Delhi District Court
Virender Mishra vs M/S Bansal Credits Limited on 4 June, 2021
In the Court of Shri Sanjiv Jain,
District Judge (Commercial Court)-03, Patiala House Courts
New Delhi
ARBT No. 2225/18
Virender Mishra,
S/o Sh. Vikram Mishra,
T-31, T-Series, East Mehram Nagar,
Government Co-Education School,
New Delhi. ... Petitioner/objector
versus
M/s Bansal Credits Limited,
2nd Floor, Kiran Sadan,
Above Allahabad Bank,
Ansari Road, New Delhi-110002
... Respondent/claimant
Date of institution : 05.06.2018 Date of reserving judgment : 24.03.2021 Date of decision : 04.06.2021 JUDGME NT
1. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (as amended upto date) hereinafter called the 'Act' challenges the award dated 16.02.2016 passed by the Arbitrator Sh. Ajay Gaur for a sum of Rs. 3,64,222.43 along with interest @ 24% per annum w.e.f. 02.01.2015 till its realization and cost of Rs. 10,000/- towards the arbitral proceedings.
ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.1 of 19 Brief facts:
2. Briefly the facts as stated in the petition are that the petitioner along with Bajrangi Pandit, Joginder Kumar and Sunny Malhotra (respondent nos. 2, 3 & 4 in the claim petition) had approached the respondent to take on loan cum hypothecation basis an Echo Car, Model 2011. The respondent considered his request and agreed to give loan to the petitioner for purchase of the car bearing registration no. DL1-LP-1939. The parties entered into a loan cum hypothecation agreement no. S 6076-E-05 dated 05.12.2012, whereby the petitioner agreed to pay to the respondent monthly hire as per schedule 1 mentioned in the agreement. Respondent nos. 2, 3 & 4 (in the claim petition) stood as guarantors to the aforesaid vehicle in their individual and personal capacity interalia to pay the loan amount as per the agreement to the respondent. It was agreed that the guarantee and the liability would be coextensive with that of the loan. In case of any failure, breach and / or default of the terms and conditions of the agreement by the petitioner, respondent nos. 2 & 3 of the claim petition would be responsible for the compliance of the agreement and make good the losses accrued / due to the respondent. Petitioner and the respondent nos. 2, 3 & 4 of the claim petition also agreed to pay on demand the total outstanding amounts of installments along with other incidental charges. The loan amount of Rs. 3,51,000/- was ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.2 of 19 repayable in 29 monthly installments @ Rs. 12,100/-. First installment was of Rs. 12,200/- and payable on 05.01.2013 and the subsequent installments were payable on or before 5th of each succeeding calendar month.
3. It is alleged that the petitioner failed to pay the monthly installments as per the agreement. The respondent gave various reminders to the petitioner calling upon him to pay the outstanding loan installments but he failed to pay the amount. The respondent then filed a petition under Section 9 of the Act for appointment of the 'Receiver' to take possession of the vehicle. Vide order dated 11.04.2014, a receiver was appointed by the Court to repossess the vehicle. The petitioner surrendered the vehicle on 08.07.2014.
4. As per clause 10.14 of the agreement, all disputes / differences and / or claims arising out of the agreement, would be referred to the Sole Arbitrator Sh. Ajay Gaur. The respondents issued an arbitration notice dated 09.09.2014 calling upon the petitioner and other respondents of the claim petition to pay Rs. 3,15,078.43 along with interest as per the agreement within 15 days from the receipt of the notice, failing which, the matter shall be referred to the Arbitral Tribunal in accordance with the agreement. As per the statement, as on 15.12.2014, Rs. 2,22,353.43 were outstanding towards the installments and Rs. 1,41,869/- towards the incidental ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.3 of 19 charges. The petitioner filed a statement of claim before the Arbitrator on 02.01.2015, notice of which was given to the petitioner and other respondents of the claim petition through registered post for 30.01.2015, which were delivered on them as per the tracking report but despite that none appeared and they were proceeded against ex parte. The respondent tendered the affidavit of its AR Mr. R. P. Tripathi, who also exhibited the documents.
5. The respondent also moved an application under Section 17 of the Act seeking permission to sell the vehicle, which was disposed of vide order dated 20.01.2015. It was observed by the Arbitrator that as on 15.12.2014, an amount of Rs. 3,64,222.43 along with interest is payable by the petitioner and the respondents of the claim petition. He referred clause 9 of the agreement interalia that the respondent is having the absolute right to dispose of the vehicle after repossessing by sale or rehire at any price or term, it may think fit without any notice or obligation to the hire / petitioner. It was observed that the motor vehicle depreciates over a period of time, whereas, the dues either remain the same or increase due to addition of interest component and / or other incidental charges. In these circumstances, it is necessary that the vehicle be sold and the amount be liquidated at the earliest. Finding a prima facie case in favour of the respondent and that the respondent would be prejudiced or would suffer ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.4 of 19 irreparable loss and also finding balance of convenience in favour of the respondent, the Arbitrator allowed the application and permitted the respondent to sell the vehicle in the open market to fetch a maximum amount and adjust the sale proceeds in the dues. The respondent accordingly sold the vehicle for Rs. 1,00,000/- on 09.02.2015.
6. The Arbitrator, after hearing the respondent passed the impugned award and ordered that the amount received on account of sale of the vehicle would be adjusted against the awarded amount.
7. The petitioner challenged the award alleging that he had been regularly paying the EMIs to the respondent. He, however, lost some of the receipts but he never defaulted in the payments of EMIs. After some time, the vehicle met with an accident and was sent for repair for few days. Due to financial hardship, he could not pay two installments. He after sometime, went to the office of the respondent to pay the remaining installments but the respondent malafidely ignored to accept the amount / installments on one pretext or the other and filed the petition under Section 9 of the Act making a false ground to get the order qua repossession of the vehicle. In July 2014, the Receiver came to his house and showed him the order. Although, he told the receiver that he is ready to pay the whole amount but the receiver did not receive the amount and forcibly repossessed the vehicle. He went to the office of the ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.5 of 19 respondent several times and requested to release the vehicle but the respondent refused and said that after selling the vehicle, it would adjust the amount against the remaining installments and gave an assurance that it would not file any case regarding the claim. In the meantime, his real brother expired and he went to his native place at Bihar for few months.
8. It is alleged that the impugned award was passed without giving him opportunity to defend his case. He came to know of the award when he received the summons on 15.03.2018 from the Court of Ld. ADJ, Patiala House, New Delhi in the Execution Petition No. 5670/2016 to appear on 24.04.2018. It is stated that the impugned award dated 16.02.2016 was obtained by playing fraud, which is liable to be set aside.
9. The petitioner challenged the award on the following grounds:
A) That the Arbitrator failed to appreciate that in the Section 9 petition, the respondent had alleged that the petitioner had paid 13 installments out of 20 installments but in the claim petition, it had alleged that the petitioner has paid only the 7 installments.
B) That pursuant to the order of the Court in Section 9 petition, the vehicle was repossessed in July 2014 but the arbitral proceedings commenced in January 2015. That the respondent had no cause of action to file the claim since the ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.6 of 19 vehicle had already been repossessed, which he had surrendered on the condition that the respondent would not file any claim in any Court in future.
C) That the Arbitrator failed to appreciate that the respondent never issued any demand notice to the petitioner before filing the claim nor it received any notice qua termination of the agreement and appointing Sh. Ajay Gaur as the Sole Arbitrator nor it received any notice from the Arbitrator nor it received the signed copy of the award from the Arbitrator.
10. On getting the notice of the petition, the respondent filed its reply alleging that the petition is barred by limitation. It is stated that the petition has been filed after one year & seven months of passing of the award. It is stated that the petitioner was duly served with the notice sent by the Arbitrator and thereafter, he was proceeded against ex parte. Copy of the award was posted on 27.02.2016 on the very address given in the agreement and it was duly served. Reference is made of Section 3 of the Act, which interalia provides that any written communication is deemed to have been received, if it is delivered to the addressee personally or at his place of business, habitual residence, mailing address by a registered letter. It is stated that the petitioner has made the false allegations that he came to know of the impugned award after he received the notice from the Executing Court. It is stated that the grounds taken by the petitioner ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.7 of 19 do not come in the ambit of Section 34 of the Act and the petition is liable to be dismissed. It is stated that the petitioner has not paid the outstanding dues even after the attachment order by the Court.
11. The respondent denied the averments made in the petition and stated that the petitioner was never regular in payment of installments. He has annexed only the seven receipts showing the payment of Rs. 89,700/-. He has paid Rs. 1,09,700/- to it and the receipt of Rs. 1250/- relates to another loan agreement. The respondent denied that the petitioner defaulted the payments of only two installments. It is stated that when Section 9 petition was filed, the petitioner was in default of seven installments. It denied that the petitioner was ready to pay the whole amount but it was not willing to accept the amount. It is stated that the notices dated 22.08.2014 & 09.09.2014 for the appointment of the Arbitrator were sent to the petitioner but the petitioner did not reply nor made the payment. It denied that the Arbitrator passed the award without giving opportunity to the petitioner to defend his case. It is stated that the petitioner though, being aware of the proceedings, did not participate in the arbitral proceedings to avoid the payments due to the respondent. The petitioner was also sent a termination notice on 06.02.2014 before the appointment of the receiver. The respondent denied that there was an condition on the surrendering of the vehicle ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.8 of 19 that it would not file any claim before any authority. It is stated that the vehicle was sold after taking the permission from the Arbitrator. Mere surrendering the vehicle would not absolve the petitioner from his liability to pay the dues of the respondent.
12. I have heard the arguments advanced by Sh.
Markanday Gupta, Ld. Counsel for the petitioner and Sh. Vikas Sehgal, Ld. Counsel for the respondent. Arbitral record was also summoned.
13. Ld. Counsel for the parties reiterated what has been stated in the petition and the reply.
14. I have perused the proceedings and the award.
15. The statutory period for filing an application / petition for setting-aside the award is provided in sub Section (3) of Section 34 of the Act, which reads as under:
(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."
16. Reading of Section 34 (3) of the Act, leaves no ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.9 of 19 manner of doubt that the period of limitation is three months. If the objections are filed beyond three months, then the delay in filing can be condoned upto a maximum period of 30 days and not more. Condonation of delay in the extended period of 30 days, is at the discretion of the court, provided the party satisfies the court that there was 'sufficient cause' for the delay. Delay in initial filing, beyond 30 days cannot be condoned, even for one day.
17. The Supreme Court in the case of Union of India Vs. Popular Construction Co., 2001 (7) SCC 354 held that Section 5 of the Limitation Act is not applicable to Section 34 (3) of the Arbitration & Conciliation Act, 1996 in view of the express inclusion within the meaning of Section 29 (2) of the Limitation Act, 1963. It was held that the court cannot condone delay beyond a period of 30 days and that also only if sufficient cause is shown as to how the applicant/petitioner was prevented from making application within the period of three months and not thereafter. It was observed that the history and the scheme of 1996 Act support the conclusion that the time-limit prescribed under Section 34 to challenge the award is absolute and unextendable by the court under Section 5 of the Limitation Act. This objective has found expression in Section 5 of the Act, which prescribes the extent of judicial intervention in no uncertain terms. It provides that in the matters governed by this part, no judicial authority shall ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.10 of 19 intervene except where so provided in this part.
18. It was observed in the case of Oil and Natural Gas Corporation Ltd Vs. Joint Ventures of Sai Rama Engineering Enterprises, 2019 SCC Online Del 10456 that a reading of judgments is a pointer to the fact that while in condonation of delay, the courts have been generally liberal but when it comes to Section 34 (3) of the Act, the limitation period is inelastic and meant to be strictly followed.
19. In the instant case, the impugned award was passed on 16.02.2016. As per the postal receipts attached with the award, signed copy of the award was sent at the addresses of the petitioner and the respondents of the claim petition on 27.02.2016. The address of the petitioner mentioned in the postal receipt is the same as mentioned in the petition under Section 34 of the Act. Section 3 of the Act specifically provides that any written communication is deemed to have been received, if it is delivered to the addressee at its place of business / habitual residence or mailing address and the said written communication is deemed to have been received, if it is sent to the addressee's last known address of business, habitual residence or mailing address by registered letter.
20. Order 5, proviso to Sub-rule (5) of Rule 9 of CPC provides that where the summons was properly addressed, ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.11 of 19 prepaid and duly sent by registered post acknowledgment due, the declaration referred to in this sub rule shall be made notwithstanding the fact that the acknowledgment having been lost or mislaid, or for any other reason, has not been received by the Court within thirty days from the date of issue of summons, the Court shall presume that notice has been duly served. Further, Section 27 of the General Clause Act 1897 provides the similar provision. It is well settled law that the presumptions are rebuttable. It is always open to the defendants to rebut the presumption by leading convincing and cogent evidence. (See cases Harcharan Singh Vs. Shivrani, (1981) 2 SCC 355, Madan & Company Vs. Wazir Jaivir Chand, (1989) 1 SCC 264, (1989), 2 SCC 602 and Basant Singh VS. Roman Catholic Mission, (2002) 7 SCC 531).
21. In the case of Pel Industries Ltd. & Ors. vs S.E. Investment Ltd, OMP (COMM) 152/2016, decided on 23rd April, 2018 by the High Court of Delhi, it was held that Section 3 of the Act provides for the mode of service of the written communication in the Act. The same is reproduced herein below:-
"3. Receipt of written communications. -
(1) Unless otherwise agreed by the parties, -
(a) Any written communication is deemed to have been received if it is delivered to the addressee personally or at his place of business, habitual residence or mailing address, and ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.12 of 19
(b) If none of the places referred to in clause (a) can be found after making a reasonable inquiry, a written communication is deemed to have been received if it is sent to the addressee's last known place of business, habitual residence or mailing address by registered letter or by any other means which provides a record of the attempt to deliver it.
(2) The communication is deemed to have been received on the day it is so delivered.
(3) This section does not apply to written communications in respect of proceedings of any judicial authority."
9. In Shabnam Gulati v. M/s Religare Finvest Pvt. Ltd. 2017 SCC OnLine DEL 11656, this Court had explained the effect of Section 3 of the Act as under:-
"18. Section 3(1) of the Arbitration and Conciliation Act, specifically states that a written communication is deemed to have been received, if it is sent to the addressee's last known place of business, habitual address or mailing address by registered letter or by any other means which provides a record of "attempt to deliver it". Therefore, unlike Sub-Rule 5 of Rule 9 of Order V of CPC requiring proof of acknowledgment or any other receipt of due delivery of the summons, or drawing of a presumption of due service only where the summons were properly addressed but the acknowledgement was lost or misled or for any other reason was OMP (Comm.) No.152/2016 Page 5 not received by the Court, under the Arbitration and Conciliation Act sending of notice by registered letter or by other means at last known place of business, habitual residence or mailing address which provides the record of "attempt to deliver it" is sufficient to draw a presumption of service. In fact the sub- section holds that it is deemed service.
19. It is also important to note here that Section 19(2) of the Arbitration and Conciliation Act, specifically provides that the Arbitral Tribunal shall not be bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872. Arbitration and Conciliation Act is a special statute and would therefore have primacy in matters of procedure, including mode of service of notice issued by the Arbitrator. In view, thereof, Order V of CPC would not have direct application in matter of mode and/or manner of service. Moreover, it is obvious that the appellant was trying to avoid service and wanted to take advantage of slyness and pretence."
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10. As it is not denied that the address mentioned in the Statement of Claim before the Arbitrator and upon which notices had been sent to the petitioners is correct, the service of notices on the petitioners was duly proved before the Arbitrator, and as they failed to appear before the Arbitrator, they were rightly proceeded ex parte by the Arbitrator.
22. In the instant case, the petitioner, despite opportunities given, failed to rebut the presumptions by leading convincing and cogent evidence. In view of the settled proposition of law as discussed above, I am of the opinion that the petitioner was duly served of the award in February / March 2016 itself but he filed the petition under Section 34 of the Act on 05.06.2018 i.e. after about two years & three months i.e. beyond the period of 120 days. The reasons given by the petitioner in the application for condonation of delay do not seem to be plausible.
23. The postal receipts forming part of the arbitral proceedings also show that the petitioner and other respondents were sent the notice dated 22.08.2014 calling upon the petitioner and other respondents to pay Rs. 3,15,078.43 along with the interest as per the agreement w.e.f. 12.08.2014 and in default, the matter shall be referred to the Sole Arbitrator Sh. Ajay Gaur. On 09.09.2014, the petitioner and other respondents were again sent the notice containing the same mailing address as stated in the petition. Even, the Arbitrator had sent a notice on 02.01.2015 calling upon the petitioner and other respondents to appear and participate in the proceedings, at ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.14 of 19 the addresses mentioned in the petition but despite that the petitioner and the other respondents did not respond to the notice nor appeared before the Arbitrator.
24. In the case of Simplex Infrastructure Limited v/s Union of India (2019) 2 SCC 455, the application / petition under Section 34 of the Act was filed with an application for condonation of delay of 514 days. One of the reasons stated by the respondent for delay in filing an application under Order 34 of the 1996 Act was that the departmental office was located at Port Blair, Andaman and it was a time consuming process for obtaining permission from the circle office at Chennai. It was held that the administrative difficulties would not be a valid reason to condone a delay above and beyond the statutory prescribed period under Section 34 of the 1996 Act. It was held that in view of the period of limitation prescribed in Section 34(3), the learned Single Judge of the High Court was not justified in condoning the respondent's delay of 514 days in filing the application.
25. It was held that the use of the words 'but not thereafter' in the proviso makes it clear that the extension cannot be beyond 30 days. Even if the benefit of Section 14 of the Limitation Act is given to the respondent, there will still be a delay of 131 days in filing the application, i.e. beyond the strict timelines prescribed in sub section (3) read along with the proviso to Section 34 of the 1996 Act.
ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.15 of 19 The delay of 131 days cannot be condoned. To do so, as the High Court did, is to breach a clear statutory mandate. It was held that after the order of dismissal of the application by the District Judge, the respondent took almost 44 days (excluding the date of dismissal of the application by the District Judge and the date of filing of application before the High Court) in filing the application before the High Court. Hence, even if the respondent is given the benefit of the provision of Section 14 of the Limitation Act in respect of the period spent in pursuing the proceedings before the District Judge, Port Blair, the petition under Section 34 was filed much beyond the outer period of ninety days. In the case of National Highway Authority of India (supra), the petitioner was notified by the Registry to file it in the correct category which was under Section 34 of the Act, the petition having been filed on November 06, 2019 was beyond the period of limitation. The High Court relied on the judgment in the case of Union of India v/s Popular Construction Company (supra) and held that the petition being hit by limitation is not maintainable.
26. In the instant case also, the petition has been filed after two years & three months i.e. much beyond the outer period of 120 days from the date of service of the award on the petitioner.
27. In the case of DDA v/s Durga Construction, (2013) ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.16 of 19 SCC Online Del 4451, it was held that although the courts have the jurisdiction to condone the delay, the approach in exercising such jurisdiction cannot be liberal and the conduct of the applicant will have to be tested on the anvil of whether the applicant acted with due diligence and dispatch. The applicant would have to show that the delay was on account of reasons beyond the control of applicant and could not be provided despite all possible efforts by the applicant.
28. Having examined the entire gamut of facts in the present case, I am of the opinion that there is delay in filing the petition, which is beyond a period of 120 days as prescribed under Section 34 (3) and proviso to the said section of the Act. This court has no power to condone the delay beyond the period of 120 days as held by the Superme Court in the case of Union of India Vs. Popular Construction Co. (supra) and Simplex Infrastructure Limited (supra). The application for condonation of delay, thus deserves to be dismissed.
29. As regards the contention that the permission of the Court was not taken before disposing of the vehicle, the arbitral proceedings would show that after the vehicle was repossessed pursuant to the order on the petition under Section 9 of the Act, the matter went to the arbitration, where the respondent filed an application under Section 17 of the Act seeking permission to sell the vehicle. Since, the ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.17 of 19 Arbitrator had seized of the matter, so under Section 17 of the Act being pari materia with Section 9 of the Act, the Arbitrator could take interim measures of protection as may appear to him to be just & convenient and he would have the same power for making orders, as the Court has for the purpose of, and in relation to any proceedings before him.
30. Clause 9.2 of the agreement provides that the lender / respondent shall be absolutely entitled to sell, assign or transfer in any manner in whole or in part all its right and interest. Any cost in this behalf whether on account of such sale etc of rights and recovery of outstanding and dues shall be to the account of the borrower and the borrower acknowledges to pay the difference between the loan amount outstanding and the amount received by the lender in the event of transfer to the 3rd party. In the instant case, the Arbitrator has correctly invoked clause 9 of the agreement and passed the order dated 30.01.2015 allowing the respondent to sell the vehicle in the open market to the maximum amount and adjust the sale proceeds in the dues. The respondent had also intimated the Arbitrator vide application dated 15.12.2015 of selling of the vehicle for an amount of Rs. 1,00,000/-. In the impugned award dated 16.02.2016, it has been ordered that the amount received on account of the said vehicle will be adjusted against the awarded amount.
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31. For the aforesaid reasons, the present petition being hit by limitation is not maintainable and the same is dismissed without going into the merits on the challenge to the impugned award dated 16.02.2016.
32. No order as to costs.
33. File be consigned to record room.
Announced in open court today i.e. 4th June, 2021 (Sanjiv Jain) District Judge (Commercial) - 03 Patiala House Courts, New Delhi ARBT No. 2225/18 Virender Mishra VS. M/s Bansal Credits Limited Page No.19 of 19