Belwal Spinning Mills Ltd vs Icds Ltd. & Anr.
2009 Latest Caselaw 2505 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                OMP No.89/2001

%                                 Date of decision: 07.07.2009

BELWAL SPINNING MILLS LTD.                      ....... Petitioner
                       Through: Mr. Jasmeet Singh, Advocate

                               Versus

ICDS LTD. & ANR.                          ....... Respondents
                       Through:    Mr. R.C. Bhalla,     Advocate     for
                                  Respondent No.1.


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
      in the Digest?                                 No


RAJIV SAHAI ENDLAW, J.

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

been preferred with respect to the arbitral award dated 25 th

November, 2000 of Respondent No.2 Sh. B.I. Sharma, Advocate

Udupi, Karnataka.

2. The admitted position is that a lease agreement dated 10th

May, 1991 was executed between the respondent No. 1 M/s.

Industrial Credit and Development Syndicate Ltd. since known as

ICDS Ltd. on the one hand and the petitioner on the other hand

whereunder the petitioner agreed to take the assets described in

Schedule A to the Agreement on lease from the respondent No. 1, to

be installed at the premises of the petitioner at 14th Floor, Hansalya

Buiding, 15 Barakhamba Road, New Delhi on the terms and

conditions and lease rent as mentioned therein. (Though the petition

gives the date of lease agreement as 1st August, 1989 but the same is

an error, being the date of another lease agreement between the

parties and with respect to arbitral award wherefrom OMP

No.369/1999 was preferred in this court and which is informed to

have been dismissed in default long back)

2. It is further the admitted position that a letter dated 11th

February, 1999 was sent by the respondent No. 1 to the petitioner as

well as to Mr. Mahesh Belwal and M/s. Impact Advertising Pvt. Ltd.

both of which are stated to have stood guarantors for payment of

lease rental by the petitioner to the respondent No. 1, stating that a

breach had been committed of the terms and conditions of the

aforesaid lease agreement dated 10th May, 1991 and a sum of Rs.

3,00,060/- was due towards balance lease rental from 10th December,

1991 to 10th April, 1994 and a further sum of Rs. 6,47,269.99 was

due towards overdue compensation at 3% per month from the

respective lease due dates and also claiming Rs. 20,000/- towards

costs of registered notices and other expenses and either the

possession of the assets leased or in alternative thereto claiming Rs.

1,000/-, in terms of the lease agreement. The said letter also notified

that the petitioner and the guarantors aforesaid will continue to be

liable for overdue compensation at 3% per month on Rs. 3,00,060/- in

future also till final payment. The letter dated 11th February, 1999

further proceeds to state that the claim aforesaid of the respondent

No. 1 had been agreed to be settled by sole arbitration of the

aforesaid Sh. B.I. Sharma, Advocate, Udupi and the respondent No. 1

was making reference of the claims to the arbitrator.

3. The aforesaid letter dated 11th February, 1999 was replied by

the petitioner vide its letter dated 27th February, 1999. The

petitioner merely stated that as per its books of accounts nothing

was payable to the respondent No.1.

4. It appears that the respondent No. 1 pursuant to the letter

dated 11th February, 1999 approached the agreed arbitrator who

made the award aforesaid impugned in this petition. The award inter

alia records that the arbitrator after accepting the reference, issued

notice of enquiry dated 19th April, 1999 to the petitioner as well as

to the two guarantors aforesaid and that the said notice had been

duly served on the petitioner and one of the guarantors. Since the

notice dated 19th April, 1999 sent to the other addressee was neither

returned nor confirmation of delivery received, the award records

that a fresh notice of enquiry dated 2nd August, 1999 was sent and

which was served by registered post AD. Though there is some

inconsistency in the award as to whether the second notice was

issued to the petitioner or to one of the guarantors, the same is

immaterial. The award further records that the petitioner and the

guarantors aforesaid failed to appear in spite of notices and were as

such proceeded ex parte.

5. The Arbitral Award after referring to the Agreement dated 10th

May, 1991 (supra) and the evidence tendered by the respondent No.

1, allows the claims of the respondent No. 1 for the amounts as

claimed in the letter dated 11th February, 1999 save that instead of

costs of registered notices of Rs.20,000/-, Rs.500/- was awarded and

alternate relief of Rs.1,000/- instead of award of return of assets was

made. It is further the award that though in terms of the agreement

the respondent No.1 is entitled to claim future interest at 3% per

month and interest at 21% per annum only from 12th February, 1999

till realization has been awarded.

6. It is inter alia the case of the petitioner that it was not in the

know of the arbitration proceedings and learnt of the same for the

first time on 6th March, 2001 only when the petitioner received the

award.

7. Objections have been preferred against the award on three

counts. Firstly, it is contended that the award is liable to be set aside

because it has been made without notice to the petitioner. Secondly,

it is contended that on the date of the commencement of the

arbitration proceedings the petitioner had been declared sick within

the meaning of SICA, 1985 and thus the proceedings could not be

initiated or continued against the petitioner and lastly it is stated

that the award is arbitrary and whimsical in allowing overdue

compensation of more than double the lease rent due. Challenge is

also made to the rate of interest.

8. The counsel for the parties have informed that an order of

winding up of the petitioner company had been made by the Delhi

High Court. From the order sheet also it transpires that notice at one

stage was issued to the official liquidator attached to this Court. The

counsel for the petitioner has relied upon the order dated 26th April,

2004 of the Division Bench in Co. A. No. 68/2003 in appeal preferred

against the order of winding up, ordering that no coercive steps shall

be taken by the official liquidator. The counsel for the petitioner has

contended that though the order of winding up has not been stayed

by the same but the effect of the said order dated 26th April, 2004 is

of stay of winding up and hence he is competent to represent the

petitioner. The counsel for the respondent No. 1 has however

contended that the petitioner has subsequently deposited Rs. 1.32

crores in the Court and the appeal against the order of winding up

has been admitted and the order of winding up has been stayed.

Thus there is no impediment to the counsel appointed by the

petitioner pursing the present proceedings.

9. At this stage, it may be noted that though the petition is

pending since 2001 and is listed in the category of finals of this

Court but till date no order has been made for requisitioning the

arbitral record. However, after perusing the entire record specially

the objections preferred by the petitioner I am of the view that non-

availability of the arbitral record does not come in the way of the

adjudication of the petition.

10. The counsel for the respondent No. 1 has at the outset raised

an objection with respect to the territorial jurisdiction of this Court

to entertain the petition as well as of the present petition being

barred by time.

11. As far as the plea of territorial jurisdiction is concerned

reliance is placed on Clause 27 of the lease agreement dated 10th

May, 1991 between the parties which is as under:

"27. It is expressly agreed that in case any dispute between

the parties concerning this agreement or any part thereto the

interpretation of any clause of the Agreement the courts in Udupi

alone shall have the jurisdiction."

It is contended that the arbitration proceedings were held at

Udupi, the respondent No. 1 applied for execution of the award as a

decree in the Courts at Udupi and only on obtaining transfer for

execution of the decree from the Courts at Udupi was the execution

of the award filed in this Court.

12. A perusal of the lease agreement shows the same to have been

executed at Delhi. The agreement provides for the payment of the

lease rental thereunder at the address of the respondent No. 1 given

in the agreement i.e. of Syndicate House, Manipal, Karnataka. The

assets subject matter of hire were as aforesaid to be located/installed

at Delhi. From a reading of the entire agreement I am unable to

gather any cause of action with respect thereto accruing at Udupi.

On enquiry from the counsel for the respondent No. 1 in this regard

he only contends that since in terms of the agreement the arbitration

was agreed to be held at Udupi, hence Udupi will have jurisdiction.

13. I am unable to accept the said contention of the counsel for the

respondent No. 1. The place of arbitration does not influence the

definition of the Court within the meaning of Section 2(e) of the Act.

Under Section 20 of the Act, the parties are free to agree on the

place of arbitration and failing any such agreement the place of

arbitration is determinable by the Arbitral Tribunal. However

"Court" has been defined as the court which would have jurisdiction

to decide the questions forming the subject matter of arbitration if

the same had been the subject matter of the suit.

14. It is settled law that the parties by consent cannot confer

territorial jurisdiction on a court which otherwise in law has no

territorial jurisdiction. Certainly the parties by agreement are

entitled to restrict the jurisdiction to one of the many courts which

under the law may have jurisdiction. In the present case, neither is it

found nor the counsel for the respondent No. 1 able to show that the

Courts at Udupi had jurisdiction over the dispute, if any, arising out

of the agreement aforesaid between the parties. The clause aforesaid

in the agreement restricting the jurisdiction to the courts at Udupi

which under the law had no jurisdiction is contrary to law and void

and cannot oust the jurisdiction of this Court. This Court otherwise

would have jurisdiction to entertain the petition, the agreement

having been executed at Delhi. The counsel for the respondent No. 1

has not contended that any earlier petition/application within the

meaning of Section 42 of the Act had been preferred in any other

Court.

15. The next contention of the counsel for the respondent No. 1 is

with respect to limitation. As aforesaid the award is dated 25th

November, 2000 and the present petition has been filed on 31 st

March, 2001. Under Section 34(3) of the Act, the limitation for filing

the application is three months from the date on which the party

making the application has received the award and under proviso

thereto, the said time is extendable by a further period of 30 days

only. The Apex Court in UOI Vs. Popular Construction Co. (2001)

8 SCC 470 has held that the court is not empowered to condone the

delay.

16. It is the pleading of the petitioner that the petitioner received

the arbitral award on 6th March, 2001 for the first time. If the said

plea of the petitioner is found to be correct the petition would be

within time else it is barred by time.

17. The petitioner save for the bare averment of having received

the award on 6th March, 2001 has not placed any material to

substantiate the same, not even the envelope in which the award

may have been received by it. The petition is vague as to from whom

the petitioner received the award. In the absence of any plea, it has

to be presumed that the petitioner must have received the award

from the arbitrator only. It is not the case of the petitioner that the

arbitrator who is an advocate based at Udupi has personally

delivered the award to the petitioner. In the absence of any plea, it

has to be again presumed that the award must have been received

either by post or by courier and in both of which cases, from the

envelope, the date of delivery could have been deciphered. The said

envelope if any ought to have been available with the petitioner. The

burden was on the petitioner to establish the said fact. The petitioner

has utterly failed to prove the same.

18. Though as aforesaid the arbitral record has not been called

but the respondent No.1 has along with its reply filed photo copy of

the letter dated 25th November, 2000 of the arbitrator of publication

of the award and enclosing therewith copy of the award.

19. I find it contrary to human conduct that if the arbitrator had

not sent the award to the petitioner under the cover of letter dated

25th November, 2000 (supra) as contended by the respondent No.1,

why would the arbitrator suddenly in March, 2001 send the award

to the petitioner.

20. Yet another factor which in my opinion conclusively establishes

the falsehood of the petitioner is that the petitioner along with the

petition filed list of documents, in part III of the record. The said list

of documents contains a true typed copy of the aforesaid letter dated

25th November, 2000 of the arbitrator intimating the publication of

the award and enclosing the copy thereof. There is no explanation

whatsoever from the petitioner in spite of opportunity having been

given today also as to how the petitioner came to be possessed of the

said letter. In view of the case made by the petitioner, of having all of

a sudden and to his surprise and shock having received the award, it

has to be presumed that the award was received under cover of the

said letter only. The petitioner has shied away from filing the original

of the said letter and from which the true typed copy was made. The

petitioner having admitted receipt of letter dated 25th November,

2000 enclosing the award, it seems improbable that the same was

received on 6th March, 2001. In any case, petitioner has failed to

discharge the burden of rebutting the presumption of service of said

letter within reasonable time of 25th November, 2000. Thus it stands

conclusively established that the petitioner received the award under

cover of letter dated 25th November, 2000 of the arbitrator and

which would make the present petition palpably barred by time.

21. Though the petition is liable to be dismissed on the aforesaid

ground but since this order is appealable, it is deemed expedient to

deal with the other objections also of the petitioner.

22. The counsel for the petitioner admits that in view of the dicta

of this Court in M/s Lloyd Insulations (India) Ltd. Vs. Cement

Corporation of India Ltd. 90 (2001) DLT 1 the plea of the

arbitration proceeding being barred Section 22 of SICA 1985 does

not survive and is untenable. The same is accordingly rejected.

23. As far as the claim of the petitioner of having no notice of

arbitration is concerned, the counsel for the petitioner has

contended that the letter dated 11th February, 1999 of the

respondent No. 1 to the petitioner demanding Rs. 9,68,329.99 p and

intimating reference to arbitration, addressed to the petitioner at its

registered office at 14th Floor, Hansalya Buiding, 15 Barakhamba

Road, New Delhi was not received. The counsel for the petitioner has

also drawn attention to the photocopy of Form 18 under the

Companies Act filed by it from which it transpires that the registered

office of the petitioner was changed from 14th Floor, Hansalya

Buiding, 15 Barakhamba Road, New Delhi to B-14, Competent

House, F-14 Middle Circle Connaught Place, New Delhi-110001

w.e.f. 1st October, 1998, It is contended that thus the address at

which notice was sent was no longer the registered office of the

petitioner and the notice could not have been served on the

petitioner.

24. The arbitrator has however in the award recorded that the said

notice dated 11th February, 1999 was replied by the respondent, as

also noted above. Thus it transpires that though as on 11th February,

1999 the Hansalya address was not the address of the registered

office of the petitioner but the petitioner was receiving dak

addressed thereto and also replied to the same. It is significant that

the petitioner has in its reply dated 27th February, 1999 not asked

the respondent No. 1 to address future communications to any other

address. Though it has been argued and pleaded that the respondent

No. 1 was aware of the new address of the petitioner but the counsel

for the petitioner save for contending that the new address was

given in OMP NO. 369/1999 preferred by the petitioner with respect

to another transaction/award with the respondent, nothing has been

shown vide which the petitioner informed the respondent No. 1 of

the change in registered office. The address given by the petitioner

in the agreement is of Hansalya building. As per Clause 24 of lease

agreement the notices thereunder are required to be given

personally or left at or posted to the petitioner at last known address

of the petitioner and the last known address of the petitioner to the

respondent No.1 is of Hansalya Building only. Nothing is shown as to

when the notice of OMP No. 369/1999 was served on the respondent

No. 1.

25. The other pleadings of the petitioner with respect to non-

receipt of notices recorded in the award to have been sent by the

arbitrator are only with respect to change in address. A perusal of

paragraph 13 and grounds „C‟ and „E‟ would show that the petitioner

has not controverted the award to the extent of recording dispatch

of notices of hearing by the arbitrator to the petitioner. All that has

been stated is that the notices were sent at the old address and not

at the new address of the registered office of the petitioner. It is for

this reason only that notwithstanding the arbitral record being not

called, need was not felt to call for the record at this stage. The

respondent No.1, along with its reply has filed photocopy of letter

dated 19th April, 1999 sent by arbitrator, and of postal receipts of

dispatch thereof and of A.D. cards returned to the arbitrator showing

delivery thereof.

26. The factum of the petitioner replying to the letter dated 11th

February, 1999 sent at the old address, even after the change of

address of the registered office, unequivocally establishes that the

plea of non service for reason of change of address is false. The only

pleading is that the address of the registered office had changed. It

is not pleaded that the office of the petitioner at Hansalaya Building

ceased to exist, though it is orally contended so by the counsel for

the petitioner.

27. For the reasons aforesaid, I do not find any merit in the plea of

the petitioner, of having no notice of arbitration proceedings. In fact

the petitioner is found to have acted mala fide, as borne out from

filing of copy of the letter dated 25th November, 2000 (supra).

28. As far as the finding of the arbitrator on the claims is

concerned, there is really no plea. All that has been pleaded is that

arbitrarily overdue compensation on lease rental has been allowed

and the rate of interest is whimsical. It is not the plea that the said

overdue compensation was not payable in terms of the agreement as

held in the award. No interference is called for in the approach of

the arbitrator of allowing the claims in terms of the agreement. The

transaction between the parties was a commercial transaction,

virtually of a loan and if the parties had agreed to the payment of

overdue compensation as a deterrent to default in payment of agreed

installment, there is no reason for the petitioner not to be bound with

the same. Similarly, considering the nature of transaction and the

agreement between the parties nothing can be found wrong with the

award of interest w.e.f. from 12th February, 1999 till the date of the

payment at 21% per annum. The said rate of interest is in fact

considerably less than the interest agreed to be paid. However, in

view of the recent judgments in view of falling rates of interest, the

rate of interest during the pendency of the objections before this

Court is reduced to 15% per annum. If payment is not made within

two months hereof, the respondent No. 1 thereafter, as under the

award shall again be entitled to interest again at 21st % per annum.

29. Save for modification aforesaid in the award, the petition is

dismissed. The petitioner having been found to have approached this

Court with a false case of date of receipt of the award is also

burdened with costs of Rs. 22,000/-.

File be consigned to records.

RAJIV SAHAI ENDLAW,J July 07, 2009 rb