Arbitration Award Challenge Chandigarh Panchkula Mohali District Court

Last Updated on April 23, 2020 by Legalseva.net

In this post we will study summary of judgment which involved challenge of Arbitral Award before District Court and on what all parameters Arbitration Award can be challenged in Chandigarh Panchkula Mohali Kharar Derabassi Zirakpur.

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SMT. SUDHA v. KOTAK MAHINDRA PRIME LTD

Judgment Digest on Challenge of Arbitral award-

In the case of Smt. Sudha vs Kotak Mahindra Prime Ltdon 16 March, 2020, the petitioners filed a petition under the Section 34 of the Arbitration and Conciliation Act, 1996 against the ex parte award declared on 09/12/2016 for setting aside of the award. The main issue of the case is regarding a vehicle loan which was sanctioned by respondent no. 1 (Kotak Mahindra Prime Ltd.) to the petitioner no. 1 on 28/02/2015 for amount of Rs 3,00,000/-. The petitioners further specified that they paid the instalments for about 10-12 months and thereafter there was default in the payment of monthly instalments. However, arbitration proceedings were filed by respondent no. 1 without any prior notice to the petitioners. The summon of execution petition was forwarded to the petitioner on 29/10/2018. The award passed by the arbitrator is said to be out of jurisdiction and liable for setting aside as it is against the principles of natural justice. The petitioner further state that no notice for appointment of arbitrator and copy of claim petition was served to them and therefore the arbitrator has misconducted himself and is in collusion with the respondent.

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The suit majorly lies around certain issues with regard to the setting aside of the arbitral award and the limitation period stated under sub-section (3) of 34 of the Arbitration and Conciliation Act, 1996. The crux of the case mainly revolves around whether the award declared by the arbitrator can be challenged in the Court of law as per the grounds mentioned under Section 34 of the Act by the petitioners or whether the case is in question of its limitation period as stated by the respondent no. 1; as it has preceded the time period as prescribed under 34 (3) of the Act, which clearly mentions that the recourse to the court against the arbitral award should be made within a period of three months from the date of receiving the arbitral award to the respective party making the application. The period can be extended to further thirty days and not thereafter only if any sufficient cause is presented by the party for delay in filing of application. One of the major loopholes which can be evidently seen in the suit is that the petitioners are claiming their innocence on the ground that they were unaware of the arbitral proceedings which were being carried out by the respondent and Arbitrator.Further, they also contended that respondent has failed to provide any notice of appointment of arbitrator and no such clause was mentioned in the agreement of loan, that in case of defaultArbitration would be resorted for resolving the particular matter.

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Facts of the case-

Court’s Name- IN THE COURT OF MS. ANJU BAJAJ CHANDNA,DISTRICT JUDGE, (COMMERCIAL COURT)-01,PATIALA HOUSE COURT, NEW DELHI

Petitioner-

Smt Sudha.

W/o Sh. Vimal Kumar,

R/o A2/25, C/o Mr. Satish Ojha,

Pardhan Enclave, Burari, Delhi-84.

Vimal Kumar

S/o Sh. G.D. Dandriyal

R/o A2/25, C/o Mr. Satish Ojha,

Pardhan Enclave, Burari, Delhi-84.

Respondent-

Kotak Mahindra Prime Ltd

19th Floor, Ambadeep Building,

14, K.G. Marg, New Delhi-110001

Also At: Regd. Office at

27 BKC, C-27, G-Block, Bandra Kurla Complex,

Bandra (E), Mumbai-400051.

Nangia

Sole Arbitrator,

Delhi High Court

Date of Institution : 11.03.2019

Arguments heard on : 16.03.2020

Decided on : 16.03.2020

Timeline of events-

02.2015- Sanction of loan agreement of Rs 3,00,000/-
07.2016 and 03.08.2016- Recall notices and arbitration notices sent by respondent
12.2016- Ex parte award decided by arbitrator
10.2018- Summon execution petition No.79/2018 received by petitioner
02.2019-16.02.2019- counsel of petitioner was hospitalized due to an accident
03.2019- Institution of petition
03.2020- Judgment date

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Petitioner’s Arguments-

The petition was filed against the ex parte award given by the arbitrator under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award on the grounds that it was against the public policy and was opposing the principles of natural justice. The petitioner states that neither did they receive any notice regarding the arbitration proceedings nor did they have any notice regarding the appointment of arbitrator and no copy of claim petition was received by the petitioner. As there was no mention of appointment of arbitrator in the loan agreement, further no notice was received by the petitioners thus it is evident that the consent of petitioners was not taken into consideration while appointment of the Arbitrator. The petitioners further assert that arbitrator has misconducted himself and has failed to adopt the appropriate procedures, thus given the award in collusion with the respondent. Petitioners state that they have moved an application under Section 5 of the Limitation Act, 1963 stating the reasons for delay in the filing of the objection petition which was due to death of the family relative of petitioner and counsel of petitioner had to be hospitalized as he met with an accident. Petitioner also states that the possession of the car was handed over to the claimant when there was default in the payment of the instalments. Thus, the petitioner prays for setting aside of the impugned arbitrator award and to be provided with statement of account and complete documents of the sale/auction of the vehicle no. DL1E2575. Petitioner pleas further to put stay on the execution petition and dismiss the execution petition and that the delay in filing of objection petition should be condoned.

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Respondent’s Arguments –

Respondent filed a set of replies to the objection petition filed by the petitioners focusing mainly on the maintainability of the suit in the court as it preceded the limitation’s period as mentioned under Section 34(3) of the Arbitration and Conciliation Act, 1996 for challenging the award declared by the arbitrator. Firstly, it is asserted by the respondent that loan recall notices and arbitration notices were sent to the last known addresses of the petitioners i.e. “99 Pradhan Enclave, Purshotam Enclave, Village Burari, Delhi-110084”. In case of change of address, it is the duty of the petitioner to communicate or send a letter to the respondent, providing them with their new addresses, which was not provided with. The respondent further contends that during the repossession of the vehicle, the knowledge of arbitration proceedings must have come to notice of petitioners. Further, the award stated by the arbitrator is neither unfair nor unreasonable and all the procedures of arbitration were duly followed by the Arbitrator, thus the petitioner’s petition stands no merit.

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The application given under Section 5 of the Limitation’s Act, 1963 is not maintainable in view of Section 34 (3) of the Arbitration Act, 1996, as it clearly states that an application for setting aside of an award must be made within three months of receiving the award or the period can be further extended to thirty days more if a request is made under section 33 and if the Court finds that there was sufficient cause for the delay in filing of the application but not thereafter. The key word of the proviso of sub-section (3) is “but not thereafter”. This phrase explicitly bars the meaning of Section 29(2) of the Limitation Act which would therefore eliminate the application of Section 5 given by the petitioners. Even after giving advantage of Section 14 of Limitation Act to the respondent, there will still be a huge gap of 131 days in filing of the application as against the proviso of sub-section (3) of Section 34 of the Arbitration and Conciliation Act, 1996 which cannot be condoned in any condition or will be strict breach of statutory mandate.

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Order of the Court-

As per the above arguments and evidences, the court gave the order of dismissal of the objection petition and even the application seeking condonation of delay for submission of the prior petition as the petition was barred by limitation and held no merit. Thus, both petitions were dismissed.

The major controversies involved in this particular petition is that whether it should be maintainable in the Court of Justice as the limitation period of the filing of application has elapsed from the petitioner’s side and the reasons stated by petitioner are legitimate and sufficient to make the petition admissible in the Court and whether the arbitration procedures followed by the arbitrator were appropriate or there was some sort of collusion between the respondent and the arbitrator. The petition also questions that the award was unfair and unreasonable on the part of petitioner. Another debatable point of the petition is if it falls under any one of the grounds for setting aside of the arbitral award as specified under sub-section (2) of Section 34 of the Arbitration and Conciliation Act, 1996.As stated by the sub-section (3) of section 34 of the Act, the application cannot be accepted after period of three months and an extension of thirty days can be granted only if the court allows and as there was delay of 131 days, the petition would be accepted or not was a big question in lieu for the court. Thus, the petition includes plenty of issues which could be argues upon.

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Therefore, as we look into the case of Smt. Sudha v. Kotak Mahindra Prime Ltd., the case revolves around challenging of an arbitral award under the grounds mentioned under section 34 of the Act, where the petitioner is praying for dismissal of the execution award given by the arbitrator on the grounds that they were unaware of the arbitration proceedings as well as the appointment of the arbitrator. They further pray for admissible of their objection application so that they are given a chance to defend themselves in the court of justice. On the other hand, the respondents give evidences stating that the arbitrator was neutral and all the arbitration proceedings were taken place in appropriate manner and notice of these proceedings were sent to the addresses of petitioner which was stated in their loan agreement and it was the fault of petitioner for not informing the respondent about their change of address. Apart from that the objection petition filed by petitioner was beyond the limitation period as mentioned under sub-section (3) of section 34 of the Act which was three months and a further extension of thirty days and not thereafter, thus the court finally came to a conclusion that the petition was not admissible in the court as it had surpassed the limitation period and the petitioner were lacking of any sufficient cause for such delay. Therefore, the petitioners were bound to follow the execution petition of the award as decided by the arbitrator.

The entire judgment can be read here.

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For case specific advice, please contact Arbitration Lawyers Advocate in Chandigarh Panchkula Mohali Zirakpur Derabassi Kharar Baltana etc.

This post is written by Rhea Banerjee.