Dismissed

M/S Ajay Transport Company v. L and T Finance Ltd.

Bombay HC6 Aug 2014ARBP/1185/2014

Case brief

AI extract

What is this about?

The Single Judge dismissed an arbitration petition challenging an award made under section 34. The court held that the petitioner refused to appear despite valid notices and prior defaults, rendering the challenge frivolous. Costs of Rs. 50,000 were awarded.

What did the court decide?

Arbitration Petition dismissed with costs fixed at Rs.50,000/-.

M/S Ajay Transport Company Vs L and T Finance Ltd. — Arbitration | Bombay HC (2014)

ARBPL No.386_2013

jsn

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

¶5

ARBITRATION PETITION (L.) NO.386 OF 2013

¶6

M/s. Ajay Transport Company … Petitioner Vs.

¶7

L & T Finance Ltd. … Respondent

¶8

Mr. Rajnish Shrivastava, Adv. for the petitioner. Ms. S.I. Joshi, Adv. a/w. Mr. Anand Pojari, Adv. a/w. Nikita Pawar, Adv. i/b. S.I. Joshi & Co. for respondent.

¶9

CORAM : MRS. ROSHAN DALVI, J. DATE : 6th August, 2014.

¶10

P.C. :

¶11

The petitioner has challenged the award dated 7^th November, 2012 under section 34 of the Arbitration and Conciliation Act, 1996 (the Act). The petitioner took a loan of Rs.1.32 Crores from the respondent on 23^rd December, 2010. The petitioner is a partnership firm. The partners were guarantors. A loan – cum - hypothecation agreement and demand promissory note dated 23^rd December, 2010 were executed by the petitioner. A separate deed of guarantee agreement was executed by the partners on the same day in favour of respondent. Under the loan agreement the petitioner was to make payments of 34 EMIs of Rs.90,000/- with last installment of Rs.75,000/-.

¶12

Clause 12 of the loan agreement provided the events of defaults. Under Clause 12.1 the failure of the petitioner to pay loan installments, interest and all other moneys payable or part thereof within the stipulated time mentioned therein, would be an event of

ARBPL No.386_2013

jsn

default.

Clause 13 of the loan provided consequences in the event of default.

¶18

Clause 13.1 stated about the termination of the loan agreement. Under C lause 13.2 there was recovery of the arrears of monies due and remaining unpaid.

¶19

Under Clause 13.3 there was right to initiate legal action under the applicable laws.

¶20

Under Clause 13.4 there was right to repossess, sell or otherwise dispose off the assets of the petitioner

¶21

and

¶22

Under Clause 13.5 there was right of giving publicity and particulars of the borrower (which is not exercised)

¶23

Because of the default almost from the beginning the petitioner gave a demand notice on 29^th May, 2012 for sum of Rs.1.29 Crores was due and payable (out of Rs.1.32 Crores of the loan taken). The petitioner claimed amount with regard to overdue compensation, cheque bouncing charges and loan installments. The petitioner recalled the loan upon termination of the loan agreement and gave notice to initiate legal proceedings by arbitration under C lause 17 of the loan agreement. The respondent gave notice that they were entitled to take possession of the equipments being the security of the loan under the hypothecation agreement and called upon the petitioner to surrender equipments also. The notice has been served by the registered post upon the petitioner as also the partners of the petitioner on 19^th June, 2012. Acknowledgments of one of the partners of the petitioner partnership firm as also the other partners

ARBPL No.386_2013

jsn

came to be shown.

Having invoked arbitration the petitioner appointed the arbitrator in terms of Clause 17.1 which provided that the respondent can appoint sole arbitrator under the Act.

¶29

The respondent accordingly made a reference to the arbitrator Mr. Bharat Jain an advocate of High Court, Bombay under its letter dated 28^th June, 2012. The learned arbitrator accepted the arbitration by his letter dated 12^th July, 2012 and issued notice upon the petitioner as also the partners of the petitioner's firm. This notice has been received on 20^th July, 2012 evidenced by the various acknowledgments signed by one of his partners on behalf of the petitioner's firm as also other partners.

¶30

The petitioner was directed to appear before the learned arbitrator on 29^th August, 2012 in the Bombay Bar Association room. Despite notice, the petitioner failed to appear. The learned arbitrator by his letter recorded about the meeting scheduled and held on 29^th August, 2012 and gave the petitioner one more opportunity to file its reply. He adjourned hearing to 26^th September, 2012 at the same venue. This notice was also been served upon the petitioner's partners similarly. The acknowledgments are signed by the same partner on behalf of the petitioner as also other partners.

¶31

The petitioner yet failed to appear despite sufficient notice. The learned arbitrator by his letter dated 27^th September, 2012 recorded the fact of the scheduled meeting on 26^th September, 2012

jsn

ARBPL No.386_2013

when the respondent / claimant appeared before him and he notified the petitioner that the arbitration was finally adjourned by two weeks to 15^th October, 2012 at the same venue. The notice of this letter has been received by the petitioner as also its partners and acknowledged by the same partner on behalf of the petitioner as also other partners on 5^th October, 2012, 10 days before the final scheduled arbitration.

¶36

The claimant thereafter exercised its right of repossession of the assets being equipments hypothecated to the claimant under Clause 13.4 . The claimant informed the learned arbitrator of this fact under its letter dated 12^th October, 2012.

¶37

On 12^th October, 2012 the petitioner for the first time wrote a letter to the arbitrator signed by all the five partners of the petitioner noting that the notice was issued, claim was filed, the venue was in Mumbai and challenging impartiality and independence of the learned arbitrator on the ground that notice of 30 days or 15 days before invoking arbitration was not given, the arbitrator's appointment was immature, his appointment was unilaterally made without consent of the petitioner (which was not required under clause 17 of the agreement between the parties), that the arbitrator heard the claimant behind the back, failed to call the party to decide the mode of proceedings in presence of the parties, the learned arbitrator failed to make the declaration under section 12 regarding his appearance as an advocate and that the venue of the operation was fixed to facilitate the respondent / claimant and that since the cause of action arose at Bokaro the arbitrator would have no jurisdiction and called upon the arbitrator to resign and vacate his

ARBPL No.386_2013

jsn

office and gave notice that his award shall not be binding upon the petitioner herein.

¶42

It can be easily seen that the contentions are misconceived as also erroneous. The arbitrator was to be unilaterally appointed as per the terms of the agreement with which the petitioner is bound ( See Mussafar Shah Vs. MMTC, 83 2000 Delhi LT 514, Saurabh Kalani Vs. Tata Finance Ltd. & Anr. 2003(3) Arb L R 345 (Bombay) (DB) and Novel Granites Ltd. Vs. Lakshmi General Finance Ltd, 2003 (3) CTC 148, (2003) 2 MLJ 831 relied upon by this Court in Arbitration Petition No.1178, 1179 and 1180 of 2012 upholding an exparte award in arbitration in which the respondent refused to appear. ). The claim was not immature. It was after the defaults were made and the respondent acquired rights under clause 12 of the loan agreement between the parties cited above. The learned arbitrator had not heard the claimant but only issued notice upon failure of appearance of the petitioner. The arbitration was fixed in Mumbai also as per Clause 17.2 of the loan agreement by which the parties were bound and the question of declaration and deciding the territorial jurisdiction would arise only if and when petitioner herein appeared before the learned arbitrator pursuant to notice. Consequently the request to resign or vacate the office is inappropriate and impertinent and the notice that the award would not be binding was only stated to have to be rejected as the petitioner was no authority to so decide.

¶43

As scheduled the final meeting was held on 15^th October, 2012 after giving the petitioner notice of 10 days prior thereto. The petitioner yet failed to appear. The claimant was represented. It

jsn

ARBPL No.386_2013

submitted that the claimant realised Rs.20 lacs out of the sale proceeds of the equipments hypothecated with the respondent herein on day after repossession under Clause 13.4 of the agreement. The learned arbitrator heard to claimant and petitioner herein because the petitioner failed to appear.

¶48

The learned arbitrator gave one more notice of the next date of hearing on 18^th October, 2012 scheduling the arbitration on 1^st November, 2012. After setting out what transpired in the meeting dated 15^th October, 2012 with regard to the sale of the repossessed equipments, the learned arbitrator also set out in the notice the arbitration agreement itself and scheduling the arbitration at the same venue on 1^st November, 2012 upon depositing of Rs.50,000/- each by the parties. That final notice has been refused by the petitioner as also its five partners and returned to the arbitrator under the acknowledgment of the postal authority dated 22^nd October, 2012.

¶49

After 22^nd October, 2012 it was clear that the petitioner herein would not submit to arbitration and appear before the arbitrator. The learned arbitrator has considered the claimant's case on 1^st November, 2012 and reserved the matter for passing the award.

¶50

On 7^th December, 2012 arbitrator passed the award and informed the parties including petitioner and all its partners again by registered post. The award has been received and acknowledged by the same party on behalf of the petitioner herein as also other partners at the same address.

¶51

7 ARBPL No.386_2013

¶52

jsn

¶53

The petitioner's entire case is of refusal to submit to arbitrator after admitted defaults. The respondent has claimed and has been given its rights precisely under the agreement.

¶54

The advocate on behalf of the petitioner would contend that notices were not given. The notices received by the registered acknowledgments have been shown falsifying his statement. The advocate would contend that the notice of the last date of hearing was not received because the address of the petitioners was changed. The acknowledgment of refusal belies that contention also and the further acknowledgment received by the same partner of the petitioner for the petitioner as well as on behalf of the other partners signed by him served at the same address showing that the address was indeed not changed.

¶55

The arbitration has been correctly held as per law and procedure. No case for setting aside the award is shown.

¶56

The advocate on behalf of petitioner would contend that interest is exorbitant. That contention is required to be taken up before the arbitrator after submitting to arbitration and his jurisdiction and cannot be accepted by the Court after making untoward and unfounded allegations of partiality and non-independence upon the arbitrator without justification and cause.

¶57

The advocate on behalf of the petitioner also sought to contend that the sale of the vehicles for Rs.26 lacs is at an undervalue because the loan of Rs.1.32 Crores was taken on 23^rd December, 2010

jsn

ARBPL No.386_2013

and the vehicles were sold on 12^th October, 2012. The advocate on behalf of the respondent has shown the Court the petitioner's contentions in paragraph 4 (j, k, l & m) in the petition itself showing that the vehicles were not functioning properly, were lying idle and the petitioner suffered losses so that the petitioner were not in position to pay the installments on time. The petitioner also stated that the place from where vehicles were purchased one Kamaz had been informed about the negative experience of the petitioner with regard to all the five vehicles purchased from them and the petitioner was informed that the vehicles would be replaced by providing additional new vehicles which was not done. The petitioner hence only claimed justification in not paying the installments. This aspect also was required to be informed to the learned arbitrator in arbitration. It cannot be considered by the Court when the petitioner refuses to submit to lawful authority.

¶62

The petitioner is now seen to be bound by the arbitral award, its notice that it would not be bound being not in accordance with law at all. There is no substantial ground shown for challenging of the award.

¶63

A respondent who has shown to Court that he has not been served with the notice from an arbitrator may make a grievance about an exparte award being passed against him. It would fly in the face of a respondent who refuses to appear before an arbitrator despite having received notices of each of the dates of arbitration hearing and who challenges the authority of an arbitrator to then complain of an award as having been passed exparte. It is for the respondent to show

ARBPL No.386_2013

jsn

how an arbitration is without jurisdiction or to make out a case in the arbitration itself. It is for the respondent to show by positive evidence how an arbitrator is not impartial or independent. Unless that is positively shown, the contention raised challenging his authority cannot be countenanced by the Court. An exparte award in such a case would require no interference.

¶68

The Arbitration Petition is wholly frivolous and misconceived. Hence it is dismissed with costs fixed at Rs.50,000/-.

¶69

( ROSHAN DALVI, J. )

M/S Ajay Transport Company v. L and T Finance Ltd.

Case brief

What is this about?

What did the court decide?

M/S Ajay Transport Company v. L and T Finance Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

C. Ravikumar Vs C.B.I

M/S. Haldia Precision Engineering Pvt. Ltd. Vs M/S. Hindustan Petroleum Corporation Ltd. and Anr.

M/S.North India Wires Ltd. Vs M/S.Hindustan Petroleum Corporation Ltd. and Anr.

M/S Ashapura Developers Vs Aditya Birla Retail Limited

Seven Hills Construction Vs L and T Finance Dltd.

Avinash T. Asgekar Vs Pramoddini R. Asgekar and 4 Ors.