Bangalore District Court
Sri. Sarfaraj @ Sarfaraz vs M/S Shriram Equipment Finance Compay ... on 22 August, 2019
IN THE COURT OF THE LXXV ADDL.CITY CIVIL & SESSION
JUDGE, BENGALURU (CCH-76)
Dated this the 22nd day of August 2019
PRESENT:
Smt. S. Nirmala Devi, B.Sc., LLB.
LXXV Addl.City Civil Judge & Session Judge
Bengaluru
A.S.No.34/2016
Petitioner/s: Sri. Sarfaraj @ Sarfaraz
S/o Sri. K.A Abdul Rahiman
Aged about 31 years
R/o Flat No.421, 3rd Floor,
Neeladri Mahal,
No.45/5, Nandidurga Road,
Banaswadi, Bengaluru - 560046.
(By Sri. K.S. B Advocate)
Vs
Respondent/s: 1. M/S Shriram Equipment Finance Compay LTD
Represented by its Manager
No.501, 'B' Block, Ranka Park,
Near Richmond Circle, Lalbag Road,
Bengaluru - 560011.
Karnataka.
Address shown/ given in the Arbitration Proceedings
Registered Office At
3rd Floor, Mookambika Complex
No.4, Lady Desika Road Mylapur
Chennai - 600004.
Branch Office At
A-13, Block B-1,
Mohan Cooperative Industrial Estate
Mathura Road, New Delhi 110044
And also at
Plot No.3384, Beadenpura
Christian Colony
D.B Gupta Road
Karol Bagh
Delhi - 110005.
2. Sri. Vijay Joshi
Sole Arbitrators
Office at No.150-A
Second Floor
Near Gurudwara
Sant Nagar
East Kailash
New Delhi - 110065.
And also at
Chamber No.982
Patiala House Courts
New Delhi -110001.
(By R-1 Sri. K.N.M Advocate, R-2 Sri. Absent)
JUDGMENT
The suit is filed U/S 34 of the Arbitration and Conciliation Act, 1996 by the appellants to set aside the impugned Arbitral Award dated: 6/12/2015 passed by the 2nd respondent in the Arbitration Petition SRE-A /56/2015.
2. Brief facts of the case as follows:
That the respondent no.1 was carrying on its business in Bengaluru as the address shown in the cause title. That the appellant had no knowledge about the respondent offices at Chennai and New Delhi as shown in the impugned Arbitration Petition. The appellant has interacted and conducted all his business with respondent no.1 at the Bengaluru office.
3. The appellant is a licensed civil contractor carrying on his business in the state of Karnataka. His father Sri. K. A Abdul Rahima is also a civil contractor. His father purchased the Doosa Hydraulic Excavator DX210 on 27/10/2011 for a sum of Rs.47,00,000/-. The said purchase was partly financed by the respondent finance company. The respondent has provided loan of Rs.36,40,000/- to the father of the appellant towards the sale consideration. His father repaid the loan of Rs.19,75,000/- as on 5/2/2015. Subsequently the appellant took over the responsibility of the said equipment from his father. Accordingly the respondent agreed to transfer the loan facility in the name of appellant on 5/02/2015. The appellant was granted a loan Rs.28,90,948/-. The appellant has repaid Rs.3,15,000/-. Due to the fluctuation in the business the appellant unable to pay the monthly installments in time/ as per schedule. He informed the same to the respondent . On 11/4/2015 the respondents recovery men delivered a document purported to be an order passed on 20/3/2015 by a "Sole Arbitrator" at Delhi ordering for the appointment of a receiver and to take possession of the hypotheticated equipment from the appellant. Till the receipt of the said document on 11/4/2015, the appellant was not aware about Arbitration Proceedings. The appellant has not consented for any Arbitration Proceedings. He was not intimated about the appointment of the arbitration or the initiation of the said proceedings and as such the Arbitration Proceedings is illegal and not binding on the appellant. That the respondent had obtained signatures of the appellant in several blank papers including blank loan agreement forms at the time of granting the loan facility. The respondent has not filled up any of the forms when the appellant had signed them. The respondent had not given a copy of the loan agreement even though he had assured to furnish the same in due course. The appellant accepted the assurance of the respondent in good faith. However, the respondent has not furnished the copies of the loan agreement and relevant papers. On the contrary the respondent has indulged in concocted documents against the appellant and has committed fraud and preceded with the impugned arbitration. Subsequent to the notice from the 2nd respondent the appellant requested the 2nd respondent through his counsel vide the letter dated: 19/5/2015 for copies of the document and also requested not to proceed with the Arbitration Proceedings purported to be taken up by the Sole Arbitrator. But the failed to comply with the request of the appellant. The respondent proceeded with the impugned proceedings and passed the impugned award. Thereby, the 1st respondent blatantly suppressed the true material facts in Arbitration Proceedings and the 2 nd respondent without adhering to the principles of natural justice has proceeded with the Arbitration Proceedings at the city of New Delhi, without any authority of jurisdiction, in the absence of appellant and passed illegal impugned award on 6/12/2015.
4. The appellant highly aggrieved by the said impugned award the present appeal has been filed U/S 34 (5) of the Arbitration and Conciliation Act, 1996 on the following grounds:-
The entire Arbitration Proceedings in Arbitration Proceedings no. SRE-A-56/2015 is without merits, illegal and void ab initio. That the 1 st defendant had not issued prior/ proper notice for appointment of the 2 nd respondent as an arbitrator. The 1st respondent was not empowered to appoint any arbitrator or refer any dispute against the appellant for arbitration. That the alleged cause of action has taken place within the city of Bengaluru and not in the city of new Delhi. The appellant and 1st respondent ought to have dealt before the courts/ forums in the city of Bengaluru. Hence, the Arbitration Proceedings held at New Delhi by the 2nd respondent is without territorial jurisdiction and hence is illegal and liable to be set aside. The appellant was not at all aware about offices of the 1st respondent situated at Chennai or New Delhi. He signed the blank loan agreement paper at Bengaluru office. He paid the installment of the loan in the 1st respondent office at Bengaluru and not at Chennai and New Delhi as shown in the impugned award. The appellant has not received communication or any document as falsely stated in the impugned award. Hence, no opportunity was given to the appellant as alleged therein. The appellant has not entered in to any contract with the 1 st respondent where in the appellant had agreed that the alleged disputes will be settled by arbitration in Delhi as alleged in the impugned award. The appellant himself has not subjected to the biased, one sided, concocted contract relied by the respondents. The appellant has never agreed to the stipulations relied by the respondents. After the appellant came to know about interim illegal order dated: 20/3/2015 passed by the 2nd respondent he filed O.S no. 3407/2015 before the Hon'ble City Civil Court, Bengaluru which is pending. The 1 st respondent appeared in the said case and not filed written statement. The appellant is not a defaulter. The appellant is repaying the 1st respondent and willfully discharging all his legal debts. Based on these grounds prayed to set side the impugned award in Arbitration Petition SRE-A 56/2015.
5. The respondent no.1 appeared through advocate and filed objection statement to the appeal. This respondent has contended that it is incorporated under the companies Act having its Registered office at Chennai. It is amalgamated with Shriram Transport Finance Company Limited having Registered office at Channai under the companies Act 1956, as per order of Hon'ble High Court of Madras in Company Petition 66/2016. Now the 1st respondent is renamed as Shriram Transport Finance Company Ltd having Registered office at Channai and branch office at Bengaluru. Said company is providing financial services to its valued customers across India. Appellant is a borrower and Mr Sadhashiva Shetty is a guarantor for purchase of vehicle/ equipment hydraulic Excavator 210. The appellant and guarantor executed loan cum hypothetication agreement and agreed to the terms and conditions. The said loan repayable by the appellants in 35 monthly installments of Rs.10,5297/- together with interest at 15.94% P.A commencing from 5/2/2014 to 5/12/2016 without fail. But the appellant become defaulter in repayment of the loan. The loan agreement contained arbitration clause along with the clause stipulating the jurisdiction. Contrary to the said agreed terms of loan agreement, this respondent got issued notice to the appellant and guarantor recalling the entire loan of outstanding. The said notice served to the appellant. On failure of appellant to pay the loan amount demanded or to produce the hypotheticated equipment within time mentioned in the notice, this respondent referred the dispute for sole arbitrator for adjudication vide reference letter dated: 12/3/2015. This respondent has contended that the address given by the appellant is different from the address given in the cause title. This respondent sent the notices to the address given by the appellant in the loan agreement. The appellant never intimated the change of address to the respondent Under this circumstance this respondent constrained to invoke clause 15 of loan agreement and recalled the amount. This respondent invoked the arbitration clause and issued notice dated: 12/3/2015 reference letter to Vijay Joshi, Advocate requesting to resolve the dispute through arbitration. The said reference notice is also served on the appellant and guarantor. Copies of reference notice with postal receipts (2) are annexed at Annexure R1(e). It is intimated that the Arbitration proceedings will be initiated if demanded amount is not paid. When the appellant failed to repay the dues as demanded, the respondent no.1 filed its claim. Upon receipt of reference, The Arbitral Tribunal is constituted and dispute is registered in Arbitration SRE-A-56/2015. The proof of dispatch was filed by the claimant which was taken on record by the tribunal. As per the direction of the tribunal this respondent has filed claim statements and supporting documents along with application U/S 17 of Arbitration and Conciliation Act, 1996 of appointment of exparte receiver to take possession of equipment. Considering the urgency the tribunal passed a separate order on 20/3/2015 and said order is also communicated to the appellant through speed post. The tribunal also issued notice on 20/3/2015 along with documents to the appellant through speed post. But he did not be served for the reason insufficient address. On 25/4/2015 there was no representation from the appellant before the Arbitration Tribunal. The tribunal granted time till 21/5/2015 for filing statement and documents by the appellant. In this regard a notice dated:
28/4/2015 is issued to the appellant which is served on 2/5/2015. Even after the service of the said notice the appellant failed to appear before tribunal and therefore, the tribunal proceeded to adjudicate the matter and passed award. However, on 19/5/2015 one Sri. K. S Bheemaiah Advocate on behalf of the appellant issued a letter to the Arbitral Tribunal and demanded for the documents along with claim petition. Therefore, the appellant has not appeared before the tribunal even after receipt of the notice but got issued un-tenable notice dated: 19/5/2015 and intentionally not chosen to contest the said proceedings. This respondent has denied that the appellant signed blank loan papers and not agreed for arbitration clause. Further, it is contended that in view of the arbitration clause the respondent appointed the arbitrator at Delhi which is as per the agreement and said arbitrator had jurisdiction to adjudicate the dispute. As per S.20 of Arbitration and Conciliation Act the parties are free to agree on the place of arbitration. Accordingly the appellant signed the loan agreement agreeing to the arbitration clause and jurisdiction on his volition and there is no fraud played by this respondent Therefore, the arbitral award is in accordance with law. This respondent prayed to dismiss the suit with exemplary cost.
6. Heard both sides and perused written argument filed on behalf of the 1st respondent and the record.
7. The following points arise for my consideration:
1. Whether appellant proves that issuance of notice U/S 21 of Arbitration and Conciliation Act is mandatory and the 1st respondent has not issued notice ?
2. Whether the appellant is entitled for the relief sought?
3. What decree of order?
8. My findings on the above points are as under:-
Point No.1 In the Affirmative;
Point No.2 In partly Affirmative;
Point No.3 As per final order for the following:
REAS O NS
9. Point No.1: According to the appellant he was not aware about the arbitration clause in the loan agreement and he did not agree for arbitration at New Delhi. The appellant further contended that the arbitrator appointed at Delhi had no territorial jurisdiction to adjudicate the dispute as the loan transaction took place at Bengaluru and appellant executed the documents at Bengaluru, he availed loan from the 1st respondent who is doing business at Bengaluru and he was not aware about the Registered office at Chennai and New Delhi. The appellant has also taken the specific contention that the 1st respondent has not issued notice regarding initiation of arbitral proceeding and this appellant has not consented for the proceedings at New Delhi and he protested the same by issuing a letter dated: 19/5/2015 after receipt of copy of expate interim order from the agents of the 1 st respondent. Thus the appellant has not admitted the receipt of notices issued by the 1 st respondent. Therefore, the 1st respondent contended that the address of the appellant given in the present case and the address given in the loan agreement are different. That the appellant had not informed the change of address. The respondent has also produced the copies of postal receipts having sent the demand notice dated:6/2/2015, postal receipts and postal consignment tracking. This respondent has also produced the copy of loan agreement. On perusal of the said document the appellant has given address as Neeladri Mahal, Jaymahal extension, Nandidurga Road, Bengaluru, Benson Town 560046 in the loan agreement. In the cause title of the present appeal he has given the detail address that is Plat No.421, 3rd Floor, Neeladri Mahal No.45/5, Nandidurga Road, Banaswadi, Bengaluru-46. Thus, except the Plot number there is no change in the address. According to the appellant on 11/4/2015 the recovery men of 1st respondent given copy of order dated:
20/3/2015. Therefore, as per the objection the demand notice dated:
6/2/2015 was served to the appellant. Even the recovery men of the respondent knew the address of the appellant as they served copy of the order. In this case the appellant has not pleaded about the non-service of demand notice dated: 6/2/2015. In any case the respondent has admitted that the said demand notice is not served to the appellant. Also from the copy of postal receipts and postal consignment tracking receipts produced by the respondent it is evident that the demand noticed date: 6/2/2015 is not served to the appellant due to insufficient address.
10. In the objection statement the respondent has contended that a notice dated: 12/3/2015 regarding reference to the arbitration was got issued to Vijay Joshi, Advocate requesting to resolve the dispute through arbitration and copy of the said notice was sent to the appellant and the respondent has produced the copies of reference notice with postal receipts at annexure R1(e). But on perusal of documents produced by the respondent said R1(e) is not produced. But the copy of interim order and the notice dated:
20/3/2015 issued by the arbitrator to the appellant along with postal receipts dated: 13/4/2015 and postal consignment tracking has been produced by the respondent As per the said documents the notice sent by the arbitrator was not served to the appellant due to insufficient address. Therefore, the respondent has not proved that the reference letter dated: 12/3/2015 was issued to the appellant and it was served. Accordingly the respondent failed to prove that the notice dated: 20/3/2015 regarding Arbitration proceedings issued by the arbitrator was served to the appellant. However, on perusal of the impugned award at page 7 & 8 the learned arbitrator has not mentioned about the service of said notices to the appellant and the guarantor. On the other hand he stated that the notice was sent to the last known address of the respondents in that proceedings. But he stated that the matter was proceeded exparte on 21/5/2015 and after that a letter dated: 19/5/2015 from Sh. K. S Bheemaia, Advocate on behalf of the respondent was received by him. He has mentioned about for demand of the documents by the appellant and stated that all the documents were sent to the appellant along with notice dated: 20/3/2015. Therefore, even before receipt of letter dated: 19/5/2015 the arbitrator placed the respondents as exparte in spite of non service of notice of Arbitration proceedings. Therefore, it is evident that the 1 st respondent played fraud in securing the impugned award.
11. The counsel for the appellant vehemently argued that the appellant has issued letter dated: 19/5/2015 to the arbitrator where in he disputed about the arbitration clause and protested the Arbitration proceedings by the sole arbitrator and also stated that he has no consent for the said proceedings and requested to stop further proceedings. A copy of the said letter has been produced by the appellant at document no.11 where in he clearly expressed that he never consented for the arbitration and he signed the blank papers at the time of availing the loan. As per the impugned award the arbitrator received the said letter. On perusal of the impugned award on page 8 the arbitrator has given reasons that there is a legal contract duly executed between the parties which has been duly acted upon by the parties and the Arbitration proceedings have been initiated by the claimants on default committed by the respondents in accordance with the terms and conditions of the agreement and he has been appointed as an arbitrator in accordance to the arbitration clause in the agreement and rejected the contention of the appellants taken in letter dated: 19/5/2015 and treated the said letter as sufficient service and proceeded exparte. Thus, the learned arbitrator has not verified and given finding regarding the issuance of reference notice to the appellants as contemplated U/S 21 of Arbitration and Conciliation Act, 1996.
12. The counsel for the appellant argued that the issuance and service of notice U/S 21 of Arbitration and Conciliation Act is mandatory and as the appellant issued letter dated: 19/5/2015 to the arbitrator clearly stating that he was not aware about the arbitration clause in the loan agreement and he has not agreed for arbitration at Delhi and requested to stop the proceedings. Therefore, the arbitrator ought to have stopped the proceedings. In this regard the respondent has stated that a reference notice dated: 12/3/2015 was issued to the appellant. But not produced the copy of the said notice as already pointed out. In view of the ground urged in the appeal and also argument addressed by the advocate for appellant it is just and necessary to give finding on this aspect.
13. On perusal of the objection statement of the respondent, the respondent has stated that contrary to the terms and conditions of loan agreement regarding arbitration clause, a notice dated: 6/2/2015 demanding/ recalling the entire loan outstanding was issued to the appellant and the guarantor. A copy of the said notice has been produced. On perusal of the said document the respondent has not whispered about existence of an agreement regarding arbitration clause in the loan agreement nor it is stated that the said notice is to be treated as a notice U/S 21 of Arbitration and Conciliation Act, 1996. Accordingly the respondent has not produced the reference notice dated: 12/3/2015 as contended in the objection nor proved that it is served to the appellant. Therefore, no piece of document has been placed on record by the respondent to prove that before appointing the sole arbitrator, the respondent had issued notice U/S 21 of Arbitration and Conciliation Act, 1996 and taken the consent of the appellant for referring dispute to the sole arbitrator.
14. Regarding the issuance and service of notice U/S 21 of Arbitration and Conciliation Act, 1996 is mandatory, the following decisions may be relied on:-
(1) In the case of Alupro Building Systems Pvt .Ltd V/s Ozone Overseas Pvt. Ltd where in the Hon'ble High Court of Delhi has held as follows:-
24. Section 21 of the Act reads as under:
"21. Commencement of arbitral proceedings.--Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent."
25. A plain reading of the above provision indicates that except where the parties have agreed to the contrary, the date of commencement of arbitration proceedings would be the date on which the recipient of the notice (the Petitioner herein) receives from the claimant a request for referring the dispute to arbitration.
The object behind the provision is not difficult to discern. The party to the arbitration agreement against whom a claim is made, should know what the claims are. It is possible that in response to the notice, the recipient of the notice may accept some of the claims either wholly or in part, and the disputes between the parties may thus get narrowed down. That is one aspect of the matter. The other is that such a notice provides an opportunity to the recipient of the notice to point out if some of the claims are time barred, or barred by any law or untenable in fact and/or that there are counter-claims and so on.
26. Thirdly, and importantly, where the parties have agreed on a procedure for the appointment of an arbitrator, unless there is such a notice invoking the arbitration clause, it will not be possible to know whether the procedure as envisaged in the arbitration clause has been followed. Invariably, arbitration clauses do not contemplate the unilateral appointment of an arbitrator by one of the parties. There has to be a consensus. The notice under Section 21 serves an important purpose of facilitating a consensus on the appointment of an arbitrator.
27. Fourthly, even assuming that the clause permits one of the parties to choose the arbitrator, even then it is necessary for the party making such appointment to let the other party know in advance the name of the person it proposes to appoint. It is quite possible that such person may be 'disqualified' to act an arbitrator for various reasons. On receiving such notice, the recipient of the notice may be able to point out this defect and the claimant may be persuaded to appoint a qualified person. This will avoid needless wastage of time in arbitration proceedings being conducted by a person not qualified to do so. The second, third and fourth reasons outlined above are consistent with the requirements of natural justice which, in any event, govern arbitral proceedings.
28. Lastly, for the purposes of Section 11 (6) of the Act, without the notice under Section 21 of the Act, a party seeking reference of disputes to arbitration will be unable to demonstrate that there was a failure by one party to adhere to the procedure and accede to the request for the appointment of an arbitrator. The trigger for the Court's jurisdiction under Section 11 of the Act is such failure by one party to respond.
29. Of course, as noticed earlier, parties may agree to waive the requirement of such notice under Section 21. However, in the absence of such express waiver, the provision must be given full effect to. The legislature should not be presumed to have inserted a provision that serves a limited purpose of only determining, for the purposes of limitation, when arbitration proceedings commenced. For a moment, even assuming that the provision serves only that purpose viz. fixing the date of commencement of arbitration proceedings for the purpose of Section 43 (1) of the Act, how is such date of commencement to be fixed if the notice under Section 21 is not issued? The provision talks of the 'Respondent' receiving a notice containing a request for the dispute "to be referred to arbitration". Those words have been carefully chosen. They indicate an event that is yet to happen viz. the reference of the disputes to arbitration. By overlooking this important step, and straightaway filing claims before an arbitrator appointed by it, a party would be violating the requirement of Section 21, thus frustrating an important element of the parties consenting to the appointment of an arbitrator.
30. Considering that the running theme of the Act is the consent or agreement between the parties at every stage, Section 21 performs an important function of forging such consensus on several aspects viz. the scope of the disputes, the determination of which disputes remain unresolved; of which disputes are time-barred; of identification of the claims and counter-claims and most importantly, on the choice of arbitrator. Thus, the inescapable conclusion on a proper interpretation of Section 21 of the Act is that in the absence of an agreement to the contrary, the notice under Section 21 of the Act by the claimant invoking the arbitration clause, preceding the reference of disputes to arbitration, is mandatory. In other words, without such notice, the arbitration proceedings that are commenced would be unsustainable in law ".
(2) In the case of Pratibha Vidyalayam V/s M/s Edu Comp Solutions Ltd and others the Hon'ble High Court of Delhi has held as follows:-
The inescapble conclusion on a proper interpretation of S.21 of the Act is that in the absence of an agreement to the contrary, the notice U/S 21 of the Act by the climate invoking the arbitration clause, the preceding the reference to disputes to arbitration is mandatory.
(3) In the case of State of Goa V/s Praveen Enterprises reported in AIR 2011 SC 3814 the Hon'ble Supreme Court has held that
13. Section 21 provides that unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commences on the date on which a request for that dispute to be referred to arbitration is received by the respondent. Taking a cue from the said section, the respondent submitted that arbitral proceedings can commence only in regard to a dispute in respect of which notice has been served by a claimant upon the other party, requesting such dispute to be referred to arbitration; and therefore, a counter claim can be entertained by the arbitrator only if it has been referred to him, after a notice seeking arbitration in regard to such counter claim. On a careful consideration we find no basis for such a contention. The purpose of section 21 is to specify, in the absence of a provision in the arbitration agreement in that behalf, as to when an arbitral proceedings in regard to a dispute commences. This becomes relevant for the purpose of section 43 of the Act. Sub-section (1) of section 43 provides that the Limitation Act 1963 shall apply to arbitrations as it applies to proceedings in courts. Sub-section (2) of section 43 provides that for the purposes of section 43 and the Limitation Act, 1963, an arbitration shall be deemed to have commenced on the date referred to in section 21 of the Act. Having regard to section 43 of the Act, any claim made beyond the period of limitation prescribed by the Limitation Act, 1963 will be barred by limitation and the arbitral tribunal will have to reject such claims as barred by limitation.
(4) In the case of Oval Investment Pvt. Ltd and others V/s India Bulls Financial Service Ltd and other and in M/S Lanco Rani J.V V/s National Highway Authority of India the Hon'ble High Court of Delhi has held that notice U/S 21 of Arbitration and Conciliation Act, 1996 is mandatory before commencement of arbitration proceedings.
(5) In the case of Indus India Bank Ltd V/s Mulchand B. Jain the Hon'ble High Court of Madras in para 9 & 10 has held that the the arbitration shall be deemed to have commenced on the date referred in notice under Section 21 and in the absence of notice the Arbitration proceeding is barred and the arbitration is not commenced.
15. In the present case though the respondent has contended that it got issued reference notice dated: 12/3/2015 to the appellant but no such notice has been produced. In this regard there is no finding in the impugned arbitral award. Therefore, admittedly the respondent has not issued notice U/S 21 of Arbitration and Conciliation Act, 1996. In view of the above cited decisions as the respondent has not got issued the notice U/S 21 of the Act and the arbitrator has not served the notice of the arbitration proceeding to the appellant and for both reasons the impugned award is not valid. Therefore, the arbitrator has not followed the procedure in the arbitration proceedings and passed the impugned award without service of notice on the appellant which denial of principles of natural infracture is opposed to public policy. Hence, I answer Point No.1 in the Affirmative.
16. Point No.2: In this appeal the appellant has also challenged the impugned order on another ground that there was no arbitration agreement to resolve the dispute at Delhi and therefore, the appointment of arbitrator at Delhi and passing of impugned order is without territorial jurisdiction. The said contention is taken on the ground that the appellant is an ordinary resident of Bengaluru and the respondent is doing the business at Bengaluru, the loan transaction took place at Bengaluru, the loan papers executed at Bengaluru and the hypotheticated equipment is at Bengaluru and the appellant made repayment of loan installments at Bengaluru and therefore, no part of cause of action arose at Delhi. In this regard the appellant has produced the receipts and the loan agreement. On perusal of the receipts the address of the respondent is shown as Mumbai. In the loan agreement the Chennai address of the respondent is given. On perusal of the loan agreement it appears that it is a Standard Contract Form. By virtue of the letter dated: 19/5/2015 the appellant protested for appointment of arbitrator and arbitration proceedings at Delhi and therefore, he expressed that he has no consent for the proceeding. Therefore, the respondent ought to have followed the procedure contemplated for appointment of arbitrator under the provisions of Arbitration and Conciliation Act, 1996. However, without following the said procedure the impugned award has been passed which is contrary to the provisions of Arbitration and Conciliation Act, 1996. Therefore, at this stage it is not necessary to give finding in respect of the territorial jurisdiction as if the impugned award is set aside the respondent is bound to initiate the arbitral proceeding with due process of law. Hence, the appellant is entitled for the relief based on the ground that no prior notice regarding reference to the arbitration was not issued and the consent of the appellant was not taken for the appointment of arbitrator. Hence, I answer Point No.2 in partly Affirmative.
17. Point No.3: In view of the above discussion I proceed to pass the following:
ORDER The application filed U/S 34 of Arbitration and Conciliation Act, 1996 is allowed.
The impugned arbitral award dated: 6/12/2015 passed in Arbitration petition No. SRE-A-56/2015 is set aside.
No order as to cost.
The respondent is at liberty to initiate fresh proceedings with due process of law.
{Dictated to the Stenographer directly on computer, corrected and then pronounced by me in open court this 22nd day of August 2019} (S.NIRMALA DEVI) LXXV ADDL.CITY CIVIL & SESSION JUDGE, BENGALURU