-Mart
Opp New Viva College
Virar, West Thane,
Maharashtra - 401303
8. Sri.P.Chandrasekhar, Advocate
Sole Arbitrator
Officer at: 212, Jalashambavi Complex
1st Main road, Gandhinagar,
Bengaluru - 560 009.
(R1 By Sri.DP, Advocate
R2, R3(a)(b) R4, R5, R6, R7 - Exparte
R8 - Arbitrator)
Date of Institution of suit : 26/10/2023
Nature of the suit : Transactions of
merchants, financiers,
traders relating
mercantile documents
(enforce, interpret)
4
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Date of commencement of :
recording of the evidence --
Date on which the Judgment : 30/10/2024
was pronounced.
: Year/s Month/s Day/s
Total duration
01 00 04
JUDGMENT
This is a petition under Section 34 of the Arbitration and Conciliation Act filed by Respondent No. 1 before the Learned Arbitrator challenging the arbitral award dated 6-7-2023 passed by the learned arbitrator, namely Respondent No. 8 herein, in Claim Petition No. 6303 of 2023, whereby the learned arbitrator allowed the claim filed by Respondent No. 1 herein [Claimant] and held that the claimant is entitled to recover a sum of Rs. 1,07,76,894/= from the respondents before the learned arbitrator, along with interest at 18% per annum from the date of the claim petition till the date of realization and also awarded Rs. 10,000 towards the cost of the proceedings.
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2. On issuance of notice of the present petition, the claimant, namely Respondent No. 1 herein, has entered appearance through counsel and filed detailed objections to the present petition. Respondents No. 2, 3(a), 3(b) and 4 to 7 are placed ex parte after due service. Notice to the learned arbitrator, Respondent No. 8, is dispensed with.
3. Since there is delay in filing the present petition, IA No. 2 is filed for condonation of delay, which is considered along with main petition.
4. Thereafter, at the time of arguments, counsel for the petitioner as well as counsel for Respondent No. 1 filed written arguments and submitted that they have no further oral arguments to make.
5. I have perused the records of the case.
6. The points that arise for consideration are as follows:
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1) Whether IA No. 2 deserves to be allowed and the delay in filing the present petition deserves to be condoned?
2) Whether the impugned Arbitral Award dated 06-07-2023 passed by the learned arbitrator, Respondent No. 8 herein, in Claim Petition No. 6303 of 2023 allowing the claim of Respondent No. 1 herein and directing the respondents before the learned arbitrator, namely the petitioner herein and Respondents No. 2 to 7, to pay a sum of Rs.
1,07,76,894/= along with interest at 18% per annum from the date of the claim petition till the date of realization to the claimant, deserves to be set aside under Section 34 of the Arbitration and Conciliation Act?
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7. My answer to the above points is as follows:
Point No. 1 : In the affirmative, Point No. 2 : In the negative, for the following;
REASONS.
Point No. 1.
8. Under Section 34 (3) of the Arbitration and Conciliation Act, a petition under Section 34 of the Act has to be filed within 3 months from the date of receipt of the award by the petitioner. Beyond the said period of 3 months, the court has the discretion to condone the delay of further period of 30 days. After the period of 3 months plus 30 days, even the court does not have the discretion to condone the delay. This position of law is laid down by the Hon'ble Apex Court in the case of Mahindra & Mahindra Financial Services Ltd. v. Maheshbhai Tinabhai Rathod, (2022) 4 SCC 162 :
(2022) 2 SCC (Civ) 547 : 2021 SCC OnLine SC 1315 at page 166, as follows;8
CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 9.1. Further, in State of H.P. v. Himachal Techno Engineers [State of H.P. v. Himachal Techno Engineers, (2010) 12 SCC 210 : (2010) 4 SCC (Civ) 605] it was noted and held as hereunder : (SCC pp. 211-12, paras 2 & 5) "2. A petition under Section 34 of the Arbitration and Conciliation Act, 1996 ("the Act" for short) was filed by the appellant on 11-3-2008, challenging the arbitral award. The petition was accompanied by an application under sub-section (3) of Section 34 of the Act, for condonation of delay of 28 days in filing the petition. The respondent resisted the application contending that the petition under Section 34 was filed beyond the period of 3 months plus 30 days and therefore, was liable to be rejected.
***
5. Having regard to the proviso to Section 34(3) of the Act, the provisions of Section 5 of the Limitation Act, 1963 will not apply in regard to petitions under Section 34 of the Act. While Section 5 of the Limitation Act does not place any outer limit in regard to the period of delay that could be condoned, the proviso to sub-section (3) of Section 34 of the Act places a limit on the period of condonable delay by using the words 'may entertain the application within a further period of thirty days, but not thereafter'. Therefore, if a petition is filed beyond the prescribed period of three months, the court has the discretion to condone the delay only to an extent of thirty days, provided sufficient cause is shown. Where a petition is filed beyond three months plus thirty days, even if sufficient cause is made out, the delay cannot be condoned."
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9. In the case on hand, the impugned award is dated 06-07-2023. In the affidavit in support of IA No. 2 for condonation of delay, it is stated that the signed copy of the arbitral award was received in the office of the petitioner on 18-07-2023. This is substantiated by the RPAD acknowledgement card, which is available in the arbitral records produced by Respondent No. 1 herein. It shows that the arbitral award was duly served on the petitioner herein on 18-07-2023. Therefore, the period of limitation begins to run from 18-07-2023, which is the date on which the arbitral award was received by the petitioner. From 18-07-2023, within 3 months, that is on or before 18-10-2023, the present petition had to be filed. However, the present petition is filed on 26-10-2023 with a delay of 8 days. Since the delay to be condoned is within 30 days after 3 months, that is, the delay to be condoned is only 8 days, the court has the discretion to condone the same under Section 34 (3) of the Act. 10
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10. In the affidavit in support of IA No. 2, it is stated that the president of the petitioner is staying in Thane, Maharashtra, and remained busy with school work and the education department for state board examinations and therefore could not come to Bangalore and contact his advocate to file the present petition. There is no reason to doubt the said reason stated in the affidavit, particularly considering that the petitioner is a School and therefore the statement that the president of the said school was busy with the work of the education department for the state board exam appears reasonable and acceptable.
11. Further, it is to be noted that the delay to be condoned is not an inordinate delay but only a delay of eight days. The law is settled that the court should be liberal in condoning delay and it is always in the interest of justice that petitions of this nature are disposed off on merits rather than on technicality of limitation. Considering all these factors and accepting the reasons 11 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 stated, in my view, the delay of 8 days in filing the present petition deserves to be condoned. Accordingly, I answer Point No. 1 in the affirmative.
Point No. 2.
12. For the sake of convenience, in this judgment, the parties are hereinafter referred to as per their rank before the learned arbitrator, i.e., the petitioner herein is referred to as Respondent No. 1, and Respondent No. 1 herein is referred to as the claimant.
13. The facts in brief are that, it is the case of the claimant that the respondents are the borrowers and guarantors in respect of a loan of Rs. 1,10,00,000/= [Rupees One crore & Ten lakhs] availed on 10-05-2019, and they executed all the necessary documents in respect to the said loan. Thereafter, on 28-11-2020, the respondents were sanctioned an additional credit facility of Rs. 13,88,000. Again on 27-02-2021, the respondents were sanctioned an additional credit facility of Rs. 12
CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 8,10,000, and all these loans were availed for the development of the educational institution of the respondents. The respondents executed all the necessary documents acknowledging the receipt of the said loan and undertaking to repay the loan along with interest.
14. Thereafter, the respondents defaulted in repayment of the above three loans. The loan agreements between the parties contained an arbitration clause. Since there was default in repayment of the loan, the claimant issued a notice dated 24-02-2023, intimating the appointment of an arbitrator. Although the said notice was duly served, the respondents did not object to the appointment of the arbitrator.
15. Thereafter, the learned arbitrator entered upon the reference and issued notice to the respondents, fixing the date of hearing. Even though the said notices were served, the respondents did not appear before the learned arbitrator and contest the matter. 13
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16. Hence, the learned arbitrator has passed the impugned arbitral award, directing the respondents to pay a sum of Rs. 1,07,76,894/= along with interest at 18% per annum from the date of the claim petition till the date of realization to the claimant.
17. Aggrieved by the said arbitral award, Respondent No. 1 before the learned arbitrator is before the court in this petition under Section 34 of the Act.
18. The principal ground raised in the present petition is that, the notice of arbitral proceedings was not duly served on the petitioner. As a result of this, the petitioner did not have a proper opportunity to defend the claim petition. In this regard, at paragraph 15 of the present petition, the ground is raised that the arbitrator committed an error in not explaining how the notice sent to the parties was deemed to be properly served and merely holding that notice was served without bringing on record the proof thereof and proceeding by the arbitral 14 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 tribunal ex parte is unlawful and therefore the entire proceeding is liable to be set aside.
19. In other words, the ground raised is under Section 34(2) (a) (iii) of the Act. No doubt, at paragraph 5 of the impugned arbitral award, the learned arbitrator has made a vague and ambiguous statement that "The respondents remained absent on the date of proceedings and hence, I am holding the service of notices on the respondents as sufficient and placing them as ex parte." However, if the arbitral records which are produced by Respondent No. 1 herein along with the memo dated 04- 09-2024 are examined closely, it is noted that the learned arbitrator had issued notices to all the respondents dated 25-03-2024, styled as "Notice Of Enquiry" fixing the date of first hearing on 20-04-2023. In the arbitral records, the RPAD acknowledgement cards are available, and one of the RPAD acknowledgement cards is in respect of the dispatch of the said notice to the petitioner herein, M/s Gurukul Vidyapeeth English School. The said R.P.A.D. 15 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 acknowledgment card discloses that the said notice is duly served on the petitioner herein on 5-04-2023, and the office of the petitioner school has put its seal for having received the same. Therefore, it is clear that the notice issued by the learned arbitrator fixing the date of first hearing on 20-4-2023 is duly served on the Petitioner herein (Respondent No. 1 before Learned Arbitrator) 5-4-2023. Therefore, it cannot be said that, no notice of the proceedings was served on the petitioner herein. Therefore, the contention that the petitioner herein was placed ex-parte without due service is unacceptable and rejected. In fact, when the office of the petitioner school has received the notice by putting the seal, it appears an incorrect ground is raised that the notice was not duly served, and therefore same is unacceptable.
20. At paragraph 14 of the grounds, contention is raised that the learned arbitrator has proceeded with undue hurry since the claim petition was presented on 16 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 23-3-2023 and award was passed on 6-7-2023, which shows that the learned arbitrator has conducted proceedings in unusual haste to give an ex-parte award. This contention cannot be accepted because from the statement made in the petition itself, it is apparent that arbitral proceedings were pending from 23-03-2023 to 6- 7-2023 for a period of nearly 3 ½ months and therefore it cannot be said that the learned arbitrator has proceeded with undue haste. Be it noted that under Section 29A of the Act, it is expected of the learned arbitrator to proceed with the proceedings expeditiously and therefore no fault can be found with the learned arbitrator in disposing off the proceedings within three and a half months. It cannot be said that there was any undue haste on the part of the learned arbitrator, particularly when the notice of the arbitral proceedings was duly served, as noted supra, but it was the petitioner who was at fault in failing to appear before the learned arbitrator and contest the matter.
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21. It is then contended at paragraph 16 that various facts have been suppressed and the claimant has obtained the award by playing fraud on the arbitral tribunal. This contention cannot be accepted when the petitioner herein did not appear and contest the proceedings. In the absence of any contest by any of the respondents and when none of the respondents appeared before the Learned Arbitrator although duly served, the learned arbitrator had no option but to accept the case of the claimant, which was supported by the documents on record. Therefore, the contention that by suppressing the facts, the claimant obtained the arbitral award is unacceptable. Such a contention could have been appreciated if the petitioner herein had entered appearance before the learned arbitrator and contested the petition and not otherwise.
22. Elaborating this ground, it is contended that the claimant was aware that the managing trustee and president of the petitioner school had passed away on 18 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 26th May 2021 due to COVID-19 and by suppressing this fact, the claim petition is filed. There is nothing on record to show that the claimant was aware of the death of respondent No. 3 herein, and therefore this contention cannot be accepted as a ground for setting aside the arbitral award.
23. It is then contended that there was an insurance policy taken in the name of the deceased president of the school and the insurance amount is to be adjusted towards the amount due to the claimant. Although the insurance policy is produced along with the present petition, no document is produced to show that any amount has been paid under the insurance policy to the claimant and therefore this is not a ground to set aside the arbitral award.
24. It is then contended that a proceeding was filed in Kolkata, which is a clear proof that the jurisdiction of the dispute is in Kolkata and not in Bangalore. Further contended that, by resorting to recovery proceedings in 19 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 Kolkata, the claimant has waived the arbitration clause and by suppressing these facts, the claim statement was made before the learned arbitrator. From the documents produced along with the petition, it appears that what was filed in Kolkata was not civil proceedings for recovery but a criminal case, which is forthcoming from the order sheet of the Metropolitan Magistrate, 7th Court, Kolkata, produced at page 46 of the petition. This discloses that the complaint was withdrawn under Section 257 of CRPC. Therefore, it is clear that no civil proceeding was filed in Kolkata, and hence there was no waiver of the arbitration clause. On the other hand, the arbitration clause provided for the seat of arbitration to be in Bangalore, and therefore the arbitration proceedings were rightly initiated in Bangalore before Respondent No. 8.
25. It is next contended that the learned arbitrator committed error in entering upon the reference without verifying whether there is compliance of Section 21 of the Act, which is mandatory. This contention cannot be 20 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 accepted because the arbitral records disclose that before initiating the arbitration proceedings, the claimant issued a legal notice dated 24-2-2023 to the learned arbitrator appointing him as the sole arbitrator, and copies thereof were marked to the respondents. Therefore, there is, in fact, a notice in respect of appointment of the arbitrator, copies of which were marked to the respondents, and therefore it cannot be said that there is non-compliance of any mandatory requirement of statute.
26. It is then contended that the respondents were not given an opportunity to dispute the appointment of the learned arbitrator, since it is quite possible that the learned arbitrator appointed by the claimant may be disqualified for any reason. Again, this contention cannot be accepted because copies of the said notice dated 24-2- 2023 were marked to the respondents and the said notice contained a postscript stating the qualification of the learned arbitrator and stating that the learned arbitrator has no direct or indirect relationship or interest to the 21 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 claimant and the appointment does not fall under any categories specified in the 7 th schedule of the Arbitration and Conciliation Act. The said notice is sent to the correct address of the petitioner herein, as stated in the present petition. The R.P.A.D. receipts are marked as exhibit P11(a) to (g) before the learned arbitrator. Therefore, if the respondents were so advised, they could have challenged the appointment of Respondent No. 8 as arbitrator on receipt of the said notice. Having not done so and having failed to contest the arbitral proceedings, it is not open to the petitioner herein at this stage to challenge the appointment on this ground.
27. It is contended in paragraph 18 that there are various litigations between the managing trustee and other trustees of the petitioner, and therefore no notice of arbitral proceedings was ever received. This contention is falsified, as already noted supra, since there is an R.P.A.D. acknowledgment card on record which discloses that the notice issued by the learned arbitrator fixing the 22 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 date of hearing on 20-4-2023 was duly served on the petitioner herein on 5-4-2023.
28. It is then contended in paragraph 19 that the learned arbitrator has not decided the matter in accordance with the substantive law applicable in India. This contention cannot be accepted because when the claimant produced various documents such as promissory notes, loan agreements, etc., in respect of respondents having availed the loan, and when there was no contest to the proceedings by the respondents, the learned arbitrator had no option but to accept the case of the claimant and allow the claim petition.
29. It is then stated that the arbitral award has not stated reasons for allowing the claim petition. Again, for the reasons already noted supra, when the respondents did not contest the petition, the learned arbitrator was bound to accept the case of the claimant which was duly supported by documents, and therefore, this contention cannot be accepted.
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30. It is then contended at paragraph 21 that the arbitral award deals with matters which are not arbitrable. This contention has to be stated only to be rejected because the arbitral award deals with disputes arising out of the loan agreements, which contain the arbitration clause.
31. The contention raised at Paragraph 22 is dealt with while considering the rulings relied upon by Learned Counsel for Petitioner.
32. It is contended at paragraph 23 that when the trust deed is not part of the record, the learned arbitrator could not have allowed the claim against the trust. This contention cannot be accepted because it is not the case of the petitioner that, the petitioner is a trust but instead the trust deed produced at page 26 of the petition is that of Bhagawat Prasad Education Trust, which is Respondent No. 2 herein. However, the said trust, has not filed any petition under section 34 of the Act challenging the arbitral award on this ground and 24 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 therefore, this ground is not available to the petitioner herein.
33. At paragraph 24 it is contended that there are no documents on record to show that the respondents are the guarantors and therefore, in the absence of guarantee deed, the learned arbitrator committed error in allowing the claim petition. It is to be noted that this contention has to be considered only insofar as the petitioner herein is concerned because the other respondents before the learned arbitrator have not preferred any Section 34 petition challenging the award in this regard. It is to be noted that, insofar as petitioner herein is concerned, namely Gurukul Vidyapeet English School, it is the applicant for the additional credit dated 28-11-2021. The said application form is marked as Ex.P 6 in the arbitral proceedings and is styled as "Covid Support Loan Request Letter". The name of the applicant in Ex.P 6 is petitioner herein, but the said application is signed by the then President and Secretary of Bhagwat Prasad 25 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 Gurukul Education Trust. This indicates that Petitioner School and said Trust are part of same organization and it appears the said trust is running the Petitioner school. In this background, if the loan applications are seen, it is noted that all the loan applications are signed by the officials of said Bhagwat Prasad Gurukul Education Trust. The loan agreements are also signed by the officials of the said trust and also of another trust by name, Gnanodaya Education Trust. Therefore, it is clear that all the respondents are essentially one and the same organization running various schools and therefore all the respondents are liable for repayment of the loan and particularly in the absence of the respondents contesting the petition, the arbitrator had no reason to doubt the case set up by the claimant and therefore rightly allowed the claim petition.
34. No other grounds are raised in the petition.
35. No doubt, the Hon'ble Apex Court has held in the case of Lombardi Engineering Limited v.Uttarakhand 26 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 Jal Vidyut Nigam Limited - 2023 SCC OnLine SC 1422, that, "a person having an interest in the dispute or in the outcome or decision thereof, must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint an arbitrator." Therefore, it is clear that a party who is interested in the litigation does not have the power to nominate the arbitrator. That is precisely what has happened in the present case because the claimant has nominated the learned arbitrator. However, the award is not challenged on this ground and therefore in the absence of this ground specifically being raised, the arbitral award cannot be set aside on the said ground.
36. In this regard, the law is settled that, unless the ground is specifically raised in the petition, the court under Section 34 of the Act, cannot set aside the award 27 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 on a ground which is not raised in the petition. Reference in this regard may be made to the law laid down by Hon'ble Bombay High Court in the case of Patel Engineering Company Ltd. v. Konkan Railway Corporation Ltd., 2009 SCC OnLine Bom 657 : (2009) 5 Bom CR 256 : (2009) 3 Arb LR 572 at page 264, as follows;
18. It is to be seen that so far as 1996 Act is concerned, there is no provision similar to the section 34 of the 1940 Act. Therefore, it cannot be said that in the scheme of 1996 Act there is any suo motu power in the Court to set aside an award and the power of the Court of suo motu setting aside an award in 1940 Act do not extend to set aside the award on the grounds which fall within section 30 of the 1940 Act. In our opinion, therefore, the submission has no substance. It is to be seen that the challenge both under sections 34(2)(a) and 34(2)(b) is adversarial and adjudicatory and is not suo motu or inquisitorial. Under both sub-sections 34(2)(a) and 34(2)(b) appropriate grounds and material facts for such grounds, need to be stated in the petition. The only difference in section 34(2)(b) is regarding the burden of proof, apparently on the basis that a Court would be aware of the law for the time beings in force and the public policy of India. In our opinion, therefore, the learned Single Judge 28 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 was not justified in considering the challenge to the award in relation to Claim No. 7 only on the basis of ground (q) in the petition. The order of the learned Single Judge to that extent is liable to be set aside.
(Emphasis Supplied)
37. Secondly, I find that before accepting appointment, the respondent No. 8 has not sent the notice in Form specified in Sixth Schedule to the parties as contemplated under Section 12 (1) of the Act. Instead, in the legal notice dated 24-02-2023, caused by the claimant appointing the arbitrator, a copy of which is also marked to the respondents, a postscript is incorporated stating that the said appointment does not fall under any of the categories of the 7th schedule. However, what is expected under Section 12 (1) is that the Learned arbitrator should disclose the information to the parties in the form incorporated in the 6 th Schedule. Therefore, strictly speaking, there is non-compliance with the requirements of the statute. However, again, this ground is not raised in the petition and therefore it is not 29 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 possible to set aside the arbitral award on a ground which is not raised in the petition. Therefore, although I find that there are two lacunae in the arbitration proceedings, as noted above, it is not possible to set aside the arbitral award on the said grounds when the said grounds are not raised in the petition.
38. All other grounds raised in the petition have already been considered by me supra and rejected.
39. Insofar as the rulings relied upon by the learned counsel for Petitioner, firstly, reliance is placed upon Ellora Paper Mills Limited v State of Madhya Pradesh reported in (2022) 3 SCC 1 wherein the law is laid down that a person who falls within the category set out in the 7th schedule is, as a matter of law, ineligible to be appointed as an arbitrator, and the only way in which his ineligibility can be removed is that the parties may waive the applicability of Section 12(5) by an express agreement in writing. This ruling will not help the petitioner herein because, as already noted supra, no 30 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 ground is raised that, the Learned Arbitrator / Respondent No. 8 was ineligible for appointment as he falls into any of the categories of 7 th Schedule. On the other hand, the only ground taken is that, there was no notice under Section 21 of the Act, whereas such a notice dated 24-02-2023 appointing the arbitrator was in fact issued with copies being marked to all the Respondents and RPAD receipts are produced to show that the same was sent to the respondents.
40. The second ruling on which reliance is placed is in the case of Bharat Broadband Network Limited v. United Telecoms Limited reported in (2019) 5 SCC 755 for the proposition that the appointment of an arbitrator who is ineligible under Section 12(5) read with Schedule 7 is void ab initio. However, in the case on hand, such a ground is not raised in the petition, and therefore, the petitioner cannot raise such a ground at the time of hearing. Thirdly, reliance is placed upon the ruling of Hon'ble Apex Court in Jaipur Zilla Dugdh 31 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 Utpadak Sahakari Sangh v. Ajay Sales and Suppliers reported in (2021) 17 SCC 248, which is in respect of the same proposition of law as the earlier rulings, and for the same reason as noted supra, this ruling is also inapplicable to the case on hand.
41. Next reliance is placed upon the ruling of Hon'ble Delhi High Court in Alupro Building Systems Private Limited vs. Ozone Overseas Private Limited reported in 2017 SCC Online Delhi 7228 for the proposition that notice under Section 21 is mandatory and without such notice, arbitration proceedings are illegal. In the case on hand, I have already noted supra that such a notice dated 24-02-2023 was in fact issued and copies of the same were marked to the respondents including the petitioner herein. Therefore, this ruling will not help the Petitioner herein.
42. Finally, reliance is placed upon the ruling of Hon'ble High Court of Karnataka in C. Muthu v. Bharat Matchworks reported in 1963 SCC Online Karnataka 32 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 88, wherein it is held that a suit filed against a dead person is a nullity. This ruling is relied upon to contend that the initiation of arbitration proceedings is a nullity since respondent No. 3 before the Learned arbitrator was dead as on the date of the claim petition itself, which was within the knowledge of the claimant. Firstly, that the death of respondent No. 3 was within the knowledge of the claimant is not substantiated. Even considering that respondent No. 3 was dead as on the date of the claim petition, it is to be noted that, this is not a case where the sole respondent was dead, but there were other respondents and therefore, even considering that the initiation of arbitration against respondent No. 3 was a nullity since he had already died as on the date of the claim petition, the arbitral award will be valid as against the other respondents who are alive. I draw support for this view from the law laid down by Hon'ble High Court of Karnataka in the case of Ninganna v. Narayana 33 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 Gowda, 1982 SCC OnLine Kar 214 : AIR 1983 Kar 116 : (1983) 1 Kant LJ 241 at page 118, as follows;
8. As far as the first contention urged for the appellants is concerned, we do not find any substance in it. It is true that the deceased inamdar was arrayed as first respondent in the writ petition. But the State Government and the Revenue Appellate Tribunal were impleaded as respondents 2 and 3. The prayer in the writ petition was for the issue of a writ of certiorari quashing the order of the Tribunal. To such a writ petition not only the Tribunal or the authority who made the order, but also the persons in whose favour the order is passed are necessary parties and without they being parties, the petition would not be properly constituted. (See Udit Narain Singh v. Board of Revenue) AIR 1963 SC 786. Therefore while it is correct to say; that as necessary parties were not impleaded no writ could have been issued as prayed, for in the petition, it cannot be said that the proceedings were void ab initio, as this was not a case in which the proceedings had been instituted against a sole defendant or respondent, who was not alive at the time of the institution of the proceedings. The defect of not impleading necessary parties could have been rectified by making an appropriate application for impleading the legal representatives of the deceased inamdar respondent, as respondents to the petition. Therefore, we are unable to agree with the contention of the learned counsel for the appellants that the 34 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 proceedings instituted in W.P. No. 6242 of 1976 were still born or void ab initio.
(Emphasis Supplied)
43. Therefore, this is not a ground to set aside the arbitral award.
44. Hence, for all the reasons noted supra, I hold that the arbitral award does not call for interference on merits. Accordingly, I answer point No. 2 in the negative and proceed to pass the following :-
ORDER.
Delay condoned.
The petition under Section 34 of the
Arbitration and Conciliation Act is
dismissed on merits, with cost.
Office to issue soft copy of this
judgment to both sides by email if
furnished.
[Dictated using Dragon Professional Speech Recognition Software Version 15.3, transcript revised, corrected, 35 CT 1390_Com.AP.161-2023_Judgment.doc KABC170025402023 signed and then pronounced by me in open court on this the 30th day of October, 2024] (Sri. S. Sudindranath) LXXXIII ADDL.CITY CIVIL AND SESSIONS JUDGE, COMMERCIAL COURT; BANGALORE.