Delhi High Court
M/S. Treason Overseas Pvt. Ltd. vs Motor And General Finance Ltd. & ... on 16 March, 2010
Author: Manmohan
F-28
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. 326/2002
M/S. TREASON OVERSEAS PVT. LTD. ..... Petitioner
Through: Mr. Anil Kumar Sangal, Advocate with
Mr. Nalin Sangal & Mr. D.P. Mohanty,
Advocates.
versus
MOTOR AND GENERAL
FINANCE LTD. & ORS. ..... Respondents
Through: Mr. Sunil Magon, Advocate.
% Date of Decision : MARCH 16, 2010
CORAM:
HON'BLE MR. JUSTICE MANMOHAN
1. Whether the 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.
JUDGMENT
MANMOHAN, J (ORAL)
1. Present petition has been filed under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as "Act, 1996") for setting
aside the ex parte arbitral Award dated 20th April, 2002.
2. The facts of present case are that on 30th June, 1997, a Hire-Purchase
Agreement was executed between the petitioner-objector and respondent
No.1-claimant whereby two Ashok Leyland Comet Alco vehicles Model
1997 were financed. Mr. Sujan Singh Bundela stood as a guarantor for
petitioner-objector. Under the Hire-Purchase Agreement, petitioner-objector
agreed to repay a sum of Rs.11,70,000/- in 23 monthly installments.
However, after repaying only one monthly installment of Rs.50,000/- on 07th
October, 1997, petitioner-objector defaulted in repayment of outstanding
amount. Accordingly, petitioner-objector incurred additional liabilities.
After repossession of the two vehicles, the same were sold by the respondent
No.1-claimant.
3. Subsequently, arbitral proceedings were initiated wherein petitioner-
objector after initially appearing through its counsel, did not appear.
Consequently, the impugned ex parte Award dated 20th April, 2002 was
passed against petitioner-objector and its guarantor, Mr. Sujan Singh
Bundela.
4. Mr. Anil Kumar Sangal, learned counsel for petitioner-objector
submits that impugned Award is contrary to public policy of India inasmuch
as the respondent No.1-claimant‟s claim was barred by limitation and
respondent No.1-claimant did not reduce its claim by the amount it had
recovered on resale of repossessed trucks.
5. On the other hand, Mr. Sunil Magon, learned counsel for respondent
No.1-claimant submits that claim petition was well within limitation as the
notice invoking arbitration was issued on 30th March, 2000 i.e. within a
period of three years from the date of first default i.e. 01st November, 1997.
6. In the alternative, he submits that the two vehicles were repossessed
by respondent No.1-claimant through police aid on 15th July, 1999 and
accordingly, respondent No.1-claimant was at liberty to initiate arbitration
proceedings within three years from the date the cause of action arose i.e.
15th July, 1999 - which it did.
7. Mr. Magon further states that without prejudice to the rights and
contention of respondent No.1-claimant, the amount of Rs.7 lacs received on
sale of two trucks could be deducted from the awarded amount. He points
out that respondent No.1-claimant is a RBI audited company.
8. In rejoinder, Mr. Sangal disputes the date of repossession of the
vehicles and states that both the vehicles were repossessed in November,
1997. According to him, it is unlikely that the vehicles were repossessed in
the year, 1999 when the default in repayment has admittedly taken place in
the year, 1997.
9. Mr. Sangal lastly states that in the absence of audited balance sheet of
respondent No.1-claimant company, the amount of Rs.7 lacs alleged to have
been received on sale of two trucks could not be believed as „gospel truth‟
10. Having heard the parties, I am of the view that the scope of
interference by this Court with an arbitral award under Section 34(2) of Act,
1996 is extremely limited. Supreme Court in Delhi Development Authority
Vs. R.S. Sharma and Company, New Delhi reported in (2008) 13 SCC 80,
after referring to a catena of judgments including Oil & Natural Gas
Corporation Ltd. (supra) has held that an arbitral award is open to
interference by a court under Section 34(2) of the Act, 1996 if it is contrary
to either the substantive provisions of law or the contractual provisions
and/or is opposed to public policy.
11. In fact, the Supreme Court in McDermott International Inc. Vs. Burn
Standard Co. Ltd. & Ors. reported in (2006) 11 SCC 181 has succinctly
summed up the scope of interference by this Court by stating "the 1996 Act
makes provision for the supervisory role of courts, for the review of the
arbitral award only to ensure fairness. Intervention of the court is
envisaged in few circumstances only, like, in case of fraud or bias by the
arbitrators, violation of natural justice, etc......"
12. It is an admitted position that petitioner-objector has defaulted in
repayment of installments under the Hire-Purchase Agreement. Today,
before me, even no reason for petitioner-objector‟s non appearance before
the Arbitrator has been advanced. Consequently, no objection on merits of
controversy can be entertained in the present proceedings.
13. Undoubtedly, the issue of limitation can be raised at any stage of the
proceedings including in an objection petition filed under Section 34 of Act,
1996. However, on a perusal of the papers, I find that respondent No. 1-
claimant has commenced the arbitral proceedings within a period of three
years from the date the cause of action arose. Even if the cause of action is
taken as the first date of default as suggested by learned counsel for
petitioner-objector, namely, 1st November, 1997, I find that the respondent
No.1-claimant had issued a legal notice dated 30 th March, 2000, that is
within the period of three years. I may mention that in accordance with
Section 21 of Act, 1996, the arbitral proceedings are deemed to commence
on the date on which a request for the dispute to be referred to the arbitration
is received by the other party.
14. In any event, I am of the opinion that the issue of limitation is a mixed
question of fact and law and the petitioner-objector has not pleaded vital
facts like the date of repossession of the vehicles either before the Arbitrator
or before this Court. Accordingly, I have no other option but to believe the
respondent No. 1-claimant‟s version that trucks were repossessed on 15 th
July, 1999. I may mention that during the hearing, learned counsel for
respondent No.1-claimant had handed over a receipt/letter dated 15th July,
1999 written by respondent No.1-claimant to Inspector, Police Station
Kotwali Chanderi, Guna, Madhya Pradesh admitting that it had received
possession of two Ashok Leyland vehicles. The said letter is countersigned
by the guarantor to the said transaction and bears the same date.
Consequently, it is impossible for this Court in the present proceedings to
give a finding that the claim petition filed by respondent No.1-claimant was
beyond the period of limitation.
15. As far as the plea that respondent No.1-claimant has not placed on
record anything to show as to how much amount it received on sale of the
two Ashok Leyland Comet vehicles is concerned, I am of the view that this
argument has been raised for the first time by petitioner-objector on 28th
January, 2009. Even in accordance with the Income Tax Act, no individual
or company is to retain its audited balance sheet for the period exceeding
seven years. Since sale in the present case pertains to the year 1999 and
arbitral award in the present case was rendered on 20th April, 2002, I am of
the view that petitioner-objector cannot insist on production of audited
balance sheet to show the amount received by respondent No.1-claimant on
sale of two repossessed trucks. However, in the interest of justice, the
awarded amount by the Arbitrator is reduced by the sale price of Rs.7 lacs.
With this modification, the objection petition is dismissed but with no order
as to costs.
MANMOHAN,J
MARCH 16, 2010
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