Indusind Bank Ltd. vs Ram Laxman Hotels Ltd & Ors
2009 Latest Caselaw 2628 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                  OMP.No.370/2002

%                                  Date of decision: 15.07.2009

INDUSIND BANK LTD.                         .......       Petitioner
                        Through:    Mr. K.K. Patra with Mr. Shivendra
                                   Swarup, Advocates

                               Versus

RAM LAXMAN HOTELS LTD & ORS ....... Respondents
                        Through: None.


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

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

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 question for consideration is whether, a third party, who

was not a party to the arbitration agreement or the arbitration

proceedings, can file a petition under Section 34 of the Arbitration

Act, 1996 with respect to an arbitral award on the ground of the

same affecting the said third party.

2. The petitioner bank is averred to have granted credit facilities

etc to the respondent No.1 company. Upon default by the

respondent No.1 company, the petitioner bank initiated proceedings

before the DRT, Mumbai, subsequently transferred to DRT, Pune.

The said proceedings are informed to have culminated with an order

in favour of the petitioner and Recovery Certificate averred to have

been issued against the respondent No.1 company.

3. It is the case of the petitioner that the respondent No.1

company, with a view to delay the recovery proceedings entered into

an agreement with respondent No.2 NRI Lead Bank alleged to be

carrying on business in banking services without authority of the

Reserve Bank of India. Respondent No.1 company vide the said

agreement is stated to have assigned its just and legal dues in favour

of the respondent No.2, in the contention of the petitioner, illegally.

It is further the case of the petitioner that collusive arbitration

proceedings were commenced between the respondent No.1

company and the said respondent No.2 before ADR Arbitral Tribunal,

Consortium Plaza, 8-J, Gopala Tower, 25 Rajendra Place, New Delhi

which has been impleaded as the respondent No.3. The said arbitral

tribunal is stated to have made an interim award dated 26th July,

2002 with respect to the immovable property of the respondent No.1

company, directing restoration of status quo ante as on 14th May,

2001 with respect thereto. The respondents No. 1 and 2 on the basis

of the said interim award are stated to be making applications by

way of impediment to the proceedings before the DRT, Pune and/or

its recovery officer. The petitioner in the circumstances preferred

the present petition for setting aside of the said interim award of

ADR Arbitral Tribunal.

4. Only the respondent No.2 NRI Lead Bank filed a written

statement to the petition. It is, inter alia, the plea in the written

statement that the arbitral award had been filed in the Principal Civil

Court of District Judge, Pune and this court has no jurisdiction to

entertain the petition; that under Section 42 of the Act also the court

at Pune alone was entitled to entertain the petition. On merits the

award was sought to be justified.

5. The respondent No.1 could not be served by ordinary process

and was ordered to be served by publication for today. Publication

has been effected. None has appeared on behalf of the respondent

No.1 None appeared for the respondent No.2 as well. The

respondents are proceeded against ex parte and the counsel for the

petitioner has been heard.

6. A perusal of the record shows the same to be incomplete. The

annexures referred to in several of the documents are not annexed

thereto. On inquiry the counsel for the petitioner states that since

the petitioner is not a party to the transaction between the

respondent No.1 and the respondent No.2 or even to the arbitration

proceedings between them, the petitioner has filed whatever

documents were made available to it and has no means to file the

complete records. On further inquiry as to whether the recovery

proceedings initiated by the petitioner were held up in any manner

for the reason of the award aforesaid, the counsel informed that the

proceedings have been going on and some monies have also been

recovered. On inquiry as to how the territorial jurisdiction of this

court has been invoked though it is admitted that respondent No.1

company has its registered office at Mumbai and properties at Pune

and that the agreement between the petitioner and the respondent

No.1 company was also reached outside the jurisdiction of this court,

the territorial jurisdiction of this court was sought to be justified only

for the reason of the arbitration proceedings having been conducted

by respondent No.3 ADR Abitral Tribunal within the jurisdiction of

this court. However, the venue of arbitration does not determine the

court within the meaning of the Act. The plea of Section 42 of the

Act raised by the respondent No.2 in its reply also remains

unanswered.

7. Though from averments on record, grave doubt is cast with

respect to the respondent No.3 ADR Arbitral Tribunal but there is a

technical objection to the maintainability of this petition. The petition

under Section 34 of the Act can be preferred only by a party to the

arbitration proceedings and not by a third party. The Chief Justice

A.P. Shah of this Court sitting in the Division Bench of the Madras

High Court in Chennai Container Terminal Pvt Ltd Vs UOI AIR

2007 Mad 325 has held that Section 34 read with the definition of

party in Section 2(1)(h) of the Act makes it amply clear that only a

party to the arbitration agreement can invoke the provisions of

Section 34 of the Act; a third party has no locus standi to challenge

the award under Section 34 of the Act. Similarly, a Single Judge of

this court also in Florentine Estates of India Ltd Vs CREF

Finance Ltd 110(2004)DLT 742 held to the same effect. In view of

the said legal position, the petition under Section 34 of the Act by

the petitioner who is admittedly not a party to the arbitration

proceedings is not maintainable and is liable to be dismissed.

8. However, I must hasten to add that the dismissal of the

petition ought not to be understood in any way as coming in the way

of the petitioner in pursuing the recovery proceedings in pursuance

to the recovery certificate or in any manner against the respondent

no.1 company. The arbitral award to which the petitioner is not

party cannot determine / affect the rights of the petitioner and

cannot come in the way of execution of the orders obtained by the

petitioner by following the due process of law against the respondent

No.1. From the documents before this court it appears that the

arbitral tribunal was aware of the claims of the petitioner against the

respondent No.1 and its properties but nevertheless proceeded to

make the order which was / is being used against the petitioner. It is

such a practice which is bringing a bad name to arbitration and need

to be condemned with full force. However, having held that this

court has no jurisdiction, I am refraining from taking any further

steps against the respondents.

9. With the aforesaid observations, the petition is disposed of,

leaving the parties to bear their own costs.

RAJIV SAHAI ENDLAW (JUDGE) July 15, 2009 M