Delhi High Court

Siya Ram Dwivedi vs New Holland Fiat India Pvt. Ltd. on 16 January, 2015

Author: Deepa Sharma

*     IN THE HIGH COURT OF DELHI AT NEW DELHI
+                        O.M.P. 1505/2014
%                     Judgement reserved on: 09.12.2014
               Judgement pronounced on: 16.01.2015
SIYA RAM DWIVEDI                               ..... Petitioner
                         Through: Mr Abdhesh Chaudhary and
                         Ms Manisha Suri, Advs.
                              versus

NEW HOLLAND FIAT INDIA PVT LTD               ..... Respondent
                  Through: Mr Shambhu Sharan, Adv.
CORAM:
HON'BLE MS. JUSTICE DEEPA SHARMA
JUDGMENT

1. Vide the present petition, the petitioner has assailed the Ex-parte

Arbitral Award dated 2nd August, 2014.

2. The Arbitrator was appointed in this case vide letter dated 18th

November, 2013 as a Sole Arbitrator for adjudication of the dispute arising

out of a Dealership Agreement.

3. The respondent's predecessor-in-interest M/s New Holland Tractors

(India) (P) Ltd. (NHT for short) was engaged in the business of manufacture

and sale of tractors and their spare parts. The NHT appointed M/s Rajinder

Machinery Mart whose proprietor is the petitioner before me, its dealer by

virtue of letter of intent dated 30.07.2002. Subsequently, a comprehensive

non-exclusive Dealership Agreement dated 01.11.2002 was executed

between the petitioner and NHT for the sale and after sale services of NHT's

products. The petitioner furnished a personal guarantee also undertaking to

make all payments of dues relating to the dealership. The said dealership

agreement was renewed by a new dealership agreement dated 05.11.2005

effective from 01.11.2005. By virtue of order passed by the High Court of

Bombay and by an order dated 01.09.2008 passed by this court, NHT got

amalgamated in Fiat India (P) Ltd. in accordance with a scheme of

amalgamation approved by the said High Courts. Consequently, all

properties, rights, title, interest, labels, brand registrations, contracts,

agreements etc. owned by NHT got vested in Fiat (India) (P) Ltd. Later, the

name of Fiat India (P) Ltd. was changed to New Holland Fiat (India) (P)

Ltd, with effect from 18.12.2008.

4. The Dealership Agreement dated 5th November, 2005 was due to

expire some time in the year 2008. A new dealership agreement dated

24.06.2009 was entered into between New Holland Fiat (India ) (P) Ltd. and

M/s Rajinder Machinery Mart for a period of three years effective from

01.01.2009. The petitioner under the said agreement furnished the personal

bank guarantee also for the payment of the amounts due from Rajinder

Machinery Mart.

5. Certain dispute arose regarding the payments between the parties and

the respondent raised the claim which was referred to the Arbitrator. Clause

25 of the Dealership Agreement was invoked by the respondent and

accordingly in view of this Clause, the Managing Director of the respondent

appointed the retired Judge of the High Court as Sole Arbitrator.

6. The dispute was referred to the Arbitrator. The Arbitrator accepted

his appointment and vide letter/notice dated 21st November, 2013 invited the

parties for preliminary hearing on 11th January, 2014 at 11.30 am at his

residence. The petitioner in response to the said notice, sent a letter dated

26th November, 2013 to the respondent and endorsed the copy of the said

letter to the arbitrator.

7. The petitioner, however, did not attend the proceedings before the

Arbitrator on 11th January, 2014. The Arbitrator gave opportunity to the

claimant to file the statement of claim which was filed on 7th April, 2013.

The arbitrator sent a notice dated 12th April, 2012 to the petitioner to file its

Statement of defence/counter-claim by 23rd May, 2014 and also to appear for

hearing on 30th May, 2014 at 11.30 am. The petitioner, however, did not

attend the proceedings before the Arbitrator at 30th May, 2014 and also did

not file his defence/counter-claim. The hearing before the Arbitrator was

thereafter fixed for the evidence of the claimant on 9 th July, 2014 and the

matter was fixed for final hearing on 18th July, 2014 at 11a.m. The copies of

the ordersheets of the proceedings held on 30th May, 2014 were sent to the

petitioner on the same day by speed post. The petitioner, instead of

appearing before the Arbitrator, sent a letter dated 26th May, 2014 which

was received by the Arbitrator on 31st May, 2014. On the final date of

hearing also, the petitioner did not attend the arbitral proceedings. The

evidence furnished by the claimant by way of an affidavit was taken on

record by the arbitrator and on the basis of the arbitral record, the Award

was passed. It is this Award which the petitioner is challenging in this

present petition.

8. The main ground of challenge is that the matter was of criminal nature

and the petitioner had filed FIR under Section 467, 468, 419 and 420 of the

Indian Penal Code and despite that the Arbitrator proceeded to pass an

Award dated 2nd August, 2014. It is submitted that this makes the Award

illegal as it was filed with the sole intention to dilute the FIR in the criminal

case.

9. It is submitted that FIR was registered since the respondent had

misappropriated and cheated the petitioner of 26 bank drafts which had been

furnished to the respondents but were not credited by them in the account

maintained.

10. It is submitted that the petitioner vide its letter dated 26 th November,

2013 had recorded his objections that the tractors were supplied to him

without any orders from him and that 26 bank drafts were not credited in the

account of petitioner and that the Arbitrator did not call the concerned bank

as per Section 26 and Section 27 of the Arbitration and Conciliation Act to

prove those bank accounts. It is submitted that Arbitrator ought to have

summoned witness from the said bank during the proceeding and this shows

that the arbitrator has not acted in independent, impartial and unbiased

manner and has failed to qualify the test as provided under Section 12 of the

Arbitration and Conciliation Act.

11. It is submitted that the Arbitrator has not followed the principle of

natural justice as it has not given full opportunity to the petitioner to contest

his case. It is submitted that while the respondent was given three months to

file statement of claim, the petitioner was given only one and a half month to

file his counter claim/defence. The petitioner was also not given the

opportunity to lead evidence. The Arbitrator has also hurried up the

proceedings and concluded the entire proceedings in three appearances, the

first being the date 11th January, 2014, the second being the date of 30 th

May, 2014 wherein the respondent was directed to file the oral evidence and

the notice was sent to the petitioner and lastly on 18 th July, 2014 wherein the

alleged final arguments were heard and the matter was reserved for

judgment and thus the petitioner was not afforded the reasonable, fair and

adequate opportunity.

12. It is submitted that impugned Award is defective and shocks the

judicial conscious and is against the public policy. The Award is based on

wrong conclusions and figures on it. It is further stated that the arbitrator

has wrongly calculated the due amount against the petitioners and has

arrived at a wrong figure. It is submitted that the Arbitrator has mentioned

in para 10 of the Award that the petitioner was required to give the amount

of Rs. 31,84,374.04 which was arrived at after adjusting the amount of Rs. 5

lacs of security deposit but again said in the said para that vide letter dated

07.11.2013, the petitioner was required to make the payment of Rs.

38,77,381.04/- which was due after adjusting the bank guarantee of

Rs.10,00,000.00.

13. Thus, by analogy of the Arbitrator, the money which was due on

8.11.2013 was Rs. 31,84,374.04 which grew to Rs. 48,77,381/- (Rs.

38,77,381+ Rs. 10,00,000) as on 07.11.2013. This shows that the interest

charged for two years roughly come to Rs. 16,93,007/- on an amount of Rs.

31,84,374/- which translates to 26.58%, while the chargeable interest as per

the Arbitrator himself was 18%. It is submitted that the Arbitrator has not

given the basis on which he has arrived to the figure of Rs. 38,77,381/- and

thus the Arbitrator has misconducted himself.

14. It is further submitted that the Banker's Cheque cannot be

dishonoured as these are the cheques which are issued by the Banks against

the money already received and are, in all sense, the Demand Drafts only.

The Arbitrator, however, without understanding the true meaning of

Banker's Cheque had wrongly arrived at the conclusion that the same has

been dishonoured. On these facts, it is submitted that an Award is liable to

be set aside.

15. No notice of the petition has so far been issued to the respondents and

the arguments on behalf of the petitioner have been heard at length. File is

also perused.

16. As it is clear from the contention raised by the petitioner, he has not

challenged the ex-parte award on the ground that he was not being properly

served of the arbitral proceedings or was not aware of the arbitral

proceedings. He himself has admitted in his petition that he had duly

received the notices of appointment of the arbitrator and of all the dates and

proceedings held before Arbitrator, but still he has chosen not to contest the

case of claimant before Arbitrator. He was given the opportunity to file the

counter claim/defence but the petitioner did not file any counter claim or put

up any defence before the Arbitrator. He had written letters dated

26.11.2013 and 26th May, 2014 to Arbitrator. In his letter dated 26th

November, 2013, he had complained that the tractors were supplied to him

without any orders and that he had issued 26 bank drafts which were not

credited in his account and requested that his statement of account be

rectified so that the business which was stopped since the year 2011 be

resumed. He has reiterated the said contentions again in his letter dated 26 th

May, 2014. The contention of the petitioner is that the Arbitrator ought to

have summoned the bank officials under Section 26 and 27 of the

Arbitration and Conciliation Act and verified his contentions raised by him

in these letters.

17. From the Award, it is apparent that the ld. Arbitrator has given due

consideration to the objections of the petitioner raised by him in these letters

and has dealt with it in his Award. Section 28 of the Arbitration and

Conciliation Act requires that the Arbitrator shall decide the dispute in

accordance with the substantive law for the time being in force in India. The

law of the land is that burden to prove on that the party which claims a fact

to be true. The burden was therefore upon the petitioner to prove his

contentions that tractors were supplied without order and his bank drafts

were not intentionally credited but he had chosen to stay away from the

arbitral proceedings and did not discharge the said burden.

18. The Arbitrator in para 20 of his Award has clearly dealt with the

contentions raised by the petitioner and it cannot be said that the Arbitrator

had swept his objections under the carpet and has not dealt with the pleas

raised by him in his letters.

19. It is also clear that the Arbitrator had given opportunity to the

petitioner to contest his case but it was the petitioner who has chosen

otherwise. The Arbitrator had decided the matter on the basis of the

evidence produced before him and rejected the contentions which were not

supported by any evidence on record.

20. It is also the settled principle of law that pendency of the criminal

proceedings does not automatically stay the civil proceedings before any

authority. Mere filing of the FIR by the petitioner regarding the 26 bank

drafts which he had allegedly handed over to the respondent and which the

respondent had not shown in the books of accounts and where there is no

contention on record that the respondent had encashed those demand drafts

and misappropriated the money, does not in any way initiate the findings of

Arbitrator.

21. The only contention of petitioner was that 26 bank drafts were not

credited in his accounts and in this matter filed an FIR. The petitioner has

concealed the facts relating to the investigation into the FIR lodged by him

on 01.07.2014. During the course of arguments, however, it is brought to

the notice of this court that the police was in the process of filing the final

record of closure of the FIR and also initiated the action under Section 182

IPC against the present petitioner for giving wrong information on the basis

of which FIR was lodged. The copy of the final report for closure and a

copy of the report for initiating criminal proceedings under Section 182 IPC

against the petitioner was also produced before the court. As discussed by

this court, the filing of a criminal petition does not automatically stay the

civil proceedings and the Arbitrator was justified in continuing with the

arbitral proceedings and the Award cannot be said to be illegal on this

ground.

22. The next argument by the ld counsel for the petitioner is that the

Award is in violation of Section 18 of the Arbitration and Conciliation Act

which requires that the party shall be treated with equality and each party

shall be given full opportunity to present his case. Although, the petitioner

has contended that he was not given full opportunity to present his case and

he was not treated with equality but has failed to point out any

circumstances which can show that he was not treated with equality or was

not given full opportunity. He was given time to file his counter

claim/defence which he did not file. It is also not shown by the petitioner

that he had some time from Arbitrator for filing defence/counter claim or

lead evidence and the Arbitrator had denied him that opportunity.

23. A mere vague contention that the Arbitrator while had given three

months time to file the statement of claim to the respondent, had given one

and a half month's time to the petitioner to file his defence/counter-claim

shows that he was not treated with equality when he did not ask for any

further time or opportunity is nothing but a weak attempt to turn the hands

of the clock backward. His claim would have had some strength had he

asked from the Arbitrator for more time to file his defence/counter claim and

the said would have been disallowed by the Arbitrator.

24. On the other hand, the Award shows that Arbitrator had been fair to

him and had rejected reliefs 3,4 and 5 of the Claimant although these reliefs

were not defended by the petitioner.

25. The contention of the petitioner that the Arbitrator has acted with bias

also stands controverted by this fact that the Arbitrator has acted fairly and

has based his findings on the evidences produced before him. The

Arbitrator has applied his mind which is clear from the very fact that he had

refused to grant the claimant relief nos 3,4 and 5.

26. This clearly shows that the Arbitrator has neither acted in biased

manner nor he has shown any inequality towards petitioner. Moreover, the

plea of bias is available to petitioner u/s 13(5) of the Act. In view of Section

13 of the Act, challenge of an Award on ground of bias is available to the

petitioner only if he has challenged the authority of Arbitrator on this ground

u/S 13(2) of the Act. In the present case, the petitioner had never appeared

before Arbitrator and adopted the challenge procedures provided under

Section 13 of the Arbitration and Conciliation Act.

27. Even otherwise, as discussed above, the petitioner has failed to show

that the Arbitrator has acted in any biased manner or has not treated him

with equality and had refused the petitioner to grant him full opportunity to

present his case.

28. The next contention of the petitioner is that the Arbitrator has

calculated the due amount in a wrong manner and without any evidence and

thus liable to be set aside.

29. It is apparent from the Award that the Arbitrator has reached to this

figure on the basis of certain facts which also includes the documentary

evidences placed before him. This includes the various letters of the

petitioner acknowledging the due amount.

30. The findings to this fact has been discussed by the Arbitrator in para

18 of his Award which is reproduced as under:-

"18. The claimant's case as stated above stand proved by the documents placed on record and the oral evidence contained in the affidavit of Sri Imran Khan. In his letter dated 26.11.2013 addressed to the claimant's Managing Director the respondent's grievance was about the levy of interest and the non- accounting of 26 bank drafts for amounts totalling to Rs.41,90,900.00. The same grievance is repeated in the respondent's letter dated 26.05.2014 addressed to me. The statement of account filed by the claimant shows that only one banker's Ch. No. 587623 for Rs.3,55,000.00 (item No.2 in the list appended to respondent's letter dated 26.11.2013) is reflected therein. The statement of account shows that the said cheque was dishonoured by the bank. The other bank drafts are not reflected in the said statement of

account. The said banker's cheque and the bank drafts purport to bear the dates between 09.08.2003 and 30.11.2006. The claimant has filed confirmation of balance letter signed by the respondent Sri Siyaram Dwivedi himself. The first only is at page 113 of the documents by which an outstanding balance of Rs. 75,77,765.00 is acknowledged by the respondent to be due to the claimant. In the confirmation for the period ending 31.03.2008 (page 106 the respondent acknowledged a balance of Rs. 46,63,816.00 and made a note thereon that the interest be waived. At page 109 is copy of a letter dated 07.04.2009 addressed by the respondent to the claimant acknowledging that as on 31.03.2009 as per the respondent's own books of account a sum of Rs.40,62,207 was due from him to the claimant in the Tractor Account and another sum of Rs. 1,24,356.00 was due in the parts account. This is a hand written letter signed by the respondent Sri Siya Ram Dwivedi and falsifies the respondent contention that any payments were not recorded in the claimant's bank of account. The last acknowledgment (page 114) is of an amount due to the claimant as on 31.03.2011 of Rs.3892,265.31".

31. Therefore, it is clear that the findings of the Arbitrator are based on

the documentary evidences before him which included certain documents

issued and signed by the petitioner himself.

32. There is no contention before me that those documents do not bear the

signatures of the petitioner. It therefore cannot be said that the Award of the

Arbitrator is not based on evidences produced before it.

33. Section 34 of the Arbitration and Conciliation Act lays down the

grounds on which the Arbitral Award can be challenged.

34. In the present case, the petitioner has challenged the Award on the

ground that the Arbitral Award is in conflict with the public policy of India.

The public policy has been defined by the Hon'ble Supreme Court in Oil

and Natural Gas Corporation Ltd vs. Saw Pipes Ltd., AIR 2003 SC 2629:

2003(2) R.A.J. 1

"31. Therefore, in our view, the phrase "public policy of India" used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term "public policy" in Renusagar case 1994 Supp (1) SCC 644 it is required to be held that the award could be set aside if it is patently illegal. The result would be -- award could be set aside if it is contrary to:

(a) fundamental policy of Indian law; or

(b) the interest of India; or

(d) in addition, if it is patently illegal.

Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void."

The legal position was further crystallized in the later decision in Steel

Authority of India Limited v. Gupta Brother Steel Tubes Limited, (2009)

10 SCC 63 thus (SCC, p. 78):

"18. It is not necessary to multiply the references. Suffice it to say that the legal position that emerges from the decisions of this Court can be summarised thus:

(i) In a case where an arbitrator travels beyond the contract, the award would be without jurisdiction and would amount to legal misconduct and because of which the award would become amenable for being set aside by a court.

(ii) An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by courts as such error is not an error on the face of the award.

(iii) If a specific question of law is submitted to the arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law does not make the award bad on its face.

(iv) An award contrary to substantive provision of law or against the terms of contract would be patently illegal.

(v) Where the parties have deliberately specified the amount of compensation in express terms, the party who has suffered by such breach can only claim the sum specified in the contract and not in excess thereof. In other words, no award of compensation in case of breach of contract, if named or specified in the contract, could be awarded in excess thereof.

(vi) If the conclusion of the arbitrator is based on a possible view of the matter, the court should not interfere with the award.

(vii) It is not permissible to a court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings."

35. In the catena of judgments, it had been clearly held that the illegality

for purpose of setting aside the award must be capable of going to the root of

the matter. Trivial illegality cannot be termed as contrary to public policy

(Reliance placed on findings in the case of Prathyusha Associates Vs.

Rashtriya Ispat Nigam Ltd., 2006 (1) ALT 691 (DB).

36. The courts have also time and again in plethora of judgments have

held that while dealing with the Award under Section 34 of the Arbitration

and Conciliation Act, the Court does not sit in appeal over the award of an

arbitral tribunal and is required to re-assess and re-appreciate the evidence.

It can be challenged only on the grounds mentioned in section 34 (2) of the

Act. (Reliance placed on findings in the case of P. R. Shah Shares & Stock

Broker (P) Ltd. Vs. M/s B. H. H. Securities (P) Ltd. & Ors., 2012 (1) SCC

594.

37. Relevant para 21 of the said judgment is reproduced as under:-

"21. A court does not sit in appeal over the award of an arbitral tribunal by re-assessing or re-appreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act...Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at."

38. In the case of Sudarshan Trading Co. Vs. Govt. of Kerala, (1989) 2

SCC 38, the Supreme Court has clearly held that the Courts are not required

to examine the award in order to find out whether the arbitrator had acted

correctly or incorrectly. Also in the case of Ispat Engg. & Foundry Works

v. SAIL, (2001) 6 SCC 347, the Supreme Court has held that there exists a

long catena of cases through which the law seems to be rather well settled

that the reappraisal of evidence by the court is not permissible.

39. From the contentions raised by the petitioner, it is apparent that he

wants this court to re-assess and re-appreciate the evidences.

40. From the nature of challenge to the Award by the petitioner, it is clear

that he has failed to point out any illegality in the Award which goes to the

very root of the Award and makes it illegal. It is apparent on the face of the