Rohtas Financiers (P.) Ltd. vs Lakshmi Commercial Bank Ltd.
1991 Latest Caselaw 88 Del

JUDGMENT

S.G. Jain, J.

(1) Facts giving rise to this appeal are that M/s. Rohtas Financiers (P) Ltd. and its directors (hereinafter referred as the Appellants) on the one side and Lakshmi Commercial Bank Ltd , which has now merged into Canara Bank (hereinafter referred to as the Respondent) on the other referred the disputes arising out of a cash credit limit allowed by the respondent bank to the appellants to the arbitration of Sh.Bikram Singh advocate as per the agreement dated 15th March, 1967. The arbitrator entered upon the reference and proceedings were filed in the court. Neither party filed any objections and rather a request had been made by the parties through their counsel to make the same a rule of the court. Consequently, the court made the award a rule of the court and a decree was awarded in its terms on 10th May, 1967.

(2) The appellants challenged the award dated 15th March, 1967 and the decree passed thereon in suit No. 234 of 1967 by filing a suit No. 329 of 1968 in the court. In para 13 of the plaint the appellants averred that fra had been played upon them and upon this court. The particulars of fraud given are:-

(A)that the blank signed papers had been filed in by trying certain proceedings and statements alleged to have been made by the plaintiff.

(B)that other blank papers had been converted into affidavits and were filed in this court and these affidavits were alleged to have been executed on dates when the deponents were not even in Delhi;

(C)that the arbitrator bad filed suit No. 234 of 1967 under Section 14 of the Arbitration Act in this court in which notices had been ordered to be issued The notices were not issued. Instead, one Mr. B S. Narang, Advocate, appeared on behalf of the plaintiffs and filed an application that the award be made a rule of the court. It is alleged that the plaintiffs do not even know Mr. B.S. Narang advocate whose name has been substituted for the name of the original advocate given in the power of attorney;

(D)that on April 12, 1967 the defendant also made an application under Section 17 of the said Act for making the award a rule of the court and the application filed by the defendant and on behalf of the plaintiff had been typed on the game typewriter.

(3) The defendant/respondent denied in the written statement that any fraud has been practiced on the appellants or on the court. The maintainability of the suit has been challenged in view of the provisions of Section 32 of the Arbitration Act, 1940

(4) After hearing the parties counsel and going through the record the learned single Judge came to the conclusion that Section 32 of the Act embodies the well settled principle of law that where the parties to a difference have pursued arbitration proceedings resulting into an award, they cannot get rid of it except as provided in the Act. The suit insofar as it claims the relief for letting aside the award is concerned, it clearly falls within the prohibition contained in Section 32 of the Act. The validity of the award cannot be questioned on any grounds whatsoever and that would include the challenge made by the plaintiffs in the suit for setting aside of the award on the ground of fraud, otherwise the effect of decreeing the suit will be to set aside the award dated 15ih March, 1967. lu other words, it will amount to its extinction. Under Section 32 of the Act, the award cannot be questioned in any other court except in the court in which it was filed under the provisions of the Act for making it a rule of the court and that too in the manner and on the grounds as provided in the Act.

(5) , Regarding the allegations of fraud made by the plaintiffs/appellants in the plaint, the learned single Judge after appreciating the evidences on record came to the conclusion that no fraud has been established and therefore, he dismissed the suit filed by the plaintiffs/appellants.

(6) Aggrieved, this appeal has been filed against the judgment passed by the learned single judge on 26th September, 1975.

(7) Though in the memorandum of appeal, the appellants have taken various pleas challenging the judgment of the learned single judge, but before us, the learned counsel for the appellants assailed the findings of the learned single Judge only on three issues, which are :-

(A)whether the award dated 15th March, 1967 was obtained by fraud.

(B)whether the decree passed in suit No. 234 of 1967 was obtained by fraud by the defendant.

(C)Whether the present suit is not maintainable inview of the provisions of Section 32 of the Arbitration Act ?

(8) Shri Mehta learned counsel for the appellants drew our attention to various documents and evidence on record and argued that the learned single Judge failed to appreciate that Section 32 of the Arbitration Act was not a bar to a suit filed on the basis of fraud. According to him an award can be independently challenged if it has been obtained by fraud. Section 32 of of the Arbitration Act only bars suits which challenge the existence or the validity of the award and not proceedings pertaining to the fact of its having been procured by fraud.

(9) He further submitted that the learned single Judge failed to appreciate that the award in this case was being challenged on the ground that it had been obtained by fraud and misrepresentation. The alleged proceedings before the arbitrator and the subsequent proceedings in the court had all been taken at the back of the appellants and without their knowledge. It was thus not possible for them to file any objections under Sections 30 and 33 of the Arbitration Act and take any other proceedings under the Arbitration Act for having it set aside. The award bad merged in the decree at the time when the appellants came to know of it and objections under Section 30 and 33 could not be filed after the passing of the decree. No notice of the filing of the award had been issued and received by the appellants and as such no decree could have been passed. The counsel allegedly appearing on behalf of the- appellants had neither been appointed nor had he been given in any such authority to admit the award. Blank papers bad been taken by the bank which were later on converted to their own use and even carbon copies of affidavits were subsequently filed in to suit their purpose. Complete details of the fraud bad been furnished in para 13 and its sub paras of the plaint and the appellants had proved the same but the learned single Judge without appreciating the same reached the adverse conclusions.

(10) Record shows that the proceedings before the arbitrator started on 10th March, 1967 wherein he entered upon the reference of arbitration on the basis of an agreement duly executed by the parties pertaining to the disputes having arisen between them out of the cash credit limit granted by the bank to the appellants. The proceedings before the arbitrator run into nine type written pages and the appellants have signed these proceedings on each page and the signatures appear either on the margin or in the middle or at the bottom. The agreement of reference has also been signed by the appellants on each page. It is also apparent that when the parties appeared before the arbitrator on March 10, 1967. a request was made on behalf of the appellants that a very short date may be given as the matter primarily hinged on documentary evidence and the appellants had to go out of Delhi. All the proceedings of arbitration including the statements of the parties were recorded on 12th March, 1967 and the award was given on 15th March, 1967.

(11) It is immaterial that the arbitration proceedings took only two or three days because as per record it has been done at the request of the appellants themselves. It does not lie in the mouth of the appellants now to say that the arbitration proceedings have been done in haste and at their back by fraud. We are of the view that the appellants did enter into the agreement of reference, appeared before the arbitrator and made their statements wherein. they have practically admitted the claim made by the respondent bank.

(12) Section 32 of the Arbitration Act provides that notwithstanding any law for the time being in force no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award be set aside, amended, modified or in any way affected otherwise, than as provided in the Act. The validity of the award cannot be questioned on any ground whatsoever and that would include the challenge made by the appellants/plaintiffs in the suit for setting aside of the award on the ground of fraud.

(13) We are in agreement with the findings of the learned single Judge that the suit of the appellants/plaintiffs insofar as it asks for the relief for setting aside the award dated 15th March, 1967 is concerned, it is clearly barred under Section 32 of the Act

(14) Regarding the plea of the learned counsel for the appellants that the decree passed in suit No. 23 4 of 1967 was obtained by fraud, it is well settled now that the plaintiffs alleging fraud must furnish specific details and then can succeed only upon the proof of fraud as is alleged. In para 13 of the plaint particulars of the fraud have been furnished.

(15) So far as para 13 (a) is concerned these particulars relate to proceedings antecedent to the making of the award. The validity of the award cannot be challenged in the suit.

(16) In para 13(b); the appellants have alleged that blanks were converted into affidavits which were got attested by the respondent bank's officers themselves and the affidavits were then filed in this court.

(17) In para 13(c) it is stated that Shri Bikram Singh Sawhney, the arbitrator had moved an application under Section 14 of the Act, which was registered as suit No. 234 of 1967, that the court ordered that notices be issued for 2nd of May, 1967 by registered Ad post as well as by ordinary process, that instead of notices being issued, as ordered by the court, one Shri B.S. Narang advocate appeared on behalf of the plaintiffs in the said suit and made application on 12th April, 1967, allegedly on behalf of the plaintiffs praying that the award be made a rule of the court, that the appellants/plaintiffs did not even know Shri Narang nor had they ever given him power of attorney to appear or admit the award, and that on examination of the file the appellants/plaintiffs found that the name of the original advocate on the power of attorney had been rubbed off and the name of Shri B.S. Narang bad been added instead by fraud by the officers of the respondent bank or some one interested in getting the decree passed.

(18) It is difficult to accept the appellants contention that the signatures of the appellants bad been obtained on blank paper and the documents and papers were typed written or filled in later on. We also find it difficult to accept the contention of the appellants that they did not instruct Mr. B S. Narang, advocate, to appear for them in the High Court in the proceedings for the filing of the arbitration agreement and having it made a rule of the court.

(19) Shri K.L Suri one of the appellants and director of the appellant company has appeared as his own witness and produced the certified copies of documents Ex. P 5 to P 9 and admitted the signatures on the originals. He has also proved the resolution Ex. D 3 passed by the appellant company authorising Shri Suri to approach the Bank for settlement of the disputes in cash credit account. The application, C.M.391 of 1967 in suit No. 234 of 1967, is admitted to have been signed by Savitri Suri, K L. Suri and N.K. Suri, the certified copy of which is Ex P 5. Along with this application there are three affidavits of these persons. It has been admitted by Shri K.L. Suri that when he signed this application, it was typed document and that the affidavit attached to this application also bears his signatures.

(20) The learned single Judge after appreciating the evidence on record, correctly came to the conclusion that the appellants/plaintiffs had agreed to the reference to the arbitration proceedings; the terms of the award and to its being made a rule of the court and we affirm the same. No significance can be attached to the fact that notices of the arbitration proceedings in the court were not actually served on the appellants/plaintiffs when a counsel appeared on their behalf to accept the award for the purpose of having it made a rule of the court.

(21) We find no infirmity in the impugned judgment and, therefore, dismiss this appeal, No order as to costs.