M/S. Rajive Stock Brokers Limited vs Smt. Saroj Bala
2009 Latest Caselaw 3196 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+OMP No.145/2008 (U/s.34 of the Arbitration Act, 1996) & IA
No.2787/2008 (of the petitioner u/s.34 (3) of the Act)
*

%                               Date of decision: August 17, 2009

      M/s. Rajive Stock Brokers Limited                   ....Petitioner
                           Through: Mr. Jos Chiramel with Mr. R.K. Tripathi,
                                    Advocates

                                    Versus

      Smt. Saroj Bala                                   .... Respondent
                           Through: M.K. Verma, Advocate


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?                     No

2.    To be referred to the reporter or not?              No

3.    Whether the judgment should be reported             No
      in the Digest?


RAJIV SAHAI ENDLAW, J.

1 The petition under Section 34 of the Arbitration Act, 1996 with

respect to ex-parte (against petitioner) arbitral award dated 15th

December, 2006 is for consideration. The petition has been

instituted on 3rd March, 2008. The petition is accompanied with IA

No.2787/2008 under Section 34(3) of the Act. It is the case of the

petitioner that the petitioner had not received any copy whatsoever,

lest signed copy, of the award from the arbitrator and learnt of the

award aforesaid for the first time only on 29th February, 2008 and

immediately where after the petition was filed.

2 The grounds set out in the OMP are also inter alia under

Section 34(2)(a)(i) and (iii) of the Act i.e. of the petitioner having not

been given proper notice of the appointment of the arbitrator or of

the arbitral proceedings and thus being under in-capacity and or

unable to present its case before the arbitrator.

3 Since the grounds in the application are the same as inter alia

in the OMP, the two have been heard together.

4 The petitioner at the relevant time was a Stock Broker Member

of National Stock Exchange of India Ltd. (NSE) and the respondent

was a constituent of the petitioner. Disputes and differences having

arisen between the parties, Col. Gujral G. Singh (Retd) was

appointed as the arbitrator in accordance with the byelaws of NSE;

he published an award dated 25th February, 2002; by the said award

the claims, of the petitioner against the respondent as well as of the

respondent against the petitioner were dismissed.

5 The respondent herein preferred OMP No.149/2002 in this

court under Section 34 of the Act inter alia with respect to the award

of dismissal of its claims. The petitioner herein did not prefer any

proceedings with respect to the said award.

6 Notice of OMP No.149/2002 was issued by this court to the

petitioner herein. The address of the petitioner in the proceedings

before the Arbitrator Col. Gujral G. Singh was of 35 DSE Building, 3

and 4/4B Asaf Ali Road, New Delhi-2. The same address was given in

the memo of parties in OMP No.149/2002 also. The notices sent by

this court at the said address are informed to have been returned

unserved with the report that the petitioner had left the said

address. Even though the counsel for the respondent has during the

hearing not controverted the averments of the counsel for the

petitioner with respect to the service of the petitioner in OMP

No.149/2002, by way of abundant caution, at the time of hearing, the

file of OMP No.149/2002 has also been called to this court and

perused for the said purposes.

7 It is noted in pencil in the ordersheet dated 9th May, 2002 of

OMP No.149/2002 that the petitioner herein who was the respondent

No.1 therein was unserved and had since shifted to Noida. The

respondent was on 16th July, 2002 directed by this court to take fresh

steps and furnish fresh address of the petitioner herein and on which

notice was ordered to be issued to the petitioner. The same order

was reiterated on 13th November, 2002 also.

8 The counsel for the petitioner has argued and it is not disputed

by the counsel for the respondent that pursuant to the said

directions, the respondent herein furnished the address of the

petitioner at C-131, Second Floor, Sector-49, Noida. Notice was sent

to the petitioner at the said address for 12th March, 2003. The

service report from the said address was awaited. On 12th March,

2003 the counsel for the respondent herein sought time to make an

application for substituted service of the petitioner herein and on

such application being made, on 7th April, 2003 the petitioner was

ordered to be served by substituted service. The petitioner failed to

appear inspite of service and was vide order dated 17th September,

2004 ordered to be proceeded against ex-parte. OMP No.149/2002

was allowed vide order dated 11th March, 2005. The award made by

the arbitrator in so far as the same rejected the claims of the

respondent was set aside and justice P.N. Nag (Retd) appointed as

the arbitrator. It was further ordered that since the petitioner was

not represented in OMP No.149/2002 before this court, the

arbitrator appointed by the said order shall issue notice to the

petitioner before proceeding further.

9 The arbitral proceedings thereafter commenced before the

Arbitrator Justice P.N. Nag (Retd); he presumably on the basis of the

memo of parties of OMP No.149/2002 wherein the address of the

petitioner was given as that of DSE Building Supra, on 23rd April,

2005 issued notice to the petitioner for 9th July, 2005 at the said

address. On 9th July, 2005 the arbitrator recorded that the notice

sent to the petitioner had been received back with the report that

the petitioner had sold the property and is not available at that

address. The arbitrator in view of the fact that the notice had not

been served on the petitioner in OMP No.149/2002 also, on 9 th July,

2005 itself directed the petitioner to be served by publication in the

English Edition of the newspaper Hindustan Times for 24th

September, 2005. However the said publication was not carried out,

as noted in the order of 24th September, 2005. The arbitrator

however without recording any reason, on that date ordered the

petitioner to be served in the Hindi Edition of the newspaper Tribune

at the address of DSE Building only for 18th November, 2005. The

said publication was carried out and the arbitrator held the

petitioner to have avoided notice of service and on 18th November,

2005 proceeded ex-parte against the petitioner. In these

circumstances the ex-parte award under challenge was published.

10 The arbitral record shows that the signed copy of the award

was forwarded by registered post AD by the Arbitrator to the

petitioner again at the address of DSE Building. The arbitral record

contains the envelope containing the signed copy of the award

returned to the arbitrator from the said address with the postal

endorsement dated 19th December, 2002 of "left without address".

11 Neither does thus the record shows nor is it the case of the

respondent that any further attempts were made to serve the

petitioner with the signed copy of the award.

12 The petitioner claims to have learnt of the arbitral award upon

steps being taken by the National Stock Exchange for recovery of the

amount of the award from the security deposit of the petitioner with

the NSE, on being approached by the respondent.

13 In the aforesaid circumstances the counsel for the petitioner

has contended that the respondent has acted fraudulently; the

respondent inspite of knowledge of the Noida address aforesaid of

the petitioner, allowed the arbitrator to send notice to the petitioner

at the address of DSE Building which as per the orders in OMP

No.145/2008 as well as the notation on the process issued by the

arbitrator the petitioner had left long back.

14 The petitioner has along with the petition also filed the original

notice of OMP No.149/2002 issued by this court to the petitioner at

the Noida address aforesaid for 12th March, 2003. The petitioner has

also filed documents to show notice given by it to NSE of change of

its address as well as notices of change of address given to Registrar

of companies Delhi with which the petitioner is registered as a

Private Limited Company. It is thus contended that the award is

liable to be set aside on the grounds aforesaid.

15 Per contra the counsel for the respondent has urged that since

the petitioner inspite of service at the Noida address also had failed

to appear before this court in OMP No.149/2002, the respondent

presumed that the petitioner was not available at the said address

also and thus allowed the notices of arbitration proceedings to be

served at the address of DSE Building which was the last known

address of the petitioner. It is further contended that no public

notice or intimation of change of address was given by the petitioner

to the respondent and the petitioner has also not filed any

documents to show its precarious financial condition for the reason

whereof it is contended that the petitioner inspite of service of notice

of OMP No.149/2002 failed to contest the same. Attention is also

drawn to Para 12 of the OMP wherein it stands admitted that the

petitioner in fact had before the notice issued by the arbitrator

Justice P.N. Nag (Retd) had left the address of C-131, Second Floor,

Sector 49, Noida also and moved to G-109, Second Floor, Sector-41,

Noida. It is thus contended that no purpose in any case would have

been served even if the notice of arbitral proceedings had been given

at the address of C-131, Second Floor, Sector 49, Noida. Lastly, it is

contended that the respondent has in terms of the order in OMP

No.149/2002 paid the entire fee of Rs.1 lac of the arbitrator and

would suffer unnecessarily if made to bear the charges of arbitration

again.

16 The counsel for the petitioner has in rejoinder urged that the

action of the petitioner being fraudulent, no benefit of the fee of the

arbitrator borne by the respondent can be claimed. It is also

contended that since the award of Col. Gujral G. Singh has been set

aside, even the part rejecting the claims of the petitioner is deemed

to have been set aside.

17 I have perused the record of OMP No.149/2002. I do not find

therein anything to show that the notices sent to the petitioner at the

address of C-131, Second Floor, Sector-49, Noida were received

back with any endorsement of the petitioner being not available at

the said address. In fact the service report from the said address

was awaited when the respondent applied for substituted service and

which was allowed. In fact for substituted service also (i.e. in the

newspaper) the respondent inter alia gave the address of C-131,

Second Floor, Sector-49, Noida of the petitioner and which leads me

to believe that notwithstanding service report from the said address

being awaited, according to the respondent, the petitioner continued

to be available at the said address only. Further, the said address

had been given by the respondent itself and it is presumed that it

must have been so given after inquiry and satisfying itself that the

petitioner was available at said address.

18 The respondent, inspite of the same neither disclosed the said

address of the petitioner to the arbitrator Justice P.N. Nag (Retd) nor

made any attempts for service on the petitioner of the notice of the

arbitral proceedings as directed by this court, at the said address.

19 That being the position, in my view, the case of the petitioner

having not been given proper notice of appointment of the arbitrator

or of arbitral proceedings within the meaning of Section 34 (2) (a)

(iii) is made out. In my view, the action of the petitioner of inspite of

service having not appeared before this court in OMP No.149/2002

would not come in the way of setting aside of the award on the said

ground in as much as the petitioner was expressly directed to be

served with the notice, inspite of having been proceeded ex-parte

before this court in OMP No.149/2002.

20 Similarly, the factum of the petitioner having changed the said

address also would not be material. Had the respondent made any

inquiries from the said address, the respondent could have learnt of

the next address also of the petitioner. I also find merit in the

contention of the counsel for the petitioner that had the respondent

made any inquiries from NSE of which the petitioner continued to be

the member, the respondent could have found out the correct / latest

address of the petitioner.

21 It cannot be lost sight of that the petitioner is a Private Limited

Company registered with the Registrar of Companies. It is admitted

position that the address of the petitioner with the Registrar of

Companies also as on that date was not of DSE Building at which

address attempts for service was made but was some other address.

No efforts was made to serve the petitioner at the said address also.

Section 51 of the Companies Act, 1956 also provides for service of

documents on the company at the address of its registered office.

No such service has been effected in this case.

22 However the contention of the counsel for the respondent of

the respondent having had exclusively borne the fee of the earlier

arbitrator has merit. Had the petitioner appeared in OMP

No.149/2002 notice whereof was admittedly served upon it, it would

have know of the appointment of the arbitrator and could have

participated in those proceedings and which would have not have led

to the fees of those proceedings being wasted. In the circumstances,

while setting aside the award for the reasons aforesaid, it is deemed

appropriate to direct that the fee of this round of arbitration shall be

borne by the petitioner only, subject to final award as to costs of

arbitration.

23 The award dated 15th December, 2006 is thus set aside. The

respondent has indicated intention to resume the arbitral

proceedings. To avoid any hick up in service this time, the parties

are directed to appear before Justice P.N. Nag (Retd) arbitrator

earlier appointed, on 29th August, 2009 with prior appointment. The

fee earlier fixed of Justice P.N. Nag is maintained for this round of

proceedings also, i.e. of Rupees One Lakh, to be borne by the

petitioner, subject to the final award of costs as aforesaid. Since the

date for appearance has been fixed in this order in the presence of

the counsel for the parties, no further notice would be required to be

given by the arbitrator to either of the parties and if either of the

parties fail to appear before the arbitrator, they will do so at their

own peril. The arbitral record received in this court be also returned

to the arbitrator.

RAJIV SAHAI ENDLAW (JUDGE) August 17, 2009 J