Shubhra Chit Fund (P) Ltd vs Ram Kumar Shastri & Ors
2010 Latest Caselaw 2936 Del

                                                          REPORTABLE


*      IN THE HIGH COURT OF DELHI AT NEW DELHI


                            FAO No.57/1995


                                     Date of Decision: June 03, 2010


       SHUBHRA CHIT FUND (P) LTD           ..... Appellant
                    Through Mr. A.K.Kohli, Advocate with
                    Mr. D.C.Thakur, Advocate

                   versus


       RAM KUMAR SHASTRI & ORS                      ..... Respondents
                   Through None


       CORAM:
       HON'BLE MISS JUSTICE REKHA SHARMA

1.     Whether the reporters of local papers may be allowed to see the
       judgment? Yes
2.     To be referred to the reporter or not? Yes
3.     Whether the judgment should be reported in the „Digest‟? Yes

REKHA SHARMA, J.

The facts giving rise to the present appeal are as under:-

The appellant is running a chit fund business. Respondent No.1

became member of two chits of Rs.50,000/- each spread over in

40 months with the monthly subscription of Rs.2500/- for both the

chits less dividend as per the chit agreement executed between him

and the appellant. Both the chits were prized at Rs.30,000/- each and

the prized money amounting to Rs.60,000/- was paid to respondent

No.1. After receiving the prized chits, respondent No.1 defaulted in

making payment of the installments. Hence, a legal notice was sent to

the respondents which evoked no response from them leaving the

appellant with no option but to refer the matter to the sole arbitration

of Shri S.P.Aggarwal, Advocate in terms of the agreement between

the parties. The respondent initially appeared before the arbitrator

but when the matter was at the final stage, he absented from the

proceedings resulting in the passing of an ex-parte award dated

January 04, 1991 whereby a sum of Rs.93,820/- was awarded in favour

of the appellant. The appellant did not move the Court for making the

said award a rule of the court, as the respondent after the passing of

the award agreed to make the payment of the awarded amount. He

even made payment of a sum Rs.22,250/- but thereafter made no

further payment. This led the appellant to make yet another

reference to the same arbitrator for claiming the balance amount.

Notices were sent by the arbitrator to the respondents and in

response thereto, respondent No.1 appeared before the arbitrator and

he promised to deposit Rs.22,000/- to 23,000/- but made no deposit as

per the promise. In so far as the other respondents are concerned,

they refused to accept the notice. The arbitrator consequently made

another award dated May 22, 1992 and thereby awarded a sum of

Rs.80,377/- in favour of the appellant and against the respondents.

This time, the appellant moved the court of the District Judge

for making the award a rule of the court. Respondent No.1 filed

objections to the award. The learned Additional District Judge vide

order dated April 21, 1994 though dismissed all the objections raised

by respondent No.1 but declined to make the award a rule of the

court. The learned Judge has held that as the earlier award made by

the arbitrator dated January 04, 1991 was not superceded or quashed,

another reference to the arbitrator on the same subject matter could

not be made. Consequently, the award arising out of the second

reference was set-aside.

Feeling aggrieved by the order of the learned Additional District

Judge, dated April 21, 1994, the present appeal has been preferred by

the appellant. The respondents have chosen not to contest the

appeal.

The question which arises for consideration is, whether the

learned Additional District Judge could go into the question of legality

or validity of the second reference made to the arbitrator resulting in

the award dated May 22, 1992?

What is of significance is that respondent No.1 appeared before

the arbitrator in response to notice of the second reference but raised

no objection to the appointment of the arbitrator on the ground that

the reference made was not valid. On the contrary, he promised to

pay the sum of Rs.22,000/- to 23,000/- but not only did he not keep the

promise but also stopped appearing before the arbitrator resulting in

the ex-parte award against him. What is further of significance is

that even before the learned Additional District Judge, respondent

No.1 though challenged the award on number of grounds but raised

no challenge to the legality or validity of the second reference. In this

view of the matter, when respondent No.1 himself had submitted to

the jurisdiction of the arbitrator and had raised no challenge to the

second reference either before the arbitrator or before the learned

Additional District Judge, the learned Judge, in my view, erred in

holding that the second reference was bad in law, more so, for the

reason that the finding so given was given without notice to the

parties, particularly, the appellant.

What also needs to be noticed is clause-13 of the Agreement of

Guarantee executed between the appellant and the respondents. As

per this clause, "the agreement is irrevocable and shall continue to

remain in force till the payment of the said amount either by the

prized subscriber or by the guarantors." In view of this clause, the

respondents having not made the payment, the second reference

could be made notwithstanding the fact that the earlier award made

by the arbitrator was not got made a rule of the court. The default on

the part of the respondents was a continuing default and the

appellant, therefore, was well within its right to take recourse to a

second reference.

For the foregoing reasons, the impugned order dated

April 21, 1994 is set-aside and the award is made a rule of the court.

Decree in terms of the award be drawn. The awarded amount shall

carry interest @ 6% per annum from the date of the decree till

realization.

The appeal is disposed of.

REKHA SHARMA, J.

JUNE 03, 2010 ka