M/S. Shubhra Chit Fund (P) Ltd. vs Vinod Kumar Anand And Ors.
2014 Latest Caselaw 869 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         FAO Nos.184/1993 & 185/1993

%                                                17th February, 2014

1.    FAO No.184/1993

M/S. SHUBHRA CHIT FUND (P) LTD.                        ..... Appellant
                   Through: None.


                          Versus
VINOD KUMAR ANAND AND ORS.                             ..... Respondents
                Through: None.

2.    FAO No.185/1993

M/S. SHUBHRA CHIT FUND (P) LTD.                        ..... Appellant
                   Through: None.


                          Versus
VINOD KUMAR ANAND AND ORS.                             ..... Respondents
                Through: None.


CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not?


VALMIKI J. MEHTA, J (ORAL)

1.           Both these appeals are being decided by the present judgment

inasmuch as there are common issues of fact and law. The appeals have

FAO Nos.184/1993 & 185/1993                                    Page 1 of 5
 been filed by the M/s. Shubhra Chit Fund (P) Ltd against the impugned

judgments of the court below dated 31.3.1993 by which objections under

Sections 30 and 33 of the Arbitration Act, 1940 have been accepted and the

Awards passed against the principal borrowers and guarantors, dated

30.11.1987 have been set aside.

2.            I am taking the grounds on which Awards have been set aside

as decided by the court below, and discussion on each of the ground will

show that the impugned judgment is illegal and bound to be set aside.

3.            The first issue held against the appellant was that the guarantee

agreement cannot be said to contain an arbitration clause by which the

disputes had to be referred to arbitration. The relevant clauses in this regard

of the main agreement and the guarantee agreement are clause Nos.10 and

12, and which read as under:-

     "AGREEMENT CLAUSE 10:
     That all questions and matter of differences or dispute between the
     parties hereto or their representative touching the construction hereof
     or any Act or thing in regard to or concerning to the rights, duties
     obligations or there enforcement, performance, including the failure
     to pay a claim or instalment, herein before cited and/or arising out of
     this agreement or to the subject matter hereof shall be referred to the
     Sole Arbitration of Sh. S.P. Aggarwal Advocate, Chamber No.427,
     Western Wings, Tis Hazari Court, Delhi-54. Whose decision shall
     be final and binding on the parties concerned. The provisions of the
     Arbitration Act or any statutory modification thereof shall apply to
     the arbitration and any other submission shall not be determined by
     the prized subscriber or seek winding up of the company. It is
FAO Nos.184/1993 & 185/1993                                         Page 2 of 5
      further agreed that any of the parties may refer the dispute to the said
     arbitrator through court or otherwise.

     AGREEMENT OF GUARANTEE: CLAUSE 12:
     The all questions and matters in "disputes or differences" between
     the parties hereto or their representatives touching the construction
     hereof or any Act, or thing in regard to or concerning or connected to
     the rights, duties and obligations or their enforcement, or
     performance, including the failure to pay a claim or instalment,
     hereinbefore recited and/or arising out of or relating to his agreement
     or to the subject matter hereof shall be referred to the Sole
     Arbitration of Sh. S.P. Aggarwal Advocate, Chamber No.427,
     Western Wings, Tis Hazari Court, Delhi. 54. whose decision will be
     final and binding on the parties concerned costs shall be at the
     discretion of the arbitration and the Award shall be final and binding
     on the parties concerned. The provisions of the Arbitration Act or
     any statutory modification thereof shall apply to the Arbitration and
     this submission shall not be determined by death of the prized
     subscriber or of the Guarantors or winding up of the company."

4.            A reading of the aforesaid clauses leaves no manner of doubt at

all that there was an arbitration agreement by which the disputes and

differences had to be referred to arbitration and therefore I fail to understand

the wholly perverse findings of the court below that there was no arbitration

agreement between the appellant and the objectors/guarantors. This finding

of the court below is set aside.

5.            The next aspect is that the arbitrator was not validly appointed

and there was no proper reference. This aspect will have to be understood

with the aspect that the objectors were proceeded exparte in the arbitration

proceedings. In law if the objectors fail to appear and are proceeded exparte,
FAO Nos.184/1993 & 185/1993                                          Page 3 of 5
 then, objections cannot be entertained for the first time under Sections 30

and 33 of the Act and objections as to jurisdiction are deemed to be waived.

6.           The facts of the present case show that in the arbitration

proceedings, a compromise was arrived at on 18.9.1987 at Rs.23,550/- for

payment upto September, 1987 in respect of three disputes whose cases were

pending and guarantors were present at the time of settlement. The cheque

of Rs.2,500/- drawn on New Bank of India, Rana Partap Bagh Branch, Delhi

dated 19.9.1987 was given before the sole arbitrator. This cheque was

however dishonoured and therefore arbitrator had no option but to continue

the arbitration proceedings. The arbitration record as also the impugned

order shows that the objectors were all along aware of the proceedings in the

arbitration inasmuch as notices were sent to the stated address of the

principal borrowers and the guarantors. There is a presumption of service

because the addresses were the same addresses where the notices were

initially sent. Merely because there is a UPC cannot mean in the facts of the

present case that objectors were not served. Therefore, the fact of the matter

is that the objectors never appeared in arbitration proceedings and therefore

Awards, were validly passed against the principal borrowers and the

guarantors/objectors with respect to the money of the Chit Fund which was

received by the principal borrowers.      It is important to note that the
FAO Nos.184/1993 & 185/1993                                       Page 4 of 5
 appellant/company is run with public funds and which is therefore money of

public lying in trust with the appellant/company. Faith has been put by

various persons in the appellant/company and therefore frivolous defences

and objections to set aside the Awards are not permissible once the objectors

did not appear in the arbitration proceedings.

7.           I may also note that the name of Sh. S.P. Aggarwal is duly

mentioned in the arbitration clause and once objectors appear in the

arbitration proceedings at one stage but thereafter failed to appear, no

objections can be raised as to existence of an arbitration agreement or

validity of reference or jurisdiction of the arbitrator.

8.           In view of the above, appeals are allowed by setting aside the

impugned judgments dated 31.3.1993 and by upholding the Awards dated

30.11.1987 passed in favour of the appellant/Chit Fund company. Parties

are left to bear their own costs.




FEBRUARY 17, 2014                                VALMIKI J. MEHTA, J.

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